HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE September 30, 1997 9:05 a.m. Anchorage, Alaska MEMBERS PRESENT Representative Con Bunde, Chairman Representative J. Allen Kemplen Representative Tom Brice (via teleconference) MEMBERS ABSENT Representative Joe Green, Vice Chairman Representative Al Vezey Representative Brian Porter Representative Fred Dyson COMMITTEE CALENDAR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 148 "An Act relating to the public school funding program; relating to the definition of a school district, to the transportation of students, to school district layoff plans, to the special education service agency, to the child care grant program, and to compulsory attendance in public schools; and providing for an effective date." - HEARD AND HELD MEDICAID REGULATIONS REGARDING FRAUD (* First public hearing) PREVIOUS ACTION BILL: HB 148 SHORT TITLE: SCHOOL FUNDING ETC./ CHILD CARE GRANTS SPONSOR(S): HEALTH, EDUCATION & SOCIAL SERVICES JRN-DATE JRN-PG ACTION 02/18/97 382 (H) READ THE FIRST TIME - REFERRAL(S) 02/18/97 382 (H) HES, FINANCE 04/04/97 988 (H) SPONSOR SUBSTITUTE INTRODUCED- REFERRALS 04/04/97 988 (H) READ THE FIRST TIME - REFERRAL(S) 04/04/97 989 (H) HES, FINANCE 04/08/97 (H) HES AT 3:00 PM CAPITOL 106 04/08/97 (H) MINUTE(HES) 04/24/97 (H) HES AT 3:00 PM CAPITOL 106 04/24/97 (H) MINUTE(HES) 04/28/97 (H) HES AT 3:30 PM CAPITOL 106 04/28/97 (H) MINUTE(HES) 04/30/97 (H) HES AT 3:30 PM CAPITOL 106 04/30/97 (H) MINUTE(HES) 08/25/97 (H) HES AT 10:00 AM CAPITOL 205 08/25/97 (H) MINUTE(HES) 09/30/97 (H) HES AT 9:00 AM ANCHORAGE LIO WITNESS REGISTER JEFF LIPSCOMB 9921 Main Tree Drive Anchorage, Alaska 99516 (No telephone number provided) POSITION STATEMENT: Testified on SSHB 148. CHERYL BREAGER 11940 Kristie Circle Anchorage, Alaska 99516 Telephone: (907) 345-7916 POSITION STATEMENT: Testified on SSHB 148. JENNY ORTON, Teacher Huffman Elementary School 12910 Admiralty Place Anchorage, Alaska 99515 Telephone: (907) 345-3707 POSITION STATEMENT: Testified on SSHB 148. JULIE JENSEN (ph) ZARR (No address provided) Telephone: (907) 345-2212 POSITION STATEMENT: Testified on SSHB 148. EDDY JEANS, Manager School Finance Section Education Support Services Department of Education 801 West 10th Street, Suite 200 Juneau, Alaska 99801-1894 Telephone: (907) 465-2891 POSITION STATEMENT: Answered questions regarding SSHB 148. JOE LIBAL, Teacher 4923 Rollins Drive Anchorage, Alaska 99508 Telephone: (907) 345-3707 POSITION STATEMENT: Testified on SSHB 148. HARRIET DRUMMOND, Vice President Anchorage School Board 2139 Hillcrest Place Anchorage, Alaska 99503 Telephone: (907) 279-7722 POSITION STATEMENT: Testified on SSHB 148. JOHN CYR, President National Education Association-Alaska 114 Second Street Juneau, Alaska 99801 Telephone: (907) 586-3090 POSITION STATEMENT: Testified on SSHB 148. LELAND DISHMAN, Superintendent of Schools North Slope Borough P.O. Box 69 Barrow, Alaska 99723 Telephone: (907) 852-2611 POSITION STATEMENT: Testified on SSHB 148. MARIE CARROLL, Chief of Staff North Slope Borough P.O. Box 69 Barrow, Alaska 99723 Telephone: (907) 852-2611 POSITION STATEMENT: Testified on SSHB 148. ASHLEY REED 360 West Benson, Number 200 Anchorage, Alaska 99503 Telephone: (907) 562-2560 POSITION STATEMENT: Testified on SSHB 148. KATHI GILLESPIE, Legislative Chairman Anchorage School Board 2741 Seafarer Loop Anchorage, Alaska 99516 Telephone: (907) 345-5335 POSITION STATEMENT: Testified on SSHB 148. KAREN KULIN 10841 Glazanof Drive Anchorage, Alaska 99516 Telephone: (907) 346-1372 POSITION STATEMENT: Testified on SSHB 148. ROBERT GOTTSTEIN 630 West Fourth Avenue, Suite 300 Anchorage, Alaska 99501 (No telephone number provided) POSITION STATEMENT: Testified on SSHB 148. BOB LABBE, Director Division of Medical Assistance Department of Health and Social Services P.O. Box 110660 Juneau, Alaska 99811-0660 Telephone: (907) 465-3355 POSITION STATEMENT: Participated in discussion of Medicaid regulations regarding fraud. NANCY WELLER, Medical Assistance Administrator Division of Medical Assistance Department of Health and Social Services P.O. Box 110660 Juneau, Alaska 99811-0660 Telephone: (907) 465-5825 POSITION STATEMENT: Participated in discussion of Medicaid regulations regarding fraud. P.K. WILSON, Medical Assistance Administrator Division of Medical Assistance Department of Health and Social Services 4411 Business Park Boulevard, Suite 46 Anchorage, Alaska 99503-7117 Telephone: (907) 273-3221 POSITION STATEMENT: Participated in discussion of Medicaid regulations regarding fraud. CAROLYN PHILLIPS 161 Karen Street, Number 3 Soldotna, Alaska 99669 Telephone: (907) 262-9531 POSITION STATEMENT: Testified on health care issues. DORIS REYNOLDS 111 Birch Drive Kenai, Alaska 99611 Telephone: (907) 283-3203 POSITION STATEMENT: Testified on health care issues. JIM JORDAN, Executive Director Alaska State Medical Association 4107 Laurel Street Anchorage, Alaska 99508 Telephone: (907) 562-2662 POSITION STATEMENT: Testified on Medicaid regulations. ACTION NARRATIVE TAPE 97-45, SIDE A Number 001 CHAIRMAN CON BUNDE called the House Health, Education and Social Services Standing Committee meeting to order at 9:05 a.m. at the Anchorage Legislative Information Office (LIO). Members present at the call to order were Representatives Bunde and Kemplen; Representative Brice was present via teleconference from Fairbanks. SSHB 148: SCHOOL FUNDING ETC./ CHILD CARE GRANTS CHAIRMAN BUNDE brought before the committee Sponsor Substitute for House Bill No. 148, "An Act relating to the public school funding program; relating to the definition of a school district, to the transportation of students, to school district layoff plans, to the special education service agency, to the child care grant program, and to compulsory attendance in public schools; and providing for an effective date." [The first 1.7 minutes of tape 97-45 are blank.] CHAIRMAN BUNDE advised members that the discussion of local contribution is found on page 3, line 10. Special needs funding is found on page 3, line 25. Minimum size for schools is found on page 5, line 1. How and when students will be counted will be a change from the fall counting; Chairman Bunde said it adds February. And the hold harmless provisions are found on page 26, line 27. CHAIRMAN BUNDE noted that there are side-by-side comparisons. Four proposals on the foundation formula are active at this time. In addition to SSHB 148, there are two proposals from the Senate and one from the Administration. While the committee would focus on SSHB 148, Chairman Bunde encouraged input as to whether they should mix and match these proposals. Number 040 JEFF LIPSCOMB came forward to testify, representing himself and other parents of the South Anchorage area regarding what Alaskans hold dear: equal distributions from the permanent fund and an equitable level of education opportunity. Mr. Lipscomb suggested SSHB 148 needs to include a provision for the state's foundation formula that requires school districts to budget schools on a per- student basis. He reminded members that the 1960s civil rights movement required federal intervention to ensure equal education opportunities in the South. In addition, Title 9, a federal act, was required many years ago to ensure equal education opportunities for women. MR. LIPSCOMB pointed out that in the Anchorage School District, the largest district in the state, average expenditures per student have increased. While he had no figures for 1997, the proposed budget provided approximately $7,200 per student. However, amounts spent in the high schools for instruction are decreasing. Mr. Lipscomb cited variations: Bartlett High School received almost $3,900 per student, while Service High School, the largest of the district's high schools, received $3,300 per student. MR. LIPSCOMB said according to Mr. Cristal, the foundation formula includes reimbursement that for the Anchorage School District represented about $3,588 per student; for secondary students, it represented $4,692. Mr. Lipscomb pointed out that the Department of Education's space criteria for an elementary school is 106 square feet per student, whereas for secondary schools, it is 150 square feet. The additional reimbursement for secondary students is to acknowledge the increased cost of a secondary program. MR. LIPSCOMB said the average cost of the instructional program for the elementary student in the Anchorage School District is $3,900. According to Mr. Cristal, the average instructional cost for a middle school student is $4,600. The district spends all its money on primary and middle schools, and secondary schools get the least amount of money. MR. LIPSCOMB discussed the inequity in custodial expenses. While Bartlett High School and West High School are physically the two largest high schools in the district at 360,000 square feet, they also have the smallest populations. However, Bartlett has 11 custodians, and West has 13 custodians; Service High School, with 2,300 students, has 11 custodians. MR. LIPSCOMB asked: What happens when the largest schools in terms of square footage have the smallest enrollments? He answered that they have a lot of room. He restated that the Department of Education (DOE) criteria is 150 square feet per student. MR. LIPSCOMB advised members that the current school district priorities are an addition to Chugiak High School and replacement of Dimond High School. However, Service High School has the worst overcrowding problem. Number 095 MR. LIPSCOMB discussed library resources, noting that the large schools with small populations have many more books available to the students. He made a correction: The West High School library is a combination library with Romig Junior High. If students from both schools were added together, the number provided would come down. As for book value at the high schools, the number for West High School doesn't include monies for the major new addition, which includes a new pool. Mr. Lipscomb pointed out that the smallest populations are in the schools where the district has its largest investments, while the school with the largest population has the smallest size and the lowest value. Number 112 MR. LIPSCOMB asked: Are we doing anything to correct this situation? He answered with an example: In April, 1996, the voters approved a $2.7 million bond to repair and replace the tracks and tennis courts at the high schools. He explained that at Bartlett High School, they decided to make it a bigger track so it would be the site of a state meet. At Dimond High School, they decided to replace the football field, in addition. At Chugiak, because there was some extra money left over from the lower-than- expected bid, they decided to upgrade the track to make it similar to the Bartlett track; the justification was that since they had such nice facilities at Chugiak, it would be a shame to waste them. And at East High School, they added an additional tennis court so that they could hold the "J-V jamboree." Mr. Lipscomb asked, "So, what school had the minimum? Service High School had the minimum tennis courts and the minimum-size track. It's hard to pull yourself up from the bootstraps when you don't have boots." MR. LIPSCOMB asked how this affects performance in the district, reminding members that the district spends $3,900 per student at the primary level. One school district goal is increasing success at each level. He stated, "And you can see, there is a maintenance in the reading; there's a big jump in language in the primary; there's a jump in total mathematics in the primary; and, of course, total battery is an increase. So, what happens in secondary, where we spend less money than we do in primary? Test scores go down." MR. LIPSCOMB said Service High School receives 84 percent of the average funding for primary schools. "Everything goes down," he commented. "As I told some people yesterday, what you really want to be in the Anchorage School District is a sixth grader, because that's where you peak. After sixth grade, it's downhill. You get less money, and you get less education." Number 147 MR. LIPSCOMB emphasized that they are spending the most money on facilities which are already the best and biggest. He referred to the chart titled, "History of enrollment and enrollment projections by high school," which shows where they were December 30 of last year. The school board unanimously voted to evaluate the boundaries of the high schools, and they established a boundary task force, telling this task force to level out enrollment of the high schools. Mr. Lipscomb explained, "The school board was concerned about the overcrowding at Service and the growth in South Anchorage, so they wanted it leveled out. The boundary task force did ... their duty and came out with recommendations that ranged in the 90-to-95th percentile, while the school board, for whatever their reasons, they modified that proposal." MR. LIPSCOMB referred to the school board's approved plan, denoted with a blue cross-hatch. He said, "And as you can see, there was protection for our best and biggest high schools, and an increase in enrollment projected back at Service High School. The yellow shows actually where we're at, as of September 15th; and we're essentially the same place we were last year, so there's no protection here. And these are Anchorage School District capacity utilizations. If you used the 150 square feet per student, for DOE criteria, these numbers would be higher for Service and Dimond; they would stay the same for Bartlett; they would go down at West. The actual DOE criteria, the capacity utilization, is approximately 117 percent at