Legislature(2003 - 2004)

03/04/2004 09:02 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     SPONSOR SUBSTITUTE FOR SENATE BILL NO. 1                                                                                   
     "An Act 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 this bill  "increases the student  dollar in                                                            
our  base  student   allocation  in  our  foundation   formula."  He                                                            
remarked,  "all of us  have heard  the school  bell; it's rung"  and                                                            
that that this  legislation is the  start of addressing the  need of                                                            
adequate funding for education.                                                                                                 
AMENDMENT #1:  This amendment increases the base student  allocation                                                            
from the existing $4,169  currently provided in AS.14.17.470 and the                                                            
$4,263 amount proposed in the bill, to $4,576.                                                                                  
Co-Chair Green  moved for adoption  and commented that although  she                                                            
supports this  legislation, this amendment would be  an improvement.                                                            
AT EASE 9:05 AM / 9:06 AM                                                                                                       
Co-Chair Wilken objected for an explanation.                                                                                    
Co-Chair Green noted this  amendment would increase the base student                                                            
allocation, and  result in an approximately $82 million  increase to                                                            
the foundation  funding formula  distributed  across the state  over                                                            
the FY 04 budget year.                                                                                                          
Senator  Bunde  asked the  increase  per  student over  the  current                                                            
funding amount.                                                                                                                 
Co-Chair Green replied $407.                                                                                                    
Senator Bunde asked the reason for this amount of increase.                                                                     
Co-Chair  Green relayed  concerns  expressed regarding  funding  for                                                            
each school district,  along with the unanticipated  increased costs                                                            
of the Public  Employees Retirement  System (PERS) and the  Teachers                                                            
Retirement  System (TRS) and increased  insurance expenses  of up to                                                            
ten  percent, which  the school  districts  could  not control.  She                                                            
shared that she  has received comments from some districts  that she                                                            
has never before heard  from, that despite efforts to control costs,                                                            
increased  funding for these  expenses are  necessary. She  informed                                                            
that this funding  increase would allow districts  to budget for the                                                            
next two years.                                                                                                                 
Senator Bunde  remarked that  his was "well  aware" of the  PERS/TRS                                                            
"problem" but  expected it should  be funded separately rather  than                                                            
"lock it in" to the base  student allocation. He supported utilizing                                                            
the earnings  reserve fund  for these expenses.  He also noted  that                                                            
although  this increase would  eliminate the  budget deficit  of the                                                            
Anchorage  School District,  it would  also increase  the  allowable                                                            
local  contribution.   He  characterized  this  proposal   as  "good                                                            
news/bad news."                                                                                                                 
Co-Chair Green hoped that  most of the districts that have requested                                                            
the  legislature  solve the  funding  problem understand  that  this                                                            
proposed increase would  increase the local funding limits and allow                                                            
districts to  increase local contributions.  She remarked  that this                                                            
would  allow  community  members  to  "participate"  in  the  fiscal                                                            
situation  of their  school districts.  She also  expressed that  no                                                            
funding increases  would be requested the following  year, given the                                                            
total  increase   of  the  foundation  funding  formula   and  funds                                                            
generated  locally. She predicted  this increase  would address  the                                                            
PERS/TRS  situation for one  to two years,  although she  understood                                                            
that  a multiple  year solution  of five  to twenty  years would  be                                                            
required.  She remarked that  this increase  should convey  that the                                                            
legislature  is accepting responsibility  and that local  government                                                            
taxpayers and citizens should also accept responsibility.                                                                       
Senator  Bunde  pointed out  that  24 districts  would  not  provide                                                            
increased  local contributions  because they  make no contributions                                                             
Co-Chair  Wilken  commented   that  some  school  districts  do  not                                                            
contribute  to  the  education  expenses   in  their  community  and                                                            
therefore  those   districts  would  not  receive  increased   local                                                            
Senator  Hoffman  asked  if  the  intention  is  that  the  PERS/TRS                                                            
