Legislature(2013 - 2014)SENATE FINANCE 532

03/14/2013 09:00 AM Senate FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 62 SCHOOL CONST. GRANTS/SMALL MUNICIPALITIES TELECONFERENCED
Heard & Held
+ SB 38 EXTEND STATE MEDICAL BOARD TELECONFERENCED
Moved CSSB 38(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
= SB 21 OIL AND GAS PRODUCTION TAX
Moved CSSB 21(FIN) Out of Committee
SENATE BILL NO. 62                                                                                                            
                                                                                                                                
     "An Act relating to grants for school construction."                                                                       
                                                                                                                                
9:40:02 AM                                                                                                                    
                                                                                                                                
Senator Olson stated that time  was of the essence regarding                                                                    
the bill because  of the school construction  that was going                                                                    
on, particularly  related to  the small  municipalities, and                                                                    
scheduling problems related to the funding.                                                                                     
                                                                                                                                
Mr.  Scott introduced  SB 62  and stated  that it  allowed 5                                                                    
school  districts be  become eligible  to  use the  Regional                                                                    
Educational  Attendance  Area   (REAA)  School  Construction                                                                    
Fund,  which  had  been  established in  2010  by  the  26th                                                                    
Legislature in SB 237. He  explained that the impetus behind                                                                    
the REAA Fund was the Kasayulie Case.                                                                                           
                                                                                                                                
Mr. Scott  presented a brief  sectional analysis.  He stated                                                                    
that  Section   1  added  the  words   "to  small  municipal                                                                    
districts" to the  name of the REAA Fund.  Section 2 defined                                                                    
what a  small municipal  school district  was, which  was "a                                                                    
district in the  state that has an  average daily membership                                                                    
(ADM) of  not more than 300  and the full value  per ADM was                                                                    
not more  than $500,000."  Section 3 added  "small municipal                                                                    
districts"  to the  name  of  the REAA  Fund  and Section  4                                                                    
delineated  that small  municipal school  districts had  the                                                                    
definition that was pointed out in Section 2.                                                                                   
                                                                                                                                
9:43:11 AM                                                                                                                    
                                                                                                                                
Vice-Chair  Fairclough   observed  that  the   fiscal  notes                                                                    
appeared to propose  $35 million per year.  She inquired why                                                                    
the  appropriation  was  not  standing  alone  and  why  the                                                                    
Kasayulie  case  was  part  of  the  discussion.  Mr.  Scott                                                                    
replied that  there was a  new revised fiscal note  and that                                                                    
he  would try  to answer  the question.  He shared  that the                                                                    
REAA Fund dealt with the  Kasayulie case regarding how there                                                                    
was  inconsistent  funding  for Rural  Alaskan  schools  and                                                                    
pointed out that  there was formula in law, which  was in AS                                                                    
14.11.025(b) and Section 1 of  the bill, that determined the                                                                    
$35 million  amount; the  formula used  the total  amount of                                                                    
annual  debt  service  divided  by  the  percentage  of  the                                                                    
schools that were located in  the district and multiplied by                                                                    
a .244 quotient.                                                                                                                
                                                                                                                                
Vice-Chair Fairclough  thought that  the Kasayulie  case was                                                                    
resolved with setting up the  REAA funds. She understood the                                                                    
issue, but  did not  understand why  the Kasayulie  case was                                                                    
being  discussed in  reference  to a  bill  that was  adding                                                                    
additional aid.                                                                                                                 
                                                                                                                                
Co-Chair  Meyer noted  that Senator  Hoffman knew  the issue                                                                    
well.                                                                                                                           
                                                                                                                                
Senator  Hoffman   stated  that   the  Kasayulie   case  was                                                                    
legislation that  he had worked  on for about 10  years, and                                                                    
believed  that he  had piggy  packed on  a bill  of Co-Chair                                                                    
Meyer's in  order to  resolve the case.  He stated  that the                                                                    
Kasayulie  case was  brought forward  for  REAAs, but  noted                                                                    
that there continued  to be school districts  in Alaska that                                                                    
were  not REAA's  and  did  not have  the  capacity to  sell                                                                    
bonds; furthermore,  Tanana and St. Mary's  were first class                                                                    
cities that did not have  this designation or authority, but                                                                    
still  had  a  responsibility   to  build  new  schools.  He                                                                    
explained that  the 2  cities had led  the way  in accepting                                                                    
the responsibly in  funding education, but did  not have the                                                                    
foresight to realize that they  would be responsible for new                                                                    
school construction.  He furthered  that the  Kasayulie case                                                                    
had been  primarily addressed to REAA  Rural Alaskan schools                                                                    
and pointed out  that the case had been  decided against the                                                                    
State  of Alaska;  the judgment  basically  stated that  the                                                                    
difference  in funding  between REAA  and urban  schools was                                                                    
arbitrary and inadequate.                                                                                                       
                                                                                                                                
