Legislature(2005 - 2006)HOUSE FINANCE 519
04/07/2006 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB403 | |
| HB362 | |
| HB51 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 488 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 403 | TELECONFERENCED | |
| += | HB 362 | TELECONFERENCED | |
| = | HB 51 | ||
HOUSE FINANCE COMMITTEE
April 7, 2006
1:42 P.M.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 1:42:36 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Mike Kelly
Representative Beth Kerttula
Representative Carl Moses
Representative Bruce Weyhrauch
MEMBERS ABSENT
Representative Jim Holm
ALSO PRESENT
Speaker John Harris; Eddy Jeans, Director, Education Support
Services, Department of Education and Early Development;
Mike Palowski, Staff, Representative Kevin Meyer; Ian Fisk,
Staff, Representative Bill Thomas; Paul Lisankie, Director,
Division of Workers' Compensation, Department of Labor &
Workforce Development; Margo Warring, Juneau School Board;
Andy Story, Juneau School Board; Julie Morris, Juneau School
Board; Stephanie Allison, Glacier Valley School District,
Juneau; John Ringstad, Fairbanks School District, Fairbanks;
Mary Francis, Executive Director, Alaska Council of School
Administrators; Mary Hakala, Alaska Kids Count Network,
Juneau; Cindy Spanyers, Alaska Public Employees Association
(APEA), Juneau
PRESENT VIA TELECONFERENCE
Deborah Germano, Borough Assembly, Homer; Bill Bjork,
President, National Education Association (NEA)-Alaska,
Anchorage; Harlon Harmon, North West Arctic Borough School
District; Sarah Welton, President, Mat-Su School Board; Rob
Wells, Mat-Su School Board; Doug Johnson, Valdez City School
Board; Susan Sciabbarrasi, Superintendent, Wrangell Public
School District
SUMMARY
HB 51 An Act relating to permitting employers in the
same trade to form joint insurance arrangements
for self-insured workers' compensation coverage.
CS HB 51 (FIN) was reported out of Committee with
a "no" recommendation and with a new zero note by
the Department of Labor & Workforce Development
and indeterminate note #1 by the Department of
Commerce, Community & Economic Development.
HB 362 An Act increasing the base student allocation used
in the formula for state financing of public
education; and providing for an effective date.
HB 362 was HEARD & HELD in Committee for further
consideration.
HB 403 An Act relating to registration and operation of
neighborhood electric vehicles.
CS HB 403 (FIN) was reported out of Committee with
"individual" recommendations and with zero note #1
by the Department of Public Safety and fiscal note
#2 by the Department of Administration.
1:43:23 PM
HOUSE BILL NO. 403
An Act relating to registration and operation of
neighborhood electric vehicles.
Co-Chair Chenault MOVED to ADOPT work draft #24-LS1229\L,
Mischel/Luckhaupt, 3/31/06, as the version of the bill
before the Committee. There being NO OBJECTION, it was
adopted.
1:44:03 PM
IAN FISK, STAFF, REPRESENTATIVE BILL THOMAS, explained the
changes, which eliminates Section 1, and language was added
to Page 3, Lines 9-11, specifying that the low-speed vehicle
cannot be operated within a municipality unless that
municipality has adopted an ordinance allowing it. The
Division of Motor Vehicles (DMV) for those changes noted
support.
1:45:04 PM
Representative Hawker thanked Representative Thomas for the
legislation.
1:46:17 PM
Representative Hawker MOVED to REPORT HB CS 403 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CS HB 403 (FIN) was reported out of Committee with
"individual" recommendations and with zero note #1 by the
Department of Public Safety and fiscal note #2 by the
Department of Administration.
1:47:49 PM
HOUSE BILL NO. 362
An Act increasing the base student allocation used in
the formula for state financing of public education;
and providing for an effective date.
