Legislature(2017 - 2018)SENATE FINANCE 532

04/02/2018 03:00 PM Senate FINANCE

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Audio Topic
03:02:17 PM Start
03:03:29 PM Regulatory Commission of Alaska Appointee Dr. Anthony Scott
03:35:46 PM SB216
04:19:29 PM SB104
04:37:37 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change --
Consideration of Governor's Appointees
+ Regulatory Commission of Alaska: TELECONFERENCED
- Dr. Antony Scott
Scheduled but Not Heard
<Pending Referral>
Heard & Held
Heard & Held
-- Public Testimony Reopened for this Hearing --
-- Public Testimony <Limited to 2 Minutes> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 216                                                                                                           
     "An Act  relating to the  calculation of state  aid for                                                                    
     schools    that    consolidate;   relating    to    the                                                                    
     determination of  the number of schools  in a district;                                                                    
     and providing for an effective date."                                                                                      
3:35:46 PM                                                                                                                    
Senator  Micciche MOVED  to ADOPT  the committee  substitute                                                                    
for SB 216, Work Draft 30-LS1483\N (Laffen 3/30/18).                                                                            
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
SENATOR VON  IMHOF, SPONSOR, explained the  legislation. She                                                                    
stated that the  bill was created when  the Anchorage School                                                                    
District presented to the  Anchorage legislators. She shared                                                                    
that she  was previously  a member  of the  Anchorage School                                                                    
Board. She  stated that there  was a school  capacity study,                                                                    
that found that there was  migration and movement within the                                                                    
Anchorage  elementary schools  that left  some schools  over                                                                    
capacity  and some  schools under  capacity. She  noted that                                                                    
there  was some  halting of  state aid,  so there  were some                                                                    
schools  that delayed  some  renovation and  reconstruction.                                                                    
She  stated  that in  the  last  fall the  Anchorage  School                                                                    
District  had   done  calculations  to   evaluate  different                                                                    
scenarios  of consolidating  older  elementary schools  with                                                                    
excess capacity,  and moving  students to  nearby elementary                                                                    
school with  excess capacity; and the  hypothesis of closing                                                                    
an elementary  school. It  was found that  when there  was a                                                                    
school of  approximately 250 students,  there was  a certain                                                                    
school-size  cost factor  of  the  average daily  membership                                                                    
that was  greater than moving  students to a  larger school.                                                                    
It  was found  that the  revenue  did not  exceed the  costs                                                                    
saved for closing  that school. It was  suggested that there                                                                    
be  an allowance  for an  adjustment  in the  intent of  the                                                                    
3:40:07 PM                                                                                                                    
Co-Chair MacKinnon  requested the  changes in  the committee                                                                    
substitute. Co-Chair MacKinnon deferred to Mr. King.                                                                            
3:40:24 PM                                                                                                                    
JONATHAN KING,  STAFF, SENATOR NATASHA VON  IMHOF, discussed                                                                    
the Explanation of Changes (copy on file):                                                                                      
     Page 3,  line 14 and  Page 5, lines  5, 9, 11,  12: All                                                                    
     references to "state aid"  within subparagraphs (H) and                                                                    
     (I)  are  changed  to read  "basic  need"  to  properly                                                                    
     define  the  section  of  statute  that  this  bill  is                                                                    
     Page  5,  lines  22-24:  Section  (M)  is  reworded  to                                                                    
     clarify  the   information  that   would  need   to  be                                                                    
     submitted  by school  districts  to  the Department  of                                                                    
     Education  to calculate  the consolidation  transition.                                                                    
     Instead of the  more generic "appropriate calculations"                                                                    
    the bill specifies "schools and corresponding ADM."                                                                         
     Page  5: Section  (N), which  defined "community,"  was                                                                    
     deleted. This term is  already appropriately defined in                                                                    
     the   Department   of   Education's   funding   formula                                                                    
Co-Chair MacKinnon WITHDREW the OBJECTION.                                                                                      
3:43:00 PM                                                                                                                    
AT EASE                                                                                                                         
3:43:25 PM                                                                                                                    
Mr.  King  discussed  the   presentation,  "SB  216:  School                                                                    
