Legislature(2003 - 2004)

05/05/2003 01:35 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SB 202-EDUCATION FUNDING &PUPIL TRANSPORTATION                                                                     
CHAIR FRED DYSON  called the Senate Health,  Education and Social                                                             
Services  Standing  Committee  meeting  to  order  at  1:35  p.m.                                                               
Present were Senators  Green, Wilken, Guess and  Dyson. The first                                                               
order of business to come before the committee was SB 202.                                                                      
SENATOR  GARY  WILKEN,  sponsor  of  SB  202,  said  it  has  two                                                               
provisions relating to the K12  public education funding and they                                                               
are  both intertwined  within the  Senate  operating budget.  The                                                               
first  item is  that SB  202 revises  the method  in which  local                                                               
school districts  are reimbursed for pupil  transportation costs.                                                               
Over  the past  seven years,  district transportation  costs have                                                               
increased  77  percent,  from  $32.8 million  in  FY97  to  $58.1                                                               
million   in  FY04.   This   legislation   establishes  a   pupil                                                               
transportation grant program as a  means to control the growth of                                                               
these  costs.  Under the  program,  local  school districts  will                                                               
receive  an   allocation  based  on  their   actual  per  student                                                               
transportation  cost  in FY03.  In  FY04  and beyond,  the  pupil                                                               
transportation  grant  will  be  determined  by  multiplying  the                                                               
district's   transportation    allocation   by    their   student                                                               
enrollment.   The   reimbursement   program   recognizes   fiscal                                                               
constraint  while continuing  to support  local school  districts                                                               
with their transportations costs.                                                                                               
The second part  of the bill increases the  K12 education funding                                                               
per student  amount to $4,169,  an increase of $159.  This change                                                               
distributes  $32.1 million  to 53  school  districts through  the                                                               
education  foundation  formula, a  plan  that  offers stable  and                                                               
predictable revenue to all 53 school districts.                                                                                 
SENATOR GRETCHEN GUESS asked who  came up with the transportation                                                               
formula and how  they came up with the $1,200  figure. One of her                                                               
concerns  was that  dispersed districts  had  more costs  because                                                               
they have more roads than in the denser districts.                                                                              
SENATOR WILKEN replied  that he wanted Eddy Jeans  to explain the                                                               
answer, but basically  those kinds of routes are  embodied in the                                                               
current funding to school districts.                                                                                            
MR. EDDY  JEANS, School Finance Manager,  answered Senator Guess'                                                               
question  about  the  $1,200  by  saying  that  it  is  a  policy                                                               
statement of the  maximum amount they are willing  to reimburse a                                                               
district on  a per student  basis. There are five  districts that                                                               
exceed the $1,200. Alaska Gateway  was at $1,464; Bristol Bay was                                                               
at  $1,322;  Copper River  was  at  $1,300; Delta/Greely  was  at                                                               
$1,351; and  Southeast Island  was at  $1,234. They  already know                                                               
that a boat picks up students  at Southeast Island. Some of those                                                               
parents will be paid 'in lieu  of' (giving parents $.30 per mile)                                                               
to run their bus route a  little bit further and their costs next                                                               
year should  come in below what  they are on a  per student basis                                                               
this year.                                                                                                                      
He said that  the Delta Greely school district has  a sole source                                                               
bid  on their  contract, but,  hopefully,  they will  be able  to                                                               
negotiate  a   better  rate.  If   not,  they  can   possibly  do                                                               
transportation cheaper in-house.                                                                                                
SENATOR  GUESS asked  how  many  districts' pupil  transportation                                                               
would be over $1,200 in FY04.                                                                                                   
MR. JEANS replied that they did  not run FY04 figures, because it                                                               
is  better  to  base  the   formula  on  actual  expenses  versus                                                               
projected expenses. He said that  Delta Greely projected a slight                                                               
increase in  FY04, but  more students  are projected.  Under this                                                               
grant program, based  on the projected 882 pupils  for FY04, they                                                               
will  actually generate  $1 million.  That is  because growth  is                                                               
built into  the foundation program  for projection  purposes, but                                                               
not into their  transportation budget. "So, you're  going to have                                                               
some winners  and losers in  this proposal  and we know  it's not                                                               
perfect, but  it's better than  the current  reimbursable system,                                                               
we believe."                                                                                                                    