EDDY JEANS, DIRECTOR, EDUCATION SUPPORT SERVICES, DEPARTMENT
OF EDUCATION AND EARLY DEVELOPMENT, explained that HB 362
would raise the Base Student Allocation (BSA) for students
attending public schools K-12 beginning in FY07. Under the
bill, the BSA would increase from $4,919 to $5,352,
approximately an 8.8% increase over last year. It would be
the fourth increase since 2003, when the allocation was at
$4,010; all four increases amount to a 33% increase.
Mr. Jeans continued, the bill is an important effort to
finance K-12 public education at a level, to meet the
increased costs of the school districts. The increase adds
approximately $90 million dollars to education.
Mr. Jeans explained the funding break down:
· $40 million dollars for Public Employees Retirement
System (PERS) and Teacher's Retirement System (TRS)
increases;
· $30 million dollars for increased fuel costs; and
· $20 million dollars to help school districts meet
adequate yearly progress.
Mr. Jeans advised that the $20 million dollars was included
as a discussion starting point.
Representative Hawker mentioned the unpredictability of
energy costs and asked if direct reimbursement had been
considered. Mr. Jeans explained that the Department does
not control how costs are incurred. Allocating funds
through the program makes it discretionary; it up to the
local school boards to determine how to allocate those
revenues.
1:51:54 PM
Representative Hawker stated that school funding must be
addressed more innovatively.
Vice Chair Stoltze commented that the Mat-Su school district
had hired "efficiency experts", who pointed out habit
forming activities of the personnel to help minimize costs.
Mr. Jeans replied that most districts had considered such
ideas from various perspectives and he mentioned the
Fairbanks and Kodiak school district's reduction of energy
costs.
1:53:54 PM
PUBLIC TESTIMONY
MARGO WARRING, JUNEAU SCHOOL DISTRICT testified on HB 262
and spoke on behalf of the Juneau Board of Education in
support of an increase to the BSA. The current proposed BSA
is $5,352 dollars, which unfortunately for Juneau means a $2
million dollar cut to the current budget. The recommended
BSA is in the amount of $5,552 dollars, an increase of $200
additional dollars.
Ms. Warring underscored the importance of education in the
world. The largest communities in the world, India and
China, are growing because of their greater funding of the
education infrastructure. The United States (U.S.) now
th
rates as #17 in the world for education achievement levels.
There are enormous disparities between Asian and American
high schools and achievement levels. The number #1 factor
in success is not class size but the quality of education.
It is important that each state commit to education to
attract highly qualified teachers.
The U.S. average for teacher's salaries was 31.5% during the
1990-2000. During that same time, Alaska teacher's salary
only grew 10.9%, last amongst all state. The percentage of
the Alaska State budget that goes to K-12 education is now
the lowest in the Nation.
1:57:25 PM
ANDY STORY, JUNEAU SCHOOL DISTRICT, thanked the public
assembly for funding to the cap for education in Juneau.
Even that continued support has not been enough to maintain
levels of adequate help for the schools. Increased
expenditures exceed the increased revenue for the coming
year. HB 362 proposes $2 million dollars in cuts to the
Juneau school budget next year if more revenue is not
invested for education. The Alaska Association of School
Boards (AASB) distributed a handout indicating the BSA
increase needed for services and costs.
Ms. Story reiterated that the recommended increase should be
$200 dollars more per pupil and that salary increases
proposed for the staff are modest.
1:59:43 PM
JULIE MORRIS, JUNEAU SCHOOL BOARD, noted that the school
board had participated in a task force during the summer,
which looked at cost factors. She recommended adjusting
those cost factors over the top of what the Governor has
proposed. Currently Juneau received a .005-cent (1/2 penny
more than Anchorage); however, a recent study recommended an
adjustment of 14.5%. She maintained that implementing half
that amount could restore a maintenance level of funding.
Ms. Morris pointed out that many other school districts face
the same challenges with the erosion of purchasing power
from the BSA due to cost differentials. The schools are
hurting. Of the $90 million dollars proposed by the
Governor, nearly half will go into the Public Employees
Retirement System (PERS) and Teacher's Retirement System
(TRS).
