Legislature(1999 - 2000)
04/11/2000 03:15 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 11, 2000
3:15 P.M.
TAPE HFC 00 - 112, Side 1
TAPE HFC 00 - 112, Side 2
CALL TO ORDER
Co-Chair Therriault called the House Finance Committee
meeting to order at 3:15 p.m.
PRESENT
Co-Chair Mulder
Co-Chair Therriault Representative Foster
Vice Chair Bunde Representative Grussendorf
Representative Austerman Representative Moses
Representative J. Davies Representative Phillips
Representative G. Davis Representative Williams
ALSO PRESENT
Diane Barrans, Executive Director, Postsecondary Education
Commission, Department of Education; Karen Rehfeld,
Director, Division of Education Support Services, Department
of Education and Early Development; Carl Rose, Executive
Director, Association of Alaska School Boards; Diane
Barrans, Executive Director, Postsecondary Education
Commission, Department of Education; Sheila King, Finance
Officer, Alaska Student Loan Corporation; Carol Carroll,
Director, Division of Support Services, Department of
Natural Resources; Marie Marx, Staff, Senator Leman.
TESTIFIED VIA TELECONFERENCE
Milton Byrd, President, Charter Community College; Jon
Stolle, President, American Institute of Architects,
Anchorage; John Davis, Superintendent, Bering Straight
School District, Unalakleet; Major Thomas, Member, Alaska
National Guard; Richard Turcic, Division of Administrative
Services, Military and Veterans; General Thomas Westall,
Alaska National Guard, Glennallen; Major Richard Thomas,
Alaska National Guard.
SUMMARY
HB 211 "An Act relating to liability for providing
managed care services, to regulation of managed
care insurance plans, and to patient rights and
prohibited practices under health insurance; and
providing for an effective date."
HB 211 was Postponed.
HB 281 "An Act providing for the issuance of general
obligation bonds in the amount of $665,000,000 for
the purposes of paying the cost of design,
construction, and renovation of public elementary
and secondary schools, renovation of state
buildings, capital improvements at the University
of Alaska, and capital improvements to state
harbors; and providing for an effective date."
HB 281 was Postponed.
HB 331 "An Act relating to payment, allowances, and
benefits of members of the Alaska National Guard
and Alaska Naval Militia in active service;
relating to computation of certain benefits for
members of the Alaska State Militia; and providing
for an effective date."
CSHB 331 (MVA) was REPORTED out of Committee with
a "do pass" recommendation and with a zero fiscal
note by the Military and Veterans Affairs.
HB 373 "An Act relating to return of contributed capital,
or payment of a dividend, to the state by the
Alaska Student Loan Corporation; and providing for
an effective date."
HB 373 was REPORTED out of Committee with "no
recommendation" and a zero fiscal note by the
Department of Education and Early Development.
HB 445 "An Act relating to a rural school construction
and planned maintenance pilot program; and
providing for an effective date."
HB 445 was heard and HELD in Committee for further
consideration.
CSSB 247(FIN)
"An Act relating to eligibility of certain persons
who receive veterans' benefits for longevity bonus
payments; and providing for an effective date."
CSSB 247 (FIN) was REPORTED out of Committee with
a "do pass" recommendation and with a fiscal
impact note by the Department of Administration,
published date 3/20/00.
CSSB 275(HES)
"An Act relating to the school year for purposes
of the postsecondary student loan program; and
providing for an effective date."
CSSB 275 (HES) was REPORTED out of Committee with
a "do pass" recommendation and with a zero fiscal
note by the Department of Education and Early
Development.
CS FOR SENATE BILL NO. 275(HES)
"An Act relating to the school year for purposes of the
postsecondary student loan program; and providing for
an effective date."
Representative J. Davies observed that he further reviewed
the bill and is comfortable with the language.
Co-Chair Mulder MOVED to report CSSB 275 (HES) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSSB 275 (HES) was REPORTED out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
Department of Education and Early Development.
