Legislature(2009 - 2010)HOUSE FINANCE 519
04/07/2010 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB363 | |
| SB237 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 237 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 363 | ||
HOUSE FINANCE COMMITTEE
April 7, 2010
1:52 p.m.
1:52:50 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 1:52 p.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Vice-Chair
Representative Allan Austerman
Representative Mike Doogan
Representative Neal Foster
Representative Les Gara
Representative Reggie Joule
Representative Mike Kelly
Representative Woodie Salmon
MEMBERS ABSENT
Representative Anna Fairclough
ALSO PRESENT
Rob Earle, Staff, Representative Bob Herron; Jomo Stewart,
Staff, Senator Kevin Meyer; Jay Livey, Staff, Senator
Hoffman; Eddy Jeans, Director, School Finances and
Facilities, Department of Education and Early Development;
Eric Gebhart, Superintendent, Nenana Society School
District; Carl Rose, Executive Director, Alaska Association
of Alaska School Boards; Amy Lujan, Executive Director,
Alaska Association of School Business Officials (ALASBO);
Mary Francis, Executive Director, Alaska Council of School
Administrators; Paul Verhagen, Board Member, Nenana School
District
PRESENT VIA TELECONFERENCE
Mike Barnhill, Attorney, Department of Law
SUMMARY
HB 363 AIDEA MEMBERSHIP
CS HB 363 (FIN) was REPORTED out of
Committee with a "do pass" recommendation
and with new fiscal note from the Department
of Commerce, Community and Economic
Development.
SB 237 SCHOOL CONSTRUCTION DEBT REIMBURSEMENT
CS SB 237(FIN) was HEARD and HELD in
Committee for further consideration.
1:52:56 PM
HOUSE BILL NO. 363
"An Act relating to the membership of the Alaska
Industrial Development and Export Authority."
Representative Kelly MOVED to adopt Amendment 1, 26-
LS1503\S.2, Cook, 4/7/10:
Page 2, line 18, following "serve":
Insert "at the pleasure of the governor for"
Co-Chair Stoltze OBJECTED for the purpose of discussion.
Representative Kelly explained Amendment 1.
Co-Chair Stoltze MAINTAINED his OBJECTION. He thought that
the amendment could cause confusion and create a false
sense of uncertainty for other boards.
1:55:22 PM
Representative Doogan requested a clearer explanation of
the law in respect to the changes proposed in the
amendment.
1:56:01 PM
MIKE BARNHILL, ATTORNEY, DEPARTMENT OF LAW (via
teleconference), stated that opinions from the department
dating back to the 1980s suggest that when a board member
was to serve for a specified period of time, a property
interest was created for the amount of time the board
member would serve. At that time the department recommended
that the governor should not remove board members
prematurely without an established cause. In the interest
of caution, if the legislature believed that the board
members should serve at the pleasure of the governor, it
should be explicitly stated in the legislation.
A roll call vote was taken on the motion.
IN FAVOR: Doogan, Foster, Gara, Kelly, Salmon, Thomas,
Austerman
OPPOSED: Hawker, Stoltze
The MOTION PASSED (7-2).
1:58:59 PM
ROB EARLE, STAFF, REPRESENTATIVE BOB HERRON, discussed the
fiscal note. He stated that the fiscal impact had increased
due to the addition of 3 public members to the board.
Vice-Chair Thomas MOVED to REPORT CS HB 363(L&C), 26-
LS1503\S, as amended, out of Committee with individual
recommendations and the accompanying fiscal note. There
being NO OBJECTION, it was so ordered.
CS HB 363 (L&C) was REPORTED out of Committee with a "do
pass" recommendation and with new fiscal note from the
Department of Commerce, Community and Economic Development.
2:00:53 PM AT EASE
2:02:03 PM REONVENNED
2:02:12 PM
SENATE BILL NO. 237
"An Act extending the deadline for authorizing school
construction debt reimbursed by the state."
JOMO STEWART, CO-COMMITTEE AID, SENATE EDUCATION COMMITTEE,
STAFF, SENATOR KEVIN MEYER, explained that the bill would
make permanent a program that the legislature had been
running through regular reauthorizations. It would codify
in statute a system for the equitable distribution of
school construction funds, historically achieved thorough
yearly budgetary processes. He stated that The State of
Alaska School Bond Debt Rimbursement Program provided the
important partnership between local communities and the
state. The program was open to any municipality that had
the capacity to bond. It had allowed projects on the
Department of Education and Early Development's approved
list to be reimbursed by the state for up to 70 percent of
the cost, and had allowed local governments to perform
school construction that might not have otherwise been able
to afford. The program was a long-running initiative that
had been regularly reaffirmed with the extension of the
sunset date. The benefits of the program had been limited
to localities with bonding capacity, which had left a large
section of the state's student population without access to
program benefits. The bill would create in statute a
comparable statutory mechanism for school construction in
Rural Education Attendance Areas (REAA). The legislation
would create a REAA, into which proportional state
appropriations would be placed for the funding of rural
construction into the future. Yearly deposits into the fund
were estimated at $40 million per year, and at no time
would the value of the fund exceed $100 million.