Co-Chair Meyer interjected, it was not his intent to move
the bill from committee at this time. The bill would be
held.
2:02:24 PM
STEPHANIE ALLISON, GLACIER VALLEY SCHOOL DISTRICT, JUNEAU,
voiced concern that the BSA is not sufficient to educate our
children. With the proposed cuts, in her son's class, it
would mean the loss of a minimum of one teacher with class
sizes increasing. The loss of an elementary teacher is
serious and means that teachers spend more time managing and
less time teaching. The current proposal means that a
teacher would average 25 elementary students per class. She
worried about funding and how it affect student's struggle
to succeed.
Ms. Allison pointed out that Alaska fails to fund their
schools adequately, which means that Alaska fails to realize
that their most valuable asset is their children. The
current BSA holds the Juneau School District short by $2
million dollars. She noted that children are holding fund-
raisers to fund their art programs.
2:06:02 PM
JOHN RINGSTAD, FAIRBANKS SCHOOL DISTRICT, FAIRBANKS,
commented that Fairbanks supports the proposed legislation.
2:06:40 PM
MARY FRANCIS, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, JUNEAU, addressed school funding. At the
time that the Governor's proposal was presented, most school
administrators statewide did not have the opportunity to
determine the impact. There are short falls everywhere in
the State, while attempting to sustain programs. She
pointed out the many years of flat funding for schools. Ms.
Francis urged consideration of a larger BSA.
2:08:33 PM
MARY HAKALA, ALASKA KIDS COUNT NETWORK, JUENAU, spoke of the
concerns parents everywhere in the State have. Education is
a massive subject and difficult to address. She spoke to
the future potential of Alaska, which rests with the youth
of the State.
The gas line will sustain the State economically but it is
the youth that will sustain Alaska into the future. She
urged no more cuts to school program and requested:
· No more cuts to what is left;
· Allow for improvements, and that
· Local control works.
Ms. Hakala emphasized that the cuts are real and deep. She
pointed out that property taxes are high. The State cannot
expect the communities to continue fully funding education.
Approximately, $150 million extra dollars are needed to keep
schools whole. The State cannot sustain those costs. The
Federal government is changing their Cost-of-Living-
Allowance (COLA) in Alaska. Right now, Alaska ranks as the
th
#44 State in funding of school education in the Nation.
Ms. Hakala commented that with Alaska's wealth, the State
should rank in the top ten and urged that the Legislature
make the necessary resources available.
2:16:37 PM
CINDY SPANYERS, ALASKA PUBLIC EMPLOYEES ASSOCIATION (APEA),
JUNEAU, stated that the parents of the State are counting on
legislators to maintain programs that are now in place. She
mentioned the number of children in her child's elementary
school and addressed parental involvement. The Juneau
School District has given many hours to improve the numbers.
She urged that funding be increased.
2:18:41 PM
DEBORAH GERMANO, (TESTIFIED VIA TELECONFERENCE), BOROUGH
ASSEMBLY, HOMER, voiced concern for the direction that
education is moving in the State. The numbers proposed by
the Governor are not enough and that the Homer School
District is seriously "hurting".
Ms. Germano addressed direct funding of fuel costs.
Currently, almost $1 million dollars per year in operating
money is going to support transportation. She urged that
the increase be assessed, relating to how it affects each of
the districts for transportation, health insurance, & salary
costs. She requested at least $1.5 million extra dollars
funding allocation. She reiterated that Homer is currently
a "bare-bones" operation.
2:23:46 PM
BILL BJORK, (TESTIFIED VIA TELECONFERENCE), PRESIDENT,
NATIONAL EDUCATION ASSOCIATION (NEA)-ALASKA, ANCHORAGE,
stated that their organization represents the 13,000
teachers and support staff statewide. He stressed that
schools need help and addressed the Governor's request. Mr.
