Legislature(1995 - 1996)
03/07/1996 01:34 PM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 488 - SCHOOL DISTRICT MATCHING FUND REQUIREMENT Number 0796 CO-CHAIR IVAN called the meeting back to order at 2:45 p.m. There was no longer a quorum. Co-Chair Ivan noted that committee packets for HB 488 contained the bill; the affected statutes; a zero fiscal note from the Department of Community and Regional Affairs; a fiscal note from the Department of Education; a sponsor statement; data from the Department of Labor; and letters of support. Number 0828 REPRESENTATIVE DON LONG, sponsor of HB 488, presented the bill. He said certain school district areas had been neglected because of inability to come up with the matching fund requirement. He read from the sponsor statement: "This legislation is intended to allow municipalities with an unemployment rate of 10 percent a waiver towards their participating share. At the present time, municipalities with an unemployment rate of 10 percent of greater have a much harder time of paying their local share for school construction. This high unemployment rate results from a lack of economic development or jobs in a municipality, which translates into low revenue for the local municipalities. "Since the adoption of the school district participation grant program in 1973, many schools in Alaska have been neglected due to these municipalities' inability to come up with their participating share of the grant. I believe this bill would be a step in the right direction in helping economically depressed municipalities in their efforts to receive school construction grants." Number 0910 REPRESENTATIVE LONG explained that although some schools had applied for waivers, none had been granted since 1993. Many of the schools had been on a list for many years, yet had never been funded. He felt the only municipalities that could afford matching fund programs would have their schools fixed or constructed. There was no effective means of helping these municipalities come up with matching funds. CO-CHAIR IVAN noted that there was again a quorum present, with Representatives Austerman, Vezey and Elton present in addition to himself. Number 0980 REPRESENTATIVE ELTON asked how Representative Long had arrived at the 10 percent figure. He said Mat-Su, for example, was "on the cusp of maybe being eligible," which he did not think was necessarily intended. Number 1019 REPRESENTATIVE LONG responded that in discussions with people from his district, they had arrived at an average figure of 10 percent. He noted that in his own district, those figures had gone up to 14 or 16 percent in some areas. REPRESENTATIVE ELTON asked why the previous year was being used. He suggested an average of prior years would ensure that it was more than a one-year phenomenon and asked if there had been discussion about that. Number 1055 REPRESENTATIVE LONG replied, "The discussion was based on that the department would have the ability to prove that they ... meet that requirement of the 10 percent." He indicated they had not considered an average over several years. CO-CHAIR IVAN noted that he did not plan to move the legislation out today. "We need more input and questions answered before we proceed," he said. Number 1131 REPRESENTATIVE AL VEZEY said, "Representative Long, I'm not aware that the unemployment rates in different regions of the state have been extremely cyclical in the last, say, eight years." He noted that with 10 years, there might be cyclical action. "We have certain regions of the state which have historically high unemployment rates," he said. "When we passed the statutes providing for the matching funding for the bonding propositions and whatnot, those unemployment conditions were known then. And I would, on the surface, think that all that was taken into account." He thought going back in now might distort the whole idea of local sharing on these cost programs. Number 1232 REPRESENTATIVE LONG responded that it had become apparent that it was hard for a school district to obtain a waiver. He envisioned this legislation as an additional waiver mechanism for school districts that would not otherwise qualify. He said a municipality might have funds but be mandated by another department, for example, the Department of Environmental Conservation, to spend the money elsewhere, such as in fixing their landfill. Number 1338 CO-CHAIR AUSTERMAN indicated he had questions for the Department of Education. MICHAEL MOORE, Total Quality Manager, Northwest Arctic Borough, testified via teleconference from Kotzebue that the borough was having a great deal of difficulty raising the required match for schools. "What we estimate we need to do for the next 20 years is set aside $750,000 a year at a minimum to meet the match requirement," he said. He indicated they faced deficits otherwise totalling $15 million in the next five years. "So, we don't believe we're going to be able to do it. Our unemployment rate over the past three years has averaged approximately 18 percent." Number 1430 REPRESENTATIVE VEZEY asked Mr. Moore what the relationship was in the borough between borough revenues, school district revenues and unemployment. MR. MOORE responded there was no direct relationship. "The unemployment figure is an indicator of the state of the economy," he said. "Another indicator would be that we have a number of communities with 30 percent of the people at or below poverty level. There's many indicators that could have been used. I don't have any reason to believe that the unemployment indicator is an incorrect one, but it might need additional factors and that might be something to consider in the bill." Number 1494 JOHN ROGERS, Special Assistant to the Superintendent, Northwest Arctic Borough School District, testified via teleconference from Kotzebue. He said he had been asked by Superintendent Swenson to testify in support of HB 488. He explained they were in the final design stages of a school facility in Selawik, the first project for which they had received funding that required a local match. "In this particular case," he said, "that requirement was $1,436,669. After the money was appropriated by the legislature, we worked with the Department of Education to identify approximately $245,000 of prior year expenses which qualified for local match purposes. This left the district with a $1.2 million obligation to complete this requirement for Selawik schools." Number 1569 MR. ROGERS continued, "Over the last two years, the district has had to utilize all of its cash reserves to meet this obligation. Just recently, the school board appropriated the final $850,000 which was necessary for us to go ahead and apply with the local match requirement. At the same time they were appropriating the $850,000 for construction, they also had to go in and cut approximately $435,000 out of the operating fund budget. The action of the board in this final appropriation for the construction project in Selawik has utilized all of the district's available cash reserves. If additional construction funds were to be appropriated by the legislature for our school district, we cannot meet any more local match requirements." Number 1643 MR. ROGERS indicated that HB 488 provided a method for a waiver of the local match requirement in areas of the state having high unemployment, such as his borough. He reiterated the school district's support of the bill. Number 1649 REPRESENTATIVE VEZEY asked Mr. Rogers what the match formula had been. MR. ROGERS replied he believed the borough's match was 10 percent, providing a 90/10 split. Number 1699 MICHAEL MORGAN, Special Projects Manager, School Finance, Department of Education, testified that the department acknowledged that districts faced challenges in meeting the local match requirement. "And this bill certainly speaks to that," he said. He indicated he was there to answer questions regarding the fiscal note. CO-CHAIR AUSTERMAN stated his understanding that for the fiscal note, the Department of Education had used the total number of sites, 29. MR. MORGAN clarified that was municipalities. "This excludes REAAs," he said. CO-CHAIR AUSTERMAN stated, "And you've said 11 of them go over the 10 percent." MR. MORGAN replied, "That's correct. That was using 1995 unemployment figures." Number 1773 CO-CHAIR AUSTERMAN referred to the fiscal note for $873,000 and asked if it was based upon full funding. MR. MORGAN clarified it was full funding of the department- recommended projects for FY 1997. "This is based on the six-year plan that we put forth within the last couple weeks," he said. CO-CHAIR AUSTERMAN asked if it was full funding for the 11 sites. Number 1805 MR. MORGAN replied, "No, that's based on full funding for all projects within that fiscal year." He added, "For the first two fiscal years in the six-year plan, the department targeted, in its six-year plan, a target figure of $100 million a year. And part of the projects which were recommended for funding under that $100- million-dollar goal were recommended for funding, for example, perhaps, for planning a design only in FY 97, with full funding for construction to follow in FY 98. So, the $873,000 speaks to the full funding as recommended by the department, but that doesn't necessarily cover the full scope of all the projects in that one year." CO-CHAIR AUSTERMAN asked if it covered the 11 sites. MR. MORGAN replied yes. CO-CHAIR AUSTERMAN asked if it covered more than the 11 