HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE April 1, 1998 3:08 p.m. MEMBERS PRESENT Representative Con Bunde, Chairman Representative Joe Green, Vice Chairman Representative Brian Porter Representative Fred Dyson Representative J. Allen Kemplen Representative Tom Brice MEMBERS ABSENT Representative Al Vezey COMMITTEE CALENDAR CS FOR SENATE BILL NO. 36(FIN) am "An Act relating to public schools; relating to the definition of a school district, to the transportation of students, to employment of chief school administrators, to school district layoff plans, to the special education service agency, and to the child care grant program; and providing for an effective date." - PASSED HCS CSSB 36(HES) FROM COMMITTEE (* First public hearing) PREVIOUS ACTION BILL: SB 36 SHORT TITLE: PUBLIC SCHOOL FUNDING SPONSOR(S): SENATOR(S) PHILLIPS, Taylor, Halford, Wilken, Torgerson Jrn-Date Jrn-Page Action 1/13/97 24 (S) PREFILE RELEASED 1/10/97 1/13/97 24 (S) READ THE FIRST TIME - REFERRAL(S) 1/13/97 24 (S) HES, FIN 2/12/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205 2/12/97 (S) MINUTE(HES) 2/27/97 542 (S) COSPONSOR(S): HALFORD 3/14/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205 3/14/97 (S) MINUTE(HES) 3/17/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205 3/17/97 (S) MINUTE(HES) 3/19/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205 3/19/97 (S) MINUTE(HES) 3/21/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205 3/21/97 (S) MINUTE(HES) 5/05/97 (S) HES AT 3:15 PM BUTROVICH ROOM 205 5/05/97 (S) MINUTE(HES) 5/06/97 1712 (S) HES RPT 1AM 3NR 5/06/97 1712 (S) AM: WILKEN; NR: GREEN, LEMAN, ELLIS 5/06/97 1712 (S) FISCAL NOTES (DOE-2) 11/12/97 (S) MINUTE(HES) 1/23/98 (S) FIN AT 8:45 AM SENATE FINANCE 532 2/03/98 (S) FIN AT 9:00 AM SENATE FINANCE 532 2/03/98 (S) FIN AT 6:30 PM SENATE FINANCE 532 2/24/98 (S) FIN AT 8:30 AM SENATE FINANCE 532 2/26/98 (S) FIN AT 8:30 AM SENATE FINANCE 532 2/26/98 (S) FIN AT 6:00 PM SENATE FINANCE 532 2/27/98 (S) FIN AT 4:30 PM SENATE FINANCE 532 2/28/98 (S) FIN AT 10:00 AM SENATE FINANCE 532 3/02/98 2705 (S) COSPONSOR: WILKEN 3/03/98 (S) FIN AT 8:30 AM SENATE FINANCE 532 3/03/98 (S) FIN AT 4:30 PM SENATE FINANCE 532 3/04/98 (S) FIN AT 10:00 AM SENATE FINANCE 532 3/04/98 (S) FIN AT 4:30 PM SENATE FINANCE 532 3/06/98 (S) FIN AT 9:00 AM SENATE FINANCE 532 3/09/98 (S) FIN AT 9:00 AM SENATE FINANCE 532 3/09/98 (S) RLS AT 11:45 AM FAHRENKAMP RM 203 3/09/98 (S) FIN AT 4:30 PM SENATE FINANCE 532 3/09/98 (S) MINUTE(RLS) 3/10/98 (S) RLS AT 1:15 PM FAHRENKAMP RM 203 3/10/98 (S) MINUTE(RLS) 3/10/98 2805 (S) FIN RPT CS 5DP 1NR 1DNP NEW TITLE 3/10/98 2806 (S) DP: SHARP, PHILLIPS, PARNELL, TORGERSON 3/10/98 2806 (S) DONLEY NR: PEARCE DNP: ADAMS 3/10/98 2806 (S) FISCAL NOTE TO CS (DOE) 3/10/98 2806 (S) ZERO FISCAL NOTE TO CS (LABOR, REV) 3/10/98 2808 (S) RULES TO CALENDAR & 1 OTHER REC 3/10 3/10/98 2809 (S) READ THE SECOND TIME 3/10/98 2809 (S) MOTION TO ADOPT FIN CS 3/10/98 2810 (S) FIN CS Y14 N5 E1 3/10/98 2810 (S) AM NO 1 ADOPTED UNAN CONSENT 3/10/98 2811 (S) AM NO 2 ADOPTED UNAN CONSENT 3/10/98 2811 (S) AM NO 3 ADOPTED UNAN CONSENT 3/10/98 2811 (S) AM NO 4 WITHDRAWN 3/10/98 2812 (S) AM NO 5 FAILED Y5 N14 E1 3/10/98 2814 (S) AM NO 6 FAILED Y4 N15 E1 3/10/98 2814 (S) AM NO 7 FAILED Y5 N14 E1 3/10/98 2815 (S) AM NO 8 NOT OFFERED 3/10/98 2815 (S) AM NO 9 FAILED Y5 N14 E1 3/10/98 2816 (S) AM NO 10 FAILED Y5 N14 E1 3/10/98 2817 (S) ADVANCED TO THIRD READING UNAN CONSENT 3/10/98 2817 (S) READ THE THIRD TIME CSSB 36(FIN) AM 3/10/98 2817 (S) COSPONSOR: TORGERSON 3/10/98 2817 (S) PASSED Y12 N7 E1 3/10/98 2818 (S) EFFECTIVE DATE ADPTD Y18 N1 E1 3/10/98 2818 (S) ADAMS NOTICE OF RECONSIDERATION 3/11/98 2829 (S) RECON TAKEN UP - IN THIRD READING 3/11/98 2830 (S) PASSED ON RECONSIDERATION Y12 N8 3/11/98 2830 (S) EFFECTIVE DATE ADPTD Y18 N2 3/11/98 2831 (S) TRANSMITTED TO (H) 3/13/98 2613 (H) READ THE FIRST TIME - REFERRAL(S) 3/13/98 2613 (H) HES, FINANCE 3/21/98 (H) HES AT 1:00 PM CAPITOL 106 3/21/98 (H) MINUTE(HES) 3/25/98 (H) HES AT 3:00 PM CAPITOL 106 3/25/98 (H) MINUTE(HES) 4/01/98 (H) HES AT 3:00 PM CAPITOL 106 WITNESS REGISTER MIKE FORD, Attorney Legislative Legal Counsel Legislative Legal and Research Services 130 Seward Street, Suite 409 Juneau, Alaska 99801-2105 Telephone: (907) 465-2450 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. EDDY JEANS, Manager School Finance Section Education Support Services Department of Education 801 West 10th Street, Suite 200 Juneau, Alaska 99801-1894 POSITION STATEMENT: Addressed Amendment 11. DAVID TEAL, Senior Analyst McDowell Group 416 Harris Street Juneau, Alaska 99801 Telephone: (907) 586-6126 POSITION STATEMENT: Addressed Amendment 11. RICHARD S. CROSS, Deputy Commissioner Department of Education 801 West 10th Street, Suite 200 Juneau, Alaska 99801-1894 Telephone: (907) 465-8678 POSITION STATEMENT: Answered questions on proposed committee substitute for CSSB 36. DANIEL VANMETER, Student Togiak School Togiak, Alaska 99678 Telephone: Not Provided POSITION STATEMENT: Testified in opposition to SB 36. COLYN ISAACSON, Student Togiak School Togiak, Alaska 99678 Telephone: Not Provided POSITION STATEMENT: Testified in opposition to SB 36. JEANINE KENNEDY, Executive Director Rural Alaska Community Action Program 731 East 8th Avenue Anchorage, Alaska 99501 Telephone: (907) 279-2511 POSITION STATEMENT: Testified in opposition to SB 36. JIM CHALIAK, Representative Yup'ik Immersion Program P.O. Box 2271 Bethel, Alaska 99559 Telephone: (907) 543-4179 POSITION STATEMENT: Testified in opposition to SB 36. CHARLENE SAUNDERS P.O. Box 140 Cordova, Alaska 99574 Telephone: (907) 424-3265 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. ROBERTA GILLOTT, Teacher P.O. Box 140 Dillingham, Alaska 99675 Telephone: (907) 842-1316 POSITION STATEMENT: Testified in opposition to SB 36. MAC CARTER, Board member Yukon Flats School District P.O. Box 30009 Central, Alaska 99730 Telephone: (907) 520-5999 POSITION STATEMENT: Testified in opposition to SB 36. ROGER LIEBNER, Representative Soldotna High School Parent Teacher Association 207 Corral Avenue Soldotna, Alaska 99669 Telephone: (907) 262-1339 POSITION STATEMENT: Testified in opposition to SB 36. RAY GRIFFITH, Superintendent Southeast Island School District P.O. Box 8340 Ketchikan, Alaska 99901 Telephone: (907) 225-9658 POSITION STATEMENT: Testified in opposition to SB 36. GILBERT GUTIERREZ, Member Nome School Board P.O. Box 306 Nome, Alaska 99762 Telephone: (907) 443-4364 POSITION STATEMENT: Testified in opposition to SB 36. ROGER JACOBSON Box 634 Tok, Alaska 99780 Telephone: (907) 883-4260 POSITION STATEMENT: Testified in opposition to SB 36. STEVE CATHERS P.O. Box 570 Unalaska, Alaska 99685 Telephone: (907) 581-3151 POSITION STATEMENT: Testified in opposition to SB 36. SAM TOWARAK, Assistant Superintendent Bering Straits School District P.O. Box 225 Unalakleet, Alaska 99684 Telephone: (907) 624-3611 POSITION STATEMENT: Testified in opposition to SB 36. ARTHUR LAKE, Tribal Administrator Native Village of Kwigillingok Kwigillingok, Alaska 99622 Telephone: Not Provided POSITION STATEMENT: Testified in opposition to SB 36. BESSIE TITUS Minto, Alaska 99758 Telephone: (907) 798-7112 POSITION STATEMENT: Testified in opposition to SB 36. JANICE (INDISC.) Hughes, Alaska 99745 Telephone: (907) 889-2293 POSITION STATEMENT: Testified in opposition to SB 36. DAVE JONES, Director of Finance Kodiak Island Borough School District 722 Mill Bay Kodiak, Alaska 99615 Telephone: (907) 486-9278 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. JIM FOSTER, Superintendent Skagway School District Box 297 Skagway, Alaska 99840 Telephone: (907) 983-2960 POSITION STATEMENT: Testified in opposition to SB 36. MOSES KRITZ, Mayor City of Togiak Box 83 Togiak, Alaska 99678 Telephone: (907) 493-5829 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. GINGER JENKINSON, Representative Anchorage Council of Parent Teacher Associations 3940 Twilite Anchorage, Alaska 99516 Telephone: (907) 345-4901 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. BARB ANGAIAK P.O. Box 1233 Bethel, Alaska 99559 Telephone: (907) 543-3459 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. TOM RICHARDS, JR. P.O. Box 73433 Fairbanks, Alaska 99707 Telephone: (907) 452-2316 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. KIMBERLEY A. STRONG, Representative Village of Klukwan; and ANS Grand President for the Alaska Native Sisterhood Box 286 Klukwan, Alaska 99827 Telephone: (907) 767-5586 POSITION STATEMENT: Testified in opposition to SB 36. JOHN KUNIK, Member Copper River Against Bureaucracy Box 83 Glennallen, Alaska 99588 Telephone: (907) 822-5515 POSITION STATEMENT: Testified in opposition to SB 36. BRIAN BERGERON, Student Ketchikan Gateway School District 2428 2nd Avenue Ketchikan, Alaska 99901 Telephone: (907) 247-0524 POSITION STATEMENT: Testified in opposition to SB 36. BARBARA DALKE Box 6039 Mentasta Lake, Alaska 99780 Telephone: (907) 291-2327 POSITION STATEMENT: Testified in opposition to SB 36. BOB CHRISTAL, Superintendent of Schools Anchorage School District 4600 DeBarr Road Anchorage, Alaska 99519 Telephone: (907) 269-2111 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. SYD WRIGHT, Retired School Principal P.O. Box 624 Petersburg, Alaska 99833 Telephone: (907) 772-4859 POSITION STATEMENT: Testified in opposition to SB 36. OLGA SUTTON Box 52 Togiak, Alaska 99678 Telephone: (907) 493-5829 POSITION STATEMENT: Testified in opposition to SB 36. BILL FERGUSON P.O. Box 576 Bethel, Alaska 99559 Telephone: (907) 543-4912 POSITION STATEMENT: Testified in opposition to SB 36. CRISTINA SCHNEIDER P.O. Box 80883 Fairbanks, Alaska 99708 Telephone: (907) 479-3389 POSITION STATEMENT: Testified in opposition to SB 36. DIANE GUBATAYAO P.O. Box 5915 Ketchikan, Alaska 99901 Telephone: (907) 225-4350 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. NORA DAVID Box 6004 Mentasta Lake, Alaska 99780 Telephone: (907) 291-2312 POSITION STATEMENT: Testified in opposition to SB 36. ELIZABETH BACOM, School Board Member Petersburg School District Petersburg, Alaska 99833 Telephone: (907) 772-3090 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. JOE ALEXIE, Representative Togiak Natives, Limited Box 86 Togiak, Alaska 99678 Telephone: (907) 493-5146 POSITION STATEMENT: Testified in opposition to SB 36. DARIO NOTTI P.O Box 2179 Bethel, Alaska 99559 Telephone: (907) 543-3072 POSITION STATEMENT: Testified in opposition to SB 36. REVA SHIRCEL, Director of Education Tanana Chiefs Conference 122 First Avenue Fairbanks, Alaska 99701 Telephone: (907) 452-8251 POSITION STATEMENT: Testified in opposition to SB 36. JANE BROWN Box 92 Glennallen, Alaska 99588 Telephone: (907) 822-5520 POSITION STATEMENT: Testified in opposition to SB 36. HANNAH RAMISKEY 428 Tower Ketchikan, Alaska 99901 Telephone: (907) 225-6648 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. PAUL FROST Togiak, Alaska 99678 Telephone: Not provided POSITION STATEMENT: Testified in opposition to SB 36. SURAIYA JOHN General Delivery Mentasta Lake, Alaska 99780 Telephone: (907) 291-2336 POSITION STATEMENT: Testified in opposition to SB 36. SHERYLE CHARLIE Minto, Alaska 99758 Telephone: Not Provided POSITION STATEMENT: Testified in opposition to SB 36. JANICE KVERNVIK, Member Petersburg School Board P.O Box 1221 Petersburg, Alaska 99833 Telephone: (907) 772-4566 POSITION STATEMENT: Testified in opposition to SB 36. CHRISTINE COOPCHIAK, Representative Togiak Health Clinic Togiak, Alaska 99678 Telephone: (907) 493-5511 POSITION STATEMENT: Testified in opposition to SB 36. CATHY SAMPSON-KRUSE P.O. Box 287, Number 3042 Bethel, Alaska 99559 Telephone: (907) 543-5916 POSITION STATEMENT: Testified in opposition to SB 36. DIANA CAMPBELL 2071 Lakeview Fairbanks, Alaska 99707 Telephone: (907) 452-7768 POSITION STATEMENT: Testified in opposition to SB 36. JOHN THOMAS, Superintendent Ketchikan Gateway Borough School District Pouch 2 Ketchikan, Alaska 99901 Telephone: (907) 225-2118 POSITION STATEMENT: Testified in support of SB 36. GORDON KRON Box 627 Tok, Alaska 99780 Telephone: (907) 883-5771 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. JOHN CYR, President NEA-Alaska 114 2nd Street Juneau, Alaska 99801 Telephone: (907) 586-3090 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. LUCY CROW P.O. Box 567 Bethel, Alaska 99559 Telephone: (907) 543-2535 POSITION STATEMENT: Testified in opposition to SB 36. CYNTHIA HENRY, Legislative Chair Fairbanks North Star Borough School Board P.O. Box 70785 Fairbanks, Alaska 99707 Telephone: (907) 474-0034 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. TILLI ABBOTT, Principal Hoonah City Schools P.O. Box 592 Hoonah, Alaska 99829 Telephone: (907) 945-613 POSITION STATEMENT: Testified in opposition to SB 36. KARL GREENEWALD, SR., Representative Huna Totem Corporation P.O. Box 202269 Anchorage, Alaska 99501 Telephone: (907) 243-3940 POSITION STATEMENT: Testified in opposition to SB 36. JOANN MCDONALD P.O. Box 1001 Bethel, Alaska 99559 Telephone: (907) 543-6072 POSITION STATEMENT: Dario Notti read her testimony into the record. LINDA DEMIENTIEFF 102 Antoinette Street Fairbanks, Alaska 99701 Telephone: (907) 451-6601 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. CHRIS CAMPBELL, Member Ketchikan School Board 601 Main Street Ketchikan, Alaska 99901 Telephone: (907) 225-1477 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. ROBERT MCCLORY 162 Shoup Road Ketchikan, Alaska 99901 Telephone: (907) 225-1477 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. SANDY JOHN Tok, Alaska 99780 Telephone: (907) 883-5355 POSITION STATEMENT: Testified in opposition to SB 36. UNIDENTIFIED SPEAKER Kwigillingok, Alaska 99622 Telephone: Not Provided POSITION STATEMENT: Testified in opposition to SB 36. REBECCA GAMEZ, Director Employment Security Division Department of Labor P.O. Box 25509 Juneau, Alaska 99802-5509 Telephone: (907) 465-2711 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. MIKE NOEL, Info Services Manager Division of Administrative Services Department of Labor P.O. Box 21149 Juneau, Alaska 99802-1149 Telephone: (907) 465-4881 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. CYNDEE SIMPSON SUGAR P.O. Box 1574 Bethel, Alaska 99559 Telephone: (907) 543-2700 POSITION STATEMENT: Testified in opposition to SB 36. VELETA MURPHY 270 Ester Drive Fairbanks, Alaska 99709 Telephone: (907) 455-9075 POSITION STATEMENT: Testified in opposition to SB 36. PAUL SUGAR P.O. Box 1574 Bethel, Alaska 99559 Telephone: (907) 543-2700 POSITION STATEMENT: Testified in opposition to SB 36. DEBORAH VOGT, Deputy Commissioner Department of Revenue P.O. Box 110400 Juneau, Alaska 99811-0400 Telephone: (907) 465-2300 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. BOB MEDINGER P.O. Box 1063 Bethel, Alaska 99559 Telephone: (907) 543-4486 POSITION STATEMENT: Testified in opposition to SB 36. SHIRLEY DEMIENTIEFF, President Fairbanks Native Association 229 Second Avenue Fairbanks, Alaska 99701 Telephone: (907) 456-3318 POSITION STATEMENT: Testified in opposition to SB 36. BILL WILKERSON Kwigillingok, Alaska Telephone: (907) 588-8629 POSITION STATEMENT: Testified in opposition to SB 36. GLEN MARUNDE Box 192 Tok, Alaska 99780 Telephone: (907) 883-4601 POSITION STATEMENT: Testified in opposition to SB 36. CARL WILLIAMS P.O. Box 2073 Bethel, Alaska 99559 Telephone: (907) 543-2958 POSITION STATEMENT: Testified in opposition to SB 36. DENA IVEY, Representative Fairbanks Chapter of the Alaska Native Brotherhood and Sisterhood P.O. Box 80164 Fairbanks, Alaska 99708 Telephone: (907) 456-2471 POSITION STATEMENT: Testified in opposition to SB 36. STEVEN BURKE P.O. Box 943 Bethel, Alaska 99559 Telephone: (907) 543-5277 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. JOHN PECKHAM P.O. Box 8394 Ketchikan, Alaska 99901 Telephone: (907) 225-6047 POSITION STATEMENT: Testified on proposed committee substitute for CSSB 36. PATRICIA OKSOKTARUK 648 Rebecca Street, Number 3 Fairbanks, Alaska 99709 Telephone: (907) 458-7343 POSITION STATEMENT: Testified in opposition to SB 36. KAREN KALLEN-BROWN P.O. Box 84056 Fairbanks, Alaska 99708 Telephone: (907) 457-7270 POSITION STATEMENT: Testified in opposition to SB 36. MARGARET WILSON 548 Aquila Fairbanks, Alaska 99712 Telephone: (907) 457-7798 POSITION STATEMENT: Testified in opposition to SB 36. DON SHIRCEL 1150 Euriophorum Drive Fairbanks, Alaska 99709 Telephone: (907) 474-8044 POSITION STATEMENT: Testified on SB 36. ACTION NARRATIVE TAPE 98-37, SIDE A Number 0001 CHAIRMAN CON BUNDE called the House Health, Education and Social Services Standing Committee meeting to order at 3:08 p.m. Members present at the call to order were Representatives Bunde, Green, Dyson and Kemplen. Representatives Porter and Brice arrived at 3:09 p.m. and 3:11 p.m., respectively. Representative Vezey was absent. CSSB 36(FIN)am - PUBLIC SCHOOL FUNDING Number 0052 CHAIRMAN BUNDE announced the committee would be hearing CSSB 36,(FIN)am, "An Act relating to public schools; relating to the definition of a school district, to the transportation of students, to employment of chief school administrators, to school district layoff plans, to the special education service agency, and to the child care grant program; and providing for an effective date." The committee would consider amendments first and then begin to take public testimony. The meeting was being teleconferenced to 20 sites to allow for public input. Number 0138 CHAIRMAN BUNDE stated the committee would begin with discussion on Amendment 2. Representative Porter had moved Amendment 2 at the previous meeting and Representative Kemplen had objected. Chairman Bunde explained Amendment 2 would basically institute a local contribution in areas of the state that currently do not make a local contribution to their schools. Number 0241 REPRESENTATIVE J. ALLEN KEMPLEN noted that a question had been raised at the previous meeting regarding the impact of this proposed amendment on individuals in urban areas who were working in the Rural Education Attendance Areas (REAAs). He asked if that issue had been resolved. CHAIRMAN BUNDE said, "I believe as the application of the amendment is anticipated and there will of course be regulations that have to be developed to get this amendment, or the whole bill, into action, but that anyone who was domiciled outside an REAA would not be subject to this tax, only those people who are not -- any Alaskan resident who is domiciled outside the REAA. The thought being that someone living in Fairbanks is already paying taxes to support their school or any of the other urban areas. It's only the REAAs where local support is required." Number 0338 REPRESENTATIVE KEMPLEN referred to page 2, line 17 of the amendment which states, "For purposes of AS 43.42.020, an employer has a business situs in the unorganized borough outside of a home rule or first class city if, at any time in the calendar year, an individual performs services in the unorganized borough outside of a home rule or first class city as an employee of that employer." He asked for an interpretation of that section. CHAIRMAN BUNDE said, "I believe what that's saying is that you are doing business in an REAA if you meet this description and if you employ persons as you do that business, they would be subject to a tax to support their schools." He asked Mike Ford if he had additional comments regarding the amendment. Number 0424 MIKE FORD, Attorney, Legislative Legal Counsel, Legislative Legal and Research Services, said the tax is imposed if compensation is received for services performed in the unorganized borough. For example, an Anchorage resident, performing services and receiving compensation for those services in the unorganized borough, is subject to the tax. There is a credit provision, however, that allows the individual to recover that amount paid, assuming the individual already contributed to schools in an area other than the unorganized borough. Number 0464 REPRESENTATIVE KEMPLEN asked if for example a heavy equipment owner/operator from Fairbanks who accepts a job in an REAA for the summer, would be taxed on the compensation received. MR. FORD said, "Correct. In the unorganized borough." CHAIRMAN BUNDE interjected, "Not if he lives in Fairbanks." MR. FORD said, "Well no, he's compensated for services performed in the unorganized borough." CHAIRMAN BUNDE said, "And he would be exempt from taxation if he was ..." MR. FORD said, "Not technically true. He would be subject to the tax but he has a credit against the tax for which he could apply. So it's not an exemption, but a credit." Number 0537 REPRESENTATIVE KEMPLEN asked how much the credit would be. MR. FORD said it's a credit up to the amount of the tax paid by the individual. Number 0551 REPRESENTATIVE BRICE stated, "It's a credit up to the amount of tax you've paid. You have a guy doing electrical finish work who might hit three different REAAs in a day. Say he pays $1,100 on his property tax at home - probably a fifth or sixth of that goes to schools, say $200 or $300 goes to schools - he's credited the $200 or $300, correct? After that credit, he no longer can apply for it." MR. FORD said that was correct. Number 0617 REPRESENTATIVE JOE GREEN said in the example given, hypothetically