Legislature(1993 - 1994)
02/03/1993 01:42 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
The Chairman announced the committee would be hearing SB 59 (SCHOOL CONSTRUCTION & MAINTENANCE GRANTS) and SB 60 (APPROP:SCHOOL CONSTRUCTION GRANT FUND) JERRY COVEY, Commissioner, Department of Education, came forward to give an overview of the legislation. He explained that the state currently has a crisis with school facilities. As the department has been working to put together a comprehensive education plan over the last year and a half, throughout the state there was a lot of concern expressed about school facilities and the need to address problems. Commissioner Cover explained that a group consisting of superintendents, architects, engineers, cost estimators, legislators, and staff addressed the issue through the Alaska 2000 process. They developed about twelve recommendations. The final recommendations were built into a plan for school construction. Commissioner Covey explained that many schools in rural and urban Alaska are overcrowded and are in need of repair. In the urban areas many schools were over built and were far in excess of what the actual needs were. He indicated that many of the rural schools were built hastily and were poorly designed. Commissioner Covey informed the committee there are 286 portable classrooms, in sixteen school districts, which have been in use for up to ten years. The use of portables further compounds the crises in school facilities in that in the current method that is used to identify capital needs, portable classrooms count as regular classrooms. Students in portable classrooms are being counted as though they are in regular classrooms which reduces the apparent need for classroom space, while the need is great. Commissioner Covey explained that there are sophisticated facility systems, especially in rural Alaska. They are located in parts of the state where there is not the infrastructure to support them. It dramatically increases the cost of maintaining those facilities as people have to travel from urban centers to rural Alaska to handle systems such a pneumatic heat systems, fire suppression systems, etc. Commissioner Covey explained that based on the Department of Labor's predictions, there is a projected 4 percent increase in enrollment. It was projected that there would be a need of up to $100 million annual increase to take care of just new enrollment. Commissioner Covey discussed the need of major maintenance to school facilities and obtaining the funding. Because of the way the CIP process is structured, the projects have jumped from categories 3 and 4 to category 1. He explained that category 2 is unhoused students. It is time for the state to develop a comprehensive plan to address all the problems and the department's plan attempts to do that. He said a lot of time and effort has been put into it and he is bringing it to the legislature with the understanding that the legislature is faced with the problem of finalizing the plan and coming up with the funding scheme. The department and the governor propose using of the earnings of the permanent fund as the funding mechanism. It was realized early last fall that about $150 million would be needed each year, for the next few years, to address the plan. Commissioner Covey explained there are some changes in the current CIP process which would factor a higher level of accountability at the local school district level to maintain facilities. Other technical changes relate to local contributions by all school districts based on their ability to pay. He said although the funding source is highly sensitive to all Alaskans, it is a valid request and an appropriate use of the funds. Number 196 SENATOR LEMAN explained he is aware of significant needs in the Anchorage area and said the most overcrowded school is Sand Lake Elementary School and another is the Turnagain. He referred to the prioritizing of projects and asked what the rationale was. COMMISSIONER COVEY explained that the present system has been one method of funding school construction. In addition, through other capital appropriations, some school districts have had their needs addressed. Not all projects that have been funded have gone through the process. Some school districts have made a greater use of the process than other school districts and that is why it appears that some of the districts are represented better than other districts. Commissioner Covey explained that Anchorage appears to be under represented because of a number of things; such as, they have obtained funding in other ways and didn't utilize the process to the extent that other districts have. If the proposed process is funded appropriately, there will be significant activity by school districts all over the state to get their projects listed in the CIP process Number 274 CHAIRMAN RIEGER referred to Commissioner Covey's testimony regarding the participation of the school districts and asked him to discuss his comment regarding some of the school districts having made much greater use of the process than other school districts. COMMISSIONER COVEY explained that the department believes that some districts have been very active in seeking projects and getting them placed on the list and others have not. He said he has been told by some districts that the highest priority they have on the list is not their highest priority and if funding were available, they would want to redirect it, at the district level, to other projects. SENATOR SALO asked if a district is allowed to get a health and safety grant and then use it for a preferred project. COMMISSIONER COVEY indicated that the answer is "no." Commissioner Covey explained that the major area that the department is seeking to change in the process is reducing the priorities, under the capital plan, down to about four or five categories rather than seven or eight. He said they would like to build in major maintenance funding