MINUTES SENATE FINANCE COMMITTEE 4 March 1998 5:30 p.m. TAPES SFC-98, #64, Sides A and B CALL TO ORDER Senator Bert Sharp, Co-chairman, reconvened the committee at approximately 5:30 p.m. PRESENT In addition to Co-chairman Sharp, Senators Pearce, Phillips, Donley, Torgerson, Parnell and Adams were present when the meeting was reconvened. Also Attending: Senator Gary Wilken; Representative Gene Therriault; Representative Con Bunde; Deborah Vogt, Deputy Commissioner, Department of Revenue; Richard Cross, Deputy Commissioner, Department of Education, Karen Rehfeld, Director, Education Support Services, Department of Education; Eddy Jeans, Manager, School Finance Section, Education Support Services, Department of Education; Dwight Perkins, Special Assistant to the Commissioner, Department of Labor; John Cyr, President, NEA-Alaska; Dave Tonkovich, Fiscal Analyst, Division of Legislative Finance; and aides to committee members and other legislative members. SUMMARY INFORMATION SENATE BILL NO. 36 "An Act relating to transportation of public school students; relating to school construction grants; relating to the public school foundation program and to local aid for education; and providing for an effective date." Co-chair Sharp reconvened the committee. He noted that there were plenty copies of the new CS on the back table for public scrutiny. Spreadsheets were also available. Several items needed to be discussed at this meeting. Among them was the bilingual situation brought up earlier by Senator Adams. Senator Torgerson also had some topics for discussion. First topic for discussion would be the bilingual issue. Richard Cross, Deputy Commissioner, Department of Education was invited to join the committee. Senator Adams asked Mr. Cross to explain the runs as regards to his amendment #15 if it were to be included in the bill. Mr. Cross explained the runs done. He said Mr. Jeans would walk the committee through them. Eddy Jeans, Manager, School Finance Section, Education Support Services, Department of Education was invited to join the committee. He explained the department's spreadsheet dated 4 March 1998. Page one listed the "A", "B", "C" categories of the bilingual program and the number of students projected in each of those categories. Criteria to qualify for additional funding was that there was at least fifty percent students in these categories when compared to the average daily membership. He referred to column "H" on page one. For the Lower Kuskokwim School to come up with adjusted students plus special education, which would have been added into the district's adjusted ADM in column "T", the distribution was run based on the new Statewide adjusted ADM. Because of the increases in Lower Kuskokwim and Yupiit a redistribution of funds was required, shown on page two. Lower Kuskokwim would now generate an approximate additional $2.4 million over the current foundation formula, as shown on page 2, column "F". Yupiit School would have an additional $318,000 over the current foundation program. In response to Senator Torgerson the rest of the pages were the same calculations the committee had been walked through previously. Senator Torgerson asked for a brief description of categories "A", "B", "C" and how students move from one category to another. Were all three categories being treated the same as far as per student dollar? Mr. Jeans said the impact of this amendment there would be no difference between the monetary value received for a category "A", "B" or "C" student. An "A" student was generally a student that did not speak English and there was very little English spoken in the home. A "B" student spoke some English, however was not the dominant language and it could nor could not be spoken at home. A "C" student was a lesser degree and there was still multiple language both in the home and spoken by the student. Senator Torgerson asked how SB 36 treated these students. Mr. Cross said SB 36, without this amendment, would block funds for all special needs at twenty percent. It basically said all districts have equal needs in these categories. Senator Torgerson asked, under current methods, what would be the difference in the funding. Mr. Jeans said under the current foundation program it would take twenty-four students to generate one instructional unit for category "A" or "B". Category "C" would take one hundred nineteen students to generate one instructional unit. Senator Phillips asked if there were Statewide criteria to determine these categories and was it set at Federal, State or local levels? Mr. Cross said in the application of the Federal bilingual tests for these types of programs and testing for language dominance the State of Alaska was very different from California. There are no effective dominant tests for some of the indigenous language within Alaska and therefore the method of testing for categories "A", "B" and "C" is done district by district through a program approved by the department. There is some flexibility in the testing due to the fact that some of the indigenous language tests used in Alaska simply did not exist on the Federal level. Senator Pearce asked what the schools receiving money for the bilingual programs were doing. Were they offering immersion English programs? Were they using it to teach the language to the non-native? Mr. Cross said there were different approaches used in different districts. It varied from village to village depending on how the indigenous language was used. Senator Pearce asked if the funds could be used to save the native languages? Mr. Cross said this was somewhat controversial in the bilingual programs. Some argue that it is a legitimate use of funds and others follow the Federal guidelines strictly which says that it isn't. He would suggest that it was an area that Federal rules for bilingual programs, which really were designed for immigrants and foreign languages, simply did not apply to the situation in rural Alaska. Senator Phillips asked how one of the three categories was determined