Legislature(1997 - 1998)
05/01/1997 03:07 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.