Legislature(2009 - 2010)CAPITOL 106

02/26/2010 08:00 AM House EDUCATION

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Heard & Held
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Heard & Held
<Bill Hearing Rescheduled from 02/22/10>
        HB 350-PUBLIC SCHOOL FUNDING: LOCAL CONTRIBUTION                                                                    
9:54:06 AM                                                                                                                    
CHAIR SEATON announced that the  final order of business would be                                                               
HOUSE BILL  NO. 350, "An  Act relating to the  local contribution                                                               
to public school funding; and providing for an effective date."                                                                 
9:54:36 AM                                                                                                                    
MYRL THOMPSON,  Chair, Member, Legislative  Committee, Matanuska-                                                               
Susitna Borough  School Board, directed  attention to  the graphs                                                               
that  he  provided the  committee.    The graphs  illustrate  the                                                               
continued and rapid growth of  enrollment and the upward trend of                                                               
property  tax  assessments.   The  aforementioned  presents  some                                                               
unique  problems for  the  school district.    In the  Matanuska-                                                               
Susitna Borough School District there  are 43 schools and 60-plus                                                               
portables  are   being  used  as  classrooms.     Therefore,  the                                                               
Matanuska-Susitna Borough  School Board opposes  Section 4  of HB
350.  Section  4 would change the structure from  the base, which                                                               
allowed  for  50  percent  forgiveness   on  the  growth  of  the                                                               
assessments  over  the  years.   The  original  base  helped  the                                                               
[district] immensely and losing  the additional funding [provided                                                               
by the original  base] would be difficult for the  district.  Mr.                                                               
Thompson  acknowledged  that  there   are  always  problems  with                                                               
funding,   but  there   are  funding   adjustments  that   assist                                                               
districts.   For instance, small  schools are adjusted  for size,                                                               
which provides  them a  break.   He said that  if there  was more                                                               
time to review  HB 350, perhaps a moving base  could be developed                                                               
as opposed to [basing the funding] on the previous year.                                                                        
9:58:00 AM                                                                                                                    
REPRESENTATIVE P. WILSON inquired as  to the tax structure in the                                                               
Matanuska Susitna Borough.                                                                                                      
MR. THOMPSON  informed the committee  that the  Matanuska Susitna                                                               
Borough is the  size of West Virginia, and  therefore the schools                                                               
are  spread  throughout.   The  [tax  burden]  is placed  on  the                                                               
property taxpayer.   The  borough includes a  lot of  vacant land                                                               
for which  the taxes  have increased.   Furthermore,  the borough                                                               
has many retired  residents as well as elderly  residents who are                                                               
on  a fixed  income.   He  characterized the  area  as a  bedroom                                                               
community without  much industry.   Therefore, it's  difficult to                                                               
raise taxes in the area.                                                                                                        
10:00:08 AM                                                                                                                   
REPRESENTATIVE P.  WILSON surmised  then that the  borough hasn't                                                               
been able to increase its  taxes, and thus the borough's revenues                                                               
have stayed flat.                                                                                                               
MR. THOMPSON  clarified that  he can't say  revenue is  flat, but                                                               
the district  has received an  increase in revenue in  the amount                                                               
of less than  1 percent.  He reiterated that  the district has 60                                                               
portables, which amounts to  eight large-sized elementary schools                                                               
in portables or  two very large-sized high  schools in portables.                                                               
Therefore, if  the district  had more funds  it would  build more                                                               
10:00:56 AM                                                                                                                   
MR. THOMPSON, in  response to Chair Seaton, clarified  that he is                                                               
only concerned with Section 4.                                                                                                  
10:01:42 AM                                                                                                                   
CARL  ROSE,  Executive  Director, Association  of  Alaska  School                                                               
Boards (AASB), opined that HB  350 will impact those districts in                                                               
the  Railbelt considerably.   He  stated that  although he  isn't                                                               
prepared to  take a  supportive position on  HB 350,  he recalled                                                               
serving on the funding task  force when this issue was discussed.                                                               
He then  directed attention to  the last sentence of  the sponsor                                                               
statement, which  says HB  350 sets  a uniform  mill rate  at the                                                               
lowest current  rate so no  district will  have to pay  more than                                                               
its current  local tax mill  rate.   However, it should  refer to                                                               
the municipality rather than the  district not having to pay more                                                               
than its  current local tax  mill rate because districts  are the                                                               
recipients of the local contribution.                                                                                           
