Legislature(2013 - 2014)HOUSE FINANCE 519

04/12/2013 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- MEETING CANCELED --
+= SB 21 OIL AND GAS PRODUCTION TAX TELECONFERENCED
<Bill Hearing Canceled>
+= SB 18 BUDGET: CAPITAL TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 12, 2013                                                                                            
                         2:04 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
2:04:10 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 2:04 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lindsey Holmes                                                                                                   
Representative Scott Kawasaki, Alternate                                                                                        
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative David Guttenberg                                                                                                 
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Daniel George,  Staff, Representative Bill  Stoltze; Roberta                                                                    
Graham,  Assistant  Commissioner,  Department  of  Commerce,                                                                    
Community and  Economic Development; Senator  Cathy Giessel,                                                                    
Sponsor; Curtis  Thayer, Deputy Commissioner,  Department of                                                                    
Administration;   Nicki   Neal,    Director,   Division   of                                                                    
Personnel,  Department  of  Administration;  Rynneiva  Moss,                                                                    
Staff,  Senator John  Coghill; David  Scott, Staff,  Senator                                                                    
Donny  Olson; Elizabeth  Sweeney Nudelman,  Director, School                                                                    
Finances and  Facilities, Department of Education  and Early                                                                    
Development; Tom  Begich, Policy Director, Citizens  for the                                                                    
Educational Advancement of Alaska's Children.                                                                                   
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Johanna Bales, Executive Director, Tax Division, Department                                                                     
of Revenue; Dave Herbert, Superintendent, St. Mary's City                                                                       
School District.                                                                                                                
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 192    PAYMENT OF FISHERY RESOURCE LANDING TAX                                                                               
                                                                                                                                
          HB 192 was SCHEDULED but not HEARD.                                                                                   
                                                                                                                                
SB 7 am   CORPORATE INCOME TAX                                                                                                  
                                                                                                                                
          HCS SB  7(FIN) was REPORTED out  of committee with                                                                    
          a  "do  pass"  recommendation  and  with  one  new                                                                    
          fiscal  note from  Department of  Revenue and  one                                                                    
          new  zero   note  from  Department   of  Commerce,                                                                    
          Community and Economic Development.                                                                                   
                                                                                                                                
CSSB 18(FIN) am                                                                                                                 
          BUDGET: CAPITAL                                                                                                       
                                                                                                                                
         CSSB 18(FIN) was SCHEDULED but not HEARD.                                                                              
                                                                                                                                
CSSSSB 47(FIN)                                                                                                                  
          DISTRICT OPERATED BOARDING SCHOOLS                                                                                    
                                                                                                                                
          HCS CSSSSB  47(FIN) was REPORTED out  of committee                                                                    
          with a  "do pass" recommendation and  with one new                                                                    
          fiscal   impact  note   from  the   Department  of                                                                    
          Education and Early Development.                                                                                      
                                                                                                                                
SB 62     SCHOOL CONST. GRANTS/SMALL MUNICIPALITIES                                                                             
                                                                                                                                
          SB 62  was REPORTED  out of  committee with  a "do                                                                    
          pass"  recommendation  and   with  one  previously                                                                    
          published fiscal note: FN1(EED).                                                                                      
                                                                                                                                
CSSB 95(FIN)                                                                                                                    
         STATE EMPLOYEE COMPENSATION AND BENEFITS                                                                               
                                                                                                                                
          HCS  CSSB 95(FIN)  was REPORTED  out of  committee                                                                    
          with  a "do  pass" recommendation  and with  three                                                                    
          previously   published    fiscal   impact   notes:                                                                    
          FN1(GOV), FN2(LEG), FN3(CRT).                                                                                         
                                                                                                                                
                                                                                                                                
SENATE BILL NO. 7 am                                                                                                          
                                                                                                                                
     "An Act relating to the computation of the tax on the                                                                      
     taxable income of a corporation derived from sources                                                                       
     within the state."                                                                                                         
                                                                                                                                
2:04:47 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze discussed the meeting schedule.                                                                                
                                                                                                                                
Representative   Costello  MOVED   to  ADOPT   the  proposed                                                                    
committee substitute  for SB 7  am, Work  Draft 28-LS0104\C,                                                                    
(Bullock, 4/9/13).                                                                                                              
                                                                                                                                
Co-Chair Stoltze OBJECTED for discussion.                                                                                       
                                                                                                                                
DANIEL   GEORGE,   STAFF,   REPRESENTATIVE   BILL   STOLTZE,                                                                    
addressed the  changes in the  CS. He communicated  that the                                                                    
bill was the  companion to HB 68. He explained  that the tax                                                                    
bracket for  the first  $25,000 had been  zeroed out  in the                                                                    
Senate,   which  had   inadvertently   caused  tax   bracket                                                                    
calculations to add up incorrectly;  no relief was reflected                                                                    
for corporations  earning over  $25,000. The CS  added items                                                                    
related  to  the film  tax  incentive  program beginning  in                                                                    
Section 2.  The first item was  included on page 2,  line 29                                                                    
through  page  3,  line 6  and  prohibited  certain  content                                                                    
including   news,   weather,  current   event   programming,                                                                    
industrial  and   corporate  purposes,   advertisements  and                                                                    
infomercials,   political   advertisements,   and   sexually                                                                    
explicit content.  He stated that the  items were originally                                                                    
prohibited  under the  current film  tax program  that would                                                                    
expire on June 30, 2013.  He noted that the prohibitions had                                                                    
not  been   carried  forward  when  the   program  had  been                                                                    
continued the prior year.                                                                                                       
                                                                                                                                
Co-Chair   Stoltze   remarked    that   not   carrying   the                                                                    
prohibitions  forward  had  been  an  omission  rather  than                                                                    
commission.                                                                                                                     
                                                                                                                                
Mr.  George addressed  the  second change  to  the film  tax                                                                    
incentive  program (page  3). He  pointed  to a  Legislative                                                                    
Legal Services  document (copy on  file) that  explained the                                                                    
transition  language. He  relayed that  the provision  would                                                                    
allow individual  productions that  qualified under  the old                                                                    
program  to   finish  their  productions  and   to  continue                                                                    
receiving  the  film  tax  credits  instead  of  needing  to                                                                    
reapply in the new program.                                                                                                     
                                                                                                                                
Co-Chair  Stoltze asked  the department  to  comment on  the                                                                    
language.                                                                                                                       
                                                                                                                                
2:09:46 PM                                                                                                                    
                                                                                                                                
ROBERTA  GRAHAM,   ASSISTANT  COMMISSIONER,   DEPARTMENT  OF                                                                    
COMMERCE,  COMMUNITY   AND  ECONOMIC   DEVELOPMENT  (DCCED),                                                                    
shared  that  DCCED  believed   the  language  provided  the                                                                    
necessary transition  to allow  the film office  to complete                                                                    
projects  that had  received a  notice of  qualification and                                                                    
were  currently underway.  She  expounded  that without  the                                                                    
language there would be more  than 55 productions that would                                                                    
have  to go  through  a reapplication  process; the  process                                                                    
would require considerable time  and effort. She stated that                                                                    
the department supported the amendment.                                                                                         
                                                                                                                                
Co-Chair  Stoltze referenced  some negative  public reaction                                                                    
to legislative  efforts and  remarked on  working to  do the                                                                    
right thing  despite the comments. He  believed the reaction                                                                    
would be forgotten once the bill had passed.                                                                                    
                                                                                                                                
Representative Costello  asked for  comment about  the first                                                                    
addition included  in Section 2.  Ms. Graham  responded that                                                                    
Section 2 would  exclude five types of  productions that had                                                                    
been in  the original  bill prior  to a  change made  in the                                                                    
previous year. She  stated that the items  were important to                                                                    
exclude; DCCED  supported the exclusion of  news and weather                                                                    
programming and sexually explicit films.                                                                                        
                                                                                                                                
2:12:33 PM                                                                                                                    
                                                                                                                                
Co-Chair Austerman  asked how the department  felt about the                                                                    
benefit of  having the  film industry  in Alaska  versus the                                                                    
amount of tax the state credited back to the industry.                                                                          
                                                                                                                                
Ms.  Graham  answered that  the  film  industry was  in  its                                                                    
infancy in  Alaska. She referenced a  2012 legislative audit                                                                    
that looked at  the financial and the  operational pieces of                                                                    
the film incentive program, which  estimated a return to the                                                                    
state  of  approximately $18  million.  She  added that  the                                                                    
department's  estimate  of  return  to the  state  was  more                                                                    
conservative at  approximately $10 million; it  included the                                                                    
ground spend  in Alaska plus  wages earned by  Alaskans less                                                                    
the  tax credit.  She expounded  that the  program had  been                                                                    
successful  in its  employment of  Alaskans and  in bringing                                                                    
productions to the state.                                                                                                       
                                                                                                                                
Co-Chair Stoltze  appreciated the  department's endorsement.                                                                    
He   WITHDREW  his   OBJECTION.  There   being  NO   further                                                                    
OBJECTION, Work Draft 28-LS0104\C was ADOPTED.                                                                                  
                                                                                                                                
SENATOR  CATHY  GIESSEL,  SPONSOR  stated that  SB  7  would                                                                    
update  the corporate  income  tax  brackets. She  explained                                                                    
that  idea   for  the   legislation  was   a  result   of  a                                                                    
conversation  with  business  owners  who  had  pointed  out                                                                    
onerous  tax  brackets.  She  explained  that  the  top  tax                                                                    
bracket  was reached  at a  taxable income  of $90,000.  She                                                                    
furthered that the tax brackets  had been set in 1981; there                                                                    
had been  significant inflation since  that time,  which had                                                                    
resulted in a tax  increase for businesses. She communicated                                                                    
that  the legislation's  primary  benefit was  to small  and                                                                    
medium sized C corporations. The  top tax bracket would move                                                                    
from  $90,000  of  taxable income  to  $220,000.  The  major                                                                    
companies  that   would  be  impacted   by  the   bill  were                                                                    
construction, transportation, and  retail. She stressed that                                                                    
the  fiscal note  was less  than half  of 1  percent of  the                                                                    
corporate  income  tax   taken  in  by  the   state  from  C                                                                    
corporations.  She   stated  that  the  change   was  not  a                                                                    
significant   impact  to   the  state,   but  that   it  was                                                                    
significant  to  the  companies; it  left  more  hard-earned                                                                    
money in their hands.                                                                                                           
                                                                                                                                