Senator  Hoffman continued  to speak  to the  Kasayulie case                                                                    
and related  that the  focus of  SB 237  was to  address the                                                                    
plaintiffs' issues  of inadequate funding for  REAA schools;                                                                    
however, there  was still an  issue of  contention regarding                                                                    
how  the  governor  had submitted  his  capital  budget  the                                                                    
previous year. He explained that  as required, there was $32                                                                    
million or  $33 million  that went into  the REAA  fund, but                                                                    
that  that  during the  negotiations,  there  were 10  rural                                                                    
schools  that  needed to  be  addressed  prior to  the  fund                                                                    
kicking  in; between  2010 and  the  last year,  7 of  those                                                                    
schools had  been funded directly  through the  General Fund                                                                    
mechanism. He  related that the prior  year, the legislature                                                                    
had changed the way the  governor had approached the funding                                                                    
for the Kasigluk  and Emmonak schools to  have those schools                                                                    
be funded  through General Funds.  He observed  the governor                                                                    
trying to do the same thing  with the last school, which was                                                                    
Nightmute and  noted that  he was  planning on  meeting with                                                                    
Mr. Begich and Co-Chair Meyer  in order to rectify the issue                                                                    
the same way  as the previous year. He pointed  out that the                                                                    
REAA case was settled for REAA  schools, but that it did not                                                                    
address  the  other  5  school   districts  in  SB  62  that                                                                    
ultimately  had the  responsibility to  fund those  schools;                                                                    
furthermore,  these  5  school districts  were  small  rural                                                                    
districts  that  did not  have  the  capacity to  build  the                                                                    
schools.                                                                                                                        
                                                                                                                                
Senator Hoffman  pointed out that instead  of addressing the                                                                    
issue in  a different way,  Senator Olson was  proposing the                                                                    
change  in the  SB 62,  which seemed  reasonable. He  stated                                                                    
that  the  problem  he  had was  that  the  individual  REAA                                                                    
schools that  had brought the  Kasayulie case  forward could                                                                    
potentially experience a dilution in  REAA funds as a result                                                                    
of the  additional 5  smaller schools.  He noted  that rural                                                                    
schools had a  cost between $30 million and  $50 million and                                                                    
that the  plaintiffs of  the REAA case  would in  essence be                                                                    
sharing the  settlement with the smaller  schools districts;                                                                    
however,  he  did  not  have   much  "heartburn"  with  that                                                                    
approach if  the state could  at least fund the  last school                                                                    
with  general funds.  He  opined that  the  issue should  be                                                                    
addressed without  having to open  up the  Kasayulie lawsuit                                                                    
again.                                                                                                                          
                                                                                                                                
9:50:54 AM                                                                                                                    
                                                                                                                                
Vice-Chair  Fairclough  supported  making  sure  that  rural                                                                    
schools  were  treated with  fairness  and  agreed that  the                                                                    
Kasayulie case  should be closed.  She added that  her issue                                                                    
was  that the  Kasayulie case  should be  closed period  and                                                                    
that the state  should look at equitable  funding across the                                                                    
state  "with  that  lens."   She  shared  Senator  Hoffman's                                                                    
concern  that   adding  other   schools  could   dilute  the                                                                    
compromise  of Kasayulie  case and  observed that  the money                                                                    
contribution  would be  annual, which  represented a  win in                                                                    
the end.                                                                                                                        
                                                                                                                                
