HOUSE FINANCE COMMITTEE January 13, 2005 3:01 p.m. CALL TO ORDER Co-Chair Chenault called the House Finance Committee meeting to order at 3:01:50 PM. MEMBERS PRESENT Representative Mike Chenault, Co-Chair Representative Kevin Meyer, Co-Chair Representative Bill Stoltze, Vice-Chair Representative Eric Croft Representative Richard Foster Representative Mike Hawker Representative Jim Holm Representative Reggie Joule Representative Mike Kelly Representative Bruce Weyhrauch MEMBERS ABSENT Representative Carl Moses ALSO PRESENT Representative Bob Lynn; Roger Sampson, Commissioner, Department of Education and Early Development; Eddy Jeans, Manger, School Finance and Facilities Section, Department of Education and Early Development GENERAL SUBJECT(S): INFORMAL PRESENTATION ON FORMULA FUNDING FOR EDUCATIONAL  PURPOSES  The following overview was taken in log note format. Tapes and handouts will be on file with the House Finance Committee through the 24th Legislative Session, contact 465- 6814. After the 24th Legislative Session they will be available through the Legislative Library at 465-3808.   TIME SPEAKER DISCUSSION  3:02:07 PM Co-Chair Co-Chair Chenault introduced the Chenault committee members and Eddy Jeans from the Department of Education.  3:03:14 PM EDDY JEANS, Presented a power point presentation, MANGER, SCHOOL an Alaska Public School Funding Formula FINANCE AND Overview (copy on file.) He explained  FACILITIES that SB 36 established the current SECTION, public school funding formula and DEPARTMENT OF reviewed the five components of the EDUCATION AND funding formula: Calculation of EARLY Adjusted Average Daily Membership DEVELOPMENT (ADM), Calculations of Basic Need (Entitlement), Components of Basic Need (Who Pays), Additional Funds above Basic Need, and Components of State Aid.  3:05:41 PM Mr. Jeans Mr. Jeans discussed ADM Reporting Requirements contained in the power point presentation. He explained that school districts are required to report student information through the Online Alaska School Information System (OASIS), and reviewed student eligibility requirements for state foundation funding. He described the five steps used to calculate entitlement.  3:08:47 PM Representative Asked if the charter school authority Weyhrauch passed after SB 36 had been adopted. Mr. Jeans replied that he thought they were passed concurrently. Representative Weyhrauch inquired how charter schools factor in the ADM adjustment.  3:09:25 PM Mr. Jeans Discussed charter school requirements. In response to a question by Representative Weyhrauch, Mr. Jeans explained that charter schools operations are governed by statute. He noted that the statues were passed in 1998 and revised a few years later.  3:10:29 PM Mr. Jeans Listed the steps used to adjust the ADM for school size. He spoke about the requirements for alternative schools and charter schools.  3:11:48 PM Representative Asked why alternative schools are Weyhrauch counted as a part of the largest school in the district rather than the smallest. Mr. Jeans observed that the calculations were set out in SB 36.  3:12:16 PM Vice-Chair Asked what the Department of Stoltze Education's position was during the drafting of SB 36. Mr. Jeans explained that the Department's concern, at the time, was to try to prevent smaller schools from popping up in larger communities for the purpose of size adjustment.  3:13:08 PM Mr. Jeans Explained the number and types of  schools and their programs, including correspondence schools, in Alaska.  3:14:08 PM Mr. Jeans Reviewed school size adjustments, using Nome City Schools as an example.  3:16:35 PM Vice-Chair Asked if the statutes require a strict Stoltze adherence regarding school size variance. Mr. Jeans answered that there is no variance requirement through regulation.  3:17:15 PM Mr. Jeans Explained Nome City Schools' adjusted ADM.  3:17:29 PM Representative Asked if there is a provision for Croft adding a small alternative school's numbers to a smaller regular school's numbers. Mr. Jeans replied that there is a provision in the statute for a school with fewer than ten students to be added to the smallest school.  3:18:08 PM Mr. Jeans Explained the district cost factors and how they are determined. He explained special needs funding.  3:18:57 PM REPRESENTATIVE Inquired how the cost factors are BOB LYNN determined and what the incentive is to reduce costs. Mr. Jeans answered that it wasn't just that higher costs produce a higher cost factor, but that the higher cost to do business in a region produces a higher cost factor. He pointed out that the foundation statute requires the Department of Education to renew and update the district cost factors. The McDowell Group's model was intended to be used for this purpose, but was not used. Instead, a report by the American Institute of Research was used, but not yet adopted by the legislature. Institution of Social and Economic Research (ISER) is doing a peer review of that report now, Mr. Jeans explained. He added that the cost factors should be reviewed and updated on a periodic basis, but have not been since 1999.  