Legislature(1997 - 1998)

05/01/1997 03:07 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                HOUSE HEALTH, EDUCATION AND SOCIAL                             
                    SERVICES STANDING COMMITTEE                                
                            May 1, 1997                                        
                             3:07 p.m.                                         
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Con Bunde, Chairman                                            
 Representative Joe Green, Vice Chairman                                       
 Representative Al Vezey                                                       
 Representative Brian Porter                                                   
 Representative Fred Dyson                                                     
 Representative J. Allen Kemplen                                               
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 Representative Tom Brice                                                      
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 CS FOR SENATE BILL NO. 134(HES)                                               
 "An Act relating to home schooling for elementary and secondary               
 students."                                                                    
                                                                               
      - MOVED CSSB 134(HES) OUT OF COMMITTEE                                   
                                                                               
 * HOUSE BILL NO. 215                                                          
 "An Act making an appropriation to the education facilities fund;             
 making an appropriation from the constitutional budget reserve fund           
 under art. IX, sec. 17(c), Constitution of the State of Alaska; and           
 providing for an effective date."                                             
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 * HOUSE BILL NO. 216                                                          
 "An Act relating to the Education Facilities Financing Authority;             
 and providing for an effective date."                                         
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 * HOUSE BILL NO. 229                                                          
 "An Act relating to the establishment and operation of charter                
 schools."                                                                     
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 (* First public hearing)                                                      
                                                                               
 PREVIOUS ACTION                                                               
                                                                               
 BILL:  SB 134                                                                 
 SHORT TITLE: HOME SCHOOLING EDUCATION PROGRAM                                 
 SPONSOR(S): SENATOR(S) LEMAN, Miller, Phillips, Donley, Green,                
 Taylor, Ward, Parnell, Sharp                                                  
                                                                               
 JRN-DATE     JRN-DATE             ACTION                                      
 03/12/97       695    (S)   READ THE FIRST TIME - REFERRAL(S)                 
 03/12/97       695    (S)   HES                                               
 04/11/97              (S)   HES AT  9:00 AM BUTROVICH ROOM 205                
 04/11/97              (S)   MINUTE(HES)                                       
 04/11/97      1100    (S)   HES RPT  CS  3DP 1NR      SAME TITLE              
 04/11/97      1100    (S)   DP: GREEN, LEMAN, WARD NR: WILKEN                 
 04/11/97      1100    (S)   ZERO FN TO SB & CS (DOE)                          
 04/14/97              (S)   RLS AT 10:45 AM FAHRENKAMP RM 203                 
 04/22/97      1385    (S)   RULES TO CALENDAR  4/22/97                        
 04/22/97      1422    (S)   READ THE SECOND TIME                              
 04/22/97      1422    (S)   HES  CS ADOPTED Y12 N8                            
 04/22/97      1422    (S)   COSPONSOR(S): DONLEY, GREEN, TAYLOR,              
 04/22/97      1422    (S)   WARD, PARNELL, SHARP                              
 04/22/97      1422    (S)   ADVANCED TO THIRD READING                         
                             UNAN CONSENT                                      
 04/22/97      1422    (S)   READ THE THIRD TIME  CSSB 134(HES)                
 04/22/97      1423    (S)   PASSED Y20                                        
 04/22/97      1433    (S)   TRANSMITTED TO (H)                                
 04/23/97      1285    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 04/23/97      1285    (H)   HES                                               
 05/01/97              (H)   HES AT  3:00 PM CAPITOL 106                       
                                                                               
 BILL:  HB 215                                                                 
 SHORT TITLE: APPROP: EDUCATION FACILITIES FUND                                
 SPONSOR(S): REPRESENTATIVE(S) KOTT, Green                                     
                                                                               
 JRN-DATE     JRN-DATE             ACTION                                      
 03/26/97       850    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/26/97       850    (H)   HES, FINANCE                                      
 05/01/97              (H)   HES AT  3:00 PM CAPITOL 106                       
                                                                               
 BILL:  HB 216                                                                 
 SHORT TITLE: EDUC. FACILITIES FINANCING AUTHORITY                             
 SPONSOR(S): REPRESENTATIVE(S) KOTT, Green                                     
                                                                               
 JRN-DATE     JRN-DATE             ACTION                                      
 03/26/97       850    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/26/97       850    (H)   HES, FINANCE                                      
 05/01/97              (H)   HES AT  3:00 PM CAPITOL 106                       
                                                                               
 BILL:  HB 229                                                                 
 SHORT TITLE: STATE BOARD OF CHARTER SCHOOLS                                   
 SPONSOR(S): REPRESENTATIVE(S) VEZEY, Dyson, Mulder, Kohring, Kott             
                                                                               
 JRN-DATE     JRN-DATE             ACTION                                      
 04/04/97       989    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 04/04/97       989    (H)   HES                                               
 04/10/97      1068    (H)   COSPONSOR(S): DYSON, MULDER                       
 04/11/97      1085    (H)   COSPONSOR(S): KOHRING                             
 04/16/97      1125    (H)   COSPONSOR(S): KOTT                                
 05/01/97              (H)   HES AT  3:00 PM CAPITOL 106                       
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 RACHAEL MORELAND, Researcher                                                  
     for Senator Leman                                                         
 Alaska State Legislature                                                      
 Capitol Building, Room 113                                                    
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 465-2095                                                    
 POSITION STATEMENT:  Provided sponsor statement for CSSB 134(HES)             
                                                                               
 NANCY BUELL, Ed. D., Director                                                 
 Teaching and Learning Support                                                 
 Department of Education                                                       
 801 West Tenth Street, Suite 200                                              
 Juneau, Alaska  99801-1894                                                    
 Telephone:  (907) 465-8689                                                    
 POSITION STATEMENT:  Testified on CSSB 134(HES) and HB 229                    
                                                                               
 GEORGE DOZIER, Legislative Assistant                                          
    to Representative Kott                                                     
 Alaska State Legislature                                                      
 Capitol Building, Room 204                                                    
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 465-6848                                                    
 POSITION STATEMENT:  Provided sponsor statement for HB 215 and HB             
                      216                                                      
                                                                               
 CARL ROSE, Executive Director                                                 
 Association of Alaska School Boards                                           
 316 West 11th Street                                                          
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-1083                                                    
 POSITION STATEMENT:  Testified in support of HB 215 and HB 216;               
                      testified on HB 229                                      
                                                                               
 B. A. WEINBERG, Lobbyist                                                      
 Kashunamiut School District; Citizens for the Educational                     
    Advancement of Alaska's Children                                           
 300 Hermit Street, Number 12                                                  
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-3897                                                    
 POSITION STATEMENT:  Testified on HB 215 or HB 216                            
                                                                               
 STEPHEN McPHETRES, Executive Director                                         
 Alaska Council of School Administrators                                       
 326 Fourth Street, Number 404                                                 
 Juneau, Alaska  99801                                                         
 Telephone:  (907)  586-9702                                                   
 POSITION STATEMENT:  Testified on HB 215 and HB 216                           
                                                                               
 BOB LeRESCHE                                                                  
 Cominco / Red Dog Mine                                                        
 4270 Glacier Highway                                                          
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-8338                                                    
 POSITION STATEMENT:  Testified on HB 215 and HB 216                           
                                                                               
 ROSS A. KINNEY, Deputy Commissioner                                           
 Office of the Commissioner                                                    
 Department of Revenue                                                         
 P.O. Box 110400                                                               
 Juneau, Alaska  99811-0400                                                    
 Telephone:  (907) 465-4880                                                    
 POSITION STATEMENT:  Testified on HB 215 and HB 216                           
                                                                               
 MICHAEL A. MORGAN, Project Management Professional (PMP)                      
 Facilities Section                                                            
 Educational Support Services                                                  
 Department of Education                                                       
 801 West Tenth Street, Suite 200                                              
 Juneau, Alaska  99801-1894                                                    
 Telephone:  (907) 465-1858                                                    
 POSITION STATEMENT:  Testified on HB 216                                      
                                                                               
 BRAD PIERCE, Senior Policy Analyst                                            
 Office of Management and Budget                                               
 Office of the Governor                                                        
 P.O. Box 110020                                                               
 Juneau, Alaska  99811-0020                                                    
 Telephone:  (907) 465-4677                                                    
 POSITION STATEMENT:  Testified on HB 215 and HB 216                           
                                                                               
 KEVIN RITCHIE, Lobbyist                                                       
 Alaska Municipal League and the Alaska Conference of Mayors                   
 217 Second Street, Number 200                                                 
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-1325                                                    
 POSITION STATEMENT:  Testified on HB 215 and HB 216                           
                                                                               
 SANDY SHOULDERS                                                               
 P.O. Box 236                                                                  
 Talkeetna, Alaska  99676                                                      
 Telephone:  (907) 733-3050                                                    
 POSITION STATEMENT:  Testified in support of HB 215 and HB 216                
                                                                               
 MAUREEN SWED, Representative                                                  
 Talkeetna Elementary Parent Teacher Association                               
 P.O. Box 646                                                                  
 Talkeetna, Alaska  99676                                                      
 Telephone:  (907)  733-1500                                                   
 POSITION STATEMENT:  Testified on HB 215 and HB 216                           
                                                                               
