Legislature(2015 - 2016)HOUSE FINANCE 519

03/24/2015 01:30 PM FINANCE

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01:33:45 PM Start
01:34:56 PM Confirmation Hearings: Alaska Mental Health Trust Authority Board of Trustees
02:25:55 PM HB136
03:00:46 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Confirmation Hearing: TELECONFERENCED
Alaska Mental Health Trust Authority Board of
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 24, 2015                                                                                            
                         1:33 p.m.                                                                                              
1:33:45 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Thompson called the House Finance Committee                                                                            
meeting to order at 1:33 p.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Representative Mark Neuman, Co-Chair                                                                                            
Representative Steve Thompson, Co-Chair                                                                                         
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lynn Gattis                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Lance Pruitt                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Carlton Smith, Alaska  Mental Health Trustee; Representative                                                                    
Steve   Thompson   ,   Sponsor;  Brodie   Anderson,   Staff,                                                                    
Representative    Steve   Thompson;    Elizabeth   Nudelman,                                                                    
Director,  School  Finances  and Facilities,  Department  of                                                                    
Education and Early Development.                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
Christopher Cooke, Alaska Mental Health Trustee; Mary Jane                                                                      
Michael, Alaska Mental Health Trustee.                                                                                          
HB 136    SCHOOL BOND DEBT REIMBURSEMENT                                                                                        
          HB 136 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
CONFIRMATION HEARINGS: ALASKA  MENTAL HEALTH TRUST AUTHORITY                                                                    
BOARD OF TRUSTEES                                                                                                               
          Christopher Cooke, Anchorage                                                                                          
          Mary Jane Michael, Anchorage                                                                                          
          Carlton Smith, Juneau                                                                                                 
Co-Chair Thompson discussed the agenda for the day.                                                                             
^CONFIRMATION   HEARINGS:   ALASKA   MENTAL   HEALTH   TRUST                                                                  
AUTHORITY BOARD OF TRUSTEES                                                                                                   
1:34:56 PM                                                                                                                    
CARLTON  SMITH,  ALASKA  MENTAL HEALTH  TRUSTEE,  introduced                                                                    
himself  indicating  that he  resided  in  Juneau. He  spoke                                                                    
about  his private  sector background  in  the timber,  land                                                                    
management,  and   real  estate  fields.  He   reviewed  his                                                                    
management background  working for Sealaska in  timber sales                                                                    
and shared  that he was  the Chief Executive  Officer (CEO).                                                                    
He indicated  that he was  the owner of the  only commercial                                                                    
real  estate  company  in   Southeast  Alaska  and  brokered                                                                    
transactions statewide  as well as nationwide  totaling $225                                                                    
million  in  value.  He relayed  his  experience  with  non-                                                                    
profits  which included  serving  as chairman  of the  state                                                                    
board of  the Salvation Army,  as the "incorporator"  of the                                                                    
Sealaska  Heritage Institute,  and  serving  as Chairman  of                                                                    
Kootznoowoo  Permanent  Fund  Settlement  Trust  (KPFST);  a                                                                    
private trust where  he managed over $15  million in private                                                                    
assets.  He spoke  to the  challenges facing  the trust.  He                                                                    
pointed  to  the increased  costs  of  service delivery  and                                                                    
increased numbers  of beneficiaries. He maintained  that the                                                                    
trust's  revenue sources  should  be increased  to meet  the                                                                    
needs of  future beneficiaries. He relayed  that since 2010,                                                                    
the  trust's  Land  Office   made  substantial  changes  and                                                                    
improvements  in its  resource management  in all  areas. He                                                                    
noted the decision  by the Land Office to  further invest in                                                                    
commercial real  estate in  the lower  48 states.  He shared                                                                    
his desire was to be  involved in the commercial real estate                                                                    
investment process and "contribute to the trust."                                                                               
Co-Chair  Neuman referenced  the  trust's  need to  increase                                                                    
revenues. He  observed that the trust  possessed substantial                                                                    
properties  available  for  resource development.  He  asked                                                                    
whether Mr. Smith was "a  pro-resource development type of a                                                                    
person." Mr.  Smith responded in  the affirmative.  He added                                                                    
that  his  previous  experience in  marketing  timber  could                                                                    
assist the  land office  in its duty  to manage  the trust's                                                                    
216 thousand acres in Southeast  Alaska in a more productive                                                                    
Co-Chair  Neuman discussed  the popularity  of snow  machine                                                                    
use  and activity  in  the  Matanuska-Susitna Borough  which                                                                    
included  over  2  thousand  miles  of  tracked  trails.  He                                                                    
alluded  to the  fact that  the Alaska  Mental Health  Trust                                                                    
Authority  (AMHTA) had  made it  difficult for  snow machine                                                                    
organizations  to have  access to  trust lands  for tracking                                                                    
and trails. He asked whether  he was open to expanding trail                                                                    
systems on  trust land.  Mr. Smith replied  that he  was not                                                                    
familiar  with  the   issue  and  thought  that   it  was  a                                                                    
management issue.  He elaborated  that the board  would have                                                                    
