SENATE HEALTH, EDUCATION & SOCIAL SERVICES COMMITTEE February 12, 1997 9:01 a.m. MEMBERS PRESENT Senator Gary Wilken, Chairman Senator Loren Leman, Vice Chairman Senator Lyda Green Senator Jerry Ward Senator Johnny Ellis MEMBERS ABSENT All members present. COMMITTEE CALENDAR 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." - HEARD AND HELD PREVIOUS SENATE COMMITTEE ACTION SB 36 - No previous Senate Committee action to record. WITNESS REGISTER Senator Randy Phillips State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Prime sponsor of SB 36. Mayor Benjamin Nageak North Slope Borough PO Box 69 Barrow, Alaska 99723 POSITION STATEMENT: Suggested that in dealing with the formula, the focus be on the future of all of Alaska. Jerry Burnett, Staff Senator Randy Phillips State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Reviewed the Alaska Public School Foundation Program and answered questions. Larry Wiget, Director Government Relations Anchorage School District 4600 DeBarr Road Anchorage, Alaska 99519 POSITION STATEMENT: Supported rewriting the formula in a manner more equitable to Anchorage School District students. Mary Frances Alaska Association of Administrators Petersburg Superintendent PO Box 289 Petersburg, Alaska 99833 POSITION STATEMENT: Discussed hold harmless, single site schools, and area cost differential. Fred Reeder, President Sitka School Board 107 Shelikof Drive Sitka, Alaska 99835 POSITION STATEMENT: Reviewed concerns with SB 36. Tom Nicolos Barrow City Council PO Box 629 Barrow, Alaska 99723 POSITION STATEMENT: Alarmed with the provisions of SB 36 which leave the children of the North Slope Borough without any state funding for education. Mayor Jim Vorderstrasse City of Barrow PO Box 629 Barrow, Alaska 99723 POSITION STATEMENT: Indicated that SB 36 was unfair. Scott Brandt-Erichsen 344 Front Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed bringing the area cost differential in line with the actual cost of living. Dick Swarner, Executive Business Manager Kenai Peninsula School District 148 N. Binkley Soldotna, Alaska 99669 POSITION STATEMENT: Suggested additional funding for the foundation program and identified problems with the formula. Patrick Doyle PO Box 108 GlennAllen, Alaska 99588 POSITION STATEMENT: Expressed concern with the redistribution of funding that is far too small. Chris Campbell, Member Ketchikan Board of Education 601 Main Ketchikan, Alaska 99901 POSITION STATEMENT: Identified negative and positive areas of SB 36. Eddy Jeans, Manager School Finance Section Department of Education 801 W 10th Street, Suite 200 Juneau, Alaska 99801-1894 POSITION STATEMENT: Discussed the fiscal notes for SB 36. ACTION NARRATIVE TAPE 97-10, SIDE A SB 36 PUBLIC SCHOOL FUNDING  Number 001 CHAIRMAN WILKEN called the Senate Health, Education & Social Services Committee (HES) to order at 9:01 a.m. and introduced SB 36 as the only order of business before the committee. SENATOR RANDY PHILLIPS , Prime Sponsor, informed the committee that the Anchorage School District has 38 percent of Alaska's enrollment, but the funding is 30 percent. SB 36 would equalize the playing field by bringing Anchorage's funding to 32 percent. He reviewed the Department of Education's projected FY98 Foundation Program showing the impact of the various districts. The four school districts that would be adversely effected would be the Lower Kuskokwim, the North Slope, Unalaska, and Valdez. SB 36 would provide more money for K-12 education. The school foundation formula is broken and this bill attempts to revise the allocation. SB 36 would provide more money in order to lower the pupil teacher ratio (PTR). The local tax burden would also be more equitable. Under the current formula, for example, a $100,000 house in Anchorage contributes $400 in property tax towards education while a similar valued house in Barrow would contribute $40. Number 175 SB 36 includes the funding of single site schools in the foundation formula. The bill also requires that a funding community have at least 10 students in average daily membership (ADM). This requirement will effect about 11 schools. Senator Randy Phillips said that his main motivation for this bill was the conditions in his district - 31 children per classroom in the elementary schools. The PTR needs to be lowered. SB 36 does not add any money to the formula. In response to Senator Leman, SENATOR RANDY PHILLIPS said that SB 36 was practically the same as the amended version of the bill that came before the Senate last year. Senator Randy Phillips reviewed the history of the bill last year. SENATOR LEMAN noted that the reimbursement for pupil transportation was added on the floor last year and was included in SB 36. SENATOR RANDY PHILLIPS said yes, that was left in the bill. SENATOR GREEN remembered that one of Senator Randy Phillips' bills last year included a change in the calculation of the classroom size or the divisor. Is that included in SB 36? SENATOR RANDY PHILLIPS said that was not in SB 36. SENATOR GREEN commented that she felt that was an effective tool. SENATOR RANDY PHILLIPS