HOUSE FINANCE COMMITTEE May 11, 1998 12:10 P.M. TAPE HFC 98 - 168, Side 1. TAPE HFC 98 - 168, Side 2. TAPE HFC 98 - 169, Side 1. CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 12:10 P.M. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative J. Davies Representative Martin Representative G. Davis Representative Moses Representative Foster Representative Mulder Representative Grussendorf ALSO PRESENT Representative Scott Ogan; Representative Con Bunde; Larry La Bolle, Staff, Representative Richard Foster; Rick Cross, Deputy Commissioner, Department of Education; Eddy Jeans, Manager, School Finance Section, Education Support Services, Department of Education; Bob Doyle, Executive Director, Business and Operations, Mat-Su School District, Mat-Su. SUMMARY SB 36 An Act relating to transportation of public school students; relating to school construction grants; relating to the public school foundation program and to local aid for education; and providing for an effective date. HCS CS SB 36 (FIN) was reported out of Committee with a "do pass" recommendation and with five fiscal notes by the Department of Education and a zero note by the Department of Labor dated 3/10/98. SENATE BILL NO. 36 "An Act relating to transportation of public school students; relating to school construction grants; relating to the public school foundation program and to local aid for education; and providing for an effective date." Co-Chair Therriault MOVED to ADOPT Amendment #6 which would provide the definition of schools containing an average daily membership break-number of 100 students. Representative Foster OBJECTED. LARRY LA BOLLE, STAFF, REPRESENTATIVE RICHARD FOSTER, explained that the computer spread specifying the funding indicates that schools within their district will be negatively impacted. The final impact is not clear, consequently, Representative Foster will not support the amendment. Co-Chair Therriault reminded Representative Foster that all districts would be preserved at a previous year's funding; he reiterated that no district will see a decline in funding. Mr. La Bolle replied that it could mean that none of the "additional" funding going into the foundation program would flow to these districts. Representative J. Davies interjected that the 50 student cut-off would more closely match current distribution of schools. Representative Kohring advised that Amendment #6 will create a problem for the Mat-Su Borough school district. He requested that the Committee modify the definition of "facility". The alternative site schools in the Mat-Su area should be counted as school sites and should qualify for additional funding. Amendment #6 would require that the alternative school be merged into the high school and that revenues would be lost for students which represent that school. He continued, because of overcrowding, there are now additional leased facilities at Big Lake. He requested that consideration be given to this concern. Also, there is a third school in the Russian Village which would not be counted as part of the facility definition in Amendment #6. Representative Kohring distributed an amendment to Amendment #6. [Copy on File]. BOB DOYLE, EXECUTIVE DIRECTOR, BUSINESS AND OPERATIONS, MAT-SU SCHOOL DISTRICT, MAT-SU, spoke to the amended Amendment #6, which would expand the definition of Amendment #6 to include alternative sites. He explained the "separate facility" situation referenced by Representative Kohring. Representative Martin commented that every person in every school district wants the State to pay the bill. He emphasized that the State no longer has that money. Representative G. Davis suggested that the proposed legislation would simplify the process and that the amendment to Amendment #6 would add further complexity when addressing special needs. Representative J. Davies agreed with Representative G. Davis and added that the amended amendment would suggest negative incentives when creating smaller schools. He pointed out that in a larger community, there would continue to be administrative efficiency of scale. Representative Kohring explained that the Mat-Su School District has a 55% increased population since 1989. He maintained that the area is in a severe crisis and that the proposed formula will not help, although, noted that SB 11 will help by building additional schools. Representative Kelly commented that Mat-Su is not the only place in the State which has gone through rapid periods growth, suggesting that it is a short-term problem which could be addressed through a bonding package. Representative Kohring MOVED to ADOPT the amendment to Amendment #6. Co-Chair Therriault OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Kohring, Moses, Hanley OPPOSED: Mulder, J. Davies, G. Davis, Grussendorf, Foster, Kelly, Martin, Therriault The MOTION FAILED (3-8). Representative Kohring OBJECTED to passage of Amendment #6. A roll call vote was taken on the motion. IN FAVOR: G. Davis, Kelly, Martin, Mulder, Hanley, Therriault OPPOSED: J. Davies, Foster, Grussendorf, Kohring, Moses The MOTION PASSED (6-5). Representative Grussendorf MOVED to ADOPT Amendment #9. [Copy on File]. He explained that the amendment would address concerns in the North Slope Borough transition in public school funding and the current system of good will. Representative Mulder OBJECTED. He stated that the amendment would create a third category option for the North Slope Borough. Legal drafters were concerned that this would create a disparity problem, which must be resolved before passage of the amendment. Representative Grussendorf explained that the amendment would address the "ability" of the North Slope Borough to arrive at what was deposited