sites. MR. MORGAN replied, "The $873,000 is just the impact of the 11 municipalities that had over the 10 percent. If you go to Attachment Number 1, we kind of speak to this by saying -- the first group of figures is total scope and the $873,000 is just the impact if those 11 sites didn't have to pay their participating share for that year." Number 1890 CO-CHAIR AUSTERMAN suggested that over the number of years that they had been funding school construction, not everybody on the list had been funded at once. MR. MORGAN said, "That's correct." CO-CHAIR AUSTERMAN pointed out that the department had used a full- list figure for the fiscal note. MR. MORGAN replied, "We've used the full-list spread over a six- year period." He added, "Right now, this six-year period includes more than the full list. This includes the full list as we published it this year, plus other projects which have been currently identified by districts in their six-year plans, which really takes us out into that -- the end of the six-year horizon." Number 1950 CO-CHAIR AUSTERMAN replied, "I guess what I need from you guys is to go back and do an average on what percentage of funding you're getting actually for school construction over the last number of years, what you project to get FY 97, and come back with a figure that shows what you would need, then, for an additional funding for it." MR. MORGAN said, "If everything on the list was funded this year ... and the 11 districts got waivers, the cost would be $12 million. That's if all $650 million gets funded in one year, but ... if you total up everything on the current list for municipalities, excluding REAAs, it comes to $273,983,000. If the 11 districts ... which had over 10 percent unemployment didn't pay their participating share, it would cost an additional $12,300,000." CO-CHAIR AUSTERMAN asked for clarification. Number 2044 MR. MORGAN referred to Attachment 1, the third page of the fiscal note, and said, "The very top figure is the $273,983,644. That's total requested by districts right now, on the current list, that aren't REAAs. Right below it is, out of that 273 [million], 118 [million] of it belongs to those 11 districts that had over 10 percent unemployment. If you drop down to the second group of figures, the 57.5 [million], that's how much the participating share is out of the 273 [million] for all those municipalities. The figure right under it is how much the participating share would be for those with over 10 percent unemployment. In other words, out of the 118 [million], it would be $12,300,000." CO-CHAIR AUSTERMAN said, "And then, you're saying that the $873,000 is based upon what possibly could be funded." MR. MORGAN responded, "That was just on our recommended funding. I mean, if we come back to the Governor's plan of $7,100,000, we'd have to go back and look at those individual projects and see how they'd apply. But that was saying, if we recommended funding of $39,800,000 for districts that were municipalities in FY 97, out of that $39,800,000, the impact of this bill would be the $873,000 in [FY] 97." Number 2179 CO-CHAIR AUSTERMAN asked if a list was available of the 11 sites or the 33 percent being discussed and then noted it was part of the committee packet. Number 2200 REPRESENTATIVE ELTON expressed concern about the language in the bill that said the exemption will be granted if unemployment averaged at least 10 percent in the fiscal year immediately before the fiscal year for which the appropriation bill funding the municipality is passed by the legislature. He asked, "How many municipalities have those figures that are that recent, or does the Department of Community and Regional Affairs have those figures? Or do they keep them that up-to-date, so that you can just call somebody and say, `what was the unemployment rate?'" Number 2259 MR. MORGAN replied, "I'm not sure. I know that in preparing this fiscal note, we had to go back to '95 figures." REPRESENTATIVE ELTON asked if that was FY 95. MR. MORGAN specified it was calendar year 1995, as he understood it. REPRESENTATIVE ELTON said, "Because this requires that unemployment rates be figured in terms of fiscal years, not calendar years." MR. MORGAN replied, "Right. And I don't know the answer to that." He noted there were some practical questions that needed to be worked out. Number 2290 REPRESENTATIVE ELTON pointed out that unemployment rates were not based on fiscal years. They were based on calendar years. MR. MORGAN suggested it would probably lap into two calendar years. Number 2345 CO-CHAIR IVAN said he would hold HB 488 in committee for further information. "As far as unemployment figures are concerned, I believe the Department of Labor can provide that," he added.