HOUSE BILL NO. 445
"An Act relating to a rural school construction and
planned maintenance pilot program; and providing for an
effective date."
Co-Chair Mulder spoke in support of HB 445. He observed the
expense and difficulty of building in rural Alaska. The
legislation creates a pilot program to see if there is a
better way to build schools in rural Alaska. He pointed out
that there are four functions involved in building:
financing, design, construction, and maintenance and
operation. He maintained that these four functions tend to
be segregated. Each has its own contingency. The biggest
contingencies are generally in design and construction and
can range up to 15 percent. Bonds are sometimes let far in
advance of when the money is actually needed for the
project. There are no time limits between when bonds are let
and when the money is needed. He maintained that there would
be less money lost through interest paid if the time between
the bonding and building were reduced.
Co-Chair Mulder summarized that the bill unites the four
facets of school construction under one umbrella and reduces
costs associated with timing, contingency-planning dollars,
and change orders. The goal of the bill is to have school
construction without change orders. The bill provides
coordination and allows all components to work together,
while building a facility to the specifications of the
school district and employing local hire standards without
contingencies and cost overruns. This process is not new to
the private sector.
Co-Chair Mulder explained that the legislation would
authorize the department to enter into a RFP process to see
if there are entities that would bid as a package and
oversee the construction as a package in order to guarantee
savings to the state of Alaska.
In response to a question by Representative Grussendorf, Co-
Chair Mulder noted that he worked with the department and
other individuals on the legislation. He maintained that the
department wants direction from the legislature. He did not
anticipate that there would be a fiscal impact note
accompanying the legislation.
Co-Chair Therriault observed that the department did not
anticipate submitting a fiscal impact note. A House Finance
Committee zero fiscal note would be submitted with the bill.
Representative Phillips recalled discussions, which
indicated that the management contractor would oversee the
project for three years after its completion. The
legislation provides for "a private sector facility
maintenance plan" for "a period of time following
completion." She questioned if a "period of time" was
included over a "three-year period" because it is a test
project. Co-Chair Mulder agreed that the anticipation is
that there would be supervision for a three-year period
following completion. He thought that the department would
like to have some flexibility in regards to the "warranty"
period.
Representative Austerman referred to a handout provided by
Co-Chair Mulder titled Rural Schools Capital Construction
and Planned Maintenance Pilot Project (copy on file.) Co-
Chair Mulder observed that Mark Pepper, was the consultant.
Representative Austerman noted that the legislation pertains
to all schools. He emphasized that schools in Kodiak would
have different needs than schools in Nome. Co-Chair Mulder
pointed out that the legislation reads: A request for
proposals required under this subsection must solicit
proposals for development of all school construction
projects funded for construction in fiscal year 2001 and
located within rural educational attendance areas. He
observed that Kodiak is not within a rural educational
attendance area. He noted that there are existing designs
for many of the schools that are on the list. The intent is
not to impose a prototypical design, but to have proper
management of the design, construction and maintenance
phases in order to increase efficiency and reduce change
orders.
Representative Grussendorf recalled similar legislation in a
previous year.
Representative J. Davies referred to page 2, line 10 and
questioned the definition of "development". Co-Chair Mulder
responded that the intent is to provide management, but that
development was used because it is more encompassing.
Representative J. Davies pointed out that the legislation
focuses on FY01 construction projects and that projects may
take more than one fiscal year to complete. Co-Chair Mulder
clarified that the legislation pertains to projects that are
funded in fiscal year 2001. The legislation would be a pilot
program. He observed that some communities do not have much
experience with school construction. The intent is to
provide assistance and technical oversight to make sure the
state gets the best value for its dollars.
Representative J. Davies expressed concern that each school
be put to bid as an individual package, so that different
people around the state might work on the projects. Co-Chair
Mulder affirmed that it was his intent that the projects are
put out as separate bids and not focused toward one entity.
