Legislature(2003 - 2004)

05/07/2003 09:01 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     SENATE BILL NO. 202                                                                                                        
     "An Act relating to school transportation; relating to the                                                                 
     base student allocation used in the formula for state funding                                                              
     of public education; and providing for an effective date."                                                                 
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair Wilken  stated that the Senate  Finance Committee  sponsors                                                            
this legislation.  He shared that this legislation  would change the                                                            
methodology  of  the  grant  program  that  the State  has  used  to                                                            
reimburse  K-12 public education  school districts  for local  pupil                                                            
transportation expenses.  In addition, he stated that the bill would                                                            
increase  the per  student  base allocation  funding  to $4,169,  an                                                            
increase  of $159  per student,  by absorbing  Learning Opportunity                                                             
Grants  that   total  $2.2  million   into  the  student   education                                                            
foundation  formula. Co-chair  Wilken suggested  that the  Committee                                                            
address these two bill components separately.                                                                                   
JOHN ALCANTRA,  Government  Relations Director,  National  Education                                                            
Association  of Alaska (NEA-Alaska)  stated that the State's  12,700                                                            
public school  employees who belong  to NEA-Alaska realize  that the                                                            
Committee's recently adopted  operating budget bill is contingent on                                                            
the two issues  addressed in this  bill. He voiced appreciation  for                                                            
the Committee's  efforts  toward increasing  the  level of the  base                                                            
student allocation  funding which  he declared would provide  school                                                            
districts  "stability of  funding and  help them  reach some  of the                                                            
requirements of the State (Education) Standards."                                                                               
Mr. Alcantra voiced appreciation  for the $159 per student increase,                                                            
but announced  that NEA-Alaska's "ultimate" base student  allocation                                                            
goal  is $4,280  per  student.  He communicated  that  according  to                                                            
nationally recognized  business research [not provided],  the $4,280                                                            
funding level would assist  school districts in addressing projected                                                            
"one-year  inflationary  costs and just  one year  of unmet  needs."                                                            
Continuing, he informed  the Committee that this research recommends                                                            
a five-year phased in increase  of $365 per student, plus additional                                                            
funds to address  the inflationary  erosion of funding. However,  he                                                            
stated, that  in recognition of the  State's fiscal situation,  NEA-                                                            
Alaska is  limiting their  funding request  to the one-year  funding                                                            
request of  $4,280 per student.  He stated  that this request  would                                                            
cost the State  an additional $23 million in FY 04  and would assist                                                            
in accomplishing the State's  constitutionally mandated provision to                                                            
provide quality public education.                                                                                               
Mr. Alcantra  reminded Committee members  that the FY 03  budget was                                                            
based on a  specific crude oil barrel  price along with a  specified                                                            
draw on the  Constitutional Budget  Reserve (CBR). He attested  that                                                            
because the average  price per barrel for the initial  ten months of                                                            
the fiscal year exceeded  the specified price, the amount drawn from                                                            
the CBR account  was reduced. Therefore,  he suggested that  some of                                                            
those CBR savings could  be used to support the proposed $23 million                                                            
FY 04 funding  increase that would  be needed to adequately  support                                                            
student education funding.                                                                                                      
[NOTE: At  this point,  a brief and indiscernible  dialogue  between                                                            
Senator Bunde and the testifier transpired.]                                                                                    
Senator Bunde  asked whether  a "guarantee  of results" such  as the                                                            
majority  of high school  students passing  the State's High  School                                                            
Graduation  Qualifying Examination  (HSGQE), could be provided  were                                                            
this funding request approved.                                                                                                  
Mr.  Alcantra  remarked that  education  standard  requirements  are                                                            
important. He stated that  no guarantees could be provided to ensure                                                            
that all students,  including those  identified by measures  such as                                                            
the federal  No Child Left  Behind Act, would  pass the high  school                                                            
exit exam; however, he  avowed that an appropriate education funding                                                            
level would assist districts  in providing the most important aspect                                                            
of  an  education  which  is providing   quality  teachers,  quality                                                            
support professionals and other necessary resources.                                                                            
Co-Chair Wilken  mentioned that Senator  Bunde was one of  the prime                                                            