JAY LIVEY, STAFF, SENATOR HOFFMAN, explained that the
legislation was drafted in response to Kasayulie v. State,
3AN-97-3782 Civ. (Superior Court of Alaska, Sept. 1, 1999),
which ruled that the state had a duty to provide adequate
funding for facilities in rural areas, as well as urban
areas. This was an attempt to put into statute a reliable
stream of revenue for REAAs, which would make planning
building projects easier. He referred to the "SB 237
Funding Formula" handout (copy on File). The handout
illustrates the generation of funds into the future, based
on what has happened in REAA construction in the past and
what was projected to happen in the future. The number
$344,190,425 was comprised from a list of 11 REAAs that
were next on the department's list. The $887,836,319
represented the REAA funding that would be necessary
through FY11. The $1,230,933,627 represented the
outstanding school construction debt. At any point in time
there was an outstanding debt number that was the states
obligation for the 70 percent of approved bonds. The
number would vary each year. Any school would have to go
through all the processes to qualify for the program. The
funding formula was comprised of a constant and two
variables; from year-to-year the outstanding school
construction debt changed, as did the percentage number of
REAA students, while the constant was the 28 percent
differential percent proxy. Based on the FY2009 numbers the
formula would be approximately $38 million per year. Unused
funds would roll over into the following year. He
reiterated that any school that wanted to receive funds
would need to go through the department's process of
project approval.
2:11:40 PM
Representative Kelly understood that the $1,230,933,627
represented a decade's long obligation, with a share ratio
up to 90/10 and down to 60/40. He wondered what the
corresponding numbers for the REAAs were.
Mr. Livey was not sure. He thought that there were a
significant number of dollars that had been made for REAA
construction through the grant process that would not be
reflected in the debt number. Not all schools in the
boroughs were funded through debt.
2:14:01 PM
Representative Doogan found the funding formula confusing.
Representative Gara expressed the desire for further
clarification of the funding formula.
2:15:30 PM
Representative Joule suggested examining historical
discussions and past proposed solutions for school
construction, as a means of informing the current
discussion.
2:16:26 PM
Mr. Livey relayed that that the $543,645,894 figure had
stemmed from looking back 10 years to determine the amount
of money that had been spent in grants to REAA districts.
There were currently 11 schools on the list that were
waiting to be funded. The hope into the future was that
there would eventually be a process, outside of the
legislation, that would fund the schools. When the money
being spent in REAAs was compared with the amount of money
being spent in the district, it was assumed that the
$344,190,425 would have been spent. The total of
$887,836,319 was a combination of what had been spent in
the past, plus what would be spent over the next few years.
2:18:33 PM
Representative Gara asked how long the reimbursement
program would be extended by the legislation. Mr. Stewart
replied that the sunset date would be removed entirely.
Representative Gara asked under what conditions state
compensation would be reduced from 70 percent to 60
percent. Mr. Stewart responded that he did not know.
Co-Chair Stoltze added that the answer to the question was
complicated.
2:19:42 PM
EDDY JEANS, DIRECTOR, SCHOOL FINANCES AND FACILITIES,
DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, testified
that the administration was neutral concerning the
legislation.
Representative Salmon requested further explanation of the
SB 237 funding formula.
Mr. Jeans stated that the first concern for the
administration was with the report language. Currently,
report language referred to the information reported back
to the legislature on the impact to the state's debt
capacity. He stated that several offices had been provided
with the language that the administration wanted
incorporated into the bill. The administration requested a
more thorough report on the impacts of funding the program,
both grant and debt reimbursement, including funding
sources.
Co-Chair Stoltze stated that the sponsor of the bill had
expressed concern about tracking the states bonded
indebtedness. He wondered if the administration had similar
concerns. Mr. Jeans replied that the individual communities
bonding capacity were driven by the number of bonds the
community passed. The states bond rating would be minimally
impacted by the legislation.
2:23:49 PM
Mr. Jeans reminded the committee that passage of the
legislation would eliminate the sunset date for the
program. There were two separate authorizations; 70 percent
for districts or municipalities that remain within the
departmental space guidelines, and 60 percent for those
districts that desire to build beyond the space guidelines.