Consolidation  Transition"  (copy  on file).  He  looked  at                                                                    
slide  2,  "Alaska's  School  Size  Factor  Adjustment."  He                                                                    
stated that  the school size  adjustment was a  component of                                                                    
the  broader school  financing calculation  contained in  AS                                                                    
14.17.410, that adjusted the  average daily membership based                                                                    
upon the size of the school.  He noted that moving from left                                                                    
to right on  the curve showed that the  amount of adjustment                                                                    
declined as  the school  increased in  size. He  stated that                                                                    
every  individual student  counted less  toward funding  the                                                                    
school. He  shared that it incentivized  districts to create                                                                    
smaller  schools  and  made  a   challenge  for  schools  to                                                                    
consolidate schools.                                                                                                            
3:45:00 PM                                                                                                                    
Mr. King  highlighted slide  3, "Effect  of the  School Size                                                                    
Factor  on Consolidation  Example  1."  The distribution  of                                                                    
dots was  the distribution  of schools within  the Anchorage                                                                    
School District. He  noted that the left  hand vertical axis                                                                    
showed the  school size factor, with  was the multiplicative                                                                    
factor  used  in  determining  school  funding.  The  bottom                                                                    
showed the  actual enrollment as  a proxy for  average daily                                                                    
memberships. He  stressed that there was  a downward sloping                                                                    
curve,  which meant  that as  the  school grew  there was  a                                                                    
smaller coefficient that was used in the funding formula.                                                                       
Mr. King addressed slide 4, "What the Bill Does":                                                                               
     Section 1                                                                                                                  
          Section 1 removes a disincentive to school                                                                            
          ? Four-year transition period for consolidating                                                                       
          ? Years 1 and 2 preserve 100 percent pre-                                                                             
          consolidation per student funding.                                                                                    
          ? Year 3 provides standard funding plus 66                                                                            
          percent of pre/post difference.                                                                                       
          ? Year 4 provides standard funding plus 33                                                                            
          percent of pre/post difference.                                                                                       
          ? After Year 4 provide standard funding per AS                                                                        
Senator Micciche  asked for  a restatement  of the  last two                                                                    
bullets. Mr. King replied:                                                                                                      
          ?  Year  4  provides   standard  funding  plus  33                                                                    
          percent of pre/post difference.                                                                                       
          ?  After Year  4 provide  standard funding  per AS                                                                    
3:50:21 PM                                                                                                                    
Mr. King highlighted slide 5, "What the Bill Does Not Do":                                                                      
     Section 1                                                                                                                  
          The Bill does not:                                                                                                    
          ? Change the school size formula (AS 14.17.450);                                                                      
          ?  Change state  aid  calculations (AS  14.17.410)                                                                    
          for any  school or  district that is  not involved                                                                    
          in a consolidation;                                                                                                   
          ?  Encourage districts  to build  new schools  for                                                                    
          the purposes of consolidating existing schools;                                                                       
          ?  Allow  schools   to  reopen  and  reconsolidate                                                                    
          schools in  order to take  inappropriate advantage                                                                    
          of the consolidation transition.                                                                                      
Mr. King discussed slide 6, "What the Bill Does":                                                                               
     Section 2                                                                                                                  
          Section  2   provides  an  incentive   for  single                                                                    
          community  schools to  fully utilize  the capacity                                                                    
         of K-12 school buildings in rural Alaska.                                                                              
          ?  Corrects  a  provision in  AS  14.17.905  where                                                                    
          communities  with  a   single  K-12  schools  lose                                                                    