Co-Chair  Meyer noted  that Senator  Hoffman  had taken  his                                                                    
good  bill and  made it  better and  requested that  Senator                                                                    
Hoffman refresh the  committee on how he had  dealt with the                                                                    
Kasayulie case  in the legislation. Senator  Hoffman offered                                                                    
that he  had taken a good  bill and made it  much better. He                                                                    
related  that  the  bill  had been  in  the  Senate  Finance                                                                    
Committee   at   the   time    and   recalled   asking   the                                                                    
administration  for  assistance  in  developing  a  formula,                                                                    
which never  developed. He relayed  that the  committee knew                                                                    
the state  was on the  hook for 70  percent of the  funds to                                                                    
pay for urban  schools and that the committee  had written a                                                                    
formula  on a  percentage basis  of  how much  the State  of                                                                    
Alaska was  paying for urban  schools; a percentage  of that                                                                    
was  taken  to pay  for  rural  schools.  He shared  that  a                                                                    
problem had been  that the first 10  schools had substantial                                                                    
construction costs and that there  was an understanding that                                                                    
those schools  would be funded  so that the  smaller schools                                                                    
could be addressed. He thought  that if the Nightmute school                                                                    
was addressed through the current  year's capital budget and                                                                    
this legislation  was changed,  the state  would be  able to                                                                    
get  to the  St. Mary's  school this  next year.  He offered                                                                    
that St. Mary's was the only  school on the list, but others                                                                    
could  submit evaluations  and be  evaluated;  all of  these                                                                    
schools were  funded on  an evaluation  basis on  which ones                                                                    
were  in  the  most  need   of  repair  or  replacement.  He                                                                    
commented  that  there were  no  provisions  to address  the                                                                    
major maintenance issue.                                                                                                        
                                                                                                                                
9:54:15 AM                                                                                                                    
                                                                                                                                
Vice-Chair  Fairclough  stated  that  she  was  100  percent                                                                    
behind appropriate  funding for  Rural Alaskan  schools, but                                                                    
did not understand why there  was not a road between Toksook                                                                    
Bay and Nightmute. She pointed  out that the road was needed                                                                    
for public  safety issues,  but also  because the  state was                                                                    
building  2 schools  that were  in very  close proximity  to                                                                    
each other.  She understood that  Toksook Bay  and Nightmute                                                                    
were 2 distinct communities  that wanted to remain distinct,                                                                    
but observed that  as money started to  constrict those were                                                                    
decisions   that  the   state  would   have  to   make.  She                                                                    
acknowledged  that  a  road would  be  expensive  and  might                                                                    
create  too many  public safety  issues, but  that it  could                                                                    
connect  that  community  to  a   school  that  was  already                                                                    
improved.                                                                                                                       
                                                                                                                                
Senator  Hoffman  stated  that  he  agreed  with  Vice-Chair                                                                    
Fairclough and related that he  had recently been discussing                                                                    
additional  ways to  save to  money for  rural schools  with                                                                    
Senator Dunleavy.  He stated that there  were several issues                                                                    
in  both rural  and  urban schools  that  continued to  need                                                                    
attention   such  as   increased  education   opportunities,                                                                    
increased scores, and possible ways to save.                                                                                    
                                                                                                                                
Senator  Olson observed  that many  school districts  in his                                                                    
district were  single-school districts that did  not qualify                                                                    
as REAAs; however,  some of the districts  were dealing with                                                                    
the same situation that had  been addressed in the Kasayulie                                                                    
Case,   particularly  Galena.   He  discussed   inconsistent                                                                    
funding  of certain  school needs  in  Alaska. He  concluded                                                                    
that  the intent  of  the  bill was  to  ensure that  school                                                                    
districts across  the state were not  overlooked and rectify                                                                    
the  problem   in  districts  where   this  may   have  been                                                                    
occurring.                                                                                                                      
                                                                                                                                
Co-Chair  Meyer  recalled Vice-Chair  Fairclough's  comments                                                                    
regarding the  possibility of building  a road  from Toksook                                                                    
Bay  to Nightmute  instead of  building  another school  and                                                                    
inquired what  the distance was  between the  2 communities.                                                                    
Vice-Chair  Fairclough thought  that the  distance was  less                                                                    
than 5 miles.                                                                                                                   
                                                                                                                                
Senator Olson thought  that the distance was  about 7 miles,                                                                    
but  that  the route  would  have  to  cross the  river.  He                                                                    
pointed out that  the rising tide was a factor  on the river                                                                    
delta and  that building a  bridge would be  complicated. He                                                                    
opined that  the state would have  to consider a way  to get                                                                    
the 2 communities connected, not  only for schools, but also                                                                    
for needs like electricity.                                                                                                     
                                                                                                                                
Senator Hoffman noted  that the villages on  the river delta                                                                    
were now represented Senator Gary Stevens.                                                                                      
                                                                                                                                