Mr. Jeans said that the sunset provisions had been in place
since the mid-1980s. The second piece of the legislation
was the creation of the REAA construction fund. The
department had figured 12 percent of REAA students into its
funding formula and would need to amend it to reflect the
11 percent submitted by Mr. Livey.
Mr. Jeans continued. The bill would provide a revenue
stream to fund the school construction list for REAAs. The
department anticipated funding down the list of projects,
if the top projects were REAA projects, funds would be
available to fund those projects. Municipal projects would
need legislative funding through a general fund grant. The
department would not recommend funding the next REAA
project until the time that the municipal project, which
was at the top of the list, had been funded.
2:27:24 PM
Mr. Jeans cited the Alaska Department of Education and
Early Development Capital Improvement Projects (FY2011)
(copy on file). The first six projects on the list were in
REAA areas. The proposed revenue stream would provide $40
million annually, which would complete one project per year
for the next three years. The Northwest Arctic Borough
School District would not have direct access to the REAA
fund. The department would spend out of the fund only after
the legislature appropriated funding to build the Kivalina
School in Northwest Arctic. He thought that there was the
possibility of a bottleneck at the top of the project
funding list, but that it would apply adequate pressure to
fund programs and continue down the list.
Representative Joule asked how the legislation applied to
major maintenance projects. Mr. James replied that the way
that the legislation was drafted provided a funding stream
for the school construction list for REAAs. Nothing in the
bill would restrict any school district from applying for a
school construction or a major maintenance grant. The
legislation hoped to fund the REAA school construction
projects that had had difficulty receiving funding in the
past.
2:31:05 PM
Representative Gara asked if the bill limited the $40
million in funding to only REAAs projects. Mr. Jeans
explained that if the first project on the list was a REAA,
with a projected cost of $35 million, a deposit into the
REAA fund of $40 million would be made. The extra $5
million would stay in the fund. When city or borough
project was number 1 on the list, the department would not
skip over it in order to fund an REAA project. The
integrity of the program would be maintained by following
the list.
Representative Gara asked if there was language written
into bill that would limit the funding to non-REAA projects
until the REAA projects were funded. Mr. Jeans replied no.
Representative Gara understood that $40 million went into
the fund each year. The money could be used to build REAA
schools, but in an effort to maintain good public policy
non-REAA projects should not be skipped over. Mr. Jeans
reiterated that the language had not been incorporated into
the legislation.
2:33:37 PM
Mr. Jeans stated that the governor would like to see
contingency language that would tie dismissal of the
Kasayulie lawsuit to the passage of the bill.
2:34:41 PM
Representative Kelly understood that the crux of the
Kasayulie lawsuit was that projects had been chosen out of
order from the original project list. Mr. Jeans rebutted
that the main argument presented in the lawsuit was that
the state had two funding mechanisms for school
construction or major maintenance, and that municipalities
had the benefit of using either methodology. Conversely,
REAAs were restricted to the grant program. He added that
at the time the Kasayulie lawsuit was being heard, little
funding was available for the school construction list.
2:36:35 PM
Co-Chair Stoltze asked if the language of the court finding
was accurately translated into Section 1, sub-Sections (A)
and (B) of the legislation. Mr. Jeans replied that the
Section was an accurate summary of the crux of the
Kasayulie lawsuit. Co-Chair Stoltze highlighted Section 1,
Line 8, through Page 2, Line 5, of the bill.
Representative Doogan if the urban schools funding
mechanisms were limited to bond debt and taxes, would there
still be a cause of action in Kasayulie. Mr. Jeans
reiterated that the thrust of the lawsuit had been the dual
funding mechanism available to municipalities.
Co-Chair Stoltze thought that further legal analysis would
be needed to clarify the issue for the committee.
2:39:08 PM
Co-Chair Stoltze opened public testimony.
ERIC GEBHART, SUPERINTENDENT, NENANA SOCIETY SCHOOL
DISTRICT, testified that the district was comfortable with
the assurance that the smaller city school districts,
without bond capacity, would receive the funding necessary
to complete capital projects. He expressed support for the
legislation.
Representative Joule wondered what Mr. Gebhart had heard in
discussion that prompted support of the bill. He queried
what had been said that had provided a level of comfort
that the issues faced by Nenana would be addressed by the
legislation. Mr. Gebhart responded that he had heard of a
possible amendment that would be offered, and that would
ensure a benefit for Nenana.