pointed out that with that 35 schools were negatively effected. Number 237 SENATOR ELLIS asked if there was a provision in the bill that would fund the money if one of the negatively effected districts goes to court. Would a special session be called? Would the instructional unit value be reduced? SENATOR RANDY PHILLIPS did not know. That is a decision the Legislature and the Governor and the school districts would have to make. Similar challenges between richer and poorer school districts have occurred in California, Texas and Oregon. In all those cases, the courts made the playing field level. Senator Randy Phillips believed SB 36 would withstand a court challenge. SENATOR ELLIS commented that the question is not if litigation occurs, but when. That issue is worthy of discussion in this committee. Why was a per capita distribution of funding not utilized in SB 36? SENATOR RANDY PHILLIPS said that he would like to have 38 percent funding for the Anchorage district, but from a statewide perspective educating a student in other areas costs more. SB 36 recognizes the cost differential. Senator Randy Phillips reiterated that he was proposing this legislation because of the intolerable PTR level in the Anchorage district and the inequity in the allocation of funding. SENATOR ELLIS inquired as to the basis for which 32 percent funding for Anchorage was chosen. Why 32 percent instead of 33 percent? SENATOR RANDY PHILLIPS stated that the rationale behind the 32 percent was that it was a fair allocation. SENATOR LEMAN asked if Senator Ellis' 33 percent was calculated on the basis of distribution per pupil with the adjustment for cost of living in various communities. SENATOR ELLIS said that he just picked a number in order to determine why 32 percent was chosen and what was the basis of the fairness test. SENATOR RANDY PHILLIPS said that the percentage was based on his sense of fairness. Senator Randy Phillips reiterated that the Legislature must address the school foundation formula. Number 359 SENATOR LEMAN did not want to leave the impression that this legislation is Anchorage versus the rest of Alaska. Most everyone would agree that the existing foundation formula is inequitable, however what is considered inequitable is probably determined by the school district from which one comes and whether there would be a gain or a loss. Senator Leman said that most would recognize that some school boards take advantage of the formula by manipulating certain areas which this bill attempts to address. SB 36 attempts to distribute equitably. SENATOR RANDY PHILLIPS reiterated that SB 36 is a proposal. He said that he could only speak with authority and knowledge about the Anchorage School District. SENATOR ELLIS was interested in why the bill did not change other categorical funding besides the gifted and talented program and the bilingual program. Senator Ellis asked if SB 36 addressed the area cost differential which many feel is the most inadequate piece of the formula. If not, why was it not addressed? SENATOR RANDY PHILLIPS did not believe the existing area cost differential was adequate, however this portion is very controversial. SB 36 takes one step at a time, dealing with one 'battle' at a time instead of all at once. Senator Randy Phillips said that his staff would address the question further. In response to Senator Ellis, Senator Randy Phillips said that he did not give any thought to the distribution of money in the formula being tied to student achievement or implementation of higher standards or improvement in the quality of the system. That can be considered later. Number 417 SENATOR WARD asked if there had been any discussion regarding phasing in the reductions of the four districts who would be adversely effected. SENATOR RANDY PHILLIPS replied yes. This committee and the Finance Committee will have to collectively decide this. CHAIRMAN WILKEN announced his intention to work as much as possible on SB 36 in order to pass it on to Finance. SENATOR RANDY PHILLIPS commented that he was willing to work on this legislation with everyone and did not want to leave an impression otherwise. He thanked the committee for its time. CHAIRMAN WILKEN reviewed the plan for taking testimony. MAYOR BENJAMIN NAGEAK , Mayor of the North Slope Borough, emphasized that this is a direct discussion on the future of Alaska. There is nothing more important than the children of Alaska. He said that often Alaskans do not fully appreciate the complexities of life on the North Slope. SB 36 does not represent a responsible approach to educating Alaskan children; a broader and more equitable commitment is called for. Mayor Nageak pointed out that the North Slope Borough School District is one-third the size of California which illustrates the obstacles resulting from the remote location. A flight to Anchorage from Barrow is cheaper than visiting one of the villages in the borough. Further, the flying conditions in Barrow are no better than those in Juneau. Mayor Nageak emphasized that it is more expensive to educate a child on the North Slope Borough than anywhere