9:59:44 AM                                                                                                                    
                                                                                                                                
DAVID HERBERT,  SUPERINTENDENT, ST. MARY'S  SCHOOL DISTRICT,                                                                    
ST.  MARY'S  (via  teleconference),  voiced  the  district's                                                                    
strong support of  SB 62. He related that  St. Mary's School                                                                    
District  had originally  been part  of the  Kasayulie case,                                                                    
which had recognized  that the method of  funding new school                                                                    
construction  in  Alaska's schools  needed  to  be fair  and                                                                    
equitable. He  reported that  during the  final negotiations                                                                    
of the settlement,  the St. Mary's School  District had been                                                                    
excluded  from the  list of  schools that  were eligible  to                                                                    
receive funds  through the Kasayulie funding  mechanism; the                                                                    
exclusion was due to the  fact the St. Mary's was considered                                                                    
a  first  class city  school  district  instead of  an  REAA                                                                    
district.  He  explained  that a  first  class  city  school                                                                    
district  such as  St. Mary's  required the  city to  make a                                                                    
mandatory  local contribution  to the  school district  each                                                                    
fiscal year to  help offset the costs of  running the school                                                                    
district;   whereas,  REAAs   did  not   have  a   mandatory                                                                    
contribution  requirement. He  stated  that  St. Mary's  was                                                                    
surrounded by  REAA school  districts that  were benefitting                                                                    
from  the  Kasayulie  new   school  construction  funds.  He                                                                    
expressed  that St.  Mary's was  disappointed  to have  been                                                                    
excluded from the  settlement during the final  hours of the                                                                    
negotiations  because  it  was  the only  first  class  city                                                                    
school district in the lawsuit.                                                                                                 
                                                                                                                                
Mr. Herbert related that the  St. Mary's School District had                                                                    
then taken the  necessary steps to improves  its position on                                                                    
the new  school construction list through  the Department of                                                                    
Education and  Early Development  and had written  a quality                                                                    
application; additionally, the district  had been frugal and                                                                    
fiscally  responsible  in  order   to  make  the  additional                                                                    
investments   needed  to   improve   the   quality  of   its                                                                    
application and  had followed all  the steps to  ensure that                                                                    
it met  all requirements to  move up to  the top of  the new                                                                    
school  construction list.  He pointed  out that  currently,                                                                    
St. Mary's was  the only small municipal  school district on                                                                    
the  school construction  list that  SB 62  would apply  to;                                                                    
therefore, the  impact of the  legislation would  be minimal                                                                    
to  the state,  but would  be greatly  important to  the St.                                                                    
Mary's  School  District  because   without  the  bill,  the                                                                    
district's   chances  of   being  funded   for  new   school                                                                    
construction would be greatly diminished.                                                                                       
                                                                                                                                
Mr. Herbert  related that currently, most  municipalities in                                                                    
the  state  had  bonding  capacity, which  meant  they  were                                                                    
eligible  to  pass  bonds  and  receive  up  to  70  percent                                                                    
reimbursement  from the  state for  new school  construction                                                                    
projects.  He   stated  that  the  Kasayulie   case  funding                                                                    
mechanism  in SB  237 provided  a funding  source for  Rural                                                                    
Alaskan schools that  did not have the capacity  to bond and                                                                    
were  REAA schools;  however,  there was  1  small group  of                                                                    
school districts  that were not  included with the  urban or                                                                    
REAA  groups,  which  was  the group  that  were  the  small                                                                    
municipal school districts  as outlined in SB  62. He opined                                                                    
that  the St.  Mary's School  District had  demonstrated its                                                                    
ability to  provide quality education  in Rural  Alaska, had                                                                    
outperformed    surrounding   schools    academically,   had                                                                    
demonstrated sound fiscal management,  and was ensuring that                                                                    
its  students became  contributing and  productive citizens.                                                                    
He urged the committee to pass the legislation.                                                                                 
                                                                                                                                
Co-Chair Meyer CLOSED public testimony.                                                                                         
                                                                                                                                
10:06:15 AM                                                                                                                   
                                                                                                                                
Co-Chair Meyer  inquired if the administration  supported SB
62.                                                                                                                             
                                                                                                                                