Service High School. And I noticed over the weekend we moved in our seventh portable building at Service." Number 166 MR. LIPSCOMB stated, "We need the state to provide us protection, to give us equal education opportunity. We're looking for revision to the current foundation formula, to make it more fair and equitable. We want it on a per-student basis. You'll hear a lot of people say if the Anchorage School District has half the students in the state, they should get half the money. But why should Service High School only get 84 percent of the average cost to educate a primary student, when the school district receives incremental reimbursement from the state of over $700 per student, acknowledging the increased costs of secondary programs?" Mr. Lipscomb thanked the committee for consideration of adding a provision requiring budgeting on a per-student basis. CHAIRMAN BUNDE responded that SSHB 148 will require budgeting per student, rather than per unit. He stated his understanding that Mr. Lipscomb would like it to go per student, not just per district but also per school. MR. LIPSCOMB replied, "In the school district; that's correct." CHAIRMAN BUNDE said within the district, as well as at the district level. MR. LIPSCOMB replied that the way it is now, in his perception, the Anchorage School District doesn't carry out the intent if they're being reimbursed by the state on a per-student basis. "And they should be expending their money on a per-student basis, rather than per-school," he added. CHAIRMAN BUNDE stated, "At this time, they are not on a per- student, they are on a per-unit basis. MR. LIPSCOMB said that is correct. CHAIRMAN BUNDE said while the goal of this bill is to change it to per student, it hasn't gone so far as to describe it as "per school, per student." He suggested the committee needs to consider that. He noted that some people from the school district were present but had not signed up to testify. He asked whether anyone wished to respond to the discussion. Number 192 CHERYL BREAGER came forward to express concern about the seven portable units. She stated, "I have a junior that's in one that they've tried to clean the carpet, apparently, and it stinks so bad, they get headaches, and the teacher swears her eyes burn all day long. And so I'm quite unhappy about that. I have had my kids in portables before, but a stinking portable goes beyond what I can accept." MR. LIPSCOMB said they still have high school science classes in portable units, when rooms exist inside buildings next to the restrooms. He mentioned the difficulty of hauling water, in five- gallon buckets from the men's shower, to a portable unit for a seventh grade science class the previous year; they'd also had no place to drain it. Number 231 JENNY ORTON, Teacher, Huffman Elementary School, came forward to testify, expressing concern about class sizes. She'd started the year with 31 students, and she'd found out the Thursday before school started that it would be a third grade/fourth grade split. Other third grade classes there have 28 and 31 students, while fourth grade classes have 30 and 32 students. Although literature they'd received indicated there would be "18.2 children, as far as the pupil/teacher ratio goes," usually in reality there is one teacher in a classroom with 25 to 35 students at the elementary level these days, which concerns Ms. Orton. They hope changing the formula will provide some relief in the classroom itself. CHAIRMAN BUNDE asked what Ms. Orton thinks about a 3/4 combination. He suggested there is a rather big jump between third graders and fourth graders. Number 250 MS. ORTON agreed. In third grade, students learn many new skills. She believes combinations work if there is a plan in place, and many schools have combinations. She stated, "But to do it as a stopgap measure, hoping for relief, and then you're a month into the school year, and children are crying all over the school because they have to leave the classroom they were first comfortable in -- and we're kind of trying to figure out what kids have been taught by a previous teacher, so that we're not reteaching but so that we're not leaving holes. ... So, the combinations I don't have a problem with, if you know ahead of time, hopefully the spring before you start teaching in the fall, and if there's an ongoing plan at the school. Otherwise, I think it's just a Band-Aid." CHAIRMAN BUNDE asked whether they were still having to pump Huffman's holding tank weekly. MS. ORTON said the big trucks had been outside her classroom door quite a bit; she believes they are still pumping. CHAIRMAN BUNDE said one "given" at this point is that the pie won't get any bigger; he suggested it is important to shift the slices of pie around, although it may be uncomfortable for some people. "But all of the plans that are before us would require a minimum school size of ten students for them to receive state funding at this point," he added. "There's virtually no minimum. And there would be about a half-a-dozen schools that would have to close ... under any of these plans. And I'm certainly the last one ... that would want to close a school. However, both economically and educationally, it's very hard to argue for a school of four or five students. And that money perhaps needs to be moved around where it will impact the greatest number of people." MS. ORTON said she thinks most teachers feel that when it comes to any program or method of teaching, it comes down to: "Can you get to that child during the day when they need you?" She said that comes to numbers. She hopes that reallocating will help that in the majority of schools. CHAIRMAN BUNDE asked Ms. Orton to comment on the idea of money being allocated not only per student but also per school. MS. ORTON indicated the current situation rings unfair. She said she'd want more information. This is the first she'd really become aware of the disparity in how the money is spent between the different schools. "But it's something that I think should certainly be considered," she added. Number 290 REPRESENTATIVE J. ALLEN KEMPLEN referred to comments about reimbursing school districts on a per-student basis. Since becoming a legislator, he continues to be amazed just how big and diverse the state is. He pointed out the dramatic differences between Southeast Alaska and the North Slope, and he suggested that when moving from a temperate zone to an arctic climate, there are significant costs incurred with the change in environment. He said he is still trying to figure out how best to accommodate those additional costs from that shift, and he acknowledged that more money is certainly needed in education and to reduce school sizes. REPRESENTATIVE KEMPLEN mentioned comments he'd heard regarding "tele-education," particularly for college and high school students. He said he doesn't know how that applies for an elementary school, but the advances in telecommunications technology are very impressive. He next referred to an article in the Anchorage Daily News by Ron Duncan, president of GCI, which explained the investment that corporation is making in Alaska, hundreds of millions of dollars, to provide almost instantaneous video-conferencing abilities. REPRESENTATIVE KEMPLEN pointed out that such technology will allow a teacher to interact with students without being physically present. For example, a teacher at a central site could be going over a lesson plan and video-conferencing to a number of remote sites. The teacher could see a visual image of the children and what they are doing, while the children could see a video image of the teacher. Representative Kemplen asked Ms. Orton's opinion on how effective the application of that could be. Number 350 MS. ORTON said as a former college student, that would be an effective way for her to learn. However, on an elementary level, the key word is "remote." They are now asked to teach social skills, human growth and development, to motivate the children as well as to facilitate their learning. She doesn't believe that can be done in a remote way. Ms. Orton explained, "You can give facts, and you can have discussions. But unless the curriculum is vastly changed, I don't think that you can teach on a non-emotional way and be effective. I think my kids learn in my class because they like me. ... That's part of what makes ... them want to do some of the things that I ask them to do; they don't really like to divide fractions." Ms. Orton concluded that while personal interaction can be removed effectively in some situations, she'd be really careful about the age of the children who are affected by that. Number 372 CHAIRMAN BUNDE said research indicates the single-most important and consistent factor in a child's learning is the teacher, not whether the child comes from a single-parent family or a particular background, although parental involvement and support are vital. He stated, "And so, I think you have our support and appreciation for taking time to testify." CHAIRMAN BUNDE advised members he would defer to Eddy Jeans to answer technical questions about the existing formula or the impact of potential changes. Number 396 JULIE JENSEN (ph) ZARR came forward to testify. A parent from South Anchorage, she said the education funding formula in its present form doesn't work. Although the Anchorage School District is one of the largest in student enrollment statewide, they don't believe they are ending up with their fair share of this funding. She stated, "We have districts like the North Slope Borough, the richest borough statewide, paying zero into the state education fund, yet they're receiving funding in their schools. We have school districts around our state with millions of dollars in operating funding and few students attending these schools. We have villages and cities all over the state that do not pay property tax, yet our monies pay for their schools. The education funding formula might not need to be increased as much as it needs to be rewritten." MS. ZARR advised members that this year, as in years past, schools in the district had to beg for more teachers. Some schools had elementary levels of 30-plus children, while high school numbers are far more staggering: 46 in a calculus class and 60-plus in gym classes. They see an increase in learning and behavioral problems, in part because the children are in classes that have become too large for teachers to handle. This leaves some students with an average of one-half minute of personal time per teacher, per day, to ask their questions. Ms. Zarr said they have great teachers and students that are not realizing their full potential due to this overcrowding. They have teachers who are doing crowd control in their classrooms instead of teaching, and they have students who are sitting on the floor trying to do their work because there aren't enough seats. She asked, "When will it end?" Number 420 MS. ZARR said as a former student in the Anchorage School District, she is appalled by the current lack of teachers and curricular activities. She stated, "We as parents expect our children to have more opportunities, both academically and culturally, than were available to us when we were in school, and to reach higher than we thought possible. The reality is quite different. Not only are our children not surpassing our educational goals, but every time we turn around, something is being cut. For a state as rich as we have become, we are educationally poor. That in itself speaks for our future. If we do not act on this now and straighten this problem out, we can expect this slide to continue and our children to suffer." MS. ZARR said she doesn't profess to know all the answers to this problem, yet she can look at an overall picture and know a simple solution is available, which is new rules: "You don't pay, you don't get funding for your district." Number 447 CHAIRMAN BUNDE said a lack of local contribution in the unorganized boroughs is probably one of the most challenging issues in any of the foundation formula bills, including this one. He asked Mr. Jeans whether it is accurate that the North Slope Borough pays zero in local contribution. Number 468 EDDY JEANS, Manager, School Finance Section, Education Support Services, Department of Education, answered via teleconference from Juneau: "No, that's not, Representative Bunde. North Slope does make a contribution to education. In fact, they currently contribute about $27 million a year." CHAIRMAN BUNDE asked whether it is correct that there are school districts that have no local contribution. MR. JEANS said that is correct. In Alaska, there are 19 unorganized school districts, otherwise known as the Regional Education Attendance Areas (REAAs), that don't make a local contribution through property tax. However, he believes they make a local contribution through the impact aid program, as the municipalities do. He indicated he was referring to "Public Law 81-874, impact aid." CHAIRMAN BUNDE said that is federal money, which really comes from us anyway. There isn't anybody locally reaching in their pockets and paying taxes to support the schools. MR. JEANS said that is correct; there is no property tax in the REAAs. Number 490 JOE LIBAL, Teacher, came forward to testify, specifying that he teaches in South Anchorage. He referred to testimony by Ms. Orton regarding a third grade/fourth grade split. He said splits are good because the younger students can learn from the older students. However, one thing he has seen whenever a split has been tried is that usually the third grade leaders are put into the fourth grade classroom, because they can handle