Vice Chair Bunde expressed concern that savings can be
realized through an economy of scale. Co-Chair Mulder
stressed that most of the projects have completed the design
phase. In response to a question by Vice Chair Bunde, Co-
Chair Mulder observed that he did not know how many schools
would be affected.
Representative G. Davis acknowledged the use of prototypes
but emphasized concerns regarding local input.
JON STOLLE, PRESIDENT, AMERICAN INSTITUTE OF ARCHITECTS,
ANCHORAGE testified via teleconference. He expressed concern
that there had been insufficient debate on the bill. He
added that there are unsubstantiated claims that the
traditional method is slow and costly. He maintained that
the selection criteria seems to be narrowly crafted and
would exclude many design firms in Alaska. He emphasized
that there are few entities that would meet all of the
qualifications. He asserted that there are checks and
balances in the current system and recommended that the
legislation be held for further consideration.
DR. JOHN DAVIS, SUPERINTENDENT, BERING STRAIGHT SCHOOL
DISTRICT, UNALAKLEET testified via teleconference. He
expressed concern that the legislation would affect FY01
construction. He observed that most of the projects that
would be funded in FY01 would already be in the design
phase. It would cost additional money to reengineered or
rethink design plans. He expressed support for legislation
that would remove the school district from the
responsibility of constructing buildings. He stressed that
they have been able to achieve cost savings through the use
of a single architect on several projects. He pointed out
that many schools built under the Bureau of Indian Affairs
are prototypical in design.
Co-Chair Mulder emphasized that the legislation is not an
effort to force prototypical design. He acknowledged that
there are three projects in Unalakleet that have gone
through the design phase.
KAREN REHFELD, DIRECTOR, DIVISION OF EDUCATION SUPPORT
SERVICES, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT
testified in support of the legislation. The department
supports the overall goal to efficiently manage school
construction projects, to reduce costs, and to maximize the
dollars available for schools. She observed that the
department has had discussions with Co-Chair Mulder and his
staff regarding the school construction management pilot
program in HB 445 and understands that it is the intent to
implement a pilot program for school construction projects
that are funded in FY01.
Ms. Rehfeld pointed out that the department does not know
which projects would be included. The pilot appears to only
involve REAA school district projects. There are concerns
with the timing, preparing the RFP and some of the technical
issues. There are some details that would need to be
considered in order for the pilot program to be successful,
but the department is supportive of efforts to address
school construction.
CARL ROSE, EXECUTIVE DIRECTOR, ASSOCIATION OF ALAKSA SCHOOL
BOARDS expressed concerns with the legislation. He referred
to experiences with cost overruns relating to a school built
in Skagway. He stressed that availability of funds
contributed to cost overrun problems. He observed that he
was the president of an insurance company that replaced four
schools that burnt down. He stressed that schools were
replaced with the assistance of an architect and a
contractor. It was in the insurance company's best interest
to replace the schools promptly. He maintained that adequate
funding reduced cost overruns. He stressed the need to
identify the problem and cost. He questioned what insurance
is there that equity and fairness would be provided in terms
of the distribution of jobs.
In response to a question by Co-Chair Mulder, Mr. Rose
observed that schools are insured for replacement costs.
Replacement costs are adjusted for a variety of factors.
The company worked with the communities in all but one case
the cost was contained. The needs of a community were
balanced.
Co-Chair Mulder pointed out that savings could be realized
if there is someone responsible to assure that shipments are
timely. Mr. Rose stressed that the availability of funding
is the major issue. Costs would have increased if they had
spread the work between seasons. He reiterated concerns
regarding issues of fairness and questioned if the work
would be single source to one person. Co-Chair Mulder spoke
in support of providing sufficient funding for projects.
Vice Chair Bunde stressed that the goal is to produce school
buildings and not provide economic development. Mr. Rose
responded that the issue is between a sole source contract
and competitive bid. Co-Chair Mulder stressed that the
department would protect competition.