ELIZABETH   NUDELMAN,    DIRECTOR,   SCHOOL    FINANCE   AND                                                                    
FACILITIES, DEPARTMENT  OF EDUCATION AND  EARLY DEVELOPMENT,                                                                    
responded  that the  administration  did not  have a  formal                                                                    
position  on   the  legislation.  She  furthered   that  the                                                                    
administration had  reviewed the  bill and  did not  see any                                                                    
outstanding unanswered questions.                                                                                               
                                                                                                                                
Co-Chair  Meyer inquired  if Ms.  Nudelman had  prepared the                                                                    
fiscal note. Ms. Nudelman responded  in the affirmative. Co-                                                                    
Chair  Meyer  noted  that  the  bill's  estimated  cast  was                                                                    
$618,000  and requested  an explanation  of the  amount. Ms.                                                                    
Nudelman  responded that  the  Department  of Education  and                                                                    
Early  Development  (DEED)  had spoken  to  the  Legislative                                                                    
Finance Division and  had made a revised fiscal  not for the                                                                    
presentation.  She  shared  that  the  calculation  for  the                                                                    
funding for  the REAA Fund  was the annual school  debt that                                                                    
the  state spent,  divided  the  percentage of  municipality                                                                    
schools in  Alaska, multiplied by  a constant of  .244; this                                                                    
created the  proportion of funding  that supported  the REAA                                                                    
funding  stream.   She  explained  that  the   $618,000  was                                                                    
generated when  5 of  the municipal  school were  moved into                                                                    
the REAA  group, which changed the  percentage slightly; the                                                                    
existing funding  was about $35 million  annually, which the                                                                    
bill would change by about $600,000.                                                                                            
                                                                                                                                
Co-Chair  Meyer  inquired  if  the funds  would  be  in  the                                                                    
capital budget.  Ms. Nudelman  responded in  affirmative and                                                                    
pointed out  the funds being  capital was one of  items that                                                                    
the Division of  Legislative Finance had pointed  out in the                                                                    
original draft of the fiscal note.                                                                                              
                                                                                                                                
Co-Chair Meyer  inquired if the  $618,000 was on top  of the                                                                    
$35  million that  was already  in the  capital budget.  Ms.                                                                    
Nudelman  responded in  the affirmative  and added  that the                                                                    
$35 million in  the capital budget would  become about $35.6                                                                    
million.                                                                                                                        
                                                                                                                                
Co-Chair Meyer noted  that the fiscal was  unclear, but that                                                                    
Ms. Nudelman had had clarified things.                                                                                          
                                                                                                                                
10:08:53 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:11:50 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair Fairclough wondered what  items were currently on                                                                    
the  major maintenance  list. She  recalled that  before the                                                                    
Kasayulie  case had  been settled,  there  had been  schools                                                                    
across the state that were  trying to compete on the state's                                                                    
list and  that there  had been  a bottleneck  at the  top of                                                                    
list  of  the  schools,  which  were  predominantly  in  the                                                                    
Kasayulie case,  that needed to  be funded; as a  result, no                                                                    
other  schools across  the state  could  match the  criteria                                                                    
that was  already established with those  schools waiting to                                                                    
be  funded.  She  wondered  what   was  left  on  the  major                                                                    
maintenance  list  and  understood that  St.  Mary's  School                                                                    
District was  number 2 on  the remaining priority  list. She                                                                    
noted that someone  was copying a draft of the  list so that                                                                    
the committee could examine the issue.                                                                                          
                                                                                                                                
Co-Chair    Meyer   voiced    agreement   with    Vice-Chair                                                                    
Fairclough's request  and stated that his  office would make                                                                    
sure that all the members received a copy of the list.                                                                          
                                                                                                                                
Vice-Chair  Fairclough  requested  that  the  administration                                                                    
provide  the  list  of  major  maintenance.  Co-Chair  Meyer                                                                    
agreed that  it would be  better if  the list came  from the                                                                    
administration.  Ms.   Nudelman  replied  that   DEED  would                                                                    
provide  the  requested  information   and  added  that  the                                                                    
department prioritized  a list  for major maintenance  and a                                                                    
list for construction  each year, both of which  were on the                                                                    
department's website.                                                                                                           
                                                                                                                                
Vice-Chair  Fairclough   hoped  that  the   committee  would                                                                    
receive both  lists because  both were  important to  all of                                                                    
Alaska.                                                                                                                         
                                                                                                                                
Co-Chair Meyer noted Mr. Begich  was heavily involved in the                                                                    
Kasayulie case and requested his thoughts on the record.                                                                        
                                                                                                                                