that same $300 would be deducted from any of other taxes. MR. FORD confirmed that. CHAIRMAN BUNDE pointed out the wages of a nonresident working in an REAA would be subject to the tax, as well. MR. FORD said that was correct. REPRESENTATIVE GREEN asked "Is that like Slope workers, where their domicile may be paying taxes for a home they own, wherever that may be, is it only Alaskan taxes that are deductible or any school tax?" MR. FORD responded the way it's currently structured, it's only if a person pays taxes to a city and borough school district in Alaska. Number 0710 REPRESENTATIVE KEMPLEN inquired if it's up to the individual to make a claim for reimbursement. CHAIRMAN BUNDE said that was correct. REPRESENTATIVE KEMPLEN asked if there were reporting obligations for the employer. MR. FORD said employers are required to report the amount of tax collected on forms prepared by the Departments of Labor and Revenue. REPRESENTATIVE KEMPLEN affirmed that any business doing business in the REAAs will be required to complete additional paperwork. CHAIRMAN BUNDE pointed out the impact would be minimal; this would be added to the quarterly reports already required for other state reporting. Number 0770 CHAIRMAN BUNDE asked if there was further discussion on Amendment 2. He announced a motion was before the committee to move Amendment 2. REPRESENTATIVE KEMPLEN objected. CHAIRMAN BUNDE asked for a roll call vote. Representatives Dyson, Porter, Green and Bunde voted in favor of adopting Amendment 2. Representatives Brice and Kemplen voted against it. Representative Vezey was absent. Therefore, Amendment 2 was adopted by a vote of 4-2. CHAIRMAN BUNDE said Amendment 3 will not be offered. Number 0910 REPRESENTATIVE BRIAN PORTER made a motion to adopt Amendment 4. REPRESENTATIVE BRICE objected. Number 0924 CHAIRMAN BUNDE said Amendment 4 speaks to concerns raised by the Department of Education at the previous meeting. MR. FORD explained the department was concerned with the usage of certain terms in the legislation and Amendment 4 is just a clean-up. Number 0972 REPRESENTATIVE BRICE withdrew his objection. CHAIRMAN BUNDE asked if there was further objection. REPRESENTATIVE DYSON inquired why "state share of public school funding" was less acceptable than "basic need of each district." MR. FORD said the amendment is an attempt to fine tune the terms so there isn't any confusion between what "state share" versus "state aid" means. In determining the amount of money a district gets under the formula, it's important to be consistent in the use of the terms. He explained this actually gets closer to the existing system in terms of having "basic need." He agrees with the department's recommendation to tighten up the language. CHAIRMAN BUNDE said hearing no further objection, Amendment 4 was adopted. Number 1039 REPRESENTATIVE GREEN made a motion to adopt Amendment 5. CHAIRMAN BUNDE explained this amendment speaks to the concern raised by the Department of Education regarding transition language. MR. FORD said this language is in existing law. It doesn't appear in the bill, but the department favors including this language which provides a transition period for calculating the local contribution in case other city and borough school districts are formed. CHAIRMAN BUNDE added it is preemptive language in the event there are new boroughs formed; there are none contemplated, however. Number 1082 REPRESENTATIVE BRICE questioned the impact of the transition language. CHAIRMAN BUNDE said there is no impact because there are no new boroughs being formed, but if a borough were to form in the future, this is the mechanism under current law as to how the borough would transition into the foundation formula. MR. FORD said that was correct. If any new borough or school district is formed, the actual practical effect would be to increase the amount of state money and give a break on the local end for a 3-year period. Number 1115 REPRESENTATIVE GREEN commented, "We have impacted individual schools and there has been almost a tendency to want to move schools together to form a different or at least a different looking school district. Would that apply the same way or would that not be considered a new one, just a revised one?" MR. FORD responded if it is a city and borough district, not an REAA, then this would apply. CHAIRMAN BUNDE said hearing no objection, Amendment 5 was adopted. Number 1159 REPRESENTATIVE GREEN made a motion to adopt Amendment 6. CHAIRMAN BUNDE said Amendment 6 addresses concerns expressed by the Department of Education to include "intensive student count". Number 1180 MR. FORD suggested inserting "the" before "intensive student count". CHAIRMAN BUNDE said that was a technical amendment. Hearing no objection, Amendment 6 was adopted. Number 1236 REPRESENTATIVE GREEN made a motion to adopt Amendment 7. CHAIRMAN BUNDE explained Amendment 7 addresses the Department of Education's expressed concern regarding the 20 percent special needs. The department's concern was that if a district did not offer one of the programs, for example, a gifted and talented program, the district may not qualify for the 20 percent. MR. FORD said this amendment should address the department's concern because a report will be required only on the services provided. CHAIRMAN BUNDE pointed out it requests that districts provide a report to the state to alleviate parental concern about special needs funding not being properly spent. CHAIRMAN BUNDE asked if there was objection to Amendment 7. Hearing none, Amendment 7 was adopted. CHAIRMAN BUNDE welcomed Senator Wilken and announced the committee would temporarily skip Amendment 8 and go on to Amendment 9. Number 1313 REPRESENTATIVE GREEN made a motion to adopt Amendment 9. CHAIRMAN BUNDE noted Amendment 9 addresses the Department of Education's concern regarding the definition of "Eligible Impact Aid". MR. FORD pointed out the existing formula has a definition of eligible federal impact aid which is not included in the proposed legislation. This amendment adds the definition and revises citations to comply with federal law. CHAIRMAN BUNDE asked if there was objection to Amendment 9. Hearing none, Amendment 9 was adopted. Number 1362 REPRESENTATIVE GREEN made a motion to adopt Amendment 10. CHAIRMAN BUNDE noted Amendment 10 addresses the Department of Education's concern regarding funding for the Special Education Service Agency (SESA). MR. FORD said this amendment revises the way in which money going to the agency is calculated and provides a transition provision to ensure SESA doesn't lose funding for FY 99 because of the effects of the change. Number 1497 REPRESENTATIVE KEMPLEN asked for an explanation of the $15.75 figure in the amendment. SENATOR GARY WILKEN replied, "It's the equivalent -- it's being deleted -- the calculation has been a function of defining special education students and in order to make this more simple, we're now making the allotment a function of average daily membership (ADM), so the $15.75 is to average daily membership as the $85 is to the special education students federal classification. So it's revenue neutral and if in the future one needs more or less, then we can address the $15.75 as a function of ADM. It's much more clear to the people involved." CHAIRMAN BUNDE noted this speaks to $15.75 per student instead $85 in a different formula. CHAIRMAN BUNDE asked if there was objection. Hearing none, Amendment 10 was adopted. Number 1558 REPRESENTATIVE GREEN made a motion to adopt Amendment 11. CHAIRMAN BUNDE explained that Amendment 11 deals with the department's concern to clarify intent in the transition for small schools. MR. FORD said he believed the problem was with schools that had less than 10 students and so by altering this formula, those schools will be consolidated with the school in the district with the highest ADM, which affects the funding calculation for that district. Number 1596 REPRESENTATIVE KEMPLEN asked for an explanation of the new subsection. CHAIRMAN BUNDE asked Eddy Jeans to come forward. Number 1675 EDDY JEANS, Manager, School Finance Section, Education Support Services, Department of Education, explained this language sets the minimum size for schools at ten and simply states that if a district has a school serving less than ten students, those students will be counted in the largest school in the district. REPRESENTATIVE BRICE questioned why those students wouldn't be included in the smallest school. MR. JEANS said the purpose of placing the students in a school with the highest ADM is those students will not generate the larger dollars that are associated with operating a small school. Number 1711 REPRESENTATIVE PORTER commented it would perhaps disadvantage the next higher school by moving them into a higher category and lowering their adjusted student count. REPRESENTATIVE KEMPLEN inquired if it would be to the benefit of those smaller schools. MR. JEANS said, "I wouldn't say that this benefits small schools. Schools serving less than ten students are counted in the largest school therefore generating less dollars per student." CHAIRMAN BUNDE explained taking a school with 8 students and consolidating it with a school of 23 students, would cause the student count to jump to the next category resulting in the combined school having less money than schools in the 20-30 student category. REPRESENTATIVE KEMPLEN inquired why a school of less than ten wouldn't be counted with the school in closest proximity rather than the largest school. Number 1853 DAVID TEAL, Senior Analyst, McDowell Group, explained, "If you're using an example of a school with 8 students, right now the minimum count for any school is at 39.5 or 40 kids, so if you had a school with 8 students, they would actually be counted as 5 students each. And if you count those students in a larger school, say 100 kids or 200 kids or something ...." CHAIRMAN BUNDE interjected because of the multiplier they are counted as if there were .... MR. TEAL continued, "Yes, there's a size formula that takes every school and gives them an adjusted student count. The minimum student count is 40 and so that each student would have been counted as five students. If you put them into a larger school they might be counted as 1.5 students or 1.6 or something like that. So that clearly you do get less money if you're going to count them, I guess -- it doesn't make schools close -- my opinion on that would be the way it was, if I understand it correctly, was you just don't count schools of fewer than ten. So all you're doing now is, I think, giving some local choice in saying you don't actually have to close that school of fewer than 10 students but you're not going to get funded at a level of 40 students; you're only going to get 15 or so funding for them, which is what they would get if they were in a larger school." Number 1922 REPRESENTATIVE KEMPLEN asked, "Is there a difference between the ADM of that school that (indisc.) with the highest ADM and another school. What practical effect does that have of having them grouped with the school with the highest ADM versus someone with a lower ADM?" MR. TEAL replied, "The funding is per student. Let's just say that you got $5,000 per student, if you counted them as a school independent of all others - you had 8 kids and they were counted as 40 kids at $5,000, you'd get $200,000 for that school. If those students were grouped in with a larger school, there again they're now counted as say 1.5, you're now going to get 12 student count at $5,000 [which] is only $60,000. So the effect is a loss of $140,000. Those numbers are just kind of pulled out of the air, but that's conceptually what happens." Number 1979 REPRESENTATIVE GREEN asked, "So if we have eight students and they're going to be counted as the highest, will it make a difference which sized school they go into? In other words, do they then have a split formula or do they become part of the mass of the bigger school?" MR. TEAL said it's the biggest school. REPRESENTATIVE GREEN said, "I understand that. But I mean, say they went into a school that had 30-75 - Case A and Case B - they go into a school of 250-400, do they still go in -- either place in the count, they are counted at the highest level, something like 750 ...." CHAIRMAN BUNDE asked if he was correct that about half of the schools have 200 or fewer students? Number 2018 RICHARD S. CROSS, Deputy Commissioner, Department of Education, said that was correct. CHAIRMAN BUNDE stated, "So we are talking about, when you say you're going from a school of 10 to the highest in that region, the highest that they would likely go would be counted in a school of 200. Is that correct?" MR. CROSS said, "Not necessary so, because some of our very large districts have very small schools, like Kenai for example." Number 2036 MR. TEAL said, "Here's an example. In Haines there's Mosquito Lake School with 8 students, they would now be funded as if they had 40 students and they would be included in Haines Elementary with 194 students and would be counted as 1.08. In other words, basically nine students. So the loss could be substantial and as Mr. Cross said if the school were even larger than that, the multiplier could fall further than that." Number 2058 REPRESENTATIVE KEMPLEN asked if the economic impact would possibly be less if a school of less than ten was grouped with a closer school in the district. MR. TEAL remarked, "It could never be worse. I mean, that's all I can say." REPRESENTATIVE GREEN said, "Let's go back to the hypothetical then that the largest one would be 250 and that would be 1.08 for those 8 students - going into a school of say 30 to 75 now - would they go in at 1.08 and the rest of the students in that 30 to 75 would be 1.49 or ...." MR. TEAL said they would just be counted as additional students in the larger school. REPRESENTATIVE GREEN pointed out the proposed language states "highest" as opposed to larger. He said, "And so in that district, they may have a school that's 250 and would they be counted at that rate - 1.08 or the school that is -- they're going into a different school. In other words, they're not going into the highest school, they're just ...." CHAIRMAN BUNDE clarified that students aren't necessarily physically moving; the funding for those students would be counted as if they had moved physically to the largest school. He explained it doesn't mean that a school of ten or fewer students has to close, but if the school stayed open there would be considerably less money. Number 2151 CHAIRMAN BUNDE asked if there were further questions. Number 2159 REPRESENTATIVE BRICE made a motion to amend Amendment 11 by deleting "highest" and inserting "lowest". REPRESENTATIVE GREEN objected. Number 2169 REPRESENTATIVE BRICE said, "The idea is the higher the ADM, the lower the amount of state contribution. He agreed that a school of ten students is probably too small, but that count should be potentially at the highest amount for those kids, even if they are going into a neighboring school. He said, "I think what you're talking about is turning a small school -- or reducing the funding for a small school to reflect the needs that are being funded for a larger school." CHAIRMAN BUNDE explained, "I think we're comparing two different things. If a school of fewer than eight students, if the students were to pick up and physically move to the next largest school, wherever it be, they would be funded at that level because they are now students of that school. What we're saying is, if you have the eight students or four in one case of a school with four students, if you wish to remain where you are as a separate school, you can do that, but it's like you can fly if you can find wings." REPRESENTATIVE BRICE suggested perhaps the language should reflect the closest school, not necessarily the largest school due to a potential annexation of a small school from a large district and the problem of children being transported long distances. Number 2261 REPRESENTATIVE GREEN noted the problem with putting it at the lowest is that it's a disincentive to remain as an inefficient school. Whereas, if it's put at the highest, which is actually the lower funding, there is an incentive to either get larger or move to a larger school. Number 2279 REPRESENTATIVE PORTER added, "If a smaller school decides to merge, they can merge with any school that they want to. Then their funding is commensurate with whatever size that newly added to school has. If it is the next biggest, then it stays - it might even not be affected depending on how their numbers worked out. The disincentive of not merging is provided by saying that if you're going to stay with that little inefficient school, you're going to get the least amount per student, not the next best." REPRESENTATIVE KEMPLEN commented, "Then if I understand correctly from the comments of the prior two speakers, is that there's implicit in this language, an incentive mechanism for a merging of schools -- an incentive for small schools to merge into the larger schools, is that correct?" CHAIRMAN BUNDE commented only if the school has ten or fewer students. There's no impact on a school that has ten or more students. A school of four merging with a school of ten would be funded at the highest level. However, those two schools can stay independent if they so choose, but there's a .... TAPE 98-37, SIDE B Number 0001 CHAIRMAN BUNDE ... very strong economic incentive not to. REPRESENTATIVE BRICE explained, "I would just suggest that the intention of the amendment is to say that if the decision is to merge, maybe -- and maybe I'm not even getting to it with this, maybe there's some other language we need to look at -- if the incentive should be to go to the nearest school -- and this doesn't do it and maybe I should withdraw that and then withdraw the lowest and then go to the closest. So what we don't do is have a group of kids at community A being moved to community F if they want to make that they should go to community B if community B is viable." CHAIRMAN BUNDE noted there is nothing that would preclude that from happening. If students from community A move to community B, they become students of B and are funded at that level. REPRESENTATIVE GREEN said this is a disincentive not to stay at community A. CHAIRMAN BUNDE noted there was an amendment to Amendment 11 that would change line 9 from "highest ADM" to "lowest ADM". REPRESENTATIVE GREEN maintained his objection. CHAIRMAN BUNDE asked for a roll call vote. Representatives Brice, Dyson and Kemplen voted in favor of the amendment to Amendment 11. Representatives Porter, Green and Bunde voted against it. Therefore, the amendment to Amendment 11 failed by a vote of 3-3. CHAIRMAN BUNDE asked if there was further discussion on Amendment 11. Number 0109 REPRESENTATIVE BRICE pointed out Section 38 of the proposed legislation refers to the "largest" school in the district whereas Amendment 11 refers to the "highest" ADM. He asked if there was a difference? MR. FORD said he didn't believe there was a difference. CHAIRMAN BUNDE pointed out there is a difference between the largest school district and the highest ADM school. MR. FORD thought it was a technical change. CHAIRMAN BUNDE noted that Amendment 11 was before the committee. He asked if there was objection. REPRESENTATIVE KEMPLEN objected. CHAIRMAN BUNDE asked for a roll call vote. Representatives Brice, Dyson, Porter, Green and Bunde voted in favor of the amendment. Representative Kemplen voted against it. Therefore, Amendment 11 passed on a vote of 5-1. Number 0162 REPRESENTATIVE GREEN made a motion to adopt Amendment 12. CHAIRMAN BUNDE explained Amendment 12 updates the base student allocation on page 21, lines 13 and 14. Number 0182 REPRESENTATIVE BRICE noted that a comma should be placed between the 3 and the 8. CHAIRMAN BUNDE said he was correct. He asked if there was objection to Amendment 12. Hearing none, Amendment 12 was adopted. Number 0202 REPRESENTATIVE GREEN made a motion to adopt Amendment 13. CHAIRMAN BUNDE explained Amendment 13 allows a portion of the quality schools which the Governor has expressed concern about. It allows the implementation of performance standards, which is in addition to the graduation requirements. CHAIRMAN BUNDE asked if there was objection. Hearing none, Amendment 13 was adopted. CHAIRMAN BUNDE announced the committee would begin taking public testimony which would be limited to three minutes because of the number of people signed up to testify. Number 0334 DANIEL VANMETER, Student, Togiak School testified in opposition to SB 36. He informed the committee of the progress that's been made in the Togiak School; e.g., test scores are up, the majority of seniors have college plans for the first time in years, fifth graders are starting pre-algebra and others. He said this is not the time to send the message that rural students' education isn't as important as urban students. Kids across the state deserve an equal chance for a good education and denying a good education could have severe economic and social consequences. Number 0398 COLYN ISAACSON, Fifth Grade Student, Togiak School, thanked the committee