Representative Williams referred to a tribal government
program where the tribe manages the construction of schools
and provides local hire. The federal government pays for the
local hire portion. Co-Chair Mulder stated that he would
look into the concept.
Representative J. Davies recommended that the bill require
two or three private sector developers with different
expertise in different areas of the state. He also suggested
that there be some cost analysis regarding how the
legislation would save money.
Representative J. Davies questioned if the second use of
"price" in line 16 was redundant. He also suggested that
there be a sunset provision to remove pilot program from
statue.
Co-Chair Mulder emphasized that the department has the
ability to implement the without legislation, but observed
that the department prefers to have legislative direction.
Representative J. Davies noted that some design firms have
indicated concerns with the speed in which the legislation
has advanced and the qualification list in subsection 2.
(TAPE CHANGE, HFC 00 - 112, SIDE 2)
Co-Chair Mulder emphasized that he is open for suggestions.
HB 445 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 373
"An Act relating to return of contributed capital, or
payment of a dividend, to the state by the Alaska
Student Loan Corporation; and providing for an
effective date."
DIANE BARRANS, EXECUTIVE DIRECTOR, POSTSECONDARY EDUCATION
COMMISSION, DEPARTMENT OF EDUCATION testified in support of
the legislation. She observed that the legislation reflects
the growing financial stability of a unique, longstanding
and valued Alaskan program "the Alaska Student Loan
Program". She read from a prepared statement:
As you may already be aware, legislative and
administrative changes to the Alaska Student Loan
Programs made in recent years have resulted in the
Alaska Student Loan Corporation transitioning from an
enterprise agency operating with an annual net deficit
to one producing an annual net income. This outcome has
allowed the ASLC board to identify and prioritize
several policy goals. In priority order, these goals
are:
1) Continue in a direction of fiscal strength and good
credit standing;
2) Continue to reduce the costs of borrowing for AK
residents;
3) Continue to reduce the Corporation's equity deficit
of $43 million; and
4) Propose a mechanism that, while subordinate to the
top three priorities, makes possible a return of
contributed capital to the ASLC's original financing
source-the State of Alaska.
The ASLC is already experiencing success in meeting
these goals: in 1999 our improved financial standing
was rewarded by a full ratings upgrade to double-A by
both Moodys and Standard and Poors; the interest rate
on 2000-2001 state student loans has been reduced to
8%, the lowest rate in several years; the interest-free
borrowing while student-borrowers are in school remains
intact; and, the Corporation's equity deficit has been
reduced by almost $7 million over the past two years.
In recommending this bill for your approval, our board
is seeking a mechanism for the ASLC to fulfill its
fourth goal. The bill provides that, in any year that
the Corporation has at least a $2 million net income,
the board will declare a return of capital payment to
the State of between 10% and 35% of that income amount.
This approach was developed and endorsed by the
Corporation as one that is considered reasonable within
the financial community as a conservative method of
meeting this goal. The Corporation's senior staff and
financial advisors met and discussed the proposal with
both rating agencies and bond insurer to avoid any
adverse impact to our credit standing or possible
related increase in the cost of bond issuance. Their
reaction has been positive-under the conditions that
this bill would place in law.
It is important for me to reference current proposals
for the FY200 1 budget year that use ASLC receipts, in
both the House and Senate versions of next year's
budget, that make passage of this bill an imperative
for the Corporation's wellbeing. Approval of this
return of capital approach will pre-empt any concerns
raised by this year's budget structure. Passage of this
bill will insure that the Corporation's capital return
payment is made without putting at risk the financial
and public policy goals of the Alaska Student Loan
Corporation.
I have provided a handout that includes a Statement of
Projected Revenues and Expenses that projects both
current and future, through 2004, payment amounts. Also
included are two graphs that illustrate the income
trend and its impact on the Corporation's fund Equity
Balance over that same time period (copy on file.)