10:14:18 AM                                                                                                                   
                                                                                                                                
TOM BEGICH,  POLICY DIRECTOR,  CITIZENS FOR  THE EDUCATIONAL                                                                    
ADVANCEMENT OF  ALASKA'S CHILDREN,  noted that  Citizens for                                                                    
the  Educational Advancement  of Alaska's  Children was  the                                                                    
plaintiff group that had brought  the Kasayulie suit forward                                                                    
and that  it represented  21 of the  53 school  districts in                                                                    
the state;  furthermore, it represented  12 of 19  REAAs. He                                                                    
reassured  Vice-Chair  Fairclough  that  the  bill  did  not                                                                    
attempt reopen litigation, but that  it attempted to fix the                                                                    
gap.  He pointed  out  that there  were  schools that  could                                                                    
utilize  the Municipal  Debt  Reimbursement  Fund and  those                                                                    
that  were covered  under the  REAA  funding mechanism,  but                                                                    
that there  were a number  of small schools that  had fallen                                                                    
through the  cracks that did  not have the capacity  to bond                                                                    
or  were  not  REAAs.  He  explained  that  the  legislation                                                                    
ensured  that  that  any  districts   that  fell  under  the                                                                    
criteria  of not  having the  capacity to  bond or  were not                                                                    
REAAs  would have  access to  the REAA  funds. He  addressed                                                                    
Senator Hoffman's comments  regarding possible concerns from                                                                    
REAAs  about  a  dilution  of   funding  REAA  funding,  but                                                                    
asserted that as the plaintiff  group in the Kasayulie case,                                                                    
the  Citizens for  the Educational  Advancement of  Alaska's                                                                    
Children  had made  SB 62  its highest  legislative priority                                                                    
with  the  recognition  that some  of  the  other  plaintiff                                                                    
member districts  had not been  addressed. He  reassured the                                                                    
committee not to  worry about a feeling that  the bill would                                                                    
diminish the REAA Fund.                                                                                                         
                                                                                                                                
Mr. Begich discussed the  administration's priority list for                                                                    
major   maintenance  and   construction  and   related  that                                                                    
although  St. Mary's  could  currently  qualify for  funding                                                                    
through the  General Fund,  the REAA  Fund was  designed for                                                                    
schools exactly  like St. Mary's.  He added that  the bill's                                                                    
particular formula  was adopted to minimize  the impact that                                                                    
the legislation would  have on the REAA Fund,  which was why                                                                    
it used  a combination of value,  divided by ADM and  had an                                                                    
ADM  number  of  300;  this method  ensured  that  only  the                                                                    
districts that could not bond  would have access to the REAA                                                                    
Fund. He  explained that if  a city's tax base  expanded, it                                                                    
could cause a district to  be no longer eligible for funding                                                                    
because eligibility  was based on  a formula and not  on the                                                                    
named  communities; the  formula  was  aimed at  continually                                                                    
focusing on equity regarding how schools were funded.                                                                           
                                                                                                                                
10:17:47 AM                                                                                                                   
                                                                                                                                
Senator  Hoffman recalled  a  previously  mentioned list  of                                                                    
schools and stated  that Nightmute was the  last school that                                                                    
was to be funded with  General Funds. He recalled fixing the                                                                    
funding for  "the 2  schools" the  prior year  and switching                                                                    
the funding mechanism to General  Funds. He pointed out that                                                                    
the  governor was  again trying  to build  schools with  the                                                                    
REAA Fund and  offered that the legislature  felt that those                                                                    
top  10 schools  should  be funded  with  General Funds;  he                                                                    
requested Mr.  Begich to address these  comments. Mr. Begich                                                                    
responded that  there were  5 schools  named in  the consent                                                                    
decree, 2  of which were put  in the prior year's  budget by                                                                    
the governor  to be  funded by  the REAA  Fund; furthermore,                                                                    
the  Citizens for  the Educational  Advancement of  Alaska's                                                                    
Children and the governor had  a disagreement regarding what                                                                    
the consent  decree stated. He  explained that  the Citizens                                                                    
for  the   Educational  Advancement  of   Alaska's  Children                                                                    
thought that intent of the  consent decree was to fund these                                                                    
schools that  were extraordinary  in costs with  the General                                                                    
Fund  because it  would otherwise  wipe out  the REAA  Fund;                                                                    
furthermore, this was also the  position taken by the Senate                                                                    
the prior  year. He explained  that the prior year,  both of                                                                    
"those schools" had  been shifted from the REAA  Fund as the                                                                    
funding sources  to the General  Fund and that  both schools                                                                    
had   been  funded   and  supported   by  the   governor  in                                                                    
consistency with the consent decree.                                                                                            
                                                                                                                                