Senator  Giessel communicated  that  the  bill had  received                                                                    
wide  support from  individuals and  many state  chambers of                                                                    
commerce throughout  Alaska including the state  chamber and                                                                    
chambers  in  Fairbanks,  Anchorage,  Seward,  Chugiak-Eagle                                                                    
River,  Juneau,  and Wasilla.  She  referenced  a letter  of                                                                    
support  from the  Nana Corporation  pointing  out that  its                                                                    
shareholder businesses  would benefit  from the  change. She                                                                    
stated  the change  was a  principle  of reduced  government                                                                    
take. She expressed  delight about an amendment  made in the                                                                    
Senate that would zero out  the first tax bracket. She added                                                                    
that the amendment had resulted  in the readjustment of some                                                                    
of the numbers included in the bill.                                                                                            
                                                                                                                                
2:17:24 PM                                                                                                                    
                                                                                                                                
Senator Giessel  referred to a legislative  affairs research                                                                    
paper in members'  packets (copy on file). She  pointed to a                                                                    
chart  on page  3  and stated  that the  lower  half of  the                                                                    
brackets showed  the current system. She  discussed that her                                                                    
colleague in the  Senate had stated that the  zeroing out of                                                                    
the  first tax  bracket would  impact 14,000  companies that                                                                    
were  eligible to  pay  corporate income  tax  in 2011.  She                                                                    
corrected  that  only  1,300  companies  would  be  impacted                                                                    
(there  were 14,000  companies that  fell  into the  bracket                                                                    
(some  were S  Corporations and  LLCs), but  due to  various                                                                    
deductions  the companies  would not  all be  affected). She                                                                    
reiterated that the bill would  leave more hard earned money                                                                    
in the hands of small businesses.                                                                                               
                                                                                                                                
2:19:26 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze CLOSED public testimony.                                                                                       
                                                                                                                                
Representative  Costello discussed  a fiscal  note from  the                                                                    
Department of Revenue (DOR) that  showed no fiscal impact to                                                                    
operating  expenditures and  an  annual $5  million loss  in                                                                    
state revenue from FY 15 through FY 19.                                                                                         
                                                                                                                                
Representative Kawasaki  asked for verification that  the $5                                                                    
million change  in revenue would  result from a  decrease in                                                                    
tax filers. He asked if  fewer DOR employees would be needed                                                                    
to process taxes if there was a reduction in filers.                                                                            
                                                                                                                                
JOHANNA BALES, EXECUTIVE  DIRECTOR, TAX DIVISION, DEPARTMENT                                                                    
OF  REVENUE (via  teleconference), stated  that there  would                                                                    
not  be fewer  filers.  The bill  affected  tax rates  only;                                                                    
filers in  the zero tax  bracket would still be  required to                                                                    
file a return.                                                                                                                  
                                                                                                                                
Representative Gara  asked for  verification that  the state                                                                    
would collect  $5 million less  per year beginning in  FY 15                                                                    
because of the reduction to  the tax rate. Ms. Bales replied                                                                    
in the affirmative. She detailed  that the bill would adjust                                                                    
the tax rate  down; every current tax payer  would receive a                                                                    
reduction  in  their  tax liability.  She  stated  that  the                                                                    
fiscal note of $5 million  was an estimate. There were close                                                                    
to 1,500  tax payers who  would see some reduction;  some of                                                                    
tax payers would fall into the zero tax liability bracket.                                                                      
                                                                                                                                
2:22:04 PM                                                                                                                    
                                                                                                                                
Representative Costello addressed a  zero impact fiscal note                                                                    
from  the Department  of  Commerce,  Community and  Economic                                                                    
Development.                                                                                                                    
                                                                                                                                
Representative Costello  MOVED to  REPORT HCS SB  7(FIN) out                                                                    
of  committee   with  individual  recommendations   and  the                                                                    
accompanying fiscal notes.                                                                                                      
                                                                                                                                
Representative  Gara OBJECTED  for discussion.  He would  be                                                                    
comfortable  eliminating taxes  for  businesses making  less                                                                    
than $25,000  per year or  lowering the rate  for businesses                                                                    
making less  than $50,000  per year.  He questioned  how the                                                                    
state  would  pay for  things  if  various revenue  reducing                                                                    
bills  and budget  costs were  passed; he  stressed that  $5                                                                    
million was  a significant amount of  money. He communicated                                                                    
that  he  would  probably  cosponsor the  legislation  in  a                                                                    
different year;  however, under the budget  circumstances he                                                                    
could not  support it.  He discussed  whether the  state was                                                                    
taxing  too  much and  stated  that  the high  bracket  only                                                                    
included  a 9  percent tax  on taxable  income over  $2,000;                                                                    
below $2,000 was  bracketed. He wished he  could support the                                                                    
bill,  but pointed  to items  that needed  funding including                                                                    
infrastructure, schools,  slowing down the depletion  of the                                                                    
state's savings (until it was  known whether current oil tax                                                                    
legislation  was  working  -   if  implemented),  funding  a                                                                    
gasline, energy  projects, university buildings,  and other.                                                                    
He  pointed   to  two  $100  million   university  buildings                                                                    
currently in need  of funding and surmised  that there would                                                                    
be  more  $100  million  buildings needing  funding  in  the                                                                    
future.  He  did not  believe  the  state could  afford  the                                                                    
legislation. He opined that there  were other ways to reduce                                                                    
taxes in a  less costly way, such as time  limited taxes for                                                                    
new businesses, and eliminating  "nuisance" taxes at the low                                                                    
end. Representative Gara WITHDREW his OBJECTION.                                                                                
                                                                                                                                
There being NO further OBJECTION,  HCS SB 7 was REPORTED out                                                                    
of committee  with a "do  pass" recommendation and  with one                                                                    
new fiscal note from Department  of Revenue and one new zero                                                                    
note  from Department  of Commerce,  Community and  Economic                                                                    
Development.                                                                                                                    
                                                                                                                                
2:26:28 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:31:28 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair Neuman took over as Chair.                                                                                           
                                                                                                                                
CS FOR SENATE BILL NO. 95(FIN)                                                                                                
                                                                                                                                
     "An Act relating to the compensation, allowances,                                                                          
     geographic differentials in pay, and leave of certain                                                                      
     public officials,  officers, and employees  not covered                                                                    
     by  collective bargaining  agreements; relating  to the                                                                    
     compensation  and geographic  differentials  in pay  of                                                                    
     certain  justices  and   judges;  relating  to  certain                                                                    
     petroleum engineers  and petroleum  geologists employed                                                                    
     by  the Department  of Natural  Resources; relating  to                                                                    
     increased  pay for  certain partially  exempt employees                                                                    
     of   the  state   in  specific   circumstances;  making                                                                    
     conforming amendments;  and providing for  an effective                                                                    
     date."                                                                                                                     
                                                                                                                                
2:31:53 PM                                                                                                                    
                                                                                                                                
Representative   Costello  MOVED   to  ADOPT   the  proposed                                                                    
committee substitute  for CSSB  95, Work  Draft 28-GS1101\C,                                                                    
(Wayne, 4/11/13).                                                                                                               
                                                                                                                                
Vice-Chair Neuman OBJECTED for discussion.                                                                                      
                                                                                                                                
DANIEL GEORGE, STAFF,  REPRESENTATIVE BILL STOLTZE discussed                                                                    
that the  CS included  five changes. He  pointed to  page 2,                                                                    
lines 24  through 25 where  language clarified who  would be                                                                    
subject to  the leave  accrual portions of  the legislation.                                                                    
He  noted  that  previously  the  section  had  referred  to                                                                    
"officers and  employees of the  state employed  before July                                                                    
1,  2013,  are entitled  to  personal  leave with  pay  that                                                                    
accrues  as follows..."  The language  had  been changed  to                                                                    
read  "Officers and  employees of  the state  who are  first                                                                    
employed before July 1, 2013,  in a position for which leave                                                                    
may  accrue are  entitled to  personal leave  with pay  that                                                                    
accrues as  follows..." He  noted that  the same  change had                                                                    
been made to page 3, lines 5 through 6.                                                                                         
                                                                                                                                
Mr. George  pointed to the  next change  on page 4,  line 12                                                                    
where the word  "and" had replaced the word "or"  at the end                                                                    
of the  sentence ["(1) be  exempt from the  limitation under                                                                    
(b)  of this  section;  and..."]. He  directed attention  to                                                                    
page 4,  lines 15  through 21 where  paragraph (e)  had been                                                                    
inserted.                                                                                                                       
                                                                                                                                
2:34:26 PM                                                                                                                    
                                                                                                                                
Mr. George reiterated  the change on page 4,  line 12, where                                                                    
the word "or"  had been replaced with the word  "and" at the                                                                    
end of the  sentence. He pointed to the next  change on page                                                                    
4,  lines 15  through  21  where a  paragraph  (e) had  been                                                                    
inserted. A  drafting error had  been corrected on  page 12,                                                                    
line 18, where the language  "sec. 15" replaced "sec. 16" to                                                                    
maintain consistency throughout the paragraph.                                                                                  
                                                                                                                                
Representative Holmes asked about page 4, lines 15-21.                                                                          
                                                                                                                                
2:36:02 PM                                                                                                                    
                                                                                                                                
CURTIS   THAYER,   DEPUTY    COMMISSIONER,   DEPARTMENT   OF                                                                    
ADMINISTRATION,  pointed  to  various  staff  available  for                                                                    
questions. He mentioned that HB  195 was a similar bill. The                                                                    
bill  established   the  consistency  for  cost   of  living                                                                    
allowances  for  non-covered  employees   of  1  percent,  1                                                                    
percent, and 2.5 percent for  the next 3 years respectfully.                                                                    
He detailed  that the increases had  recently been bargained                                                                    
with  the  public employee  unions.  The  bill also  reduced                                                                    
leave  accrual   for  new  hires;  current   employees  were                                                                    
grandfathered into the  previous accrual rate. Additionally,                                                                    
a leave cap  of 1,000 hours was created for  the first time;                                                                    
hours that were  currently earned and were  over 1,000 hours                                                                    
were protected.  The bill  decreased the  percentage between                                                                    
pay  increments for  exempt and  partially exempt  employees                                                                    
from 3.75 percent to 3.25 percent every 2 years.                                                                                
                                                                                                                                
Mr. Thayer  continued to discuss  the legislation;  it would                                                                    
allow  the  state to  enhance  its  ability to  recruit  and                                                                    
retain   skilled  professionals   in   highly  complex   and                                                                    
specialized  positions such  as  the  Department of  Natural                                                                    
Resources manager  position for  the Division  of Geological                                                                    
and Geophysical  surveys (the position  had been  vacant for                                                                    
more than 1 year). The  bill would also implement geographic                                                                    
pay differentials;  he noted that  the CS  included justices                                                                    
and judges.                                                                                                                     
                                                                                                                                
2:38:14 PM                                                                                                                    
                                                                                                                                
Representative  Munoz asked  if the  bill applied  area cost                                                                    
differentials  to exempt  and non-exempt  employees for  the                                                                    
first time. If not, she  wondered when the practice had been                                                                    
implemented.                                                                                                                    
                                                                                                                                