for allowing her the opportunity to participate in the legislative process. She said if educational funding is decreased, she may have to go to a boarding school when she reaches high school because the school district could not maintain a high school. She pointed out the U.S. Government supports public education as a basic right and the Alaska Constitution mandates an adequate education. The students of Togiak are asking they not be made to choose between an adequate education and their families. CHAIRMAN BUNDE noted this is not an attempt to take education away from children, but it's an attempt to change things a bit and if more efficiency can be achieved in the school system, there hopefully will be more money available for the schools. Number 0482 REPRESENTATIVE BRICE asked if the Togiak school was one school for grades 1-12. MR. VANMETER replied it was one school, K-12 with 262 students. Number 0514 SENATOR WILKEN pointed out the Southwest Regional School District currently receives $9,700 per student whereas the Anchorage School District gets $3,900 per student. Under the proposed legislation, Southwest Regional School District would receive $8,747 per student and Anchorage would get $4,000 per student. Number 0583 JEANINE KENNEDY, Executive Director, Rural Alaska Community Action Program RurALCAP, testified via teleconference from Anchorage. She said RurALCAP is a nonprofit organization with central offices located in Anchorage, and its main function is to administer Head Start and early Head Start programs in 32 communities statewide and is not affected by the education funding formula. Senator Phillips has stated the proposed legislation will achieve simplicity, equity and accountability; however, the Board of Directors of RurALCAP believes the real issue is that urban schools are needing and demanding more money for their operations, while rural schools are saying that current funding is inadequate to cover their needs. Senate Bill 36 is not simplicity, equity and accountability. If it were, the legislature would approve an increase in funding for education in both urban and rural areas of the state. This legislation proposes to take money from one area of the state and give it to another. In short, the proposed changes in the educational foundation formula are nothing more than a redistribution of existing dollars in a fashion that is rapidly creating divisiveness among Alaskan citizens. She suggested the existing foundation formula be kept in place until a formula that is more fair and equitable can be developed. CHAIRMAN BUNDE noted the legislature had been studying formulas across the United States and the majority of states believe that a per student formula is a far more effective and fair way to distribute the money. Number 0810 JIM CHALIAK, Representative, Yup'ik Immersion Program, testified via teleconference from Bethel in opposition to SB 36. He said the first point is that ongoing materials development is desperately needed in the district for Yup'ik first and second language programs. If this legislation passes, the projects and funding will decrease or be eliminated altogether. Second, major support from the bilingual curriculum department in the district offices will either be drastically reduced or eliminated. That support includes materials development for the Yup'ik programs. Third, a reduction of instructional aides will negatively impact student learning as these aides are an integral part of daily, small group, individual instruction. Lastly, without the monetary support, the level of student achievement and performance will decrease as a result of program staff reduction. Number 1018 CHARLENE SAUNDERS testified via teleconference from Cordova. She expressed her appreciation for the time and effort that's gone into the formulation of this legislation. It is her opinion that more money needs to be put into public education, but it appears this legislation moves the same monies from one district to another. People of the state do not want to take from Peter to pay Paul; all schools deserve full and appropriate funding. She stressed the needs of her local school district are increasing, the funding is shrinking and the facilities are falling down. She believes the only solution is to pass legislation that includes increased funding. CHAIRMAN BUNDE said that until there's equity in the formula, it's unlikely more money will be available. Number 1067 ROBERTA GILLOTT, Teacher, testified via teleconference from Dillingham. She said based on her experience, she sees that schools in rural Alaska are struggling to allow students to achieve their potential. She believes that statistics have been used to gear this issue; it's been said 30 percent of the students get 20 percent of the funding, but she learned from reviewing statistics that two dissimilar entities cannot be compared in that way. Rural and urban school districts are too vastly dissimilar to compare equally. She noted that while urban areas give financial support to their local schools, the rural areas don't necessarily have money to spare so they support their schools with time and effort. Schools are the backbone of a rural community and breaking that backbone will ultimately break the state's back because it will affect not only the schools, but the community as a whole. She agreed that money needed to be added to the education system; not just reallocated. CHAIRMAN BUNDE pointed out that in 1996, there was $460 million earned income in rural Alaska. Number 1169 MAC CARTER, Board Member, Yukon Flats School District, testified from Fairbanks via teleconference in opposition to SB 36. He said to (indisc.) the idea this is fair, equitable and a simple solution to funding education is preposterous. He believes the legislature is trying to kill the rural areas and to stop educating children of the state. He couldn't believe that any committee member would think for a minute that a child's education or future life is not important enough to fund education appropriately. The areas thinking they're not getting the money they deserve should perhaps look at cutting back on some of the opportunities and extra- curricular activities that rural areas don't even have the opportunity or realization to be able to enjoy. The time line for this proposed legislation is unrealistic. He cautioned committee members this legislation will pit the urban against the rural districts. Number 1292 SENATOR WILKEN reminded Mr. Carter that 517 people in the Yukon Flats REAA earned $18,601,860 in 1996. That is $35,000 per person earned income and the highest of all the unorganized areas in Alaska. This REAA can probably do the most in terms of supporting education at the local level. Number 1331 ROGER LIEBNER, Representative, Soldotna High School Parent Teacher Association, testified from Kenai via teleconference, and strongly agreed with Jeanine Kennedy's comments with respect to fairness and equity in funding. He wished to discuss the problems he sees with the limited teacher certificate provisions in the proposed legislation. He's concerned about the message being conveyed to rural areas by lowering the standard of hiring teachers in times of increased standards throughout the nation. The bill requires initial regular teachers to successfully complete a competency exam, new teachers are required to be fingerprinted and given criminal background checks, complete courses for recertification and pay certification fees. He said there's a contradiction for the rural areas in that it appears it doesn't require any significant measure of skill and training to get this limited certificate, there's no length of time stipulated to retain the certificate and there's no background checks identified in this bill. He noted the committee had just adopted Amendment 13 which requires a development of standards, yet limited certificates do not work positively in concert with this initiative. Currently, all teachers are allowed to teach in any subject area within grade parameters. With this precedent set, limited certificates will open the door to allow teaching outside the area of expertise. He said continuing the funding at the present level in the rural areas and increasing the funding in those areas that have been most impacted recently would be a good compromise. He said, "I don't see where the McDowell Group's recommendation or the area cost differential being a part of any separate bill, which would be another measure to accommodate the disparity of funding in the state." He had hoped the amount of dissention in the state could be reduced and look at what's best for the children of the state, not necessarily from an economic standpoint. Number 1486 RAY GRIFFITH, Superintendent, Southeast Island School District, testified from Ketchikan via teleconference in opposition to SB 36. He said Southeast Island School District has 12 school sites and communities in about a 20,000 square mile area; most of the sites are remote and transportation and communications are expensive. He said the success rate of the students is very high and the graduation rate for the entire district over the last five years has been 100 percent. Needless to say, the district is proud of what it is doing. The Southeast Island School District is opposed to this legislation; if passed in its current form, the district would probably lose 5 of the 12 schools next year and certainly would lose them by FY 2000. He said this legislation does nothing to address the increased cost the district is subject to each year; in fact, the district would lose 17 percent of its funding by FY 2001. The district is reducing expenditures next year by almost 20 percent and has already eliminated all music and art; reduced counseling by half; has no vocational education staff; has staffed all schools except one with principal/teachers instead of principals. The district believes this legislation was based on a seriously flawed cost study. If the intent of the legislation is to establish equity based on the McDowell Group's school operating cost study, he sees a very serious problem. The bill would create inequity by creating winners and losers and promises to produce a very divisive climate across Alaska. Number 1635 GILBERT GUTIERREZ, Member, Nome School Board, testified via teleconference from Nome, and categorically opposed this legislation. He said the comparative analysis between rural and urban is flawed and the bill is flawed because it is attempting to override the right to vote for or against an organized borough. He said the committee is using the issue of educational funding to implement a political subdivision in order to impose more taxation. He opposed this bill because the committee was not being honest with the electorate by wanting to impose a tax on rural areas while giving the constituency in Anchorage, Fairbanks and Juneau adequate funding. He is opposed to this bill because it takes money from the rural areas and shifts it to the urban areas; robbing from the poor to give to the rich. He has found 11 citations in the McDowell Study which disclaim the study used any factual data and it does not take personnel costs into account. The only factual information statements were that on an average, teacher salaries are about the same statewide and that maintenance and operations of school systems in rural Alaska are significantly higher. He recommended funding the maintenance and operations separate from the direct educational fund which would provide true equity funding. He said this bill limits funding for special education and the gifted programs. This misguided section in SB 36 exacerbates the problem parents have in providing a fair adequate education for disabled or bright children. He concluded that SB 36 is a stopgap solution; consolidating schools will shift the responsibility and increase the educational needs to an entity further removed from the local government. In order to have the equitable long time funding for our education system, this committee would be well-served when the members sponsor a bill to create an educational foundation. CHAIRMAN BUNDE noted there had been an initiative for an educational foundation which apparently the public didn't support as enthusiastically as necessary. REPRESENTATIVE PORTER pointed out the proposed committee substitute under discussion does not require any organization in the boroughs of unorganized areas. Number 1955 ROGER JACOBSON testified from Tok via teleconference and said the cut to rural education would have little effect on him. However, what might affect him is if the funding cut is counteracted by the implementation of property taxes, which he is opposed to. It would appear the urban majority prefers property tax to an income tax or sales tax since they no longer enjoy the security of home ownership. The urban majority likely envies the security of the rural minority; this envy seeks to impose the Lower 48 (indisc.) model of property taxation on rural people. Property tax for residents of Alaska is unnecessary; even urban areas could rescind property taxes and enjoy true home ownership. Where there is a will, there's a way. He proposed a state sales tax to fund the education formula which will pursuantly lower property tax and the sales tax would increase until finally property tax for residents of Alaska would cease altogether. If the urban majority wants fancy schools, let them have those schools, but do not force fancy schools on the rural areas and then expect rural residents to pay with their freedom. CHAIRMAN BUNDE noted this legislation does not call for a property tax, but it does call for an employment tax in the rural areas. TAPE 98-38, SIDE A Number 0016 STEVE CATHERS testified via teleconference from Unalaska and said when putting these factors together, it's important to consider basic common sense. It's easy to look at a classroom setting, look at the instruction available to kids, the course selection, the added resources available and to see that rural areas are not overly funded. He is of the opinion that students have fewer educational opportunities in rural areas with the current funding and to cut back on that funding will make that discrepancy even greater. The belief that rural school districts are getting too much money and the discrepancy in funding is excessive is uninformed. He urged the committee to measure that by looking at what's available to students instead of looking at spreadsheets. He commented that some areas are net producers for the state and as part of the fishing community, Unalaska is one of those areas. He is of the opinion that to take away from the districts that have is somewhat of a socialistic approach to school funding. He believes there is a perception that rural programs are not valid programs and some of the factors that created that perception are related to differences in culture and exposure. Actually, it's been his experience that rural programs do a very good job. He recommended a study be done which accurately measures the effectiveness of rural programs in terms of educating in spite of obstacles. CHAIRMAN BUNDE asked if there was local support for schools in Unalaska. MR. CATHERS said Unalaska pays heavily. SENATOR WILKEN asked Mr. Cathers to explain how Unalaska contributed locally to the Aleutian Region School District. MR. CATHERS said Aleutian Region is an REAA and doesn't contribute except in the same way as other REAAs, but Unalaska as a city government does contribute. He pointed out that by sharing administrative services between two districts, efficiency has been maximized administratively. Number 0370 SAM TOWARAK, Assistant Superintendent, Bering Straits School District, testified via teleconference from Unalakleet. He said he would limit his discussion to two items. First, he said the committee's action on this legislation will have some economic consequences on Alaskan businesses. As they continue to look at a cheaper means of purchasing goods, a door for example, which previously they ordered from Anchorage is now ordered from an out-of-state vend out the Alaskan vendor, as well as quality control. Traditionally, fuel has been purchased from Alaskan Interior vendors, but soon they may need to look at places like Port Angeles if it results in lower fuel prices. He said, "Frankly, you can legislate income tax provisions but this is counter to the need to tax Alaskans." If new taxes are needed, let's tax everyone at the 3 percent level with a tax credit for those that paid local property or sales taxes toward education. He asked Senator Wilken what the payroll is in Fairbanks and what 3 percent would generate. What is the current local effort generated by Fairbanks and how much more does Fairbanks need to contribute. Number 0523 SENATOR WILKEN responded the people of Fairbanks contribute $17 million toward education. Number 0618 ARTHUR LAKE, Tribal Administrator, Native Village of Kwigillingok, testified offnet from Kwigillingok, and said Senate Bill 36 is ill-conceived an a piece of legislation together that will affect all of Alaska. He said the effects of this bill are enormous in rural areas. He referred to the amendment regarding schools with less than ten students and wondered if things were going back to the way they were before the Molly Hootch case when kids were sent outside the community to attend school. He said there is no equality in this legislation and everyone is aware of that except for the people putting this legislation together. He said, "We're playing political football with the children of this state and we should not be. The children are our future and our most valuable resource." The effects of pitting rural Alaska against urban Alaska will be felt in urban Alaska because school districts and people will be losing money, employment, and funds for their schools. He has serious concerns about the amount of funding being cut which translates to lost positions, which in turn will effect local economy. Number 1026 BESSIE TITUS testified offnet from Minto and urged the committee to vote against Senate Bill 36 because in her opinion, the current school foundation formula is not broken; the rural areas are not over funded when a cost of living allowance is factored in. She said there is high unemployment, poverty and low income in the area. She expressed concern with the number of courses available for students, the lack of athletic programs and that SB 36 does not factor in the operation and maintenance of the schools. It appears to her that Alaska is moving backwards into the twenty-first century. Number 1087 JANICE (INDISC.) testified offnet from Hughes in opposition to the proposed committee substitute for SB 36 because of the high cost of education and maintenance in rural Alaska. The school is on a tight budget under the current foundation formula and changing the funding formula would not solve any problems without putting more money into education. If further cuts were going to be made to education funding, she wondered how it would be possible for children to receive a quality education. CHAIRMAN BUNDE announced the committee would break for dinner and reconvene at 6:00 p.m. Number 1209 CHAIRMAN BUNDE reconvened the meeting at 6:05 p.m. He called Dave Jones to the witness stand to present his comments. Number 1218 DAVE JONES, Director of Finance, Kodiak Island Borough School District, said he would be addressing Amendment 11 and making some general remarks about the legislation. He said the Kodiak Island Borough School District has nine remote schools; eight of those schools are off the road system. This year Karluk has nine and one-half students and under the current foundation formula, that school would be given a one-year grace period. However, that grace period does not exist in the proposed legislation and the effect to the district is a loss of $162,000. When the Department of Education re-ran the spreadsheets correcting the size table errors, Karluk was reclassified to the 400 - 750 table which resulted in a loss of $162,000. A meeting was recently held between the Kodiak Island Borough School Board and the Karluk Village Advisory Board to discuss the loss inasmuch as the school board had made a commitment to Karluk based on the current program that a school would be operated there through FY 99; however, the proposed legislation would have a significant financial impact. He would request a one-year grace period for the districts affected by this, or as an alternative, adopt the amendment that was previously discussed which would reassign students to the lowest ADM school as opposed to the highest ADM school. Mr. Jones said when discussing educational equity, it's important to consider both financial equity and program equity and in the fray it seems that program equity has been swept under the carpet. In conclusion, he said the Kodiak Island Borough School District believes more funding is needed to properly educate children statewide, but the funds should not come at the expense of the rural children. Number 1383 JIM FOSTER, Superintendent, Skagway School District, testified via teleconference from Skagway in opposition to Senate Bill 36. He noted this year Skagway