Mr. Begich  continued to address Senator  Hoffman's comments                                                                    
and related that  the in the current year,  the governor had                                                                    
introduced the Nightmute and  Quinhagak schools both drawing                                                                    
from  the REAA  Fund. He  shared that  the Citizens  for the                                                                    
Educational Advancement  of Alaska's Children  believed that                                                                    
the Nightmute school should be  funded through General Funds                                                                    
and not through  the REAA Fund, but that  this represented a                                                                    
decision the legislature would have  to make. He pointed out                                                                    
that if the Nightmute were  funded through General Funds and                                                                    
the  legislation passed,  it would  ensure  that St.  Mary's                                                                    
would draw from the REAA Fund  this year and would help free                                                                    
up the clogging of the list  that had occurred over time. He                                                                    
pointed out that  there was 1 large school left  on the list                                                                    
that was  not involved in  the Kasayulie case and  that once                                                                    
it was funded, the list could be cleared rapidly.                                                                               
                                                                                                                                
10:20:32 AM                                                                                                                   
                                                                                                                                
Co-Chair  Meyer inquired  how  much money  was  in the  REAA                                                                    
fund.  Mr. Begich  replied that  the prior  year, about  $35                                                                    
million had  been appropriated to  the fund and that  in the                                                                    
current  year,  there  would  be  about  an  additional  $35                                                                    
million. He  noted that the  fund was capped at  $70 million                                                                    
and that  even if the  legislation added $600,000 it  had no                                                                    
effect  once  the cap  was  reached.  He clarified  that  if                                                                    
nothing was spent out of the  REAA fund in the current year,                                                                    
the  next year's  deposit would  be virtually  nothing; even                                                                    
though  an appropriation  was required,  the  fund would  be                                                                    
maxed out.                                                                                                                      
                                                                                                                                
Senator Olson inquired why St.  Mary's did not qualify as an                                                                    
REAA  school  district   and  expressed  concerns  regarding                                                                    
potentially making the same mistake  with some of the school                                                                    
districts that  he represented. Mr. Begich  replied that the                                                                    
St. Mary's had  chosen to organize and tax,  which took care                                                                    
of a lot  of local education and other  needs; however, what                                                                    
the district  had not addressed when  it became incorporated                                                                    
as a  city was  having to build  schools. He  explained that                                                                    
St.  Mary's did  not have  the property  tax base  needed to                                                                    
bond and  pointed out  that bonding  agencies looked  at raw                                                                    
numbers and  values; in  this instance,  St. Mary's  did not                                                                    
have property tax  base that any bonding  agency would allow                                                                    
it to issue bonds with.                                                                                                         
                                                                                                                                
Senator Olson queried  why St. Mary's had  not been included                                                                    
and  wondered   if  what  was   part  of   the  negotiators'                                                                    
reasoning.  Mr.  Begich  replied   that  the  mechanism  for                                                                    
getting the  plaintiff and  the state to  come to  the table                                                                    
and negotiate  was proposed in  2010. He explained  that the                                                                    
mechanism was  a complex bill  that was attached  to another                                                                    
complex  bill and  referenced earlier  comments by  Co-Chair                                                                    
Meyer and  Senator Hoffman; additionally, the  bill had been                                                                    
at risk  of not passing. He  shared that he could  not speak                                                                    
to what occurred  during negotiations, but that  it had been                                                                    
simpler  to  look  at  the REAA  number  versus  the  bonded                                                                    
numbers  by   those  who  were   actually  working   in  the                                                                    
legislature on  that bill; a  result, a compromise  had been                                                                    
reached. He  shared that at the  time in 2010, "we  all" had                                                                    
brought up  the question about  the bonded schools  and that                                                                    
people   had  hoped   to  correct   the  issue   before  the                                                                    
legislation  came into  play; however,  this simply  did not                                                                    
happen.  He stated  that the  Citizens  for the  Educational                                                                    
Advancement of  Alaska's Children had  pursued SB 62  on St.                                                                    
Mary's  behalf,  as well  as  other  the schools,  and  were                                                                    
hopeful that the legislation would pass.                                                                                        
                                                                                                                                