to consider "many different simultaneous  uses" of its lands                                                                    
in  the  future  and  would "contribute  to  the  management                                                                    
1:39:20 PM                                                                                                                    
Co-Chair  Neuman   commented  that  many   legislators  were                                                                    
supportive of "access to Alaska's lands."                                                                                       
Representative Gara  commented that the state  provided land                                                                    
to  the trust  to raise  revenue but  granted the  trust the                                                                    
"lowest value" and "most controversial"  land. He hoped that                                                                    
the state could provide the  trust with "more valuable" land                                                                    
in  the future.  He wondered  what "higher  yield" endeavors                                                                    
the  trust  could  undertake with  the  lands  it  currently                                                                    
oversaw.  Mr. Smith  answered that  discovering the  highest                                                                    
value  for  the  trust's  lands was  the  board's  immediate                                                                    
priority.  He  referred  to  trust  land  utilized  for  the                                                                    
University  of   Alaska's  Providence  Corridor,   which  he                                                                    
credited  the trust's  Land Office  with turning  into "cash                                                                    
flow." He  conveyed that he  "thoroughly reviewed"  the Land                                                                    
Offices  management   plan  for   each  one  of   the  asset                                                                    
categories  and  felt that  the  office  was more  seriously                                                                    
engaged  in its  management responsibilities  over the  last                                                                    
four years.                                                                                                                     
Representative  Gara voiced  that the  trust needed  general                                                                    
fund   money   to   supplement    its   programs   for   the                                                                    
beneficiaries.  He  noted  the   waiting  list  for  certain                                                                    
programs especially for substance  abuse treatment and asked                                                                    
for Mr.  Smith's view on  the matter. Mr. Smith  referred to                                                                    
his  time  on the  Juneau  Assembly  and observed  that  the                                                                    
programs with  the best and most  successful outcomes worked                                                                    
in "tandem"  with other programs.  He voiced  his confidence                                                                    
in  supporting that  type  approach for  the  trust. He  was                                                                    
interested  in  understanding  "the  program  side"  of  the                                                                    
1:46:02 PM                                                                                                                    
Representative  Kawasaki   cited  Mr.  Smith's   resume  and                                                                    
referred to  statute regarding board appointments.  He noted                                                                    
Mr. Smith's previous  appointment to the board  from 2010 to                                                                    
2011 and  wondered why his time  on the board was  so short.                                                                    
Mr. Smith responded that due  to his previous employment for                                                                    
a state  agency he  had to resign  and that  the appointment                                                                    
was an oversight.                                                                                                               
Representative Munoz asked about  the "sub-port property" in                                                                    
Juneau and  noted that it  was considered the  "crown jewel"                                                                    
of the trust's  properties. She requested that  he share his                                                                    
ideas for  the property's use.  Mr. Smith disclosed  that he                                                                    
had  not   marketed  the  property.  He   commented  on  the                                                                    
desirability  and  value  of  the  waterfront  property.  He                                                                    
recommended that from  a land-use stand point  he would hire                                                                    
waterfront  development experts  due  to the  fact that  the                                                                    
type of waterfront property the  sub-port was held the "most                                                                    
risk" and "the most opportunity."                                                                                               
Representative  Wilson indicated  that  the  Trust was  well                                                                    
known  to  start  a  project   then  turn  it  over  to  the                                                                    
legislature  to  fund from  the  state's  general fund.  She                                                                    
asked  whether  he   could  find  a  "way   to  change  that                                                                    
mentality" and discover other ways  of funding programs. Mr.                                                                    
Smith  asked  for  a  specific   example.  She  mentioned  a                                                                    
Department  of   Labor  and  Workforce   Development  (DLWD)                                                                    
project.  She asked  who was  responsible to  ensure that  a                                                                    
trust's program  funding was sustainable  without additional                                                                    
general fund money. Mr. Smith  reported that he had not been                                                                    
briefed on the situation but  stated that his immediate goal                                                                    
was to generate additional revenue.                                                                                             
Co-Chair Thompson OPENED public testimony.                                                                                      
1:51:43 PM                                                                                                                    
Co-Chair Thompson CLOSED public testimony.                                                                                      
CHRISTOPHER  COOKE,   ALASKA  MENTAL  HEALTH   TRUSTEE  (via                                                                    
teleconference), discussed his  background. He reported that                                                                    
he came  to Alaska  through the VISTA  program serving  as a                                                                    
lawyer in Kotzebue and Nome.  He met his wife in Nunapiachak                                                                    
and  practiced   as  an  attorney   in  Bethel   before  his                                                                    
appointment  as a  Superior  Court Judge  for  10 years.  He                                                                    
subsequently  returned to  private practice  and represented                                                                    
many  residents from  rural Alaska.  He  currently lived  in                                                                    
Anchorage but  maintained a home  in Bethel. He  relayed his                                                                    
