Legislature(1993 - 1994)
04/21/1993 09:05 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.