 LARRY WIGET, Director                                                         
 Government Relations                                                          
 Anchorage School District                                                     
 4600 DeBarr Road                                                              
 Anchorage, Alaska  99516                                                      
 Telephone:  (907) 269-2250                                                    
 POSITION STATEMENT:  Testified in support of HB 215, HB 216                   
                      and HB 229                                               
                                                                               
 LINDA SHARP                                                                   
 P.O. Box 190051                                                               
 Anchorage, Alaska  99519                                                      
 Telephone:  (907) 245-5501                                                    
 POSITION STATEMENT:  Testified on HB 215, HB 216                              
                      and HB 229                                               
                                                                               
 MIKE BOOTS, Member                                                            
 Alaskans for Educational Choice                                               
 P.O. Box 92021                                                                
 Anchorage, Alaska  99509                                                      
 Telephone:  (907) 276-1558                                                    
 POSITION STATEMENT:  Testified on HB 229                                      
                                                                               
 JOHN CYR, President                                                           
 National Education Association-Alaska, NEA-Alaska                             
 114 Second Street                                                             
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-3090                                                    
 POSITION STATEMENT:  Testified on HB 229                                      
                                                                               
 LAURIE PERKINS, Member                                                        
 Juneau Charter School Committee                                               
 1535 Beach Street                                                             
 Douglas, Alaska  99801                                                        
 Telephone:  (907) 364-3450                                                    
 POSITION STATEMENT:  Testified in support of HB 229                           
                                                                               
 BECKY HUGGINS                                                                 
 P.O. Box 878115                                                               
 Wasilla, Alaska  99687                                                        
 Telephone:  (907) 373-6419                                                    
 POSITION STATEMENT:  Testified in support of HB 229                           
                                                                               
 BILL THOMAS                                                                   
 P.O. Box 5196                                                                 
 Ketchikan, Alaska  99901                                                      
 Telephone:  (907) 225-4833                                                    
 POSITION STATEMENT:  Testified on HB 229                                      
                                                                               
 NANCY SCHIERHORN                                                              
 11935 Kristie Circle                                                          
 Anchorage, Alaska  99516                                                      
 Telephone:  (907) 345-5567                                                    
 POSITION STATEMENT:  Testified on HB 229                                      
                                                                               
 BILL BJORK, President                                                         
 Fairbanks Education Association                                               
 P.O. Box 333                                                                  
 Ester, Alaska  99725                                                          
 Telephone:  (907) 479-3479                                                    
 POSITION STATEMENT:  Testified on HB 229                                      
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 97-40, SIDE A                                                            
 Number 0000                                                                   
                                                                               
 CHAIRMAN CON BUNDE called the House Health, Education and Social              
 Services Standing Committee meeting to order at 3:07 p.m.  Members            
 present at the call to order were Representatives Bunde, Vezey,               
 Dyson and Kemplen.  Representatives Porter and Green arrived at               
 3:22 p.m. and 3:23 p.m., respectively.  Representative Brice was              
 absent.                                                                       
                                                                               
 CSSB 134(HES) - HOME SCHOOLING EDUCATION PROGRAM                              
                                                                               
 Number 0070                                                                   
                                                                               
 CHAIRMAN BUNDE announced the first item on the agenda was CSSB                
 134(HES), "An Act relating to home schooling for elementary and               
 secondary students."                                                          
                                                                               
 Number 0074                                                                   
                                                                               
 RACHAEL MORELAND, Researcher for Senator Leman, Alaska State                  
 Legislature, explained that CSSB 134(HES) adds a paragraph to the             
 compulsory attendance policy, AS 14.30.010(b), providing an                   
 exemption for children schooled at home by a parent or legal                  
 guardian.  Currently, there are no specific provisions in Alaska              
 statute pertaining to home schooled students.  There are several              
 ways current home schoolers comply with the law.  Home schoolers in           
 technical compliance are now required to follow the provisions for            
 private and exempt schools, or they may participate in a                      
 government-sponsored course.  Neither provision was designed with             
 home schoolers in mind.  This bill codifies the current practices             
 of many home schoolers.  Families in which children are home                  
 schooled are numerous and the number is growing.  It is the opinion           
 of Senator Leman and the Senate that home schoolers are                       
 acknowledged in law.                                                          
                                                                               
 Number 0152                                                                   
                                                                               
 CHAIRMAN BUNDE commented that other states have introduced                    
 legislation which would remove the mandatory school attendance                
 provision.                                                                    
                                                                               
 MS. MORELAND could not comment on Senator Leman's position on this            
 type of legislation.                                                          
                                                                               
 Number 0193                                                                   
                                                                               
 REPRESENTATIVE FRED DYSON stated that our state law has not made a            
 provision for children who are schooled at home.  He felt Alaska              
 had a sympathetic administration which has been doing the right               
 thing on slightly questionable grounds.  This bill, codifying the             
 process, is a good step and follows a national trend.                         
                                                                               
 Number 0259                                                                   
                                                                               
 NANCY BUELL, Ed. D., Director, Teaching and Learning Support,                 
 Department of Education, expressed support for CSSB 134(HES) as it            
 will provide clarification for parents choosing to home school.               
 Right now there are lots of parents who write in and declare                  
 themselves a private school in order to qualify.  This is not what            
 the private school legislation was intended to do.  There are no              
 means to receive accurate numbers of either private schools or home           
 schools because both home schools and private schools are                     
 registering on the same list, it is a voluntary registration.                 
                                                                               
 Number 0329                                                                   
                                                                               
 REPRESENTATIVE DYSON asked whether a number of states have been               
 doing what Alaska has done and what we are now trying to codify.              
                                                                               
 Number 0346                                                                   
                                                                               
 DR. BUELL believed that most states have laws which legitimize home           
 schooling.  Home schooling has a long tradition.  The first court             
 case, regarding home schooling, was held in the 1920s.  It has been           
 considered a legitimate alternative to the compulsory schooling               
 laws.  Most states ask that home schooled children be tested in               
 some manner, so that people can see that they are doing as well as            
 other children.                                                               
                                                                               
 Number 0387                                                                   
                                                                               
 REPRESENTATIVE DYSON commended the Administration on working with             
 these parents.                                                                
                                                                               
 Number 0395                                                                   
                                                                               
 DR. BUELL commented that several Administration have done this.               
                                                                               
 Number 0403                                                                   
                                                                               
 CHAIRMAN BUNDE asked whether home schools used the state                      
 correspondence school.                                                        
                                                                               
 Number 0408                                                                   
                                                                               
 DR. BUELL said no, although there are a lot of home school parents            
 who use the correspondence school.                                            
                                                                               
 Number 0415                                                                   
                                                                               
 CHAIRMAN BUNDE mentioned that children who were home schooled would           
 not receive a diploma unless they were involved in the state                  
 correspondence school.                                                        
                                                                               
 Number 0427                                                                   
                                                                               
 DR. BUELL answered that the parents could declare their home school           
 a private school in which case they could give a diploma under                
 whatever name they might want to call it.                                     
                                                                               
 Number 0452                                                                   
                                                                               
 REPRESENTATIVE J. ALLEN KEMPLEN clarified that CSSB 134(HES) is               
 supported by the Administration.                                              
                                                                               
 Number 0457                                                                   
                                                                               
 REPRESENTATIVE DYSON made a motion to move CSSB 134(HES) from                 
 committee with individual recommendations and attached zero fiscal            
 note.  There being no objection, CSSB 134(HES) moved from the House           
 Health, Education and Social Services Standing Committee.                     
                                                                               
 HB 215 - APPROP: EDUCATION FACILITIES FUND                                    
 HB 216 - EDUC. FACILITIES FINANCING AUTHORITY                                 
                                                                               
 Number 0487                                                                   
                                                                               
 CHAIRMAN BUNDE announced that the committee would address HB 215,             
 "An Act making an appropriation to the education facilities fund;             
 making an appropriation from the constitutional budget reserve fund           
 under art. IX, sec. 17(c), Constitution of the State of Alaska; and           
 providing for an effective date," and HB 216, "An Act relating to             
 the Education Facilities Financing Authority; and providing for an            
 effective date."                                                              
                                                                               
 Number 0498                                                                   
                                                                               
 GEORGE DOZIER, Legislative Assistant to Representative Kott, Alaska           
 State Legislature, stated that Representative Kott has become                 
 increasingly concerned about the inadequate and deteriorating                 
 school facilities throughout the state of Alaska.  Representative             
 Kott's bills, HB 215 and HB 216, address this deficiency.  House              
 Bill 216 establishes an Education Facilities Financing Authority,             
 located within the Department of Education (DOE) and an Education             
 Facilities Fund, under the control of the Education Facilities                
 Financing Authority but administered by the Department of Revenue             
 (DOR).  The Education Facilities Financing Authority would issue              
 bonds to directly finance the construction of those school                    
 facilities specifically approved by the legislature.  This bill               
 includes funding provisions for a number of new construction and              
 improvement projects.  "In addition, HB 216 would permit the                  
 authority to contract, to pay up to 70 percent of the net debt                
 service, on municipal bonds that are issued to finance municipal              
 school facilities and up to 100 percent of such bonds which are               
 issued by the University of Alaska."  He reiterated that specific             
 projects would have to be approved by the legislature.                        
                                                                               