else in Alaska. Studies show that it costs $20,000 per student per year on the North Slope to deliver the same basic education that is delivered in Anchorage for $7,000 per student per year. Mayor Nageak acknowledged the fortune of the North Slope by having an oil field. In the past years, the North Slope has suffered annual cuts resulting in the elimination of programs and staffing. He expressed concern that even without SB 36 more cuts lay ahead. Mayor Nageak emphasized that the question being addressed should not be how to divide up funding that is not adequate, but rather the question should be how all children can be cared for and educated in Alaska. In conclusion, Mayor Nageak suggested the focus be on the importance of education for all Alaskans and the future of Alaska. SENATOR LEMAN requested that Mayor Nageak fax the committee his testimony. Number 514 JERRY BURNETT , Staff to Senator Phillips, reviewed the current foundation formula with overheads. (See Attachment A) He explained that the deductible PL874 is federal impact aid which is received by the school districts in lieu of property taxes. Mr. Burnett noted that the required local effort is changed from the current 4 mills, 35 percent of basic need, to 4.5 mills property tax equivalent, 100 percent of basic need, in SB 36. Mr. Burnett then reviewed the components of the formula which include the funding community, unit calculation, unit value, and area cost differential. In SB 36 the minimum size of a funding community is 10 students, and where there is only one funding community in a small school district that school district qualifies for single site funding in the formula. With regard to the unit value, Mr. Burnett indicated that inflation adjustment of the unit value was a policy choice. Other governmental entities have not been adjusted for inflation or population increases as school districts have. Although bilingual and gifted and talented programs, SB 36 does not change the funding for special education programs. This is also a policy choice for the Legislature. SB 36 does not address area cost differential, although this could be addressed by school district or for each funding community within a school district. Mr. Burnett reviewed the unit calculation and reiterated that in SB 36, if a funding community has less than 10 students the basic unit is not received, but counted within the largest funding community within the district. Number 577 SENATOR LEMAN pointed out that the overhead's reference to very small districts, "1-120 students = 5-12 students per unit"; should that number actually be one? JERRY BURNETT was not positive. A funding community would not be created with only one student. JERRY BURNETT addressed Senator Green's question regarding the elementary divisor which was included in a bill from a previous year. Those divisors are a policy choice that the committee could consider. Mr. Burnett continued with the overheads referring to the bilingual units of the unit calculation. TAPE 97-10, SIDE B Mr. Burnett stated that SB 36 does change the categorization for bilingual units. Under SB 36 the gifted and talented category remains 40 students per unit, the change is that four and one-half percent in each school district is considered gifted and talented. Therefore, there is no identification required for the gifted and talented program. SENATOR GREEN asked if there was not a requirement that there be a gifted and talented program in a district. JERRY BURNETT said that was not addressed in the legislation, but the department could review review the current requirements of gifted and talented education. JERRY BURNETT continued with the unit calculation and the vocational students which are not addressed by SB 36. He noted that other proposals group special education units as a whole, a block of money. Again, that is a policy choice. Mr. Burnett continued with the relationship between local valuation and education funding under the current Foundation Program. He reviewed an example to illustrate the relationship between local value and state revenue which determines the basic need. The basic need is then adjusted with the deductible PL874 and the required local effort which results in the foundation funding. Mr. Burnett mentioned that the deductible PL874 is included in the formula under SB 36. This is important to consider due to the federal law requiring that the disparity be no more than 25 percent between the highest and lowest districts including local contribution if the PL874 is included in the formula. That too is a policy choice. With regards to the required local effort, all but three school districts in Alaska use the 4 mill equivalent because enough revenue is not generated to reach the 35 percent. Under SB 36, the tax equivalent is changed to 4.5 mill which reduces the state's contribution in every district that has a required local effort. Without the 35 percent cap, some school districts will contribute beyond the 35 percent and up to 100 percent of their basic need. Mr. Burnett used a graph to illustrate the relationship between local