MINUTES SENATE FINANCE COMMITTEE 9 March 1998 5:35 p.m. TAPES SFC-98, #72, Side A CALL TO ORDER Senator Bert Sharp, Co-chairman, reconvened the meeting at approximately 5:35 p.m. PRESENT In addition to Co-chairman Sharp, Senators Phillips, Torgerson, Parnell and Adams were present when the meeting was reconvened. Senators Pearce and Donley arrived shortly thereafter. Also Attending: Richard Cross, Deputy Commissioner, Department of Education; Eddy Jeans, Manager, School Finance Section, Education Support Services, Department of Education; John Cyr, President, NEA-Alaska; Carl Rose; Al Weinberg; 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 advised the committee that a draft CS for SB 36 was again before them. He noted that the new draft CS needed to be adopted as a working document. Senator Phillips said the new penciled in corrections were on page seven, line 21, delete $4,012 and insert $3,944; page twenty-one, line 12, delete $3,866 and insert $3,855; and line 13, delete $3,918 and insert $3,888. Co-chair Sharp concurred. Senator Phillips MOVED CSSB 36(FIN) "Q" as working draft. Senator Adams OBJECTED. By a roll call vote of 5 - 1 (Sharp, Donley, Torgerson, Parnell, Phillips - yea) (Adams - nay) (Pearce - absent) CSSB 36(FIN) "Q" was ADOPTED as working document. Amendment #27 was MOVED by Senator Torgerson. Senator Adams OBJECTED. (pause on record) Senator Torgerson said section thirty-three of version "Q" had quite a few repealers in it; on of which was section 14.17.031(b) which allows for a phase-in if a secondary or elementary school loses instructional units of more than ten percent in one fiscal year. Amendment #27 reworded it to "ADM" instead of "instructional units". It allows the section to be subject to appropriation so the districts would be able to come back and request additional funding. Senator Donley asked if it would apply in case of a loss due to a boundary change? Senator Torgerson indicated it did not. Senator Donley asked if the maximum of three years was correct and Senator Torgerson indicated it was. Senator Donley noted that it was a seventy-five percent hold harmless of the difference the first year rather than a one hundred percent hold harmless. Senator Torgerson concurred. Senator Donley asked if this would be an automatic part of the formula, but rather something they would have to apply for? Senator Torgerson agreed that was the intent of the amendment. He referred Senator Donley to lines five and six of the amendment. Senator Donley said he liked the idea districts would have to apply for the additional funding. He said he would like to see the amendment more specific. He suggested "...the school district may, subject to appropriation, use the last fiscal year before the decline as the base fiscal year." Co-chair Sharp clarified the amendment would just reinstate what was existing law before it was repealed. Senator Torgerson concurred. Senator Parnell said the "base year" needed to be clarified, what it was and whether there was any impact on the runs already given. Would this be retroactive? He said the "base year" would be the first year of implementation and then each succeeding year thereafter, if there was an economic loss causing a loss of ADM then it would kick in. He did not want any communities thinking they could look retroactively at this. Senator Torgerson said it was not the intent of this amendment to be retroactive. Senator Adams said he would like to hear from the Department of Law on this matter. If it did actually help the economically stressed areas in the State he wanted their opinion and if it would work. Senator Donley questioned about the "base year" and "school decrease by ten percent or more" which would trigger the statute. He asked how a series of years with decrease would be dealt with. Senator Torgerson said until he found the definition of "base year" he could not answer that. He explained that if the State fiscal year was a moving target then so was the transition target. Senator Parnell said perhaps they should wait on the amendment until they got further clarification, which could be done on the Senate Floor. Senator Donley said as long as they were working on this matter then he would also like to address the issue of a school district just shutting down or a total shut down of a community. Senator Torgerson WITHDREW amendment #27 WITHOUT OBJECTION. Amendment #28 was MOVED by Senator Torgerson. Senator Adams OBJECTED. Senator Torgerson said this amendment would add intent language under the purposes section. "...and give the people of the unorganized borough the maximum opportunity to organize the municipality and provide as much flexibility as possible in choosing the method of making a local contribution to schools." Senator Adams said the only complaint he had about the amendment was that it does not fit with the lines stated and does not therefore read well. He said the bill as it was did not provide an equitable level of funding. He maintained his objection. Senator Donley said the argument begs the question of whether the existing formula was equitable. In response, Senator Adams referred to the spreadsheet. He noted there were still twenty-three school districts that do not even get a part of the noted $50 million. There continued brief miscellaneous discussion between Senators Adams and Donley. Senator Donley further noted that it just went to show that the existing system was broken and throwing more money into the system was not going to solve the problem. It must be reformed how the money is allocated before the educational needs of the children of Alaska can be truly addressed. Senator Adams responded that the McDowell Study did not have actual facts. There were eleven disclaimers contained in it and it was not a factual report. Senator Donley defended the McDowell Study. He felt that it had been professionally done and that the committee spent a lot of time reviewing it. It was a very important study and one that should have been done many years ago. He thanked the chairman of Legislative Budget and Audit for his hard work in putting the bill together this year. It was actually looking at real costs rather than the existing scheme of things, which was incredibly flawed. He said the study was based on real facts, real analysis, and real costs of schools and education. Senator Adams noted that it did not bear the true cost of teacher salaries. It capped at different times the true cost of utilities throughout Alaska. He agreed the study was professionally done, however it was factually wrong. Senator Phillips said they followed figures supplied by the school districts to the Department of Education, which McDowell retrieved from the Department of Education and then reconfirmed with the school districts. These were the