 MR. DOZIER explained that the authority would apply only non-corpus           
 balances of the fund to debt service on bonds that are issued by              
 the authority and would also pay specified percentages of municipal           
 debt service on municipal bonds.  The authority would have the                
 right to pledge assets of the fund as security for bonds that would           
 be issued.  The fund corpus would not be utilized, only the                   
 earnings of the corpus would be used.  He said HB 215 transfers,              
 from the constitutional budget reserve fund (CBRF), $1.2 billion              
 into the education facilities fund.                                           
                                                                               
 Number 0696                                                                   
                                                                               
 CHAIRMAN BUNDE clarified that HB 215 would essentially dedicate               
 $1.2 billion to a permanent fund for school facilities.  This bill            
 deals with school facilities as opposed to the educational                    
 endowment which deals with the operation of the schools.  He noted            
 that the fiscal note was for $500,000.  He understood the need for            
 money to set up the Education Facilities Fund, but questioned why             
 it couldn't pay its own operating expenses.                                   
                                                                               
 Number 0756                                                                   
                                                                               
 MR. DOZIER answered that he had just received the fiscal note and             
 hadn't had a chance to review it.                                             
                                                                               
 Number 0778                                                                   
                                                                               
 CARL ROSE, Executive Director, Association of Alaska School Boards,           
 said the association supports the efforts of both HB 215 and HB               
 216.  They feel that there is some value in restricting dollars for           
 the purpose of investment to address some of the long term problems           
 with schools in the state.  The real value of these bills is that             
 a measure such as this can create latitude in the state's capital             
 budget in years to come.  If the legislature has a concern                    
 regarding downsizing or closing the fiscal gap, this type of                  
 measure can create the needed latitude.                                       
                                                                               
 MR. ROSE felt the numbers looked favorable in terms of addressing             
 current issues before they become critical.  Last year, the state             
 appropriated $7 million into the capital budget for schools while             
 a billion dollars of need has been identified.  These bills address           
 this long term and large problem in a creative way.                           
                                                                               
 Number 0888                                                                   
                                                                               
 CHAIRMAN BUNDE encouraged him to identify the differences between             
 wants and needs.  The state needs very little, but wants a lot.               
                                                                               
 MR. ROSE responded that the state needs a lot.                                
                                                                               
 Number 0907                                                                   
                                                                               
 CHAIRMAN BUNDE referred to the 30 percent local match requirement             
 and the zero percent match for the university.  He asked whether              
 the association had taken a position on that requirement.                     
                                                                               
 Number 0917                                                                   
                                                                               
 MR. ROSE answered that many of the school districts across the                
 state lack the ability to meet this match requirement.  He felt               
 there would be ongoing negotiations and proposed amendments which             
 would lessen that matching figure.  There is a statewide problem,             
 without the necessary resources statewide, about how to meet this             
 match requirement.  He mentioned the inability of the Rural                   
 Education Attendance Area (REAA) to meet such a match requirement             
 because of the small property value or their ability to garner a              
 local contribution.                                                           
                                                                               
 Number 0957                                                                   
                                                                               
 B. A. WEINBERG, Lobbyist, Kashunamiut School District; Citizens for           
 the Educational Advancement of Alaska's Children, was next to                 
 testify.  He said the latter group is comprised of rural school               
 districts, parents and citizens who are concerned about the state's           
 mandate for providing adequate and equitable funding for public               
 education and facilities.  The DOE has identified, through their              
 capital improvement program (CIP) application process, about $615             
 million of capital improvement projects that meet the criteria                
 established under law.  This problem will not go away if it is                
 ignored or put off; it will only become worse and more expensive to           
 fix.                                                                          
                                                                               
 MR. WEINBERG explained that HB 215 and HB 216 provide for a long-             
 term, steady stream of revenue to begin addressing these needs.               
 The groups he represents endorse the concept of these bills,                  
 especially the projects which are on the DOE's CIP priority list.             
                                                                               
 Number 1066                                                                   
                                                                               
 CHAIRMAN BUNDE asked whether the people he represented would be               
 able to meet the match requirement in order to take advantage of              
 this program.                                                                 
                                                                               
 Number 1077                                                                   
                                                                               
 MR. WEINBERG responded that REAAs, in most cases, have no means of            
 coming up with a 30 percent match.  In the case of the Kashunamiut            
 School District, they are unable to come up with the 2 percent                
 match needed for their project under the current statute.  The only           
 practical place for this money to come from is out of their                   
 district's operating budget.  If you were to require 15 times this            
 2 percent local match, it would equal several years of the total              
 operating budget of the school district.  The Kashunamiut School              
 District facility has been independently documented as being a                
 life, health and safety hazard to students as well as being                   
 educationally inadequate.  Under the DOE's space guidelines it is             
 at 189 percent of capacity.  This building is owned by the state,             
 and the state has statutory obligations with regard to education in           
 unorganized boroughs.  He concluded that this school district and             
 many other REAAs could not meet a 30 percent match requirement.               
                                                                               
 Number 1160                                                                   
                                                                               
 CHAIRMAN BUNDE asked whether this meant that HB 215 and HB 216 were           
 urban school bills.                                                           
                                                                               
 MR. WEINBERG answered possibly but he hoped that, as these bills              
 went through the process, they would incorporate the needs of the             
 rural school districts.  Most of the highest capital improvement              
 projects, as identified in the need criteria of the DOE, are                  
 located in rural school districts.                                            
                                                                               
 Number 1203                                                                   
                                                                               
 STEPHEN McPHETRES, Executive Director, Alaska Council of School               
 Administrators, stressed that HB 215 and HB 216 are not just                  
 educator's bills.  This project started off in cooperation with the           
 Cominco / Red Dog Mine Company, who recognized that schools across            
 the state are deteriorating and are in need of help.  If work is              
 not done on these facilities, the local businesses and industries             
 will eventually pay higher taxes for the repairs and maintenance of           
 the educational facilities.  Cominco felt this proposal had a lot             
 of merit.                                                                     
                                                                               
 MR. McPHETRES said that HB 215 asks the legislature to take $1.2              
 million from the CBRF in order to leverage the sale of revenue                
 bonds which would then finance school construction and major                  
 maintenance projects across the state for years to come.  This fund           
 would be able to operate for five to ten years, providing a growing           
 stream of revenue to pay for these projects.  This is different               
 from general obligation bonds which are one shot deals with a list            
 of projects on the ballot.  This fund would address the rising                
 needs of school construction and major maintenance.                           
                                                                               
 MR. McPHETRES explained that the $1.2 billion would be given back.            
 Money would be invested through the Alaska Permanent Fund                     
 Corporation, the interest off the Education Facilities Fund would             
 be used to secure revenue bonds.  Once the revenue bonds have been            
 expended, the $1.2 billion would be available for further use by              
 the legislature.  He stated that these expenditures would also                
 stabilize the construction industry.                                          
                                                                               
 Number 1329                                                                   
                                                                               
 BOB LeRESCHE, Cominco / Red Dog Mine, referred to a handout located           
 in the committee file.  These bills involve appropriations of $1.2            
 billion from the CBRF to a new fund, which these bills set up,                
 called the education facilities fund.  That money is then invested            
 by the permanent fund corporation under exactly the same rules it             
 uses to invest permanent fund money.  The education facilities fund           
 wouldn't require any special management; it would allow the                   
 Education Facilities Financing Authority to sell revenue bonds                
 based on corporate assets, not secured specifically by this $1.2              
 billion.  This bill provides three different channels to authorize            
 revenue bonds.  Revenue bond proceedings could be used, with                  
 legislative authorization under Section A, to directly fund the               
 school construction project.  This funding amount is determined by            
 the authorization section of these bills.                                     
                                                                               
 MR. LeRESCHE mentioned that the Education Facilities Financing                
 Authority can be authorized to use the bond proceeds to pay                   
 reimbursement contracts with municipalities or the university for             
 special school projects.  These projects, authorized by the                   
 legislature, would be reimbursed up to 70 percent of debt service.            
 The legislature would authorize specific projects in an annual                
 authorization bill.  The legislature may authorize the authority to           
 reimburse 100 percent of university bonds for university deferred             
 maintenance.                                                                  
                                                                               
 MR. LeRESCHE said the actual authorizations, which are included in            
 this initial bill, could be for the amount listed or they could be            
 greater or less than that amount.  A proposal to change this bill             
 calls for an authorizations in the first box.  It applies the                 
 formula under AS 14.11.008, the school district participation, in             
 the grant program.  This would make the required match dependent on           
 the ratio of full value assessments to the average daily membership           
 (ADM).  The minimum amount of local share would be 2 percent, going           
 up to 10 percent with a maximum percentage of 30 percent.  Most               
 large municipalities would have a 30 percent local match.  Some               
 smaller municipalities including Unalaska, Valdez and the North               
 Slope Borough would also have a 30 percent match.                             
                                                                               