value and total revenue of a typical district. In current law, the local excess contribution is limited to 23 percent of the basic need in order to prevent the disparity from being beyond 25 percent. Number 524 Mr. Burnett said that the main change in SB 36 is the required local effort. SB 36 establishes supplemental equalization which means that an additional contribution of state and local funds goes to the school district. That contribution is based on the ADM in the district and on 2.5 mills of the average assessed valuation in Alaska. Therefore, every school district receives an excess contribution whether there is a local tax base or not. School districts with a local tax base are required to contribute based on the local assessed valuation and how that relates to the state's average. Mr. Burnett concluded his overhead presentation and offered to answer any questions. SENATOR ELLIS inquired as to why SB 36 changes some categorical funding, but not all. JERRY BURNETT said that those changes were made in Senate Finance last year with SB 70. SENATOR ELLIS said that he would like the courtesy of an answer for the basis of those choices. CHAIRMAN WILKEN asked for testimony from Deborah Germano in Homer, but the moderator informed the committee that Ms. Germano's testimony had been faxed to the committee. Number 485 LARRY WIGET , Director of Government Relations for the Anchorage School District, supported the rewriting of the public school foundation formula in a manner more equitable for Anchorage School District students. He appreciated Senator Randy Phillips' efforts. With a rewrite of the formula, the Anchorage district does not expect to receive 38 percent of available funding, but greater equity and distribution of funds is necessary. Most urban districts in Alaska spend $6,000-$7,000 per student from their general fund while Anchorage spends $5,800 and rural districts $12,000-$15,000 per student. There may be valid reasons for these differences; however, students have needs that are not being met in urban areas which require additional state funding. Mr. Wiget recognized benefits of an "economy of scale," but stressed that the Anchorage School District faces its own unique circumstances. The Anchorage community has indicated reluctance to support increased taxes. Mr. Wiget informed the committee that if the Assembly approves Anchorage's proposed budget, the taxpayers of Anchorage will find their property taxes raised by $20 million in order to cover increased educational costs which includes debt reimbursement from 1996, 1997, 1998. Mr. Wiget emphasized that Anchorage has taken extensive program cuts for several years, the instructional program cannot continue to be cut while expecting to accomplish its education mission. For example, there are no resources to reduce class sizes; the average PTR is 25 to 1 in grades 1-6, 28 to 1 in grades 7 and 8, and 30 to 1 in grades 9-12. Further the Anchorage district does not have the resources to increase the much needed instructional technology. Mr. Wiget noted that major cost containment efforts have been undertaken, but informed the committee that there is no money in the proposed budget for salary increases to the four employee groups which must be bargained this year nor for exempt employees which includes the teachers. Mr. Wiget said that the Anchorage district has experienced moderate growth, but increases within the student population is seen in bilingual and special education students. This year alone the bilingual population in Anchorage has increased by 25 percent. He supported the following: providing the same level of reimbursement for districts who own their own transportation equipment as well as those under contract, recognizing students in relocatable facilities as unhoused (currently, there are 148 relocatable units in Anchorage), reducing the elementary divisor from 17 to 16 for districts with an ADM of over 550, examining other ideas that would provide greater equity to the foundation formula funding. He pointed out that the instructional unit has not changed since 1992 when it was $61,000 which had been increased from $60,000 in 1987. At the same time the CPI had risen over 31 percent. In conclusion, Mr. Wiget supported rewriting the school foundation formula. Number 421 SENATOR ELLIS asked if Mr. Wiget would support an increase in the percentage from 32 percent to 34 percent. In response, LARRY WIGET said yes. Mr. Wiget did not believe that the Anchorage district would receive the 38 percent of the funding. Mr. Wiget reiterated his commitment to work with the Legislature and the Governor on this issue. Mr. Wiget clarified that there are 148 relocatables in the Anchorage School District. MARY FRANCES , Alaska Association of School Administrators, believed that the committee had received a letter from Steve McPhetres regarding the association's position and concerns about SB 36. Ms. Frances highlighted the association's support of lowering the hold harmless in districts losing enrollment from 10-5 percent as well as resolving the single site issue. However, the