celebrates its 100th anniversary as a single site public school. Eleven years ago, the city of Skagway contributed $48,000 to the school budget and the state contributed about $900,000. Under Senate Bill 36, the city will fund $840,000 and the state will fund $460,000. That's a significant shift in an 11-year period. Another problem with this bill is that it allows the district to spend $1,300,000, which is $266,000 short of their needs. He explained it's a small school with a superintendent/principal, 12 teachers, business manager, secretary and two custodians which serve 130 students and huge cuts will have to be made if this legislation passes. The community willingly supports the school financially and yet this legislation would cause them to come up short $266,000. He asked what Senator Wilken recommended that communities like Skagway to do in terms of meeting their educational needs. He said it's important for the state to recognize that educational needs of the larger communities need to be meet as well as those of the smaller communities. He concluded that he and the community are at a loss in terms of how to operate with the proposed funding cuts. Number 1529 MOSES KRITZ, Mayor, City of Togiak, testified that over the years the needs of the rural communities such as subsistence issues, housing needs, social and welfare issues and most of all, educational issues have never been met. He is the product of the boarding school system many miles away from home. Some of the children in boarding schools fared in terms of becoming leaders in their communities, but many turned out dysfunctional. Many turned to alcohol because they were torn between two cultures - they don't know about the subsistence way of life and don't know how to survive in the western society. He talked about his days at the boarding schools and said currently the education system in the communities provides a much better education with many of the children going on to colleges, skill centers, et cetera. With respect to fairness, he said Alaska is a vast area and some of the urban legislators have a narrow scope of vision seeing only the population of their cities and view the rural communities as a burden. He discussed the various ways the rural communities support the local economy in the urban areas. He concluded it's time to be really fair and equally help each other to maximize the educational system for the good of the entire state. Number 1740 GINGER JENKINSON, Representative, Anchorage Council of Parent Teacher Associations, testified from Anchorage via teleconference. She said the council realizes how difficult it is to understand the current, outdated foundation formula and applauds the efforts of the sponsors for attempting to find a simpler, more fair and equitable foundation formula for the students of Alaska. The parents and teachers in the Anchorage School District realize what crowded classrooms are like and for the first time in years, Anchorage has a chance to lower the class size. It's time for a change. Number 1787 BARB ANGAIAK testified via teleconference from Bethel and said all the children of Alaska need to be provided with an education supported and funded by the state. As she sees it, the problem is not that some students are receiving more than others and somehow the scales must be balanced by shifting money from one district to another, but rather the problem is there are more students in the state and more money must be allocated to fund an education for them. Year after year, districts have struggled to make ends meet when allocation of funds has not kept up with inflation. She believes there are some misconceptions about what schools are like in rural Alaska. She teaches at Kilbuk Elementary School in Bethel, the largest school in the western part of the state. The facility was built in the late 1950s and is not modern and doesn't have many of the amenities that are found in schools in the urban areas. She discussed the overcrowding and various needs for maintenance and said many of the rural schools were built with small populations in mind and have grown well beyond what the original capacity was intended to be. She said districts have been asked over and over again to accept the same level of funding as the year before and are told by people in leadership positions that schools should be happy to receive the same amount of funding instead of being reduced. The people of Alaska should not be happy that the elected officials of the state do not see fit to provide the children with what they need, even when money is available. She concluded that more money is needed for the educational system and requested the committee to vote against this legislation. Number 1936 TOM RICHARDS, JR., testified via teleconference from Fairbanks. He is an employee of a service organization for Interior Alaska villages, but was speaking on his own behalf. The one issue he wished to discuss was accountability with respect to funding and the educational performance standards of school districts. He commented that certainly, the public deserves accountability, but accountability is a two-way street and he is of the opinion that public officials are obligated to consult with the people affected by their actions. He said Senate Bill 36 has moved too quickly through the legislative process. He discussed how the education system as it is today came about, beginning in the mid-1970s with an agreement between the federal government and the state of Alaska that no school would be transferred from the federal BIA system to the state system unless the federal government, state of Alaska and the community were in agreement. In 1975, he went to work for a regional nonprofit Native corporation in Fairbanks and at that time, there were about 14 villages which were BIA schools. Each of those communities was asked to consent to a proposal to transfer the educational responsibility from the federal government to the state government. Likewise, in 1980 when he moved to Bethel, there were 27 villages that were part of the federal BIA school system and no transfer could occur unless all concerned parties agreed. He said there were a lot of promises made by the state of Alaska in the early 1980s and now the educational system is being ripped apart in rural Alaska. He expressed his frustration with the lack of consultation with the rural communities regarding this very important issue. He pointed out there are hundreds of individuals in Fairbanks who did not support this legislation. Number 2131 CHAIRMAN BUNDE noted this effort began over four years ago when the state school board began a two-year review of the foundation formula; this committee worked on it for two years after that, so this is the fifth year of work on this issue. Number 2156 KIMBERLEY A. STRONG, Representative, Village of Klukwan and ANS Grand President for the Alaska Native Sisterhood, urged the committee to vote against this bill. One of the major problems she sees is the incorporation required for a tax base. There had been another legislative bill which attempted to force rural communities to incorporate which she had opposed also because it's another intrusion in the village lifestyle. She explained that Klukwan runs under the Indian Reorganization Act and is represented by an IRA Council. She said Klukwan does not have a money base to support the education of its children, but the residents buy things in other communities which in turn helps support that education system. For example, the Haines Borough School District has economically benefitted from the village corporation. She discussed the history of the educational system in Alaska and the hardships suffered by the children who went to boarding schools. The state of Alaska made promises to educate the children in the villages, but now the rural areas are being threatened with cutbacks with this proposed legislation. TAPE 98-38, SIDE B Number 0002 JOHN KUNIK, Member, Copper River Against Bureaucracy, testified from Glennallen via teleconference in opposition to Senate Bill 36. He said this issue has been rehashed many times over the years in various forms. Imposition of a 3 mill tax or any tax on property is not feasible as there's not enough personal property in this area to tax; less than 1 percent is in private hands in the unorganized boroughs. He pointed out the high unemployment rates in the unorganized areas; work is seasonal. There are some federal and state workers who could probably sustain the employment tax, although he believed it was illegal under the Equal Protection Clause of the Alaska State Constitution. He said the 20 mill rate tax on the pipeline goes directly into the general fund and is more than enough to make up for the community's local contribution to education. If a tax needs to be imposed, he suggested a statewide sales tax. He asked for an explanation of the $14 million exemption for some residents of Anchorage. Schools in the Glennallen area have no amenities and as far as he is concerned, no school in the state needs swimming pools or fancy gymnasiums. He said the level of education has fallen statewide, nationwide and worldwide. As a certified teacher, he believes Alaska has too many teachers teaching out of their discipline and that are definitely unqualified. CHAIRMAN BUNDE clarified it was $13 million and the tax rebate in Anchorage is made up by the taxpayers of Anchorage; it's not state money. Number 0166 BRIAN BERGERON, Student, Ketchikan Gateway School District, testified via teleconference from Ketchikan. He said he's had a great education since kindergarten even though class options have decreased over the years and the numbers of teachers he's looked up to has decreased. He talked about how the classes have gotten bigger and with the budget cuts, the number of teachers has decreased. He personally began to feel the effects of these budget cuts in seventh grade. He discussed some of the problems with the schools in Ketchikan, including old textbooks. He believes the funding distribution for education should be fair and equitable with communities paying their share of local educational costs. He is of the opinion this legislation is inappropriate because money shouldn't be taken from some communities and given to others. Number 0264 BARBARA DALKE testified from Tok via teleconference in opposition to Senate Bill 36. She has reviewed the bill and the amendments and said there is no equity for rural schools or students. This legislation pits one class of people against another and will be an educational tragedy for the rural areas. Rural areas do not have the same resources as the urban centers and taxing people who are already living below the poverty level is to be out of touch with the reality of rural Alaska. This legislation promotes and widens the gap between the "haves" and "have nots", it is disproportional and promotes quality of education in one area of Alaska; city and urban areas over the rural areas. She pointed out some of the problems experienced by the Mentasta school; e.g., outdated textbooks, mismatched hand me down encyclopedias from other schools. This legislation would reduce the staff by 1.5 positions which will leave the school with unmanageable class sizes. She concluded this bill is not conducive to education in rural areas. Number 0422 BOB CHRISTAL, Superintendent of Schools, Anchorage School District, testified via teleconference from Anchorage. He said the Anchorage School District believes it is critical that a rewrite of school funding formula occur this year. He stated, "In our view we do not view the funding of schools as a political party issue; we view it as a responsibility of all legislators and the Governor to provide a fair and equitable way of funding schools in the state." The Anchorage School District has 38 percent of the students in the state of Alaska attend public schools; 28 percent of the state revenues for schools is directed to the Anchorage School District. The district is not requesting 38 percent of the funds, but expects to receive more than 28 percent. There are over 48,000 students in Anchorage; 33 percent are minority students. There are 5,500 Alaska Native students being educated in the Anchorage School District. One-third of the elementary students in Anchorage have parents who have incomes that qualify them for free or reduced lunches in the school. Based on the comments he's been hearing, he believes there is a misconception that the Anchorage School District is doing something against children; that is absolutely untrue. They are simply asking people to take a careful and clear look about what's fair and equitable for all students in the state. The district believes that for the last ten years, they have received inequitable treatment with respect to funding of students. In the area of standards and assessments, the Anchorage School District absolutely supports standards and assessments, but those assessments and standards must be funded if there's an expectation of doing something different that what's currently being done. The Anchorage School District believes it is critical for the Alaska Legislature and the Governor to pay very careful attention to school funding, and after an equitable distribution occurs, careful thought and consideration must be given to the amount of increased funds that should be directed to public schools across the state. Number 0530 REPRESENTATIVE KEMPLEN noted there had been some concern expressed about how categorical funding is determined. Some people assert the existing approach works fairly well while others feel there should be a set percentage which in this proposed bill is set at 20 percent. He asked Mr. Christal to comment on his view of the appropriate approach for categorical funding. MR. CHRISTAL responded the Anchorage School District has been supportive of the 20 percent approach with the understanding that if there are some very intensive needs students, districts should be given the opportunity to make a case of why additional revenues should be directed toward those. Number 0602 SYD WRIGHT, Retired School Principal, testified via teleconference from Petersburg. He's had 38 years of formal education responsibility as teacher, principal and superintendent, mostly in Alaska. He said he's reluctant to testify because after all the years of observing and participating in the annual battles over educational funding, he didn't think it made a bit of difference what he or anyone else has to say. He's witnessed mayors, councils, superintendents, school board members, and others who have pled their case, but it's done no good. The bottom line is substantially more financial support of schools is needed and SB 36 does not accomplish that. He noted that many people won't testify any more because they feel it's useless. More than one former Governor has said that schools must have proper funding and have even explained how to finance it; a combination of a state income tax and use of the constitutional reserve fund. He recalled the results of the public survey taken when oil was first discovered overwhelming supported schools as a first priority. Number 0797 OLGA SUTTON testified she has seven children going through the Togiak school system and Senate Bill 36 is unfair because children in the rural areas are entitled to a reasonable education. She went to a boarding home school and doesn't want her children having to leave home to go to school; boarding schools rip families apart. Number 0844 BILL FERGUSON testified via teleconference from Bethel and supported the comments of Syd Wright. He recommended the House HESS Committee conduct a statewide poll to determine what the public position is on this bill. Over the last couple of months, he's listened to the testimony from Senators Wilken, Torgerson and Phillips, as well as the public testimony on this legislation and what he's heard is rural versus urban, urban versus rural, splitting the state and using children as pawns in a political game, overcrowding in the urban areas and so forth. It's distressing to him that the people of the state are being divided and the children are the ones suffering. He referred to a comment that rural areas have a wage base of $475 million that should be taxed; he assumed that meant all rural areas combined. He said the wage base in that area is based on a false economy in that it's all state and federal funds. If educational funding was reduced in that area by $8 million, which equates to about $56 million in the end, there would be no way that an educational program could be supported locally. Children in this state should not be pitted against each other; funds need to be made available to provide the best education possible for all children in the state. Number 1103 CRISTINA SCHNEIDER testified from Fairbanks via teleconference. She said discussing education is a formidable challenge; how best to do it, how much it costs, and who is going to pay. She said it's time to reassess the way the legislature pays for school funding in light of the state's declining revenues. She admitted that some school districts have manipulated the current funding formula to benefit children in their respective district. These are egregious problems which have been identified and can be solved. She said this legislation is part of the process of reassessment and expressed her thanks to Senator Wilken for bringing this issue to a public debate. While this bill is part of the process of finding a solution, it is not in itself the solution. She said this legislation changes the distribution of funding so dramatically that in the end 21 percent of the state's children will get only 16 percent of the state's funding for education. She knows that the state's annual revenues no longer match the spending and she is willing to pay to dedicated funds and employment taxes for a service all children deserve. She opposes Amendment 2 which creates the 3 percent payroll tax. Senate Bill 36 will close schools; some will close immediately while others will close later. The fact is there will be a $17.5 million loss to four school districts around Fairbanks; Yukon Flats, Iditarod, Yukon/Koyukuk and one other district and what could the districts hope to earn back in a 3 percent payroll tax in those rural areas - less than one-half of that loss. If schools close, children will have to leave their families - there will be no choice. She concluded that more money is needed overall for the educational system in Alaska. Number 1323 DIANE GUBATAYAO testified via teleconference from Ketchikan. She is the parent of four children in the Ketchikan School District and has for years been advocating for equitable funding for all school districts. She expressed her thanks to the legislature for commissioning the McDowell Study and to everyone for their efforts to fix a broken school funding formula. She said basing school funding upon the cost of operating a school as opposed to operating a household makes a great deal sense. In the meantime, Ketchikan is in a world of hurt; her children do not have access to equal educational opportunities. She said it is interesting to review all the spreadsheets that have been produced; one pattern is consistent no matter how the numbers are crunched by the Department of Education - Ketchikan comes out on top of all 53 districts in gaining the most. This should make her happy, but it doesn't because it takes from others to give to Ketchikan. The spreadsheets have also pointed out how severely Ketchikan has been underfunded for the past several years. Last year the Ketchikan School Board cut $1.2 million from the budget with potentially another $800,000 being cut this year. The local borough government funds the school system to the maximum allowed by law; currently at the 6.8 mill level. She understands this legislation is not perfect, but she urged the committee to incorporate the McDowell Study finding into whatever new formula is approved. Additionally, she encouraged the legislature to add new dollars to education funding. Number 1490 NORA DAVID testified via teleconference from Tok. She has five school aged children attending the Mentasta Lake School. She said Senate Bill 36 will take away from her children. Mentasta Lake has struggled to give the children the best education possible with the money available and now SB 36 would take away some of those funds. She wants to see the education system in Alaska go forward not backward. Number 1533 ELIZABETH BACOM, School Board Member, Petersburg School District, testified via teleconference from Petersburg. She thanked the legislature for making education funding a priority this session. Every child benefits when dollars are spent wisely and fairly on education. Regardless of where a child is educated, every child in Alaska deserves a quality education and every district should be accountable for how its education dollars are spent. Understanding that the funding legislation currently under consideration is a work in progress, the Petersburg School Board believes a fair and equitable education funding bill would build in accountability by incorporating quality schools initiatives. This would provide