 Number 1635                                                                   
                                                                               
 MR. LeRESCHE explained that these bills provide an ongoing                    
 solution.  The authority would stay in place as long as the                   
 legislature decides to maintain it and the legislature could                  
 annually authorize specific school projects off the budget.  These            
 projects would be funded through bond proceeds.  Part of the                  
 earnings from this fund would be used to pay the debt service on              
 the bonds.  This would allow the state to build schools when they             
 are needed, rather than waiting for earnings to accrue.  The longer           
 the waiting period, the greater the cost of the project will be.              
                                                                               
 MR. LeRESCHE stated that this fund would actually gain in value               
 while it paid off these bonds.  This occurs through the magic of              
 arbitrage which the state has the right to do.  Cominco's bond                
 counsel and the DOR's bond counsel have been discussing this                  
 proposal.  There is some question of whether or not this fund would           
 be forced to yield restrict by the Internal Revenue Service (IRS).            
 The Cominco bond counsel is convinced that this bill is written so            
 that there wouldn't be a yield restriction.  The fiscal note was              
 written by the "permanent fund" for the permanent fund on the                 
 assumption that they would have to restrict the yield on these                
 investments.  It would cost $500,000 a year to do the investments             
 differently than the standard corpus.  He felt that once it was               
 determined that yield restriction does not apply to this fund, the            
 fiscal note would decrease.  This fund could easily support itself.           
                                                                               
 Number 1800                                                                   
                                                                               
 MR. LeRESCHE announced that this bill should have chosen the title,           
 "corporation" instead of "authority."  This paper authority is                
 necessary if the state is going to sell revenue bonds secured by              
 the assets of a corporation under the Education Facilities                    
 Financing Authority.  This bill suggests that the authority consist           
 of the commissioners of the Department of Revenue, the Department             
 of Transportation/Public Facilities and the Department of                     
 Education.  The commissioners would only be able to sign the bonds,           
 which are directed by the legislature in the annual allocations.              
 Number 1858                                                                   
                                                                               
 MR. LeRESCHE explained that a simple, but accurate way to look at             
 this authority is that it is modeled after the Alaska Housing                 
 Finance Corporation (AHFC) and the Alaska Industrial Development              
 and Export Authority (AIDEA) system of financing.  The Education              
 Facilities Financing Authority does not contain the same management           
 or authority models of AHFC and AIDEA.  Basically AHFC and AIDEA              
 started out with appropriations to their corporate assets and used            
 those appropriations to leverage billions of dollars in private               
 development and homes.  The Education Facilities Financing                    
 Authority is a financially similar entity, using the basic deposit            
 to leverage early construction of necessary capital facilities and            
 major maintenance.  The Education Facilities Financing Authority              
 would be as profitable as AIDEA and AHFC.                                     
                                                                               
 MR. LeRESCHE referred to the legislative majority's five-year                 
 budget strategy which uses the earnings from this $1.2 billion as             
 revenue.  The proposed committee substitute was consolidated into             
 the five-year spending plan.  The result is that $731 million worth           
 of schools can be obtained and a certain dividend can still fall              
 back into the revenue stream.  This is done by allocating a portion           
 of the earnings of the CBRF to the retirement of the school bonds.            
 This does not impact the spending plan and the fiscal gap comes               
 down almost as fast as in the five-year budget strategy.                      
                                                                               
 Number 1920                                                                   
                                                                               
 CHAIRMAN BUNDE referred to the "Molly Hootch situation," where the            
 state built far more schools than were needed.  Now there is the              
 problem of having schools consisting of four to ten students,                 
 costing the state a lot of money.  He asked whether these bills               
 would start another construction bonanza focused more on enriching            
 contractors than on educational excellence.                                   
                                                                               
 Number 1947                                                                   
                                                                               
 MR. LeRESCHE explained that the only school projects that would be            
 done are the ones authorized by the legislature in the                        
 authorization section of the bill.  This bill would allow                     
 authorization of regional high schools and does not have to create            
 a construction bonanza.  It is the process and the technique that             
 he is advocating with this bill, not a specific item on the                   
 allocation list.  If there is an agreement that schools need to be            
 built, that the university needs money to for deferred maintenance,           
 then this bill is the most cost-effective and efficient way to do             
 accomplish these goals.                                                       
                                                                               
 Number 1985                                                                   
                                                                               
 CHAIRMAN BUNDE pointed out that the university gets 100 percent,              
 while local school districts have to come up with some match, 30              
 percent initially and perhaps smaller.  He asked why the university           
 was being given a free ride, when the municipalities were required            
 to come up with a match.                                                      
                                                                               
 Number 2000                                                                   
                                                                               
 MR. McPHETRES answered that the university is more directly state-            
 supported than a school that is part of another governmental                  
 structure such as a school district.                                          
                                                                               
 Number 2012                                                                   
                                                                               
 CHAIRMAN BUNDE referred to an initiative petition which is being              
 circulated about an educational endowment.  This educational                  
 endowment also finds the CBRF to be a useful vehicle.  He asked               
 whether it was possible to do both the endowment and the                      
 construction of facilities.                                                   
                                                                               
 Number 2020                                                                   
                                                                               
 MR. McPHETRES answered that it was not possible to do both with the           
 CBRF.                                                                         
                                                                               
 Number 2025                                                                   
                                                                               
 CHAIRMAN BUNDE clarified that they were familiar with the sweep               
 provision on the CBRF and that it would be conceivable that money             
 would not be available for any of these projects if the sweep were            
 required.                                                                     
                                                                               
 Number 2036                                                                   
                                                                               
 MR. LeRESCHE understood the budget process to be such that there is           
 a "sweep provision" in the front section and then a reappropriation           
 back from where it was originally swept.  This would fit in the               
 same category.  If the sweep were fully enforced and it couldn't be           
 put back in, then all AHFC's assets, including the science                    
 foundation and AIDEA's liquid assets, would be put back in the                
 CBRF.  This Education Facilities Financing Authority is not in a              
 different category.                                                           
                                                                               
 Number 2064                                                                   
                                                                               
 REPRESENTATIVE KEMPLEN clarified that the Education Facilities                
 Financing Authority is similar to the AHFC.  He asked the                     
 connection between the capital on one side and the operations and             
 maintenance on the other side.  The endowment referendum focuses on           
 the operating side of the equation and the Education Facilities               
 Financing Authority is on the capital side of the equation.  He               
 asked who would be paying for the operations and maintenance and              
 discussed the difficulties in coming up with state money to fund              
 the additional facilities.                                                    
                                                                               
 Number 2168                                                                   
                                                                               
 MR. McPHETRES referred back to the chair's question about whether             
 or not the CBRF would be able to support the endowment and the                
 authority.  The answer to the question was that both sides could              
 not be supported.  He said an endowment could be set up somewhere             
 else and still have authority under the CBRF.  Whenever any school            
 district gets into a design plan for a facility in their school               
 district, the cost of operations is part of the determination of              
 whether or not they can afford it and if they need to have it.  The           
 operational component is written into their proposed design.  Many            
 of the repairs, there are 61 projects currently on the list which             
 have not been addressed for years, are health and safety issues.              
 In the case of a new facility, many of those facilities are                   
 replacing older facilities.  He referred to the Juneau School                 
 District's closing Capital School and replacing it with Riverbend             
 Elementary School.  The costs are being shifted from one facility             
 to the other.                                                                 
                                                                               
 TAPE 97-40, SIDE B                                                            
 Number 0000                                                                   
                                                                               
 MR. McPHETRES added that he felt the proposed committee substitute            
 would include a local contribution.  He felt the local school board           
 should be trusted to come up with a fundable operating budget.                
                                                                               
 Number 0031                                                                   
                                                                               
 REPRESENTATIVE KEMPLEN asked who made the decision to fund which              
 project first.                                                                
                                                                               
 Number 0071                                                                   
                                                                               
 MR. LeRESCHE answered that the legislature decides.  Even though              
 the DOE priority list is put into statute, the legislature can                
 still authorize what they choose to authorize.                                
                                                                               
 Number 0120                                                                   
                                                                               
 ROSS A. KINNEY, Deputy Commissioner, Office of the Commissioner,              
 Department of Revenue, stated that in January, 1997, the Treasury             
 Division of DOR came before the legislature and outlined a long               
 range investment plan for the CBRF.  This plan was comprised of               
 three components; an investment strategy, reserve strategy and an             
 asset allocation.  During this time, the division asked for a                 
 supplemental appropriation for the fiscal 1997 budget to begin to             
 implement the asset allocation and these strategies.  This                    
 appropriation was approved by the legislature.  The DOR also asked            
 for an increment to the fiscal year 1998 budget of $100,000 to                
 continue the operation and implementation of this asset allocation.           
 This increment has thus far been approved in the fiscal year 1998             
 operating budget.                                                             
                                                                               
 MR. KINNEY explained that HB 215 appropriates $1.2 billion from the           
 CBRF.  This appropriation would dramatically change the asset                 
 allocation, the reserve policy and the investment strategy which              
 was presented to the legislature.  It will reduce the investment              
 horizon and may also take the described equity component, making it           
 no longer feasible for CBRF investments.  The DOR thinks that the             
 CBRF is an important component of the state's long range financial            
 plan and it should be managed accordingly.  At this point the DOR             
 is back before the legislature asking for direction.  If HB 215 is            
 to pass, then the DOR has to change the approved strategy.  The DOR           
 would redeploy those assets into a different mechanism in order to            
 be able to earn the highest rate of return with the least risk, but           
 information is needed to determine what the time constraints should           
 be on each of these categories of money.                                      
                                                                               