familiarity with  mental health issues and  needs around the                                                                    
state.   He  noted   that   there   were  many   challenges,                                                                    
particularly in  rural areas, in dealing  with mental health                                                                    
issues   and  accessing   programs  for   beneficiaries.  He                                                                    
announced  that one  of  his priorities  as  a board  member                                                                    
would be to examine ways  to provide rural areas with mental                                                                    
health programs  more effectively. He was  confident that he                                                                    
could carry  out his  trustee duties  and looked  forward to                                                                    
his participation and collaboration with the trust.                                                                             
1:57:24 PM                                                                                                                    
Representative Wilson reiterated  her question about general                                                                    
fund dollars for  programs for the Mental  Health Trust. Mr.                                                                    
Cooke responded  that he did  not yet possess "the  depth of                                                                    
knowledge or  history" of the trust.  However, he understood                                                                    
that the  trust regularly partnered with  other agencies and                                                                    
entities  for  program development  and  often  acted as  an                                                                    
"incubator" for  programs. He  exemplified working  with the                                                                    
Court System to develop the  Drug Court and cited a recently                                                                    
completed study  concerning recidivism  in the  Court System                                                                    
and  the Department  of Corrections  (DOC). He  thought that                                                                    
the  Trust's   role  in  partnerships  was   not  adding  an                                                                    
additional program but provided  efficiencies to or replaced                                                                    
existing programs or efforts that  generated cost savings or                                                                    
better outcomes.                                                                                                                
Representative  Wilson  was  not  sure  who  to  direct  her                                                                    
question to. She wanted to know  if Mr. Cooke was related to                                                                    
Senator Hoffmann and whether that presented a conflict.                                                                         
Representative Edgmon  expressed his strong support  for Mr.                                                                    
Cooke  and thought  he was  an excellent  candidate with  an                                                                    
extensive legal and rural background.  He confirmed that Mr.                                                                    
Cooke  was related  to Senator  Hoffmann indirectly  through                                                                    
his daughter's marriage. He thanked  him for his willingness                                                                    
to serve.                                                                                                                       
2:02:24 PM                                                                                                                    
Vice-Chair Saddler asked whether  Mr. Cooke been involved in                                                                    
"public  affairs"  for  the  benefit  of  understanding  his                                                                    
background more thoroughly. Mr.  Cooke responded that he had                                                                    
been a member  of the University Of Alaska  Board Of Regents                                                                    
for two  years in the  1970's but had  to resign due  to his                                                                    
judgeship at the  ruling of the state's  attorney general at                                                                    
the  time. He  remarked  that  he was  a  member of  various                                                                    
boards  and commissions  over  the years  in  addition to  a                                                                    
number  of  other  private boards.  He  noted  his  previous                                                                    
appointment to  the Rural Governance Commission  by Governor                                                                    
Knowles. He  responded to Representative  Wilson's question.                                                                    
He  confirmed  that  Senator   Hoffman  was  very  distantly                                                                    
related  to Stanley  Hoffman whom  married his  daughter but                                                                    
was  not  directly  related  to  his  daughter's  "immediate                                                                    
Vice-Chair  Saddler asked  whether  Mr. Cooke  had been  the                                                                    
state Chair  of the  Democratic Party  in Alaska.  Mr. Cooke                                                                    
replied in the affirmative and  added that he acted as chair                                                                    
from 1998 through 2000. Vice-Chair  Saddler asked whether he                                                                    
was  on   Governor  Walker's  transition  team.   Mr.  Cooke                                                                    
responded  in  the  affirmative.  Vice-Chair  Saddler  asked                                                                    
whether  Mr.  Cooke  felt that  his  public  involvement  in                                                                    
politics enhanced, inhibited, or did  not affect his role on                                                                    
the  board. Mr.  Cooke did  not believe  that the  board had                                                                    
"anything  to do  with politics  and was  not a  factor" for                                                                    
Co-Chair Thompson OPENED public testimony.                                                                                      
Co-Chair Thompson CLOSED public testimony.                                                                                      
Co-Chair Thompson  asked Ms. Michael  to tell  the committee                                                                    
why she wanted to continue to serve on the board.                                                                               
MARY  JANE  MICHAEL,  ALASKA   MENTAL  HEALTH  TRUSTEE  (via                                                                    
teleconference), spoke  about her experience  and background                                                                    
having just  completed a five  year term as a  board member.                                                                    
She  relayed personal  information.  She  reported that  she                                                                    
served as  the executive director  for the Arc  of Anchorage                                                                    
for  twenty  years.  She   detailed  that  the  organization                                                                    
"served the  trust beneficiaries"  and operated under  a $10                                                                    
million budget with  400 employees. She was  involved in the                                                                    
original  home  and  community  based  waiver  program.  She                                                                    
believed  her  experience  and  personal  knowledge  of  the                                                                    
system  was beneficial  to the  board and  trust staff.  She                                                                    