In response to a question by Vice Chair Bunde, Mr. Barrans
reviewed the establishment of interest rates. When the
program was funded through the General Fund there was a
statutory interest rate, which was set at 5 percent and
later increased to 8 percent. A formula was developed
through legislative changes to tie the cost of borrowing to
the cost of funds to the Corporation. The calculation has
two pieces: a weighted average of the cost of bonds in the
prior five years, and cost of the program operations.
Vice Chair Bunde observed that the Commission's philosophy
was, at one time, that the student loan should be the loan
of last resort and that there were lower interest rates
available through the federal government. Ms. Barrans
responded that the program is a close competitor with the
federal student loan program. Subsidized federal loans are
still a better deal for students that qualify. The Alaska
student loan program is close to the unsubsidized federal
student loan and does not require income or asset
qualifications.
In response to a question by Vice Chair Bunde, Ms. Barrans
stated that the best way to reduce the cost of loans to
borrowers is to reduce the cost to run the program by:
reducing losses, reducing administration costs, and to
achieve better rates on bonds. The amount of capital the
bill returns to the state does not materially affect the
ability to reduce rates in the future.
Representative J. Davies questioned if the Corporation had
discussed reinstating credit on loans for returning
students. The Alaska Student Loan Corporation has not
engaged in the discussion. Ms. Barrans clarified that the
focus has been on making up the ground that was loss in
equity investment. She added that if the full equity were
returned that discussions might occur.
In response to a question by Representative J. Davies, Ms.
Barrans observed that in the House version of the operating
budget $1.6 million dollars of Student Loan Corporation
receipts are appropriated to offset the cost of WAMI and a
new program that would provide that would provided National
Guard tuition credit. In the Senate $1.6 million dollars of
Student Loan Corporation receipts are appropriated to fund
the operation of the university.
SHEILA KING, FINANCE OFFICER, ALASKA STUDENT LOAN
CORPORATION explained surplus funds that are recycled into
new loans. The Corporation must keep a level of collateral
to meet their bonds covenants.
Representative J. Davies questioned how much is available in
the current fiscal year that would be used by the
legislature. Ms. Barrans observed that the total
appropriation of corporation receipts is $2 million dollars.
The Senate worked with the Corporation. She observed that
this is slightly less than the 35 percent that the
Corporation would have available.
Representative G. Davis noted that the transmittal letter
from the Governor indicated that some of the earnings would
go to the Alaska Scholars Program. Ms. Barrans acknowledged
that the Governor recommended the use of funds for the
Alaska Scholars Program but pointed out that funds have not
been earmarked in a statutory way. The university on the
Alaska Scholars Program could spend the funds.
Vice Chair Bunde recalled that the University found funding
for the first year of the Alaska Scholars Program and would
look to the legislature to fund it for the next year.
Ms. Barrans voiced strong support for the legislation. She
indicated that this has been a joint effort.
Representative J. Davies MOVED to report HB 373 out of
Committee with the accompanying fiscal note. Vice Chair
Bunde OBJECTED for the purpose of discussion. He pointed
out that it is a twice-removed tuition hike, but that it is
nice that the students support their university. He WITHDREW
his OBJECTION. There being NO OBJECTION, it was so ordered.
HB 373 was REPORTED out of Committee with "no
recommendation" and a zero fiscal note by the Department of
Education and Early Development.
HOUSE BILL NO. 331
"An Act relating to payment, allowances, and benefits
of members of the Alaska National Guard and Alaska
Naval Militia in active service; relating to
computation of certain benefits for members of the
Alaska State Militia; and providing for an effective
date."