 MR. KINNEY said HB 216 requires that the fund and any other funds             
 of the authority be invested through the Alaska Permanent Fund                
 Corporation, which is responsible for investing the assets of the             
 permanent fund with a diversified asset allocation.  The                      
 legislature has added a couple investment authorities to the Alaska           
 Permanent Fund Corporation through the mental health trust fund and           
 through the science and technology fund.                                      
                                                                               
 MR. KINNEY said there needs to be a recognition that the asset                
 allocation on those three funds is the same; it does not change.              
 Every time the Alaska Permanent Fund Corporation board of directors           
 changes the asset allocation for the permanent fund, the asset                
 allocations for the other two funds change along with it.  This is            
 extremely important because the DOR focuses the investment of those           
 funds on a single asset allocation which makes it very easy to                
 implement and to monitor.                                                     
                                                                               
 MR. KINNEY explained that the state has a bond attorney, who is               
 counsel to the state bond committee, and a financial advisor.                 
 These bills have been provided to them for their review.  The state           
 believes, based on the opinions that have been received, that bonds           
 issued in the form of revenue bonds, utilizing a portion of the               
 CBRF to collateralize or pledge as security the interest earnings             
 of that fund, would be yield restricted.  This means that the                 
 investments that are acquired to pay the interest on the bonds                
 would be restricted to the same rate of interest that are paid on             
 the bond issue.  Therefore, there would be no net gain.  If the               
 state were able to sell bonds for 6 percent, then the investment              
 income would be limited to 6 percent on what has been pledged as              
 collateral to pay for the bond issue.  No gain whatsoever.  In the            
 permanent fund situation, this scenario changes the asset                     
 allocation for this particular section of money, the $1.2 billion             
 or the portion that has been pledged.                                         
                                                                               
 MR. KINNEY explained that, in the normal course of events, revenue            
 bonds are normally sold based on a revenue stream provided by the             
 project.  Historically, this would comprise a building that has a             
 rent stream coming to it, a water or sewer treatment plant with               
 recognized revenues from users.  In the proposed situation, revenue           
 bonds would be sold based on earnings off of money which has been             
 set aside and restricted for that particular purpose.                         
                                                                               
 MR. KINNEY said this proposed situation creates some concerns for             
 the DOR.  He questioned what would happen if the IRS doesn't allow            
 it.  The interest rate would be changed because it becomes taxable,           
 the bond holders would incur a liability and they would come back             
 to the state of Alaska to ask to be made whole.  The bond holders             
 would probably succeed in their litigation and the state of Alaska            
 would be liable for making up that difference, resulting in a                 
 significant loss.                                                             
                                                                               
 MR. KINNEY realized that there are a number of differences of                 
 opinion with respect to this bill.  While the DOR recognizes the              
 need for some mechanism to fund school construction, they are                 
 waiting for a legal opinion from Mr. LeResche and his bond                    
 attorney.  Currently, the DOR has to take this position based on              
 the recommendations from their legal counsel and financial advisors           
 hired by the Alaska State Bond Committee.                                     
                                                                               
 Number 0463                                                                   
                                                                               
 CHAIRMAN BUNDE referred to his previous question about whether or             
 not there was enough money to create both the Education Facilities            
 Financing Authority and the educational endowment.  He assumed that           
 Mr. Kinney would concur that there is not enough money in the CBRF            
 to fund both of them.                                                         
                                                                               
 Number 0500                                                                   
                                                                               
 MR. KINNEY answered that there will be approximately $3 billion in            
 the CBRF.  The Education Facilities Financing Authority would take            
 $1.2 billion and the endowment would need more than what would                
 remain in the CBRF.  Based on the asset allocation, agreed upon by            
 the legislature, there will be an investment rate of return of 7.19           
 percent on the CBRF.  The DOR divided that amount into three                  
 components; a short term reserve component to meet the cash flow              
 needs of the current fiscal gap within the budget, a transition               
 portion that will get the state to the point where the budget will            
 be balanced shortly after 2002 or 2003, and a long term component.            
 The first component, the short term, is comprised of $800 million.            
 The intermediate term has $1.2 billion and the long term has $800             
 million.  The DOR began to shift that amount from the long term to            
 the intermediate.  When that money is taken away, then there is not           
 the ability to employ the same long term strategies.  By reducing             
 the CBRF by $1.2 million, the expected rate of return is reduced              
 from 7.19 percent to 6.31 percent.  Moving the principal and                  
 reducing the rate will result in $100 million less being generated            
 on an annual basis.  This money would otherwise be used to fund the           
 fiscal gap according to the majority plan.                                    
                                                                               
 Number 0583                                                                   
                                                                               
 CHAIRMAN BUNDE questioned that if this bill were to pass it would             
 preclude the educational endowment from being funded by the CBRF.             
 He assumed the educational endowment would face the same issues as            
 being faced by HB 215 and HB 216.                                             
                                                                               
 Number 0596                                                                   
                                                                               
 MR. KINNEY believed that the state needs to look at another                   
 mechanism for dealing with the fiscal gap if the legislature                  
 segregates portions of the CBRF and dedicates the earnings for                
 other purposes.                                                               
                                                                               
 Number 0608                                                                   
                                                                               
 REPRESENTATIVE JOE GREEN referred to the state bond counsel's                 
 stating that the DOR would be restricted on the amount of earnings.           
 This finding is in opposition to the findings of Mr. LeResche's               
 bond counsel.  He asked what caused this discrepancy in view.                 
                                                                               
 Number 0623                                                                   
                                                                               
 MR. KINNEY explained that there have been a number of cases dealing           
 with arbitrage requirements.  The Tax Reform Act of 1986 made                 
 substantial changes in the way governments can do business in                 
 respect to tax exempt financing.  If arbitrage was not an issue, he           
 would probably be counseling the legislature to issue $100 billion            
 in bonds and stick it in the permanent fund.  The problem is that             
 the money supply is fixed.  The state is fighting with the federal            
 government from the standpoint that there are entities which pay              
 taxes and entities which don't who are all competing for scarce               
 resources.  When the state goes out and issues bonds that are tax             
 exempt, the bond holder does not pay income tax on the interest               
 that they receive.  The IRS and the United States Treasury                    
 Department would like to have as much income tax as possible.  They           
 don't want the state to compete for those scare resources because             
 of the non-taxable status.  The federal attitude, for the most                
 part, is that the state of Alaska is sitting on a large sum of                
 money and why should the state bond in a tax exempt capacity when             
 the state has available cash and the interest income off of it to             
 meet those needs.  He explained that it is a tax situation, the IRS           
 wants to make sure that they get their fair share and don't want to           
 allow the state to take advantage of it.                                      
                                                                               
 MR. KINNEY referred to the Alabama case, the Deereborne (Ph.) case,           
 the Pyramid bonding case, and a number of other cases where the IRS           
 has come in and made changes to statutes, regulations or laws after           
 the fact.  If the CBRF money is put into certain kinds of                     
 investments and certain locations, then the state doesn't want to             
 be subjected to a unadvantageous tax review.                                  
                                                                               
 MR. KINNEY said DOR would like to see Mr. LeResche's legal opinion,           
 it would be passed on to the state bond attorney and other counsel            
 would probably be asked to review it in order to try to achieve a             
 consensus.  Currently, the Administration is firmly entrenched in             
 their position based on the opinions that they have received.                 
                                                                               
 Number 0794                                                                   
                                                                               
 MICHAEL A. MORGAN, Project Management Professional (PMP),                     
 Facilities Section, Educational Support Services, Department of               
 Education, stated that HB 216 looks at a great need, providing a              
 stable, long-term source of funding for educational facilities in             
 the state.  The bill addresses projects which have been approved              
 under AS 14.11.015.  Alaska Statute 14.11 is the process DOE uses             
 to approve and rank projects, the result of SB 11 in 1993.                    
                                                                               
 MR. MORGAN said the mechanism used to implement those statutes has            
 undergone a significant improvement in the last two years.                    
 Although the current prioritization process establishes a statewide           
 need, the districts and the DOE feel that the competition for                 
 limited resources creates a situation where this process, or any              
 other prioritization process, cannot succeed.  This bill seeks to             
 provide a funding mechanism, allowing for a systematic plan to                
 address educational facility needs.                                           
                                                                               
 MR. MORGAN expressed concerns regarding the bill.  First, it does             
 not equally address the statewide needs, it seems to give slight              
 leverage to those communities which have the ability to bond.                 
 Those communities are shown in provisions (a) and (b), AS                     
 44.27.140.  Also, HB 216 does not show which types of university              
 projects are funded or what that mechanism is.  This would allow a            
 broad range of projects and would not be limited to facilities                
 needs.                                                                        
                                                                               
