Legislature(1993 - 1994)
04/21/1993 09:05 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 7
An Act relating to reimbursement of school construction
debt; and providing for an effective date.
Upon convening the meeting, Co-chair Pearce acknowledged
that the committee had developed a work draft for the bill.
She then referenced ongoing problem areas and advised that a
task force consisting of committee staff and representatives
of the Dept. of Education, municipalities, school districts,
bond bank counsel, and the drafter from legal services would
be working throughout the day, in the Fahrenkamp Room, to
develop a formal committee substitute for presentation to
committee later in the day.
Co-chair Pearce noted a TELECONFERENCE link to Anchorage and
asked that JUDY BRADY, Executive Director, Alaska Municipal
Bond Bank Authority, speak to a problem that developed
yesterday afternoon. As background information, Ms. Brady
explained that the original proposal called for
establishment of a special fund, the interest from which was
to pay the 70% state contribution for school construction.
It soon became evident that the constitutional amendment
needed to set aside funding in a special account would not
be possible for "a couple of years." Municipalities still
want the state to pay the 70% while they continue to pay
30%. Problems arise because neither the bond bank nor other
institutions issuing debt could issue the state's 70% via
revenue bonds. Revenue bonds must be backed by collateral
or some form of income, other than an annual appropriation,
to pay off the bonds.
BOB POE, aide to Senator Pearce, next came before committee.
He directed attention to a draft CSSB 7 (Fin) (8-LS0142\J,
Ford, 4/20/93) and concurred in the above problem cited by
Judy Brady. The current draft allows for debt reimbursement
on a 70/30 basis for the two years prior to passage of an
amendment establishing the constitutional school
construction fund. When that fund is in place, the
municipal bond bank would have the authority to issue school
debt. Under the 70/30 arrangement, the state would pay 70%
of the construction cost, and the municipality would issue
30% of the debt in general obligation bonds through the
municipal bond bank. If the amendment to establish the
constitutional school construction fund does not pass, the
whole program would end--both debt reimbursement on a 70/30
basis and municipal bond bank ability to work with
municipalities on school debt.
Co-chair Pearce acknowledged concerns earlier expressed by
Senators Kelly, Kerttula, and Frank and advised that they
would be the subject of the ongoing task force. Senator
Kelly directed attention to page 3, line 12, and advised of
lack of support for state funding of "esoteric alternative
education programs." State funding should be committed to
basic education and classroom space. He then formally MOVED
for adoption of the following amendment at page 3, line 12:
delete "programs" and insert "facilities."
Co-chair Frank explained that the intent of existing
language is not to tell experts and bill drafters exactly
what to say but to provide a sense of what the committee
wants to accomplish. Co-chair Frank concurred in Senator
Kelly's statement regarding alternative programs.
End, SFC-93, #67, Side 1
Begin, SFC-93, #67, Side 2
Directing attention to page 5, line 30, Senator Kelly voiced
his belief that the maintenance threshold of $50,000 is too
low. He suggested that school districts statewide could
reasonably be expected to provide normal operational
maintenance and should not expect the state to pay 70% of
that cost. Senator Kelly recommended that $50,000 to
changed to $300,000. Co-chair Frank concurred. He said it
is appropriate for the state to share the cost of schools
and the cost of major renovations (roof replacement, etc.)
but not routine annual maintenance. He concurred that the
threshold should be consistent with the cost of major
renovations and/or replacement. Senator Kerttula voiced
agreement with the sense of the amendment. He cautioned,
however, that proposed changes not cause districts to ignore
maintenance and allow small problems to become major. Co-
chair Frank concurred in need to incorporate legislative
intent as well as an expression of what is authorized in
terms of renovation, rehabilitation, structural integrity,
etc. Co-chair Pearce suggested that renovation and
rehabilitation be permitted only in cases where regular
maintenance had routinely been accomplished. Senator Kelly
expressed need for statutory language accomplishing the
foregoing rather than a letter of intent.
Senator Kelly next noted that since conclusion of the former
80/20 construction program in 1990, only one school
district--Anchorage--has bonded. It would be unfair for
that district to pay 100% of its bonds while other districts
are reimbursed 70%. He then voiced need to amend the
proposed bill to include Anchorage bond issues within the
70/30 program. Senator Kerttula voiced support for the
amendment but stressed need to carefully structure language
to ensure that the allowance represents a one-time-only
effort. He then suggested that Barrow might also have
bonded for schools within the past two years.
BRIAN ANDREWS, Deputy Commissioner, Treasury, Dept. of
Revenue, came before committee. He voiced his understanding
that Anchorage was the only district to bond since
conclusion of the former program. Proposition 7 totaled
approximately $20 million, and Proposition 8 totaled $4
million.
Brief discussion followed between Co-chair Pearce and
Senator Kelly regarding the outcome of recent ballot
propositions in Anchorage.
Senator Sharp redirected attention to page 3, line 13, and
voiced need to ensure that language relating to "regional,
community, and school facilities" does not include
construction of administrative buildings.
Co-chair Pearce reiterated that a task force would be
working on the legislation in the Fahrenkamp room. Both the
room and a teleconference line are available from 9:30 a.m.
to 5:00 p.m. She then asked that committee members make
concerns known to staff. The current Senate Finance
Committee meeting will ultimately be recessed with the
intent of reconvening later in the day for review of an
updated draft CSSB 7 (Finance).
Judy Brady observed that the Alaska Municipal Bond Bank
Authority had been "running figures . . . for about four
days" in an effort to develop the technical means of making
the bill work. She suggested that the Governor's plan to
use cash for two or three years would provide the catch-up
moneys in the fastest manner and in the greatest amount.
While bonding provides a long-term solution, it will provide
"much smaller amounts" than the Governor is proposing. Ms.
Brady reiterated that in terms of catch-up, cash will get
the state where it wants to go the "quickest."
Co-chair Pearce acknowledged the foregoing. She further
noted that the committee would be discussing SB 60--a cash
school construction package. The Co-chair acknowledged that
it contains less than the Governor and the House proposed,
and she further acknowledged catch-up needs, particularly in
rural Alaska. The question is: Where does that cash come
from? She then voiced committee belief that the BP
settlement money "is rightfully in the constitutional budget
reserve."
Co-chair Pearce directed that the meeting be briefly
recessed.
RECESS - 9:40 A.M.
RECONVENE - 9:50 A.M.
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