the workload. What happens then rather defeats the whole purpose for not tracking students by ability level. With the leaders from the third grade now in the fourth grade, Mr. Libal believes it diminishes the standards that the other third graders try to live up to, which dilutes the other third grade classrooms somewhat. MR. LIBAL said he also has frustration with the pupil/teacher ratio. At a recent school board meeting, Mr. Cristal made a comment he'd thought was rather interesting, hitting the nail on the head but not going far enough: If there are 50 students projected and only 25 enroll, a teacher is dropped right away, which is financially the way it should be done. Mr. Libal agreed but said in his own case, more students enrolled than had been projected. Although they had the numbers to use another teacher, they waited four weeks for that to happen. While he could see dropping a teacher right away, he doesn't see why they don't add one right away if there are the numbers to it. He noted that when that many children enroll, usually they aren't enrolling and leaving right away. MR. LIBAL said he tries to provide an educational atmosphere that is safe both physically and mentally. After three weeks in class, a boy had asked whether they'd have to move around classrooms. When Mr. Libal said that was likely, the boy had replied, "Well, I'm going to chain myself to your desk." That was not a mentally safe environment; the children knew something had to happen but had bonded with him, the teacher. Mr. Libal said that while tele- education may be good for older students, he doesn't believe it would work well on the elementary level, because the teachers are so much more than just the knowledge they are giving to the children. Physical presence, including the attitude and character of the teacher, really adds to the education of the child. Number 545 CHAIRMAN BUNDE discussed the "Washington Monument ploy": When there isn't enough money to run government, they close down the Washington Monument and everybody gets upset because a national symbol is closed down. In some people's view, there isn't quite enough money for education. Rather than becoming more efficient and streamlining, and rather than becoming more productive, they increase class size in hopes that parents will raise a hue and cry. Chairman Bunde said that is a dangerous way to go, and he hopes that isn't happening. He pointed out that he isn't accusing anybody of that happening. However, it is something that gets discussed in the legislative halls. CHAIRMAN BUNDE asked Myrna Maynard, Legislative Administrative Assistant to Senator Drue Pearce, whether she wished to add anything; Ms. Maynard said no. Chairman Bunde requested that someone from the school district respond to Mr. Lipscomb's comments. TAPE 97-45, SIDE B Number 006 HARRIET DRUMMOND, Vice President, Anchorage School Board, came forward to testify, specifying that this is her fourth September as a member of the school board. Every year in the last four years, they've gone through this tremendous upheaval for the first several weeks of school; they are also frustrated with it. The board spent several hours the previous week discussing how to staff for additional students. MS. DRUMMOND stated, "The staff is fond of saying that kids don't come in neat packages, and 25 third graders don't always show up where you expect them to. You'll get 40 third graders here and 15 there, and then what do you do? That's an issue that we're going to have to grapple with. We have to grapple with the issue of how do you get all the kids to school on the first day of school. When we have 300-400 additional kids showing up every day of the first ten days of school, because we're not at full population until the end of September, that's an issue that we have to deal with as a district. But we have to make those changes." MS. DRUMMOND continued, "I have personal experience with my own children having to be broken up into smaller classroom units in the third grade, and it's terrible. They do get bonded with their teachers, and you don't want to tear that bonding apart. But the Anchorage School District has not increased class size in at least three years - or is it four years? I'm sorry, I don't -- I believe that happened just before I got elected to the school board. And we are doing our darnedest to not cut into the classroom any more than we have to. But every year this shows up. ... We projected for 300 new kids last year, and 700 showed up; that's one and a half elementary schools. We can't build them fast enough, never mind fund for it. So, we'd appreciate all the help we can get." MS. DRUMMOND concluded by saying she'd told herself this September to stop apologizing for living in a growing, healthy community where people want to live and have their children go to school. While that is something to be proud of, she believes they should also work on making their educational system as attractive as a possible, so they can continue to grow and be healthy. Number 024 CHAIRMAN BUNDE said the official class size hasn't increased, but he is hearing more and more about larger classes. He asked whether that is temporary until more teachers are hired. MS. DRUMMOND affirmed that. They budget for "class sizes over 30," holding back a certain number of teacher hires until they know where the big numbers have shown up. Some neighborhoods are in turmoil all year, in terms of people moving in and out, and some classes continue to grow. They must be prepared to help out those classrooms that need it, with teachers or aides, or both. CHAIRMAN BUNDE suggested that many times the board's challenges are nearly insurmountable, requiring willingness to pitch in and perhaps make a little sacrifice. He concluded by saying the Anchorage legislative caucus, in particular, would do everything possible to try to help. MS. DRUMMOND expressed appreciation for that and said they'd be happy to provide anything they could "to help you make that really tough decision." Number 043 MS. BREAGER said, "I'd like to know, on that rezoning, how it was that you attempted to rezone and cut the people at Service, the students at Service, and they ended up okaying every zone exemption that was requested, and we ended up with more students." CHAIRMAN BUNDE indicated Ms. Breager would have to ask the school board members. However, he wanted to focus on the foundation formula. MS. BREAGER said that to her, what they pay for their business and property in school tax is an obscene amount of money. She has two children at Service High School. Number 051 MR. LIPSCOMB commented on moving students after two or three weeks of school: At Service High School, with 2,300 students, more than 1,000 had their schedules changed, which is more than 40 percent. MS. BREAGER pointed out that those students were just as upset as the elementary students were, although they may not bond in the same way. CHAIRMAN BUNDE noted that college students set up schedules but go to register and are told, "No, you can't have what you've paid for." It is a source of serious irritation. Even tenth and eleventh graders have some serious plans that they'd like to stay with. Number 063 JOHN CYR, President, National Education Association-Alaska (NEA- Alaska), came forward to testify. NEA-Alaska represents almost 11,000 teachers and support personnel, plus more than 100,000 children. He believes the basic premise here is wrong. He stated, "The pie is not big enough. And to say that what we're going to do is take some from `A' and give to `B,' or move money from elementary kids to give to high school kids ... or to close ten small schools and somehow that will alleviate the overcrowding problems that we have on all the Railbelt, I just don't think it does it." MR. CYR said he has been out of the classroom for one year. He'd had 46 students in his world history class, and he'd seen 168 students a day; he believes this is as important at the high school level. Mr. Cyr had taught second grade and believes the parent who said it is right: Kids bond with their teacher; that is the critical thing. Teachers work with kids. "And we're not putting enough money into the system to let that happen the way it should in this state," he added. Number 083 CHAIRMAN BUNDE asked Mr. Cyr why the public isn't willing to put the money in there. MR. CYR said he's not sure that is true anymore, although he hears that. He believes we have "a heck of a job" to show that we are using the money wisely. He stated, "But I really believe that the people who sit in this front row who work with children are using the money wisely. I think they're doing a good job. I think they're doing everything they possibly can to make their classrooms work for children. If you need legislative oversight, if you need to give DOE some teeth to make sure the money is spent on children, hey, I'll testify for that. I think that works." CHAIRMAN BUNDE said they'd had a conversation before about the need for public scrutiny from the day the money leaves the general fund; he believes he also speaks for others when he says they are very supportive of the money that ends up in the classroom, and they are very concerned about that amount of money. Chairman Bunde said he keeps saying, "Well, more money is not going to beget trust, but trust will beget more money." He mentioned his constituents and said it appears that the majority of the people have concerns that the money is being well-spent. Number 103 MR. CYR said Scholastic Achievement Test (SAT) scores statewide have gone up, being the highest in math that they've been in 26 years. Scores are also the highest in reading comprehension, although he didn't know the exact figures. We are educating more children, working with more special education and handicapped kids, and sending more kids off to college. Whether education pays and whether they're doing a good job probably can't be answered by a test. A child who starts kindergarten this year and graduates from high school in the year 2010 will hit peak earning years somewhere around the year 2030. In the long run, they'll know how successful they were with that kid "when that child is our age." Success will include what the person earns, what his or her family is like, and what the city is like. MR. CYR said we're tragically underfunding our children, "eating their seed corn," which he thinks is criminal. He said he realizes the politics that come into play and understands having to juggle everything. But somewhere, we need to bite the bullet, make the hard decisions, and hold accountable school districts, individual teachers and legislators. We must do a better job, but we must give people the tools to do the work that we ask them to do. Mr. Cyr stated, "And I don't think we're doing that. I don't think you can have somebody have 30 second graders and then say, `Okay, you need to do a good job now.' That's crowd control." CHAIRMAN BUNDE responded, "Well, at the legislative level, I can assure you that we stand for tenure review every two years." MR. CYR replied, "As do I." CHAIRMAN BUNDE said they spend $30,000 or $40,000 per student per year; then they get the school report card, and 70 to 80 percent of eleventh graders aren't reading anywhere near grade level. "But what's more tragic is they started in the third grade testing, and they've gone steadily downhill," he said. "Now, that's not just the teachers' fault; I rush to add that. But the problems that are indicated there, I'm not sure are always solved by more money." MR. CYR responded that he would agree, and he also has read the report card. The schools are in desperate trouble. CHAIRMAN BUNDE commented, "Money spent on housing, money spent on trips to San Francisco - another conversation that I'm going to have later today." MR. CYR said it is a travesty. The DOE, the legislature or someone needs to make sure that money goes to children. He stated, "I also know the teachers who work in some of those districts, and they're killing themselves trying to do the right thing for kids. I mean, we're talking about communities that have a host of problems - economic, social. I mean, if you walk into a community where the unemployment rate is 75 percent ... and then say, `You know, you gotta get through school, you gotta get a good education, you need a world-class education, you know, you're 16, you need a world- class education.' `Really? And why would that be? So I can shoot hoops on the play deck?' I mean, to what purpose? Until we define the purpose -- I mean, I taught in rural Alaska. It's tough, tough work ...." CHAIRMAN BUNDE agreed that good teaching is tough, tough work. MR. CYR said it is devalued. CHAIRMAN BUNDE concurred. Number 161 CHAIRMAN BUNDE submitted that if we can get even a token local contribution to education statewide, we will find that urban people are more willing to support education. He stated, "That's my presumption, based on many conversations. And if I'm wrong, I hope people will tell me." MR. CYR said, "I do appreciate the work you're doing; I truly do. Taking this on is not an easy task." Number 175 LELAND DISHMAN, Superintendent of Schools, North Slope Borough, testified via teleconference from Barrow. He expressed appreciation to Eddy Jeans for clearing the air. He indicated that taxes on the North Slope from oil-related industries have contributed an average of more than $25 million a year, over 20 years, to the state treasury, which he believes is a considerable contribution to the state. MR. DISHMAN said on the North Slope they have some problems addressed that morning, including overcrowded classes. In Barrow, Ipalook