sponsors of the HSGQE legislation.                                                                                              
BRUCE  JOHNSON, Representative,  the  Alaska Association  of  School                                                            
Boards,  thanked  the  Committee  for  consolidating   the  Learning                                                            
Opportunity  Grants into  the total  funding allocated  to the  base                                                            
student  allocation  formula  as it  would  assist  school  district                                                            
funding. He testified that  while the issue of flat funding remains,                                                            
it could be addressed at another time.                                                                                          
Senator  Hoffman voiced  concern regarding  "the  eroding floor"  of                                                            
unmet funding  needs, as referenced in the "Change  to Floor" column                                                            
in the  Department's  fiscal note  #1 analysis.  He noted that  were                                                            
this legislation  adopted,  $1.4 million would  be allocated  toward                                                            
that eroding floor; however,  he asked the Department to provide the                                                            
Committee  with the remaining  "unmet" funding  need level  for each                                                            
school district.                                                                                                                
Co-chair Wilken  stated that the Department  of Education  and Early                                                            
Development  would  address  Senator Hoffman's  concern  during  its                                                            
forthcoming testimony.                                                                                                          
MARY   FRANCIS,   Representative,   Alaska   School  Administrators                                                             
Association, testified  that the administrators "add  their voice to                                                            
those who support  the increase in  the base student allocation"  as                                                            
it assists in addressing  the funding "erosion" that has been taking                                                            
place.  She avowed that,  "this is  a more  protected mechanism  for                                                            
raising the student allocation."                                                                                                
Co-Chair Wilken  stated that this concludes the testimony  regarding                                                            
the  base  student   allocation  funding.  He  specified   that  the                                                            
transportation component of the bill would now be addressed.                                                                    
EDDY JEANS,  School  Finance Manager,  Department  of Education  and                                                            
Early Development,  responded to Senator  Hoffman's "eroding  floor"                                                            
question  by   stating  that  the   Department  would  develop   and                                                            
distribute to  Members a schedule that would reflect  "the remaining                                                            
balance of  the supplemental funding  floor" were this bill  to take                                                            
effect.   He  estimated   that,  were  this   legislation   adopted,                                                            
approximately  $1.5 million could be allocated toward  the remaining                                                            
supplemental  funding floor balance  of approximately $9.5  million.                                                            
Co-Chair  Wilken read  from a  school transportation  cost  schedule                                                            
[not provided]  that denoted  the increase  in pupil transportation                                                             
expenses from  FY 97 to FY 03. He  stated that transportation  costs                                                            
in FY 97 amounted  to $32.8 million in general funds  and a total of                                                            
$53.9  million  in general  funds  in FY  03.  He stated  that  this                                                            
equates  to an  eleven-percent  increase per  year.  He stated  that                                                            
numerous options, such  as awarding contracts, are being proposed to                                                            
address this expense.                                                                                                           
Mr. Jeans explained  that currently  the State reimburses  districts                                                            
for  transportation  expenses  according   to specified   percentage                                                            
levels  that are  determined  by such things  as  whether the  route                                                            
meets  the minimum  distance  from  a school  or meets  the  minimum                                                            
number  of students  per route  requirements.  He  pointed out  that                                                            
exceptions  are  currently  in  place  to  allow  reimbursement  for                                                            
situations wherein a local  school board might authorize a bus route                                                            
in an area that  does not meet the minimum distance  requirement but                                                            
is deemed to have hazardous conditions.                                                                                         
Mr.  Jeans stated  that,  in  an effort  to  contain transportation                                                             
expenses,  this proposal  would  provide a  grant  to each  district                                                            
based on  the total amount  of the district's  FY 03 transportation                                                             
expenses divided  by the number of  students enrolled that  year. He                                                            
continued that the resulting  number would be identified as the base                                                            
per student  dollar. This  base dollar amount,  he continued,  would                                                            
then be  multiplied by  the current year's  enrollment to  determine                                                            
the grant total,  specific to that district. He mentioned  that were                                                            
the district  to lower  its transportation  costs by, for  instance,                                                            
consolidating  routes, the  resulting savings  could be used  by the                                                            
district for other purposes.                                                                                                    
Mr.  Jeans  pointed  out  that,  even  though   the  Department  has                                                            
encouraged  districts  to seek  transportation  efficiencies,  costs                                                            