          funding when their  average daily membership (ADM)                                                                    
          exceeds  425  even  when the  facility's  capacity                                                                    
          exceeds 425.                                                                                                          
          Under  the  current  provision,  schools  in  this                                                                    
          circumstance  are  treated  as 2  facilities  when                                                                    
          their ADM  is 425 and  below, but when  they reach                                                                    
          426 they  are treated at one  facility for funding                                                                    
          purposes.   This  switch   lowers  state   aid  by                                                                    
          hundreds  of   thousands  of  dollars   and  could                                                                    
          increase the  incentive to build  another facility                                                                    
          to recapture lost funding.                                                                                            
3:54:28 PM                                                                                                                    
Co-Chair  MacKinnon queried  information about  slide 9.  He                                                                    
stated  that it  was an  expected savings  using a  previous                                                                    
example he noted that on slide  8 there was an example where                                                                    
a district  with a cost  factor of 1 consolidates  5 schools                                                                    
into 4  schools. The slide  covered the total state  aid and                                                                    
the total  savings attributable  to the  treasury associated                                                                    
with consolidation.  He explained  that slide 9  showed that                                                                    
if there  were five  schools totaling  1,720, the  base year                                                                    
would contribute  $15.07 million in  state aid to  the local                                                                    
school district.  He shared  that consolidating  the schools                                                                    
to  four  schools  would  result  in  state  aid  of  $14.42                                                                    
Co-Chair  MacKinnon  wondered  whether the  model  had  been                                                                    
stress   tested  on   different   sizes   of  schools   with                                                                    
consolidation numbers. Mr. King  replied that slide 3 showed                                                                    
an example  of a stress test  for a larger school.  He noted                                                                    
that the consolidation of two  larger schools would save the                                                                    
state  approximately $1  million. He  noted the  stress test                                                                    
for  the  elementary  school showed  a  savings  of  between                                                                    
400,000  and $600,000  per year  depending  on the  original                                                                    
size  of  the  schools,  and   how  many  schools  would  be                                                                    
distributing those children over.                                                                                               
3:59:00 PM                                                                                                                    
Senator  Stevens wondered  how  the bill  would benefit  the                                                                    
children.  Mr. King  replied that  the finances  matter, but                                                                    
the  primary  purpose  of  the  educational  system  was  to                                                                    
educate  children.  He noted  that  many  of the  elementary                                                                    
schools   had  half-time   or  third-time   special  subject                                                                    
teachers,  who  spent  time shuttling  between  clusters  of                                                                    
schools.  He  felt  that  consolidating  the  schools  would                                                                    
result  in  that teacher  being  in  residence at  a  single                                                                    
Senator  Stevens  wondered  whether the  districts  had  any                                                                    
negative response to the legislation.  Mr. King replied that                                                                    
he  had not  heard any  negative feelings,  but stated  that                                                                    
there may be some in public testimony.                                                                                          
Senator  von  Imhof  added  that it  would  be  a  voluntary                                                                    
Senator Micciche  surmised that there would  be less dollars                                                                    
for infrastructure,  and more dollars in  the classroom. Mr.                                                                    
King agreed.                                                                                                                    
4:03:49 PM                                                                                                                    
JIM  ANDERSON,  CHIEF  FINANCIAL OFFICER,  ANCHORAGE  SCHOOL                                                                    
DISTRICT  (via teleconference),  stated that  he had  worked                                                                    
closely with the  sponsor. He shared that when  there was an                                                                    
initial  examination of  the  declining student  population,                                                                    
there was  a calculation.  He shared  that, currently,  if a                                                                    
school was closed for consolidation  there was a significant                                                                    
number of  students who would need  transportation. He noted                                                                    
that taking students  from one school would  result with the                                                                    
