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Senate Bill 36 Urban vs. Rural School Financing William Olmstead

SB36 Brought Revolutionary Change to School Funding Changed from “funding community” to individual school differential funding based on size of school Changed basis of area cost differential from market basket to actual school cost Changed Special Ed from individual funding to block grant replaced student counts with 20% block grant Set instructional component at 70% or greater of district budget old rule was 55% Put supplementary floor in place softens blow of other changes

Changes Based on 1998 McDowell Study of Education Costs Assumes costs of running a school are the same everywhere could not find anyone who pays a cost-of-living differential (except State) Assumes teachers are easy to recruit and retain, even in the remote bush Sometimes refuses to accept actual expenses (“would only reward over spenders”), but uses actual expense for cost differential.

Size Factor: 1 st Adjustment to Student Count Done on count at each school, not community or district Ignores actual expenses - based on staffing levels that schools “ought” to have Uses tax rate table approach for example, if you have 24 students in the school, find the “20-30” line and read over to see that your adjusted count will be: 39.6 + (1.6 * number over 20) = 46 This factor alone takes away 11% of rural district funding (per McDowell) Sponsors testified that this rewards smaller schools

What is a school? Defined by number of students, not number of buildings Up to 100 students in district is one school, even if in three buildings 3 districts this size From 101 to 750 students is two schools 33 districts in this category From 750 up, count actual buildings

REAA Funding by District Comparing Old Formula to SB36 (after size adjustment)

District Cost Factor (DCF): 2 nd Adjustment to Student Count Old adjustment based on cost of living (fuel, utilities, etc) Now uses actual district costs for administration and non-personnel costs It pays districts “for their current financial management practices - whatever they may be.” Neighboring districts can be very different Basic Need = (School count * Size factor) * DCF. Basic need varies from $4.858MM (Petersburg) to $9.389MM (Nenana) Useless for future

Special Needs Old law was based on counts of students in particular categories ranged from $1,525 for gifted to $20,300 for intensive Legislature worried schools were certifying to get dollars Now, the program is a block grant without regard to numbers covers gifted, vocational, bilingual, and exceptional students does not have to be spent on special needs power to school boards The adjusted student counts for each school are added, then sum is multiplied by 1.20

Instructional Minimum Expense No less than 70% of operating budget to be spent on instructional component (teachers and pupil support services) Was 55% until 1982, then dropped from statutes Is much harder for small districts -- have fewer students to spread costs over

Supplementary Floor Old law cushioned against major (>10%) drops in dollars Spread over 3 years Called “hold harmless” Now protects only against SB36 reduction Floor funding is in amount of the change from old to new in 1999 Funding “erodes” as enrollment changes If enrollment increases, get only 60% of the increase in count If it decreases, floor funding erodes by same percentage

Is there an urban/rural divide? YES! But mostly in the Senate. The Senate has repeatedly passed bills that would have had a great impact on the bush, only to have them modified by the House.

Urban/Rural Justifying taking from REAA because they aren’t taxing themselves: “ If folks will just help themselves a little bit in this effort, it helps the formula tremendously.” Senator Wilken (R, Fairbanks) Some Senators tried to limit the Supplemental Floor, reasoning: “ Keep in mind the Lower Kuskokwim has a town of 6,000 and they don’t pay a dime towards education.” Senator Torgerson (R, Soldotna)

Urban/Rural “ When the subsistence issue is being discussed, I hear that 60% of rural Alaska is non-native, but with the education funding issue, I hear that 70-80% of rural Alaska is Native.” Representative Bunde (R, Anchorage) “ How can Fairbanks be asked to spend money on schools when there are boroughs with a value four times greater with one-eighth of the students who pay very little for education?” Senator Wilken (R, Fairbanks)

Urban/Rural “ Nothing is so inherently unequal as attempting to equalize unequals.” Leland Dishman Superintendent, North Slope Borough School District SB 36 is a“reverse Robin Hood Strategy.” Patrick Doyle Superintendent, Copper River School District

Senate Bill 36: Required Local Contribution Originally, the Senate version required 4.5 mill, with excess funds collected going to the state to fund other districts

SB174 (2001) Senate Actions: Zeroed out North Slope Borough - took away $10 million That is, no education dollars Increased : Anchorage $4.4 million Mat-Su $1.2 million Fairbanks $1.1 million Net cost of bill only $1.6 million, so North Slope Borough would pay for most of the increases Final version of the bill that passed the Legislature: Every district got increases Total cost $18.4 million Anchorage got $6.7 million

Senate Bill 48 (2001) Mandatory Borough Bill Senators bothered that they cannot find a way to make the REAAs pay for education Their solution: Force them into boroughs, which can tax, then withhold education funding if they don’t tax New 3rd class borough can only tax and educate Would be forced in by Department of Community and Economic Development Was in the Senate version of SB36 (in 1997), but they had to drop it Passed Senate, sitting in House CRA Committee

Did SB 36 solve problems? Effect of size factor minimized by floor Cost factors being redone, again Few meeting 70% mandate More and more funding responsibility being put on municipalities

1990-2000 State funding up 31% 26% enrollment increase 5% increases in foundation funding includes transportation increase TRS increase Local effort up $39 million (required) + $59 million (optional) = 55% increase Anchorage CPI up 30%

1990-2000 State funding going down 2001 decrease by $19.2 million from FY2000 enrollment down local required effort up Federal impact aid up 2002 decreased by another $10.5 million Funding has closely tracked enrollment. Enrollment Change State Aid Change

Priorities? FY2002 foundation budget $665 million for 133,330 children FY2002 cost to inflation-proof the Permanent Fund $714 million

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