a way to address needed school improvements and the funding to implement them. School districts are currently working under numerous unfunded mandates from new professional evaluation systems to high school graduation assessments aimed at improving student performance. Districts that are successful in implementing improvements should be rewarded while districts that are unable to raise student performance should be assisted. She advised the committee to implement the cost differential study. Petersburg and other Southeast Alaska communities do not enjoy the same economies of scale in operating schools as Anchorage, yet they are placed at the same level as Anchorage in the current formula. Senate Bill 36 recognizes Petersburg has been underfunded for years; however, it does not allocate any additional money for schools, but takes money from other districts and redistributes it. While this legislation would benefit Petersburg, the potential harm it would do to more than 20,000 Alaskan students has prompted Governor Knowles to promise a veto and the affected districts would certainly sue over the issue. If no new funding formula is implemented this year, Petersburg will face an even greater deficit next year. The legislature needs to invest in education to make up for the lack of inflation proofing over the last 10 years and retain the current local funding caps. As costs have risen in the Petersburg District, with no compensating increase of state funding, Petersburg has demonstrated its commitment to education by increasing the local contribution to the maximum allowed. Further transfers of state funding responsibility to local taxpayers need to be avoided. The districts losing funding under the new formula should be held harmless. The state should not have to take resources away from some Alaskan children to give to others. The Petersburg School Board appreciates the challenge faced by the legislators in enacting legislation that would be viewed as fair and equitable by all areas of Alaska. The school board requested that all funding proposals be evaluated. Number 1729 JOE ALEXIE, Representative, Togiak Natives, Limited, said in his opinion Senate Bill 36 is not a workable solution for the following reasons: First, it destroys the very nature of its purpose which is to give to the rural school children the right to have the highest form of education. If educational funding is cut, the goal of reaching the best form of education for the rural children will not be met. The broken funding formula is not the fault of either rural or urban school children. Second, he believes this is discriminatory. It is well known the rural schools lack many things a good school should have. Third, there are laws to protect children from abuse. By cutting funding, he believes this crime is a reality, for by not giving or funding basic educational needs is like a parent not providing the very needs for children. TAPE 98-39, SIDE A Number 0002 DARIO NOTTI testified from Bethel via teleconference. He referred to Amendment 4 and said it appears that school funding is being changed into a welfare program by deleting "state's share or public school funding" and inserted "state aid". This takes away the perception of educating the student and turns it into a welfare program that can be cut and slashed. He cited from various sections of the Alaska Constitution and said this legislation seems like it's not aimed at the good of the whole state; it's a one-sided bill. He federal government sends out a PILT (Payment in lieu of taxes) check; therefore, they do share in the cost of the education by allowing the federal government to establish the wildlife refuge. He discussed the various ways in which Bethel supports the Anchorage economy and property tax by ordering various supplies. He would be willing to pay an income tax equal to what other residents of the state would pay. He pointed out the cost of operating a smaller rural school is greater than operating an urban school. Number 0407 REVA SHIRCEL, Director of Education, Tanana Chiefs Conference, testified from Fairbanks via teleconference. She said in the Indian way, it is a moral obligation to provide adequate education for the children and every child has that right in the state of Alaska. The right to an adequate education is guaranteed to all citizens under the state constitution. She said the 37 federally recognized tribes of the Tanana Chiefs Conference wish to make their position known on this proposed legislation. This bill would move millions of dollars in state aid from rural to urban school districts with the expectation that rural communities would somehow be able to finance the loss of funds through the establishment of organized boroughs. The Tanana Chiefs Conference requests committee members to carefully consider the ramifications of taking away the educational resources of any Alaskan children. She said this state has never in its history taken away from one child to give to another. Until plans are implemented for long term and sustainable economic development within rural Alaska, the legislature must be realistic in their expectations that an adequate tax base could be generated from newly created organized boroughs to support the educational needs of rural Alaskan children. She heard the comments that Anchorage has 40 percent of the state's students and receives 30 percent of the state's educational funding. That may be true, but it's important to remember that the overwhelming majority of the schools are located in the rural Alaskan communities. She said the spirit of this bill and its obvious impacts on the future generations of rural Alaskan children neither addresses the needs or prepares Alaska's children to enter the twenty-first century together with equal chance and opportunity. Number 0637 JANE BROWN testified via teleconference from Glennallen. She noted that many of the residents in the area are currently in Anchorage shopping, supporting urban businesses. She pointed out that residents of the area currently more than pay their way for school funding - the pipeline is taxed by the state at a 20 mill rate and the dollars generated go directly into the general fund which more than pays for the $6 million needed for the Copper Basin. She said she opposes this bill and the sponsors need to go back to the drawing board and reassess what the bill is attempting to accomplish. She said Senate Bill 36 has been amended so many times, it's almost impossible to keep up with all the changes. She stated the proposed committee substitute for Senate Bill 36 is unconstitutional because a dedicated tax cannot be established. She suggested if the burden of school finance is to be spread fairly, cap the permanent fund and use the excess dollars to fund schools. She requested committee members to vote against this legislation. Number 0788 HANNAH RAMISKEY testified via teleconference from Ketchikan. She said she personally pays $2800 in property tax in addition to a 5 percent sales tax on purchases. She does not want to see other Alaskan children put in the same situation in which Ketchikan's children find themselves. However, after undergoing several budget cuts, the Ketchikan School District views this legislation as the only hope to pull them out of serious budget shortfalls. Since 1993, 32 positions have been cut and supplies cut almost 70 percent, but the number of students has remained the same; without help, another 8.5 to 11 positions will be cut. She said the community funds to the cap, administrative costs are among the lowest in the state, the district accepts the state's accountability standards or higher and they cannot accomplish any more without help from the state. She urged the committee to review the funding inequity in the state and find a good, fair way to give all of Alaska's children the opportunity for a good education. Number 0867 PAUL FROST of Togiak testified via teleconference from Anchorage. He has three sons attending school in Togiak but has owned property in Anchorage for a number of years, so he has been supporting schools in Anchorage through property taxes. He commented the first part of the school in Togiak was built in 1952, with a few cubicles added since then. He discussed the great differences between the school in Togiak and the school he graduated from in Anchorage and couldn't believe the legislature was even considering taking funds away from the rural schools to give to the urban schools. He asked committee members to reconsider their position of taking educational dollars away from rural schools and to vote against this legislation. Number 1070 SURAIYA JOHN testified from Tok via teleconference. She has been a student at Katy John High School in Mentasta Lake for three years; prior to that she went to school in Fairbanks. She expressed her happiness with being back in the village where she can learn about her culture. She expressed concern that her younger relatives may not have the opportunity to stay in the village if this legislation passes. She is opposed to SB 36 because it will strip the children in the rural areas away from their culture and families. She does not want to see the funding cut for rural schools and children having to go to schools far away from their parents. She discussed the effects of the older generation having to go away to boarding schools and shared experiences of her grandfather's life at the boarding school. Number 1259 SHERYLE CHARLIE testified offnet from Minto, reiterating the testimony of many of the previous speakers. Every child in the state of Alaska is guaranteed the right to the best education and programs the state has to offer. Why should one group suffer to satisfy the desires of another group? She has seven children in school and wants to see the best for each one. She said both the young and old have been through a lot and the people in rural Alaska need support and taking funds away from rural schools or closing schools is not the answer. The children are the future of Alaska and it's important the right message be sent to them. She encouraged committee members to listen to every word that's being said about this proposed legislation. Number 1371 JANICE KVERNVIK, Member, Petersburg School Board, testified via teleconference from Petersburg. She said that Elizabeth Bacom had previously presented the Petersburg School Board's position on SB 36, but as a parent and grandparent, she's concerned with the direction of funding for schools. She said each year there have been promises about school funding and this is the year to do something; however, the proposed legislation is not the answer. Rural communities are being pitted against urban communities and the only fair way to fund schools is to put new money into the system. She said it's time to fix up the school buildings and get on with the real job - to educate the future generation. She said the number of people who supported the National Endowment Initiative indicates that Alaskans really do care about children and their education. Number 1428 CHRISTINE COOPCHIAK, Representative, Togiak Health Clinic, said the community of Togiak values their students and is proud of them. She shared some of the accomplishments of students in the areas of sports, music and academically. She expressed concern that this proposed legislation would decrease the number of opportunities for the students, which already are limited due to the cost of living in rural Alaska. The people of Togiak don't expect to have a lot of extras, but do want the basics. Further decreasing the funding will not be eliminating the frills, but it will cut into the basics like teachers and programs. The biggest fear in Togiak is the high school program will be eliminated, leaving few good options. This proposed legislation is not fair to rural communities and rural children; the state has a responsibility to all the children. This is not the way for Alaska to be approaching the twenty-first century - this state should be on the leading edge, not the first state to backslide. Number 1570 CATHY SAMPSON-KRUSE testified via teleconference from Bethel in opposition to SB 36. It is her opinion the Native people are being attacked by the state of Alaska on all sides: Tribal sovereignty, hunting and fishing, education and bilingual funding, Indian Child Welfare Act, et cetera. She said people in the rural communities would begin their economic sanctions slowly by word of mouth and letters to store owners advising that they and their supporters would no longer be willing to spend millions of dollars in the urban areas. She has been inspired to stand up for her convictions and requested fair funding for K-12 education, building and maintenance of schools and additional funding for higher education. Number 1754 DIANA CAMPBELL testified via teleconference from Fairbanks in opposition to SB 36. Her family has a long history of teaching Alaska rural children beginning when her grandparents taught countless rural children how to read and write in their home villages and made sacrifices to do so. She is somewhat bewildered though; she's always believed that it's better for adults to sacrifice for children than children sacrificing for adults. This legislation would take from the poorest communities and give to the richest. She acknowledged that rural communities have problems; poverty, unemployment and low student test scores. Her grandparents knew that education was the greatest weapon the rural areas have to combat these problems. With respect to boarding schools, ironically her mother left home as a junior high school student to attend school and lived in an orphanage until she graduated, not seeing her mother again until she was in her twenties. She knew her language when she left the village, but didn't know it when she graduated from high school. In conclusion, she's all for finding smart ways to spend money for education, but Senate Bill 36 is not a smart way to spend education money. Number 1850 JOHN THOMAS, Superintendent, Ketchikan Gateway Borough School District, testified from Ketchikan via teleconference and said he agreed with the student who said that every student deserves an opportunity for an equal education. Funding that education is the responsibility of the state. Many parts of the states, rural and urban, are not satisfied with the current status of schools. Ketchikan appreciates the vigorous manner in which the legislature has addressed this issue this year and the people of Ketchikan are not talking about the negative effects of SB 36, rather they are talking about the negative effects of the last ten years under the current foundation formula. Ketchikan has done everything the legislature would like to see: Graduation (indisc.), property tax, sales tax, fund to the local cap, expend 69 percent of funding on instruction and with all that, you'd think the Ketchikan school system would be exemplary, but it's are not. Their enrollment is basically flat and because of that, continuous, drastic reductions have been made since 1991. Teachers, nurses, librarians, counselors and administrators have been cut, programs have been reduced, reduced funds for supplies and materials, and there's talk of closing a school and reducing or eliminating funding for student activities. On top of that, the closure of the Ketchikan Pulp Mill has resulted in a 7 percent enrollment drop. The Ketchikan School District is not just predicting the consequences; they are experiencing it. They need help as do other districts. He supports SB 36, but he also supports continuing efforts to find sufficient funding so all students can have the opportunity to pursue a quality educational program. He supported legislative efforts and encouraged legislators not to stop short of the mark. Number 1963 GORDON KRON testified via teleconference from Tok in opposition to SB 36 because it's inequitable. While the larger schools have indicated they may have to cut nurses, counselors, music, art, et cetera, due to the cutbacks over the past 10 years, the rural areas have never even had access to those things. Passage of SB 36 will widen the gap between the "haves" and the "have nots". If funding cuts continue, the larger urban schools will continue to have art and music programs while rural Alaska will have less of the basic academic necessities. He urged committee members to give this legislation serious consideration before taking action. Number 2044 JOHN CYR, President, NEA-Alaska, said he's struggled with where to start with his testimony, so he would express his technical concerns first and finish with the difference between intent and impact. He said NEA-Alaska has some real concerns with the technical aspect of this legislation. With respect to the categorical funding cap for bilingual, he thought the case could be made for special education children that that distribution probably falls evenly amongst the population, but he didn't believe the case could be made that the bilingual student population falls evenly amongst the population of Alaska. It just doesn't seem logical to fund bilingual at the same rate across the state when there are communities which have no bilingual programs while there are others where the vast preponderance of students are at some level, bilingual. He said the amendment for the student count is disturbing. He said the rapidly growing communities will not get a chance for additional funding without the second count, but will have to absorb the loss through the course of the year. With respect to the waiver procedure for minimum expenditure toward instruction, NEA-Alaska believes that 70 percent of the funds should go to the classroom, but there's no procedure built in for a waiver. He predicted that districts will not be able to meet the 70 percent requirement, they will get an automatic waiver and there will be no change in terms of money being directed toward the classroom. He expressed some concern with the chief school administrator language. He explained that currently only the PTPC has control because they control those individuals with a certificate. With the proposed language, he wasn't certain what redress the state has to address situations where there might be malfeasance. He commented the driving factor in this legislation is the school size factor - not the McDowell Study or the area cost differential. He's said, "It's the idea that each school is its own funding formula, and so that in those communities where you have, quite honestly, the most efficient schools we can have, a single school in a single community educating all the kids, they're penalized. And I think that's an unintended consequence of this. I think that's something that nobody intended to have happen, and yet it has happened." A community with 300 or 400 kids and 3 schools actually does quite well under the proposed formula. However, a community with the same number of students but only one school loses money. It is important to come to an understanding of how those schools are funded, because in his view this bill punishes the most efficient schools. Number 2199 REPRESENTATIVE DYSON noted that perhaps there are some unintended results, but under this formula each student in a small school is counted as five. He asked if that didn't help to mitigate the impact on small schools. MR. CYR responded that if Ben Eielson Junior/Senior High School in Fairbanks for example, was counted as two schools it would gain an extra $400,000. He pointed out there are a number of schools in the state that could be split. The way the formula drives and loads at the front end, it rewards inefficiency. Number 2247 CHAIRMAN BUNDE interjected that currently schools are being defined more effectively in order to avoid situations of districts padding their funding by additional funding communities. MR. CYR said he was not suggesting the current funding communities necessarily work and agreed it was something that needed to be looked at. Finally, he said the difference between intent and impact is real important and he didn't believe that anyone started down this path to hurt rural children by wanting to close schools, by providing less opportunity for rural children, by making sure that little children in rural Alaska don't have a community school - they could get it off the Internet or go to a boarding school somewhere. The state has been there - it didn't work 20-25 years ago and it won't work now. He noted that a number of districts would lose tremendous amounts of money and the impact of those losses won't be felt in administrative offices, but will be felt in classrooms. He said somewhere something needs to be done to make sure the children aren't hurt. Number 2323 CHAIRMAN BUNDE asked if Mr. Cyr, as the representative for NEA-Alaska, supports in Alaska. MR. CYR said there's a need to look at how schools are funded across Alaska. NEA-Alaska has consistently talked about the need for a universal tax for schools. His preference would be some kind of income tax with a back-end write off for people living in the organized boroughs who already provide for their schools at some level. He thought it had .... TAPE 98-39, SIDE B Number 0001 MR. CYR .... "I don't