CAROL CARROLL, DIRECTOR, DIVISION OF SUPPORT SERVICES,
DEPARTMENT OF NATURAL RESOURCES provided information on the
legislation and spoke in its support. The legislation
changes the name of the Alaska State Militia to the Alaska
State Defense Force. The legislation also changes the way
pay is calculated for national guardsmen when they are
brought onto state active duty. Presently, pay is calculated
based on rank, years of service and added allowances. The
basic pay from the federal government would be multiplied by
200 percent. This would streamline the administrative
process without affecting pay of the members. The proposal
was presented to and approved by the officers and enlisted
men's associations. The legislation would also clarify in
statute that the members of the Alaska State Defense Force
should be paid as if they are state employees. They are
currently handled as emergency employees.
Representative Phillips spoke in the support of the bill and
stated that she was ready to move the bill from Committee.
MAJOR RICHARD THOMAS, ALASKA NATIONAL GUARD testified via
teleconference in support of the legislation. He stressed
that anything that can simplify procedures during disasters
would be of assistance. He noted that the bill would make
pay more timely and accurate.
RICHARD TURCIC, DIVISION OF ADMINISTRATIVE SERVICES,
MILITARY AND VETERANS AFFAIRS, ANCHORAGE testified via
teleconference in support. He stressed that the current
system is extremely complicated and emphasized that the new
system would simplify and reduce the time needed to
calculate pay. The legislation would also ensure timely
payments.
GENERAL THOMAS S. WESTALL, BRIGADOR, ALASKA STATE MILITIA,
GLENNALLEN TESTIFIED via teleconference in support. The
Alaska State Defense Force is a trained military service
that principally trains in the field of mobilization. The
defense force can mobilize in 24 hours. There are three
trained soldiers assigned specific jobs in the State
Emergency Coordination Center. The Alaska State Militia has
operated in almost every disaster that the state has been
involved in over the past 16 years. The soldiers are
civilians in their normal capacity. They need protection of
their civil jobs, which is provided under AS 24. These
soldiers are not looking for compensation. He noted that
they have been committed for extended periods of time. The
Division of Emergency Services would have to hire staff to
do the task that the State Defense Force has traditionally
done. Emergency Services would not be able to operate 24
hours a day without exhaustion.
Vice Chair Bunde noted that there is a zero fiscal note
accompanying the bill.
Representative Phillips MOVED to report CSHB 331 (MVA) out
of Committee with the accompanying fiscal note.
CSHB 331 (MVA) was REPORTED out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
Military and Veterans Affairs.
CS FOR SENATE BILL NO. 247(FIN)
"An Act relating to eligibility of certain persons who
receive veterans' benefits for longevity bonus
payments; and providing for an effective date."
MARIE MARX, STAFF, SENATOR LEMAN spoke in support of the
legislation on behalf of the sponsor. She observed that
Senator Leman was contacted by constituents regarding the
loss of the longevity bonus to veterans entering nursing
homes because their stay in the nursing home was being paid
by their veteran's benefits. The Division of Longevity
Bonus' interpretation of a private source was the cause of
the problem. "Private source" is anything paid directly by
an individual. If an individual's care is paid by a private
source they are able to keep their longevity bonus check.
Senate Bill 247 restores the eligibility of certain veterans
who are being cared for in nursing homes to receive
longevity bonus payments. Veterans' benefits are federal
benefits earned by those who have served our country in the
armed forces. It is not fair to include veterans' benefits
in the same category as needs-based state benefits such as
Medicaid, the receipt of which disqualifies a nursing home
patient from receiving longevity bonus payments. The
longevity bonus payments are prospective from the time of
re-qualification; the bill is not retroactive. Those
veterans disqualified under the existing statute could
reapply for qualification for bonus payments beginning July
1, 2000. Six veterans are estimated to be affected by the
bill and the estimated cost is $12 thousand dollars.
Representative Williams MOVED to report CSSB 247 (FIN) out
of Committee with the accompanying fiscal note. There being
NO OBJECTION, it was so ordered.
CSSB 247 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with a fiscal impact note by the
Department of Administration, published date 3/20/00.
ADJOURNMENT
The meeting was adjourned at 4:40 p.m.
| Document Name | Date/Time | Subjects |
|---|