3:21:10 PM Mr. Jeans Continued to explain how the Department of Education was planning to provide special needs funding. He noted that school districts must file a plan with the department. Using Nome schools as an example he explained special needs funding.  3:22:01 PM Mr. Jeans Outlined the intensive services funding and used Nome as an example.  3:23:07 PM Mr. Jeans Highlighted correspondence program funding.  3:24:18 PM Mr. Jeans Reviewed spreadsheets contained in the handout: Public School Funding Program Overview (copy on file.) He discussed page 7, which dealt with Nome's adjusted ADM and basic needs and talked about who pays for basic need.  3:25:35 PM Mr. Jeans Reviewed requirements under SB 174 and explained Nome's full and true value. He discussed the required local contribution, for Title VIII Federal Impact Aid Payments and how they are calculated. He referred to the impact AID percent contained on page 9, column E, of the spreadsheet and explained how the percentages are derived.  3:30:19 PM Mr. Jeans Referenced column G on page 9 to explain state aid. He also discussed funds above basic need (including additional local contribution), quality schools grant, and the supplemental funding floor.  3:32:01 PM Representative In response to a question by Croft Representative Croft, Mr. Jeans explained federal law as it applies to the cap on what local municipalities can contribute. Representative Croft asked about federal funding to the school districts. Mr. Jeans replied that the formula could be adjusted and explained state aid and how it was derived.  3:33:59 PM Mr. Jeans Provided details about the quality schools grant. He explained how the supplemental funding floor was established specific to Nome's school district. Nome's transition to the new formula was clarified. Mr. Jeans gave several examples of supplementary funding floor adjustments.  3:36:49 PM Representative Asked if the McDowell Group model Weyhrauch allowed for inflation. Mr. Jeans said that it did not. He added that it only addressed "need". How the state pays for that need is left up to legislative discussion. Representative Weyhrauch asked what the annual rate of inflation was in 1998. Mr. Jeans replied that he could get that information.  3:38:07 PM Mr. Jeans Explained how Nome City School's "floor" was established.  3:39:11 PM Mr. Jeans Reviewed the components of state aid  and how it is prorated.  3:40:17 PM Representative Asked about district cost factors. Mr. Foster Jeans referred him to page 8, column P of the handout. He indicated that Commissioner Sampson would continue with the slide presentation.  3:41:00 PM ROGER SAMPSON, Shared information about Governor COMMISSIONER, Murkowski's educational funding DEPARTMENT OF proposal by highlighting a national EDUCATION AND trend regarding a shortage of teachers. EARLY He referred to a graph showing the DEVELOPMENT number of teachers who attended a recent Alaskan job fair, which was a smaller number than ever before. He emphasized the importance of timing in regards to funding education, so as not to lose more teachers. He emphasized the need to keep the teachers that we have and pointed out that this is a national issue, not just Alaskan. He encouraged early and forward funding of education because of the shortage.  3:44:46 PM Representative Asked if all jobs would be able to be Joule filled in all districts, given the shortage.  3:45:38 PM Commissioner Replied no. He observed that districts Sampson are often unable to fill particular kinds of positions with candidates who hold the qualifications needed. He pointed out that current and past legislatures have taken action to broaden the pool potential to fill those positions.  3:46:06 PM Representative Asked what the dropout rate is and if Joule there would be enough classrooms if there were no dropout rate.  3:46:33 PM Commissioner Replied that he needed to look at the Sampson numbers in order to answer that question. He added that Alaska fits a national pattern in turnover; in the first 5 years of teaching, 50 percent of teachers choose to leave the profession.  3:47:16 PM Representative Asked if there would be enough Joule classroom space and qualified teachers if the dropout rate decreased.  3:47:40 PM Commissioner Emphasized that providing a known level Sampson of funding is one part of solving the problem.  3:48:13 PM Representative Agreed that it was a disturbing trend Croft and suggested that a good retirement package is an important component of attracting and retaining teachers. .  He questioned whether it is a good time for the Administration to add a tier three level to the retirement package.  3:48:56 PM Commissioner Replied that national data indicates Sampson that salary and benefits are not the main reasons teachers leave. The top two reasons are because teachers do not feel supported and lack feedback about their competence. He mentioned the Alaska teacher mentor program as a possible solution to retaining more teachers.  3:51:03 PM Representative Asked if Commissioner Sampson was Joule suggesting that teachers could be paid less and given fewer benefits and be encouraged to stay in teaching through other mechanisms.  