Elementary School, one of the largest in the state, has more than 800 students in early childhood education (ECE) through fifth grade. Many classrooms in the lower grades have more than 25 or 26 students in very small classrooms. The need for additional state dollars and additional space is not unique to urban areas. MR. DISHMAN noted that many of their classrooms are multi-age and multi-grade. It is not unusual in rural schools to find a teacher laboring with three different grade levels and up to 22 or 23 children in the same classroom, with various grade levels and ability levels. He stated, "So, it's a tough job, wherever we are, and we're all working for the common good of the kids." Mr. Dishman emphasized that on the North Slope, they are trying their best to contribute to the highest quality education they can have. Number 198 MR. DISHMAN said they need to address somewhat the cost of distance delivery, which is a vehicle to deliver a quality education. The cost of interactive TVs between locations is very high, and he isn't sure they'll be able to afford it over another year on the Slope. Therefore, it is not a panacea. MR. DISHMAN stated, "We, for over the past two years, have taken over an $800,000-a-year cut from our assembly. So, basically, with our enrollment increasing at about 100 to 105 kids per year, we need five new classrooms and five new teachers, if we were a utopian situation, every fall. But for the past two years, we've been faced with a frozen budget, and I expect to see a decreased budget coming up this year from the borough, because their funds are down considerably. So, ... that's kind of my emotional plea, is it's the idea that we're all in this together, and we need to look for ... a common equation that will allow all kids to get a high quality education, wherever they live, regardless, be it urban or rural." Mr. Dishman deferred to Marie Carroll to present a prepared statement. Number 222 MARIE CARROLL, Chief of Staff, North Slope Borough, testified via teleconference from Barrow. She stated: "Prior to the discovery of oil at Prudhoe Bay, life on the North Slope was very primitive, and poverty was common. I was there and didn't realize it when I was growing up. Over the past 25 years, we have worked hard and made many improvements in our public services. One of the most important was to establish K-12 schools in each of our eight villages. "The Inupiat people and other borough residents place a very high value on education. We are committed to quality schools and quality education. Our children are our future. We've said that many times. They are our first priority. Only through education can they have hope and a real opportunity for quality life in the fast-changing world. I've seen that change over the past 25 years in my own life and in our families. With the changes, I think education is even more important now to us than it was even 40 years ago, or even 30 years ago. "I am deeply concerned, Mr. Chairman, that some of the educational foundation funding measures considered in the last session of the legislature were not focused on our children, their needs and their future. The Governor, the members of the legislature and all Alaskans should be working for the common good for all of Alaska's children. Alaska has the resources to provide quality education and quality schools which will enable all children to achieve their full potential. "Mr. Chairman and the members of the committee, ... we all need to take a long-term view of our children's future and the state of Alaska's long-term economic interests. I believe that means providing needed and quality education for all children, urban and rural. I think Mr. Dishman ... made it clear that we face the same problems that the urban schools do in rural Alaska, working together and avoiding regional conflict, and maintaining conditions which create good jobs and opportunity for future generations. ... I believe that we all need to work towards these goals." MS. CARROLL thanked the committee for the opportunity to testify. She concluded by saying the North Slope Borough and their school district are committed to working with the legislature to improve the quality of education for all students in Alaska. CHAIRMAN BUNDE said he'd heard that rural Alaska is one of the fastest growing areas in Alaska. He asked whether Mr. Jeans could comment on that. MR. JEANS said he could not. CHAIRMAN BUNDE said several schools now indicate they have education funded for early childhood education (ECE) through twelfth grade. He asked whether that service is offered in Anchorage. Then he commented, "I see a shaking of the head, no, that that's not offered in Anchorage." He asked for confirmation that it is only offered in rural areas. MR. JEANS responded that the foundation program only provides funding for kindergarten through twelfth grade, unless children at least three years old, he believes, require special education services. They don't provide funding for other preschool programs. CHAIRMAN BUNDE asked whether that would include the ECE. MR. JEANS replied that he is assuming the ECE is an early childhood program. They don't provide funding through the foundation program for that, only for special education children under five. ASHLEY REED came forward to testify, speaking as a parent, not a lobbyist. He has traveled around the state and has a child who will soon go to school. While he seldom agrees with John Cyr on issues, he'd found himself agreeing with him that day. Mr. Reed said he believes this legislation and this hearing are pitting different parts of Alaska against one another. Alaskans appreciate living in a large state with diverse regions and cultures. Rather than pitting regions against each other, we need to try to work together. MR. REED agreed with Mr. Cyr that we're trying to divvy up a pie that is already too small. While he understands that the legislature is in a budget-cutting mode, and it should be applauded for efforts on that, when we're talking about our children, we're talking about Alaska's future. This is an area that we should look at and try to fully fund. MR. REED commended the chairman's and the legislature's efforts last year in passing a cigarette tax, which would take effect the following day and raise approximately $30 million. However, he doesn't believe it is in the best interest of Alaskans to rewrite a formula, taking away from Peter to pay Paul. Number 316 MR. REED mentioned testimony from parents and teachers in whose voices he'd heard frustration, anger and disappointment that they don't have the funds to provide the type of quality education in which they believe. Mr. Reed said he doesn't want to take money from any other community so that kids in Anchorage can have a better education. Rather, he wants the children of Alaska, no matter where they live, to have the same quality of education. MR. REED said parents and teachers need to ask for the legislature's leadership in trying to broaden the debate, which has been put in a box: the school foundation formula. If Anchorage wants more money, it must be moved from one part of the box to another. Mr. Reed acknowledged there are many issues, including the issue of unorganized boroughs; rather than talking about fixing this one problem or this one bill, maybe they need a package of legislation or increased appropriations, such as from an unorganized borough tax, for example. He believes that to limit it and just say we are going to revise the school foundation formula puts Alaskans at peril. There will be winners and losers. However, Mr. Reed said, if we reach into our hearts and do what's right, we're not going to steal from Peter to pay Paul. Instead, we will look for a way to accommodate all of our children in Alaska, which he believes is what we should do. MR. REED said there are schools in rural Alaska without water, and there are communities without sewers. Anchorage residents sometimes forget how convenient life is, and how much luxury they have. He asked whether we should we have running water in every classroom and every school, and he said he believes we should. However, we don't have that. In some communities in rural Alaska, the school is fortunate to have running water. But it may be the only place in the community that has running water, and people wanting a shower may have to go to the school to get one. MR. REED noted that legislators have the opportunity to visit various communities and interact with colleagues from around the state. He again asked that legislators offer leadership to try to change the debate from a "small box" to a package that is in the best interests of Alaska's children. MR. REED said the Alaskan public has proven, through public opinion polls, that they clearly want the cost of government reduced; he indicated the legislature has done a good job of heading in that direction. However, the same polls show a large commitment for public education and related funding. Mr. Reed asked again that they consider expanding the pie. The cost of education goes up, as does the cost of living and government salaries and per diem. Mr. Reed mentioned the high cost differential between Anchorage and Barrow and cited examples. He said he'd mentioned the North Slope because it is a school district that is threatened under the current drafted legislation. MR. REED suggested that if legislators had the commitment shown in campaign brochures, we'd have well-funded education in Alaska. He again encouraged the committee to offer leadership and encourage colleagues to look at the issue in a different debate format, as he believes that would truly be in the best interests of Alaskans. Number 396 CHAIRMAN BUNDE pointed out that the goal of this bill is twofold. First is to make the formula simpler so that the general public understands it and perhaps is more supportive, which may bring more financial support. The formula is rather convoluted now and hasn't been changed since the early 1980s. The other part is to make it more fair, because if people believe they're being treated fairly, then they're willing to provide the financial support. Number 404 MR. REED agreed those are legitimate concerns. However, he also believes the public's primary concern is for their sons or daughters in Anchorage to have adequate funding. When people testify that they want the formula changed, perhaps they should be asked whether they believe education is being funded adequately. The debate has gone on so long inside this small box, people have become accustomed to arguing for more money within the context of that box. He believes the debate is, and should be, greater than that. CHAIRMAN BUNDE commented that personally, he also supports other educational endeavors, particularly those that will bring the unorganized boroughs into the twentieth century. Number 420 REPRESENTATIVE KEMPLEN said in the private sector, people seek to improve quality of their raw materials when looking at producing a product. One way they improve the quality of their particular goods is to work closely with their suppliers, in terms of quality control, letting the supplier know their quality standards, for example. In talking about education, they are talking about kids coming into the system, and improving the quality before they come into the process is important; Representative Kemplen believes it should be discussed more by the leaders of this state, particularly those interested in education. He said having much more of a holistic approach to educating our people is extremely important. REPRESENTATIVE KEMPLEN noted that from the prenatal stage through the first years of life, the foundation is being laid for the rest of an individual's life, including how well the person can assimilate information and learn. If someone wants results from an eighth grade reading score or an exit exam, it makes sense to look at improving quality in the early years, before the kids come into the educational system. Representative Kemplen said providing resources to improve the quality, including prenatal care, Head Start programs, and "all of those programs and those initiatives that enhance the ability of a human being to learn," is a wise investment. When he looks at the foundation formula, he sees that it deals with funding for kids once they're in the system. Number 473 REPRESENTATIVE KEMPLEN said we can have the most impact on those kids before they get into the system. For a more comprehensive approach to education, it seemed they would look at plugging into this foundation formula not just the distribution of monies to particular school districts or K-12 individuals, but also to support the preschool programs, to support initiatives, so that the quality for kids is excellent before teachers even have a chance to interact with them. He applauds Mr. Reed for asking the leadership of this legislature and this state to think beyond the box, and to think in a broader perspective. He expressed hope that as we continue this dialogue, Alaskans will open their minds and think about the education of our citizens in a more holistic fashion. Number 504 CHAIRMAN BUNDE referred to a comment by Mr. Cyr about a 16-year-old in Chevak, for example, whom they expect to excel in high school, but to do what? He suggested that development of our economy goes hand-in-hand with what they are trying to achieve here. With the two divisive issues of subsistence and Indian country on the agenda, he'd hate to see education become a third divisive issue. "But they have to be interrelated in people's minds," he added. Number 520 MR. REED commended Chairman Bunde for a good job of chairing