for an individual. Mr. Cross explained. He said there were tests for proficiency, however it was not as straightforward as in testing for Spanish or French. The determination as to what category the student will go to is made in accordance with the structure as approved by the Department of Education. Senator Torgerson said he needed further explanation of the formula. He referred specifically to page two of the spreadsheet. Mr. Jeans explained the increased adjusted ADM. Lower Kuskokwim School district has many schools which go through the size adjustment tables. He referred to page three, column "H". Senator Torgerson said he was dividing the per student out to see what the students were actually getting and to see if equitable fairness was being achieved. He outlined for the committee that a student in Anchorage would receive $4,023; Kenai would receive $4,202; Sitka would receive $3,969; and Lower Kuskokwim would receive $19,138. Mr. Jeans said these numbers could basically be correct. Senator Torgerson said he would continue to check the figures. Senator Adams said the amendment for bilingual education would help not only rural Alaska but also urban Alaska, since Anchorage claims eighty-two different languages. He noted for the benefit of his counterpart that the $19,138 for a student in Lower Kuskokwim was still cheaper than the cost spent on the Alaskan Youth Corps. Amendment #15 was MOVED by Senator Adams. Senator Torgerson OBJECTED. Senator Adams said this was the same bilingual amendment as discussed last night. He felt it was worthwhile and that bilingual plays a great part in education no matter where one is. Senator Phillips commented on the disparity pointed out by Senator Torgerson. There followed miscellaneous comments by various committee members. Mr. Jeans said there were many adjustments occurring in the formula. As one deals with larger schools, going through the size adjustment tables, they are not enjoying or possibly are enjoying the size adjustment at the same level rural schools, which are much smaller, are going to enjoy. Looking at Lower Kuskokwim, the size adjustment factor is 1.49, whereas Anchorage has 1.0. Each adjustment they go through compounds the student count therefore generating more additional dollars for that community or school district. Senator Phillips advised that his aide identified the per student cost figure for Lower Kuskokwim at $11,271 and Senator Torgerson concurred. But even with this correction he noted the cost was approximately triple. (pause on record) Senator Wilken with reference to amendment #15 said it was not a small technical amendment but rather a big amendment. It would put the State right back into the job of dealing with categorical funding. One of the goals of the bill, however, was fairness and simplicity. He noted a growth in categorical funding that far exceeds the growth in students. Special education had grown double; bilingual/biculture had grown at four times the rate. That is money that does not go into regular programs. SB 36 shows that the State provides equal funding categorically across the State. Through this bill school boards would get to decide what was important and decide where they would like to spend their money. Everyone would be provided a twenty percent foundation upon which they build a categorical program and they can put different priorities to whatever they wish. Anymore than the twenty percent they get it will have to be funded locally. If the amendment is accepted in ten years they will be back with the same problem, which is inflated dollars because of inflated definition. He believed the concerns of Senator Adams could be addressed otherwise rather than through the formula. Senator Adams concurred that the local school boards should have the options on how to spend money. However, in order for them to be able to spend money they need money. There is no fairness, particularly when the North Slope is getting zero out of this. Senator Wilken responds. Education is the responsibility of the State and the burden of that responsibility must be spread fairly throughout the State. Senator Adams reminded the committee that the North Slope Borough has the second highest taxes even before Fairbanks. There is a misconception the North Slope can support itself. By a roll call vote of 1 - 6 (Adams - yea) (Sharp, Pearce, Donley, Torgerson, Parnell, Phillips - nay) amendment #15 FAILED. Amendment #22 was MOVED by Senator Torgerson. The amendment would ensure no new REAA's. Senator Adams OBJECTED. By a roll call vote of 6 - 1 (Sharp, Pearce, Donley, Torgerson, Parnell, Phillips - yea) (Adams - nay) was ADOPTED. Amendment #23 was MOVED by Senator Torgerson. The amendment would clarify that any tax collected in a specific REAA would be credited toward that REAA. Senator Adams OBJECTED. By a roll call vote of 6 - 1 (Sharp, Pearce, Donley, Torgerson, Parnell, Phillips - yea) (Adams - nay) was ADOPTED. Amendment #24 was MOVED by Senator Adams. Senator Sharp OBJECTED. Senator Adams explained that the amendment deletes the requirement for REAA's to contribute to the cost of school construction. Presently they contribute two percent. Senator Torgerson also OBJECTED. Senator Donley felt the amendment was serious discrimination towards urban areas. He said most of the urban areas when doing school construction were fortunate enough to get State assistance or a bond. They were also contributing at least thirty percent locally. Now, he would like to see that gap closed. Senator Adams responds. Going back three or four years, those urban areas that could post bonds have received approximately $203 million, whereas in areas such as REAA's they have received only $7.3 million. There is inequity there as regards to school construction. Co-chair Sharp clarified that the amendment would insert school construction and new sections regarding new school construction. Senator Donley continued to feel there were serious inequities now in the system that discriminates against urban areas. The