think we just say we're taxing you -- because quite honestly at 3 percent, there are a number of people out in the rural areas who are going to pay a lot more money into the general fund towards education than you would pay if you .... So, I think there's got to be an equity issue here." Number 0018 CHAIRMAN BUNDE asked if NEA-Alaska would have a more positive view of this bill if it produced a significant increase in the foundation funding for all schools in the state. MR. CYR responded, "If you're asking me if I think that I would be in favor of a bill that provided more money for education for every child in Alaska - absolutely I would be in favor of that." CHAIRMAN BUNDE asked, " From your perspective statewide -- you have statewide responsibilities from rural to urban and back, would you say it's more likely that we would have increased funding if we have local support and we have equity than if we don't?" MR. CYR said if there was equity of program. He said it's important not to confuse equity of program with equity of dollars. If equity of educational opportunity is really looked at and every child receives the kind of education needed, and parents in Anchorage, as well as parents in Togiak, believe those schools are doing a good job, he thought that more money should be made available for education. He said, "I think rural education - I think it's a myth if we say rural education doesn't work." Rural Alaska has been transformed in one generation. Number 0108 LUCY CROW testified via teleconference from Bethel and said SB 36 is the worst discrimination she's ever witnessed and it will never work. She urged the committee not to support this piece of legislation. Number 0139 CYNTHIA HENRY, Legislative Chair, Fairbanks North Star Borough School Board, testified via teleconference from Fairbanks and said the Fairbanks School Board believes the current school foundation formula is broken and the board extends its gratitude for efforts on this important issue. She wanted to share the board's priorities for a new foundation formula. First, the formula should be made more equitable for the larger districts and all communities, including REAAs, should contribute to the cost of education. The rationale for that is the board has long supported its concept of change to the foundation formula that required all citizens to participate in the funding of their schools. The location of a personal residence should not eliminate that responsibility and under the current system, only those residents of organized municipalities pay directly to the operation of their schools. It is the board's belief that when citizens directly participate in the funding of schools, public scrutiny increases and school districts and school boards are held to a higher standard. The board also believes that special education funding should be determined as a percentage of enrollment. The board has a fairly long history of supporting this concept and has gone on record for several years supporting the leveling out of funding provided for all special needs children. The Department of Education generated a report recommending funding special needs as a percentage of enrollment several years ago and the board supported that recommendation then and supports it now. The Fairbanks North Star School Board also supports relief from the impacts of local assessed valuation on state funding. This was an issue the board felt needed to be addressed. She noted under the current formula, the district is facing a reduction of $2.3 million because of changes in the assessed valuation. The board is supportive of the quality school initiatives and she believed would be supportive of the earlier amendment which included some of the quality school initiatives into SB 36. The board believes the state will need to provide funding for the mandated services that are required because there are costs associated with some sort of developmental assessment for kindergartners. She said there's a large expense in that kind of effort, but the board supports it. Finally, the Fairbanks North Star School Board believes there should be a periodic review and adjustments made to the state foundation formula to cover increased costs, which is part of the problem with the existing foundation formula. She thanked each committee member for their efforts in this important issue. Number 0318 REPRESENTATIVE BRICE asked how close Fairbanks was to reaching the local contribution cap. MS. HENRY said, "We would be there or just over if the foundation formula does not change and our request that's being made this year, which is approximately $4 million more than last year, I think puts us at or just over the cap." Number 0353 TILLI ABBOTT, Principal, Hoonah City Schools, testified she was born and raised in Hoonah, graduated from Hoonah High School and is now the principal. Although this legislation would not affect Hoonah directly, she was speaking on behalf of all rural communities. She said education is not only a basic right for all citizens of the United States, but it also should be equitable and she keeps hearing over and over that someone is going to be left out. Having gone to college in Anchorage, she knows there are funding resources available there for education, whereas the people in the rural communities do not have the opportunities and resources. As a first year principal, she has become aware of how much money it costs to operate a school. Take athletics, for example, which is an important part in rural communities in building self-esteem; it took about $10,000 to send the basketball team to Anchorage to compete in the state tournament. She referred to a newspaper article with a picture of a group of young ladies from rural areas wearing arm bands in protest of SB 36. That really made an impression on her, especially when an article appeared the following day stating the mayor found some $12 million he didn't know existed. She thought it was sad that the education and self-esteem of young people depends on legislators. She asked committee members when they had last spoken with a teen besides their own or visited a rural school. She extended an invitation to come walk in the shoes of students and people in rural areas. She surmised that each committee member had an adequate education and wanted the same for their children and grandchildren. She said they are no different than the people in the rural communities who want the same opportunities. She asked committee members to place themselves in the position of having to face the possibility of having to send their children or grandchildren to a boarding school. Number 0508 REPRESENTATIVE DYSON said he understands the McDowell Study does a more accurate job than ever before on the cost differential of running education in the various areas of the state. The results of that study were taken into account in SB 36 in a more accurate way than ever before. He wondered what he was missing when Ms. Abbott and others keep saying that Senate Bill 36 doesn't take into account the cost differential of operating a school in the rural areas. MS. ABBOTT replied she didn't believe it took a study, but just common sense. She said, "I think it really takes you to go into that school district and look at their books and see how that money is spent. I think it really takes you to come out to Hoonah and see that we don't have any frills." REPRESENTATIVE DYSON asked what gave Ms. Abbott the idea that SB 36 doesn't take into account the cost differential in running education in rural areas. MS. ABBOTT said discussions with a Senator and a Representative gave her that idea. She hadn't read all of the McDowell Study, but the Senator and Representative had really highlighted the fact there is nothing right about this bill. REPRESENTATIVE DYSON commented he has lived in Alaska for 35 years and worked in lots of villages. He's not able to understand the hostility and anger and the lack of specific information about what is wrong with this bill, therefore, it doesn't help him re-evaluate where the problems are. He noted he hasn't heard any outrage about the schools that have been taken advantage of under the current formula. MS. ABBOTT responded when the red flags are raised and there's rhetoric over and over, it is a legislator's responsibility to go out and find out how the people are feeling about a specific issue. Number 0672 REPRESENTATIVE KEMPLEN referred to the administrative costs and Ms. Abbott's comment about the high cost of sending the kids to the tournament. There had been earlier testimony about how important programs like band, wrestling, basketball and the like are in creating a sense of pride and self-esteem in students, giving them a strong foundation upon which to be self-sufficient citizens. He wondered how those costs are accounted for. The McDowell Study mentions there is a wide variation in the administrative category and said it appears that certain schools are including the cost of extra curricular activities in the administrative category. He asked Ms. Abbott if the expenditures for the basketball team in Hoonah are charged to an administrative function. MS. ABBOTT said not to her knowledge. SENATOR WILKEN observed the Hoonah School District has 270 students, but by adding in the data from the McDowell Study and the categorical funding, the Hoonah School District actually gets credit for 504 students under Senate Bill 36. He explained the student count is brought up to try to make everyone equal. MS. ABBOTT reiterated that SB 36 does not directly impact Hoonah and it is not anticipated to, but she's testifying on behalf of the rural communities up north. She stressed it wasn't fair that people had to even think about perhaps moving away from families because of inequities in the funding. CHAIRMAN BUNDE noted that Mt. Edgecumbe was strongly supported by the rural community and many of today's rural Native leaders went to school at Mt. Edgecumbe. Number 0991 REPRESENTATIVE DYSON asked what has led Ms. Abbott to think this bill is going to force people to go to boarding schools. MS. ABBOTT said the cry from the people in the urban areas is they are tired of paying taxes while still not receiving the funds they feel they are entitled to. People in the rural areas are concerned that funds are being taken from their schools and because of the lack of funds, schools will be closing immediately. REPRESENTATIVE DYSON explained students in the smallest schools would be counted as five students, which translates to five times more money than a student would get in Anchorage, for example. He believed there was a point at which it was no longer efficient to operate a school. Currently, there are several thousand students statewide involved in correspondence or home schools, and he believed that option was open to anyone if in the rarest occasion a school would close. He wondered why people weren't thinking about either of those options. MS. ABBOTT responded she would want her child to have the opportunity to find out what education is all about, including the ability to learn social skills. She explained that in many rural areas, the school is the heartbeat of the community. Number 1138 KARL GREENEWALD, SR., Board Member, Huna Totem Corporation, said he grew up in Hoonah and went to college in Fairbanks and Anchorage. He was testifying on behalf of himself in opposition to SB 36. He said while there are discussions about the possibility of schools being closed and children being sent to boarding schools, it is really important to remember that our federal government is promoting strong family values and guidance. He referenced the previous comment about some $9,000 per student in rural areas versus $3,000 some per student in Anchorage and said there is a big cost of living difference between the rural areas and urban areas. He pointed out that rural communities make a significant economic impact on both rural and urban areas and went on to discuss the economic impact of the two Native Corporations in Anchorage, as well as the week long Alaska Federation of Natives Conference. He talked about the importance of rebuilding their Native culture which was taken away. He said this legislation would have a great impact on the people in the rural areas and urged committee members to give it some serious thought. Number 1618 MR. NOTTI read the following statement on behalf of JOANN MCDONALD: "Rural Alaska is stretched for adequate funds to educate children. Now overcrowding has already caused program cuts - music, art, advanced science and math, no tutors or summer school. Please help our children and vote no on SB 36. Save rural Alaska. Love and educate our best resource - our kids." Number 1748 LINDA DEMIENTIEFF testified via teleconference from Fairbanks. She is a single parent with two children and is also a product of the boarding school. She finds herself in the same position now as she was 30 years ago having to explain to the Senate that children in rural areas did not want to go to boarding schools. She had been watching the committee on television and was of the opinion this issue has not been well thought out. She reminded committee members they are dealing with the lives of Alaska's children and interfering in their education will affect the entire life of these children. The legislature has the power to either reverse the efforts of the people in rural areas without giving any thought, or to make this good by taking it back to the drawing board and working with the people in the villages. CHAIRMAN BUNDE noted this project has been underway for five years now. Number 1938 CHRIS CAMPBELL, Member, Ketchikan Gateway Borough School Board, testified from Ketchikan via teleconference. She said she has read the McDowell Study and has been tracking efforts to reform the school funding issue for many years. She thought the McDowell Study was the most accurate area cost differential study conducted to date. Many of the districts that would benefit under SB 36 are located in Southeast Alaska, including a number of villages. This points out the inequitable situation that has existed for years with Southeast communities more than shouldering their burden for educating students and making do with less. She noted the Ketchikan School District has funded education to the cap for years, yet in the last two years 32 positions have been lost as well as programs. At the end of this fiscal year, the budget will have been cut by $2 million in a 2-year period. She said much of the testimony she's heard has been moving and it's true that people do make choices as to where they want to live. She is concerned about the impact this legislation will have on some areas around the state and the issue of boarding schools is a haunting one. However, the schools in Southeast Alaska do deserve fair equity and it is her hope that SB 36 will provide the vehicle for an (indisc.) change. REPRESENTATIVE BRICE said given the passage of SB 36, the Ketchikan School District will receive a 20 percent increase in state contribution. Considering that's a big increase to the budget he wondered if the district would have adequate time to efficiently get that money into the classrooms. MS. CAMPBELL said the board is prepared to get the money into the classroom. There is a need for new textbooks, technology, additional teachers, aides, et cetera. TAPE 98-40, SIDE A Number 0001 ROBERT MCCLORY testified via teleconference from Ketchikan as a parent concerned about school funding issues. He's seen his children's programs attacked by a seemingly never ending string of budget cuts, yet the students still have good grades, good work habits, positive attitudes and good test scores. However, his fear is that further budget cuts will definitely have an effect. Obviously he would like to see the local schools in Ketchikan receive funding; by that he means comparable to all the other schools in Alaska. He acknowledged the complexity of the existing foundation formula makes it difficult to sort out the problem, but he believes the existing funding formula should be replaced with a formula that people can understand and work with. Some people think SB 36 is taking from the poor and giving to the rich, but he sees it differently - he sees it as a simple platform from which to start providing some equity in funding and identifying which schools are still in need of additional funding. He believes SB 36 contains other important features like cutting administration costs, putting a larger percentage of the funding into the classrooms and asking communities to share in the cost of education. He asked the committee to ensure this legislation does not become a political issue which dies from a lack of consensus. He said it's important not to lose sight that there are really two issues: the funding formula and a mechanism for funding education adequately. CHAIRMAN BUNDE commented he believes the two issues are intertwined. Number 0342 SANDY JONES testified via teleconference from Tok in opposition to SB 36. She conveyed that people in Mentasta have worked hard to establish a good education system and if this legislation passes, the school will have to cut 1.5 teachers or close down the school. She said, "My father was a product of a boarding home. I, too, was in a boarding home but I became an alcoholic because I didn't have the education that the Tok school had." She expressed her frustration about the legislature making decisions for and taking away the rights of the Native people of Alaska. Number 0578 UNIDENTIFIED SPEAKER testified offnet from Kwigillingok with suggestions for SB 36. He said, "First we lose the money and next we will be required to establish municipalities and boroughs in order to generate money for education. These extensions of state government will then require property taxes. These taxes will be paid by the village (indisc.) ANCSA Corporations. Many of these corporations will become bankrupt and people will be sent to find their own way as best they can. It's no big secret that Native Alaska has become a welfare society." He said he's not had a real job in seven years and there's nothing worse than a healthy able-bodied man ear people. He said if more money is needed for education, the income tax should be reinstated. He doesn't want anyone using his permanent fund dividend. Number 0798 REBECCA GAMEZ, Director, Employment Security Division, Department of Labor, expressed concern with the implementation of Amendment 2 in terms of the date. She said the current date of January 1, 1999, would be very difficult for the department to comply with because of year 2000 compliance issues being dealt with by the department. An earlier Senate working draft proposed a date of January 1, 2001, which would be workable for the department. She explained about one-third of the data processing efforts are going toward year 2000 compliance and the other two-thirds are being used to comply with Legislative Budget and Audit requests. She said currently there are four programmer positions vacant and it's difficult to fill these technical positions because of the high demand with year 2000 around the corner. Number 0913 CHAIRMAN BUNDE asked what date would be workable for the department. MS. GAMEZ said realistically, the original date of January 1, 2001, would be the department's preference. Number 0944 MIKE NOEL, Info Services Manager, Division of Administrative Services, Department of Labor, said if the department is to accomplish the year 2000 compliance testing in readiness for the event when it occurs, he didn't think it would be practical for the department to attempt to accomplish this new task before January 1, 2000. CHAIRMAN BUNDE inquired how much would be involved in merely writing the forms for employers to use in collecting the local contribution. MR. NOEL replied it would involve more than just writing the forms. The department would be required to process the forms when returned by the employers, correlating the information to the wage records anticipated to come into the system to determine the individual has had wages paid and now the employer is reporting the taxes on those wages. This would require substantial programming changes, so it's a little more complicated. CHAIRMAN BUNDE noted the House Finance Committee would address the fiscal impact of implementing this legislation. Number 1064 MS. GAMEZ said the department's second concern is regulation drafting and approval. She explained it is a timing problem in that the regulations need to be in place before the programming can occur. She pointed out there are some definition inconsistencies that could affect employers; i.e., compensation for services, reportable wages, employer, individual, et cetera. Another area of concern for the department is the lack of employer input. Also, based on her interpretation of Amendment 2, a tracking system would need to be put in place when a worker performs work in an unincorporated borough setting. Number 1198 REPRESENTATIVE BRICE inquired how the department would deal with a truck driver running a haul between Fairbanks and Valdez. MS. GAMEZ said based on the department's interpretation of Amendment 2, the truck driver's employer or