shared  that  she  worked  as a  Director  of  Economic  and                                                                    
Community Development  for the City of  Anchorage. She noted                                                                    
that during  her first term on  the board she served  on the                                                                    
Planning and  Program Committee and the  Resource Management                                                                    
Committee.  She   indicated  that  the   Planning  Committee                                                                    
successfully completed  the Bring  the Kids  Home Initiative                                                                    
and continued  to focus on  disability justice,  housing and                                                                    
long-term  support,  beneficiary employment,  and  workforce                                                                    
development.  She  remarked  that  the  Resource  Management                                                                    
Committee worked hard  to generate new income  for the trust                                                                    
and increased  revenue "three-fold."  She reported  that she                                                                    
had  personally worked  closely on  the first  Housing First                                                                    
project  in Anchorage.  She spoke  about  the state's  tough                                                                    
economic  predicament   and  thought  that  the   board  was                                                                    
committed  to  becoming part  of  the  solution. She  looked                                                                    
forward  to assisting  in  the  development a  comprehensive                                                                    
mental health plan for the  state and beneficiaries that was                                                                    
cost effective and innovative.                                                                                                  
2:11:17 PM                                                                                                                    
Representative  Wilson   reiterated  her   funding  question                                                                    
regarding  whether  the  trust  had  other  revenue  sources                                                                    
besides  general  funds.  Ms.  Michael  responded  that  she                                                                    
viewed the relationship  between the trust and  the state as                                                                    
a  partnership  and  attempted to  focus  on  programs  that                                                                    
provided  the  most benefit  and  were  cost effective.  She                                                                    
exemplified  the Bring  the Kids  Home Program  that shifted                                                                    
the money spent on  psychiatric residential treatment out of                                                                    
state at higher  costs back to Alaska to  treat the children                                                                    
in  the  state,  which  produced  a  multitude  of  benefits                                                                    
including  spending  state  resources   in  the  state.  She                                                                    
believed  that "it  was worth  it to  make the  change." She                                                                    
understood that  not all programs would  survive and thought                                                                    
that the emphasis would shift  to core services. She did not                                                                    
expect that  the trust would request  additional funding for                                                                    
new programs.                                                                                                                   
Representative Wilson asked whether  the Bring the Kids Home                                                                    
initiative  was successful  in providing  the same  level of                                                                    
care as the out of  state services. Mr. Cooke responded that                                                                    
she would  provide the information.  She noted that  the out                                                                    
of  state care  was  typically  hospitalizations, which  was                                                                    
very expensive  and that the  returned children  were placed                                                                    
back  in   their  community  either  with   community  based                                                                    
services or group homes at much reduced costs.                                                                                  
Co-Chair Thompson OPENED public testimony.                                                                                      
Co-Chair Thompson CLOSED public testimony.                                                                                      
Ms.  Michael thanked  the committee  for the  opportunity to                                                                    
serve on the Trust.                                                                                                             
Co-Chair Thompson thanked all three appointees.                                                                                 
Co-Chair   Thompson   read   a   statement   regarding   the                                                                    
confirmation committee  process that reminded  the committee                                                                    
that full confirmation took place  in a joint session of the                                                                    
full legislature.                                                                                                               
2:17:00 PM                                                                                                                    
AT EASE                                                                                                                         
2:20:37 PM                                                                                                                    
HOUSE BILL NO. 136                                                                                                            
     "An Act relating to school bond debt reimbursement;                                                                        
     and providing for an effective date."                                                                                      
Co-Chair Thompson indicated that he  would not be moving the                                                                    
bill out of committee today.                                                                                                    
REPRESENTATIVE  STEVE THOMPSON,  SPONSOR,  read the  sponsor                                                                    
statement for the bill.                                                                                                         
     Under  the current  fiscal shortfall  of $3.5  billion,                                                                    
     the state must control  expenses. It is imperative that                                                                    
     the  state not  only find  efficiencies and  reduce the                                                                    
     size of operational costs of  the state, but also limit                                                                    
     the potential growth of state  spending. House Bill 136                                                                    
    (HB 136) will allow the state to control expenses.                                                                          
     There  are   four  major   cost  drivers   in  Alaska's                                                                    
     statewide operating  costs: K-12 education,  Health and                                                                    
     Social  Services,  debt   service  (PERS/TRS  and  bond                                                                    
     payments), and  employee salaries and benefits.  HB 136                                                                    
