Legislature(2021 - 2022)DAVIS 106

03/04/2022 08:00 AM House EDUCATION

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 350 SCHOOL BOND DEBT REIMBURSEMENT TELECONFERENCED
Heard & Held
-- Invited & Public Testimony --
+= HB 108 CONCURRENT SECONDARY & TRADE SCHOOL TELECONFERENCED
Heard & Held
+= HB 48 AK PERFORMANCE SCHOLARSHIP; ELIGIBILITY TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
             HB 350-SCHOOL BOND DEBT REIMBURSEMENT                                                                          
                                                                                                                                
8:12:29 AM                                                                                                                    
                                                                                                                                
CO-CHAIR STORY  announced that the  next order of  business would                                                               
be  HOUSE BILL  NO. 350,  "An Act  relating to  school bond  debt                                                               
reimbursement; and providing for an effective date."                                                                            
                                                                                                                                
8:12:48 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND, as  prime  sponsor, presented  HB  350.   She                                                               
stated that she  represents a district with  five physical school                                                               
buildings, adding  that there are  at least 17  school attendance                                                               
areas.    As  decisions  made in  the  legislature  impact  every                                                               
school, she stated she is not  just representing the needs of the                                                               
Anchorage School  District (ASD) but  the needs of  Alaska's 500-                                                               
plus schools.   Beginning in  2015 the state  stopped reimbursing                                                               
new  school bond  debt  as a  result of  Senate  Bill 64  [passed                                                               
during the  Twenty-Ninth Alaska State  Legislature].   She stated                                                               
that  bill  passed  due  to  revenue  shortfalls  in  the  state.                                                               
However, she added  that the state has continued to  pay the debt                                                               
from school  bonds passed prior  to 2015.   She stated  she voted                                                               
against  the legislation  in 2015,  but  the bill  passed with  a                                                               
retroactive date  of January  1, 2015, instead  of July  1, 2015.                                                               
Starting in spring 2015 Anchorage  taxpayers paid more for school                                                               
bonds  than   if  the  moratorium   had  not  been  set   by  the                                                               
legislature.  She  added that in 2020, since the  state was still                                                               
having serious revenue issues, House  Bill 106 [passed during the                                                               
Thirty-First  Alaska State  Legislature] extended  the moratorium                                                               
to 2025.   She stated  that school  bonds are critical  to school                                                               
districts  by  helping  build  new   schools  and  keeping  older                                                               
facilities running.  Bonds pay  for a variety of construction and                                                               
maintenance  projects, such  as new  boilers, roof  replacements,                                                               
security  improvements,  and  more.   She  remarked  that  school                                                               
districts already spend  a substantial amount of  their budget on                                                               
regular  maintenance  to  keep   buildings  in  good  repair  and                                                               
students and  staff in safe and  healthy schools.  But  as school                                                               
facilities age, and thousands of  students and staff come and go,                                                               
facilities wear out, and daily  maintenance is insufficient.  She                                                               
stated  that districts  must bring  forward carefully  considered                                                               
bond  issues   developed  in   consultation  with   their  school                                                               
communities and local governments.                                                                                              
                                                                                                                                
CO-CHAIR DRUMMOND  said that the  school bond debt  moratorium is                                                               
set to end  July 1, 2025.  The proposed  legislation would change                                                               
the date  to July  1, 2022,  allowing the state  to help  the pay                                                               
school bonds  sooner.   She explained  that the  2015 legislation                                                               
also decreased  the rate the  state reimbursed communities  to 40                                                               
percent or  50 percent,  depending on  whether the  bonds covered                                                               
new construction  or major maintenance.   She stated that  HB 350                                                               
seeks to increase  the reimbursable school bond debt  back to the                                                               
original 60 percent  or 70 percent.  She voiced  her opinion that                                                               
Alaska taxpayers  and school  districts can  no longer  afford to                                                               
pay the full price for  essential maintenance and construction of                                                               
public schools.  She stated  that ASD continues to approve school                                                               
bonds,  but the  district limits  new bonds  to be  no more  than                                                               
retired annual bond debt.  She  added that instead of every year,                                                               
ASD puts  new school bonds  on the ballot  every two years.   She                                                               
said that there  are over 500 school facilities in  the state and                                                               
all  either  suffer  from  maintenance   issues  or  need  to  be                                                               
replaced.   She  referenced the  2021 study  by the  Institute of                                                               
Social and Economic  Research (ISER) at the  University of Alaska                                                               
Anchorage.  The  study found that school districts  in Alaska are                                                               
unable to address all maintenance problems due to underfunding.                                                                 
                                                                                                                                