SENATOR GUESS asked what the fuel  cost was in FY03, since it has                                                               
gone up  so much in  the last year.  Where is the  discussion and                                                               
adjustment for fuel cost?                                                                                                       
MR. JEANS replied that the  majority of questions he has received                                                               
on  that   are  related  to   the  new  proposed  fuel   tax  and                                                               
municipalities are  exempt from  that. Contractors would  have to                                                               
pay  the increase,  however,  and there  have  been questions  on                                                               
whether a district  could reopen their contract  to renegotiate a                                                               
different rate if the district provided the fuel.                                                                               
     It depends on  what kind of negotiating  people want to                                                                    
     do. Mr.  Chairman, the reason  for this is,  as Senator                                                                    
     Wilken   pointed   out,   the   cost   of   the   pupil                                                                    
     transportation programs  have just  grown by  leaps and                                                                    
     bounds over  the last  10 years.  In fact,  since 1990,                                                                    
     it's  increased  136%.  Senator Wilken  used  a  little                                                                    
     smaller  time  frame, so  his  percentage  is a  little                                                                    
     lower than mine.  We believe at the  department that if                                                                    
     we  continued  with  this current  reimbursable  system                                                                    
     that we're going to have  transportation costs that are                                                                    
     going  to  exceed  $100  million  by  2012.  The  pupil                                                                    
     transportation  programs  are   contracted  every  five                                                                    
     years. We get  increases with those and  they also have                                                                    
     inflation  built into  them, an  automatic inflationary                                                                    
SENATOR  GUESS  responded  that she  still  wanted  her  question                                                               
answered on gas prices. She didn't care about the taxes.                                                                        
SENATOR WILKEN responded:                                                                                                       
     I  guess  if one  wanted  to  consider that  you  could                                                                    
     renegotiate  when fuel  costs  went up,  then we  would                                                                    
     also  renegotiate a  fuel cost  down. I'm  not sure  if                                                                    
     anybody  would ever  agree on  what the  price of  fuel                                                                    
     would be in 53 different  school districts. That may be                                                                    
     something more  than we are  able to handle.  I suspect                                                                    
     it's just like  other things. You just deal  with it. I                                                                    
     don't  think  it's  a  disproportionate  share  of  the                                                                    
     budget that can't be handled in some other way.                                                                            
CHAIR  DYSON  said in  the  school  districts he  represents  the                                                               
school bus  management is about as  good as he knows  how to make                                                               
     When you lock  in a cost in this bill,  a district like                                                                    
     mine  may be  doing the  most efficient  job that  good                                                                    
     fleet managers  can do, they're at  a disadvantage vis-                                                                    
     à-vis  a  school district  that  has  been real  sloppy                                                                    
     about it and  could gain a lot in  efficiencies. I know                                                                    
     it's impossible to deal with  that, but can you tell me                                                                    
     what your guys' thinking was?                                                                                              
MR. JEANS replied:                                                                                                              
     I've  been   working  very  closely  with   the  school                                                                    
     districts  for a  number of  years trying  to get  some                                                                    
     containment  on the  pupil  transportation program.  In                                                                    
     fact,  you   may  remember  how  we   worked  with  the                                                                    
     Anchorage,   Fairbanks,   Mat-Su  to   bring   contract                                                                    
     alignments  so that  we could  get outside  contractors                                                                    
     into the  state. We were successful  with bringing some                                                                    
     outside contractors in.  Were their rates substantially                                                                    
     lower than the existing  contractors? The answer is no.                                                                    
     But,  they had  to bust  into our  system. So  they had                                                                    
     high start up  costs associated with that.  In fact, as                                                                    
     you know,  Anchorage and Mat-Su enjoy  brand new buses.                                                                    
     I've heard  people say during  some of  this testimony,                                                                    
     not  in this  committee, but  in the  House side,  this                                                                    
     isn't fair,  because some districts  are at the  end of                                                                    
     their contract  and they're going to  require new buses                                                                    
     and  others aren't.  Quite  frankly,  Mr. Chairman  and                                                                    
     committee members, I have not  seen a contract go down,                                                                    