     addresses the growth in state  debt service expenses by                                                                    
     suspending  subdivisions  of  government's  ability  to                                                                    
     bond without explicit state approval.                                                                                      
     House Bill  136 would  sunset Alaska  statutes relating                                                                    
     to  state  aid for  costs  of  school construction  and                                                                    
     major  maintenance  debt  for five  years.  After  five                                                                    
     years, if the legislature  does not take further action                                                                    
     on these  statutes, the reimbursement rates  for school                                                                    
     construction would  be reinstated and reduced  from 70%                                                                    
     to  50%  for  eligible   projects  described  under  AS                                                                    
     14.11.100 (h), (i),  (j) (2) - (5) and from  60% to 40%                                                                    
     for eligible projects  described under AS 14.11.100(h),                                                                    
     (i), and (j) (2), (3), and (5).                                                                                            
BRODIE ANDERSON, STAFF, REPRESENTATIVE STEVE THOMPSON, read                                                                     
the sectional analysis of the bill.                                                                                             
     *Section 1:  Amends AS  14.11.014, adds  new subsection                                                                    
     Sunsets  the  bond  debt reimbursement  provisions  for                                                                    
     school  construction  and  major maintenance  for  five                                                                    
     years, May 1, 2015 - July 1, 2020.                                                                                         
     *Section 2: Amends AS 14.11.100(a)                                                                                         
     Page  6,  line  21  restricts  reimbursement  of  bonds                                                                    
     authorized after  May 1,  2015. Page 7,  lines 1  - 11,                                                                    
     deletes language relating to  bonds   authorized  after                                                                    
     May 1, 2015.                                                                                                               
     *Section 3: Amends AS 14.11.100(a)                                                                                         
          Page 12, line 17 - Page 13, line 2 inserts                                                                            
          language relating to bonds authorized on or after                                                                     
          July 1, 2020.                                                                                                         
          (18) For projects approved under AS 14.11.100                                                                         
          (h), (i), and (j) (2) - (5) the reimbursement                                                                         
          would be 50 percent.                                                                                                  
          (19) For projects approved under AS 14.11.100                                                                         
          (h), (i), and (j) (2), (3), and (5) the                                                                               
          reimbursement would be 40 percent.                                                                                    
     *Section 4: Amends AS 14.11.100                                                                                            
          adds a new section (s) Restricts the Commissioner                                                                     
          from approving an application for bond debt                                                                           
          reimbursement between May 1, 2015 - July 1, 2020.                                                                     
     *Section 5: Amends AS 14.11.102                                                                                            
          adds new section (c) Restricts the Commissioner                                                                       
          from approving an application for bond debt                                                                           
          reimbursement between May 1, 2015 - July 1, 2020.                                                                     
     *Section 6:    Repeals sections 1, 4, and 5 of this                                                                        
                    act on July 1, 2020                                                                                         
     *Section 7:    Retroactivity clause                                                                                        
                    Sections 1, 2, 4, and 5 of this act are                                                                     
                    retroactive to May 1, 2015                                                                                  
     *Section 8:    Section 3 of this act takes effect July                                                                     
                    1, 2020                                                                                                     
     *Section 9:    Sections 1, 2, 4, 5, and 7 of this act                                                                      
                    take effect immediately                                                                                     
2:25:55 PM                                                                                                                    
Representative  Guttenberg cited  the multi-year  allocation                                                                    
totals shown on the  document titled, "Multi-year Allocation                                                                    
Totals - Operating Budget -  FY 2016 Senate Structure" (copy                                                                    
on file) and asked whether the  purpose was to point out the                                                                    
total  amount of  the state's  obligation from  2007 through                                                                    
2015.  Mr. Anderson  responded  affirmatively. He  indicated                                                                    
the information conveyed prior reimbursement obligations.                                                                       
Representative  Guttenberg asked  what the  totals would  be                                                                    
for FY  17 and FY 18  based upon past history.  Mr. Anderson                                                                    
referred  to  an additional  page  in  the committee  packet                                                                    
titled,  "Statewide   Liability  School   Construction  Debt                                                                    
Retirement, Updated 2/13/2015" (copy  on file) that reported                                                                    
the debt from  FY 15 through FY 34. He  explained that based                                                                    
on  the document  the  FY 16  total  was approximately  $108                                                                    
Co-Chair Thompson interjected that  the document showed that                                                                    
by  paying off  the debt  through 2034  the state  liability                                                                    
totaled $1,212,713,044.                                                                                                         
Mr.  Anderson added  that the  totals  only reflected  bonds                                                                    
already issued.                                                                                                                 
Vice-Chair Saddler inquired about  the physical condition of                                                                    
the schools  around the state.  Mr. Anderson  responded that                                                                    