 MR. MORGAN mentioned that there would still be a competition for              
 limited resources, even under the provisions of HB 216.  His final            
 concern is that a specification of this bill is that projects must            
 meet the criteria under 14.11.015.  However, the last part of this            
 bill lists a whole series of projects, some of which would be                 
 ineligible under the current statute.  This bill already sets up a            
 conflict between what this bill proposes and the existing statute.            
 If these issues are resolved, it would allow an allocation of funds           
 which would address needs on a priority basis and would allow                 
 school districts to plan, in a systematic way, the maintenance and            
 facility needs for elementary and secondary education.                        
                                                                               
 MR. MORGAN referred to the bottom line of the fiscal note.  He said           
 it should read that the first year money is taken out of general              
 fund monies, and that in succeeding years, the cost would be funded           
 by this authority.                                                            
                                                                               
 Number 0964                                                                   
                                                                               
 BRAD PIERCE, Senior Policy Analyst, Office of Management and                  
 Budget, Office of the Governor, stated that the idea of endowing a            
 source of funding for school construction is intriguing.  The                 
 Administration has proposed a similar-sized bond package in the               
 six-year capital plan, which would address different types of                 
 capital needs and not just school construction.  The Governor has             
 made it clear that he is committed to an educational endowment.  He           
 believes that if anything should be endowed, it should be the                 
 foundation formula.                                                           
                                                                               
 MR. PIERCE discussed the effects of HB 216 on the majority's long-            
 range fiscal plan.  This plan relies heavily on CBRF earnings as an           
 annual revenue source.  He noted that Mr. LeResche's spread sheet             
 went out five years.  Once you remove $1.2 billion and the state              
 begins earning a lower rate of interest, the earnings drop off and            
 the fiscal gap widens.  Without any new taxes or without use of               
 permanent fund earnings, the CBRF would be drained in about nine              
 years, by 2005.  The Administration is interested in putting                  
 together a bond package to fund capital needs.  The state is not              
 investing enough in our infrastructure, and we should look at the             
 needs in a broader context, with the use of all available fiscal              
 tools.                                                                        
                                                                               
 Number 1074                                                                   
                                                                               
 CHAIRMAN BUNDE referred to the Commissioner Condon's concerns about           
 tieing up the CBRF in negotiations regarding the sale of natural              
 resources, specifically gas.  There are foreign entities that look            
 at the CBRF as the state's fall-back position in the event of                 
 economic hard times.  He asked:  If the CBRF was tied up in the               
 Education Facilities Financing Authority or an endowment, would               
 foreign entities be less inclined to enter into long-range                    
 contracts with the state?                                                     
                                                                               
 Number 1120                                                                   
                                                                               
 MR. KINNEY responded that the reserve policy, which the DOR                   
 presented in January, addressed that particular issue.  The                   
 financial community, both domestic and international, look at the             
 state of Alaska and its capabilities from a financing standpoint.             
 The state has not hidden the fact that there is a fiscal gap and              
 the state needs to put forth a long-range fiscal plan that fills              
 this gap.  Until the state does this, many people in the financial            
 community consider such things as the CBRF because it is relatively           
 easy to get to in comparison to the permanent fund or the excess              
 earnings from the permanent fund.  Reserves will be extremely                 
 important to the financial community until the state comes in with            
 a plan that shows that the state can and will fill that fiscal gap.           
 Even when this plan is in place, there will still need to be some             
 measure of reserve maintained in the state of Alaska as the state             
 is subject to the volatility of oil and gas prices on an annual               
 basis.  Part of this reserve policy and the CBRF is designed to               
 meet that need should it arise.  The state has been fortunate that            
 in this last fiscal year we have had escalating oil prices.  At               
 some point, the state might have the need to draw from that reserve           
 pool in order to meet the obligations which have been incurred                
 through the budgetary process.  This is the reason that people are            
 very concerned about adequate reserves for the state of Alaska.               
                                                                               
 Number 1186                                                                   
                                                                               
 MR. PIERCE indicated that the $800 million short-term fund is                 
 designed to take care of the average standard deviation of oil                
 prices over a two-to-three-year period.                                       
                                                                               
 Number 1209                                                                   
                                                                               
 KEVIN RITCHIE, Lobbyist, Alaska Municipal League and the Alaska               
 Conference of Mayors, stated that fixing schools is at the top of             
 the list of many municipalities.  The concern of all the                      
 municipalities is the future costs of dealing with the                        
 deterioration of schools.  Even though it is not a part of the                
 municipal and state budgets, it is a growing liability.   It will             
 be paid in the future if it is not paid now.  He referred to                  
 resolutions from the Alaska Municipal League and the Alaska                   
 Conference of Mayors which are located in the committee file.                 
                                                                               
 Number 1303                                                                   
                                                                               
 SANDY SHOULDERS testified next via teleconference from Mat-Su.  She           
 testified in support of HB 215 and HB 216.  She referred to the               
 current situation where municipalities and boroughs have had to               
 fight for needed projects.  She mentioned the technical problems              
 with the bills that should be worked out, specifically the                    
 differences between the rural schools and the (indisc.) fund.                 
 "Whether they mention we're not quite frankly doesn't really matter           
 to me right now."  She wanted the state to fund those projects                
 listed on the priority list as they comprise safety and health                
 issues.                                                                       
                                                                               
 Number 1414                                                                   
                                                                               
 MAUREEN SWED, Representative, Talkeetna Elementary Parent Teacher             
 Association, had her statement read into the record by Ms.                    
 Shoulders.  Ms. Swed believed that the problems of capital                    
 improvement funding could be solved this session with HB 215 and HB           
 216.  These funds would allow communities to break ground in the              
 spring of 1998, allowing students into new facilities in the fall             
 of 1998.  Design work has already been completed and they are ready           
 to begin construction in Talkeetna.                                           
                                                                               
 Number 1447                                                                   
                                                                               
 LARRY WIGET, Director, Government Relations, Anchorage School                 
 District, testified next via teleconference from  Anchorage.  The             
 Anchorage School District supports the concept of establishing an             
 Education Facilities Financing Authority and funding it.  They feel           
 that it is an exciting idea and a way in which statewide needs of             
 school construction can be responsibly met now and in the future.             
 He referred to legislative control over the allocation of the funds           
 on an annual basis.   The construction and maintenance needs of               
 both rural and urban schools have to be addressed.  The longer it             
 takes, the most costly it will become.  If this process is done in            
 a systematic method, allocating funds in a reasonable manner and              
 over an extended period of time, it will allow all communities                
 around the state to plan for the building and maintenance of                  
 facilities in a way which does not overtax the existing                       
 construction ability of contractors within the state.  This will              
 enable us to put money into the local economies in a reasonable and           
 prudent manner while meeting both the long-term and short-term                
 needs of school construction within the state.                                
                                                                               
 Number 1533                                                                   
                                                                               
 CHAIRMAN BUNDE mentioned that testimony has been given that it is             
 not possible to use the CBRF for both the Education Facilities                
 Financing Authority and the educational endowment.  He asked him to           
 take the question to the Anchorage School District of what they               
 would prefer.                                                                 
                                                                               
 Number 1558                                                                   
                                                                               
 LINDA SHARP testified next via teleconference from Anchorage.  She            
 felt that a broad overview as well as equity was needed in terms of           
 the health and safety of children.  She was not as concerned about            
 the university facilities.                                                    
                                                                               
 Number 1612                                                                   
                                                                               
 CHAIRMAN BUNDE mentioned the conflicting projections.  He referred            
 to the testimony from Mat-Su which felt that if these bills passed            
 this session that construction could begin immediately and children           
 could enter new schools within a year.  He understood that this               
 fund would have to generate some income before bonds could be                 
 issued.                                                                       
                                                                               
 MR. DOZIER answered that the fund would not have to generate income           
 immediately.  Bonds could be issued to raise the money.                       
                                                                               
 CHAIRMAN BUNDE announced that this was the first time these bills,            
 HB 215 and HB 216, were heard; they would be held for further                 
 consideration.                                                                
                                                                               
 HB 229 - CHARTER SCHOOL ESTABLISHMENT & OPERATION                             
                                                                               
 Number 1692                                                                   
                                                                               
 CHAIRMAN BUNDE announced the next item on the agenda was HB 229,              
 "An Act relating to the establishment and operation of charter                
 schools."                                                                     
                                                                               
 REPRESENTATIVE AL VEZEY, Sponsor of HB 229, introduced Mr. Boots,             
 who provided information on HB 229.                                           
                                                                               
 Number 1710                                                                   
                                                                               
 MIKE BOOTS, Member, Alaskans for Educational Choice, was in support           
 of HB 229.  He worked with a number of the proposed charter schools           
 in Anchorage and with other proposed charter schools around the               
 state.  The charter schools are a means to an end.  These schools             
 help bring back people into the public education system who, for              
 whatever reason, have become dissatisfied.  Those people are                  
 increasingly moving their children into home school situations or             
 private school situations.  He referred to the increasing number of           
 private schools and stated that he would be surprised if that                 
 growth rate discontinued.  The very people who are able to afford             
 those alternatives are likely to be property tax payers.  Once                
 those people leave those system, then their public education                  
 funding support diminishes.  This creates an overall decline in               
 public support for public education.                                          
                                                                               
