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House Strikes Retirement Plan, Funding Formula Change From Education Bill

By | April 8, 2014 - 1:16 am

The Alaska House of Representative passed a sweeping education bill Monday night, but only after removing some of its more contentious elements and adding another pot of education funding.

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At the stroke of midnight, the House voted in favor of an education bill that nobody seemed particularly thrilled about.

It gave schools too much money.

“I’m concerned that this isn’t sustainable,” said Eagle River Republican Lora Reinbold in closing remarks.

It gave them too little money.

“The bill in front of us now will lead to additional cuts,” said Anchorage Democrat Geran Tarr.

It did not hold schools accountable enough.

“I think the educational institutions in this state should be coming to us and proving to us what they’re returning on our investment,” said Chickaloon Republican Eric Feige.

But in the end, a large majority of the House agreed with Anchorage Republican Craig Johnson.

“I will not sacrifice the good for the perfect,” said Johnson. “I will not say no to something that takes us forward, even if it’s baby steps.”

The final vote was 28-11, and the split was largely on caucus lines. Jonathan Kreiss-Tomkins, of Sitka, was the lone Minority Democrat who voted in favor of the bill. Mark Neuman, of Big Lake, and Tammie Wilson, of North Pole, were the only Republicans to vote against it.

The bill was introduced by Gov. Sean Parnell as the marquee legislation to what he dubbed the “education session.” Included in its 60-odd sections are provisions that encourage vocational education, set up a grant program for new charter schools, and allow students to earn credit for testing out of classes.

But the two farthest-reaching components of the bill were not a part of the governor’s original bill. They were additions the House Finance Committee made last week, and neither survived the floor session.

One restructured the teacher retirement payment plan so that the Legislature would stretch out its pension obligation over time, by making appropriations from the state’s pool of tax revenue. Gov. Sean Parnell has advocated for an opposite approach that involves putting a large amount of money into the retirement trust upfront, and then ideally paying pensions out over a shorter timeline with the help of investment earnings.

Rep. Cathy Muñoz, a Juneau Republican, successfully brought forward an amendment wiping the bill free of all changes to the retirement system. During her floor speech, she noted the plan included in the bill would stretch out retirement payments an extra 40 years and cost the state $15 billion more than Parnell’s plan, according to an actuarial analysis.

“The risk of continuing to balloon the unfunded liability is real, and in turn the impact to our credit rating is also real,” said Muñoz.

The other major part of the bill that was scrapped dealt with the school funding formula. The House Finance Committee had tweaked the formula in a way that favored large schools, without including a similar boost for small schools.

Rep. Bryce Edgmon, a Dillingham Democrat who caucuses with the majority, offered an amendment restoring the original formula. He said the formula change had not been properly vetted. He also framed the amendment as a matter of fairness, acknowledging that while the urban schools need money, “so do the smaller schools.”

Edgmon’s amendment also added $30 million in one-time school funding to the bill. That’s in addition to an increase to the base student allocation that’s worth $225 million over three years. By comparison, the governor proposed increasing per-student funding by $100 million over that same period of time.

While some Democrats in the minority said the funding package on the table was better than nothing, it still did not go far enough for most. As a caucus, they offered a failed amendment that would have put $450 million toward the base student allocation stretched over three years.

Democrats also attempted to get rid of language in the bill forbidding the state from spending money to implement Common Core standards, which they noted resembled Alaska’s own standards. They also tried to limit a new tax credit so that it would only cover contributions made to public schools, not private ones. None of their amendments were successful.

The bill will now be sent to the Senate.

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