he did not have the answer  to that question and referred to                                                                    
the Department of Education and Early Development (DEED).                                                                       
Vice-Chair  Saddler   asked  whether  the  state   would  be                                                                    
"abrogating" its  responsibility if it  did not fund  at the                                                                    
level  of  the  70  percent   30  percent  [state  -  local]                                                                    
reimbursement split.  Mr. Anderson  indicated he  would have                                                                    
to review  before he  could answer. He  added that  the bill                                                                    
did  not   prohibit  school  districts  from   bonding.  The                                                                    
legislation  only restricted  the  state's reimbursement  of                                                                    
the bonds.                                                                                                                      
2:30:19 PM                                                                                                                    
Vice-Chair Saddler  restated his question about  the general                                                                    
condition of the schools in the state.                                                                                          
ELIZABETH   NUDELMAN,   DIRECTOR,    SCHOOL   FINANCES   AND                                                                    
FACILITIES, DEPARTMENT  OF EDUCATION AND  EARLY DEVELOPMENT,                                                                    
answered  that  the condition  of  the  schools varied.  She                                                                    
elaborated that the  condition of a school was  based on the                                                                    
"useful life  of the components"  which created  a continued                                                                    
need for repair.  However, many buildings were  in very good                                                                    
condition based on maintenance and repair needs being met.                                                                      
Representative Wilson asked about  the history of the school                                                                    
bond  debt reimbursement  program and  the reasoning  behind                                                                    
the program.  Ms. Nudelman replied that  the bonding program                                                                    
was initiated  sometime in the  1970's. She  determined that                                                                    
upon  examination   of  the  previous  statute,   the  state                                                                    
partnered  with  school   districts  and  municipalities  to                                                                    
construct and  repair schools around the  state. The program                                                                    
mandated that  the municipalities  carried the debt  and the                                                                    
state  reimbursed a  portion of  the debt  under eligibility                                                                    
requirements. She  confirmed that the bill  did not prohibit                                                                    
municipalities from bonding.                                                                                                    
Representative  Wilson asked  about the  bonding ability  of                                                                    
schools  that  were  not  in  municipalities.  Ms.  Nudelman                                                                    
responded  that Regional  Education  Attendance Area  (REAA)                                                                    
schools  were located  in unorganized  boroughs and  did not                                                                    
have  the "legal  capacity"  to bond.  She  added that  some                                                                    
schools  located in  small municipalities  could not  obtain                                                                    
the backing to  bond for school construction  or repair. She                                                                    
detailed that a second statutory  program was a school grant                                                                    
program   called  the   CIP  Program   (capital  improvement                                                                    
project).  The department  received  applications each  year                                                                    
and ranked the projects according  to need and forwarded the                                                                    
list to  the governor and  legislature for funding  from the                                                                    
capital budget.                                                                                                                 
Representative Wilson  reported that from 2005  through 2015                                                                    
the  grant  program  totaled   $763  million.  She  wondered                                                                    
whether  with  passage  of the  bill,  the  districts  would                                                                    
switch over to the grant  program instead of bonding without                                                                    
reimbursement from the state.  Ms. Nudelman assumed that the                                                                    
grant  program  would  receive   more  applications  in  the                                                                    
absence  of the  debt reimbursement  program. Representative                                                                    
Wilson  commented that  she hoped  the  grant program  would                                                                    
also  be  reexamined  by the  legislature  and  include  all                                                                    
school construction.                                                                                                            
Co-Chair   Thompson   remarked    that   the   school   debt                                                                    
reimbursement program  was subject  to appropriation  by the                                                                    
legislature and  therefore, some  sideboards were  in place.                                                                    
He agreed  with Representative  Wilson's latter  comment and                                                                    
noted  that the  point of  the bill  was to  completely halt                                                                    
bonding for a period of time  until the state could "get our                                                                    
financial house in order."                                                                                                      
Representative Wilson wanted to  ensure that the legislation                                                                    
was applied equally throughout the state.                                                                                       
2:37:14 PM                                                                                                                    
Co-Chair  Neuman asked  whether  the bill  would affect  the                                                                    
construction  of the  last  Kasayulie  School. Ms.  Nudelman                                                                    
responded  that  the bill  did  not  apply to  the  Kivalina                                                                    
School.  Co-Chair Neuman  expressed more  concern about  the                                                                    
bill  affecting  the  Kasylie case  mandate  and  asked  for                                                                    
further clarification.  Ms. Nudelman  relayed that  the debt                                                                    
reimbursement  program  timeline eligibility  happened  when                                                                    
the  voters authorized  the debt.  She  expounded that  debt                                                                    