actual dollars and cents supplied by the school districts themselves. If anything is flawed or there is any criticism it would have to be as to how the school districts reported their figures. Co-chair Sharp asked if there was any further discussion regarding amendment #28 and there being none a roll call vote was called. By a vote of 6 - 1 (Sharp, Pearce, Donley, Torgerson, Parnell, Phillips - yea) (Adams - nay) it was ADOPTED. Senator Torgerson advised the committee that he had requested the Legislative counsel provide an opinion on whether or not the bill meets the Constitutional requirements. Also he requested counsel to add to the opinion if they were in violation of the Civil Rights Act of 1964. He referred to the memo received from counsel and noted specifically that the bill was not in violation of any constitutional issues and also not in violation of the Civil Rights Act. Senator Adams said there was two sides to every issue. He noted the opinion was done by Mr. Mike Ford for whom he had the highest respect. However, the Senator continued to maintain that it was not a constitutional bill and felt the Equal Protection Law was still in violation. He further maintained the State Human Rights Act was in violation under AS 18.80.255 and also the Federal Civil Rights Act of 1964. He apologized if he insulted anyone during the morning session when he said basically money was being taken away from the Native students to bring it in to the white urban. He was not attacking this from a racist point of view, however, if anyone did have a little racist value he forgave them for that. Co-chair Sharp also pointed out the disparity print out provided by the department. He noted the disparity was at approximately nineteen percent, less than the statutory maximum. Eddy Jeans, Manager, School Finance Section, Education Support Services, Department of Education was invited to join the committee. In referring to the disparity run test based on 1998 school operating budgets, he noted the same methodology was used as in the current disparity tests. He pointed out that under CSSB 36 "Q" there was an additional local contribution that can be made by many school districts that have been illustrated in their handouts. He noted page seven of eight under column "H", entitled "required local effort". Within column "H" no school district in the State would be contributing at their maximum local effort based on their 1998 budgets. There were a number that were contributing at the cap level. The disparity level under the current level came in at about twenty-three percent. Senator Torgerson noted they would be somewhere between nineteen and twenty-three percent, however still below the twenty-five percent mandated by the Feds. Mr. Jeans concurred. Senator Adams asked about the decrease in the amount of money a school district would get according to some of the runs. He asked what would happen, as in Lower Kuskokwim, to their qualified teachers, with the lack of funding. Would there have to be teachers laid off? Mr. Jeans indicated that such a run had not been produced. Senator Torgerson MOVED CSSB 36(FIN) "Q" version as amended with individual recommendations and accompanying fiscal notes. Senator Adams OBJECTED. He said when the committee began working on this bill he thought they would be working on something that would be equitable, simple and fair. However, this is not what he saw. As in when all the money was taken away from the North Slope. Cap categories that affect areas that have bilingual programs. A limit set of 70/30 for administration. He referred to the kicker section forty, that makes mandatory boroughs, which he felt was wrong. He noted again for the committee that the North Slope paid the second highest tax rate; following Anchorage who was first, the North Slope does pay its share of taxes. The highest property tax is paid in Barrow. They put in $28 million for education, which was forty-four percent of their budget. The balance was spent for health, municipal services, police, fire, search and rescue planning. This was a school district that now receives the second to the last in State funding. They have only two and a half percent of the students in the State of Alaska. The $11.6 million they received was equal to 1.7 percent of the funding. He continued to maintain that constitutionally the State had to contribute for everybody, not just give the North Slope nothing. He was happy the third class borough option was taken out, but in referring to section forty, that hurt school districts around the State of Alaska. As an REAA they were only subject to two percent for school construction. If a borough was set up then they would have to put in ten percent and they cannot afford that. He referred to SB 337 which was introduced today and said there would be a large fiscal note placed on it because assessment needed to be done. He felt section forty tried to force government on people. Even with no public comments with reference to this subject, he felt they were acting as little dictators by placing that on the people without their input. The capping of category programs was not necessary, because the educational needs in different sections of the State was much different. He said bilingual education was one of the greatest assets they had. It helped save culture and heritage. Every school district needed to be funded. It was wrong to rob one school district for another. The committee should listen to parents, PTA and school boards across the State. They do not like this particular bill. By leaving out some of the school districts, fairness and equity were also left out. Even though they committee had good debates, he said this formula did not work. He said there was a better solution to this bill, which would be to take the cigarette tax and use that funding. He advised the committee that what they had before them was an unconstitutional bill and it would be challenged and there would be lawsuits. The bill was not fair and did not have equity. He said the bill was flawed and there was a better method in dealing with it. All school districts should be held harmless and work on the school districts that actually need help. This bill is not the way to solve the problem. Co-chair Sharp thanked Senator Adams. He asked a roll call vote be taken and by a vote of 6 - 1 (Sharp, Pearce, Donley, Torgerson, Parnell, Phillips - yea) (Adams - nay) CSSB 36(FIN) "Q" was REPORTED OUT with individual recommendations and accompanying fiscal notes. In closing, Co-chair Pearce reminded the committee that there was a Revenue Summit at 9:00 a.m. She said it would be chaired by Senate President Mike Miller and House Speaker Gail Phillips. ADJOURNMENT Co-chair Sharp adjourned the committee at approximately 6:15 p.m. SFC-98 -6- 3/9/98