Legislature(1993 - 1994)

04/21/1993 09:05 AM FIN

Audio Topic
* first hearing in first committee of referral
+ 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                 
  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                 
  Co-chair  Pearce  directed  that  the  meeting  be   briefly                 
                       RECESS - 9:40 A.M.                                      
                      RECONVENE - 9:50 A.M.                                    

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