10:24:42 AM                                                                                                                   
                                                                                                                                
Senator Bishop  inquired if the legislation  would close the                                                                    
donut hole  on any  other schools.  Mr. Begich  responded in                                                                    
the affirmative.                                                                                                                
                                                                                                                                
BRUCE JOHNSON, EXECUTIVE DIRECTOR,  ALASKA COUNCIL OF SCHOOL                                                                    
ADMINISTRATORS,  stated that  the membership  was supportive                                                                    
of the legislation.                                                                                                             
                                                                                                                                
Senator  Olson inquired  what the  consequences of  the bill                                                                    
not  passing  in  a  timely manner  would  be.  Mr.  Johnson                                                                    
replied  that  if  the  bill  did not  pass,  the  5  school                                                                    
districts  that were  being considered  would  be unable  to                                                                    
have  some  of  their   needs  addressed  regarding  capital                                                                    
projects  because  they  did  not  have  the  money  or  the                                                                    
capacity  to  raise  it  through a  bond  because  of  their                                                                    
limited taxing authority.                                                                                                       
                                                                                                                                
10:27:45 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:30:14 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Meyer noted that the bill represented a lot of                                                                         
money and that the committee would have further discussion                                                                      
on the legislation.                                                                                                             
                                                                                                                                
SB 62 was HEARD and HELD in committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                
10:31:04 AM                                                                                                                   
RECESSED                                                                                                                        
                                                                                                                                
3:17:16 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects
SB 62 - ADM and Full Values by Muni.pdf SFIN 3/14/2013 9:00:00 AM
SB 62
SB 62 - Kasayulie v. Alaska Consent Decree and Settlement Agreement.pdf SFIN 3/14/2013 9:00:00 AM
SB 62
SB 62 - Sectional.docx SFIN 3/14/2013 9:00:00 AM
SB 62
SB 62 - Sponsor Statement.docx SFIN 3/14/2013 9:00:00 AM
SB 62
SB062-EED-ESS-3-1-13.pdf SFIN 3/14/2013 9:00:00 AM
SB 62
CS SB 38.pdf SFIN 3/14/2013 9:00:00 AM
SB 38
SB 38 - AS 08.64.PDF SFIN 3/14/2013 9:00:00 AM
SB 38
SB 38 - LB&A Sunset Review.PDF SFIN 3/14/2013 9:00:00 AM
SB 38
SB 38 - Sponsor Statement.doc SFIN 3/14/2013 9:00:00 AM
SB 38
SB 38 - State Medical Board Fact Sheet.PDF SFIN 3/14/2013 9:00:00 AM
SB 38
SB 38 - State Medical Board Website.PDF SFIN 3/14/2013 9:00:00 AM
SB 38
SB062-EED-FundTransfer-3-13-13 (3).pdf SFIN 3/14/2013 9:00:00 AM
SB 62
SB 21 - CS (FIN) Version Y.pdf SFIN 3/14/2013 9:00:00 AM
SB 21
SB021CS(FIN)-DNR-DOG-3-12-13.pdf SFIN 3/14/2013 9:00:00 AM
SB 21
SB021CS(FIN)-DOR-TAX-03-14-13.pdf SFIN 3/14/2013 9:00:00 AM
SB 21
Econ One Presentation For Senate Finance (3-14-13).pdf SFIN 3/14/2013 9:00:00 AM
SB 21
PFC SFIN 14 March 2013.pptx SFIN 3/14/2013 9:00:00 AM
SB 21
SB 21 Conoco Phillips SFIN 031413.pdf SFIN 3/14/2013 9:00:00 AM
SB 21
SB 21 DOR Presentation CostFcastSFIN_v4_edjt_20130314.pdf SFIN 3/14/2013 9:00:00 AM
SB 21
SB 21 Amendment 1 Kelly Y.7.pdf SFIN 3/14/2013 9:00:00 AM
SB 21
SB021CS(FIN)-DOR-COMM-03-14-13.pdf SFIN 3/14/2013 9:00:00 AM
SB 21
SB 21 summary sheet changes for new SEN FIN.pdf SFIN 3/14/2013 9:00:00 AM
SB 21
PFC SFIN 17 March 2013.pdf SFIN 3/14/2013 9:00:00 AM
SB 21