2:42:18 PM
Vice-Chair Thomas stated that he would not be offering
Amendment 1(no amendment action was taken on the
legislation):
Page 1, line 2, following "areas":
Insert "and city school districts in the unorganized
borough"
Page 2, lines 7 - 8:
Delete "regional educational attendance areas"
Insert "the unorganized borough"
Page 2, line 10:
Delete "that is a regional educational attendance
area"
Insert "in the unorganized borough"
Page 2, line 12, following "AS 14.11.005 - 14.11.020":
Insert "and for which sufficient bond funding is
unavailable"
Page 2, following line 17:
Insert a new subsection to read:
"(c) The department shall determine for each
school district that is in the unorganized borough
whether the district has the bonding capacity
necessary to finance construction of a project
approved under AS 14.11.005 - 14.11.020. If the
department determines that sufficient bond funding is
unavailable to the district, the project may receive a
grant under this section."
Page 2, line 18:
Delete "Regional educational attendance area school
fund"
Insert "Fund for school construction in the
unorganized borough"
Page 2, line 19:
Delete "regional educational attendance area school
fund"
Insert "fund for school construction in the
unorganized borough"
Page 2, lines 21 - 22:
Delete "regional educational attendance areas"
Insert "the unorganized borough"
Page 2, line 25:
Delete "$100,000,000"
Insert "$120,000.000"
Representative Thomas felt comfortable with the assurances
made by Mr. Jeans that smaller schools would be on the
capital improvements projects list.
Representative Joule could remember a time when some
schools were "cherry picked" over others for construction
and maintenance funding. He noted that over time, an effort
had been made to adhere to the list put out by the
department.
2:44:15 PM
CARL ROSE, EXECUTIVE DIRECTOR, ALASKA ASSOCIATION OF ALASKA
SCHOOL BOARDS stated that the association was in support of
the bill. He shared that some of the larger school
districts were in favor of the removal of the sunset date,
while many of the REAA schools were in favor of the bill as
a means of funding. In 2002, the state issued a GEO bond to
clear the back log of construction and major maintenance
projects. At that time, there was not a formula that
addressed equity moving forward. The association saw the
bill as a means of merging the 2 methods of school funding.
The Kasayulie lawsuit had highlighted the issue of major
maintenance neglect. The association believed that adhering
to the capital list was crucial. If the list was not
followed people would lose faith in the process.
2:46:55 PM
Representative Joule stated that when applying for the list
schools have one shot each year to get building issues
taken care of. He wondered if the list could be frozen to
allow the legislature time to study it. Mr. Rose replied
that schools that were in disrepair needed immediate
assistance. Unchecked maintenance issues would become
replacement issues. He added that it was expensive to
continually apply for the list.
Representative Kelly asked if the membership was unanimous
in its support for the bill. Mr. Rose replied that the
association was unanimous in its support. He said that the
assurance of 2 funding mechanisms, assuring districts that
there would be a level of funding available for both large
and small districts, would be ideal. Mr. Rose added that
some of larger groups would be better served by the removal
of the sunset date plan, and REAAs by the implementation of
an additional funding mechanism.
Co-Chair Stoltze asserted that when discussing a major
policy issue such as this he expected to see more
representation from the different school districts. He
mentioned that the superintendent from Mat-Su was in the
building, but had not talked with him concerning the issue.
He said he had not had discussions with the Anchorage
School District. He felt that the legislation had not been
properly vetted through the process.
2:52:56 PM
Representative Doogan stated that he had not heard from a
school district representative from his area concerning the
issue.
Representative Gara relayed that the district he
represented had the desire for funding needed in the
district, but not to the exclusion of another district. He
believed that his district would want equitable funding for
all school districts.
Representative Salmon said that he had heard from 5 of the
13 districts he represented, and had heard no complaints
concerning the legislation.
2:54:46 PM
AMY LUJAN, EXECUTIVE DIRECTOR, ALASKA ASSOCIATION OF SCHOOL
BUSINESS OFFICIALS (ALASBO), explained that ALASBO members
were the staff that handled the budgets, accounting, and
business operations of Alaska school districts. She stated
that the capital improvement project list was good process,
but that there had never been a reliable source of funding
to back it up for rural areas. Due to the inconsistent
funding, many districts could not keep up with the
expensive planning process each year. She felt that if the
legislation were in place, districts would have the
confidence that projects would eventually be funded. The
existing sub-standard facilities in rural Alaska had
hindered the deliverability of quality education. She
voiced support for the removal of the sunset date. Voters
in municipal districts would support school bonds provided
the commitment for the state's share was strong.