8:17:46 AM                                                                                                                    
                                                                                                                                
CO-CHAIR DRUMMOND continued that  ISER noted since the moratorium                                                               
began in  2015, out  of 21 school  districts, only  Anchorage and                                                               
the North  Slope Borough  could "afford" new  school bonds.   She                                                               
emphasized,  "We all  know  how much  costs have  gone  up."   In                                                               
example, she  stated she served  on the schoolboard  between 1994                                                               
and 2003, and  the cost to build a new  elementary school was $10                                                               
million  to $12  million; today  the cost  would be  $35 million.                                                               
She  surmised  that due  to  the  decline  in the  population  of                                                               
Alaska, the  state will not  need to  build as many  new schools.                                                               
She  said  ISER  noted  that   the  National  Council  on  School                                                               
Facilities  (NCSF)  recommends  states  spend 4  percent  of  the                                                               
state's  total  school  replacement  value  annually  on  capital                                                               
projects.   She  stated that  Alaska currently  spends about  2.6                                                               
percent  of school  replacement value;  thus, the  state's school                                                               
facilities  are falling  behind.   She  said  the legislature  is                                                               
mandated to supply  a minimum amount of funding  to rural schools                                                               
in  [Regional Education  Attendance  Areas (REAAs)]  that do  not                                                               
have taxing  authority.   She pointed  out municipalities  do not                                                               
have a funding guarantee and  are falling behind.  In conclusion,                                                               
she urged the  committee to support HB 350.   She deferred to her                                                               
staff to present the sectional analysis.                                                                                        
                                                                                                                                
8:19:44 AM                                                                                                                    
                                                                                                                                
SARAH  EVANS,  Staff,  Representative  Harriet  Drummond,  Alaska                                                               
State Legislature,  on behalf  of Representative  Drummond, prime                                                               
sponsor, gave  a sectional analysis  of HB 350, [included  in the                                                               
committee packet],  which read  as follows  [original punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
     Section 1: Amends AS 14.11.014 (d)                                                                                         
                                                                                                                                
     Sunsets   the   moratorium    on   school   bond   debt                                                                    
     reimbursement  provisions for  school construction  and                                                                    
     major maintenance from July 1, 2025, to July 1, 2022.                                                                      
                                                                                                                                
     Section 2: Amends AS 14.11.100(a)                                                                                          
                                                                                                                                
     Page  7,  line 3  inserts  language  relating to  bonds                                                                    
     authorized on or after July 1, 2022.                                                                                       
                                                                                                                                
     (18)  For projects  approved  under  AS 14.11.100  (h),                                                                    
     (i), and  (j)(2)    (5) the  reimbursement would  be 70                                                                    
     percent on or after July 1, 2022.                                                                                          
                                                                                                                                
     (19)  For projects  approved  under  AS 14.11.100  (h),                                                                    
     (i), and  (j)(2), (3), and (5)  the reimbursement would                                                                    
     be 60 percent on or after July 1, 2022.                                                                                    
                                                                                                                                
     Section 3: Amends AS 14.11.100 (s)                                                                                         
                                                                                                                                
     Restricts   the   Commissioner    from   approving   an                                                                    
     application  for bond  debt reimbursement  on or  after                                                                    
     January 1, 2015, but before July 1, 2022                                                                                   
                                                                                                                                
     Section 4: Amends AS 14.11.102 (c)                                                                                         
                                                                                                                                
     Restricts   the   Commissioner    from   approving   an                                                                    
     application  for bond  debt reimbursement  on or  after                                                                    
     January 1, 2015, but before July 1, 2022.                                                                                  
                                                                                                                                
     Section 5:  Section 6, ch.  3, SLA 2015, is  amended to                                                                    
     read:  28 Sec.  6. AS  14.11.014(d), 14.11.100(s),  and                                                                    
     14.11.102(c) are repealed July 1, 2022.                                                                                    
                                                                                                                                
     Section 6:  The uncodified law  of the State  of Alaska                                                                    
     is amended by adding a new section to read:                                                                                
                                                                                                                                
     Retroactivity. If  this Act take  effect after  July 1,                                                                    
     2022, this Act is retroactive to July 1, 2022.                                                                             
                                                                                                                                
     Section 7:  This Act takes effect  immediately under AS                                                                    
     01.10.070 (c).                                                                                                             
                                                                                                                                
MS. EVANS  hypothesized if  HB 350 passes  and the  governor does                                                               
not sign  the bill  before July  1, 2022,  then any  school bonds                                                               
that pass  with reimbursements  would be  retroactive to  July 1,                                                               
2022.                                                                                                                           
                                                                                                                                
8:22:40 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND  stated that  she  believes  ASD is  the  only                                                               
community  with  a   spring  election,  so  the   bond  issue  on                                                               
Anchorage's  ballot  would not  be  eligible  under the  proposed                                                               
legislation.                                                                                                                    
                                                                                                                                