NICKI NEAL,  DIRECTOR, DIVISION OF PERSONNEL,  DEPARTMENT OF                                                                    
ADMINISTRATION, replied that it was  not the first time that                                                                    
the   geographic   differential   was  applied   to   exempt                                                                    
employees.  She believed  the statutory  provision had  been                                                                    
adopted  in  1966;  the provision  specifically  applied  to                                                                    
partially exempt  and non-covered classified  employees. She                                                                    
could not say  whether the provision had  first been applied                                                                    
to  exempt employees  upon its  implementation in  1966. She                                                                    
detailed  that a  number  of years  ago,  the provision  had                                                                    
begun to apply to exempt employees  who were paid off of the                                                                    
statutory salary schedule.                                                                                                      
                                                                                                                                
Representative Munoz  asked for comment on  a McDowell Group                                                                    
study  and  any  impact  it had  on  the  cost  differential                                                                    
calculations.                                                                                                                   
                                                                                                                                
2:39:52 PM                                                                                                                    
                                                                                                                                
Ms.  Neal replied  that the  McDowell Group  had recommended                                                                    
the  establishment of  geographic differential  pools. There                                                                    
were five  pools (including a  base pool) and  locations had                                                                    
been  grouped  based on  survey  results.  She relayed  that                                                                    
differences   between   surveys   were   not   statistically                                                                    
significant. For  example, one  pool including  ranges above                                                                    
base of 5  percent to 17 percent may have  been grouped with                                                                    
a geographic  differential of 11 percent.  She restated that                                                                    
a  statistically significant  difference  between the  pools                                                                    
did not exist.                                                                                                                  
                                                                                                                                
Vice-Chair Neuman  asked the department to  comment on other                                                                    
changes in the CS.                                                                                                              
                                                                                                                                
Ms. Neal  communicated that  Sections 1  through 3  had been                                                                    
added  in the  Senate CS.  The sections  provided geographic                                                                    
differential  to judges  and justices  on $100,000  of their                                                                    
base  salary;   the  current  geographic   differential  was                                                                    
applied   to  $40,000.   She   shared   that  the   proposed                                                                    
differential  was  consistent   with  rates  established  in                                                                    
Section 15  of the bill. Sections  4 and 5 had  been amended                                                                    
to clarify  that leave accrual  rates were  determined based                                                                    
on  an employee's  first  date  of hire  as  opposed to  the                                                                    
employee's most  recent appointment  date. An  editing error                                                                    
on page 4, line 12 had  been corrected and the word "or" had                                                                    
been  replaced  with  the  word  "and" at  the  end  of  the                                                                    
sentence.                                                                                                                       
                                                                                                                                
Ms.  Neal  continued  to  address   changes  in  the  CS.  A                                                                    
subsection (e) had  been added to the bill on  page 4 [lines                                                                    
15 through 21]. She relayed  that the wording of the section                                                                    
was  consistent with  wording in  Section  6 that  addressed                                                                    
what would occur  if 15 days of personal leave  was not used                                                                    
during  a 12-month  period. She  elaborated  that the  leave                                                                    
would  be  canceled  without  pay   unless  an  agency  head                                                                    
certified  in  writing  that the  employee  was  denied  the                                                                    
opportunity to take  the leave. Section 20  had been amended                                                                    
in  the Senate  CS to  define  public officers  as heads  of                                                                    
principle departments of the  executive branch and permanent                                                                    
and  temporary  employees  in   the  executive  branch  (not                                                                    
including  the   governor  and  lieutenant   governor).  She                                                                    
continued that  Section 16  had been  incorrectly referenced                                                                    
in Section  24, page 12, line  18 and had been  corrected to                                                                    
read "sec. 15."                                                                                                                 
                                                                                                                                
Vice-Chair  Neuman WITHDREW  his OBJECTION.  There being  NO                                                                    
further OBJECTION, Work Draft 28-GS1101\C was ADOPTED.                                                                          
                                                                                                                                
Representative Costello  asked the department to  comment on                                                                    
the problem  the bill attempted  to solve related  to leave.                                                                    
She wondered if the bill  would prevent a person from saving                                                                    
leave  to  use  at  a  future date  for  something  like  an                                                                    
extended vacation.                                                                                                              
                                                                                                                                
2:44:54 PM                                                                                                                    
                                                                                                                                
Mr. Thayer replied  the bill would require a  person who had                                                                    
over 400  hours of leave  to use  112.5 hours of  leave. The                                                                    
department had  bargained with unions  that one week  of the                                                                    
112.5 total  could be  cashed out.  He added  that employees                                                                    
could choose to cash out all but one week of leave.                                                                             
                                                                                                                                
Mr.  Thayer  addressed  the  leave  issue  as  a  whole.  He                                                                    
explained  that the  absence  of  a cap  on  leave had  been                                                                    
brought   to   the   forefront   during   the   department's                                                                    
negotiations  with unions.  He  noted that  a  cap that  had                                                                    
existed on  sick leave  had been  removed. He  conveyed that                                                                    
the state currently had an  unfunded leave liability of $164                                                                    
million.  One of  the bargaining  goals was  to address  the                                                                    
issue by  slowing down the  accrual for new  employees after                                                                    
July 1,  2013; the  change applied  to the  three bargaining                                                                    
units and  the legislation would  extend the change  to non-                                                                    
covered employees. The  bill placed a cap of  1,000 hours on                                                                    
accumulated leave (the cap had  also been bargained with the                                                                    
unions;  the Classified  Employees Association  union had  a                                                                    
cap  of  825  hours).  He   furthered  that  there  were  10                                                                    
employees  that  made up  35,000  hours  of leave  that  was                                                                    
valued at  $1.6 million. He  stated that the value  of leave                                                                    
over  $1,000 was  $1.2 million.  Under the  legislation, the                                                                    
liability  of  the future  10  employees  in outlying  years                                                                    
would be $400,000 instead of $1.6 million.                                                                                      
                                                                                                                                
Mr. Thayer continued  that the mandatory usage  of leave had                                                                    
been  increased under  the legislation.  The existing  usage                                                                    
requirement was one-week of leave  per year; the requirement                                                                    
had been increased to two  weeks of leave for employees with                                                                    
below 400 hours  of leave; employees with over  400 hours of                                                                    
leave would  be required to  take three weeks of  leave with                                                                    
the ability to cash in one  of the three weeks. He explained                                                                    
that a person  with 400 hours of leave  was accumulating 270                                                                    
hours, but they would only be  required to use 112 hours. He                                                                    
listed items  used by the  bill to address the  $164 million                                                                    
leave  liability  including  the   leave  cap,  new  accrual                                                                    
ratings, and increasing the mandatory  leave usage. He added                                                                    
that the  current liability would  not increase  because the                                                                    
department was  actively working to  reduce the amount  to a                                                                    
manageable level.                                                                                                               
                                                                                                                                
2:48:28 PM                                                                                                                    
                                                                                                                                
Representative Gara pointed to page  4, line 8. He addressed                                                                    
emergency situations  that would  enable an employee  to use                                                                    
more than  1,000 hours  of leave.  He thought  the exception                                                                    
would be  permissible in situations  beyond an  employee who                                                                    
was denied  the opportunity to  use leave. He  wondered what                                                                    
happened  if a  single mom  with four  children developed  a                                                                    
serious medical condition  and needed the leave  in order to                                                                    
receive treatment.  He asked  if the  hypothetical situation                                                                    
would be covered under the bill.                                                                                                
                                                                                                                                
Mr.  Thayer replied  that  1,000 hours  of  leave was  worth                                                                    
approximately 6  months. He communicated that  union members                                                                    
had access to  emergency leave that would provide  up to one                                                                    
month of health care.  He relayed that non-covered employees                                                                    
would have to rely on leave donated by colleagues.                                                                              
                                                                                                                                
Representative Gara  asked if the  department saw  a problem                                                                    
with the limit. Mr. Thayer replied in the negative.                                                                             
                                                                                                                                
Representative  Gara  believed  there   was  a  problem.  He                                                                    
elaborated that a union employee  would receive health care,                                                                    
but  no pay  for  an  additional month;  and  a mother  with                                                                    
cancer  needing extensive  treatment could  not use  accrued                                                                    
leave she had earned and worked  for to help her through the                                                                    
circumstance.                                                                                                                   
                                                                                                                                
Mr. Thayer  stated that  1,000 hours  would be  available to                                                                    
the employee for use.                                                                                                           
                                                                                                                                
Representative  Gara relayed  that medical  conditions could                                                                    
last beyond 6 months in some circumstances.                                                                                     
                                                                                                                                
Vice-Chair  Neuman   observed  that  a  Department   of  Law                                                                    
employee was available for questions as well.                                                                                   
                                                                                                                                
2:51:14 PM                                                                                                                    
                                                                                                                                
Ms.  Neal clarified  that  an employee  could  accrue up  to                                                                    
1,000 hours  and could  use any of  the leave  they accrued.                                                                    
She restated  the potential  medical situation  as described                                                                    
by  Representative  Gara and  noted  that  employees of  all                                                                    
bargaining  units and  non-covered  employees could  receive                                                                    
donated  leave   from  coworkers.  She  expounded   that  an                                                                    
employee  would  be paid  for  any  donated leave  received;                                                                    
health  insurance  would  continue for  the  any  particular                                                                    
month  when an  employee  was in  paid-leave  status at  the                                                                    
first  of   the  month.  She   specified  that   unions  had                                                                    
additional leave  programs such  as an emergency  leave bank                                                                    
that employees could contribute  to and a catastrophic leave                                                                    
bank;  supervisors and  confidential units  had catastrophic                                                                    
leave as well.  She relayed that a generous  amount of leave                                                                    
was  available.  She  added that  employees  were  typically                                                                    
generous with leave  donation when a coworker  had a medical                                                                    
situation.                                                                                                                      
                                                                                                                                
2:52:46 PM                                                                                                                    
                                                                                                                                
Representative  Gara   asked  for   a  description   of  the                                                                    
catastrophic leave bank.                                                                                                        
                                                                                                                                
Ms.  Neal  replied  that the  catastrophic  leave  bank  was                                                                    
available  to   several  unions   and  possibly   more.  She                                                                    
explained  that provisions  differed by  agreement; however,                                                                    
the  bank   was  most  commonly  filled   by  employees  who                                                                    
separated from the  state with an excess  leave balance. She                                                                    
discussed  that  years back  there  had  been a  distinction                                                                    
between  annual and  sick leave;  when  the conversion  took                                                                    
place  many  employees  ended  up  with  excess  sick  leave                                                                    
because  only  a  portion had  been  converted  to  personal                                                                    
leave. The  excess sick leave  was available to  an employee                                                                    
when they  had a significant medical  condition. The balance                                                                    
canceled when  an employee terminates state  service; all or                                                                    
a portion  of the  units were  placed into  the catastrophic                                                                    
leave bank.  The bank was  then available for  union members                                                                    
to  maintain  pay  status  typically  for  health  insurance                                                                    
purposes. She  stated that most  commonly the  bank provided                                                                    
enough leave  to keep  an employee in  pay status  the first                                                                    
couple  of  days  of  the   month  to  ensure  their  health                                                                    
insurance is paid.                                                                                                              
                                                                                                                                