association does support a hold harmless clause in any funding formula that would treat all districts equally without exception. The association also supports an updated analysis of the area cost differential. Ms. Frances, speaking as the Petersburg Superintendent, underscored her previous comments on the area cost differential. Petersburg is a single site with an area differential of one. Petersburg is on an island, not unlike the communities on Prince of Wales who have an area cost differential break, although Price of Wales is closer to a major community. This is an example of when the area cost differential is not appropriate and should be addressed. Petersburg also contributes at the maximum local contribution for education. Funding at the value of the instructional unit would leave no room for additional money. Petersburg contributes at about 35 percent with locally raised dollars. Number 348 FRED REEDER , President of Sitka School Board, commented that Sitka cannot afford a government relations position. Mr. Reeder identified the following concerns with SB 36. The inflation index is not addressed in the bill which is one of the main problems with the current formula. Sitka, on an island like Petersburg, has an area cost differential of one as does Anchorage; however, things cost more in Sitka than Anchorage. The bill treats all districts with enrollment of 900 over the same even though a district of 1,700 is very different than one of 40,000. The money to have one expert gets diffused in a district of 1,700 versus one of 40,000; there are some economies of scale to consider. Further, the Sitka district is opposed to the cap. The Sitka community is already contributing at an 8 mill equivalent and now the community is being asked to contribute more. Mr. Reeder indicated that problem could be attributed to the area cost differential and the lack of inflation proofing. TOM NICOLOS , Barrow City Council, was alarmed with the provisions of SB 36 which leave the children of the North Slope Borough without any state funding for education. Under SB 36, the North Slope Borough will lose approximately $12 billion of the state education funding currently received. Furthermore, the North Slope Borough will lose $34 million in recaptured funds which equals a total loss of $46 million. The North Slope Borough's total operating budget is about $167 million of which much is dedicated to retiring its debt service. The loss of $46 million is 25 percent of the borough's total operating budget. Any municipality in Alaska would be devastated by such a loss. Mr. Nicolos pointed out that the Alaska Constitution, Section 7.1 requires that the Legislature establish and maintain a system of public schools. Under SB 36, the children of the North Slope Borough will not receive any funding for public schools for the State of Alaska which seems to be in conflict with the Alaska Constitution. In what position does this leave the State of Alaska? What happens when the borough, locally, is not able to fund education due to millions of its dollars supporting education for every student in Alaska except its own? With regards to Senator Randy Phillips' comments, Mr. Nicolos said that tax revenue from a $100,000 home in Barrow $230 goes towards education not $40 as the Senator stated. Further, a $100,000 home in Anchorage would be appraised at $200,000 in Barrow. The North Slope does pay its fair share for education. Number 264 MAYOR JIM VORDERSTRASSE , City of Barrow, felt threatened by SB 36. Alaska collects revenue from the North Slope while very little of that returns to the North Slope. The people of the North Slope have placed education over their personal comfort voting to fund education at the local level rather than have running water. Now that the infrastructure has been built, money is necessary to maintain and operate the school. Mayor Vorderstrasse echoed Mr. Nicolos' comments regarding the cost comparison of Anchorage and Barrow. It is not fair to take the North Slope's money and leave them with nothing. SCOTT BRANDT-ERICHSEN informed the committee that he was the Ketchikan Borough Attorney and Legal Counsel for the Ketchikan School District, however Mr. Brandt-Erichsen was not testifying in that capacity. Through his work for the school district, Mr. Brandt-Erichsen reviewed the current foundation formula and its legality. His discoveries motivated him to testify today. Mr. Brandt-Erichsen discussed various approaches such as the concentration of resources on low test score districts, the per capita approach, and the notion that the state could collect 4 or 5 mills from all districts and distribute 100 percent of the funds. There are policy reasons to support each approach. Number 198 Under the current formula, Mr. Brandt-Erichsen identified the area cost differential as an error. A June 1996 Department of Labor report using 100 as a base value, stated that the cost of living in Ketchikan was 119. The area cost differential for Ketchikan is 1.00. In comparison, St. Marys has the same cost of living reported as Ketchikan, 119, but an area cost differential