2:57:17 PM
MARY FRANCIS, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, testified that the organization supported
the bill. She mentioned that the superintendents from
Anchorage and Fairbanks had spent time with the sponsor
during the development of the bill. She pointed out to the
committee that there were many projects that were not on
the capital improvement project list. The members supported
the list, but thought that a statewide audit of school
construction and major maintenance needs could provide
insight. The requirements for getting on the list were
complicated. She cited "Position Statement 09-5, Funding
Bond Debt Reimbursement and the Capital Improvement
Program" (copy on file). She trusted that the committee
understood that not all necessary projects were on the
list.
3:00:21 PM
Representative Gara voiced concern that the capital
improvement program was not an accurate reflection of the
needs throughout the state, and that legitimate projects
did not always make the list. Ms. Francis assured the
committee that she had not intended to suggest that the
list was not a good list. She clarified that there were
needs in the state that were not on the list because of
time and resource constraints. Representative Gara wondered
how big of a problem the constraints were for districts
trying to make the list. Ms. Francis replied that the
statewide audit of school construction and major
maintenance needs would provide the necessary information
from all districts.
3:02:26 PM
Vice-Chair Thomas asked if the superintendents had taken a
position on energy efficiency in regard to school
construction. Ms. Francis replied that the proposed audit
should focus on the expectation that all school facilities
were maximally energy efficient, and provided safe
environments.
3:04:37 PM
PAUL VERHAGEN, BOARD MEMBER, NENANA SCHOOL DISTRICT,
expressed concern that Representative Thomas had withdrawn
Amendment 1. The amendment would have included rural
schools in the language of the bill, which was at the heart
of the issue.
Co-Chair Stoltze clarified that no action would be taken on
amendments during the meeting. If Vice-Chair Thomas wanted
to take action at a later meeting, that was his
prerogative.
Vice-Chair Thomas stated for the record that if it was
clear in conversation that schools would be treated
equally, the intent language of the amendment was not
necessary.
Representative Doogan understood that the bill would
indefinitely extend the 70/60 payment schedule for larger
districts, and create a funding mechanism for REAAs. He
expressed concern that schools in middle would still have
to come to the legislature for funding.
Representative Kelly related to the desire to put a funding
mechanism in place and make it predictable. He was not
comforted by the numbers illustrated on Mr. Livey's
handout. He thought the overall numbers for the legislation
were too high.
Co-Chair Stoltze requested a representative from the
Department of Law attend the next hearing of the bill to
discuss the Kasayulie case.
3:12:22 PM
Representative Salmon asked what the qualifications were to
be placed on the capital improvements project list. Mr.
Jeans stated that there was an application process that
districts had to go through on an annual basis. The schools
detailed what projects were school construction or major
maintenance based on the criteria set out in law. The
department prioritized the projects based on need.
Representative Salmon asked how the department prioritized
projects. Mr. Jeans stated that typically the school
construction list was slow moving, except when projects
were funded. The first 10 projects currently on the list
pertained to overcrowding issues.
3:15:05 PM
Representative Gara asked Mr. Livey about the handout which
illustrated 5 year periods of REAA funding. According to
the chart between 2001 and 2010 the REAA school
construction funding had been $750 million. He wondered
what the $40 million per year would solve, as it was lower
than the average spending over the last 10 years.
Mr. Livey responded that the $40 million was not intended
as all of the construction funding for the REAAS. The
amount that the state would spend was expected to fluctuate
from year to year. The $40 million would be the steady
stream of revenue.
CS SB 237(FIN) was HEARD and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 3:19 PM
| Document Name | Date/Time | Subjects |
|---|---|---|
| CS for SB 237 - Sponsor Statement.docx |
HFIN 4/7/2010 1:30:00 PM |
SB 237 |
| CSSB 237 ACSA Position Statement[1].pdf |
HFIN 4/7/2010 1:30:00 PM |
SB 237 |
| CSSB 237 DEED Capital Projects[1].pdf |
HFIN 4/7/2010 1:30:00 PM |
SB 237 |
| CSSB 237 Kasayulie Ruling[1].pdf |
HFIN 4/7/2010 1:30:00 PM |
SB 237 |
| CSSB 237 Maintenance Reimbursement 2010.pdf[1].pdf |
HFIN 4/7/2010 1:30:00 PM |
SB 237 |
| SB237 Amendment #1 Thomas.pdf |
HFIN 4/7/2010 1:30:00 PM |
SB 237 |
| SB 237 Funding Formula.pdf |
HFIN 4/7/2010 1:30:00 PM |
SB 237 |
| HB 363 Amendment #1 Kelly.pdf |
HFIN 4/7/2010 1:30:00 PM |
HB 363 |
| SB 237 DEED Handout.pdf |
HFIN 4/7/2010 1:30:00 PM |
SB 237 |