     because somebody  did not  have to  buy new  buses. The                                                                    
     rates seem  to go  up in justification  as we  need new                                                                    
     buses, but five  years later, after we've  paid for the                                                                    
     buses  through this  program,  the  rates aren't  going                                                                    
     back down. It  just continues to build.  That's part of                                                                    
     the reason this proposal is before you.                                                                                    
CHAIR  DYSON  said  it  has   been  represented  to  him  that  a                                                               
disproportionate   and   most    uncontrollable   part   of   the                                                               
transportation  cost   is  serving   handicapped  kids.   In  his                                                               
district,  60  percent of  the  routes  deal with  children  with                                                               
physical  disabilities. He  asked if  there was  any solution  to                                                               
that problem.                                                                                                                   
MR.  JEANS   answered  that  issue   had  been  brought   to  the                                                               
department's attention  and they  are currently working  with the                                                               
Anchorage school district to resolve  it, but it's already a part                                                               
of the equation.                                                                                                                
     At least the ratio that  they're dealing with right now                                                                    
     would  be carried  on  into the  future.  It would  not                                                                    
     address  if their  special ed  population went  from 50                                                                    
     percent  to 60  percent or  70 percent  of their  total                                                                    
     population.  That  would  not   be  addressed  in  this                                                                    
One  of  his main  concerns  is  that  the  formula is  based  on                                                               
verifiable data  and the OASIS  system verifies every  student in                                                               
the state and  where they go to school. That's  why they've tried                                                               
to  tie the  grant program  to the  average daily  membership. It                                                               
wouldn't add any new reporting  burden to the school district. He                                                               
has  been  asked  by  some  school districts  why  he  won't  use                                                               
ridership, but  that's a self-reported number  requiring auditing                                                               
of school districts on the  number of students riding their buses                                                               
every day.                                                                                                                      
CHAIR DYSON asked if they reimburse special educations routes?                                                                  
MR. JEANS answered that the  special education routes are already                                                               
included in  the current year's  reimbursement and that  would be                                                               
carried over into the grant  system. The special education routes                                                               
tend  to  be  more  expensive  than  the  regular  routes.  Fewer                                                               
students  used them  and typically  require  aides and  sometimes                                                               
CHAIR DYSON  said it  was a big  issue that he  would be  glad to                                                               
talk to him about at another time.                                                                                              
SENATOR GUESS  asked the sponsor  what happens if the  costs fall                                                               
under the grant.                                                                                                                
SENATOR  WILKEN answered  that his  school district  is embracing                                                               
this idea  because now they can  sit around the table  and have a                                                               
discussion about people transportation  costs knowing if they can                                                               
do  it more  efficiently with  less  cost, they're  able to  take                                                               
every  dollar saved  and  put  it into  the  classroom. The  next                                                               
question becomes  when the FY  03 allocation for money  starts to                                                               
become too  tight, they  would start to  have a  discussion about                                                               
increasing it the  FY 06 allocation, for instance.  This helps to                                                               
focus the discussion.                                                                                                           
SENATOR GUESS  said there  had been  a lot  of discussion  in the                                                               
last  two years  on gifted  transportation and  she was  assuming                                                               
they were talking about everyone's transportation.                                                                              
MR.  JEANS replied  that was  correct; this  includes everybody's                                                               
current transportation profile.                                                                                                 
SENATOR GUESS  said she has  the same concern that  Senator Dyson                                                               
does in areas like Anchorage,  Fairbanks, Mat-Su and Juneau where                                                               
they  are  constantly having  an  increase  in special  education                                                               
children,  this  formula  could  be  a  real  problem.  They  are                                                               
assuming  all the  proportions are  going to  stay the  same. She                                                               
didn't know if they could separate out routes and costs or not.                                                                 
MS. JENNIE  HAMMOND said  she lives in  Nikiski with  her husband                                                               
and two  children, ages three  and five. She does  everything she                                                               
can to  get her children  ready for school. She  said legislators                                                               
