Legislature(1995 - 1996)

03/07/1996 01:34 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 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.                  
                                                                               

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