of 1.3. He reviewed other Southeast Alaska cost of living numbers and their area cost differentials. Mr. Brandt-Erichsen explained it is a multiplier, not the actual cost of living. Therefore, Ketchikan experiences a loss of $11,000 per instructional unit which results in no school nurses in the elementary school, less librarians for the entire district, half-time Physical Education teachers, and no counselors this year. If the area cost differential reflected the true cost of living, Ketchikan could have these positions. In conclusion, Mr. Brandt-Erichsen stated that SB 36 is a good effort, but emphasized without a correction of the area cost differential it will fall short. DICK SWARNER , Executive Director for Business Management for the Kenai Peninsula School District, acknowledged that SB 36 gives the Kenai Peninsula more money and noted that the Governor's bill would be introduced this week. Without additional money to the formula, Mr. Swarner said that adjustments to the formula would result in winners and losers. Therefore, gathering support for such a bill is difficult. Mr. Swarner suggested that additional funding be placed in the rewrite of the foundation program. There are obvious discrepancies in the formula that require adjustment. For example, the area cost differential needs to be revised. The Kenai Peninsula also has a 1.00 area cost differential, although the district has some schools that can only be visited by plane as is the case in some bush districts. There are no distinctions in area cost differential for those schools in outlying areas of the Kenai district. Mr. Swarner also recommended that the transportation funding be kept a separate item instead of being included in the foundation program. Number 129 PATRICK DOYLE , testifying from GlennAllen, pointed out that the declining facilities in the Copper River District and the entire state was not addressed. Mr. Doyle reiterated the concern of redistributing funding that is not enough. No new money has been added to the unit value since 1987. With regard to the 10 student ADM, two schools in the Copper River District have 8-10 students on a regular basis. If those schools were eliminated, those children would have to ride a bus two to two and one-half hours in 35-50 degrees below zero weather. Mr. Doyle wondered if any consideration had been given to such a situation. CHRIS CAMPBELL , Ketchikan Board of Education member, stated that if the Legislature did not increase funding for the foundation formula for COLA, the only alternative is to redistribute money from the wealthier districts to the needier districts. The Ketchikan Borough traditionally funds to the cap, but Ms. Campbell noted that Ketchikan was also facing social and economic impacts from the closure of the Ketchikan Pulp Company. She reiterated Mr. Brandt- Erichsen's comments regarding the cuts that the Ketchikan School District has faced. Further, the technology purchases are funded almost entirely from contributions through parent-teacher organizations. Ms. Campbell supported the specified ADM of 10 students in SB 36. If parents choose to live in remote areas in Alaska as did her parents, correspondence courses could be used as she used. Ms. Campbell believed that including the single site school districts would reduce the politics in that situation. Also taking a student count at the end of November would provide a more realistic basis for determining the number of students receiving instruction throughout the entire school year. Ms. Campbell also supported the change in assessment of declining student enrollment from 10 to five percent. The impacts resulting from the closure of the Ketchikan Pulp Company may be offset by the aforementioned feature. SENATOR ELLIS asked Ms. Campbell if she agreed with Mr. Brandt- Erichsen that this bill should address the area cost differential. CHRIS CAMPBELL replied, yes. Number 030 SENATOR ELLIS pointed out that the Senator from Ketchikan was a Co- Sponsor of SB 36. CHAIRMAN WILKEN thanked Mr. Frank Hill for listening in from King Salmon. Chairman Wilken thanked all the teleconference participants. EDDY JEANS , Manager of the School Finance Section of the Department of Education (DOE), noted that DOE had prepared two fiscal notes for SB 36, one for pupil transportation and one for the foundation program. TAPE 97-11, SIDE A Mr. Jeans began discussing the fiscal note dealing with pupil transportation. He said that the proposed amendment would cost an additional $1.6 million in general fund in order to fully reimburse Anchorage for their district operated transportation services. That section also includes costs for administration of those services which includes routing, crossing guards, and a transportation coordinator. Currently, other school districts are not reimbursed for those costs. Mr. Jeans pointed out that the two fiscal notes combined would add approximately $38 million into education provided these are fully funded. Mr. Jeans turned to the fiscal note for the foundation program. Section 4 increases the required local contribution by municipalities