need to  step up  the funding  to get more  teachers back  in the                                                               
classroom.  She opposed  SB 202  and urged  them to  increase the                                                               
foundation formula.                                                                                                             
CHAIR DYSON asked her where she heard about this issue.                                                                         
MS.  HAMMOND replied  that she  read about  it in  the paper  and                                                               
attended school board meetings. The  school board did not support                                                               
it either.                                                                                                                      
MR. BRUCE  JOHNSON, Association of Alaska  School Boards, thanked                                                               
the members of the Senate  and Senator Wilken, in particular, who                                                               
attended their recent fly-in. They  have had a lot of opportunity                                                               
to interact  about this  issue. They recognize  this as  a policy                                                               
shift and if it's one they  are going to make, he encouraged them                                                               
to consider  that there will be  winners and losers. "It  will be                                                               
easier  to create  efficiencies  in larger  systems than  smaller                                                               
systems  and  let's  be  certain   we  do  not  penalize  smaller                                                               
He said  it would be  hard for Tok,  for instance, to  create any                                                               
efficiencies  because there  is one  road, with  one driver,  who                                                               
will pick  up the same  students. They  would be impacted  by the                                                               
$1,200  cap as  well as  flat student  enrollment at  this point,                                                               
which is further eroding their issues.  He urged them to focus on                                                               
intensive  students,   the  ones  who   are  often  in   need  of                                                               
transportation to and  from school, which is  required by federal                                                               
law. This is the issue  Anchorage and other districts are talking                                                               
about. "How to  deal with that when it's a  federal mandate other                                                               
than taking  money from  someplace else  in order  to accommodate                                                               
He said  there was potential  for improvement in the  bill before                                                               
the end  of session and there  were ways they could  mitigate the                                                               
negative issues for some of the districts.                                                                                      
Regarding  the   per  pupil  increase   in  the   foundation,  he                                                               
acknowledged  the   hard  work  that  went   into  rolling  funds                                                               
currently outside  of the formula  into the per  pupil allocation                                                               
while recognizing that it represents  flat funding at a time when                                                               
there are significant rising costs in most of the districts.                                                                    
MR. TIM  STEELE, Vice President, Anchorage  School Board, thanked                                                               
them  for  rolling Learning  Opportunity  Grants  (LOG) into  the                                                               
foundation formula. He said:                                                                                                    
     In a  year that saw  virtually every candidate  for the                                                                    
     legislature  as well  as the  governor express  support                                                                    
     for education,  it's difficult to  be thankful  for any                                                                    
     cuts.  Funding for  any  component  of our  educational                                                                    
     matrix  at the  '03 level  is a  cut in  the purchasing                                                                    
     power  of our  schools all  across the  state. After  a                                                                    
     decade of  inadequate funding  and increased  state and                                                                    
     federal mandates, we had hoped  at the beginning of the                                                                    
     session  that  we  would make  some  progress.  Senator                                                                    
     Stevens, then  in the  House, submitted  legislation to                                                                    
     increase the  formula by $118 per  student (4128). This                                                                    
     is  a 2.9%  increase in  the formula  over last  year's                                                                    
     funding. That would at least  keep pace with inflation.                                                                    
     Alaska is  not a poor state  and our tax burden  is the                                                                    
     lowest  in the  United States.  If we  can't even  keep                                                                    
     pace  with  the  cost  of   living  and  educating  our                                                                    
     children, what can we say  for the future. A failure to                                                                    
     provide  even   the  cost   of  living   increase  will                                                                    
     negatively  impact  the  quality of  education  in  our                                                                    
     schools. Please,  amend this bill  by adding a  cost of                                                                    
     living increase of  $118 to the formula.  This would at                                                                    
     least be  some progress,  not progress  that represents                                                                    
     adequacy,  but certainly  would be  going in  the right                                                                    
MR.  JOHN  ALCANTRA,   Government  Relations  Director,  National                                                               
Education  Association Alaska,  said they  believe that  the work                                                               
the Senate  Finance Committee has  done so far is  heading Alaska                                                               
in the right direction.                                                                                                         
     An important  component of the committee's  work was in                                                                    