3:51:28 PM Commissioner Replied there is a need to provide more Sampson incentives than dollars and benefits. Representative Joule asked if Alaska now pays less for salaries and benefits. Commissioner Sampson replied that Alaska used to rank very high in salaries compared to other states but that some other states are paying more now and that inflation is a factor. He pointed out that Alaska is still in the top 5 percent for beginning teacher salaries.  3:52:29 PM Co-Chair Mentioned that the trend is not new and Chenault not only an Alaskan problem.  3:53:14 PM Co-Chair Meyer Asked if there was a graph that showed the projection of student growth in the next five years.  3:53:28 PM Commissioner Replied that student growth in Alaska Sampson is quite stable now with the exception of a few areas. Co-Chair Meyer asked if the number of home-schooled students is about 5 percent and if that number is also steady. Commissioner Sampson said that number was on the increase until a year ago. In 2004, there was a decline in enrollment. He added that he has no data on home-schooled students that do not receive funding from the state. Co-Chair Meyer asked how student money is transferred from one district to another. Commissioner Sampson explained that the count period establishes where the dollars go. Co- Chair Meyer asked Mr. Jeans whether a cost study was being done. Mr. Jeans referred to the ISER study and the  corrections being made to it.  3:56:49 PM Representative Related that his wife retired from Holm teaching because of a lack of district support regarding class size. He noted that class size is a big issue for teachers. He asked what the university system was doing to support the numbers of teachers needed in Alaskan school districts.  3:58:18 PM Commissioner Replied that the state and the Sampson university systems are working closely together to try to increase numbers in the teacher preparation programs, but are still falling short of numbers. Only 20 percent of needed teachers are being produced, he added.  3:59:17 PM Representative Asked what lack of support means. Lynn Commissioner Sampson clarified that it indicates lack of support from the district, community, parents, and principal; a combination of actions by others as well as needs not met.  4:01:26 PM Representative Said that as a teacher he noted that Lynn some problems such as inclusion go beyond the local level and need to be solved on the federal level. He emphasized that class size and special education issues are a national problem.  4:04:17 PM Commissioner Agreed that teachers become frustrated Sampson with these problems.  4:04:56 PM Representative Observed that the Governor wants to Weyhrauch have educational funding addressed early in the legislature and pointed out that it is the first subject before the Committee.  4:05:49 PM Co-Chair Agreed with the importance of education Chenault funding.  4:06:06 PM Vice-Chair Referred to home school issues and Stoltze questioned the Administration's position regarding home schooling and additional regulations.  4:06:56 PM Commissioner Pointed out that the Administration is Sampson pro-choice in regards to education options. He added the caveat that the Governor wants levels of accountability.  4:07:42 PM Vice-Chair Asked if new regulations were being Stoltze considered.  4:08:31 PM Commissioner In response to a question by Vice-Chair Sampson Stoltze, explained that regulations for monitoring of statewide correspondence  classes have been enacted.  4:09:32 PM Representative Noted the level of commitment, but Hawker questioned the level of accountability in regards to the Governor's K-12 funding plan. `  4:10:35 PM Commissioner Noted that the federal government has Sampson required accountability through the No Child Left Behind program. The department is working on a growth model. Performance will be reported yearly.  4:11:35 PM Representative Summarized that testing is part of the Hawker accountability factor. He stressed that there needs to be a demonstration of what is being paid for.  4:12:17 PM Representative Asked if FY05 increases would be Joule compared to FY06 in terms of accountability.  4:12:48 PM Commissioner Pointed out that Alaska is a local Sampson control state and districts show different levels of accountability. Different districts have different priorities.  4:13:40 PM Representative Referred to special student categories Kelly and questioned the percentage of students in each compared to the cost for each. He added a personal story of a teacher that left the profession. He noted that discipline is also a factor.  4:15:04 PM Mr. Jeans Noted that special education funding is provided as a block grant. He said that part of it has to do with the state allocation of the funding. He said it made sense to go to a block allocation.  4:16:39 PM Co-Chair Meyer Gave a heads up about showing up front the needs for budget purposes. Mr. Jeans replied that Co-Chair Meyer would be happy when he sees the budget.  ADJOURNMENT The meeting was adjourned at 4:19 PM