Representative  Gara asked  whether anyone  was contributing                                                                    
to the catastrophic leave banks currently.                                                                                      
                                                                                                                                
Ms.  Neal  answered  that  some   units  had  a  substantial                                                                    
balance.  She shared  that there  were still  employees with                                                                    
excess  sick leave  balances. She  stated  that the  balance                                                                    
would likely be exhausted in  many years; however, a balance                                                                    
currently  existed that  employees  continued to  contribute                                                                    
to.                                                                                                                             
                                                                                                                                
2:55:16 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki asked how  much leave existed in the                                                                    
catastrophic  and other  union  funds. He  wanted to  ensure                                                                    
that  protection   existed  for   future  years.   Ms.  Neal                                                                    
responded that  the department maintained and  had access to                                                                    
the accounts. She would follow up with the balances.                                                                            
                                                                                                                                
Representative Kawasaki referred to  an amendment related to                                                                    
the geographic pay differentials he  had planned to offer to                                                                    
a  similar bill  (HB  195); he  did not  plan  to offer  the                                                                    
amendment  to  SB 95.  He  understood  that there  had  been                                                                    
controversy when  the first differentials had  been adopted.                                                                    
He did not  have reason to disagree with  the McDowell Group                                                                    
study, but  he observed that for  differential pay Fairbanks                                                                    
was  a  3  and  Anchorage   was  a  zero.  He  listed  other                                                                    
communities  that  were  listed  as  zeros  (Delta,  Denali,                                                                    
Cantwell) and  guessed that the  locations were on  the road                                                                    
system  and  would  be  more   expensive.  He  wondered  how                                                                    
frequently the survey was conducted.                                                                                            
                                                                                                                                
Mr. Thayer  replied that  a survey was  supposed to  be done                                                                    
every five years;  the most recent study  had been completed                                                                    
in 2009.  The department  would ask  for an  allocation from                                                                    
the legislature in FY 15 for an updated study.                                                                                  
                                                                                                                                
2:57:54 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki looked at  language in Section 16 of                                                                    
the bill  noted that the geographic  pay differential survey                                                                    
was subject to appropriation, which  was always the case. He                                                                    
wanted  to  ensure  that  the  division  would  conduct  the                                                                    
survey.  He  was  interested  to  know  whether  the  survey                                                                    
results and  pay rates  across the  state were  changing. He                                                                    
believed  the department  should  have  the information.  He                                                                    
noted  that  the   survey  was  not  a   given  because  the                                                                    
legislation  specified  that it  would  be  done subject  to                                                                    
appropriation.  He wanted  the department  to regularly  ask                                                                    
for money to fund the survey.                                                                                                   
                                                                                                                                
Ms. Thayer  understood Representative Kawasaki's  intent and                                                                    
ensured that  the department would make  the funding request                                                                    
at the five-year mark.                                                                                                          
                                                                                                                                
Representative Edgmon pointed  to pages 6 and 7  of the bill                                                                    
and  stressed  that   the  geographic  differential  numbers                                                                    
between  communities  did  not  make  sense.  He  looked  at                                                                    
various  communities:  Fairbanks  was   a  3,  nearby  Delta                                                                    
Junction  was  a zero,  Dillingham  was  a 37,  nearby  King                                                                    
Salmon  was a  50,  Bethel was  at  50, Nome  was  a 37.  He                                                                    
emphasized  that  the numbers  were  all  over the  map.  He                                                                    
wondered what  could take  place to  bring the  numbers into                                                                    
alignment.                                                                                                                      
                                                                                                                                
Mr.  Thayer   relayed  that   the  department   had  emailed                                                                    
responses  to  committee  members' questions  on  April  11,                                                                    
2013.  He replied  that the  Bethel differential  was higher                                                                    
than  those  for  Dillingham  and   Nome  because  the  2009                                                                    
McDowell Group study assigned  cost differentials to various                                                                    
locations  throughout   the  state  based  on   a  household                                                                    
consumption survey  and a retail price  survey. He furthered                                                                    
that  below  the  differentials assigned  to  the  locations                                                                    
Bethel had been a 1.53, Dillingham  was a 1.37, and Nome was                                                                    
at  1.39. The  study  had also  recommended  that the  state                                                                    
define  geographic differential  pay  pools  in the  various                                                                    
communities.    He   elaborated    that    based   on    the                                                                    
recommendations  Bethel  had  been  placed  at  50  percent;                                                                    
whereas Dillingham and  Nome had been placed  at 37 percent.                                                                    
He  furthered  that  the household  consumption  and  retail                                                                    
price  surveys  had  looked  at  utilities,  cost  of  fuel,                                                                    
transportation costs, and home  prices. He explained that in                                                                    
some  of the  rural areas  such as  Glennallen and  Tok many                                                                    
residents did  not have mortgages,  which was  factored into                                                                    
the study as  a low cost of living in  the areas compared to                                                                    
Fairbanks  or  Anchorage with  home  values  of $300,000  or                                                                    
$400,000.  He noted  that the  McDowell Group  could discuss                                                                    
the survey with members.                                                                                                        
                                                                                                                                
Representative  Edgmon did  not want  to belabor  the point,                                                                    
but restated that the numbers in the survey were disparate.                                                                     
                                                                                                                                
Vice-Chair  Neuman had  heard  similar  comments from  other                                                                    
committee members.                                                                                                              
                                                                                                                                
3:02:50 PM                                                                                                                    
                                                                                                                                
Representative  Thompson  wondered  why Valdez  and  Cordova                                                                    
were at 11 and  Yakutat was at zero. He looked  at page 7 of                                                                    
the bill and noted that  Deadhorse was listed as 50 percent.                                                                    
He relayed  that state employees  traveled to  the community                                                                    
to  keep snow  cleared at  the airport;  he wondered  if the                                                                    
employees  were living  in state  housing  and whether  they                                                                    
received a  50 percent  differential or  per diem.  He asked                                                                    
about the Coldfoot community as well.                                                                                           
                                                                                                                                
Ms. Neal answered  that if Deadhorse was  an employee's duty                                                                    
station they  would receive  the [50  percent] differential;                                                                    
however,  if  their  duty  station   was  in  Fairbanks  the                                                                    
employee would  receive the  Fairbanks differential  and per                                                                    
diem.                                                                                                                           
                                                                                                                                
Representative  Thompson  asked  for  verification  that  an                                                                    
employee  based in  Fairbanks traveling  to Deadhorse  for 3                                                                    
weeks of work  would be paid the  Fairbanks differential and                                                                    
per diem.                                                                                                                       
                                                                                                                                
Ms. Neal replied in the affirmative.                                                                                            
                                                                                                                                
3:03:55 PM                                                                                                                    
                                                                                                                                
Representative Wilson asked  about the household consumption                                                                    
survey. She  wondered if the  survey looked at the  price of                                                                    
housing or if a person had a mortgage.                                                                                          
                                                                                                                                
Mr. Thayer replied that the  study had looked at both items.                                                                    
He  noted  that phone  interviews  had  been conducted  with                                                                    
employees to help with the study.                                                                                               
                                                                                                                                
Representative Wilson  asked how much the  studies cost. Mr.                                                                    
Thayer replied that the survey cost approximately $500,000.                                                                     
                                                                                                                                
Representative  Wilson  wondered  how  many  employees  were                                                                    
contacted for  the study.  Ms. Neal  replied that  the study                                                                    
results indicated how many employees  were contacted in each                                                                    
location. She  could follow  up with  the data  and informed                                                                    
members  that the  study was  available on  the department's                                                                    
website.                                                                                                                        
                                                                                                                                
Representative  Wilson  speculated   that  the  state  could                                                                    
conduct a cost of living  survey for less than $500,000. She                                                                    
recalled that  communities did not  believe the  prior study                                                                    
was accurate.  She wondered if  there would be a  better way                                                                    
to conduct the study.                                                                                                           
                                                                                                                                
Ms.  Neal replied  that  the study  determined  the cost  of                                                                    
living  in an  area  and included  responses  from a  random                                                                    
sample of community  members. The prior study  had cost just                                                                    
under $400,000  and the  department estimated  the following                                                                    
study  would  be around  $500,000,  but  that it  would  not                                                                    
exceed the amount.                                                                                                              
                                                                                                                                
3:06:12 PM                                                                                                                    
                                                                                                                                
Representative Wilson  asked if  a Request for  Proposal was                                                                    
submitted  for   the  survey.  Ms.  Neal   answered  in  the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Vice-Chair  Neuman asked  Representative Holmes  to look  at                                                                    
the cost of the surveys to  see if there were ways to reduce                                                                    
the number.                                                                                                                     
                                                                                                                                
3:06:49 PM                                                                                                                    
                                                                                                                                
Representative  Gara had  seen numbers  changed in  the past                                                                    
based  on personal  experience  and  knowledge of  committee                                                                    
members.   He   surmised   that   Representative   Thompson,                                                                    
Representative  Edgmon, or  other committee  members may  be                                                                    
able to  point out illogical geographical  pay differentials                                                                    
and  to modify  the  numbers until  more  accurate data  was                                                                    
available.                                                                                                                      
                                                                                                                                
Representative Gara  pointed to page  4, lines 6  through 8.                                                                    
He asked  for verification that  a state employee  could use                                                                    
more than 1,000  hours of leave if they had  been denied the                                                                    
opportunity to use it.                                                                                                          
                                                                                                                                
Ms.  Neal  replied  that  the   provision  would  enable  an                                                                    
employee to  accumulate more  than 1,000  hours of  leave if                                                                    
they  were denied  the  opportunity to  use  it during  that                                                                    
year.  She  noted  that  the  ability  was  subject  to  the                                                                    
adoption of  regulations by the  personnel board.  She added                                                                    
that providing the ability was the department's intent.                                                                         
                                                                                                                                
Representative Gara  wondered if the department  was keeping                                                                    
track of leave hours that employees were not able to use.                                                                       
                                                                                                                                
Ms. Neal replied that an  employee would be required to keep                                                                    
their leave  balance at 1,000 hours  or below at the  end of                                                                    
the leave  year. Employees had  the ability to use  leave or                                                                    
to  cash  it in  to  keep  the  level  at 1,000  hours.  The                                                                    
department did  not allow employees to  accumulate more than                                                                    
1,000 hours of leave.                                                                                                           
                                                                                                                                