     putting  the money  into the  base student  allocation.                                                                    
     This  allows districts  some stability  of funding  and                                                                    
     helps  them  meet some  of  the  requirements of  state                                                                    
     standards. NEA-Alaska has advocated  for a base student                                                                    
     allocation  of $42.80  per student  since  May of  last                                                                    
     year.  Forty-two  eighty  is a  conservative  estimate,                                                                    
     asking  for just  one year  of  inflationary costs  and                                                                    
     just  one year  of unmet  needs identified  by business                                                                    
     leaders such  as Roger Conn,  Jim Palmer and  Carl Mars                                                                    
     in  a report  published  two years  ago. These  leaders                                                                    
     asked for  a base student allocation  increase of about                                                                    
     $365 per pupil over five  years, plus increases to deal                                                                    
     with the  erosion caused by inflation.  We collectively                                                                    
     realize  the budgetary  situation  in  Alaska; we  just                                                                    
     only request  one year  instead of  trying to  fill the                                                                    
     hole  all at  once.  Our suggestion,  which again,  has                                                                    
     been on  the table  for over 10  months, will  cost the                                                                    
     state approximately $31  million in FY 04,  but it goes                                                                    
     to  the  constitutional  mandate of  a  quality  public                                                                    
     education.  The sponsors  of a  companion piece  in the                                                                    
     House,  HB   233,  which  increase  the   base  student                                                                    
     allocation by  $158 per pupil  has also  identified $14                                                                    
     million  in  lapsed funds  to  [indisc]  to a  new  LOG                                                                    
     program  in  the capital  budget.  This  amounts to  an                                                                    
     additional  $70 per  pupil. This  idea gets  us another                                                                    
     step  closer  to the  goal  of  adequately funding  K12                                                                    
     education  for FY  04.  The budget  for  last year  was                                                                    
     based on $20.50  per barrel of oil and the  CBR draw at                                                                    
     about  $950 million.  With oil  averaging over  $28 per                                                                    
     barrel for  the first  10 months  of this  fiscal year,                                                                    
     this  means the  CBR draw  will be  about $400  to $450                                                                    
     million less  than anticipated. K12 funding  needs just                                                                    
     $31 million to adequately fund  K12 for the next fiscal                                                                    
     year beginning July 1....                                                                                                  
     NEA-ALASKA  believes  the  education  community  should                                                                    
     take  the  remainder of  the  school  year to  identify                                                                    
     pupil needs under  the state standard and  the No Child                                                                    
     Left Behind (NCLB)  Law. This would be the  basis for a                                                                    
     long-term fix for education funding...                                                                                     
He said his own personal research  shows that this bill would add                                                               
only about $2  million in funding for K12 education  in FY 04 and                                                               
with the additional requirement of  the (NCLB) law and the almost                                                               
2 percent  inflation of 2002,  this additional funding,  while in                                                               
the proper category  of the base student  allocation, falls short                                                               
of the need for the next year.                                                                                                  
MR.  STEVE  KALMES,  Director, Transportation,  Anchorage  School                                                               
District, reminded  the committee that school  bus transportation                                                               
is the  safest form  of transportation in  America today.  One of                                                               
the  premises of  the  bill is  that  all student  transportation                                                               
operations  are inefficient,  but there  isn't any  money he  can                                                               
pull off  transportation and put  in the classroom  in Anchorage.                                                               
It would  be just  the opposite.  He said  there is  incentive to                                                               
save as he  has worked for five superintendents  in Anchorage who                                                               
were all interested in being  as efficient as possible. There are                                                               
also interested people  in the community and  budget review teams                                                               
have gone over  their budgets. Two hundred  and forty-seven buses                                                               
are being run  in Anchorage currently and in 1984,  they ran 291.                                                               
This is with a larger student  enrollment. About 37% of the buses                                                               
that run in the Anchorage  school district transport 5 percent of                                                               
their  population,  the  special  education  students.  About  45                                                               
percent  of their  costs are  allocated to  those students.  This                                                               
includes  preschoolers and  any student  who attends  any program                                                               
that isn't available  in the home school, as  well. Reductions in                                                               