that was  authorized in  2011 would  remain in  the program.                                                                    
The  Kivalina School  was part  of the  Kasayulie settlement                                                                    
resolved  in  2011.  In  the FY  2016  budget  the  governor                                                                    
appropriated approximately  $4.7 million  for design  of the                                                                    
school.  In  order  for  the bill  to  affect  the  Kivalina                                                                    
project, either  the governor or  legislature would  have to                                                                    
deny  funding for  the project.  The Kivalina  School was  a                                                                    
separate  issue   from  the  legislation.   Co-Chair  Neuman                                                                    
indicated  he  wanted to  ensure  that  the bill  would  not                                                                    
create   a  legal   issue   with   the  mandated   Kasayulie                                                                    
Vice-Chair  Saddler  asked  whether  the  legislation  would                                                                    
prompt lawsuits for the state  from municipalities or school                                                                    
districts. Ms. Nudelman  responded that she "did  not have a                                                                    
basis" to form an opinion  about the potential for lawsuits.                                                                    
She maintained  that the legislature  held the  authority to                                                                    
appropriate funds and create statute.                                                                                           
2:41:35 PM                                                                                                                    
Representative  Kawasaki   wondered  what  portion   of  the                                                                    
overall state debt belonged to  schools versus other bonding                                                                    
debt.  Co-Chair Thompson  answered  that  the state's  total                                                                    
bond payments  in FY 15  was approximately $264  million, of                                                                    
which $114.6 million was attributed to school debt.                                                                             
Co-Chair Neuman  stated that  total debt  bond reimbursement                                                                    
was actually $228 million.                                                                                                      
Representative Kawasaki  expressed concern about the  May 1,                                                                    
2015 effective  date of  the bill.  He indicated  that every                                                                    
other  school district  except Anchorage  would be  excluded                                                                    
from the  program this  year base on  the date.  He wondered                                                                    
whether  any discussion  ensued in  regards to  changing the                                                                    
effective date.  Mr. Anderson relayed that  both the Bristol                                                                    
Bay Borough  and the Anchorage  School District  was holding                                                                    
school  debt  bonding  elections  before  May  1,  2015.  He                                                                    
confirmed  that  every  other   school  district  "would  be                                                                    
impacted" by passage of the legislation.                                                                                        
Co-Chair Thompson reminded  the committee that reimbursement                                                                    
of any school  debt bond package was  subject to legislative                                                                    
appropriation.  He  cautioned  that  both  school  districts                                                                    
needed  to remember  that with  passage of  the bond  issue,                                                                    
they   still  might   be  required   to   pay  100   percent                                                                    
Representative   Kawasaki   asked   whether   other   school                                                                    
districts were planning on having  a bond measure as part of                                                                    
elections in the fall. Ms.  Nudelman was uncertain. However,                                                                    
she  did  know  of  one   other  school  district  that  was                                                                    
anticipating   a   new   bond  proposal   at   some   point.                                                                    
Representative Kawasaki  asked whether many  districts would                                                                    
rush  to  add  school  bonding  proposals  as  part  of  the                                                                    
upcoming elections in the fall  if the date was changed. Ms.                                                                    
Nudelman was not certain but thought that it was possible.                                                                      
2:45:56 PM                                                                                                                    
Representative Edgmon clarified  that the debt reimbursement                                                                    
program  had  "historically  come  and gone  in  the  past."                                                                    
Recently, there had  not been a sunset date  attached to the                                                                    
program.  He  stated  that  the  grant  program  was  highly                                                                    
competitive.  He  offered  that the  Ketchikan  lawsuit  was                                                                    
focused on  the K -  12 funding formula and  the operational                                                                    
side of  education funding.  He also  indicated that  he had                                                                    
some  "conflicted feelings  about the  bill." He  understood                                                                    
the  reason  from  the standpoint  of  "fiscal  discipline."                                                                    
However,  from  the  standpoint of  the  small  Bristol  Bay                                                                    
Borough School  District, he  thought that  it would  be the                                                                    
last opportunity  for the  school to  take advantage  of the                                                                    
program. He added  that the school was in  desperate need of                                                                    
repair and that repairs would  render the school more energy                                                                    
efficient  and  overtime  could   save  money.  He  wondered                                                                    
whether  a  "rush"  of school  districts  were  expected  to                                                                    
attempt  to qualify  before the  program  would sunset.  Ms.                                                                    
Nudelman believed  that school districts were  restricted by                                                                    
its voters  who understood  the larger fiscal  crisis facing                                                                    
the state and thought that  the voters would need convincing                                                                    
before a bond issue was passed.                                                                                                 
Mr.  Anderson   responded  that  through  his   research  in                                                                    
anticipation  of  the  legislation he  discovered  that  the                                                                    
municipal school bonding process  was lengthy and could last                                                                    