8:23:20 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOPKINS  inquired how  many schools with  bonds on                                                               
the major maintenance list would be included under the bill.                                                                    
                                                                                                                                
8:24:52 AM                                                                                                                    
                                                                                                                                
HEIDI   TESHNER,  Acting   Deputy  Commissioner,   Department  of                                                               
Education  and   Early  Development   (DEED),  stated   that  the                                                               
department  does  not  know  the   exact  number  of  qualifiable                                                               
projects  on the  current major  maintenance list.   She  offered                                                               
that there  are currently 18 municipalities  and school districts                                                               
that  receive funding  under the  school debt  bond reimbursement                                                               
program.   She  stated that  it  is safe  to assume  if ASD  sold                                                               
bonds,  then it  would have  several  projects on  the list  that                                                               
potentially qualify under the program.   In response to a follow-                                                               
up question,  she stated  that the proposed  bill would  open the                                                               
bond  reimbursement  program on  July  1,  2022, affecting  bonds                                                               
loaded on or after this date.                                                                                                   
                                                                                                                                
8:26:15 AM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease at 8:26 a.m.                                                                                 
                                                                                                                                
8:26:51 AM                                                                                                                    
                                                                                                                                
MS.  TESHNER  directed attention  to  the  fiscal note  with  the                                                               
Office of  Management &  Budget component 153.   She  stated that                                                               
the fiscal note  is indeterminate because DEED does  not know how                                                               
many  municipalities or  school districts  will come  forward and                                                               
start selling bonds immediately after  July 1, 2022.  She stated,                                                               
due to  the timing of  voter approval, DEED assumes  the earliest                                                               
the program  would grow is fiscal  year 2024 (FY 24).   She added                                                               
that under  AS 14.11.102, the  districts and  municipalities must                                                               
provide to DEED  their anticipated debt for  the following fiscal                                                               
year by  October 15 of every  year.  This anticipated  debt would                                                               
be included in DEED's October 21  budget report.  She stated that                                                               
assuming  the districts  and  municipalities  could organize  and                                                               
submit  the  anticipated  debt  by  the  deadline,  it  would  be                                                               
included in the FY 24 governor's budget.                                                                                        
                                                                                                                                
8:28:29 AM                                                                                                                    
                                                                                                                                
LISA PARADY,  PhD, Executive Director,  Alaska Council  of School                                                               
Administrators   (ACSA),  noted   that  ACSA   is  the   umbrella                                                               
organization  for   superintendents,  elementary   and  secondary                                                               
principals,  school  business  officials, and  "all  hard-working                                                               
school administrators" in Alaska.   She stated her support for HB
350, noting  that the  bill addresses school  safety, which  is a                                                               
high priority in  ACSA's position statement.   She reiterated Co-                                                               
Chair Drummond's remark that one  of the continuing challenges in                                                               
Alaska  is the  ongoing deferred  maintenance for  schools.   She                                                               
said  that the  average  school  facility is  44  years old  with                                                               
almost  50  buildings around  60  years  old, while  the  current                                                               
financial  backlog  is  hundreds  of millions  of  dollars.    In                                                               
agreement  with Representative  Hopkins's  statement, she  stated                                                               
this is  not just an  ASD issue but a  huge issue for  all school                                                               
districts.                                                                                                                      
                                                                                                                                
DR. PARADY stated  that ACSA supports funding  for school capital                                                               
projects  and  major  maintenance  for  facilities  in  order  to                                                               
provide students  a safe and  healthy learning environment.   She                                                               
said that ACSA  and the Alaska Municipal League  (AML) designed a                                                               
survey   together   to   better  understand   school   districts'                                                               
maintenance backlog.  She stated  that after all school districts                                                               
have responded  to the survey,  the information will  be provided                                                               
to  committee members.    Thus  far the  survey  has reported  10                                                               
districts with  major maintenance  needs ranging from  $1 million                                                               
to $10 million, and 7  districts reported major maintenance needs                                                               
ranging from  $10 million  to $100  million.   One of  the survey                                                               
questions  addresses  the  actual  process  a  district  must  go                                                               
through to  request funds from  DEED.  This process  is estimated                                                               
to  cost $10,000  per request.   She  said that  school districts                                                               
must weigh  the risk of  making a $10,000-plus investment  to put                                                               
an application  forward.  So  far 61 percent of  school districts                                                               
responded  that there  is "no  point," as  most projects  are not                                                               
funded.                                                                                                                         
                                                                                                                                