the driver, if self-employed, would driving time through the unincorporated areas of the state. Number 1264 CYNDEE SIMPSON SUGAR testified via teleconference from Bethel that she was appalled that education funding was being cut in the rural areas to give to the urban areas. She attended school in Ketchikan and on the Kenai Peninsula and said the opportunities she had 20 years ago are above what the rural students have today. She believed when the legislature was speaking of equality, it was in terms of dollars, certainly not in terms of programs or facilities. She stressed that "being out of sight is being out of mind" because until she actually lived in rural Alaska, she didn't think about rural Alaska. She said there should be a way to help all Alaska's children; the rural children are being discriminated against because of where their family chooses to live. She encouraged the legislature to get back to work for Alaska's children. She commented on the amount of money her family spent in Anchorage the past year, and said she would join or possibly lead a group to boycott spending money in Anchorage. Number 1414 VELETA MURPHY testified from Fairbanks via teleconference. She stated she's a property owner in Fairbanks and a former teacher. She's shocked the state would consider reverting to a system that removes schools from communities and re-establishes a system which in the past has forced parents to farm their children out to other villages or boarding schools. This legislation will impact all rural children; not just Native Alaskans. In small communities, the school becomes a cultural as well as an educational center, and the state will be taking the heart of the community away in these small communities. As adults, we are supposed to protect and care for all the children of the state and she certainly could not support any system that penalizes children for where they live. Education is a necessity in our world, but it shouldn't cost children their family. It's unfair and morally reprehensible to consider taking money from one group of children for another. It's been agreed that rural education costs more; what's really needed is more money for all education. She doesn't want to live in a state that doesn't support education for all. She agrees with many of the comments that have been made at this hearing and mostly she's ashamed that everyone can't see that all children are important and deserve to have neighborhood schools, wherever they live. She opposed this legislation and urged the committee to do so also. CHAIRMAN BUNDE agreed that children are important, but it's also important that local people support their schools. Number 1521 PAUL SUGAR testified from Bethel via teleconference in opposition to Senate Bill 36. He said although he's a rural Alaskan he understands urban Alaskan's frustration with educational funding that is based on property taxes. Earlier, he had heard committee members speaking about people making choices about where they live and dealing with the consequences. He was reminded that people of urban Alaska made a choice, through an election, to impose a borough upon themselves as well as to impose property taxes. He said there is a very fundamental flaw with Senate Bill 36; an ever-shrinking pi Number 1669 DEBORAH VOGT, Deputy Commissioner, Department of Revenue (DOR), testified on the tax issue. She said the tax would create a 3 percent employment tax on all individuals performing services in the unorganized borough; residents and nonresidents, wage earners and self-employed. She explained the Department of Labor would collect the taxes from the wage earners and the Department of Revenue would collect from the nonresidents, self-employed and individuals in an organization who don't pay into unemployment insurance. She said she's confused as to where the legislature is drawing the taxing power in the legislation. She senses the legislature is exercising its constitutional power as the municipal assembly for the unorganized borough and if that's so, it presents a number of issues that may be worth considering. If, however, the legislature is exercising the power to levy a general tax, that raises a different set of issues. With respect to the constitutional power to sit as the assembly for the unorganized borough, she said it's not completely clear to her what kinds of taxes are available to be used in that capacity. The other issue is that most of the individuals who pay taxes in a municipality or a borough, have a direct connection with the people who are imposing tax; i.e., the people paying the tax elect the people who are imposing the tax. That connection does not exist with the people in the unorganized borough and this body as a whole. She thought those issues should be considered. MS. VOGT said in terms of implementation of the tax, some of the problem issues that have been discussed include the effective date of January 1, 1999. She explained the Department of Revenue would use IRS data in order to verify self-employment income of those individuals. The department doesn't receive that data, so it would need to be purchased from the IRS. Both the Department of Labor and Department of Revenue parts of the tax would be enforced and administered by Department of Revenue; i.e., the DOR would be responsible for auditing and enforcing the tax. She observed that finding some of these self-employed individuals and nonresidents earning income in the unorganized borough is a problem. Another problem will be how the employers will determine which REAA to attribute those deductions to; there's going to be a fairly complex issue of matching the wages and the taxes deducted from the wages to the particular area from whence they came, and it will be even more problematic for individuals who move around; e.g., truckers, commercial fishermen, construction workers, tourist operations, et cetera. She didn't think it would be easy to determine how those funds will be collected and allocated. MS. VOGT stated, "There are some equity issues to think about - a municipal resident's contribution ends with the fulfillment of the local taxes, and then if that individual goes off and works in the unorganized borough, then he can have a credit for the taxes that he paid in the unorganized borough that went to education, but he'll pay additional taxes on wages for any work performed there. Whereas, his next door neighbor might have the identical job, but stay home and perform it and he'll just pay the property tax and not the additional employment tax." Municipal residents who rent will not pay property taxes and therefore, will be treated differently from their neighbor if they both work in the unorganized borough and one pays employment tax and the other doesn't. The credit provisions are essentially implemented by the employer - the employee can ask the employer to stop withholding tax from his paycheck by presenting evidence of the local taxes. Quite frankly, she didn't see how this was going to work because that would ask the employer to be familiar enough with local taxes in other parts of the state to know what parts went toward education. Another issue with the credits is that nonresidents also pay local support for schools in their communities and as she understands the legislation, would not be entitled to a credit. As a former lawyer, she thought that raises constitutional issues that should be looked at. The administration of the tax is problematic in that it's a very labor intensive tax; fiscal notes from the two departments indicate it would take seven people to administer a tax that would produce about $10 million to $11 million. By a comparison, not a single person is allocated to enforce the cigarette tax; it's absorbed in work performed by people administering other taxes and that tax produces about $35 million. MS. VOGT said frankly, the tax would not be an audit priority for the Department of Revenue and the staff probably would not spend a lot of time trying to track down nonresidents who worked in the unorganized borough. CHAIRMAN BUNDE observed the lack of enthusiasm in the Administration probably generates additional roadblocks, but he assured Ms. Vogt it had been addressed from a constitutional and legal point of view. Number 2020 BOB MEDINGER testified via teleconference from Bethel. In response to Representative Dyson, a major flaw in the cost study is the fact that it's based on Department of Education (DOE) data that reflects expenses and not the cost of a program and it has nothing to do with quality education or the quality of a program. If the data from the study is applied to SB 36, these are the results for the Lower Kuskokwim based on mostly bad data: Loss of $8 million, 65 teachers are laid off, 115 classified employees, mostly bilingual staff, are laid off, close two or three schools, and the bilingual program is completely eliminated. In an attempt for people in rural Alaska to relate and get a better understanding of the urban versus rural view he asked what Chairman Bunde would do if his child's school just closed and there wasn't a bus or a road to get his child to another school. CHAIRMAN BUNDE responded he would do what he would do for any resource that disappeared; he would relocate. MR. MEDINGER asked Chairman Bunde to assume this bill passed and he found the language of his home, English, would no longer be the language in his child's school, what would his reaction be. CHAIRMAN BUNDE responded he would speak the language of the dominant culture because that's the only way his children would survive in the modern world. MR. MEDINGER asked Chairman Bunde of all the criticisms about SB 36 he had heard this afternoon, has even one of them been justified in his mind and if so, what would it have been. CHAIRMAN BUNDE responded that justification much like beauty is in the beholder. He added that change is frightening for everyone and this bill involves a lot of change. The thought of communities being required to make a contribution, when for 20 or 30 years a community has made no contribution for schools, is going to be upsetting. He could empathize and understand why people would be concerned or criticize. MR. MEDINGER said his question had been if Chairman Bunde finds any of the criticisms actually justifiable. CHAIRMAN BUNDE noted that Representative Porter would like to answer that question. Number 2150 REPRESENTATIVE PORTER replied, "I find everything - every criticism that was made by anybody that testified tonight justifiable. The perception that they have, as very appropriately from their point of view put out by folks that will be losers, if you will, in this initial rendition of the formula, have done a very good job in convincing folks that the folks down here are intentionally taking money from rural areas and giving it to the urban areas. I guess I would turn the question around and if you were me from midtown Anchorage where my constituents are telling me that they are tired for the last 10, 15, 20 years of being on the short end of this distribution stick, what you would do if you were supposedly elected to represent them?" MR. MEDINGER said it's very simple. The state has $23 billion in a savings account. He asked how much of that, percentage-wise, would need to be put into Anchorage, Fairbanks, Juneau, Kenai and Mat-Su to bring up the level of perceived inequity that's needed. REPRESENTATIVE PORTER said he supported using that fund for the reason it was intended to be developed; that being the operation of government. Unfortunately, there were not a lot of other legislators who agreed with him and in fact, the citizens of the state couldn't be drawn together to get enough signatures on a petition to put that on the ballot for a vote. Until it is put on the ballot for a vote, funds from the permanent fund are not going to be used for education. Number 2226 CHAIRMAN BUNDE noted the $24 billion doesn't belong to the legislature; it belongs to 600,000+ Alaskans and it's their choice as to how the earnings of the permanent fund is spent. From the day the permanent fund started, he has concluded the earnings were for operation of government, but as an employee of the people who sent him to the legislature to represent them, it is his job to represent their point of view on that issue. Number 2248 REPRESENTATIVE DYSON said there were a couple of issues that have been raised which have caused him to do some rethinking. He said, "One, the McDowell Study made the assumption that everybody was doing their educational business somewhat correctly. My own perception is that there are districts around the state doing an extraordinary job and have for a long time been into cost reductions, efficiencies of scale and working at excellent ways of delivering service. And there's some schools and school districts around that are utterly irresponsible, incompetent, self-serving leadership, that are building taj mahals, and building up their last few years of their teachers' contract for their retirement and are not being held accountable and are quite irresponsible in how they've been doing things. Hopefully, the latter category are a small minority, but indeed, we have started here with the assumption that everyone is doing their business with equal excellence and equal efficiency - I think that's not a given - so what we're doing here is starting out on a basis that's somewhat inaccurate. And I don't know how it could have been done better, particularly in the time frame we had. Second thing that I believe is, that in all of the villages that are predominately Native, I think we should be working towards funding bilingual education in all of them in rural Alaska. So those are two criticisms that I've heard and listened to and tend to believe." Number 2322 CHAIRMAN BUNDE pointed out the median household income for Bethel and for Anchorage is within $1,000 of each other, so at least in the case of Bethel, it's not taking from the poor and giving to the rich. MR. MEDINGER interjected the cost of living is 50 percent higher in Bethel and the 23 communities around Bethel are among the lowest economic based per capita income in the United States, not just Alaska. TAPE 98-40, SIDE B Number 0002 CHAIRMAN BUNDE commented that it costs more to live in Alaska than it does in Arkansas, but he doesn't expect the federal government will provide a subsidy for Alaskans. Number 0013 REPRESENTATIVE KEMPLEN said one of the interesting things about the McDowell Study is that it was not intended to be a comprehensive review of all the philosophical and equity issues that might be addressed by the legislature in considering revisions to the foundation formula. The assumption of the McDowell Study was that categorical funding would be distributed in a manner similar to the existing allocation in the current foundation formula. With respect to the geographical area including Bethel, Mr. McDowell mentioned that 50 percent of the reduction that occurs in those school districts is because of the changes to the categorical funding category; specifically the bilingual. The 20 percent cap placed on categorical funding had significant impacts on the distribution of money going into the Bethel region. He believed there should be more discussion on categorical funding issues in addition to the philosophical and equity issues. He pointed out the permanent fund is projected to produce over $1 billion after dividends and inflation proofing which is available for appropriation by a majority vote of the state legislature. The people of Alaska need to make their wishes known to their respective legislators regarding the use of the permanent fund. Number 0131 SENATOR WILKEN noted that Mr. Medinger is from a district with 3,600 students and the state support this year is $36 million. In 1996, there were 4,900 people in that district who had a total of $119 million in earned wages. Under the current foundation formula, the district gets $10,618 per student as compared to $3,931 for Anchorage. In looking at those numbers, he feels compelled to ask, "Why don't you help pay for education?" MR. MEDINGER said, "You're right - I agree, we should and we're willing to - give us something fair and we will. I also want to point out one thing. When you look at PL-874 money, of which our area generates $10 million, that is not counted in the local match. When you take that PL-874 money that comes in from rural Alaska, and you match it up as a match in the education funding unit today, you know we're putting in more money than the property taxes that are being spent on education in Anchorage, and it's not counted as a local match. Why is that?" SENATOR WILKEN said he didn't want to get into the discussion of PL-874 funds at this time, but those funds are treated the same across the state. He added the district will be able to keep dollar for dollar in PL-874 money when it begins to contribute on its own. Number 0208 SHIRLEY DEMIENTIEFF, President, Fairbanks Native Association, testified from Fairbanks via teleconference. She said the Fairbanks Native Association has not had a meeting since this legislation became a hot issue, so the comments she's presenting are hers personally as a private citizen. When Cynthia Henry had finished her testimony, Ms. Demientieff had asked if the Fairbanks North Slope Borough School District was supporting SB 36. Ms. Henry responded the school district was supporting components of it, but not the whole bill. Ms. Demientieff had added the school district did not, however, support taking money from rural areas and bringing it to Fairbanks. She noted that committee members have been elected by a constituency to be representatives of the people. Legislators are supposed to be experts to whom the public should be able to ask questions without being looked down upon or subjected to sarcastic questions or comments. Her job as a citizen is to review the paper generated by the legislature to determine if it's understandable and if it makes sense. In her mind, the proposed formula is no more clear than the existing foundation formula. She pointed out that committee members have staff to research and advise them on the various programs and issues, while the public can't be expected to understand complex issues such as the school foundation formula. (NOTE: A portion of Ms. Demientieff's testimony is missing due to tape malfunction). MS. DEMIENTIEFF said the school is the community center in each village. She noted that in Fairbanks education dollars are spent to support the swimming pool, Herring Auditorium, to pay for instructors for programs such as dance, crafts and other extra- curricular activities. MS. DEMIENTIEFF didn't believe the McDowell Study took into consideration the extreme cost of living in rural areas. In summary, she said urban parents would never think about the possibility of being forced to send their children away to school, but yet, as an urban parent they're saying it's alright to send children to boarding schools. She went to a boarding school as a child and certainly does not want that quality of life for her children. Number 0453 BILL WILKERSON testified offnet from Kwigillingok and said he's spent the past 21 years on the west bank of the Kuskokwim River teaching in three villages. He stated over the past 21 years, 99 percent of the children coming into those schools have spoken Yupik, their Native language. Those students have been instructed for the first three years of school in reading, writing and speaking Yupik, which research indicates should be done for students who don't speak English as their first language. These students graduate from school reading, speaking and writing Yupik, a language going back thousands of years. The passage of Senate Bill 36 will mean the history of that language which has been consistently transmitted along will be ended because the highly trained, classified teachers who teach these students the first three years, are from the village and have trained for years. Sixty-five teachers will be lost, many of whom are the bilingual teachers who teach the children during those first three years. He explained these are not certified teachers. He said it's impossible to hire a teacher from the Lower 48 who can suddenly walk in and teach the children how to read, write and speak Yupik. The villages love their bilingual programs; these programs should be revered, not eliminated. He stated SB 36 is ill-founded and urged the committee to listen to a Harvard Ph.D. economist appearing on a radio show the following Wednesday who would attack three major points of the McDowell Study. He encouraged the committee to not support SB 36. People in rural Alaska believe that Anchorage should get additional educational funding if needed, but not at the expense of the rural areas. He requested the legislature place SB 36 on the back burner, go back to the drawing board and draft a bill that will better solve the educational problems and bring harmony between the rural areas and the urban areas. Number 0660 CHAIRMAN BUNDE remarked he hopes this is a process toward finding more funding, but there must be equity and local contribution or there won't be any additional education dollars. Number 