from 4 mills to 4.5 mills across the state. That is capped at the district's basic need which effects one district, the North Slope Borough. Section 5 requires any excess generated by the 4.5 mill tax levy to be returned to the State of Alaska. Therefore, $34,500,000 in revenue would support the total increase of approximately $36 million. DOE does not believe that this money would be collected and available for distribution in the year of implementation of this proposal. The North Slope Borough would take the State of Alaska to court and tie the money up in litigation. Therefore in order to fully fund these changes, an additional appropriation of $34 million would be required from the Legislature or the instructional unit value would need to be pro- rated. The unit value is estimated to be approximately $58,300. Number 070 Mr. Jeans explained that the increase in the required local effort under Section 4 also effects the amount of impact aid the state can deduct. Sections 6 and 7 establish a minimum funding community at 10. If a funding community fell below 10 ADM, then those children would be counted at the largest funding community within the school district. Section 8 adds a single site table. Section 11 changes the bilingual units to a single weight. Currently, there are three weight categories established in regulation. This would allow one statutory weight, .021, to apply to all bilingual students. Where there are increases in Section 11, one can assume that the number of bilingual students in that district are on the lower end of the scale regarding weighing factors. Where there are brackets, one can assume that the district has a larger percentage of their students at the higher end of the scale. Section 12 establishes instructional units for gifted and talented. The gifted and talented allocation is removed from the special education component and establishes its own component. The gifted and talented allocation is based on 4.5 percent of the population. Therefore, 4.5 percent of a district's ADM would be multiplied by the current weight factor in statute, .025, in order to determine the gifted and talented allocation. Based on the changes of bilingual education and gifted and talented, there would be some adjustments to the supplemental aid of REAA, but the specific statute is not effected by SB 36. Section 13 adds supplemental equalization by providing an allocation to districts which is shared between the state and local municipalities based on their ability to pay. Districts with an assessed value per student below the statewide average would receive a larger share of state aid. Those districts with wealth above the statewide average would be required to contribute a higher share. Number 137 SENATOR ELLIS asked if the 4.5 percent for the gifted and talented program was based on a national figure. EDDY JEANS said that the 4.5 percent is at the statewide average. Also a Special Education Task Force in 1993 made a recommendation that there be an allocation based on 4.5 percent. In response to Senator Ellis, Mr. Jeans acknowledged that perhaps there is a perception that some districts do over identify gifted and talented. The change does address that possibility by making it a single allocation. SB 36 does not require the identification of gifted and talented children, it only makes an allocation based on 4.5 percent of the population. SENATOR ELLIS asked if there was a national number that specified the correct percentage for gifted and talented students in a given population. EDDY JEANS said that he could provide the national average to Senator Ellis. SENATOR ELLIS asked Mr. Jeans to review the PL874 figures. EDDY JEANS explained that under the impact aid law, when a school district has a required local contribution there is a proportional calculation provision . A proportional calculation means that when there is excess contributions over the requirement, a percentage is calculated which is applied against the amount of impact aid to be deducted. Since the required local effort has increased, more impact aid can be deducted from those districts. This is a side effect of the increase in the required local effort. Number 184 In response to Chairman Wilken, EDDY JEANS understood that the Administration's plan for the foundation program would be introduced today. CHAIRMAN WILKEN requested that the table showing the change in bilingual and special education in comparison to the change in ADM over the years. Chairman Wilken also asked Mr. Jeans to determine the amount of money Delta Junction receives for special education. EDDY JEANS said that he would get that information for the Chair. SENATOR ELLIS extended his request to DOE regarding the basis for the figures of categorical funding. SENATOR WARD asked if it was the intention of the committee to identify the differences between SB 36 and the Governor's legislation. CHAIRMAN WILKEN expected to hear the Governor's bill with SB 36. Further, a comparison of the two is forthcoming. There being no further business before the committee, the meeting was adjourned at 10:50 a.m.