expenses  would be  addressed  within  the base  student  allocation                                                            
funding, and whether  this funding would be sufficient  according to                                                            
school districts'  estimates. He understood from meetings  with some                                                            
school   district  representatives   that   this  funding  plus   an                                                            
additional one-time allocation is necessary.                                                                                    
Co-Chair  Green   shared  that  the  funds  indicated   by  district                                                            
representatives  as necessary for  the PERS/TRS and other  increases                                                            
would be  provided for in  the amendment.  She predicted that  these                                                            
funds would be adequate  for most of the larger school districts but                                                            
qualified  that some  smaller districts  could have  an anomaly  and                                                            
require a different  solution. She stated that this  amendment would                                                            
provide  funding necessary  for the  PERS/TRS  increased expense  in                                                            
those districts she addressed.                                                                                                  
Senator  Hoffman   pointed  out  this  funding  increase   would  be                                                            
statutory and  does not address the  operating budget. He  asked how                                                            
this proposal  compares to Governor  Murkowski's budget request  and                                                            
his plans, noting  that the Governor has announced  he would support                                                            
a draw from the CBR of  no more than $400 million for FY 05 and that                                                            
the  legislature  must  generate   an additional   $200  million  in                                                            
revenue,  while  this  amendment   would  increase  the  budget  $82                                                            
million.  Senator Hoffman  asked  if the  intent would  be that  the                                                            
legislature would  increase the amount of revenue  generated to $282                                                            
million,  or  reduce   other  appropriations  to  accommodate   this                                                            
increase. He recalled  the Governor's comments to  the Conference of                                                            
Alaskans emphasizing his  adamancy about dramatic budget reductions.                                                            
Senator Hoffman  asked Co-Chair Green  if the intent is to  meet the                                                            
Governor's  expectation of  withdrawing no  more than $400  from the                                                            
Co-Chair  Green  replied  that  this amendment  this  is  the  first                                                            
portion  of  the  budget  process  and  represents  an  $88  million                                                            
increase  for education.  She anticipated  that  the Governor  would                                                            
support  this funding increase  because he  supports education;  she                                                            
anticipated "great cooperation".                                                                                                
Senator Hoffman supported  the concept of this amendment; however he                                                            
countered  that  the Governor  also  supports  operating  government                                                            
without withdrawals  from the CBR. He pointed out  that the governor                                                            
has a "red  pen" i.e. authority  to exercise  the line item  veto on                                                            
appropriation   legislation  and  has  the  final   say  unless  the                                                            
legislature overrides the  veto with a three-quarters majority vote.                                                            
Senator  Hoffman remarked  this is  a high standard.  He  emphasized                                                            
that he  supports education  funding but  needed assurance  from Co-                                                            
Chair  Green that  the  governor  would also  support  an  increased                                                            
budget and  not exercise the line  item veto authority to  limit the                                                            
CBR draw to $400 million.                                                                                                       
Co-Chair Green  reiterated this is  the first portion of  the budget                                                            
process  and that  more  would be  known in  the coming  weeks.  She                                                            
informed that she has been in discussions with the Governor.                                                                    
Senator Hoffman asked if  Governor Murkowski exercised the line item                                                            
veto, whether  the legislature  would "take  a stance" and  override                                                            
those vetoes.                                                                                                                   
Senator  Hoffman agreed with  this increased  funding for  education                                                            
and  that  it  should   be  appropriated  before   the  end  of  the                                                            
legislative  session, provided  that the Senate  Minority's  goal to                                                            
spend monies from the CBR as a last option is achieved.                                                                         
Senator  Bunde noted  he has  heard this  amendment  would cost  $82                                                            
million and also $88 million and asked the correct amount.                                                                      
Co-Chair Wilken  stated that the cost  of SB 1, as amended  would be                                                            
$82 million.                                                                                                                    
Co-Chair  Wilken  removed  his  objection   and  the  amendment  was                                                            
Co-Chair Wilken noted those present to testify to this bill.                                                                    
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
AT EASE 9:23 AM / 9:23 AM                                                                                                       

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