Legislature(2009 - 2010)HOUSE FINANCE 519

04/07/2010 01:30 PM House FINANCE

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* first hearing in first committee of referral
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Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 363(FIN) Out of Committee
                  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                                                                    
PRESENT VIA TELECONFERENCE                                                                                                    
Mike Barnhill, Attorney, Department of Law                                                                                      
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                                                                    
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                                                                    
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,                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                    
Page 1, line 2, following "areas":                                                                                            
     Insert "and city school districts in the unorganized                                                                     
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                                                                    
     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                                                                    
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                                                                  
     Insert   "Fund   for   school   construction   in   the                                                                  
unorganized borough"                                                                                                          
Page 2, line 19:                                                                                                                
     Delete  "regional  educational attendance  area  school                                                                    
     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                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                      
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