 MR. BOOTS felt that charter schools provided a way to deal with the           
 dissatisfactions and to bring those dissatisfied people back into             
 the public school setting.  To have their children attend a public            
 school, which is what charter schools are, is to reestablish                  
 support for public education.  There are a large majority of people           
 who are relatively satisfied with the public education and charter            
 schools address the margins.  Charter schools provide equity for              
 those people who are dissatisfied with public education, but do not           
 have the monetary resources to deal with this dissatisfaction.                
                                                                               
 Number 1841                                                                   
                                                                               
 MR. BOOTS explained that creating charter schools provides an                 
 exterior incentive to the educational establishment.  It gives that           
 entity the opportunity to become more responsive to whatever it is            
 that is causing dissatisfaction.  In order to accomplish this goal            
 and prevent manipulation, some omissions from the original charter            
 school law need to be remedied.  There are three major                        
 accomplishments envisioned in HB 229.  One goal is to create an               
 independent means of approval for charter school proposals,                   
 independent of the local school board.  The bill is designed to               
 maintain local control in the sense that it envisions a municipal             
 charter school board as an alternative.  Charter school proposals             
 would still have the ability to go to their local school board or             
 they could go to the locally appointed municipal charter school               
 board.  If they lived in an area where there was no municipality to           
 create such a board or if the municipality refused to do so, then             
 the charter school proposers would have the option to go to the               
 state board.  That state board would not be an option if the                  
 locality creates their own local board.                                       
                                                                               
 MR. BOOTS hoped that the appointed board would be approved by an              
 elected body such as the assembly or city council with some                   
 objective criteria by which charter school proposals would be                 
 judged.  That criteria could be formulated on a local level and               
 could be done through the school district as long as the rules                
 applied to everyone.                                                          
                                                                               
 Number 1938                                                                   
                                                                               
 MR. BOOTS stated that the second thing HB 229 does is to create a             
 system that cannot be manipulated.  It provides an incentive for              
 responsiveness by the bureaucracy, by removing the limit on the               
 number of charter schools.  The number of charter schools will                
 reach a natural limit as that incentive creates responsiveness in             
 regular schools and people become more satisfied.  He explained               
 that forming a charter school is not an easy undertaking.  It takes           
 hours and hours of work, planning, coordination of a great number             
 of people; parents, teachers and the governing body, to make it all           
 happen.                                                                       
                                                                               
 Number 1970                                                                   
                                                                               
 MR. BOOTS said the third thing that HB 229 does is to establish               
 provisions by which charter contracts will require, by grade level,           
 stated levels of attainment of students and the methods by which              
 those students will be assessed.  The bill does not set out what              
 those methods should be or what those levels of attainment will be,           
 it simply requires that it be included in the contract.  This                 
 provision would provide some accountability, the state doesn't want           
 bad charter schools.  If the charter school does not meet their               
 objectives, then they would be closed down.                                   
                                                                               
 Number 2005                                                                   
                                                                               
 CHAIRMAN BUNDE commented that the credo for this legislative                  
 session was smaller and smarter government.  He felt HB 229 might             
 be smarter, but it would not be smaller.  He expressed concerns               
 that HB 229 creates an unfunded mandate for the municipalities to             
 create a second school board, it increases bureaucracy by creating            
 another state school board and it undermines and circumvents the              
 duly elected school board.  He felt that elections were the way to            
 address concerns about school boards.                                         
                                                                               
 TAPE 97-41, SIDE A                                                            
 Number 0000                                                                   
                                                                               
 CARL ROSE, Executive Director, Association of Alaska School Boards,           
 stated that his association is in support of charter schools,                 
 recognizing the latitude and the opportunity that they provide.               
 Last week the National School Board Association took up this issue            
 and passed a resolution that recognizes that charter schools are              
 one of several mechanisms to improve or address the quality of                
 education.  The association was united on the issue of sole                   
 authority behind a charter school because it concerns such issues             
 as local control, representative government and accountability at             
 the ballot box.  There should be the ability to decertify a school            
 if the agreed upon contracted issues of student performance and               
 fiscal management are not met.  The association also unanimously              
 agreed that there needs to be some way in which we can hold someone           
 accountable for the criteria that is set for a charter school.                
 There was also a need for some assurance that a charter school law            
 would not foster racial, economic, social segregation or                      
 segregation of children with special needs.                                   
                                                                               
 MR. ROSE stated that the charter school movement in Alaska is alive           
 and well.  He focused on three areas of concern with charter                  
 schools and with HB 229 in particular.  One is the issue of                   
 entering into a contract with a school board, state charter board             
 or municipality.  The issue comes down to the local board and a               
 sense of accountability, someone needs to be responsible for the              
 educational progress of that school.  An appointed body could be              
 somewhat biased in terms of the creation of the school.  A                    
 municipal authority was created for the purpose of municipal                  
 affairs and a local board runs for election in order to address the           
 educational needs of a school district.  He felt that three                   
 different entities could decertify a school, but he did not know if           
 all three of those entities would be held accountable for the                 
 purpose of education.                                                         
                                                                               
 MR. ROSE stated that he is concerned about having unlimited numbers           
 of charter schools because of the static level of educational                 
 funding.  Schools are continuing to do more with less.  The                   
 potential numbers of charter schools, which could be granted                  
 outside the authority of the local school board, would have serious           
 consequences for any school district.  These charter schools will             
 be public schools, but they will not be held accountable in the               
 same fashion.  People who have to come up with the money and the              
 resources to operate these schools will be accountable to the                 
 public.  Until the state can determine the costs and successes of             
 charter schools and formulate provisions to fund them, the number             
 should be limited.                                                            
                                                                               
 MR. ROSE said that this law allowing charter schools has only been            
 in effect one year.  Many charter schools have been denied for                
 various reasons.  He could not say why any local school district              
 would chose not to approve a charter school, but the elected people           
 on those school boards probably have more of an ability to identify           
 what the restricting issues might be.  He concluded by saying that            
 his association does not support HB 229, this bill shares the                 
 authority but only holds one group accountable and there is the               
 additional issue of cost.                                                     
                                                                               
 Number 0405                                                                   
                                                                               
 NANCY BUELL, Ed. D., Director, Teaching and Learning Support,                 
 Department of Education, stated that the DOE and the State Board of           
 Education, though not in an official capacity, would agree with               
 both Mr. Rose and the chair.  She commented that there could not be           
 a more supportive school board for charter schools than the current           
 state board.  The school board does not want to turn down any                 
 schools that have been approved at the local level and they have              
 not moved to do so.  The board has directed the DOE to work                   
 endlessly with local districts and local boards to come up with               
 charterable schools.                                                          
                                                                               
 DR. BUELL said half of the quota allowed by law has been formed,              
 and the DOE has every reason to believe that this number will                 
 increase.  At this point, it is the feeling of the DOE and the                
 board that another board would not be a facilitating factor because           
 of their realization that there are glitches in the present law.              
 Hearings have been held to address a number of issues, one of which           
 is funding.  Almost no schools, that they know of, have been turned           
 down at the local level.  One of those schools that was turned down           
 is still working with the local board and may be approved sometime            
 in the future.  Some of the pieces of HB 229 could be pieces that             
 could be incorporated into future law, but at this point the state            
 needs to work with the existing law to see what those glitches are.           
                                                                               
 DR. BUELL said the United States Department of Education, which               
 funds a competitive national charter school grant, assists local              
 districts with planning and implementing charter schools.  The U.S.           
 Department of Education said that regardless of the law, states               
 seem to go through the same type of phases with charter schools.              
 At first, it is difficult to figure out what level of details are             
 required in an application and what should be required of schools.            
 Districts evolve and then the procedure appears to settle into                
 place and it becomes an easier process for schools to get                     
 chartered.  In studies, Alaska was perceived to have a weak law,              
 and other states were perceived to have stronger laws because they            
 had a structure in place that allowed a bypass of the local board             
 and allowed for chartering at a municipal or state level.  Those              
 other states went through the same phases that Alaska is going                
 through in terms of seeing the same kinds of applications and                 
 issues being raised.  This tells us that it is not the law that is            
 the issue, but the process of accommodating these needs.                      
                                                                               
 DR. BUELL stated that they would not recommend any great changes at           
 this point, but would look forward to working on incorporating some           
 requested changes in the law.                                                 
                                                                               
 Number 0671                                                                   
                                                                               
 JOHN CYR, President, National Education Association-Alaska (NEA-              
 Alaska), stated that his organization is also on record as being              
 supportive of charter schools.  Charter schools are a testing                 
 ground for new ideas and ways of dealing with students in the                 
 manner in which they are applicable to regular schools.  He                   
 expressed concern with funding and with sections of the bill.  Some           
 concerns have already been addressed and so he chose to focus on              
 concerns which have not been raised.  The bill states that a                  
 charter school is operated in the local school district where it is           
 located.  He asked whether a charter school could be chartered in             
 one community and then operate in another community.                          
                                                                               