DR. PARADY  related that  of the  school districts  that reported                                                               
funding needs, one  district said it needed a  heating system and                                                               
had to close the school for two  days due to no heat.  She stated                                                               
other  districts requested  dramatic upgrades  to old  and unsafe                                                               
school buildings.  She explained  that since the school bond debt                                                               
moratorium  in 2015  many school  districts  have been  deferring                                                               
their major maintenance  needs.  In 2021 ISER  reported that from                                                               
FY 00  to FY 14  Alaska paid an average  of $300 million  on K-12                                                               
capital spending.   She stated  for FY 15  to FY 20  Alaska spent                                                               
$124  million.   She reiterated  NCSF's suggestion  that spending                                                               
for  Alaska   schools  should  be  $374   million  for  essential                                                               
maintenance.   She  stated she  believes HB  350 could  alleviate                                                               
deferred school  maintenance by sunsetting  the school  bond debt                                                               
moratorium   and  changing   reimbursement   amounts  for   major                                                               
maintenance.   She concluded that  this would help  ensure Alaska                                                               
students have a safe learning environment.                                                                                      
                                                                                                                                
8:34:03 AM                                                                                                                    
                                                                                                                                
DR. PARADY,  in response  to a  question from  Co-Chair Drummond,                                                               
said  that  the  estimated  $10,000  is  not  a  fee  charged  to                                                               
districts  by  DEED,  but  the sum  represents  the  cost  school                                                               
districts  incur during  the application  process and  equates to                                                               
staff time.                                                                                                                     
                                                                                                                                
8:34:40 AM                                                                                                                    
                                                                                                                                
MS.  TESHNER, in  response  to a  question  from Co-Chair  Story,                                                               
stated that  any inquiries about Alaska's  capacity for statewide                                                               
debt  should be  directed to  the State  of Alaska  Department of                                                               
Revenue.                                                                                                                        
                                                                                                                                
8:35:42 AM                                                                                                                    
                                                                                                                                
MS. TESHNER,  in response to  a question from  Co-Chair Drummond,                                                               
stated that DEED maintains a  major maintenance list on an annual                                                               
basis.  She  said that the list is posted  on DEED's website, and                                                               
she offered to  forward a copy to committee members.   She stated                                                               
that DEED finalized the 2023 list  on January 1, and there are 97                                                               
projects for  a total state  share of  $196.6 million.   She said                                                               
districts  need to  apply by  September 1.   The  applications go                                                               
through a scoring and ranking  process, and the major maintenance                                                               
list becomes available by November 5 every year.                                                                                
                                                                                                                                
8:37:06 AM                                                                                                                    
                                                                                                                                
MS.  TESHNER, in  response  to a  question  from Co-Chair  Story,                                                               
stated that there are currently  no major maintenance projects in                                                               
the FY 23 capital budget, only school construction.                                                                             
                                                                                                                                
8:37:27 AM                                                                                                                    
                                                                                                                                
MS.  TESHNER,  in  response to  a  question  from  Representative                                                               
Hopkins,  stated that  the school  debt reimbursement  program is                                                               
only available  to the municipalities  and school  districts that                                                               
have bonding  authority.   All districts can  be included  on the                                                               
major  maintenance list  if they  apply by  September 1  of every                                                               
year,  as outlined  in AS  14.11.100.   She  described the  major                                                               
maintenance   list   as  a   grant   program   and  school   debt                                                               
reimbursement as an entitlement program.                                                                                        
                                                                                                                                
8:38:50 AM                                                                                                                    
                                                                                                                                
JIM   ANDERSON,  Chief   Financial   Officer,  Anchorage   School                                                               
District,   stated   that   when  the   governor   vetoed   state                                                               
reimbursement  [of school  bond debt]  by  50 percent  in FY  20,                                                               
$16.5  million [of  debt] shifted  to Anchorage  property owners.                                                               
He continued that  in FY 21 an additional $38  million shifted to                                                               
property  owners,  and  in  the   current  year  property  owners                                                               
incurred another  $20.3 million.   He explained that  before each                                                               
year's  reduction of  bond debt  reimbursements  ASD had  already                                                               
passed  its following  year budget.   He  continued that  in each                                                               
case ASD had to pay an  entire fiscal year of unexpected costs in                                                               
order to receive  additional tax revenue the following  year.  As                                                               
a  public  entity  with  91  facilities  worth  approximately  $2                                                               
billion, he  stated ASD has  one of  the largest fiscal  plans in                                                               
the state.                                                                                                                      
                                                                                                                                