Representative Gara  queried how the department  would grant                                                                    
more  than 1,000  hours to  people who  had been  denied the                                                                    
opportunity  to  use  leave.   Ms.  Neal  replied  that  DOA                                                                    
notified employees  and supervisors  prior to  the end  of a                                                                    
leave  year  that  the employee  would  exceed  the  maximum                                                                    
allowable limit  at the end  of the year. She  detailed that                                                                    
the employee  had the  option of  scheduling the  leave with                                                                    
the  supervisor's approval  or cashing  it out  to keep  the                                                                    
number of hours at or below 1,000.                                                                                              
                                                                                                                                
3:09:44 PM                                                                                                                    
                                                                                                                                
Representative   Gara  asked   for  verification   that  the                                                                    
department   allowed   employees   who   were   denied   the                                                                    
opportunity to use the leave to exceed the 1,000 limit.                                                                         
                                                                                                                                
Ms. Neal  responded in the affirmative.  She elaborated that                                                                    
regulations would allow the department  head to certify that                                                                    
an  employee had  been  denied the  opportunity  to use  the                                                                    
leave,  which would  enable their  leave  balance to  accrue                                                                    
beyond the 1,000 hour limit.                                                                                                    
                                                                                                                                
3:11:15 PM                                                                                                                    
                                                                                                                                
Representative  Thompson asked  whether money  had been  set                                                                    
aside to fund the leave balance or if it was unfunded.                                                                          
                                                                                                                                
Ms. Neal replied  that the state had a  reserve account. The                                                                    
balance was sufficient  to pay the leave for  the next year,                                                                    
but it  was not sufficient  to pay  out all of  the existing                                                                    
leave.                                                                                                                          
                                                                                                                                
Representative Thompson  shared that when he  had been mayor                                                                    
[City  of  Fairbanks]  the  city had  200  employees  and  a                                                                    
$700,000 unfunded leave balance.  He expounded that the city                                                                    
had eventually  set the  money aside  and had  begun funding                                                                    
unused leave on  an annual basis. He  asked for verification                                                                    
that the state had a leave  balance set aside to help offset                                                                    
the problem.                                                                                                                    
                                                                                                                                
Ms. Neal answered in the affirmative.                                                                                           
                                                                                                                                
Representative Gara MOVED to ADOPT Amendment 1:                                                                                 
                                                                                                                                
     Page 4, line 8:                                                                                                            
                                                                                                                                
          Insert "leave" after "or for illness confirmed in                                                                     
          writing by a physician"                                                                                               
                                                                                                                                
Representative Wilson OBJECTED.                                                                                                 
                                                                                                                                
Representative  Gara spoke  to the  amendment. He  explained                                                                    
that there  were rare circumstances  in which a  person knew                                                                    
they  would  need  to  take  time off  due  to  illness.  He                                                                    
believed that  a person was  entitled to leave  earned above                                                                    
1,000 hours  if an illness  required them to take  time off.                                                                    
He understood  the state's goal  with the cap,  but stressed                                                                    
that an exception should exist  in cases of serious illness.                                                                    
He detailed  that the  extra 40  to 80  or more  hours would                                                                    
make  a   difference  to   individuals.  He   cited  various                                                                    
financial responsibilities a person  may have such as caring                                                                    
for children, paying  for school, and other.  He opined that                                                                    
an exception  for medical leave  was of equal  importance to                                                                    
the one allowable exception that  enabled employees who were                                                                    
not  permitted to  use leave  to accumulate  over 1,000  per                                                                    
year.  He  stated  that  under  the  circumstance  employees                                                                    
should be granted  access to leave earned;  he considered it                                                                    
a work ethic reward.                                                                                                            
                                                                                                                                
Representative Thompson  asked how the amendment  would read                                                                    
in the bill.                                                                                                                    
                                                                                                                                
Representative Gara  pointed to  page 4,  line 7  and stated                                                                    
that   the  amendment   would  modify   the  bill   to  read                                                                    
"...because  the   officer  or   employee  was   denied  the                                                                    
opportunity to  use personal leave or  for illness confirmed                                                                    
in writing by a physician."                                                                                                     
                                                                                                                                
Representative  Thompson pointed  to  the drafted  amendment                                                                    
and observed  that it would  insert the word  "leave" [after                                                                    
"or for illness confirmed in writing by a physician"].                                                                          
                                                                                                                                
Representative Gara MOVED to AMEND Amendment 1 to read:                                                                         
                                                                                                                                
     Page 4, line 8                                                                                                             
                                                                                                                                
          Insert after "leave" "or for illness confirmed in                                                                     
          writing by a physician"                                                                                               
                                                                                                                                
Representative Holmes OBJECTED for discussion.                                                                                  
                                                                                                                                
Vice-Chair Neuman  asked Representative Gara to  clarify how                                                                    
the amendment would read in the bill.                                                                                           
                                                                                                                                
Representative   Gara  replied   that   with  the   proposed                                                                    
amendment  the bill  would read  "...because the  officer or                                                                    
employee was  denied the opportunity  to use  personal leave                                                                    
or for illness confirmed in writing by a physician."                                                                            
                                                                                                                                
Representative  Holmes  asked   for  the  administration  to                                                                    
comment on the  amendment. She did not  believe the language                                                                    
in Amendment  1 would  accomplish the sponsor's  intent. She                                                                    
detailed that the  bill section related to how  much leave a                                                                    
person could accumulate; whereas,  the sponsor had discussed                                                                    
the  amendment in  the context  of how  much leave  a person                                                                    
could use.  She understood that the  legislation would allow                                                                    
an employee  to accumulate  1,000 hours  of leave;  a person                                                                    
who became ill  could use all 1,000 hours, but  would not be                                                                    
accumulating additional hours.                                                                                                  
                                                                                                                                
Vice-Chair Neuman clarified that  the amendment to Amendment                                                                    
1 was before the committee.                                                                                                     
                                                                                                                                
Representative  Holmes WITHDREW  her OBJECTION.  There being                                                                    
NO further OBJECTION, Amendment 1 was AMENDED.                                                                                  
                                                                                                                                
Vice-Chair Neuman restated the amendment as amended.                                                                            
                                                                                                                                
Representative Gara affirmed.                                                                                                   
                                                                                                                                
Representative Munoz asked if  the amendment would allow for                                                                    
a  continual  accumulation  of hours  over  the  1,000  hour                                                                    
limit.                                                                                                                          
                                                                                                                                
Ms. Neal replied  in the affirmative. She  clarified that an                                                                    
employee's  leave balance  would reduce  if they  became ill                                                                    
and  began to  use  their  leave. As  long  as the  employee                                                                    
remained in paid-leave status they  would continue to accrue                                                                    
leave.  She furthered  that when  an employee  was on  leave                                                                    
full-time they would use leave  faster than they accrued it;                                                                    
therefore, they would  fall below the 1,000  hours and would                                                                    
not reach a  point where they would  accumulate beyond 1,000                                                                    
hours.                                                                                                                          
                                                                                                                                
Vice-Chair  Neuman pointed  to language  on page  4, line  4                                                                    
stating that  the personnel board may  adopt regulations. He                                                                    
wondered  if  the  provision  allowed  the  board  to  adopt                                                                    
regulations that would cover the amendment.                                                                                     
                                                                                                                                
Ms. Neal answered in the affirmative.                                                                                           
                                                                                                                                
3:19:42 PM                                                                                                                    
                                                                                                                                
Representative Thompson  pointed to  a situation in  which a                                                                    
person  may realize  they would  need major  surgery 5  or 6                                                                    
months in  the future that  would require recovery  time. He                                                                    
asked for  verification that the  amendment would  allow the                                                                    
person to  accumulate more than  1,000 hours to  ensure they                                                                    
had sufficient leave time accrued for recovery.                                                                                 
                                                                                                                                
Ms. Neal affirmed.                                                                                                              
                                                                                                                                
Representative Costello stated that  the intent of Amendment                                                                    
1 was  to allow a person  to accrue and use  more leave. She                                                                    
observed that  under the  system a  person could  not accrue                                                                    
more  than 1,000  hours of  leave while  they were  in paid-                                                                    
leave status. She believed the  amendment could also address                                                                    
a  situation where  a person  knew they  would need  to take                                                                    
leave  in the  future  to  deal with  a  medical issue.  She                                                                    
detailed that  if the person  accrued more than  1,000 hours                                                                    
and had a letter from a  doctor they would be allowed to use                                                                    
the total hours of leave earned.                                                                                                
                                                                                                                                
Ms. Neal replied that the  tracking of the issue might prove                                                                    
challenging.                                                                                                                    
                                                                                                                                
Representative  Costello countered  that  under the  current                                                                    
bill the  department would  track individuals  accruing more                                                                    
than 1,000 hours  who had not been permitted  to take leave.                                                                    
She wondered why there would  be a difference in the ability                                                                    
to track one circumstance and not another.                                                                                      
                                                                                                                                
Ms.  Neal  agreed  that  tracking  would  be  available  for                                                                    
conditions under the amendment [if adopted].                                                                                    
                                                                                                                                
Vice-Chair Neuman  added that the amendment  would allow the                                                                    
personnel  board  to  adopt regulations  to  deal  with  the                                                                    
issues.                                                                                                                         
                                                                                                                                
3:23:12 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki  pointed to a circumstance  in which                                                                    
a person had  saved up leave in anticipation  of double knee                                                                    
replacement surgery.  He believed individuals  were planning                                                                    
ahead for  major medical needs more  frequently. He wondered                                                                    
if  a person  could take  leave if  another person  in their                                                                    
family was ill.                                                                                                                 
                                                                                                                                
Ms. Neal  replied in  the affirmative;  a person  could take                                                                    
leave  to care  for  a  family member.  She  pointed to  the                                                                    
existence of federal and state family leave acts.                                                                               
                                                                                                                                
Representative Kawasaki  spoke in support of  the amendment.                                                                    
He  discussed that  the Fairbanks  Memorial  Hospital had  a                                                                    
leave bank  and a maximum  leave cap of 650  hours; however,                                                                    
the hospital also  had the ability to surpass  the limit for                                                                    
items  such as  adult  care.  He provided  an  example of  a                                                                    
husband and  wife sharing  duties to  care for  elder family                                                                    
members.  He believed  the circumstances  were arising  more                                                                    
and more frequently.                                                                                                            
                                                                                                                                
Representative  Gara asked  for verification  that a  person                                                                    
could  use  leave  if they  accrued  it.  Another  committee                                                                    
member or  an administration  representative replied  in the                                                                    
affirmative [inaudible].                                                                                                        
                                                                                                                                