 MR. CYR said the bill also says that charter schools can establish            
 contract provisions and local contracts, this is inconsistent with            
 specific portions of this bill.  He referred to page 4, line 27.              
 He questioned what HB 229 would do for the operation of charter               
 schools that isn't currently being done.  Charter schools have been           
 proposed and accepted throughout the state.  The current law seems            
 to be working, and although the mechanism changes with HB 229, he             
 did not understand how it would work differently.                             
                                                                               
 MR. CYR expressed that the numbers were interesting.  There has to            
 be a realization that if the state is to have charter schools, the            
 state has to address funding them.  Even on a limited basis, there            
 is still a drain to the local school district.  He questioned that            
 if the numbers increase, then will every school eventually become             
 a charter school.  The purpose of charter schools is to begin to              
 explore a new way to bring parents into the schools.                          
                                                                               
 Number 0920                                                                   
                                                                               
 LAURIE PERKINS, Member, Juneau Charter School Committee, voiced               
 support for HB 229 and for the issues raised by Mr. Boots.  The               
 issue of draining funding away from the current schools does not              
 take into account that most charter school students come from                 
 families who are home schooled or attend private schools.  Most of            
 the founding members of the Juneau Charter School and most                    
 application requests have been for children who are currently being           
 home schooled or are enrolled in private schools.  Charter schools            
 will actually bring more children into the public school                      
 environment.  The charter school committee especially supports AS             
 14.03.028 which removes the limit currently placed on communities             
 regarding the number of charter schools which can be established.             
 If parents want to start a school in a community, they should not             
 be limited by an arbitrary number under the current law.                      
 Facilities severely limit the number of students who can be served            
 by a charter school.  Removing an imposed limit on charter schools            
 will allow communities to match their available facilities to the             
 sizes and numbers of schools which are established.  This bill will           
 also raise the standards of accountability for charter schools.               
 The additional requirement for performance standards can only                 
 increase the chances of a charter school's success.                           
                                                                               
 Number 1053                                                                   
                                                                               
 BECKY HUGGINS testified next via teleconference from Mat-Su.  She             
 explained that, after viewing the current charter school process in           
 the Mat-Su area and following the process in other areas of the               
 state, she strongly supports HB 229.  The changes in this bill are            
 positive, improving the application process and bringing a                    
 standardization of accountability.                                            
                                                                               
 Number 1085                                                                   
                                                                               
 BILL THOMAS testified next via teleconference from Ketchikan.  He             
 stated that he was involved in the process of getting a charter               
 school in Ketchikan.  The statements from Mr. Boots are a breath of           
 fresh air to people like himself.  He felt that parents were                  
 excluded from the local Parent Teacher Association (PTA).  He is              
 supportive of charter schools.  The provisions of the bill, the               
 memorandum from Mr. Chenoweth and the sponsor statement are all in            
 order and timely.  He felt there were arbitrary limits placed on              
 the number charter schools.                                                   
                                                                               
 Number 1292                                                                   
                                                                               
 LINDA SHARP testified next via teleconference from Anchorage.  The            
 charter school law was passed two years ago and the state is now              
 entering the third year in which charter schools could be                     
 implemented.  Anchorage will open the first charter schools this              
 year.  She stated that the people who are opposed to HB 229 are               
 people who are earning $50,000 to $100,000 a year, they represent             
 the establishment and want to keep a status quo.  She encouraged              
 the committee to ask the Anchorage School District for the test               
 scores on all the schools they operate.  If the establishment wants           
 to maintain the status quo, then she wanted the legislature to hold           
 them accountable to the schools which ought to close.                         
                                                                               
 MS. SHARP said this bill is a small step in the right direction.              
 More radical suggestions could be proposed such as asking for a               
 totally independent board for charter schools and asking charter              
 schools to answer to that independent board alone.  There could be            
 a request that teachers be taken out of the teacher's union and               
 that vouchers be supplied to allow students to attend whatever                
 school they chose.  This bill merely asks the mayor to appoint a              
 local board of volunteers, that the charter school law require                
 goals and tests to prove that the children have learned and it                
 lifts the lid on the number of charter schools.  She stated that              
 school districts are not used to holding schools accountable for              
 what children learn.  She felt that schools, including charter                
 schools, ought to be closed if they fail to educate children on an            
 annual basis.                                                                 
                                                                               
 Number 1473                                                                   
                                                                               
 NANCY SCHIERHORN, Member, Alaskans for Educational Choice,                    
 testified next via teleconference from Anchorage.  She has been               
 involved, in one way or another, with the charter school law for              
 approximately a year and a half.  She does not plan to send her               
 children to the Anchorage charter schools that are opening, but is            
 simply a strong supporter and advocate for school choice.  She was            
 frustrated about the lack of options existing in the Anchorage                
 district or the inability to obtain access to those options,                  
 specifically the long waiting lists to obtain access to those                 
 alternatives.                                                                 
                                                                               
 MS. SCHIERHORN has studied the charter school law in Alaska and in            
 other states.  Accountability for success is ultimately measured by           
 attendance at the schools.  An alternative review board for the               
 charter school approval is not going to alter the parents' ability            
 to decide whether or not the school is achieving its goals.  She              
 was active in last summer's process that the Anchorage School                 
 District undertook to implement procedures for the existing charter           
 school laws.  Those procedures resulted in approximately 20 to 25             
 pages incorporating almost all the existing district regulations,             
 policies, procedures, et cetera.  This paperwork needed to be                 
 completed before the application process began.                               
                                                                               
 MS. SCHIERHORN stated that the result of the Anchorage School                 
 District application process is that the school district has                  
 retained almost complete control of the approved charter schools.             
 The district administrators are not subject to public elections.              
 Even though the law states that it is the school board which                  
 approves or disapproves the charter schools, it would be                      
 unrealistic to view the Anchorage School District administrators as           
 not playing an integral role in that project.  The problems                   
 associated with not having an alternative review board is that it             
 inhibits innovation, discourages people from proposing charter                
 schools, makes it costly for the charter schools that are approved            
 and subjects the charter schools to the politics of the district.             
 These things allow the school district to retain its existing                 
 monopoly.  Almost half of the states with charter school laws have            
 some sort of alternative review, either a board or an appeals                 
 process.  Charter schools are flourishing in those states.  Alaska            
 needs an alternative board or an appeals process and she urged the            
 committee to listen to the comments of people who are working with            
 this law.                                                                     
                                                                               
 Number 1638                                                                   
                                                                               
 LARRY WIGET, Director of Government Relations, Anchorage School               
 District, supported the testimony of Mr. Rose and his                         
 organization's resolution.  He disagreed with the previous two                
 speakers.  The Anchorage School Board's position on the charter               
 school laws is that they are diligently working to implement this             
 process.  The school district retains the liability for these                 
 charter schools.  The school board and school district are asking             
 that they have the opportunity to work out the glitches with the              
 existing law, to put forth the charter schools under the guidelines           
 of the existing law before the law is changed.  The Anchorage                 
 School District has the possibility of putting in eight charter               
 schools over the course of the next five years.  Three charter                
 schools will be opened in the fall and the district anticipates               
 that more charter schools will be formed this year to add to the              
 numerous options that are already available.                                  
                                                                               
 Number 1717                                                                   
                                                                               
 CHAIRMAN BUNDE asked him to take a message back to the Anchorage              
 School District and School Board that "failing to live up to the              
 letter of the law, and I am not saying that that has occurred, but            
 should that occur, is often begot serious and onerous regulation              
 from the state.  So, I want to encourage the Anchorage School Board           
 to be diligent in their application of the existing school board              
 law."                                                                         
                                                                               
 Number 1756                                                                   
                                                                               
 BILL BJORK, President, Fairbanks Education Association, explained             
 that after the charter school bill was passed, the Fairbanks                  
 Education Association and the North Star Borough School District              
 cooperatively developed a process in Fairbanks which was                      
 instrumental in getting the first real charter school off the                 
 ground.  Fairbanks has approved another charter school for next               
 year, and another one will be proposed this year.  For all three of           
 these proposals, the Fairbanks Education Association worked                   
 cooperatively with the charter school proponents, entering into               
 amicable negotiations and pointed out sections of the contract                
 which could be problematic for these small schools.  The                      
 association agreed to waivers for each of those schools and has               
 worked throughout this year with the established charter school to            
 ensure that they were successful and to do what they could to help            
 them.                                                                         
                                                                               
 MR. BJORK stated that the Fairbanks Education Association and the             
 North Star Borough School District support charter schools.                   
 Charter schools provide exciting and enthusiastic choices for                 
 students within the public school system.  Allowing an appointed              
 board to approve charter schools that the local school board would            
 have denied moves the decision out of the community.  He felt that            
 the support for charter schools would also move out the community.            
 He was not advocating for the status quo, but that the legislature            
 should look carefully.  The education of these students is too                
 important to move radically.  Charter schools are an exciting                 
 alternative.                                                                  
                                                                               
 Number 1861                                                                   
                                                                               
 CHAIRMAN BUNDE stated that this bill would be held over for further           
 consideration.                                                                
                                                                               
 ADJOURNMENT                                                                   
                                                                               
 There being no further business to conduct, CHAIRMAN BUNDE                    
 adjourned the meeting of the House Health, Education and Social               
 Services Standing Committee at 5:10 p.m.                                      
                                                                               

Document Name Date/Time Subjects