urban areas pay a tremendous percentage as compared to rural areas. The department has developed a system which continues to discriminate against the urban areas by not counting students in "portables" as "unhoused". He said it was very difficult to rise up on the priority list of the Department of Education. It was so bad that for many years the Anchorage school district did not bother to submit projects because they felt they were being discriminated against the way the formula was developed. They felt they would not even be considered to get any construction dollars. He said his district cared enough about their children to tax themselves to construct schools. Senator Adams said Senator Donley's district was lucky to have "portable" classrooms. Most of his constituents do not have "portables" and do not have State facilities. Most are still located in old BIA schools buildings. If REAA's had the ability they would also tax themselves. Most of their dollars come from Federal funds under PL874. Senator Donley noted that folks in REAA's had the opportunity to form themselves into boroughs in order to contribute towards their local expenses themselves. Senator Adams asked that if some of the poorest districts did form a borough what would they tax? By a roll call vote of 1 - 6 (Adams - yea) (Sharp, Pearce, Donley, Torgerson, Parnell, Phillips - nay) amendment #24 FAILED. (Tape #64, Side A switched to Side B.) Amendment #25 was MOVED by Senator Torgerson. Senator Adams OBJECTED. Senator Torgerson explained the thrust of the amendment would be to delay the starting date of the employment tax for local contribution in unorganized Alaska until the year 2001. He outlined several reasons for doing that. One of the fiscal notes received from the Department of Revenue outlined that it would be very difficult to implement the local effort by 1 January 1999. They recommended the effective date be changed to 1 January 2000. For the benefit of those watching KTOO he read the amendment into the record. Senator Adams said he opposed any tax on any group, especially those in his district. He wanted a definition from the sponsor of the amendment explaining employment tax. Would it be the wages they earn? Or perhaps the check a retired person gets on a monthly basis would be taxed? Or one of the elders that receives only a Permanent Fund Dividend would be taxed on that? Senator Torgerson said those questions were already laid out in the bill and he would not be changing that with the amendment. (pause on record) Co-chair Sharp indicated that some of the problems cited by the Departments of Labor and Revenue in their fiscal note would also be addressed. Senator Parnell asked if there would be any general fund costs generated? Senator Torgerson said his main concern was what the Department of Revenue was talking about with regards to notification of employees as far as the fiscal note was concerned. Co-chair Sharp again reiterated a significant impact on fiscal notes. Senator Adams noted that based on the fiscal note from the Department of Labor new runs would have to be made. In response to a question by Senator Pearce, Senator Torgerson said that by the year 2001 they would begin to collect the tax and by the year 2002 there would be full implementation. By a roll call vote of 6 - 1 (Sharp, Pearce, Donley, Torgerson, Parnell, Phillips - yea) (Adams - nay) was ADOPTED. Senator Torgerson requested a brief at ease. Co-chair Sharp concurred but asked no one leave the room. (at ease) Senator Donley MOVED to RESCIND committee action in adopting amendment #14. Senator Adams OBJECTED. Senator Torgerson indicated that he originally voted for the amendment, however, since has been told that under indistrict costs the district provides classroom space and provides additional things that Statewide correspondence was not required to provide. There is additional cost for the district versus Statewide correspondence. He said he would be supporting the motion. By a roll call vote of 6 - 1 (Sharp, Pearce, Donley, Torgerson, Parnell, Phillips - yea) (Adams - nay) committee action on amendment #14 was RESCINDED. Co-chair Sharp advised that the amendment was now again before the committee for consideration. Senator Donley said he objected to the main motion. By a roll call vote of 1 - 6 (Adams - yea) (Sharp, Pearce, Donley, Torgerson, Parnell, Phillips - nay) amendment #14 FAILED. Senator Torgerson requested a brief at ease. Co-chair Sharp concurred but asked no one leave the room. (at ease) Senator Torgerson explained a brief discussion between committee members regarding boarding school students. He noted there was a problem with Galena as they were taking some of the profit from the Statewide correspondence and funding a boarding school operation. He has always supported boarding schools as has the Legislature over the years, however they have never funded it the same as Mt. Edgecombe. He wanted to see if there was a quick fix amendment. Since that could not be accomplished this evening he will have an amendment he could offer in Rules or on the Floor tomorrow. Senator Wilken and Eddy Jeans will meet with him early tomorrow morning to try and work out some solution. Co-chair Sharp asked if that would change the values of the bill. Senator Torgerson said possibly it could, but at this time he did not understand how they would fix it. Therefore he would try to work this out. Co-chair Sharp explained the procedure he wanted to follow. He did not want to send the Department back to the drawing board with a new CS embracing new values to make new runs and then it would need to be changed again. He wanted to make the changes here and send the bill to the Floor by Friday. Senator Torgerson said this amendment would not require a title change and perhaps it could be addressed in the House. Co-chair Sharp said he would rather legitimize the operation in Galena because it was a good operation. Co-chair Sharp outlined the schedule for tomorrow morning. The oil and gas hearing was for legislators