Representative  Wilson wondered  if  the  department was  in                                                                    
favor  of   the  amendment.  She   stated  that   the  issue                                                                    
represented a policy call and  related to how much liability                                                                    
the state would have. She  believed 1,000 hours of leave was                                                                    
substantial. She  read the proposed amendment:  "for illness                                                                    
confirmed  in writing  by a  physician."  She stressed  that                                                                    
there were  a multitude  of illnesses,  some of  which would                                                                    
have  a minor  impact;  however, the  minor illnesses  could                                                                    
also  be  brought  to  a   supervisor  for  increased  leave                                                                    
approval under  the amendment. She surmised  that the intent                                                                    
of the  existing exception that  would allow an  employee to                                                                    
exceed  1,000  hours  of  leave   was  related  to  specific                                                                    
situations  where specialists  with  unique expertise  could                                                                    
not  take time  off. She  opined that  the current  language                                                                    
would not  create a significant  amount of tracking  for the                                                                    
department,  but  that  the amendment  could  increase  that                                                                    
number substantially and may require  DOA to employ a person                                                                    
to  provide   the  tracking   function.  She   believed  the                                                                    
amendment was counterproductive to  the goal of reducing the                                                                    
state's liability.                                                                                                              
                                                                                                                                
3:26:54 PM                                                                                                                    
                                                                                                                                
Mr.  Thayer noted  that the  department  had not  previously                                                                    
discussed the amendment. He reminded  the committee that the                                                                    
bill  only applied  to  1,300  non-covered executive  branch                                                                    
employees (such as  employees of the Department  of Law). He                                                                    
shared the  concern that non-life threatening  illnesses may                                                                    
be  harder  to track  or  defend;  the  goal  was to  cap  a                                                                    
liability.  He  stated  that there  was  a  compassion  that                                                                    
played  into the  conversation related  to life  threatening                                                                    
illnesses. He relayed  that the unions felt  that six months                                                                    
was a  generous leave  amount; the  unions had  been granted                                                                    
the 1,000 hour cap and he  felt it made sense to provide the                                                                    
same number for non-covered employees.                                                                                          
                                                                                                                                
Representative Wilson voiced her  opposition to Amendment 1.                                                                    
She  believed the  amendment  would cause  the  issue to  be                                                                    
brought up for union contracts.  She furthered that the idea                                                                    
had come at  a late notice and she did  not know exactly how                                                                    
it would  impact the bill. She  opined that if the  idea was                                                                    
good that it should  be introduced the following legislative                                                                    
session for  inclusion in all contracts  instead of applying                                                                    
it to a limited number of employees.                                                                                            
                                                                                                                                
3:28:41 PM                                                                                                                    
                                                                                                                                
Representative Thompson  spoke in support of  the amendment.                                                                    
He surmised  that if a person  knew that they were  going to                                                                    
need  a  double hip  replacement  or  knee replacement  that                                                                    
regulations would  specify the requirement  for confirmation                                                                    
by a physician explaining how  many months a person would be                                                                    
out of  work. He believed it  would be up to  the department                                                                    
to outline  the criteria. He  stressed that a  person should                                                                    
be able to  save leave hours if they provided  a letter from                                                                    
a physician.                                                                                                                    
                                                                                                                                
Vice-Chair Neuman  stated that the personnel  board was able                                                                    
to  adopt  regulations. He  remarked  that  there were  many                                                                    
unknowns related to the issue.                                                                                                  
                                                                                                                                
Representative  Holmes communicated  that  she  was "on  the                                                                    
fence" regarding  the amendment. She believed  the amendment                                                                    
would not  help people plan  far enough ahead  for illnesses                                                                    
such as cancer,  but that it would help  people planning for                                                                    
surgery.  She discussed  that  the  amendment would  provide                                                                    
more  generous   terms  to   exempt  and   partially  exempt                                                                    
employees than to union employees.                                                                                              
                                                                                                                                
3:30:43 PM                                                                                                                    
                                                                                                                                
Representative Costello  wondered whether the  amendment was                                                                    
too vague  or if  the department  could use  the committee's                                                                    
intent as a guideline for the adoption of regulations.                                                                          
                                                                                                                                
Mr. Thayer  replied that the committee's  testimony could be                                                                    
gathered to  help formulate  regulations. He  understood the                                                                    
intent and saw  a need for a similar  amendment; however, he                                                                    
was concerned about who would  determine whether an employee                                                                    
needed extra  leave hours.  He stressed  that the  state did                                                                    
not want to  get into situations in which an  employee had a                                                                    
significant amount of leave that  they could cash out at any                                                                    
time. He furthered  that if leave accrual  above 1,000 hours                                                                    
was allowed it  would necessary to define that it  was for a                                                                    
medical reason, when  it would occur, and how  long it would                                                                    
take. He  stated that  the amendment  alone would  not allow                                                                    
the department  to accomplish the definition.  He pointed to                                                                    
a  situation where  an employee  could amass  many hours  of                                                                    
leave, decide not  to have surgery, and then  cash the leave                                                                    
out at retirement.                                                                                                              
                                                                                                                                
3:32:28 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Neuman wondered  if  the  amendment would  allow                                                                    
personnel  to  adopt  regulations  that  would  address  the                                                                    
concerns.                                                                                                                       
                                                                                                                                
Representative Costello  was aware of the  growing liability                                                                    
to the state.  She noted that the amendment  was intended to                                                                    
address circumstances  in which a person  needed extra leave                                                                    
for use  at a specific time.  She pointed to the  word "may"                                                                    
on page  4 ["the  personnel board  may adopt  regulations to                                                                    
allow an  exemption from the requirements..."]  and wondered                                                                    
if it  meant the  department would not  be required  to take                                                                    
any action.                                                                                                                     
                                                                                                                                
Ms.  Neal replied  that it  was the  department's intent  to                                                                    
adopt regulations,  but the language  did not require  it to                                                                    
do so.                                                                                                                          
                                                                                                                                
Representative Costello asked for  a track record of donated                                                                    
leave  hours. She  wondered whether  there were  individuals                                                                    
who received a tremendous amount of donated leave.                                                                              
                                                                                                                                
Ms.  Neal replied  in the  affirmative. She  elaborated that                                                                    
employees were often very  sympathetic when their co-workers                                                                    
were sick. She had seen  employees receive hundreds of hours                                                                    
and  referenced a  specific situation  in which  an employee                                                                    
had received  over 1,000 hours  of donated leave.  She noted                                                                    
that donated leave was not subject  to the cap; it went into                                                                    
a  separate  account  and  was processed  on  an  as  needed                                                                    
(first-in, first-out) basis.                                                                                                    
                                                                                                                                
Vice-Chair  Neuman  asked  for verification  that  a  person                                                                    
could not  cash out donated  time. Ms. Neal answered  in the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
3:35:12 PM                                                                                                                    
                                                                                                                                
Representative Munoz  stated that the issue  of fairness was                                                                    
her priority. She observed that  the legislation would apply                                                                    
to  higher  paid  employees and  not  union  employees.  She                                                                    
believed the lack  of fairness was troubling.  She wanted to                                                                    
see the  issue become  part of future  contract negotiations                                                                    
and to find a way to make it fair for all employees.                                                                            
                                                                                                                                
Representative  Gara  addressed  the  comments  provided  by                                                                    
other members  and the administration. He  communicated that                                                                    
the personnel  board would not  need to adopt  regulation if                                                                    
the amendment  was worded well  and did not  require further                                                                    
delineation; however,  the word  "may" enabled the  board to                                                                    
put  regulation in  place if  necessary.  He discussed  that                                                                    
there  were  many  circumstances  when  people  planned  for                                                                    
medical  events.  He  pointed  to  his  personal  experience                                                                    
planning 6 months  ahead for cancer surgery  the prior year.                                                                    
He  noted  that recovery  time  could  be much  longer  than                                                                    
anticipated. He addressed a concern  that a malingerer could                                                                    
sham the state; he emphasized  that the state would have the                                                                    
right  to  fire  the  employee.  He  believed  adopting  the                                                                    
amendment would  give unions a better  chance at negotiating                                                                    
its expansion to  their members. He would like  to see union                                                                    
members  receive  the  benefit  as  well,  but  it  was  not                                                                    
possible to amend their contracts  at present. He reiterated                                                                    
his support for the amendment.                                                                                                  
                                                                                                                                
3:38:53 PM                                                                                                                    
                                                                                                                                
Representative Wilson  pointed to  donated leave  banks that                                                                    
could  be set  up  for  employees. She  believed  it made  a                                                                    
difference that  the amendment could  not be applied  to all                                                                    
state workers. She  surmised that there were  items in place                                                                    
that could  be used to  address the issue. She  guessed that                                                                    
unions would have negotiated for  more leave if 6 months was                                                                    
not sufficient.                                                                                                                 
                                                                                                                                
Representative Thompson  remarked that depending  on someone                                                                    
receiving donated leave could not  be relied on. He provided                                                                    
an example and stated that he  may choose to donate leave to                                                                    
Representative Wilson but may choose  not to donate leave to                                                                    
Representative Gara.                                                                                                            
                                                                                                                                
Representative Costello stated  that the amendment addressed                                                                    
a  valid concern.  She relayed  that  she would  vote no  at                                                                    
present, but would  write a letter asking  the department to                                                                    
look at the issue. She felt  that the current wording may be                                                                    
problematic  and was  willing  to  work with  Representative                                                                    
Gara during the interim to correct the issue.                                                                                   
                                                                                                                                
A roll call vote was taken  on the motion to adopt Amendment                                                                    
1.                                                                                                                              
                                                                                                                                
IN FAVOR: Gara, Kawasaki, Thompson, Neuman                                                                                      
OPPOSED: Wilson, Costello, Holmes, Munoz                                                                                        
                                                                                                                                
The amendment failed (4/4).                                                                                                     
                                                                                                                                
3:42:51 PM                                                                                                                    
                                                                                                                                
Representative  Costello  discussed   the  three  previously                                                                    
published fiscal  notes. The first  note (FN1) was  from the                                                                    
Office  of  the  Governor  and showed  a  fiscal  impact  of                                                                    
$8,171,900 in  FY 14, $4,821,800  in FY 15,  and $10,664,000                                                                    
in FY 16  [corrected below]. The second note  (FN2) was from                                                                    
the Legislature and indicated a  fiscal impact of $1,281,200                                                                    
in FY  14, $410,400 in FY  15, and $1,039,300 in  FY 16. The                                                                    
third  note  (FN3) was  from  the  Alaska Court  System  and                                                                    
included a  fiscal impact of  $1,088,700 in FY  14, $749,100                                                                    
in FY 15, and $1,890,900 in FY 16.                                                                                              
                                                                                                                                
Representative  Holmes clarified  that the  FY 16  amount in                                                                    
FN1 was $10,644,000.                                                                                                            
                                                                                                                                
