SENATE HEALTH, EDUCATION AND SOCIAL SERVICES COMMITTEE March 31, 1999 1:38 p.m. MEMBERS PRESENT Senator Mike Miller, Chairman Senator Pete Kelly, Vice-Chairman Senator Gary Wilken Senator Kim Elton MEMBERS ABSENT Senator Drue Pearce COMMITTEE CALENDAR SENATE BILL NO. 105 "An Act determining the facilities constituting a school for purposes of public school funding; and providing for an effective date." -HEARD AND HELD PREVIOUS SENATE COMMITTEE ACTION SB 105 - See HESS Committee minutes dated 3-22-99 WITNESS REGISTER Mr. John Kimmel, Staff Aide Senator Robin Taylor Alaska State Capitol Juneau, AK 99811-1182 POSITION STATEMENT: Presented SB 105 Senator Robin Taylor Alaska State Capitol Juneau, AK 99811-1182 POSITION STATEMENT: Presented SB 105 Senator Lyda Green Alaska State Capitol Juneau, AK 99811-1182 POSITION STATEMENT: Commented on SB 105 Mr. Eddy Jeans, Manager School Finance Section Department of Education 801 W. 10th St. Ste. 200 Juneau, AK 99801-1894 ACTION NARRATIVE TAPE 99-16, SIDE A Number 001 SB 105-PUBLIC SCHOOL FUNDING CHAIRMAN MILLER called the Senate Health, Education and Social Services (HESS) Committee to order at 1:38 p.m. and brought up SB 105. MR. JOHN KIMMEL, Staff Aide to Senator Taylor, presented the sponsor statement on SB 105 which has been introduced to address inequities that occurred in the passage of the 1998 education foundation formula. He said the Petersburg School District had an enrollment of 752 students last October when student counts were done to determine funding levels. Today, Petersburg estimates an enrollment of 747 students which, under the current formula, would lose Petersburg $200,000 in funding because its ADM has fallen below the present 750 ADM benchmark. Lowering the ADM to 450 would also provide equity for other school districts that saw a 40-year pattern of funding 3 school units change to where only 2 school units were funded. Wrangell and Petersburg each have three separate school buildings. Section 2 of the bill deals with inequities under current statute requiring enrollment levels of at least 200 students for alternative, correspondence and charter schools to be counted as a separate school, even though the school may have the full complement of services. Currently most correspondence schools receive only 80% of the funding allocated to other separate schools. Number 072 SENATOR ROBIN TAYLOR, on line from Anchorage, explained the changes in the proposed CS. It eliminates provision (B) in Section 1 in the original draft. Senator Taylor worked with the drafter to ensure the change occurred in the formula, which is accomplished by leaving in the initial number shift from 750 to 450. By including the additional definitive language in the original bill, it inadvertently picked up three more school districts, Kuspuk, Haines and Metlakatla who didn't object to the old formula, and had additional funds flow to them out of SB 36, which would have been increased by adding this language. In addition, there was a technical change in Section 2 on page 2 lines 14-15. It changes the definition of a correspondence school and adds the words "counted as a separate school if". This change was made to provide some additional savings within this formula. SENATOR TAYLOR admitted discomfort in presenting Section 2 to the committee because it would primarily address concerns that occurred in SB 36 in the Mat-Su and Kenai districts affected by the 80% funding levels given to alternative and charter schools. These districts also expressed concerns about the correspondence schools. Unfortunately the fiscal note reflects a shift within the formula or a net add-on to the formula of about $16 million. He was concerned that the language contained in Section 2, because of the broad sweep in raising correspondence schools from 80% to 100%, conveys an additional $2.9 million in the fiscal note to the Galena School District which has an aggressive correspondence program statewide. Some of the students lost on student counts to the Petersburg School District were lost to the Galena School District on their correspondence program. Each of those were unintended consequences of the old formula, and probably not appropriately addressed in the new formula. SENATOR TAYLOR said these matters more directly impact Senator Green's and Senator Torgerson's district, and he deferred to them to present their concerns about Section 2 of the bill. Number 146 SENATOR LYDA GREEN agreed that there were unintended consequences, particularly with the Mat-Su charter school, alternative school and correspondence school. The correspondence school tops 700, and the charter schools total about 250-300 students, with their enrollment growing. She said it caused angst last year when the funding was not at 100% as it had been for years. The correspondence school is a well-run, fully staffed and implemented building, with oversight and two dozen teachers who work with the kids. She asked the committee to consider how to assist the negatively impacted districts. SENATOR ELTON recalled that in the debate last year Alyeska Central School was getting 60% while other correspondence schools were getting 100% and the data suggested the right amount was somewhere in between the two. He pointed out that correspondence schools are somewhat different and lack sports facilities and libraries. He asked Senator Green what has changed in the data over the past year. SENATOR GREEN replied she would not compare the correspondence school in Mat-Su to Alyeska. Mat-Su is hands-on and Alyeska is mostly by mail. Mat-Su has a large number of students. SENATOR ELTON asked if Mat-Su provides a gymnasium, track and field facilities, music rooms, or libraries. SENATOR GREEN answered it does not. SENATOR WILKEN recalled that 80% was the best number at the time. Galena was at 65% and others were at 100%, so 80% became a negotiated number last year to move the bill on. The Fairbanks School District took more than a $300,000 hit as a result, and he suggested that if this is going to be fixed, it should be fixed for everybody. He asked if the language is too broad in Section 2, lines 6-7, where it includes correspondence school or charter school or alternative school. A correspondence school differs from a charter school, which could have a gym and everything a school has, but with a different focus. He offered for the committee's consideration, addressing correspondence schools in one section of the bill and charter schools in another. Number 218 SENATOR GREEN explained that the charter and alternative schools in her district have more of the facilities in common with a traditional school. Her district correspondence school was very negatively impacted by the reduction. She suggested that the name "correspondence school" may be inaccurate