have  continued   to  increase.  He   noted  that  in  addition   to                                                            
reimbursing  districts   for  their  transportation   expenses,  the                                                            
current  program  includes  a provision  that  provides  a  built-in                                                            
inflation factor allowance.                                                                                                     
Mr. Jeans attested,  that, in his  experience, these transportation                                                             
contracts  have  not provided  savings  because  "there  was  little                                                            
incentive"  to the school  district  to negotiate  the price  of the                                                            
contract  with the  transportation  provider.  He stated  that  this                                                            
grant program  would provide the district with "the  flexibility" to                                                            
negotiate with the provider.                                                                                                    
Co-Chair  Wilken  referred   the Committee   to  the  Department  of                                                            
Education  and Early Development  fiscal note  #2 which denotes  the                                                            
impact of the grant program on each school district.                                                                            
Co-chair  Wilken asked  Mr. Jeans  to explain  the  "$1,200 cap  per                                                            
student" as noted in the fiscal note #2 spreadsheet.                                                                            
Mr.  Jeans  responded  that  the  Department  is  making  a  "policy                                                            
statement"  by specifying  $1,200  as the  maximum  limit the  State                                                            
would pay per  student for transportation expenses.  He communicated                                                            
that five districts currently  exceed this limit: the Alaska Gateway                                                            
District  with  a  rate of  $1,464  per  student;  the  Bristol  Bay                                                            
District  with a rate of  $1,322; the Copper  River District  with a                                                            
rate of  $1,300; the Delta/Greely  District  with a rate of  $1,351;                                                            
and the Southeast Island  District with a rate of $1,234. He pointed                                                            
out that private  entities are under contract in these  districts to                                                            
provide   student  transportation.   He  commented   that,   "it  is                                                            
conceivable"  that districts  could reduce  transportation costs  by                                                            
conducting that service "in-house."                                                                                             
Mr. Jeans allowed  that costs would  be more difficult to  negotiate                                                            
in areas where there is a single bidder or limited competition.                                                                 
Senator  Taylor   summarized  that  this  legislation   would  allow                                                            
individual school  districts to receive transportation  funding, but                                                            
at a level based upon their FY 03 funding.                                                                                      
Mr. Jeans affirmed  that the determination would be  based on the FY                                                            
03  per student  transportation  funding  amount  as it  relates  to                                                            
current student  enrollment. He voiced that were student  enrollment                                                            
to lower or increase, the amount allocated would follow suit.                                                                   
Co-Chair  Wilken opined  that this  methodology,  if adopted,  would                                                            
continue until such time as the Legislature changes it.                                                                         
Mr. Jeans concurred.  He forecast  that the Legislature might  alter                                                            
the amount as a result  of school district lobbying for a percentage                                                            
increase that would be allocated across the board.                                                                              
Senator  Taylor asked  whether  this legislation  could  "lock in  a                                                            
number" on a statewide basis.                                                                                                   
Mr. Jeans  stated that  rather than designating  a specific  amount,                                                            
the grant level  would fluctuate according  to a district's  student                                                            
enrollment each  year. He stated that this proposal  is projected to                                                            
cost the State $54 million in FY 04.                                                                                            
Senator Taylor  surmised that were the number of students  to remain                                                            
the same, the grant total would remain constant.                                                                                
Mr. Jeans concurred.                                                                                                            
Senator Taylor  argued, therefore,  that this proposal would  reward                                                            
districts  with  increasing  enrollment   and  "punish"  those  with                                                            
lowering enrollment.                                                                                                            
Mr.  Jeans  countered that  the  current  reimbursement  program  is                                                            
viewed by school districts  as a punishment "because their contracts                                                            
have inflationary adjustments  built into them." He stated that this                                                            
"vested interest" proposal  would provide districts with the ability                                                            
to negotiate contracts  and to revisit their current  transportation                                                            
system in order to reduce  costs or generate savings. These savings,                                                            
he attested, could then  be used for other purposes in the district.                                                            
Mr.  Jeans  expressed  that,  under the  current  system,  were  the                                                            
Municipality  of Anchorage  to lower its  transportation costs,  the                                                            
savings generated  at the State level  would then be distributed  to                                                            