0673 GLEN MARUNDE testifying via teleconference from Tok was of the opinion that Ms. Vogt's testimony, pointing out problems with the tax, was vital information and should have been presented earlier when everyone was available to hear her remarks. He presented three hypothetical situations of working individuals and asked how the 3 percent employment tax would be applied in each of the three situations. Inasmuch as the tax goes into the general fund, he questioned how an individual would go about getting a rebate on taxes paid. The point he was trying to get across is there are many inequities and problems created by this tax and tax credit. CHAIRMAN BUNDE asked if Mr. Marunde favored local contribution for schools. MR. MARUNDE said no, he and the people in Glennallen favor a statewide tax and would like to see legislation introduced requiring the state to fund education and prohibit property taxes from being used anywhere in the state to fund schools. Number 1063 CARL WILLIAMS testified via teleconference from Bethel reminding committee members that rural Alaska provides the oil, minerals, fish and natural resources that power the state's economy. He expressed his frustration with the legislature for drafting a bill like Senate Bill 36, which is targeted, divisive and does not address the fundamental program which is that all schools need more funding. He said targeted legislation is bad public policy and legislation that pits Alaskan against Alaskan is destructive public policy. He spoke of welfare reform and the attempt to put an end to dependency on the government and said there is nothing that rural Alaskans desire more, but the only way for rural children to escape the vicious trap is through their schools - schools that operate in regions where the cost of living and doing business is 50 percent to 100 percent higher than urban Alaska. Even the McDowell Study could not erase the cost differentials between regions completely. He offered to provide lodging, food and transportation to Bethel and to one of the villages in the area for Chairman Bunde or any of the sponsors of this legislation in return for a couple days and the promise to come with an open mind and ears. CHAIRMAN BUNDE stated he has traveled extensively in western Alaska and has a pretty good grasp of village life in that area. Number 1402 DENA IVEY, Representative, Fairbanks Chapter of the Alaska Native Brotherhood and Sisterhood, testified from Fairbanks via teleconference. She said she was fortunate to have received a top notch public education and believed she would have received the same quality education regardless of where she was located. However, Senate Bill 36 presents a real threat to Alaska Natives and Alaska Native culture, simply by virtue of where an individual happens to be located geographically. She said Senate Bill 36 is discriminatory which is (indisc.) to the protections which the federal and state constitutions guarantees the people. Number 1472 STEVEN BURKE testified via teleconference from Bethel. He moved to Bethel from Connecticut about 18 months ago and has three children in the school system in Bethel. He expressed that SB 36 will significantly impact his children's educational opportunities, mostly for the negative and observed the quality of education in Bethel is certainly not the same as it was in Connecticut. His daughter is in the Yup'ik Immersion Program and he's disturbed that one of the consequences of SB 36 will be to eliminate bilingual education. He stressed the uniqueness of bilingual education in Alaska should be preserved at all costs. He hoped the committee would take that into consideration in deliberating this bill. Number 1549 JOHN PECKHAM testified he has a third grade daughter in the Ketchikan School District and shares the same frustration as the other witnesses from Ketchikan about the lack of funding in the Ketchikan district. He said while there have been many comments made about winners and losers under Senate Bill 36, he pointed out there have been winners and losers under the current foundation program and Ketchikan feels it has been one of the losers. Number 1609 SENATOR WILKEN noted that in reviewing the data for Sitka and Ketchikan, the McDowell Group had been astonished at the administrative costs in Ketchikan. While administrative costs in some districts were really high and couldn't be explained, they were unable to explain the administrative costs in the Ketchikan district because they were so low. MR. PECKHAM said he believed the school boards have tried to keep the pupil/teacher ratio consistent, but now the budget cuts are impacting that also. SENATOR WILKEN confirmed that's exactly what the board had done and should be congratulated for keeping things afloat as long as they have. Number 1671 PATRICIA OKSOKTARUK testified via teleconference from Fairbanks. She is from White Mountain and is pursuing a double degree at the University of Alaska Fairbanks. She urged the committee not to support SB 36. She said the recent U.S. Supreme Court Opinion released on the Venetie issue has served to heighten tensions between urban and rural Alaska, and SB 36 only exacerbates this conflict in ideology. She said as the residents attempt to develop a cohesive state identity, the greatest challenge before all citizens is mutual respect and appreciation for urban and rural Natives and non-Natives. The quality of education must be maintained for all children across the state. She stated education funding is like any other service facing minimization which is a statewide and national trend. Everyone bears the burden of maintaining and improving this service. Changing the funding calculation is the right idea, but SB 36 is not the solution. She said we must, for every child's sake, begin to take responsibility for education through state employment taxes or a statewide sales tax. She stated the fact that scholars are coming out of rural Alaska, despite many obstacles, is a credit to a few outstanding teachers who served in the rural areas. Number 1991 KAREN KALLEN-BROWN testified via teleconference from Fairbanks and said Senate Bill 36 does nothing to solve the problem of the funding formula or to fix any of the education problems in the state. Taking money from rural children to give to urban children will only exacerbate the problems and will not solve any of the difficulties. As a parent and teacher who has lived, worked and schooled her own children in both rural and urban Alaskan schools, she could safely say that children in rural areas do not have the breadth of educational opportunity available to urban children. The state should invest in the future by adequately funding all schools so each child has equal opportunity to an excellent education, regardless of individual and diverse needs. She said equality does not always mean the same; it means having one's needs met so that one has the same opportunity. Rural schools and rural children are always struggling to have their needs met. She urged the committee not to pass SB 36. She concluded that a fair solution to the problem needs to be found - Senate Bill 36 is simple, but it's not fair. Number 2097 MARGARET WILSON testified from Fairbanks via teleconference in opposition to SB 36. She is a product of a boarding school and it seemed to her the only choice for the people in the rural communities is to start the boarding schools again. She left her home at age 11 and never went back. She has spent most of her adult life in Fairbanks, is a homeowner and her children attend school in Fairbanks. Her children would be appalled to know any extra money for their school would come at the expense of the rural areas. She asked the committee to give careful consideration to what's being taken away from kids in the rural areas. TAPE 98-41, SIDE A Number 0001 DON SHIRCEL testified via teleconference from Fairbanks. He said he had heard all the testimony presented this evening and it seems obvious to him there is a need to change the current funding formula, but SB 36 doesn't appear to have any less problems or fewer inequities than the old formula. He strongly suggested the committee consider the comments of the many different people from communities around the state and seriously consider working on another bill that would improve the formula. In his opinion, SB 36 is not an improvement. Number 0122 CHAIRMAN BUNDE closed public testimony. He stated, "I accept that this is an issue upon which reasonable people can disagree. I, however, feel that the area cost differential was a valid study done by people without any political ax to grind that indicated that there have been about $26 million incorrectly directed toward rural areas because the cost of an education out there was not accurately reflected, that we have after a great deal of study, attempted to address a foundation formula problem. I think this is part of a process and I can speak only for me when I say that, and I've said it earlier this evening, I will reiterate one more time, that unless the public - the vast population of this state - 65 percent of them who do not have children in school, but still have an equal right to discuss how education money is spent, the majority of the folks including those without children in school, understand that education makes Alaska a better place; that education is absolutely critical to the success of our children. However, until they feel there's equity in the way the money is distributed, and until they feel there's fairness in local support that there must be change, that people no matter where they live in the state, have an obligation to support their school system. And until that happens, they are not apt to invest more money in the current system. There's been quite a bit of testimony about the fact that the foundation formula has been flat funded for a number of years, that it has not been adjusted for inflation - the legislature did not do that capriciously - we did that because it reflected the will of the majority of the people. There's a fair argument that perhaps there was money not well spent and by holding the formula flat, schools have grown into a more adequate or more realistic level of funding. I am personally convinced that we are now at a point where inflation has had a negative impact and we should have more money in the formula, which is why I support a process that will, I think, achieve that which is to have local contribution and to have a fair distribution of the money so that folks can see a connection between their children attending school and this foundation money that comes from the state, so people all over the state, whatever their background, can experience the basic psychology of ownership of their schools by making a contribution to it. I think we all know that we appreciate and take better care of anything that we make a personal investment in. So, with those ideas in mind, knowing that the bill still has another committee of referral, that there are some questions about how to achieve the goal, particularly of local contribution, it's the Chair's intention to move this bill forward to the next committee of referral with support of my committee members ...." Number 0457 REPRESENTATIVE PORTER said, "It's my intent to vote to move this bill from committee. It is my intent to indicate on the slip that does that in the choices that we get, that I'm a "no rec" at this time because I'm fully appreciative of the fact that the bill is not completed; it needs adjustment in the funding allocation -- in some elements of the formula that will affect funding allocations. It's my opinion after hearing what we have heard of it, that the disparity in the current numbers, as compiled by DOE, is going to go down based on better establishment of some of these facts." Number 0515 REPRESENTATIVE PORTER made a motion to move CSSB 36(FIN)am as amended from committee with individual recommendations and attached fiscal notes. REPRESENTATIVE KEMPLEN objected. CHAIRMAN BUNDE said all committee members would an opportunity to comment. REPRESENTATIVE KEMPLEN stated, "I do have a number of comments and a lot of them actually have emerged both from listening to the testimony but also from careful review of a report that was submitted to the Honorable Randy Phillips by David Teal, Project Manager of the McDowell Group, dated March 27, 1998, in response to a series of questions that were raised on Senate Bill 36. And I think what he has to say there merits real consideration by the committee of issues that really belong in the purview of this committee. And I feel this committee is going to be absolving itself of its responsibility by moving it on to the Finance Committee. I think that the Finance Committee is already going to have a lot of work that it has to do and the burden -- giving them the burden of producing a solution to this piece of legislation rightly belongs in this committee. And one of the -- for example, in this report where he talks about there is a question about the 70 percent/30 percent split, his answer is that 'the consultant made no recommendation on any split, that while the statewide average is about 70/30, this average is weighted by a handful of large districts with large efficient buildings. Most districts currently spend less than 70 percent on instruction and the range of splits is very wide from about 50/50 to about 90/10.' So, SB 36 now has that 70/30 split in it - it has significant implications to some of the small rural schools. There needs to be a different methodology developed to address this issue in this proposed piece of legislation to allow the variety of splits that exist here in our wide expansive state to be shown. And to establish just a blanket 70/30 split is -- we asked the McDowell Group when he was presenting his testimony about whether or not it was grounded in any sort of analytical or quantitative measures, he did say that it was not and that it was kind of an arbitrary figure. That causes me significant concern. I think it's a problem that definitely needs to be addressed." Number 0721 REPRESENTATIVE KEMPLEN continued, "Another issue that also needs to be addressed with this piece of legislation is that again, citing from this report, 'The School Operating Cost Study Questions and Answers', in response to a question on recognizing the significant level of indirect funding for children in urban areas which is not available to rural students, and examples including museums, libraries, performances and other enriching activities or facilities, the consultant responds that the study does not attempt to measure the quality of educational services for equalized quality; it measures only the instructional staff and district costs required to provide a basic education. That's all this study does; that's all that the consultant says that it does - is just provide numbers so that decision makers can look at providing a basic education. And really that comes into the question of what is really our commitment to excellence in education across Alaska. Because a basic education in the rural areas is really a testimony for allowing mediocrity for really creating dual standards where in the rural areas, it's okay to have mediocrity but that in the urban areas, you can have a quality education. I think this causes some real policy choices - it's a philosophical issue, but it's also definitely an equity issue that needs to be addressed." Number 0839 REPRESENTATIVE KEMPLEN further stated, "Another item that is brought out in these questions and answers is that the -- in response to the question of 'instructional cost differences are unnecessarily arbitrary. The author should have compared their estimates to those found in the existing literature.' His response says, 'The legislature may wish to base its appropriation for education on studies of optimum class size and other measures of educational need. The study reviewed actual class sizes in Alaska schools but did not compare them to class sizes in other states. The intent of this study was to derive revised allocation factors, not to determine an appropriate level of basic need.' So, that level of basic need is really a question again of policy, it's a question of what the legislature is going to do in terms of quality. What type of quality are we willing to commit ourselves to for schools throughout the state of Alaska. So, the -- I guess there's a number of different issues that have been brought up. The consultant, in his response to the questions that have been raised, has indicated that these are issues of significant import for decision makers, who are us, and that we really should be addressing those here in this committee. And I think for us to allow this piece of legislation to move out of this committee without wrestling with these and deriving answers, we're really not fulfilling our full responsibilities as members of the HESS Committee. The Finance Committee is already going to be loaded down with the stranded gas bill, it's going to be loaded down with subsistence, we're going to give it the foundation formula - you know, it's just going to be loaded down with complex and in-depth policy issues, one after another and to load this on to them without doing our preliminary work to address the issues, I think is just not right and I feel very uncomfortable about moving this out of committee in its current shape." Number 0979 REPRESENTATIVE GREEN said, "I actually find myself in agreement with some of the comments of the former speaker. I also have concern about this that the person - Deborah Vogt - that talked to us about the taxing aspects of this that could be quite burdensome and also the concern that has been brought to my attention that we, I don't have adequately addressed, that there may be some flawed data that we're using in doing the tables that we've done and I would like to pursue that. Albeit those two issues are both finance issues and I've been one who champions that issues should be akin to the committees they're assigned to, if it's a finance issue, it should be in the Finance Committee and so on - policy should be here. I just have a lot of heartburn with the project but I won't hold it up. My concern is that I very likely will have conflicts and not be able to be at the Finance hearing when this is brought up and so what I intend to do then is to send my concerns in a memo to the Chair of the Finance Committee." Number 1050 REPRESENTATIVE BRICE commented, "I would like to thank Senator Wilken for taking this on as well as the other senators. It's a very difficult and very emotional issue. I think it's unfortunate, but I think the fact still remains that the (indisc.) public opinion is very poisoned on it - right, wrong or indifferent - it is. I think that cause has given the political realm that we're dealing in for the next 40 days causes a great deal of difficulty in this body. I think there still are a number of issues that need to be addressed from property valuation through optimum class sizes, what do we expect to see of our educational system - urban and rural - that just aren't quite clearly set out in this bill. I will be the first to admit there needs to be change in the current system and I think that some form of local contribution is appropriate, although technically, I think, there are some problems with the system that we're putting in now. But I think that unfortunately, not enough debate was on what does it take to provide -- or what are our educational goals for our schools; what are we looking for for the children of this state as they go through their educational process. On the other hand, I don't think enough discussion was brought about on what are the impacts that this bill has - we see numbers, we see formulas, we see ADMs and transition funding, how many teachers are going to leave the classroom because of this, what is it going to do pupil/teacher ratios, what's it going to do to various other aspects of education. I'm sure those issues will be continued - or will be brought about in future discussions. I think that -- I hope that as the bill moves, some of those questions are answered, that hopefully, some of the concerns that are out there can be allayed and that we have a product in the end that basically leaves no child behind. Thank you, Mr. Chair and I appreciate the work this committee has done." Number 1226 CHAIRMAN BUNDE was compelled to say, "While we can disagree on policy issues, it's important that we recognize that there's strong local control in this state as far as people setting standards and that again, in one or another, this committee has addressed school foundation formula reform for two years, now." Number 1241 REPRESENTATIVE DYSON identified himself with the remarks of Representative Porter. CHAIRMAN BUNDE asked for a roll call vote. Representatives Dyson, Porter, Green and Bunde voted in favor of moving the bill from committee. Representatives Brice and Kemplen voted against it. Therefore, HCS CSSB 36(HES) moved from the House Health, Education and Social Services Standing Committee. ADJOURNMENT Number 1309 CHAIRMAN BUNDE adjourned the House Health, Education and Social Services Committee at 10:50 p.m.