because there are so many students enrolled who are not attending the high schools or the elementary schools. It has been a great back up for those people who need curriculum assistance, testing and a more traditional education than home- schooling provides. SENATOR WILKEN asked Senator Taylor where the number 450 came from. SENATOR TAYLOR explained it was primarily selected to make certain the problem would not recur again in the near future if enrollments decline further. Wrangell and Petersburg were the only two schools omitted by the shift in the formula. He has worked with Mr. Jeans on it, and it would not have a statewide impact. Number 266 SENATOR TAYLOR followed up on Senator Wilken's recommendation for Section 2, noting the large fiscal impact, the unintended shifting of a tremendous amount of money to Galena, and the unique characteristics of the correspondence program in the Mat-Su. He suggested a tighter definition for Mat-Su, and removing "correspondence school" from that paragraph to direct the funding 100% back to the charter and alternative schools. A sub-definition of "correspondence school" could be drafted. SENATOR TAYLOR said this might accomplish the purpose of cleanup without having a statewide impact that would drive the numbers out of sight. He deferred to Senator Wilken who has spent a lot more time on it than himself. CHAIRMAN MILLER invited the department to participate in the discussion. MR. EDDY JEANS, Manager of School Finance for the Department of Education, stated he would answer questions. CHAIRMAN MILLER noted the fiscal note of $17 million is mostly contained in Section 2 of the bill. He asked for a breakdown of how much would go to correspondence schools, and how much to charter schools because of the different definitions of schools. MR. JEANS replied he did not break it down between the correspondence and alternative schools. Section 2 "grandfathers in" every charter, alternative and correspondence school in the state serving more than 10 students to go through the school size adjustment table. He found a couple correspondence programs were not serving 10 students, and therefore would still fall under the existing provisions. MR. JEANS explained there was a lot of discussion last year about "in-district correspondence" and "out of district correspondence." Under the old foundation formula, correspondence children were rolled into the largest school in the district and received the size and area cost differential adjustments associated with a school. SB 36 recognized that there are two separate costs to provide educational services: those directly related to a child attending a school facility on a daily basis with fixed costs; and a program providing educational services either through the mail, electronically, or over the Internet. He said the latter costs don't deserve the adjustment for school size as well as cost factor. SB 36 clearly developed two pots of money - one to cover the cost of a facility and housing children on a daily basis, and another for other educational services. MR. JEANS said "that's how I believe we arrived at the 80%." All correspondence programs would be funded the same whether state-operated or district-operated. MR. JEANS continued, the department is concerned that language "grandfathering in" alternative schools and charter schools would promote small, inefficient schools, and encourage the districts to create more small schools. This will be an issue in the larger school districts. The threshold for efficiency was set at 200 for those schools, which the Legislature can amend, but the department understood that 200 was set to promote efficiency. CHAIRMAN MILLER asked if only Section 1 was retained, what kind of fiscal note it would carry. MR. JEANS said, based on the amended language, Section 1 would be almost $765,000. SENATOR ELTON asked for explanation of the next two pages of the spread sheet. The impact of Section 2 is $20.7 million, but on the next page the combined impacts of Sections 1 and 2 drops to $17.1 million. MR. JEANS answered the exhibit is on page 2; in Section 2 the piece missing is the change in the funding floor. Because these districts are receiving an increase in basic need, their funding floor is going to be decreased. SENATOR ELTON added up the numbers on page 2 of the spreadsheet with the impact of Section 2. He said it reveals about one half of the money would go to the urban districts, and about 3/4 of it would go to the urban districts and Galena. Galena really stands out, and he asked, do they need another $5 million? Is the department comfortable with the number of correspondence students and the student/teacher ratio? MR. JEANS replied the Galena issue is a concern and the reason 80% was considered a sufficient allocation in the debate last year. Under the old law prior to enactment of SB 36, Galena was entitled to the school size adjustment, and last year the department negotiated with them and did not pay them for their area cost differential. SENATOR ELTON asked Mr. Jeans how the department feels about Section 1, and the fix for the Petersburg and Wrangell problem. MR. JEANS answered "The department will have a problem with this bill any way it goes." DOE is in the first year of implementing the new formula, and in the department's opinion "it's premature to try to isolate little pieces someone believes are out of whack." In fact, SB 36 required the department to prepare a number of reports for the Legislature that are due in 2001. One analysis will compare funding communities versus the new school table. Number 385 SENATOR WILKEN asked regarding Section 1 if Petersburg and Wrangell are both single-site school districts. MR. JEANS said that is correct. He asked if they both meet the 60% instruction requirement. MR. JEANS said he couldn't answer that, but he would be happy to find out. CHAIRMAN MILLER stated his intent to adopt the CS, hold it and do further work on the definitions. He stated "the $17 million fiscal note certainly shocks me and it will certainly shock the Finance Committee." He suggested reducing it. SENATOR WILKEN moved CSSB 105(HES) Version M Ford 3/26 be adopted in lieu of the original bill. Without objection, it was so ordered. CHAIRMAN MILLER announced his intent to take up SB 105 next Wednesday, April 7 after working out some of the concerns. The Board of Regents confirmations would come before the committee later on, and he asked the committee to review the confirmation packet and determine if there are other individuals they would like to appear before the committee, either in person or by teleconference. On April 7, the committee would take up SB 71 and SB 97, and the following week Senator Ellis's bill and several minority bills would be heard. The meeting adjourned at 2:05 p.m.