MR.  ANDERSON directed  attention to  a slide  titled, "ASD  Bond                                                               
Debt vs.  Facility Backlog," [included  in the  committee packet]                                                               
and pointed out the graph shows  that over the past 10-plus years                                                               
total  bond debt  decreased and  deferred maintenance  increased.                                                               
He directed the  committee to FY 10,  FY 11, and FY  12, when ASD                                                               
kept  deferred maintenance  costs  at just  over  $100 million  a                                                               
year.   He  said  that  ASD never  caught  up  but described  the                                                               
situation as "bearable."  As a  result of the moratorium in 2015,                                                               
he pointed  out ASD bond  debt spiked in FY  16.  After  that the                                                               
voters  in the  community supported  decisions to  make sure  ASD                                                               
would never add  another bond that was higher than  what it could                                                               
afford.   He  surmised  the  total bond  debt  has decreased  and                                                               
leveled  off since  the earthquake  [November 2018].   He  voiced                                                               
doubt on whether  voters will pass a $112  million bond currently                                                               
on  the ballot.   He  predicted that  by FY  25 the  ASD deferred                                                               
maintenance will be  over $1 billion.  He said  that resuming the                                                               
state bond reimbursement  program would be a  relief to Anchorage                                                               
taxpayers as they have carried  an additional debt of $75 million                                                               
over the  past three years while  also paying 100 percent  on all                                                               
bonds  since  2015.    He   stated  he  believes  at  some  point                                                               
everything  must level  off.   Referencing ISER's  recommendation                                                               
[capital  projects  be  4 percent  of  total  school  replacement                                                               
value], he  said that that  would cost  about $80 million  a year                                                               
for Anchorage; he  stated that it would be very  difficult to ask                                                               
Anchorage  voters in  this economy  for $80  million per  year in                                                               
school  bonds.   In  conclusion, he  stated  restoring bond  debt                                                               
reimbursement in  2022 would  give ASD  time to  communicate with                                                               
the community  and start  taking care  of facilities,  instead of                                                               
[using] Band-Aids.                                                                                                              
                                                                                                                                
8:45:01 AM                                                                                                                    
                                                                                                                                
CO-CHAIR STORY opened public testimony on HB 350.                                                                               
                                                                                                                                
8:45:20 AM                                                                                                                    
                                                                                                                                
NILS  ANDREASSEN, Executive  Director,  Alaska Municipal  League,                                                               
stated  he  feels  he  could   talk  at  length  on  the  state's                                                               
obligation regarding  school construction and  major maintenance.                                                               
He  stated  that  he  appreciates  HB  350  and  will  focus  his                                                               
testimony on the  result of the [2015] moratorium  on school bond                                                               
debt  reimbursement.    After speaking  with  [AML]  members,  he                                                               
stated he  believes that they  would be  "just fine" if  the bill                                                               
passes,  but there  is a  trust issue  with local  governments on                                                               
whether the  state will  meet its  reimbursement obligation.   He                                                               
stated each district would need to  evaluate its own risk in case                                                               
the  state did  not follow  through with  reimbursement; this  is                                                               
challenging  as  recent history  demonstrates  the  state is  not                                                               
positioned to carry through on its  obligation.  Due to the needs                                                               
of  school districts,  he said  that  he believes  the state  has                                                               
significant  obligations  with  $2  billion in  projects  in  the                                                               
coming years.  He stated  he observed that historically the state                                                               
only funded  8 percent of its  maintenance list.  He  stated that                                                               
school  bond reimbursement  works as  a mechanism  for fulfilling                                                               
the state's obligation to fund public education.                                                                                
                                                                                                                                
MR.  ANDREASSEN said  he  is encouraged  that  the proposed  bill                                                               
increases  reimbursements to  at least  50 percent.   He  advised                                                               
committee members to  think about the state's  guarantee to local                                                               
governments and  school districts; if the  current debt structure                                                               
is not enough, evaluate the state's  debt book and other types of                                                               
state debt that  guarantees fulfillment.  He  suggested there are                                                               
opportunities  to   specify  the  debt  type   [in  the  proposed                                                               
legislation],  whether  it  is state  guaranteed  debt  or  state                                                               
supported debt.   He  noted that the  state keeps  its obligation                                                               
for a  variety of levels of  debt.  He stated  AML represents 165                                                               
cities  and boroughs  across Alaska.   Considering  the important                                                               
community-level   need   of   school   construction   and   major                                                               
maintenance,  if HB  350  "moves in  the  right direction,"  then                                                               
[AML] will  be "happy  to see it  pass."  He  added that  [if the                                                               
state fails to  meet its obligation], then he does  not know what                                                               
will happen.   He said that strengthening the  bill by clarifying                                                               
[the state's] responsibility would help.                                                                                        
                                                                                                                                
8:50:23 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND expressed  interest to  learn about  the other                                                               
types of  state debt referred  to by Mr. Andreassen.   Concerning                                                               
funds  from the  Infrastructure Investment  and Jobs  Act (IIJA),                                                               
she  stated  that  many  communities consider  schools  to  be  a                                                               
critical piece  of infrastructure.   While schools are  not roads                                                               
or bridges,  she stated  that in many  communities in  Alaska the                                                               
school is the  major public facility.  She  expressed interest in                                                               
whether  IIJA funds  could  be applied  to  school facilities  in                                                               
addition to other types of public facilities.                                                                                   
                                                                                                                                