Bjork worried that funding discussions are coming up too
late in session to adequately address needs. Schools are
making decisions about the upcoming year at this time and
the proposed amounts are being spread too thin. He pointed
out the number of lay-offs that will occur with shortfalls
to Juneau and Anchorage.
Mr. Bjork noted that K-12 schools are suffering from the
high costs of energy. Schools are feeling the crunch of all
those costs. He believes there is a better way to fund
schools. Costs need to be determined to meet the standards
of the State, which should not be "difficult or political".
Mr. Bjork urged that education be looked at as the #1
resource investment. It will pay dividends for the future
of Alaska. NEAA is recommending a base allocation of $5,611
per student, an increase of $145 million dollars over the
Governor's recommendation. The Kenai School District is a
"poster child" for the negative impact of current funding of
the schools - a school district that has cut everything and
now must cut 70 more teachers.
Mr. Bjork stressed that Alaska can do better, emphasizing
that the State is counting on the Legislature to more wisely
address education.
2:29:49 PM
HARLON HARMON, (TESTIFIED VIA TELECONFERENCE), NORTH WEST
ARCTIC BOROUGH SCHOOL DISTRICT, testified on an additional
BSA level increase. He worried about the undetermined costs
associated with medical and insurance. He stressed that
inflationary items cannot be covered with the $20 million
dollars. He encouraged consideration above the proposed
amount. The primary concern rests with meeting mandates for
increased quality, which comes with a price tag. He
encouraged the Committee to make an appropriate investment
for education.
2:32:58 PM
SARAH WELTON, (TESTIFIED VIA TELECONFERENCE), PRESIDENT,
MAT-SU SCHOOL BOARD, stated that the Mat-Su district is the
fastest growing area in the State and that increases to
costs for doing business are rising. The district requests
an increase above the $90 million dollars recommended by the
Governor. She explained that the price tag proposed by the
Governor translates to a cut of 80 teachers in that district
with a growth in population.
Ms. Welton urged greater funding for the Alaska schools.
2:36:46 PM
ROB WELLS, (TESTIFIED VIA TELECONFERENCE), MAT-SU SCHOOL
BOARD, commented on the difficulty that the Mat-Su School
District is experiencing from the increased costs of running
those schools. He highlighted the increases experienced by
the Mat-Su School district:
· $4.4 million for the TRS
· Over $4.1 million in contract increases
· Over $2.5 million in health insurance
· $1.8 million in new staff costs
· $800 thousand to open a new elementary school
· $750 thousand in fixed costs
· Over $1 million in special education costs
Mr. Wells mentioned the tax cap adopted by the Assembly last
year. He recommended that Municipal Assistance and Revenue
Sharing be reinstated to help the local school districts.
He hoped to see the Institute of Social and Economic
Research (ISER) study resolution this year.
2:39:17 PM
DOUG JOHNSON, (TESTIFIED VIA TELECONFERENCE), VALDEZ CITY
SCHOOL BOARD, VALDEZ, spoke to the lay-offs that the Valdez
School District will experience with the increase as
proposed by the Governor. Valdez has always had the support
of their City for additional educational support. He
emphasized needs resulting from the high PERS/TRS costs and
the eroding floor resulting from passage of SB 36. As of
March 31, 2006, their district was $56 thousand above the
budgeted fuel amount. He estimated that they would be $700
thousand dollars short in the next school year, which will
require more teacher layoffs.
Mr. Johnson observed that the City of Valdez has funded the
school district to the cap. He spoke in support of
additional funding regardless of what it takes.
2:43:07 PM
SUSAN SCIABBARRASI, (TESTIFIED VIA TELECONFERENCE),
SUPERINTENDENT, WRANGELL PUBLIC SCHOOL DISTRICT, WRANGELL,
testified in support of HB 362. She acknowledged the
Governor's proposed funding increase, but observed that
school districts still have to make huge cuts with Kenai,
Valdez and Wrangell, hardest hit. The BSA should adequately
be funded with consideration of the area cost differential.