this committee over the years, and he noted the hours the committee members spend listening to concerns, debate and information about education. He encouraged this committee to try to lead their colleagues down a path of a broader discussion, saying it is good government and good politics. He commented that he'd never known a politician that lost a race because of being considered pro- education. CHAIRMAN BUNDE responded, "Good point. And I would say: Collectively, we're all wiser than we are individually. So, that's one of the reasons we're pleased with your testimony." Number 563 KATHI GILLESPIE, Legislative Chairman, Anchorage School Board, came forward to testify. With her were Harriet Drummond, Vice President of the Anchorage School Board, who had testified earlier; Larry Wiget, Director of Public Affairs and Government Relations for the Anchorage School District; and Janet Stokesbary, Chief Financial Officer. MS. GILLESPIE expressed appreciation for this hearing and the past conversation, particularly the previous year. She stated, "We also appreciate, over the course of the last few years, you fully funding education and also increasing funding to take care of student enrollment, which has helped particularly in the Anchorage School District." MS. GILLESPIE said the foundation formula, as originally put forward, has been a problem and a concern for the Anchorage School District. It has been ten years since it was developed and put into place, and they propose that it is time to take another look at it, which the legislature has decided to do. They look forward to the results of the area cost differential study being conducted right now on the Senate side. MS. GILLESPIE said they have approximately 40 percent of the students and receive 30 percent of the funding. They also have an increased proportional share of special education students because of the services they provide in the Anchorage School District. It makes good business sense to take a look at this foundation formula because of changes in population in Alaska. MS. GILLESPIE advised members that they'd developed a spreadsheet after looking at some proposals put forward by the House and Senate, including HB 148; they'd tried, on some issues that they believe are important for the Anchorage School District, to list advantages and disadvantages they see in each proposal. In addition, they are putting together a position paper on the foundation formula rewrite, and Ms. Gillespie offered to highlight some of the issues outlined there. She explained, "They're all important. And do we expect to see all of these things happen in a foundation rewrite? No, we don't. But what we would hope to do ... is to broaden the conversation and give you our perspective as people that represent the parents and teachers and kids in the Anchorage School District." MS. GILLESPIE said they have talked for years about inflation- proofing the foundation formula, and they realize that with the financial situation that the state is in, and with the decline in oil funding, that is a problematic issue for the state. [Comments cut off mid-speech by tape change.] TAPE 97-46, SIDE A Number 001 MS. GILLESPIE said in the last ten years, because of inflation, their funding has decreased 30 percent in terms of real dollars, although the value of the foundation has increased 1.7 percent. Over the past seven years, they have become more streamlined. They've had to cut programs to the tune of $50 million. She asked, "Has that had an effect on the quality of education that we've been able to provide our kids? Absolutely. Has it had an effect on class size? Yes, it has, although we've gone out of our way to try to protect the classroom and the class size, in particular." Ms. Gillespie said they're able to do fewer and fewer programs for their kids because of the erosion in the foundation formula, and they'd like to see that addressed. MS. GILLESPIE said pupil transportation is an issue for urban districts and districts that have transportation money. "We do want to see that outside the foundation formula because the foundation has not been inflation-proofed," she said. "We have worked very hard over the last ten years ... to ratchet down the costs that it cost us to provide pupil transportation here in the district, and we are very concerned over some of the proposals - not in this particular bill, but in others - to put the transportation money in the foundation, because of the effect that we're seeing ... on other parts of the instructional programs because of ... the problems with inflation." Number 018 MS. GILLESPIE discussed another concern in Anchorage relating to sixth graders. Instructionally, they are moving more and more to the idea that sixth graders should be in a middle school situation. Other districts throughout the state, especially urban ones such as Kenai, Fairbanks and the Matanuska-Susitna Borough, have middle schools that include sixth graders. MS. GILLESPIE advised members that in Anchorage, the problem is that sixth graders, under the present foundation formula, are considered elementary students. She explained, "Elementary students are funded, as Mr. Lipscomb told you, at a lesser amount than secondary students are funded, about $1,100. It costs us $700 more to educate a sixth grader in a middle school situation than it does to educate that sixth grader in an elementary school. And so, while instructionally we ... are discussing the idea of `maybe it's more appropriate for the sixth graders to be in a secondary situation,' we don't have that flexibility within the foundation formula. Also, in terms of space utilization, sixth graders are considered elementary students; therefore, they get the 106 square feet that an elementary student gets, as opposed to 150 square feet that a secondary student gets. So, one of the things that we would very much like to see in any foundation rewrite is discussion about some flexibility, whether or not sixth graders would be considered elementary students or secondary students." Number 033 MS. GILLESPIE said they are very concerned about unfunded mandates at both national and state levels. They'd recently spoken with DOE Commissioner Holloway, who was considering mandating the National Assessment of Educational Progress (NAEP) test for students. Unfortunately, that is costly, estimated at approximately $14,000 for the Anchorage School District. Ms. Gillespie stated her understanding that there'd been further discussion at DOE, and there is a possibility they aren't going to mandate NAEP now because of the cost. MS. GILLESPIE said as we look at the quality schools initiative and some other special education mandates, the costs of charter schools, including start-up and administrative costs, are being mandated. In some respects, these aren't mandated but are options that the public expects them to follow through with; they are increased costs for them, but not increased costs that they are getting from the state. MS. GILLESPIE said technology is also an issue for the Anchorage School District. They are grappling right now with how to begin to provide technology in their schools, with their current operating budget, at the level that some of the rural districts are able to provide for their students. She explained, "We can't survive on grant money alone, trying to implement technology in our schools. Somehow, we're going to have to try and figure out a way to include this in our operations." Number 052 MS. GILLESPIE expressed appreciation for the testimony that day, which shows the frustration of Anchorage residents over education and related funding. There are broad concerns about class size. In the Anchorage School District, they try to set a minimum class size but have difficulty setting a maximum class size. This has certainly impacted areas with a high potential for growth, including Eagle River, South Anchorage, or any area that happens to experience a big increase in student enrollment. Within the budget constraints, they haven't been able to move forward to reduce class size and maintain the quality of programs that they believe they must provide for all students. Number 061 MS. GILLESPIE said the equity of the curriculum is also an issue. Because of growth and inflation, they feel the quality of their curriculum has decreased, which concerns them greatly. She concluded, "It's been ten years. We were not entirely satisfied with the foundation as it was originally set up; it is not a perfect formula, ... from our perspective. And so, we applaud your efforts to take another look - a fresh look - at the foundation formula, and to try and come up with a foundation that is equitable to everyone in the state. We do educate the majority of students in the state, and we would like to do a better job with the funds available." She expressed appreciation for the opportunity to talk with the committee, and she said she knew they'd be having continued discussions during the legislative session. CHAIRMAN BUNDE said, "A question on the NAEP test: Is that the commitment that the state Administration made to follow ... Clinton's Administration, fourth and eighth grade ...?" MS. GILLESPIE replied that those are two separate issues. The NAEP test is governed by the independent board at a national level; they give the test to selected classrooms and then develop statewide statistics. Unfortunately, there is a cost to the Anchorage School District, and they weren't able to get much information appropriate for Anchorage. She commented, "And so, we consider that an unfunded mandate. If the state wants it, we believe the state should pay for it." CHAIRMAN BUNDE asked, "What would you anticipate it would cost the Anchorage district if the state were to adopt the Clinton Administration's support for the eighth grade testing proposal?" Number 091 MS. GILLESPIE responded, "We're very concerned about that, particularly in light of the fact that the test has not been developed yet. But there have been some news reports ... from the Clinton Administration that this test would be available in a very short time, the results would be available in a very short time, kid-specific, school-specific, district-specific and state- specific. Now, one can only image what that would cost, to get that in a short turnaround time and ... be specific to the kid. So, we have been in contact with Senator Stevens' office. There have been several amendments to the education appropriations bill that's before the Congress right now. And what we're saying is that if they go forward with national testing, then we need to see some money come from the federal level to subsidize that, so it's not a cost to the district or to the state, quite frankly." CHAIRMAN BUNDE asked how Ms. Gillespie would react to Mr. Reed's comments about having a bigger pie rather than shuffling the pieces of the pie. He specified that it didn't have to be an "either/or" response. MS. GILLESPIE replied that the issue is always adequacy and equity. She agreed that costs for education have risen, as they've gone up in every other area. She stated, "But reality is you have to deal with the revenue that you're taking in, as a community and as a state. And I think that we all have a part to play in reducing our costs and becoming more efficient, in order to deal with the reality of Prudhoe's decline. And so, I do believe that -- you know, there's a constitutional mandate to support education. I do believe that we cannot balance the budget by decreasing funding for education, but I think that we have a part to play also in helping the state deal with the reality of reduced revenues from oil funding. But because we're having difficulty with the adequacy issue, and more money and adequate money, that should not preclude us from dealing with the other piece of this, which is the equity issue and how that money is distributed." Number 102 MS. GILLESPIE continued, "We in the Anchorage School District have had ... ongoing concerns about the equity portion of this. And so, I don't think that we should not have the discussion about the foundation rewrite, or only have that discussion if there is unlimited funding to fund education. They are both equally important discussions, but the one should not preclude the other, in my mind." CHAIRMAN BUNDE clarified that he didn't mean to indicate it was an either/or situation. Noting that he himself lives in the Service High School area, he asked Ms. Gillespie to comment on Mr. Lipscomb's testimony regarding why Bartlett High School appears to be funded at a much higher level than Service High School. Number 111 MS. GILLESPIE explained that in the Anchorage School District, some areas of the budget are funded by school, whereas some are funded by student. She stated, "And one of the things that we started discussing during the last budget discussion is: Do we need to take a fresh look at the way we allocate funds, and take more of those items that are now funded by school and take a look at funding them by student? We had hoped to address the inequity there by boundary changes. Unfortunately, the senior high level, for a variety of reasons, we were not able to equalize the student population as we had hoped. And so now, I think that that gives even more seriousness to the issue of taking a look ... at the budget and trying to fund those items that should be funded by student by student, and then reduce the number of things that are funded by school. But, there again, do you set a minimum or a maximum? ... And do you take away ... from the one school in order to give to the other school if you can't hire more people? And so, we're grappling