months.  He  observed that  "in  regards  to the  bum  rush"                                                                    
scenario, current evidence of that would be apparent.                                                                           
2:50:21 PM                                                                                                                    
Representative Edgmon  wondered whether the committee  had a                                                                    
legal  opinion  from the  Department  of  Law regarding  the                                                                    
legality  of   imposing  a  definitive  cut-off   date.  Mr.                                                                    
Anderson reported  that no legal  memo existed  regarding HB
Co-Chair  Thompson   informed  Representative   Edgmon  that                                                                    
Alaska  Housing Finance  Corporation  (AHFC)  had a  program                                                                    
applicable to  public buildings, including schools  that was                                                                    
being utilized  in many rural  areas. He explained  that the                                                                    
program was focused on  energy efficiency and weatherization                                                                    
and  the grant  would be  repaid through  guaranteed savings                                                                    
from lower energy costs achieved overtime.                                                                                      
Co-Chair  Neuman  interjected  that  private  entities  also                                                                    
offered the same energy efficiency type programs.                                                                               
Vice-Chair  Saddler   remarked  that  in  response   to  the                                                                    
suggested "land  office rush" for the  remaining school debt                                                                    
program , he thought that  the notion of the "generous state                                                                    
reimbursement coming to  an end" would not  be surprising to                                                                    
the school districts given the state's financial condition.                                                                     
Representative  Munoz  asked  whether non-REAA  schools  can                                                                    
apply for  the grant  funding. Ms.  Nudelman replied  in the                                                                    
affirmative. Representative  Munoz asked what the  number of                                                                    
applications the  department received for the  grant program                                                                    
in a  given year  was versus the  number of  awarded grants.                                                                    
Ms. Nudelman responded that  DEED received approximately 160                                                                    
to  200 applications  and that  in the  FY 2016  budget four                                                                    
applications were awarded totaling  $13 million exclusive of                                                                    
the  capital construction  project for  the Kivalina  School                                                                    
design. She noted that the  number of applications typically                                                                    
decreased during leaner budget years.                                                                                           
2:55:12 PM                                                                                                                    
Representative Munoz asked whether all  of the funds for the                                                                    
grant  program was  state  funding.  Ms. Nudelman  responded                                                                    
that  the grant  program required  a percentage  of matching                                                                    
funds based  on the  assessed value  per ADM  (average daily                                                                    
Representative Gattis believed that  over the 40 year period                                                                    
of  the reimbursement  program  it  incentivized the  school                                                                    
districts   to  overbuild   buildings  which   all  required                                                                    
maintenance. She felt that the  school districts were moving                                                                    
into a period  of necessary maintenance and  with passage of                                                                    
HB 136,  were getting its  source of funding  revoked, which                                                                    
was  not planned  for. She  asked  for the  total amount  of                                                                    
deferred  school  maintenance  in the  state.  Ms.  Nudelman                                                                    
responded  that   one  way  that  the   department  assessed                                                                    
deferred maintenance  was reviewing the insurance  value for                                                                    
all of  the school buildings statewide.  She elaborated that                                                                    
DEED  also required  six year  plans  from school  districts                                                                    
regarding maintenance  needs. She thought that  both methods                                                                    
gave   the  department   a   good   indication  of   general                                                                    
maintenance  needs  of  the schools.  Representative  Gattis                                                                    
wondered  whether the  district had  a specific  number. Ms.                                                                    
Nudelman had  access to a  report with the numbers  that she                                                                    
would provide to the committee.                                                                                                 
Representative Kawasaki  notified the committee that  a 2010                                                                    
report on school construction  and major maintenance funding                                                                    
had been distributed.                                                                                                           
Representative  Munoz  stated  that charter  schools  became                                                                    
eligible  for the  school  debt  reimbursement program.  She                                                                    
wondered whether charter schools  were included in the bill.                                                                    
Mr. Anderson was uncertain.                                                                                                     
HB  136  was  HEARD  and   HELD  in  committee  for  further                                                                    
He discussed the agenda for the next day.                                                                                       
3:00:46 PM                                                                                                                    
The meeting was adjourned at 3:00 p.m.                                                                                          

Document Name Date/Time Subjects
Mental Health Trust - Smith #1.pdf HFIN 3/24/2015 1:30:00 PM
Mental Health - Michael #4.pdf HFIN 3/24/2015 1:30:00 PM
Mental Health - Cooke #3.pdf HFIN 3/24/2015 1:30:00 PM
HB 136 Sectional Analysis.pdf HFIN 3/24/2015 1:30:00 PM
HB 136
HB 136 Sponsor Statement.pdf HFIN 3/24/2015 1:30:00 PM
HB 136
HB 136 Fiscal Note EED.pdf HFIN 3/24/2015 1:30:00 PM
HB 136
HB 136 Support Material - State Debt Liability.pdf HFIN 3/24/2015 1:30:00 PM
HB 136
HB 136 Support Material - MultiYearAllocationTotals.pdf HFIN 3/24/2015 1:30:00 PM
HB 136
HB 136 Supporting Documents - May 1 Date Only - Letter From Bristol Bay Borough.pdf HFIN 3/24/2015 1:30:00 PM
HB 136
HB 136 Opposing Documents - FNSB School Debt Reimbursement Letter.pdf HFIN 3/24/2015 1:30:00 PM
HB 136
HB 136 DEED 6 YR Plan 2015 Final.pdf HFIN 3/24/2015 1:30:00 PM
HB 136
HB 136 DEED Response to Rep. Gattis.pdf HFIN 3/24/2015 1:30:00 PM
HB 136