Legislature(2005 - 2006)HOUSE FINANCE 519

04/07/2006 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 488 OIL AND GAS PRODUCTION TAX TELECONFERENCED
<Bill Hearing Postponed>
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 403 NEIGHBORHOOD ELECTRIC VEHICLES TELECONFERENCED
Moved CSHB 403(FIN) Out of Committee
+= HB 362 INCREASE BASE STUDENT ALLOCATION TELECONFERENCED
Heard & Held
= HB 51 EMPLOYER ASSN FOR WORKERS' COMP INS
Moved CSHB 51(FIN) Out of Committee
                  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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