Representative Costello affirmed.                                                                                               
                                                                                                                                
3:44:14 PM                                                                                                                    
                                                                                                                                
Representative  Costello MOVED  to REPORT  HCS CSSB  95(FIN)                                                                    
out  of committee  with individual  recommendations and  the                                                                    
accompanying fiscal notes.                                                                                                      
                                                                                                                                
Representatives Kawasaki and Gara OBJECTED for discussion.                                                                      
                                                                                                                                
Representative Kawasaki  commented that the  last geographic                                                                    
pay  differential  study  had  been done  in  2008  and  was                                                                    
outdated; a  capital budget appropriation  had been  made to                                                                    
fund the  2008 study. He  noted that the previous  study had                                                                    
been done 15 years earlier.  He had not offered an amendment                                                                    
that would make sure the  director was required to conduct a                                                                    
survey.  He  believed  it was  the  department's  intent  to                                                                    
conduct  a  survey,  but  he thought  members  may  be  more                                                                    
comfortable if the language was  in statute. He WITHDREW his                                                                    
OBJECTION.                                                                                                                      
                                                                                                                                
Representative Gara  appreciated the interest that  had been                                                                    
expressed in  Amendment 1.  However, he  pointed to  page 4,                                                                    
line 7 of the legislation  and stated that it was impossible                                                                    
to work out  a solution with the  department because statute                                                                    
specified  that DOA  would not  be  allowed to  do what  the                                                                    
amendment  would  do.  He  detailed  that  the  only  people                                                                    
allowed  to  accumulate  over  1,000  hours  of  leave  were                                                                    
employees who  were denied the  opportunity to  use personal                                                                    
leave. He stressed that the change  would need to be made in                                                                    
statute.                                                                                                                        
                                                                                                                                
Vice-Chair  Neuman  remarked  that  an  amendment  could  be                                                                    
offered on the House floor.                                                                                                     
                                                                                                                                
There  being  NO  further OBJECTION  HCS  CSSB  95(FIN)  was                                                                    
REPORTED out  of committee with  a "do  pass" recommendation                                                                    
and  with three  previously published  fiscal impact  notes:                                                                    
FN1(GOV), FN2(LEG), FN3(CRT).                                                                                                   
                                                                                                                                
3:47:08 PM                                                                                                                    
RECESSED                                                                                                                        
                                                                                                                                
3:54:16 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 47(FIN)                                                                         
                                                                                                                                
     "An Act relating to boarding schools operated by                                                                           
     school districts; and providing for an effective                                                                           
     date."                                                                                                                     
                                                                                                                                
3:54:25 PM                                                                                                                    
                                                                                                                                
DANIEL   GEORGE,   STAFF,   REPRESENTATIVE   BILL   STOLTZE,                                                                    
discussed the change appearing in  a CS to CSSSSB 47(FIN) on                                                                    
page 2, lines 11-15:                                                                                                            
                                                                                                                                
     (A) for the Southeast Region (Region I), $820                                                                              
          [$410];                                                                                                               
     (B) for the Southcentral Region (Region II), $800                                                                          
          [$400];                                                                                                               
     (C) for the Interior Region (Region III), $968                                                                             
          [$484];                                                                                                               
     (D) for the Southwest Region (Region IV), $1,006                                                                           
          [$503];                                                                                                               
     (E) for the Northern Remote Region (Region V), $1,184                                                                      
          [$592].                                                                                                               
                                                                                                                                
Mr. George  relayed that the  totals represented  a doubling                                                                    
of the prior  amount [for a per-pupil  monthly stipend (page                                                                    
2, line 8)].  He noted that a prior version  of the bill had                                                                    
included a tripling  of the existing amount.  He deferred to                                                                    
the bill sponsor for additional information.                                                                                    
                                                                                                                                
RYNNEIVA  MOSS, STAFF,  SENATOR  JOHN COGHILL,  communicated                                                                    
that the  change in  the CS  reflected a  compromise between                                                                    
the  sponsor and  Co-Chair Stoltze.  The sponsor  understood                                                                    
that it was a financially tight  year and that it may not be                                                                    
the  year   to  expand   boarding  schools.   She  expressed                                                                    
enthusiasm  and  faith in  the  boarding  school system  and                                                                    
relayed the sponsor's  belief that it would  be an important                                                                    
part  of Alaska's  educational system.  She stated  that the                                                                    
sponsor would  work over the  summer on an  educational plan                                                                    
that  would include  the expansion  of  the boarding  school                                                                    
program,  expanding financing  options  for boarding  school                                                                    
facilities,  and helping  with school  maintenance in  rural                                                                    
areas. She elaborated that the  original bill had multiplied                                                                    
the  existing stipend  by three;  the  existing stipend  had                                                                    
been  placed in  statute  in 2005.  She  expounded that  the                                                                    
stipend  had  been  increased  by two  times  in  2011.  She                                                                    
pointed  to  a  fiscal  note  that  reflected  an  increase;                                                                    
however, the  note was  based on  the stipend  sunsetting on                                                                    
July 1, 2013.  She explained that the fiscal  note showed an                                                                    
increase that did not really exist  if compared to FY 12 and                                                                    
FY 13.                                                                                                                          
                                                                                                                                
Representative   Costello  MOVED   to  ADOPT   the  proposed                                                                    
committee  substitute for  CSSSSB 47(FIN),  Work Draft,  28-                                                                    
LS0408\E (Mischel,  4/12/13}. There  being NO  OBJECTION, it                                                                    
was so ordered.                                                                                                                 
                                                                                                                                
Ms. Moss reiterated that the  sponsor had great faith in the                                                                    
boarding  school  system  and was  encouraged  by  inquiries                                                                    
about rural  Alaska magnet schools and  other opportunities.                                                                    
She pointed  to the  success rate  of children  who attended                                                                    
boarding schools.  She relayed  that the sponsor  would like                                                                    
to see an increased opportunity for the children.                                                                               
                                                                                                                                
Representative Edgmon appreciated the  sponsor's work on the                                                                    
bill. He  referred to  an amendment he  had not  offered and                                                                    
expressed  disappointment that  elementary students  had not                                                                    
been included in  the stipend program; he  surmised that the                                                                    
issue would be worked on.                                                                                                       
                                                                                                                                
Ms. Moss replied in the affirmative.                                                                                            
                                                                                                                                
Representative Edgmon  looked forward to seeing  the bill on                                                                    
the House floor.                                                                                                                
                                                                                                                                
Vice-Chair Neuman agreed.                                                                                                       
                                                                                                                                
Representative Costello  discussed the fiscal note  from the                                                                    
Department of Education and Early  Development in the annual                                                                    
amount of $1,660,700 in FY 14 through FY 19.                                                                                    
                                                                                                                                
Representative  Edgmon MOVED  to REPORT  HCS CSSSSB  47(FIN)                                                                    
out  of committee  with individual  recommendations and  the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
HCS CSSSSB 47(FIN) was REPORTED  out of committee with a "do                                                                    
pass"  recommendation and  with one  new fiscal  impact note                                                                    
from the Department of Education and Early Development.                                                                         
                                                                                                                                
4:01:47 PM                                                                                                                    
RECESSED                                                                                                                        
                                                                                                                                
4:02:16 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
SENATE BILL NO. 62                                                                                                            
                                                                                                                                
     "An Act relating to grants for school construction."                                                                       
                                                                                                                                
4:02:29 PM                                                                                                                    
                                                                                                                                
DAVID SCOTT, STAFF,  SENATOR OLSON, stated that  SB 62 added                                                                    
five  schools  for   Regional  Educational  Attendance  Area                                                                    
(REAA)  grant  fund eligibility.  The  bill  defined what  a                                                                    
small  municipal   school  district   is  and   allowed  the                                                                    
districts to be eligible  for REAA funds including Hydaburg,                                                                    
Kake, Klawock,  St. Mary's,  and Tanana.  He added  that the                                                                    
locations were  all first  class cities and  were a  part of                                                                    
the unorganized  borough. He shared  that the REAA  fund was                                                                    
created  in the  26th Legislature  [2009-2010] to  provide a                                                                    
revenue stream  to REAA school  districts; it was  a funding                                                                    
mechanism  that  arose  from the  Kasayulie  settlement.  He                                                                    
furthered that  the fund was  capitalized through  a formula                                                                    
included on page 1, line 9.                                                                                                     
                                                                                                                                
Mr. Scott  continued that REAA  school districts  lacked the                                                                    
ability to bond and could  not take advantage of the state's                                                                    
bond reimbursement  program (the term 70/30  referred to the                                                                    
program).  He  relayed  that   some  rural  communities  had                                                                    
elected  to   incorporate  as  first  class   cities,  which                                                                    
required    the   communities    to   take    on   education                                                                    
responsibilities and  to lose their  REAA school  status. He                                                                    
stated  that the  communities were  in "limbo"  because they                                                                    
could  not  use the  REAA  fund  and  did not  have  bonding                                                                    
authority. He communicated  that the intent of  the bill was                                                                    
to  get the  schools  out  of limbo  status.  He pointed  to                                                                    
Section  2  of the  legislation  and  stated that  the  term                                                                    
"small municipal  school district"  was defined as  a school                                                                    
with an Average Daily Membership  (ADM) of less than 300 and                                                                    
with a full value per ADM of no more than $500,000.                                                                             
                                                                                                                                
4:06:04 PM                                                                                                                    
                                                                                                                                
Representative  Edgmon expounded  on  Mr. Scott's  testimony                                                                    
and  explained  that  most   school  districts  (the  bigger                                                                    
districts)  had   the  ability  to  access   the  bond  debt                                                                    
reimbursement program.  He shared  that as  a result  of the                                                                    
Kasayulie court  case, the legislature  had created  an REAA                                                                    
school construction fund in 2010.  The bill would grant five                                                                    
communities  eligibility for  the  REAA school  construction                                                                    
fund   program,  which   would   simultaneously  address   a                                                                    
potential   log-jam    on   school    construction   capital                                                                    
improvement  project list.  He  furthered  that without  the                                                                    
ability to  bond or  to access  the REAA  construction fund,                                                                    
the  communities  would  not  have  another  funding  source                                                                    
outside  a legislative  capital appropriation.  He clarified                                                                    
that  the legislature  had the  ability to  fund the  school                                                                    
construction   and   maintenance  projects;   however,   the                                                                    
legislature  did not  always  have the  ability  to put  the                                                                    
needed funds in the budget.                                                                                                     
                                                                                                                                
Vice-Chair  Neuman commented  that  small  schools were  not                                                                    
necessarily 5,500 or less.                                                                                                      
                                                                                                                                