at a micro-level ... with the same issues that you're grappling with at a macro-level. And ... it's an ongoing discussion." Number 128 REPRESENTATIVE KEMPLEN noted that some areas of the community have demographics that typically lead to more well-prepared children, in terms of household incomes, access to resources, and two-parent families, for example, whereas in other parts of the community, there are lower incomes and single-parent households. That difference in geographical area results in different qualities of students. One could argue that students from higher-income, two- parent households are better prepared to learn, and that the school district can provide a quality education with little remedial need, while those from lower-income, single-parent households come ill- prepared to learn and may need remedial assistance to help them improve the quality of that input. Representative Kemplen likened it to a business that gets a gear from one supplier which is finely tuned and well-machined, so that little must be done to plug it into the process, while from another supplier, it gets a gear with many burrs, so that in order for it to fit into the system and function well, additional work must be done. REPRESENTATIVE KEMPLEN referred to earlier discussion of per-unit, per-student funding. He asked how that would work, expressing concern about the difference between prepared and ill-prepared students, and he suggested the latter would require more money. MS. GILLESPIE said she agreed with Representative Kemplen. She stated that the presentation by Mr. Lipscomb had not yet been given to the school board, although she'd heard it the previous day at the South Anchorage Alliance meeting. She offered information about the kinds of things that she believes Mr. Lipscomb is talking about. For example, one nurse would be provided for a high school of 2,300 kids, and one nurse would also be provided for a high school of 1,400 students. Ms. Gillespie stated, "You know, one might say that in one school, you're getting half the nursing care that you're getting half the nursing care that you're getting ... in the other school, the same thing with the amount of activity funds, where you have the same ... amount of activity money given at a school of 2,300, as opposed to a school of 1,400. And you might say that ... there was twice as much money given to the school of 1,400 as to the school of 2,300." MS. GILLESPIE said those are issues that the school board is grappling with, and they'll be working with Mr. Cristal and the parent-teacher community to address those sorts of issues. She doesn't know what the resolution will be. It will be very difficult within the budget constraints, though, to put more money into the schools with higher populations. Ms. Gillespie stated, "That is something that we're looking at, just as you're looking at equity in funding on a statewide level. It's an issue for all of us." She said they hope to do a good job. They'll continue to talk to the public about it and hopefully respond in some way that will equalize the funding and services provided for all students in the Anchorage School District. Number 192 REPRESENTATIVE KEMPLEN said many large organizations or corporations always try to improve the quality of their input, in order to produce a better product. He referred to earlier testimony about special education funding in the foundation formula that is specifically targeted for children under five. He asked whether the school district has any programs underway, or initiatives in place, that seek to improve the quality of preschool children, so that when they come to the school district, they are better prepared to learn and to respond readily to the "magic" worked on them by the schools. MS. GILLESPIE replied that they work with the programs funded by the state. They provide special education services for children from birth up until five years old, depending on the level of need. They also provide some support for the Head Start program, and they try to transition those Head Start students and parents up through grade three, through `Project Pride.' She said they can't afford the grade levels they are offering now, though, and there is no way they can provide early childhood education with the current financial situation. If the state wants to provide those, as extra funding, she'd think that is great, but they must concentrate on the grade levels that they are mandated to serve now, starting with kindergarten. Number 222 REPRESENTATIVE KEMPLEN asked whether the school district would support a change in the foundation formula to allocate funding for preschool services that isn't taken away from existing resources. MS. GILLESPIE said only if it is coupled with inflation-proofing. If they expand the scope of work without inflation-proofing the foundation formula, it will just lead them faster down the road to insufficient funds. "So, if it's coupled with inflation-proofing, absolutely," she concluded. Number 240 HARRIET DRUMMOND stated, "At a recent work session, the board agreed that we need to do some outreach to parents, beginning at birth of their children. And we agreed that ... we need to do that within the funding that we currently have. But how much education can we do, as Ms. Gillespie said, outside of our funding for K-12? We are partnering where we can. I know specifically at North Star - and where is the Healthy Start program, besides North Star? - we're partnering to provide space for the Healthy Start program, which is a state program that reaches out to the parents and preschoolers, reaches out to parents who are monolingual in a language other than English, to help bring them into school ready to learn. But that's only possible in the schools that are getting Title 1 funding already, the extra funding from the federal government, to help low-income-area schools." MS. DRUMMOND agreed there are children coming to school not ready to learn in the same way that others are. Where possible, they provide partnership opportunities, but they can't provide the funding. However, if they can provide the space, they're doing it. Ms. Drummond stated, "You are seeing the results in your own neighborhood of Fairview. And that community has figured out and made tremendous strides in their test scores this year, this past profiles and performance report. But that took a great deal of community will and resolve ... to put the money and the resources where it was most needed. And I think we're seeing that result; it's not without a lot of hard work. ... So, those are your local success stories." MS. DRUMMOND said Mr. Lipscomb's issue with facilities is also a local issue they are working on. Last spring, Anchorage voters agreed to pay more local taxes to renew and renovate many older schools, and to put significant amounts of money into studying and designing the needs of Service High School, Dimond High School, and several other old secondary schools. MS. DRUMMOND stated, "It's now their turn, and we're working on it. And we are prepared to pay for that ourselves. ... There doesn't seem to be any assistance coming from a statewide level, but we are moving forward. We are accountable to the local voters; they wouldn't be approving one bond issue after another if they didn't think we were doing the job right now. But it takes time." CHAIRMAN BUNDE responded that hopefully there will be, in the not- too-distant future, more school construction and maintenance (indisc.). MS. DRUMMOND replied, "We hope so. And we wrote those bond issues so we could take advantage of that when the time came. Thank you." Number 273 REPRESENTATIVE KEMPLEN mentioned the common wisdom of reducing class size for "the professionally trained master teacher." He said an alternative scenario proposed is reducing the adult-to- child ratio, which can be done by providing more parents or other adults in the classroom who can assist the professional teacher. For example, the teacher could give assignments; adults could take five or six students in a group, with the teacher being a "rover" but the other adults working on a one-to-one, personal level with the children. REPRESENTATIVE KEMPLEN indicated this has come up in discussions of welfare reform, particularly in bush communities and in some Anchorage neighborhoods that are looking at ways to provide a work environment for adults currently receiving public assistance, who are now mandated to have some sort of productive work activity. Many villages don't have a cash economy, and even some lower-income Anchorage neighborhoods have inadequate work opportunities for single parents, especially when child care and transportation are factored in. The idea is to provide funding for parents in the elementary schools to become teacher aides, for want of a better word. That brings more adults into the elementary school environment. And if they're parents, it provides them an economic incentive to be involved in their children's education, because they are working at the elementary school. REPRESENTATIVE KEMPLEN asked for a "read" from the school district as to the utility of that approach. He asked whether only teacher- to-pupil ratios are important in talking about class size, or whether they could also look at adult-to-child ratios. Number 334 MS. GILLESPIE replied that the first choice, always, is fewer children in the classroom, for a variety of reasons. Adding more children and a second person only adds warm bodies, not necessarily improving the instructional program because of limited space, increased noise and distraction. So, certainly reducing the number of children per certified teacher is the number one priority. Ms. Gillespie said they had, in the past, to address some class sizes, provided a teacher aide who'd had some training. But it isn't their first choice as far as the instructional program for the children. MS. GILLESPIE disagreed with the idea of subsidizing welfare reform out of the education budget, saying there isn't the funding for that. They want to ensure that people in the classrooms are trained and are an asset to the students. While providing jobs for people trying to work their way off of welfare is a common commitment that everyone will have to address, and while the school district will be willing to take a look at whether there is a part they can play, the wholesale paying of people to do jobs that they used to volunteer for is not within their means now. Ms. Gillespie said it is an interesting concept. But first they'd have to discuss whether they want to put more children and more adults in a room, and whether that is good for the instructional program. And second, how would they train those people and fund putting them in the classroom? She restated that it is an interesting concept but would deviate from what they consider good practice right now. Number 364 MS. DRUMMOND commented that as a board, they haven't made that decision to which Ms. Gillespie was referring. But on an isolated basis, it is happening. Muldoon Elementary School did a grant- funded project, last year or the year before, where they paid parents who were on welfare; she didn't know the name of the project or the results. Ms. Drummond emphasized that they can't do this on a grants basis, school by school. She said, "We either need to decide that we're going to do it citywide, or we have pockets where things are happening and pockets where they aren't happening because the grant money isn't there." Number 375 REPRESENTATIVE KEMPLEN indicated the principal of Muldoon Elementary School had expressed that the experiment was an unqualified success, resulting in a significant improvement in parental participation, including increased self-esteem in the parents in terms of being involved with their children's education, for example. In addition, the children themselves became more enthusiastic about learning because their parents were there and involved. He stated his belief that it is a successful prototype in Anchorage, particularly in their disadvantaged elementary schools, that pays significant dividends. Representative Kemplen suggested that should be looked at more seriously as public policy. He reiterated the need to broaden the perspective on what is possible to meet the challenges of today. Number 398 CHAIRMAN BUNDE commented that philosophically, there are different points of view as to how much the government should "parent" children. While he encouraged the school board to increase parental involvement, paying bribes for parents to do what good parents ought to do is another area to discuss. CHAIRMAN BUNDE announced a five-minute break at 11:15 a.m. He called the meeting back to order at 11:20 a.m. Number 406 KAREN KULIN came forward to testify. She said they'd moved to Anchorage 14 years ago, choosing - she emphasized that word - to live on the upper hillside; her children never had school buses. However, her husband's partner lives on a worse hill in Eagle River, and that woman's children have always had school buses. Ms. Kulin stated, "The school district told me in approximately '84 that that was a political thing, that they were given four-wheel- drive school buses, and it takes a lot of money, and I'll never have it. But it's my choice. I don't have sewers where I live. I understand villages don't have sewers in a lot of areas. Again, that's my choice." MS. KULIN said her husband commercial fishes in Chignik, where nine years ago they built a new school with state money; four children were going to the school then, and the school cost a half million dollars to build. She stated, "It's breathtaking to look at, you know - oak wainscoting, the science labs that my kids have never had at O'Malley, Hanshew or Service High School. They have a choice to live there, like I have a choice to live here. They don't pay taxes; I pay a great deal of taxes." Ms. Kulin advised members that this is a bad fishing year. However, the father of several of these children in past years has made approximately $1 million per year, yet he doesn't share in the cost of his children's education. MS. KULIN pointed out that they are talking about disadvantaged children here. She feels they are taking money away from the future leaders of America. She stated, "I'm not saying other children should not be given funds, but you don't take away from funds from the children who will return to society, more than likely, in the end." She said statistically, Service High School is a disadvantaged school. Her oldest daughter started there in 1988 and graduated in 1992; her next daughter went there from 1992 to 1996; and this year, she has another freshman there. MS. KULIN indicated she has watched the total disintegration of the school district; she cited overcrowding and maintenance of the school as issues. She and her husband worked on the (indisc.) and grounds committee for several years when their oldest daughter was there. The school was in appalling disrepair, and the bathrooms were atrocious. When her second daughter went there, children themselves put toilet paper in the bathrooms because of inadequate custodians. Ms. Kulin asked, "Is that an advantage or a disadvantage?" MS. KULIN said she understands there is a need for preschool education. However, if they can't fund K-12 adequately, why are they even looking at preschool? While she hadn't originally planned to testify, she'd become frustrated upon listening. She said she believes the bush schools need money, but not necessarily in the way it is being allocated, and she isn't sure that "individually, per student" will be the answer. MS. KULIN concluded, "But I think we have to remember that people do have a choice. I know that in our area, it appears to me that we're pouring more into a high school, with taxpayer money, than any school in the Anchorage School District, if you just look at property values, but yet our students are being given less." Ms. Kulin asked whether members saw her point at all. Number 505 REPRESENTATIVE KEMPLEN responded that the educational system in Alaska needs more money. MS. KULIN agreed but said it also needs better allocation. She'd spent innumerable hours at O'Malley, Hanshew and Service, which is part of being a parent. While she understands that these children are disadvantaged and feels sorry for them, she doesn't think paying parents to be parents is necessarily what it is all about. REPRESENTATIVE KEMPLEN indicated that reasonable, rational people fine-tune things, looking for ways to do a better job than they did yesterday, and change requires flexibility. However, some parents lack good parenting skills, and their children may produce costs to the community through crime or other dysfunctional behavior. MS. KULIN mentioned the burden. REPRESENTATIVE KEMPLEN said it benefits a community to invest in improving parenting skills and giving a child the best chance possible in life, so that the individual moves off the track leading to crime, drugs and dysfunctional behavior. He said we should be looking both at additional money for K-12 and at improving the quality of children coming into the K-12 system; he mentioned providing the type of initiatives that improve that quality. Number 570 MS. KULIN agreed and said if there was excess money, she could see that. However, if a family can barely feed itself, do they adopt more children? These children are being shortchanged already, and she can't understand advocating bringing more in within the preschool system. She thinks every child should be given the opportunity of going to preschool; her own children certainly went. But she doesn't think they can take away from properly educating those in the system already to bring more into that realm. She recounted how, a number of years ago, a friend had felt he needed to move to the O'Malley district because the test scores were always better there, which he believed meant that O'Malley had better teachers. Ms. Kulin stated, "But that doesn't mean that we have better teachers. It means we have better parent involvement." While she could understand and appreciate what Representative Kemplen was saying, she believes they must take care of what they already have before bringing on more. MS. KULIN restated her belief that the school district has seriously deteriorated. She commented, "I think it's a total 'dumbing' of America, if you want to know the truth." Her oldest daughter, who is in a master's teaching program and doing a practicum at Hanshew, told her the textbooks are appalling. While her daughter teaches both a gifted eighth grade class and a regular class, the former has perhaps 20 gifted students and 10 others. It is frustrating for those who can't keep up. "That's mainstreaming, I guess," Ms. Kulin commented. Number 624 CHAIRMAN BUNDE said Ms. Kulin had presented some interesting and challenging questions, and her testimony was a good endorsement of the high school competency tests just passed the previous year. He indicated he shared Ms. Kulin's frustration. TAPE 97-46, SIDE B Number 004 ROBERT GOTTSTEIN came forward to testify, specifying that although he is a member of the Board of Education, he wasn't representing the board. An owner of Northern Television and the Fourth Avenue Theater, he has degrees in business and economics, with a major in finance. He grew up here and has been in business here since college, for the last 20 years. He was involved in a large organization, Carr-Gottstein, that is on the same scale as the Anchorage School District in terms of numbers of employees; he said he moved around a lot in that organization, taking advantage of an opportunity he had to learn a business. MR. GOTTSTEIN said for the last ten years, he'd been concerned about schools in general in Alaska, and the education of people, whether in preschool, K-12 or postsecondary. He said we've got a great opportunity in this state, and it's not being fulfilled. When the Governor asked him to join the Board of Education, he did it because he thought there were ways to contribute to the solution, using his background and expertise that perhaps others don't have. He said he might consider himself an education economist, and he doesn't know that others have really attempted to make the connection between economics, finance, and education. Number 024 MR. GOTTSTEIN, himself a twin, recounted a story a professor had told him about six-year-old twins, one depressed and one jovial, who couldn't see eye to eye. A psychologist put the sad one in a room filled with toys and the happy one in a room filled with manure. An hour later, the one with the toys was crying because he couldn't find the one toy he was looking for. When they opened the other door, manure was flying and the child said, "Where there's this much manure, there's got to be a pony in here somewhere." MR. GOTTSTEIN said that is the point here. To meet expectations for all Alaskan children, we must re-evaluate how we're doing things and whether they are really designed to produce the best results. We spend $1,150,000,000 in Alaska on K-12, counting federal, state and local dollars. He said to be generous, he can't be very complimentary of the business practices of education. He believes it is apparent to the public that "if it's going to take more money for education, we cannot continue to practice and deliver in the manner in which we have." However, he can't say whether we need more, although he has some instincts to believe that if we spent more, we could produce better results. "But I'm not here to tell you that if we simply got more, we would produce better results," he added. MR. GOTTSTEIN said the Board of Education, with the Department of Education, has worked a number of years on a new foundation formula, and he himself has spent a lot of time on it. Compared to the current practice of delivering schools, he thinks it is head and shoulders above that - not that it couldn't be improved upon, because he agrees that one can always improve upon things. While he believes that elements of other bills have virtue, the bills introduced last year missed a component that he thinks is fundamental to the success of good practices in education. Number 060 MR. GOTTSTEIN said he believes we must, in a sense, block grant reasonable amounts of money to districts, or to students and families in a public setting, and let communities decide, within good-practice parameters, how best to spend those monies. And we have to be very good at determining what is reasonable. Mr. Gottstein said it is up to the state, and the bill described - testing at the end of the senior year - is an example of the kinds of things we need to do. We need to assess how our children are doing. While the end of the line is an important point, there are other points along the line to assess. There is discussion of national standards, not just state standards, and this isn't just a local discussion. Number 070 MR. GOTTSTEIN discussed poor business practices within the present system. For example, we spend around $30 million on transportation in Alaska, which is 3 percent of $1,150,000,000. That 3 percent controls so many things in education. For example, it determines where a child goes to school; a parent doesn't. He stated, "If there are a variety of choices ... in a public setting, and unless one has the time and the resources to transport a child, you have no choice." Mr. Gottstein discussed a debate over boundaries in the Anchorage school system; the chorus was about how many parents would be forced to send their children to schools to which they'd rather not send them, and that someone other than the parents would make those decisions. MR. GOTTSTEIN referred to talk about parents and the authority and responsibility that we want to give children. He suggested we're speaking out of two sides of our mouths, because if we believe that is important, how can we say a 3 percent item will deny a parent the privilege of deciding what school is best? He said almost all parents will send their children to a school that is convenient, free, and satisfies the need of the parents. This district in particular, and others across the state, no longer offer public school free, which involves an area of economics on which he believes he has some expertise but which hasn't been well-debated. Mr. Gottstein said by and large, parents have greater expectations of their children than anybody else does. He asked, "How is it that we diminish those expectations by depriving them of what they think is right for their child? What, because of a 3 percent item?" Number 102 MR. GOTTSTEIN said one big debate in Alaska about funding is the rural/urban debate. The 80 percent of the students who live in urban Alaska receive 70 percent of the dollars, whereas the 20 percent living in rural Alaska receive 30 percent of the dollars. The whole issue of disparity is over 10 percent, about $100 million. Nobody argues that it costs more to deliver education in rural Alaska; the issue is how much and what is reasonable. Mr. Gottstein said, "If you're simply talking input, you can argue about half of that, or 5 percent, because it does cost more to build buildings there. There are some economies of scale. Fuel is more expensive there. It does cost more to bring a qualified teacher or to employ a qualified teacher in rural Alaska, on average. However, the scales aren't really so much higher because their experience is less; the turnover is higher. So, in fact, you're not really getting the benefit of it. So, you could argue, say, `Well, we're going to take 5 percent, or $50 million, away from rural Alaska, and we're going to spread it around the rest of the urban area ... because it's fair.' Well, if you took that 5 percent and spread it around the urban areas, it would be wiped away in 18 months of inflation." MR. GOTTSTEIN said he doesn't think there is universal failure. He believes most students are well-served, but far too many students aren't being served and so we are compelled to do better; if we don't, we'll create opportunities for the private schools to grow at such pace that it will be at the expense of everybody else in the public schools. Mr. Gottstein said, "What I'm afraid of is that we're going to eliminate the purpose of public schools, because it's to provide it for everybody. If you're simply looking at input, then you could argue to take 5 percent away from rural Alaska. But if you're looking at outputs, you can't, because we know that the performance of the students in rural Alaska, compared to the national average, is not acceptable. ... It's not acceptable to the parents in those communities; it's not acceptable to those communities; it's not acceptable to this community." MR. GOTTSTEIN advised members that the student/teacher ratio is better in rural Alaska than in the rest of the state. He said the schools themselves are pathetic, and there is a lawsuit pending that could make the mental health land lawsuit pale in comparison; it will be a great constitutional debate unless this issue is resolved. He indicated that if urban student/teacher ratio applied in rural Alaska, performance would be worse. Mr. Gottstein asked, "All for what? To delay really getting at the issue which are fundamental to the problems in public school. In my judgment, it's