MR.  ANDREASSEN  expressed confidence  that  IIJA  will not  fund                                                               
schools.   He  suggested  creativity in  the  approach state  and                                                               
local governments  can take, for  example, with  broadband, water                                                               
and   sewer,  transportation,   climate  change,   and  pollution                                                               
prevention  in   relation  to   school  construction   and  major                                                               
maintenance.   But  he emphasized  that  IIJA does  not take  the                                                               
place of  the state's  obligation to fund  public education.   He                                                               
said   that  with   the  influx   of  funding   from  IIJA,   new                                                               
opportunities  and offsets  may  help  local governments  address                                                               
construction and maintenance needs in  their communities.  But he                                                               
stated  that after  four to  seven years  of decreased  bond debt                                                               
reimbursement  and  two years  of  the  COVID-19 pandemic,  local                                                               
governments  made up  costs by  using their  deferred maintenance                                                               
budgets.  Thus,  he stated that school  districts and communities                                                               
are not [financially] well positioned.                                                                                          
                                                                                                                                
8:53:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HOPKINS  stated that  HB  350  would only  impact                                                               
schools in  organized municipalities  and not  REAA schools.   He                                                               
continued that the average age of  schools in Alaska is 44 years,                                                               
so "we  are not getting rid  of shiny new buildings  with shinier                                                               
new buildings."   He  stated concern  over available  options for                                                               
municipalities  to   fund  major  maintenance   projects  without                                                               
assistance from the state.                                                                                                      
                                                                                                                                
MR. ANDREASSEN advised that funding  major maintenance and school                                                               
construction projects  is the  state's responsibility,  but local                                                               
governments  do  try  to  address   the  safety  of  students  in                                                               
classrooms.    He stated  most  school  districts in  Alaska  are                                                               
municipal districts,  and most  of these  would have  school bond                                                               
debt reimbursement as an option.   He stated a formula exists for                                                               
funding REAA school districts, but  he does not know the formula.                                                               
Otherwise,  he said  that local  governments have  the option  to                                                               
pull funds from public safety,  local education contribution, and                                                               
other  infrastructure projects.    This  means local  governments                                                               
either  pull  funds from  existing  saving  accounts or  increase                                                               
local taxes.   He stated that he believes  local governments will                                                               
have to contribute funds for HB 350 to be successful.                                                                           
                                                                                                                                
8:56:20 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DRUMMOND referred  to the  lengthy process  a community                                                               
must go through to evaluate need  for a school bond package.  She                                                               
inquired whether ALM knows of  communities that would be ready to                                                               
have  a school  bond  package on  their ballot  this  fall.   She                                                               
stated that ASD  is on a different voting cycle.   She emphasized                                                               
that  she  is  not  "planning   any  tricks"  to  make  the  bill                                                               
retroactive like [Senate Bill 64] in 2015.                                                                                      
                                                                                                                                
MR. ANDREASSEN responded  that AML is unaware of  any members who                                                               
are "chomping at  the bit" to take advantage of  the program.  He                                                               
stated that that does not mean  there are not projects that would                                                               
fit in  a bond package.   He stated he believes  the need exists,                                                               
so some  members would be  responsive to an opportunity  for bond                                                               
debt reimbursement in order to save local tax dollars.                                                                          
                                                                                                                                
CO-CHAIR  DRUMMOND   stated  she  appreciates   Mr.  Andreassen's                                                               
comments concerning  trust issues between municipalities  and the                                                               
state.  She  questioned Mr. Anderson on any change  in the amount                                                               
that is devoted to regular maintenance in the ASD's budget.                                                                     
                                                                                                                                
8:58:37 AM                                                                                                                    
                                                                                                                                
MR. ANDERSON  replied that ASD  spends around $25 million  a year                                                               
on maintenance,  with a  gradual increase  over the  last several                                                               
years.   The  school district  has also  used bond  debt on  some                                                               
emergency  projects that  fell outside  of the  bond.   He stated                                                               
that ASD  stopped using bonds  for security updates  and intercom                                                               
systems because  the school district  could not put  larger bonds                                                               
in front of  voters without a secured reimbursement.   He said he                                                               
has not  yet determined the  percentage between fund  balance and                                                               
the  cost of  maintenance.   Due  to inflation  and the  COVID-19                                                               
pandemic, he  stated that construction  costs have spiked  in the                                                               
last six  to eight months.   He  continued that he  believes five                                                               
years ago ASD would have never resorted to using fund balances.                                                                 
                                                                                                                                