distribution among  many schools. He noted  that there would                                                                    
be a loss of $500,000 dollars for any closed school.                                                                            
Senator Stevens  queried the impact on  the Anchorage School                                                                    
District. Mr.  Anderson replied that  that a  consultant had                                                                    
been hired  to establish  a plan. The  initial brief  to the                                                                    
school board would be more than one school.                                                                                     
Senator Micciche  requested a copy  of that analysis  on the                                                                    
associated  costs with  school  consolidation. Mr.  Anderson                                                                    
agreed to provide that information.                                                                                             
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
4:08:42 PM                                                                                                                    
HEIDI  TESHNER,  DIRECTOR,   FINANCE  AND  SUPPORT  SERVICES                                                                    
DIVISION,  DEPARTMENT OF  EDUCATION  AND EARLY  DEVELOPMENT,                                                                    
stated that she had worked  with the bill sponsor to provide                                                                    
feedback.  She   felt  that   the  conversations   had  been                                                                    
incorporated into the committee  substitute, and allowed for                                                                    
the calculations to work for the districts.                                                                                     
Co-Chair  MacKinnon  queried a  position  on  the bill.  She                                                                    
wondered  whether school  districts would  benefit from  the                                                                    
policy.  Ms. Teshner  replied that  Department of  Education                                                                    
and Early  Development (DEED)  was supportive  of additional                                                                    
tools for districts, and the  bill was seen as an additional                                                                    
tool to maximize their facilities.                                                                                              
Co-Chair  MacKinnon  queried the  benefit  of  the bill  for                                                                    
rural communities.                                                                                                              
4:10:29 PM                                                                                                                    
MINDY LOBAUGH, SPECIALIST, SCHOOL  OF FINANCE AND FACILITIES                                                                    
SECTION,  DEPARTMENT  OF  EDUCATION AND  EARLY  DEVELOPMENT,                                                                    
looked at  Section 2, which  was an  unintended consequence.                                                                    
She  shared that  originally the  formula  had initially  an                                                                    
adjustment of  750, so  a community  under 750  received the                                                                    
appropriate  adjustments for  the  single  site. She  shared                                                                    
that  when  there  was  a  change in  2001,  there  was  the                                                                    
possibility of  a fix to a  community, but there was  not an                                                                    
opportunity  to revisit  the issue.  She shared  that Hooper                                                                    
Bay was  part of that issue,  so the language would  put the                                                                    
formula on a stronger track.                                                                                                    
Co-Chair  MacKinnon asked  for  more  information about  the                                                                    
fiscal note.                                                                                                                    
Ms. Teshner explained the fiscal note.                                                                                          
Senator Micciche explained the fiscal note.                                                                                     
4:15:15 PM                                                                                                                    
Senator  Micciche  felt  that   the  fiscal  note  had  some                                                                    
reflection of the reduced eventual  payout from the state to                                                                    
the districts.  He wondered how  that reduced  funding would                                                                    
be   assessed,   so   there   could   be   a   philosophical                                                                    
understanding of a  reduction associated with consolidation.                                                                    
Ms. Teshner  replied that, because  there was an  unknown of                                                                    
what  schools  would come  forward,  but  there would  be  a                                                                    
reduction in year three.                                                                                                        
Senator  Micciche wondered  whether the  primary purpose  of                                                                    
the  bill  was for  consolidation  to  not adversely  impact                                                                    
school districts,  but noted that  there would be  a reduced                                                                    
costs to the state. Ms. Teshner replied in the affirmative.                                                                     
Co-Chair MacKinnon  announced that  amendments would  be due                                                                    
the following day.                                                                                                              
SB  216  was  HEARD  and   HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
SB 216 School Consolidation Presentation-Senate Finance.pdf SFIN 4/2/2018 3:00:00 PM
SB 216
SB 216 Sponsor Statement.pdf SFIN 4/2/2018 3:00:00 PM
SB 216
SB 216 Sectional Analysis-Sen Fin.pdf SFIN 4/2/2018 3:00:00 PM
SB 216
SB 104 SFIN Request - Special Education Plan Benefits.pdf SFIN 4/2/2018 3:00:00 PM
SB 104
SB 104 Position 3-18.pdf SFIN 4/2/2018 3:00:00 PM
SB 104
SB 216 Lower Yukon School District Support Letter.pdf SFIN 4/2/2018 3:00:00 PM
SB 216