10:03:20 AM                                                                                                                   
MR.  ROSE,  referring  to  the  chart of  state  costs  from  the                                                               
Department  of  Education  and Early  Development  (EED)  updated                                                               
10/22/09,  told  the  committee  that he  was  present  when  the                                                               
foundation formula was established and  later amended.  He opined                                                               
that  at that  time, no  one recognized  that the  $3 million  in                                                               
fiscal year (FY) 2000 would triple  in the second year.  Although                                                               
it didn't  compound all the way  through, it was rapid  growth to                                                               
this year's  $77 million.  The  concern, he related on  behalf of                                                               
the task force,  was that this growth seems  to be uncontrollable                                                               
and thus  has to  be addressed  at some point.   Although  HB 350                                                               
attempts  to  address  the growth,  it  inevitably  creates  some                                                               
problems as related by Mr. Thompson.   Upon review of this chart,                                                               
it  appears  that everyone  will  be  held  harmless at  the  $77                                                               
million level  in FY 11.   The  fiscal note illustrates  that the                                                               
state will need  to put up an additional $21  million to mitigate                                                               
the 2.7 mill rate.  The  aforementioned is a positive move if the                                                               
goal  is to  mitigate the  escalating cost  of this  legislation.                                                               
However, most of  the AASB membership can't  calculate the impact                                                               
of HB 350 in  subsequent years.  He opined that  it would be safe                                                               
to say  that freezing  the base  at the $77  million level  on an                                                               
ongoing  basis and  continue to  pay the  $21 [million]  possibly                                                               
into FY 16 is one way  to mitigate the unpredictable costs to the                                                               
state.  Mr. Rose further opined  that by putting this in statute,                                                               
a need  has been  created and  people depend  upon the  funds and                                                               
implementation of the proposal in  HB 350 will certainly elicit a                                                               
human cry from certain areas of the state.                                                                                      
MR.  ROSE  informed  the  committee  that  when  the  [foundation                                                               
formula] legislation was placed in  statute, it included a date -                                                               
the base  year of  1999.   He noted the  different impact  on the                                                               
AASB membership.   While  some of  the small  communities haven't                                                               
grown and thus pay the full portion  under the 4 mill and the 2.7                                                               
mill rate, some  school districts have grown  considerably.  Over                                                               
the  past 10  years, a  need  has been  developed and  it may  be                                                               
difficult to  mitigate that all at  once if the public  policy is                                                               
to arrest  the impacts of  this clause in the  foundation formula                                                               
without disturbing local communities  that are dependent upon it.                                                               
Mr. Rose  suggested that moving  the base  to a prior  year would                                                               
have a  significant impact  on the amount  of money  available to                                                               
municipalities  for   the  local  contribution  in   the  future.                                                               
Although this  isn't a surprise,  it's a  tough policy call.   In                                                               
conclusion, Mr.  Rose opined that  if this issue  isn't addressed                                                               
it  will become  a "runaway  train."   However, if  the issue  is                                                               
going to be  addressed it must be  done in a way  that allows the                                                               
communities to  ramp down to  the level proposed.   He reiterated                                                               
that  AASB doesn't  know what  HB 350  will mean  and there's  no                                                               
knowledge  what the  impact will  be  in the  second, third,  and                                                               
fourth  year  after  the  first  year  when  districts  are  held                                                               
10:10:14 AM                                                                                                                   
REPRESENTATIVE P.  WILSON commented that many  of the communities                                                               
that  have not  grown  have lost  population,  such as  Wrangell.                                                               
Wrangell,  she estimated,  has lost  probably 20  percent of  its                                                               
student population [over the last  10 years] and one-third of its                                                               
teachers.  However, the district  still has to provide the school                                                               
and services.   Although Wrangell  is under  the 4 mill  base, it                                                               
has had  to increase its  mill rate  and sales tax  because there                                                               
aren't  enough funds  to meet  the  4 mills  and other  community                                                               
necessities.   In Wrangell the  mill rate totals 11.5  mills, but                                                               
the sales tax is 7 percent.   The communities that aren't growing                                                               
don't  believe  it's  fair  that   the  growing  communities  are                                                               
receiving breaks while they don't  and continue to provide school                                                               
10:12:25 AM                                                                                                                   
CHAIR SEATON stated that public  testimony would remain open, and                                                               
HB 350 would be held over.                                                                                                      

Document Name Date/Time Subjects
Amendments 12 and 13.pdf HEDC 2/26/2010 8:00:00 AM
HEDC 3/1/2010 8:00:00 AM
HB 297