Ms. Sciabbarrasi pointed out that Anchorage is used as the
base for the area cost differential. In order to meet
equity, the district cost factors must be considered. She
stressed that with the proposed increase, districts are
experiencing cost deficits up to 90%. She urged that the
$91.2 million dollar increase be accepted and fully funding
for new district cost factors.
2:47:18 PM
Co-Chair Chenault stated his intention was to submit an
amendment addressing the area cost differential. He
observed the effects of the cost differential on school
districts. He argued that the cost of keeping students in
school is less than the social cost if they drop out.
Co-Chair Chenault indicated that it was not his intent to
hurt any school district in the State. The intent is to
make a fair and equable system for the State of Alaska.
Adjustments have not been made yet, instead funding has been
added to the base, which increases the gap between those
with increased costs. He noted that his amendment would
make increases according to 25% of the ISER study. He
expressed his willingness to continue working on a proposal,
but maintained that equity must be addressed.
Co-Chair Chenault proposed 25% to the cost factors, which is
still short of what it will take to fix his district. He
maintained that forward motion must occur. The cost
differentials help all districts in the State. He did not
support additional funding to the base, without an increase
to the differentials.
2:55:46 PM
Co-Chair Meyer observed the difficulties in addressing the
base allocation. He acknowledged the need, but stressed
that the largest school district [Anchorage] would not
benefit.
2:56:46 PM
Representative Kelly asked if a cap had been considered.
Co-Chair Chenault stated that he was willing to look at a
cap, but reiterated the need for addressing the
differentials. He stated if a study occurs, it must have
specific requests for that information.
2:58:03 PM
Representative Kelly referenced areas difficult to recruit
teachers. Co-Chair Chenault explained he is looking to fund
fuel, PERS and TRS costs inside and outside of the formula.
There will be winners and losers under most options. He
observed that Kenai is currently funded to the cap,
reiterating that most inequity results from cost
differentials, which have not been changed since 1998.
HB 362 was HELD in Committee for further consideration.
3:01:27 PM
HOUSE BILL NO. 51
An Act relating to permitting employers in the same
trade to form joint insurance arrangements for self-
insured workers' compensation coverage.
Co-Chair Meyer MOVED to ADOPT Amendment #1. Representative
Kelly OBJECTED.
MIKE PALOWSKI, STAFF, REPRESENTATIVE KEVIN MEYER, explained
that Amendment #1 on Page 2, Line 11, clarifies the joint
liability language. The amendment adds "and the solvency of
the association of self-insured employers". The amendment
clarifies the member's obligations and the solvency of the
association.
Representative Kelly WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment #1 was adopted.
Co-Chair Meyer MOVED to ADOPT Amendment #2. Representative
Kelly OBJECTED.
Mr. Palowski explained that Amendment #2, Page 5, Line 27,
addresses concerns with assessment. The amendment inserts
"of not less than $300,000 in the aggregate and not less
than $10,000", in order to qualify for a certificate of
self-insurance. He acknowledged that it would push some
smaller companies from being able to join some associations.
The sponsoring groups testified in favor of the legislation
including that language.
3:06:15 PM
Representative Weyhrauch pointed out that addition of that
language would drive him out of business. He questioned the
deletion of all material on Page 5. He suggested
alternative language to Line 28: "Or an amount necessary to
maintain solvency with the association". That language
could provide the Department the discretion to determine the
appropriateness of the floor. He noted that he did support
the first part of the amendment.
Mr. Pawlowski agreed that the change could work well for the
language of the bill and was consistent with the intent.
Representative Weyhrauch MOVED to AMEND Amendment #2,
deleting Lines 5 & 6 of the amendment and then on Page 5,
Line 28, add "or" before "in". There being NO OBJECTION,
Amendment #2 was amended.