into educational funding during the past year. The North Slope Borough is aware of the problems which could occur with the disparity test. He acknowledged that this is an unique situation. Co-Chair Therriault suggested that if a specific problem arises, the Legislature can then address that concern and that until there is an absolute need, the concern should not be brought forward. Representative Grussendorf recommended referencing the disparity test. Representative G. Davis commented that it would be an option to use the local effort. EDDY JEANS, MANAGER, SCHOOL FINANCE SECTION, EDUCATION SUPPORT SERVICES, DEPARTMENT OF EDUCATION, spoke to work draft version "J", Page 3, Line #9. He commented that language indicates that in addition to the local contribution required, the city and borough districts, throughout a fiscal year, may make a contribution of not more than the greater of or the equivalent of: ? A two-mill tax levy on the full and true value. He understood that language would be inserted into Section #1; or ? 23% of that districts basic need for that year, maintaining the State's ability to meet the federal disparity test. He added that #1 would allow those districts which have extreme property wealth, to contribute money that allows them to be in the top 5%, excluded from the disparity calculations. Mr. Jeans pointed out that as Amendment #9 is written, it would not affect the disparity test, but instead would allow the North Slope Borough to continue to make contributions, keeping them in the top 5%. Mr. Jeans noted that there are four districts at the 2-mill provision: North Slope, Valdez, Unalaska, and Skagway. Co-Chair Hanley voiced concern on the overall effectiveness of the North Slope Borough's taxing ability. He believed that the amendment would be establishing a precedent to tax in order to make the local effort. Representative J. Davies questioned how this amendment would provide authorization for the North Slope Borough to collect any more taxes. Co-Chair Hanley noted that the amendment states that they "may make a local contribution". He stated that it should be clear for the record that the amendment will not allow them to exceed other existing caps. Representative J. Davies emphasized that the language was permission and would not allow them to collect other taxes. RICK CROSS, DEPUTY COMMISSIONER, DEPARTMENT OF EDUCATION, commented that the mechanism is unique and specific to the school foundation funding formula. The amendment is written simply to determine the excess local effort which a district can contribute. The amendment would be specific to this law and not to the tax code. (Tape Change HFC 98- 168, Side 2). A roll call vote was taken on the motion. IN FAVOR: Grussendorf, Moses, J. Davies OPPOSED: G. Davis, Kelly, Kohring, Martin, Mulder, Therriault, Hanley Representative Foster was not present for the vote. The MOTION FAILED (3-7). Co-Chair Therriault MOVED to ADOPT Amendment #10. [Copy on File]. He stated that the amendment would address the modifiers to the floor mechanism. Should a district fall below 95% of the district's average daily membership (ADM), they would begin to lose at a per capita rate. Representative Martin believed that the amendment could exasperate the problem of double counting students. Co- Chair Therriault explained that the proposed mechanism does not deal with freezing them or providing extra money through the formula. It would apply only to those districts which have an established "floor" and would serve to decrease that amount as those districts loose students. It would not impact the amount of money received through the formula. The trigger for the erosion of the floor is at a lower threshold than the current statutory figure on the current funding formula. Representative J. Davies advised that by adopting the amendment, the bottom line is that when a district looses a student, they will loose more than the ADM amount and that when there is an increase in the student population, the district will gain less. Representative J. Davies MOVED to ADOPT an amendment to the amendment, changing Line #14 to 90%. Co-Chair Therriault OBJECTED. Representative J. Davies explained that a floor is meant to be a base line adjustment. The operation on the ADM should sit on top of that adjustment. In the past, the floor incorporated such aspects as bilingual and bicultural, which will be removed with passage of the proposed amendment. It will enter a 20% compromise into the block. A roll call vote was taken on the motion. IN FAVOR: Foster, Grussendorf, Martin, Moses, J. Davies OPPOSED: Kelly, Kohring, Mulder, G. Davis, Hanley, Therriault The MOTION FAILED (5-6). Representative J. Davies MOVED to change Line 10 to 90%. There being NO OBJECTION, it was amended. Co-Chair Therriault asked if there was OBJECTION to Amendment #10 as amended. Representative J. Davies maintained his OBJECTION. Representative J. Davies clarified how Section (e) would work. Co-Chair Therriault acknowledged that there would be erosion of the floor and once it was gone, then 100% would occur. Representative J. Davies inquired the initial purpose of the floor. Co-Chair Therriault replied that it was to help bridge from one formula to the next. Representative J. Davies believed that it would help to preserve whatever funding level currently exists. Co-Chair Hanley pointed out that as the formula currently exists, there are districts which will loose money; those districts are not loosing money under the proposed amendment and that they will be held harmless. Representative J. Davies argued that would depend on "where one sits", whether or not a district was to loose or gain. He stressed that the amendment would "compromise