a diversion to talk about this. Now, the problem is we've got a formula that isn't working. And if there's no more money and you write a ... new formula, by definition, you've got winners and losers; and there the politics are, okay? Well, I happen to believe we have, maybe, a new opportunity to write a formula that's rational, that puts the whole thing together, that encourages rational decision-making, which I think does not exist in much fashion in the current model." Number 140 MR. GOTTSTEIN referred to the recently raised tobacco tax, which is supposed to go towards education. He said if we're truthful about holding education harmless, we're not simply going to set aside inflation, which is another issue. He stated, "Then, we can't just say we're holding it harmless but just keep the foundation formula harmless. We used to spend, about ten years ago, $150 million to pay off debt service in the schools. We're now down to about $65 million, and in another five years, it's going to be $20 million. Those savings, which used to be spent to help maintain and build schools, have been taken away from education and have been used in other parts of government." MR. GOTTSTEIN continued, "I'm saying that is not holding education harmless. Let's not go back to another $150 million. Let's just start today and say, `As that debt service goes down, let's take those savings and add it to the $35 million,' okay? And let's put some money that we would spend on capital -- and I won't go into the whole detail because it would take me some time, so I'll try to capsulize this. If you really add some dollars that are there, that we're really already spending on education, and you add the tobacco tax on it, now you've got maybe $70 to $80 million more. With that $70 to $80 million, we're going to put additional responsibility, which is the school construction and maintenance. We shouldn't be separating those issues; just like we live in our households or we live in our businesses, you can't separate the issues. We need to establish priorities, and where better to establish those priorities than where the rubber meets the road, where the people are going to be impacted by the decisions ... that are being made." MR. GOTTSTEIN suggested that if we simply took the money we are really spending and added the $35 million estimated from the tobacco tax, there is enough - with the proposed formula, he believes - to give at least a little more to everybody, and materially more to quite a few. Speaking for himself personally, he said another important piece is the endowment, which he believes can be a constructive mechanism. However, it could be done correctly or incorrectly. MR. GOTTSTEIN explained that he doesn't believe an endowment set aside to pay for the operating budget is appropriate. First, it doesn't pass any political test he's aware of, because for an endowment that will protect the operating budget, $600-$700 million worth of revenue must be produced, which requires $9-$10 billion. Mr. Gottstein stated, "Now, if we're serious about it, we're going to say the public is prepared to set aside half of the permanent fund, in which all of those earnings are to be used to pay for public schools." He said we can debate whether that is a good business practice, but he thinks it is politically unachievable. He'd rather use the endowment - if we produce one - to secure the most "insecure" part of schools, the school buildings themselves. Number 200 MR. GOTTSTEIN suggested if we took the $175 million currently in the public school trust fund, and we took $100 million a year for ten years and had a high-yield investment strategy that wasn't required to produce income, at the end of ten years there would be $2 billion. He stated, "Now, the bond experts across the country say if you have $2 billion in the bank and you have a revenue stream, part of the foundation formula in which the local communities decide whether it's a dollar or ten dollars or a hundred dollars, ... that the bond market requires recourse. They require collateral, okay? That's what this $2 billion is about. If we buy a home ... and we don't make the payments, the bank can take it back and sell it to somebody else. Well, that can't happen with school, because if the community doesn't pay for the schools, who's going to buy it? So, bond dealers need to have a secondary collateral." MR. GOTTSTEIN said the traditional way across America is the full faith and credit of a state, but we're not bonding statewide. However, that doesn't mean there isn't another way to do it. Utah and Texas have a similar fund; for every dollar in their endowment, they can borrow two dollars, as long as the income stream supports the payment of the debt. Mr. Gottstein said, "But we have about $3-1/2 billion worth of schools in our state. Maybe we should have about $4 billion, certainly maybe ten years from now. If we had the $2 billion, that would meet the collateral test, okay?" MR. GOTTSTEIN said we're not talking about setting aside $10 billion; we're talking about setting aside less than 1 percent of the permanent fund for ten years. He stated, "And then if you've got an aggressive yield strategy, then you've solved the capital problem forever, unless we have an extraordinary inflation coupled with an extraordinary increase in enrollment. But if you have a reasonable increase in enrollment and not-outrageous inflation, then the yield on that endowment will rise enough to meet the student demand to build housing for the collateral piece. And, in my judgment, at the end of the day - which is, to me, an argument, again, against having an endowment for the operating budget - but at the end of the day, what the legislature - a la the public - appropriate for education, in total, is a reflection of the success of schools." MR. GOTTSTEIN indicated that while he agrees parents should be in schools, whether to pay them is a different issue. With the Board of Education, he has been working on a number of things that he believes need to be done, including revamping teacher licensure; setting standards against which to measure teachers; setting standards against which schools can be measured, with an accreditation process; and measuring the performance of all students, so that parents, teachers, administrators, the community and the state know how they are performing. He stated, "In my judgment, if we don't understand how integral rewriting the foundation formula will be to the success of all of these other things, we're going to miss it, because we're not going to really get into what are the things that we need to do, in terms of business practices, so that we end up not only with efficiencies but with ... a perception on the part of the public that they're beginning to get their money's worth." MR. GOTTSTEIN stated, "We just saw a report ... from the Department of Education listing the salaries and compensations of every superintendent in the state. It was ... one of a number of reactions that we have to the Ed Gilley Adak case, because clearly, there were abuses that took place. And if what he did was legal, it shouldn't have been, okay? Now, ... one statement about those salaries is that they don't really seem out of line. And I'd say, given the experience that many of these people have, it isn't out of line. But from my business background, you can't justify having 53 of them in those kinds of categories." Number 242 MR. GOTTSTEIN closed by saying one of the huge business practices we need to achieve is allowing people who are in the best positions to make decisions to have the authority to do so. He stated, "And in my judgment, by combining administrative functions - transportation, food service, accounting, law, construction - with academic services is not correct. Academic responsibility primarily should be vested in the school, in which we measure the students, teachers and school against standards. And administrative functions should be handled by people who have careers in those kinds of functions. And you don't need 53 of them. You don't need 53 food service programs. You don't need 53 transportation programs. As a business person, I say that's a pathetic business practice. It's not acceptable. It's not acceptable to me; I can understand why it wouldn't be acceptable ... to the community. What's necessary is enough to make sure that there are competing elements, ... so that best business practices are required in order for those entities to succeed and to thrive. Maybe that's 6; it isn't 53. Politically, maybe it's 12, okay? But it isn't 53." MR. GOTTSTEIN said we're not doing what we need to do; every child in this state should have the opportunity, but many don't. If we're going to get serious about giving all our children an opportunity, we must get serious about what's going on, not just resting our laurels on existing practices. We must get out of the "box," find those best practices, and embark on them. Only by doing so will we raise the confidence of the public to provide the funds necessary to serve not only their own children but others as well. Number 269 CHAIRMAN BUNDE thanked Mr. Gottstein for saying eloquently what he himself had said earlier: More money won't beget trust, but trust will beget more money. He acknowledged that SSHB 148 is an outgrowth of the work that the school board did "and two years of work on your behalf," although it had been moved forward to the legislative arena and tweaked some. CHAIRMAN BUNDE also thanked Mr. Gottstein for bringing up the endowment, and he expressed appreciation for the points he had made. He said he wishes the people who are promoting it well, and he hopes it does what they want it to do. He stated, "One of my main concerns is that you create an endowment here and you think that the general fund contribution will remain the same. And no, they're going to be inverse: The greater the endowment, the less the general fund contribution will be." MR. GOTTSTEIN replied that he believes that's exactly right. He said, "That's why you have to set half of the permanent fund aside in order to solve the issue that you've addressed, because unless the income is enough to satisfy the entire need, ... then you haven't gotten into the area of debate. And as long as you haven't solved the area of debate, it's in the legislature's hands." CHAIRMAN BUNDE said in other states, where lotteries add to the educational foundation, the only place that he knows of where that has really worked is Georgia, where it was written into law that the lottery will be additional money, not replacement money. That has worked quite well. MR. GOTTSTEIN said the referendum on the endowment isn't explicit about whether it would be "operating or capital," although people have opinions on it, of course. Personally, he believes an endowment could be extraordinarily constructive if it could be used for this capital issue, because clearly we have not dealt with the capital needs, not only in rural Alaska but also in Anchorage. "That's why we don't have computers, by the way," he commented. He asked how it is that they can build schools but cannot buy computers, "because we can build the schools and then not at the expense of the student/teacher ratio, but if we buy computers, it's at the expense of the student/teacher ratio, and it really isn't much more complicated than that." CHAIRMAN BUNDE, noting that it was nearly noon, asked whether anyone else wished to testify. He specifically asked Mr. Earnhart, who'd signed up, whether he wished to testify, but Mr. Earnhart said given the time, he'd pass and would provide comments in writing. Chairman Bunde thanked participants and expressed the belief that collectively we can solve our problems. Number 322 CHAIRMAN BUNDE asked Eddy Jeans whether the North Slope $27 million contribution goes to education or to the general fund. MR. JEANS said it goes to the school district operating fund. CHAIRMAN BUNDE called an at-ease. (SSHB 148 was held over.) MEDICAID REGULATIONS REGARDING FRAUD TAPE 97-46, SIDE B TAPE 97-47, SIDE A & B SUMMARY OF INFORMATION CHAIRMAN BUNDE reconvened the meeting at approximately 1 p.m. PRESENT Committee members present were Representatives Bunde and Kemplen. Also attending: Joe Hayes, Researcher for Representative Brice, via teleconference from Fairbanks. BOB LABBE, Director, Division of Medical Assistance, Department of Health and Social Services, discussed Medicaid regulations. NANCY WELLER, Medical Assistance Administrator, Division of Medical Assistance, Department of Health and Social Services, discussed Medicaid regulations. P.K. WILSON, Medical Assistance Administrator, Division of Medical Assistance, Department of Health and Social Services, discussed Medicaid regulations. CAROLYN PHILLIPS testified on "non-quality home health care" providers and services, agencies, medical personnel shortages, and long-term patient and senior citizen neglect in the Kenai/Soldotna area. DORIS REYNOLDS testified on health care issues. JIM JORDAN, Executive Director, Alaska State Medical Association, testified on concerns of the physician community, including notice provisions, audits and audit reports, and appeals relating to overpayments. COMMITTEE ACTION The committee took no action. ADJOURNMENT The meeting adjourned at 2:25 p.m. NOTE: THE MEETING WAS RECORDED AND HANDWRITTEN LOG NOTES WERE TAKEN. A COPY OF THE TAPE(S) AND LOG NOTES MAY BE OBTAINED BY CONTACTING THE HOUSE RECORDS OFFICE AT 130 SEWARD STREET, SUITE 211, JUNEAU, ALASKA 99801-1182, (907) 465-2214, AND AFTER ADJOURNMENT OF THE SECOND SESSION OF THE TWENTIETH ALASKA STATE LEGISLATURE, IN THE LEGISLATIVE REFERENCE LIBRARY.