CO-CHAIR DRUMMOND stated that when  she last served on the school                                                               
board [1994  through 2003]  ASD had  $25 million  a year  for its                                                               
maintenance budget.   She stated that this  reflects the pressure                                                               
school  budgets  are  under  to  provide  enough  funds  for  the                                                               
classroom and regular maintenance of aging facilities.                                                                          
                                                                                                                                
MR.  ANDERSON  stated  that  the   base  student  allocation  has                                                               
remained stationary for  six years and many reductions  had to be                                                               
made  across  the   board  in  order  to  limit   the  impact  on                                                               
classrooms.   He stated  that "everything is  on the  table every                                                               
year and has been for a while."                                                                                                 
                                                                                                                                
9:01:17 AM                                                                                                                    
                                                                                                                                
PETER HOEPFNER, Vice President,  Cordova School District Board of                                                               
Education,  said in  2015  he testified  against  Senate Bill  64                                                               
because  construction needs  in Alaska  school districts  "do not                                                               
just disappear."   He stated that construction  prices have risen                                                               
over the last  seven years, and deferred  maintenance costs more.                                                               
He  said that  he  believes  the lack  of  investment [in  school                                                               
maintenance and construction] harms  education, and the bill will                                                               
help shift  costs away from  communities.  He addressed  that the                                                               
change  in the  2015  legislation [for  bond debt  reimbursement]                                                               
resulted in a  20 percent reduction by the state.   He emphasized                                                               
the importance of commitment for the  length of the bond, "and no                                                               
going back."   He stated  communities voted  on a known  tax, and                                                               
the  state did  not  honor  this tax  amount.    When a  promised                                                               
financial  plan from  a  known  entity fails,  the  result is  an                                                               
unanticipated debt.   He stated  this debt to the  Cordova School                                                               
District  (CSD)  accompanied  a   reduction  in  funding  to  the                                                               
education of Cordova's  students.  He stated, "There  needs to be                                                               
teeth  to this  promise."   People  voted for  bonds knowing  and                                                               
planning on  the amount of  the intended  debt.  For  example, he                                                               
stated  that  last  year  CSD  had  an  unexpected  $1.5  million                                                               
obligation.    He   said  that  CSD  had   an  education  funding                                                               
contribution  cap of  $2.1  million.   Due  to the  unanticipated                                                               
amount outstanding, CSD  only had funds of $1.7  million and bond                                                               
debt reimbursement of $1.5 million.   He concluded that something                                                               
needs to be done.                                                                                                               
                                                                                                                                
9:04:14 AM                                                                                                                    
                                                                                                                                
PENNY  VADLA, School  Board  Treasurer,  Kenai Peninsula  Borough                                                               
School  District (KPBSD),  stated her  support  of HB  350.   She                                                               
described the district  as a large and diverse with  a variety of                                                               
42  schools covering  26,000 square  miles.   She  stated one  of                                                               
KPBSD's main legislative  priorities is the review  of the school                                                               
bond  debt moratorium  and  to ensure  funding  for the  existing                                                               
state  bond  reimbursement  program.   She  stated  that  KPBSD's                                                               
maintenance department continues to  work but finds it impossible                                                               
to complete the large repairs  and potential rebuilds with such a                                                               
wide  variety of  schools spread  across  the central  peninsula,                                                               
outlying areas, and across the bay.   She stated that KPBSD needs                                                               
the state support with bond  debt reimbursement of 60 percent for                                                               
school  repairs  and  70  percent for  school  rebuilds.    Cost-                                                               
shifting to the communities impacts  schools by halting services,                                                               
programs, and other support needs.                                                                                              
                                                                                                                                
MS.  VADLA   remarked  that  unlike  large   municipalities  with                                                               
constituencies  in  one town,  KPBSD  is  diverse and  extensive,                                                               
making it  difficult to obtain support  for a small bond  for one                                                               
community.  She added that  KPBSD supports all schools in Alaska.                                                               
She said that  for years KPBSD maintained its  own buildings, but                                                               
now without  state support repairs  are delayed.   She emphasized                                                               
that the  state needs to  fulfill its obligation to  prioritize a                                                               
quality education to the state's  students in safe buildings with                                                               
the bond debt  reimbursement program.  She  acknowledged that she                                                               
does not know  how KPBSD will attain the current  $420 million of                                                               
deferred school  maintenance.  She  stated that KPBSD had  a bond                                                               
listing 19 projects for maintenance  along with a new building at                                                               
the Kachemak Selo School; the  bond included 38 schools to ensure                                                               
the  vote of  the  communities.   She  concluded  by stating  her                                                               
appreciation of  HB 350 and  the support  of the committee.   She                                                               
added that the state's job is to educate its students.                                                                          
                                                                                                                                