other areas of the State  as opposed to being allocated toward other                                                            
Anchorage expenses.  He stated that  were this legislation  adopted,                                                            
in this  scenario, Anchorage  would retain  those savings and  could                                                            
use them as determined by the district.                                                                                         
SFC 03 # 80, Side A 10:37 AM                                                                                                    
Senator Taylor  agreed that  this would be  beneficial to  districts                                                            
that  have  this  ability;  however,  he  expressed  that  districts                                                            
experiencing  a declining  enrollment would  suffer. He argued  that                                                            
the proposal does not address  the fact the districts with declining                                                            
enrollment would  still be required "to pick up students  at the end                                                            
of the  road." Districts  with  declining enrollment,  he  attested,                                                            
would  receive   "a  double   hit"  as  they   would  receive   less                                                            
transportation   money  and  less   money  from  the  base   student                                                            
allocation  factor. He stated  that this  proposal should include  a                                                            
hold harmless clause for districts with decreasing enrollment.                                                                  
Senator Hoffman acknowledged  Senator Taylor's concern regarding the                                                            
expenses  and  requirements  that  face  districts   with  declining                                                            
enrollment.  Furthermore, he  voiced concern  that this legislation                                                             
would punish  rather than reward those  districts that have  already                                                            
lowered  their transportation  expenses,  by receiving  a lower  per                                                            
student amount  than awarded  to those districts  that have  exerted                                                            
little effort  toward addressing the  issue. He commented  that this                                                            
raises a question of fairness.                                                                                                  
Mr. Jeans verified  that the proposal  is based on current  district                                                            
expenditures.  He  acknowledged  that  some  districts  with  single                                                            
transportation  bidders have  experienced  substantial increases  in                                                            
expenses  as opposed to  districts with  competitive situations.  He                                                            
continued  that,   by  providing  their  own  transportation,   some                                                            
districts might experience "cheaper transportation."                                                                            
Mr. Jeans remarked  that the Administration's  position is  that the                                                            
current reimbursable  system does not promote cost  containment, and                                                            
he commented that this  proposal would allow local districts to make                                                            
independent  decisions  regarding  transportation.  Furthermore,  he                                                            
stated  that current  regulations  allow  districts  to charge  user                                                            
fees,  but he remarked  that because  districts  are reimbursed  for                                                            
their expenses,  this option  is not utilized.  He stated that  this                                                            
option would continue to be available under the new system.                                                                     
Senator Hoffman  reiterated that districts  whose expenses  approach                                                            
the $1,200  per student limit could  realize "substantial  savings;"                                                            
however, he contested that  the districts "that are well below" that                                                            
limit would not have similar  options. He suggested that a flat rate                                                            
per student be  provided to all districts as he attested  this might                                                            
address the inherent problem with this proposal.                                                                                
STEVE KALMES, Director  of Transportation, Anchorage School District                                                            
testified via  teleconference from Anchorage to voice  that contrary                                                            
to the  Department's testimony,  he does  not contribute the  rising                                                            
costs  of  student  transportation  to  the  current  reimbursement                                                             
program, as he  contended, such things as the cost  of buses, wages,                                                            
driver training,  fuel, and insurance drive expenses.  He noted that                                                            
adherence  to the Department  of Education  and Early Development's                                                             
mandate  that transportation  must  be  provided for  special  needs                                                            
students incurs enormous expense to the District.                                                                               
Mr. Kalmes disclosed  that, in order to contain costs,  the District                                                            
has actively  sought  bidders and,  with five  bidders, "the  prices                                                            
were what  they were." He  communicated that  one of the  District's                                                            
largest concerns  regarding  this grant proposal  is how to  address                                                            
the high cost  of transporting special needs students.  He disclosed                                                            
that the costs  associated with transporting special  needs students                                                            
amount  to  approximately   42  percent  of  the  District's   total                                                            
transportation  expenses  and  equates  to  ten times  the  cost  of                                                            
transporting  a regular program  child. He  exampled that "the  most                                                            
expensive route in the  district" is the one that transports special                                                            
needs students  from the  Mat-Su valley to  the Alaska State  School                                                            