so that annually, instead of just taking care of the worst problems, other problems of a minor nature are also being addressed. Another change would be to build into the plan a maintenance component that would require a district to demonstrate a good maintenance program to qualify for any funding. Senator Salo referred to SB 60 and said the department would over see and mandate that there be a maintenance review. She asked what the implications would be if the department were to take on that responsibility. Commissioner Covey said he would like to defer the question to his staff. Number 333 GARY BADER, Director, Administrative Services, Department of Education, showed the committee a book with pictures of some maintenance projects that the department is trying to address. He discussed the two primary components of SB 59. The first is to separate the existing grant component into two categories - school construction and major maintenance. Another component is to establish the local match. Mr. Bader explained that the participating share in cities and boroughs is based on the per pupil amount and the full value of taxable property within the school district bounds divided by the average daily membership of the school district. The categories of the share requirement under the bill are attempted to be equitable based on the ability to pay. He noted for FY 94 the share would range from 5 to 40 percent for city and borough school districts, depending on the amount of wealth in the school district. Over the next three years, the district's share would increase another 5 percent each year, so there would ultimately be 30 to 55 percent match. Mr. Bader referred to REAAs and explained their participating share is zero the first year, 1 percent the second year, escalating up 1.4 percent each year until it gets to a maximum participation of 3.8 percent. Mr. Bader referred to SB 60 and explained it is the companion bill to SB 59 and it gives SB 59 meaning. He referred to information in the member's files entitled "Capital Improvement Program Budget Request" and said the projects are placed into categories as they are submitted. They are then ranked based upon standard ranking scales. He explained that after the ranking is completed, the districts are notified. The districts have the ability to ask the department to reconsider their placement on the list. He continued to review the "Capital Improvement Program Budget Request" information dated January 21, 1993, in the committee members' files. CHAIRMAN RIEGER asked if the qualifications for the different categories are in statute. It was indicated that the statute was 14.11.013 SENATOR SALO asked how often the list can be changed. Mr. Bader explained that the list is reconstructed each year. COMMISSIONER COVEY said that the department believes that the list of projects are all valid projects. He said he is confident that they are real needs. Senator Salo said she believes that all the projects are valid projects, but are they the projects that have the most serious needs. Commissioner Covey said the process of rating the projects begins in September when the districts send requests to the department. The department holds hearings from October through this week. He explained that by the end of the fiscal year, all projects through FY 95 will have a new scale that will go from seven categories down to four. The maintenance requirement will also be brought in. He explained that the message will be given to the districts in the spring and that time frame will allow them time to develop their list for next year. CHAIRMAN RIEGER asked if he is correct in saying the regulations that the Department of Education has adopted have basically taken statute in that the department must go through the first category before moving to the second. Commissioner Covey said that is his understanding. However, the statute does say that the department may use its judgement in terms of setting priorities. He said the department believes that absent that regulation, they have the authority to move between categories of projects. Chairman Rieger referred to when the statute passed in 1989 and said the House Finance minutes state that there was a concern that absolute prioritization not be pursued. He said he thinks that Commissioner Covey is saying that there is a list of projects that the school districts don't believe are their top priorities, the commissioner doesn't believe that they are top priorities, but because the regulations and paperwork have lead down this path, this is what must be put forward. The legislature is expected to put $150 million towards it. Commissioner Covey said he believes the process has credibility and some school districts take it very seriously. He said when some of the larger school districts have millions of dollars of capital needs and they see the state is putting somewhere between $20 and $30 million into the process annually, it is not something that builds their confidence and inspires them to spend a lot of time on the process. They have found ways around it. In addition, Commissioner Covey said although the process was designed as well as it could be, people have learned how to manipulate it. All it takes is to get an architect or engineer to make certain claims about the quality or integrity of that structure. He said he believes that the priorities at the top of the list are valid. There was continued discussion regarding the categorization of projects. Number 566 Chairman Rieger asked if it would be a fair statement to say that the major maintenance portion of SB 60 corresponds to the third priority category "C" which says, "protect the structure of existing school facilities." MR. BADER indicated it would be the third and fourth. SENATOR MILLER asked if the department has addressed all the safety and unhoused student issues on a statewide basis. Mr. Bader said the department has covered all the health- life safety issues for FY 94. He