9:09:11 AM                                                                                                                    
                                                                                                                                
MS.  VADLA, in  response to  a question  from Co-Chair  Drummond,                                                               
stated  that the  Kenai Peninsula  voters  defeated the  original                                                               
bond  for  the  community  of  Kachemak Selo.    After  that  the                                                               
schoolboard put  together another  bond that  stalled due  to the                                                               
COVID-19  pandemic.   She  stated  that  KPBSD took  a  different                                                               
direction with  the bond, but  it stalled as  well.  There  is no                                                               
current  bond going  forward.   She stated  that she  can provide                                                               
documentation on these  bond packages.  In response  to a follow-                                                               
up  question, she  said she  does  not have  all the  information                                                               
concerning  the bond  amounts  and  does not  want  to put  forth                                                               
misinformation.                                                                                                                 
                                                                                                                                
9:12:09 AM                                                                                                                    
                                                                                                                                
NORM WOOTEN.  Director of Advocacy, Association  of Alaska School                                                               
Boards,  stated  that  prior  to   the  [2015]  moratorium  local                                                               
municipalities had vested interest with  a share of 30 percent or                                                               
40 percent, depending  on the bond proposal  put forward, whether                                                               
it was  for new construction  or major maintenance.   When Senate                                                               
Bill 64 passed  in 2015, he stated  it was like a  "gut punch" to                                                               
districts.   Before this, during  his time on the  schoolboard in                                                               
Kodiak, a  major bond package  passed to rebuild the  high school                                                               
in  Kodiak.   He  stated  that that  package  passed  due to  the                                                               
voters' knowledge of the many  years of promised reimbursement by                                                               
the state.   He stated  the Kodiak community and  school district                                                               
was "shocked" to have a  longtime commitment pulled from the bond                                                               
package.   He  stated across  Alaska many  districts were  in the                                                               
same  situation.   He  said that  some  municipalities found  the                                                               
money to  pay down the  bond debt  either by reducing  funding to                                                               
schools  or  by increasing  property  tax.    He stated  that  he                                                               
believed  the legislature  created cost-shifting  by transferring                                                               
its  shortfall  to the  municipalities;  he  emphasized that  the                                                               
money still had  to be paid, so debt was  shifted to boroughs and                                                               
municipalities.   He  said that  by passing  HB 350,  [financial]                                                               
support would go to school  districts and municipalities but most                                                               
importantly, to the students within the state.                                                                                  
                                                                                                                                
CO-CHAIR  DRUMMOND   stated  she  visited  Kodiak   recently  and                                                               
commented  that Kodiak  takes  good  care of  its  schools.   She                                                               
stated that she  also remembers the 2015 legislation  like a "gut                                                               
punch."  She commented that  facing voters became difficult after                                                               
that, as [Senate Bill 64] translated to a local tax increase.                                                                   
                                                                                                                                
9:15:59 AM                                                                                                                    
                                                                                                                                
CO-CHAIR STORY,  after ascertaining  that no  one else  wished to                                                               
testify, closed public testimony on HB 350.                                                                                     
                                                                                                                                
9:16:39 AM                                                                                                                    
                                                                                                                                
CO-CHAIR STORY announced that HB 350 was held over.                                                                             
                                                                                                                                

Document Name Date/Time Subjects
HB 108 support 030222.pdf HEDC 3/4/2022 8:00:00 AM
HB 108
HB 48 support 030222.pdf HEDC 3/4/2022 8:00:00 AM
HB 350 Bill Packet.pdf HEDC 3/4/2022 8:00:00 AM
HB 350
HB 350 ASD Bond Debt vs Facility Backlog.pdf HEDC 3/4/2022 8:00:00 AM
HB 350
HB 350 FN Debt Service.pdf HEDC 3/4/2022 8:00:00 AM
HB 350
HB 108 Amendment 1 HEDU.pdf HEDC 3/4/2022 8:00:00 AM
HB 108
HB 108 Amendment 2 HEDU.pdf HEDC 3/4/2022 8:00:00 AM
HB 108
HB 350 Supporting Docs.pdf HEDC 3/4/2022 8:00:00 AM
HB 350
HB 350 Sectional.pdf HEDC 3/4/2022 8:00:00 AM
HB 350
HB 350 Sponsor Statement.pdf HEDC 3/4/2022 8:00:00 AM
HB 350
HB0350A.PDF HEDC 3/4/2022 8:00:00 AM
HB 350
HB 350 3.4.2022 (H)EDC Hearing DEED Follow-Up.pdf HEDC 3/4/2022 8:00:00 AM
HB 350
HB 48 support 030222.pdf HEDC 3/4/2022 8:00:00 AM
HB 48