the compromise" and that a rural student would only be worth 60% of what an urban student is worth. Co-Chair Hanley interjected that current formula indicates that a rural student is worth 2 to 4 times that which a urban student is worth. He stressed that this is not equitable. Representative Martin stated that the floor creates a weak situation. Representative J. Davies stated that Amendment Committee members that it does cost more to run schools in rural Alaska. To calculate what is equitable should be based on how much "education" is being given per student. Under the new formula, the State will be reducing the amount of dollars that a new student gets in rural Alaska and shifting that benefit to urban Alaska. Representative J. Davies MOVED to DIVIDE the question between Lines #11 and #12. Co-Chair Therriault agreed, asking the Committee to vote on Amendment #10(a). A roll call vote was taken on the motion. IN FAVOR: Kelly, Kohring, Martin, Mulder, G. Davis, Therriault, Hanley OPPOSED: Grussendorf, Moses, J. Davies, Foster The MOTION PASSED (7-4). A roll call vote was taken on the motion to adopt Amendment IN FAVOR: Kelly, Kohring, Martin, Mulder, G. Davis, Hanley, Therriault OPPOSED: Moses, J. Davies, Grussendorf, Foster The MOTION PASSED (7-4), Amendment #10 was adopted as amended. Representative J. Davies MOVED to ADOPT Amendment #11. [Copy on File]. Co-Chair Therriault OBJECTED. Representative J. Davies explained that the amendment would allow the base student allocation to increase by 1% per year. Co-Chair Therriault pointed out that it would be an automatic cost-of-living allowance (COLA) adjuster. A roll call vote was taken on the motion. IN FAVOR: Moses, J. Davies, Grussendorf, Foster OPPOSED: Kohring, Martin, Mulder, G. Davis, Kelly, Therriault, Hanley The MOTION FAILED (4-7). Representative Kohring MOVED to ADOPT Amendment #12. [Copy on File]. Co-Chair Therriault OBJECTED. Representative Kohring explained his concerns regarding State funding for correspondence study. Co-Chair Therriault noted that in the bill, a flat rate would be used for correspondence across the State. The proposed amendment would change that by providing a higher rate for the "in" district versus the "out" of district. A roll call vote was taken on the motion. IN FAVOR: J. Davies, Foster, Kohring OPPOSED: Martin, Mulder, G. Davis, Grussendorf, Kelly, Hanley, Therriault The MOTION FAILED (3-7). Representative Kohring MOVED to ADOPT Amendment #13. [Copy on File]. He stated that the amendment would provide Intent Language to address the shortfalls in funding due to miscalculations in the public school funding formula through supplemental appropriations. Co-Chair Therriault OBJECTED. He voiced concern with meeting the unaddressed student enrollment with supplemental appropriations. He pointed out that the bill does contain language to address the adjustment of student count or incorrect reporting. Representative J. Davies pointed out that the proposed language would allow districts which experienced an increased enrollment during the year, to be able to apply for supplemental funding during the year. He noted that the proposed formula provides for a single count period so as to avoid a teeter-totter effect. This amendment would lead to confusion. Representative Kohring pointed out that the Department of Education should establish criteria regarding when the reports should be remitted by the school districts. He added that the amendment would help the rapidly growing school districts. A roll call vote was taken on the motion to adopt Amendment IN FAVOR: Moses, Mulder, Foster, Kohring OPPOSED: J. Davies, G. Davis, Grussendorf, Kelly, Martin, Therriault, Hanley The MOTION FAILED (4-7). (Tape Change HFC 98- 169, Side 1). Representative Kohring MOVED to ADOPT Amendment #14. [Copy on File]. He stated that the amendment would authorize funding for temporary overcrowding and emergency assessment. Representative J. Davies asked how costs would be mitigated for overcrowding. Representative Kohring replied that costs would be associated with renting a portable facility and would be reflective that the initial foundation formula dollars will not be adequate to cover the needs of the Mat- Su Borough. Representative J. Davies asked if the amendment would provide for supplemental funding over and above the increment given on the per student basis. Representative Kohring acknowledged it would and that it would be used for operations. Representative J. Davies explained that there are many other districts loosing under the proposed formula and that the amendment would address only the needs of one specific school district. Representative J. Davies OBJECTED to Amendment #14. A roll call vote was taken on the motion. IN FAVOR: Kohring OPPOSED: J. Davies, G. Davis, Foster, Grussendorf, Kelly, Martin, Moses, Mulder, Hanley, Therriault The MOTION FAILED (1-10). Representative J. Davies WITHDREW Amendment #15. [Copy on File]. Co-Chair Therriault MOVED to ADOPT Amendment #16, a change to Page 8, Line 10, raising the per student dollar amount to $3940 dollars. There being NO OBJECTION, it was adopted. Representative Mulder MOVED to report HCS CS SB 36 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative J. Davies OBJECTED. A roll call vote was taken on the motion. IN FAVOR: G. Davis, Foster, Kelly, Martin, Mulder, Therriault, Hanley OPPOSED: Grussendorf, Kohring, Moses, J. Davies The MOTION PASSED (7-4). HCS CS SB 36 (FIN) was reported out of Committee with a "do pass" recommendation and with five fiscal notes by the Department of Education and a zero fiscal note by the Department of Labor dated 3/10/98. ADJOURNMENT The meeting adjourned at 4:20 P.M. H.F.C. 10 5/11/98 p.m.