noted there were approximately twenty. Senator Miller asked how many unhoused projects there are. COMMISSIONER COVEY explained that there is over $200 million in unhoused student projects alone. The department is taking about $75 million out of the $150 million and addressing all the priority one projects and a couple of unfinished projects. Then the department is attempting to split the remaining $75 million between priority 2, 3, and 4 projects. MR. BADER indicated that there are fifty-eight unhoused student projects in FY 94. TAPE 93-7, SIDE B Number 001 Commissioner Covey said the projects will change as people give greater attention to the process. He explained that the bulk of next year's funding will be addressed towards the unhoused student situation. SENATOR MILLER asked if the department will be looking at the same source of funding next year that they are looking at currently. Commissioner indicated that the answer is "yes." Senator Miller said if the department is looking at the same source of funding, why not deal with the problem now. Commissioner Covey explained that they are trying to put fourth a plan that the infrastructure will support. Senator Miller expressed concern of unhoused student needs in the Fairbanks North Star School District. Commissioner Covey referred to the rating process and said the projects are rated based upon a specific number of criteria. It is the department's intent, as they look at revision of the process, to work with representatives from the school districts in reviewing the criteria. Number 047 SENATOR SALO referred to requiring good maintenance programs and asked what incentive there is for the school districts to not allow deterioration of their facilities. She also referred to the sliding scale of local contributions and said she believes it will be a real problem in places where districts will go out to bond for the other portion of the money. DUANE GUILEY, Director, School Finance, Administrative Services, Department of Education, said the incentive to encourage districts to improve on their preventive maintenance plan and their regular maintenance plan is that the department would write regulations that would require a preventative maintenance plan to be in place that was auditable by a third party. That would serve as justification for participation in the major maintenance fund distribution. In other words, they could not apply for a project under the major maintenance fund in FY 95 and beyond unless they have in place a preventative maintenance plan. CHAIRMAN RIEGER referred to deliberations on the new maintenance fund and asked if the committee considered separate appropriations in the foundation formula for maintenance versus operations. Mr. Guiley indicated that there was discussion. He said many states provide, through the general operating fund, a flat dollar amount per student for school construction. In those states, they provide as little as $30 per student and as high as $300 per student. There are various plans throughout the states and in many of those plans there are absolutely no restrictions as to how those dollars are used. He said that subject was discussed by the committee and given the various sizes of school districts in the state and the existing backlog of structures, the best proposal was to fund the existing list. The committee felt very strongly that the list was an appropriate process. The disadvantage to the existing process was that those projects normally classified in categories 3 and 4, relating to the protection of structure and code upgrade, have stayed on the list and remained unfunded, they continued to leap over all the priority 2 unhoused student projects. Mr. Guiley explained that the statute requires the department to submit a list to the governor by November 1, and to the legislature within ten days after the beginning of the legislature. It also requires the department to rank those projects in a priority sequence. Mr. Guiley said the statutes further provides that the department cannot award projects unless they are in priority sequence. Even though the statute provides broad classification of what the department must consider in assigning those priorities, once the department transmits that list, that becomes the priority list. That list can only be changed though the appeal process which the department is currently undertaking. Mr. Guiley explained the statute also provides that if an appeal is pending at the time of an appropriation bill, the priority that is assigned on the date of the appropriation is the priority in effect. Number 086 Chairman Rieger said that as he reads the statute, it requires the department to prioritize projects and not in categories. Mr. Guiley said that is a fair statement. He explained that what requires those projects to be funded in a specific sequence is once the priority list is transmitted, the department is supposed to prepare an estimate of the amount of money needed to finance each project, as stated in AS 14.11.013. The department is supposed to provide a grant schedule with a proposed schedule of appropriations to the governor by November 1, and to the legislature ten days after session begins. In preparing the grant schedule, the department shall establish priorities among the projects for which grants are requested. Further, the department shall award grants in the order priority established. MR. BADER referred to Senator Salo's question regarding the sliding scale of local contributions and said that some of the municipalities have indicated that the scale, as proposed, may create some difficulty in terms of getting voter approval for bonding. He indicated it is currently under review. CHAIRMAN RIEGER said it is not his intention to pass the bill out of committee. He indicated it would be heard again at a later date. Number 123 There being no further business to come before the Senate HESS Committee, Chairman Rieger adjourned the meeting at 2:43 p.m.