Representative  Wilson asked  if the  term "small  municipal                                                                    
school  district"  was  used   in  any  other  locations  in                                                                    
statute.  Mr.  Scott  answered that  the  bill  created  and                                                                    
defined the term in Section 2.                                                                                                  
                                                                                                                                
4:09:07 PM                                                                                                                    
                                                                                                                                
Representative  Wilson  questioned   whether  the  districts                                                                    
would  have the  same  70/30 structure  as larger  districts                                                                    
where the  state pays  70 percent and  the districts  pay 30                                                                    
percent.                                                                                                                        
                                                                                                                                
ELIZABETH  SWEENEY NUDELMAN,  DIRECTOR, SCHOOL  FINANCES AND                                                                    
FACILITIES, DEPARTMENT  OF EDUCATION AND  EARLY DEVELOPMENT,                                                                    
responded  that  the bill  provided  a  funding source  that                                                                    
would fund  schools on the  construction list in  order. She                                                                    
continued  that  there  would be  funds  available  for  the                                                                    
districts as they reached the top  of the list for REAAs and                                                                    
small municipalities.  She furthered that when  a school was                                                                    
funded  there would  be a  participating share  paid by  the                                                                    
district.  The  participating  share  had  not  changed  and                                                                    
ranged from 2 percent to 30 percent.                                                                                            
                                                                                                                                
Representative Wilson  looked at  the definition of  a small                                                                    
municipal school  district on page 2,  lines 1 and 2  of the                                                                    
bill. She  asked if  the numbers  had been  selected because                                                                    
anything above the  amounts had bonding ability.   Mr. Scott                                                                    
replied in the affirmative.                                                                                                     
                                                                                                                                
Representative  Wilson  stated  that   she  had  no  problem                                                                    
helping with bonding for school  districts that did not have                                                                    
that ability. She  wanted to be fair to  all communities and                                                                    
noted  that larger  districts paid  high  property taxes  to                                                                    
participate. She  was comfortable that the  bill would allow                                                                    
the  small communities  to make  improvements and  that they                                                                    
shared in  the cost. She  voiced support for  the definition                                                                    
[for small municipal school district] used in the bill.                                                                         
                                                                                                                                
Mr. Scott affirmed.                                                                                                             
                                                                                                                                
4:12:30 PM                                                                                                                    
                                                                                                                                
Representative  Munoz thought  that first  class cities  had                                                                    
the ability  to bond. Mr.  Scott replied that being  a first                                                                    
class city  did not give  the automatic ability to  bond. He                                                                    
detailed that  the five communities did  not have sufficient                                                                    
economic capacity  to be granted  bonds by a  municipal bond                                                                    
bank. There were some first  class cities in the unorganized                                                                    
borough that could bond.                                                                                                        
                                                                                                                                
Representative Munoz  understood, but stated that  there was                                                                    
no statutory prohibition that  would prevent the communities                                                                    
from bonding if they had the capability. Mr. Scott agreed.                                                                      
                                                                                                                                
4:13:45 PM                                                                                                                    
                                                                                                                                
DAVE  HERBERT,   SUPERINTENDENT,  ST.  MARY'S   CITY  SCHOOL                                                                    
DISTRICT (via  teleconference), spoke  in strong  support of                                                                    
the  legislation. He  shared that  the  school district  had                                                                    
originally been  part of  the Kasayulie  case that  had been                                                                    
settled   in  2011.   He  explained   that  the   settlement                                                                    
recognized   that  the   method   of   funding  new   school                                                                    
construction  in  Alaska's schools  needed  to  be fair  and                                                                    
equitable. He  shared that St.  Mary's had been  excluded in                                                                    
the  final settlement  negotiations  because it  was not  an                                                                    
REAA  school district  (St.  Mary's is  a  first class  city                                                                    
school  district). He  explained  that being  a first  class                                                                    
city school district  required the city to  make a mandatory                                                                    
local contribution  to the school district  each fiscal year                                                                    
to help  offset its  operation costs; whereas,  REAA schools                                                                    
did   not   have   a  mandatory   local   contribution.   He                                                                    
communicated  that  the  district had  taken  the  necessary                                                                    
steps   to  improve   its  position   on   the  new   school                                                                    
construction list  through DEED. He elaborated  on the steps                                                                    
the  district  had  taken.  He  shared  that  currently  the                                                                    
district  was the  only small  municipal school  district on                                                                    
the list that the legislation would apply to.                                                                                   
                                                                                                                                
Mr.  Herbert  furthered that  the  impact  of the  bill  was                                                                    
minimal  to the  state,  but was  greatly  important to  St.                                                                    
Mary's.  He relayed  that  most  municipalities had  bonding                                                                    
capacity  and were  eligible  to receive  up  to 70  percent                                                                    
reimbursement from  the state  for new  school construction.                                                                    
He detailed  that there  was only a  small group  of schools                                                                    
that did not qualify for  the bond reimbursement or the REAA                                                                    
fund source.  He stressed that the  legislation would ensure                                                                    
that  new school  construction  funding  sources were  truly                                                                    
equitable for  all of Alaska's  schools. He stated  that the                                                                    
district  had demonstrated  its ability  to provide  quality                                                                    
education.  He urged  the committee  and the  legislature to                                                                    
pass the legislation.                                                                                                           
                                                                                                                                
4:18:32 PM                                                                                                                    
                                                                                                                                
TOM BEGICH,  POLICY DIRECTOR,  CITIZENS FOR  THE EDUCATIONAL                                                                    
ADVANCEMENT OF  ALASKA'S CHILDREN,  spoke in support  of the                                                                    
legislation.   He   shared   that   the   organization   was                                                                    
responsible  for  initially   bringing  the  Kasayulie  suit                                                                    
forward. He informed the committee  that the legislation was                                                                    
the organization's number one  priority and the top priority                                                                    
for  its  REAA members.  He  stated  that  the bill  made  a                                                                    
necessary correction to an error that needed repair.                                                                            
                                                                                                                                
Representative Wilson  asked for verification that  the five                                                                    
school  districts  were the  only  districts  that were  not                                                                    
currently covered by a bonding mechanism.                                                                                       
                                                                                                                                
Mr.  Begich  replied  in  the  affirmative.  The  group  had                                                                    
reviewed the formula before the  bill had been introduced to                                                                    
ensure that it would not  unfairly penalize schools with the                                                                    
ability to bond. He added  that because the bill contained a                                                                    
formula instead  of specifying the five  school districts it                                                                    
would allow districts to "pop"  out of the category if their                                                                    
economic capacity increased.                                                                                                    
                                                                                                                                
Representative Edgmon remarked that  a significant amount of                                                                    
work had  gone into the  bill prior to its  introduction. He                                                                    
believed the bill  was a good compromise and  noted its zero                                                                    
fiscal note.                                                                                                                    
                                                                                                                                
Representative  Munoz appreciated  the sponsors'  who worked                                                                    
on  the bill.  She asked  how the  construction fund  worked                                                                    
that had resulted from the Kasayulie case.                                                                                      
                                                                                                                                
Mr.   Begich   answered   that   the   Kasayulie   mechanism                                                                    
established  in 2010  had  been built  on  a fairly  complex                                                                    
formula  developed by  Senator  Lyman  Hoffman's office  and                                                                    
added to by the House  Finance Committee. He elaborated that                                                                    
the formula  looked at  the bonding  capacity for  any given                                                                    
year for  schools that were eligible  for bond reimbursement                                                                    
and established a referential amount  based on the number of                                                                    
schools that was  deposited into the REAA  fund annually. He                                                                    
stated  that  the  REAA  fund  had a  $70  million  cap.  He                                                                    
detailed that the idea was  to encourage the spending of the                                                                    
available  funds  annually  in  order to  rectify  what  the                                                                    
courts  found was  a biased  process of  funding schools  in                                                                    
Alaska.                                                                                                                         
                                                                                                                                
Vice-Chair Neuman CLOSED public testimony.                                                                                      
                                                                                                                                
4:22:15 PM                                                                                                                    
                                                                                                                                
Representative  Kawasaki  asked  about a  report  on  school                                                                    
construction and major maintenance.  Mr. Scott replied noted                                                                    
that the report was available on the DEED website.                                                                              
                                                                                                                                
Representative Kawasaki did not see  a problem with the bill                                                                    
if its  intent was to  fix the ability for  schools' ability                                                                    
to  bond and  to provide  for  funds. He  believed a  bigger                                                                    
question  existed regarding  how schools  equitably received                                                                    
money for construction. He pointed  to a Fairbanks school on                                                                    
the list for  major maintenance that continued  to move down                                                                    
on the priority  list. He believed the  overall issue should                                                                    
be addressed by the committee in the future.                                                                                    
                                                                                                                                
Representative  Wilson asked  how the  school priority  list                                                                    
for major maintenance worked.                                                                                                   
                                                                                                                                
Representative Edgmon replied that  the bill was not related                                                                    
to the major maintenance list.                                                                                                  
                                                                                                                                
Representative   Wilson  clarified   her  interest   in  the                                                                    
construction list.  Ms. Nudelman  replied that the  list was                                                                    
recalibrated   each  year;   districts  could   reuse  their                                                                    
application for one year.                                                                                                       
                                                                                                                                
4:24:27 PM                                                                                                                    
                                                                                                                                
Representative Costello  addressed the one zero  fiscal note                                                                    
from the Department of Education and Early Development.                                                                         
                                                                                                                                
Representative  Edgmon   MOVED  to  REPORT  SB   62  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
SB 62 was REPORTED out of committee with a "do pass"                                                                            
recommendation and with one previously published fiscal                                                                         
note: FN1(EED).                                                                                                                 
                                                                                                                                
HOUSE BILL NO. 192                                                                                                            
                                                                                                                                
     "An  Act relating  to  the filing  date  for the  final                                                                    
     quarterly  payment   of,  and  to  the   assessment  of                                                                    
    penalties under, the fishery resource landing tax."                                                                         
                                                                                                                                
HB 192 was SCHEDULED but not HEARD.                                                                                             
                                                                                                                                
CS FOR SENATE BILL NO. 18(FIN) am                                                                                             
                                                                                                                                
     "An    Act    making,     amending,    and    repealing                                                                    
     appropriations,   including   capital   appropriations,                                                                    
     supplemental   appropriations,  reappropriations,   and                                                                    
     other   appropriations;    making   appropriations   to                                                                    
     capitalize  funds;  and   providing  for  an  effective                                                                    
     date."                                                                                                                     
                                                                                                                                
CSSB 18(FIN) am was SCHEDULED but not HEARD.                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
4:25:15 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 4:25 p.m.                                                                                          
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
CS-FIN SB 7, version C (with FilmFix).pdf HFIN 4/12/2013 1:30:00 PM
SB 7
Memo 13-232 lnd (for CS-FIN SB 7, version C).pdf HFIN 4/12/2013 1:30:00 PM
SB 7