for  the Deaf  that  the District  operates  for the  Department  of                                                            
Education and Early Development.                                                                                                
Mr.  Kalmes understood  that  the  grant  amount would  increase  as                                                            
enrollment climbed;  however, he voiced surprise that  funding would                                                            
decrease were  the opposite to occur.  He stated that as  enrollment                                                            
increases,  those  students  are absorbed  within  an  existing  bus                                                            
route. However,  he contended that were the number  of students on a                                                            
particular route  to decline, that route would still  be required to                                                            
operate. He suggested that,  were the grant program implemented, the                                                            
FY 03 base level  be used as the level that funding  not drop below.                                                            
Co-Chair Green communicated  that she had served on a committee that                                                            
addressed the needs of  special education programs in the State. She                                                            
noted that  the Anchorage  School District  met with that  committee                                                            
regarding the  numerous education  programs the District  conducted.                                                            
She identified  that  many of those  programs  were optional  rather                                                            
than mandatory  programs. Therefore, she asked whether  the District                                                            
was mandated to operate the Alaska School for the Deaf (ASD).                                                                   
Mr. Kalmes  responded that the District  is under contract  with the                                                            
Department  of Education and Early  Development to operate  the ASD.                                                            
He could not  verify whether the program  was mandated or  optional.                                                            
Co-Chair Green identified  ASD as being an optional program, and she                                                            
asserted  that  the costs  associated  with  running  that  program,                                                            
including  transportation costs,  are included  in the base  student                                                            
allocation  calculation.   She  stated  that  the  District   should                                                            
identify which  programs are conducted  on an optional, contractual                                                             
basis verses those that are mandated.                                                                                           
Senator Olson asked whether  the special needs bus transportation is                                                            
provided by the District.                                                                                                       
Mr.  Kalmes responded  that  the transportation  is  comprised of  a                                                            
combination of District and contracted routes.                                                                                  
BARBARA  SCHUHMANN,   Parent,  testified  via  teleconference   from                                                            
Fairbanks  to suggest  that the  Department of  Education and  Early                                                            
Development  leave the  current program  in place.  She opined  that                                                            
other cost containment  options such as a route analyses, exist. She                                                            
continued that  this legislation contains  assumptions such  as that                                                            
the same percentage  of students rides  buses in every district  and                                                            
that  all costs  are  equal in  all districts.  She  specified  that                                                            
parents  rely on  school bus  service,  and she  expressed that  the                                                            
service  should be  viewed  as a transportation   and public  safety                                                            
service rather  than being  viewed as an  education system  service.                                                            
She stressed  that the risks involved  in reducing routes  should be                                                            
Senator  Bunde  asked whether  school  districts,  particularly  the                                                            
Anchorage  School District,  have considered  charging user  fees to                                                            
assist in offsetting the cost of school transportation.                                                                         
Mr.  Kalmes  responded  that  an  Anchorage   citizen  review  panel                                                            
recently  asked the Department  of Education  and Early Development                                                             
how  a user  fee  program would  affect  the  current reimbursement                                                             
system.  He  commented  that  the  current  policy  tends  to  be  a                                                            
disincentive  to this  approach  because the  Department  determined                                                            
that the reimbursement  amount would  be lowered by the same  amount                                                            
collected from the user fees.                                                                                                   
Mr.  Jeans verified  that  other  districts  have not  pursued  this                                                            
option for that very reason.                                                                                                    
Senator Bunde asked whether  this option would be possible under the                                                            
grant program system being proposed.                                                                                            
Mr. Jeans responded  that a rider fee could be collected  without an                                                            
impact on the proposed grant system.                                                                                            
Senator Taylor  countered that there is no language  in the proposed                                                            
grant  system  that would  require  a transportation   system to  be                                                            
operated;  therefore, he  declared that a  District could  eliminate                                                            
transportation and keep the money.                                                                                              
Co-Chair Wilken  stated that this  scenario would be a local  issue.                                                            
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
RECESS 10:56 AM / 5:38 PM                                                                                                       

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