transportation costs  will impact  the regular routes  since they                                                               
can't cut special education routes.                                                                                             
Upcoming issues  are current  contracts that  are in  place until                                                               
2006  that have  increased costs  in  them for  the next  several                                                               
years.  There are  increased costs  for labor  and fuel  and high                                                               
driver  turnover. He  said that  a  long-term equitable  solution                                                               
needed to be found by the legislature.                                                                                          
SENATOR WILKEN noted:                                                                                                           
     More importantly, today there  is nothing in the system                                                                    
     that encourages or  forces a district to see  how to do                                                                    
     it better.  That's the important part  about this grant                                                                    
     system and  I believe that's why  the administration is                                                                    
     supporting such a  system and it puts  that decision on                                                                    
     the local  people where it  should be. The  funding for                                                                    
     it, then,  is the responsibility of  the legislature to                                                                    
     weigh  those requests  for resources  just as  we weigh                                                                    
MR. LARRY  WIGET, Executive  Director, Public  Affairs, Anchorage                                                               
School  District,  said he  wanted  to  read something  into  the                                                               
record  from the  spring  2002 education  report  for the  Alaska                                                               
State Senate Finance Committee.                                                                                                 
     To  educate  Alaska's  children, they  must  first  get                                                                    
     safely  to  school.   Consistent,  safe  and  efficient                                                                    
     transportation  is  vital  to  the  education  process.                                                                    
     Pupil transportation  is not  cheap, but  is essential.                                                                    
     Money for transporting students  frees up funds for the                                                                    
     classroom.  If  the  state did  not  fully  fund  these                                                                    
     costs,  districts  would  be forced  to  use  classroom                                                                    
     dollars to  pay for getting students  safely to school.                                                                    
     This is  a policy  shift, which will  negatively impact                                                                    
     the Anchorage school district.                                                                                             
CHAIR DYSON  said that the  committee had requested  fiscal notes                                                               
from DEED, but had not yet received them.                                                                                       
MR. JEANS  responded that  DEED submitted  those fiscal  notes to                                                               
the legislative liaison  office on Friday and he  didn't know why                                                               
they didn't have them.                                                                                                          
SENATOR GUESS  asked if  any districts were  going to  lose money                                                               
from where  their LOGS  are now  with net  increases in  the base                                                               
student allocation.                                                                                                             
SENATOR WILKEN responded that no one should lose any dollars.                                                                   
MR. JEANS  added that when they  look at this in  terms of moving                                                               
the LOGS inside  the foundation formula, the  district that would                                                               
be most adversely affected by  that would be the Anchorage school                                                               
district. This bill has enough of  an increase so they would more                                                               
than  recover what  they would  lose by  moving their  LOG grants                                                               
into  the  foundation  formula.  He   couldn't  tell  her  on  an                                                               
individual basis.                                                                                                               
SENATOR GUESS said she knows  the number of intensive students is                                                               
tracked  as part  of  the  foundation formula  and  asked if  the                                                               
number of  special education students who  need transportation is                                                               
a verifiable piece of data.                                                                                                     
MR. JEANS  replied that  they have their  federal count  that was                                                               
done on December 1, but  it wasn't verifiable data. The intensive                                                               
count is the  next level he would  go to and he  needs some costs                                                               
from a couple  of school districts so he can  break it down. They                                                               
have been trying to run that data.                                                                                              
SENATOR WILKEN  brought forth a  fiscal note  from Representative                                                               
Gatto's bill on  this subject and he asked the  committee to look                                                               
at it  and move  this bill  on to  Finance where  it would  get a                                                               
fiscal note that he didn't think  would be any different than the                                                               
one before them.                                                                                                                
SENATOR  GREEN  moved   to  pass  SB  202   from  committee  with                                                               
individual  recommendations with  the  anticipated fiscal  notes.                                                               
There were no objections and it was so ordered.                                                                                 

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