Representative Kelly WITHDREW his OBJECTION to Amendment #2.
There being NO further OBJECTION, amended Amendment #2 was
adopted.
3:09:11 PM
Co-Chair Meyer MOVED to ADOPT Amendment #3. Vice Chair
Stoltze OBJECTED.
Mr. Pawlowski stated that Amendment #3 relates to single
self-insurance. Page 2, Line 1, deletes $5 million dollars
and inserts $10 million dollars; Page 6, Line 9, deletes $5
million dollars and inserts $10 million dollars; Page 6,
Line 11, deletes $5 million dollars and inserts $10 million
dollars. The changes reflect the testimony received from
the Department of Labor & Workforce Development.
Vice Chair Stoltze WITHDREW his OBJECTION.
Representative Kelly asked the new number. Mr. Pawlowski
did not know. There being NO further OBJECTION, Amendment
#3 was adopted.
3:10:45 PM
Co-Chair Meyer MOVED to ADOPT Amendment #4. Vice Chair
Stoltze OBJECTED.
Mr. Pawlowski explained the change to Page 6, Line 18,
following "employers", inserting "shall be registered under
AS 21.27.630-21.27.660 and". The change was recommended by
Director Linda Hall, Department of Labor & Workforce
Development, allowing the process of claims be addressed by
rd
a 3 party administrator.
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment #4 was adopted.
3:11:46 PM
Co-Chair Meyer MOVED to ADOPT Amendment #5. Representative
Kelly OBJECTED.
PAUL LISANKIE, DIRECTOR, DIVISION OF WORKERS' COMPENSATION,
DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT, explained that
Amendment #5 reflects that the association will be kept in
the frame work of the Workers Compensation Act for purposes
of determining entitlement.
Mr. Lisankie continued, Part 2 of the Amendment, Page 16,
following Line 7, the association will not have a premium
but rather an assessment. Currently, the language requests
consideration of insertion of "each association of self
insured employers" base all contributions on either
insurance premiums or payments. That language guarantees
that the association, on behalf of the members, would make
the contributions now. The tail end of the amendment
provides provisions needed when an association is started &
then during the transition period.
3:15:25 PM
Representative Kerttula inquired where workers would be
placed under the second portion of Amendment #5. Mr.
Pawlowski explained that the provisions in Title 21, relates
to the accounting portion. The places, where it would be
applicable, such as on Page 7, Line 30, providing the
investment of assets and the type of investment classes.
There is a difference between accounting and gap accounting,
and the internal procedures the insurance company is
required to go through, and is not appropriate for self-
insurance.
3:17:05 PM
Mr. Lisankie agreed, stating that it would guarantee that
they fit into the Worker's Compensation statute but not
subject to all the Title 21 Insurance Act regulations.
Representative Kelly WITHDREW his OBJECTION. There being NO
further OBJECTIONS, Amendment #5 was adopted.
3:17:56 PM
Representative Weyhrauch MOVED to ADOPT Conceptual Amendment
#6 to Page 15, Line 26, describing a tangible net income.
Co-Chair Meyer OBJECTED.
Representative Weyhrauch addressed net worth protection by
adding after "chapter", language: "including defining
tangible net worth".
Mr. Pawlowski thought that would be okay. Co-Chair Meyer
agreed.
Co-Chair Meyer WITHDREW his OBJECTION. There being NO
further OBJECTION, conceptual Amendment #6 was adopted.
3:20:29 PM
Representative Foster MOVED to REPORT CS SS HB 51 (FIN) out
of Committee with individual recommendations and with the
accompanying notes. There being NO OBJECTION, it was so
ordered.
CS HB 51 (FIN) was reported out of Committee with a "no"
recommendation and with a new zero note by the Department of
Labor & Workforce Development and indeterminate note #1 by
the Department of Commerce, Community & Economic
Development.
3:21:17 PM
ADJOURNMENT
The meeting was adjourned at 3:23 P.M.
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