Legislature(2011 - 2012)SENATE FINANCE 532
03/29/2012 01:00 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB25 | |
| HB250 | |
| SB182 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 25 | TELECONFERENCED | |
| + | HB 250 | TELECONFERENCED | |
| + | SB 182 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 29, 2012
1:11 p.m.
1:11:03 PM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee
meeting to order at 1:11 p.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lesil McGuire, Vice-Chair
Senator Johnny Ellis
Senator Dennis Egan
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
None
ALSO PRESENT
Michael Pawlowski, Staff, Senator Lesil McGuire; Bob
Loescher, Alaska Technology Development Group, Juneau; Mark
Davis, Deputy Director, Alaska Industrial Development and
Export Authority; Peter Naoroz, Manager, Kootznoowoo,
Juneau; Duff Mitchell, Alaska Independent Power Producers
Association, Juneau; Casey Schroder-Hotch, Staff,
Representative Bill Thomas; Pat Luby, Advocacy Director,
American Association of Retired Persons, Juneau; Chris
Rose, Executive Director, Renewable Energy Alaska Project
(REAP); Senator Kevin Meyer; Bruce Johnson, Executive
Director, Alaska Council of School Administrators, Juneau.
PRESENT VIA TELECONFERENCE
Robert Wilkinson, Chief Executive Officer, Copper Valley
Electric, Glennallen; Dave Jones, Assistant Superintendent,
Kenai Peninsula School District, Kenai; Mike Fisher, Chief
Financial Officer, Fairbanks Northstar School District,
Fairbanks; Steven Kalmes, Director of Transportation,
Anchorage School District, Anchorage; Ken Forest, Mat-Su
Borough School District, Palmer.
SUMMARY
SB 25 AIDEA SUSTAINABLE ENERGY PROGRAM
SB 25 was HEARD and HELD in committee for further
consideration.
SB 182 PUPIL TRANSPORTATION FUNDING
SB 182 was HEARD and HELD in committee for
further consideration.
CSHB 250(ENE)
EXTEND RENEWABLE ENERGY GRANT FUND
CSHB 250(ENE) was HEARD and HELD in committee for
further consideration.
SENATE BILL NO. 25
"An Act relating to participation by the Alaska
Industrial Development and Export Authority in energy
projects."
Co-Chair Hoffman communicated that SB 25 had not previously
been heard by the committee. The intent was to introduce
the legislation, hear public testimony, and set the bill
aside for further review. [Note: the bill version discussed
by the committee during the following meeting is CSSSSB
25(L&C).]
1:12:11 PM
SENATOR LESIL MCGUIRE, SPONSOR, introduced her staff
Michael Pawlowski. She acknowledged the Senate Finance
Committee for work that had contributed to the growth of
the Constitutional Budget Reserve (CBR) and the Statutory
Budget Reserve (SBR); the funds currently contained over
$15 billion. The purpose of the bill was to put $250
million of the money to work and to set it aside as a
savings for the future. She discussed a PowerPoint
Presentation, "Alaska's Sustainable Strategy for Energy
Transmission and Supply (ASSETS)" (copy on file). She
stated that the presentation contained slides and estimates
of capital spending based on projects that had been
identified in reports prepared for or by the Alaska Energy
Authority (AEA). She expounded that the presentation was
not an endorsement of any of the projects or fuel sources
identified by AEA or its contractors. Reports would be
referenced in order to show the size of the existing
liability.
Senator McGuire continued that the legislation was intended
to address a shortage in access to capital. She expounded
that in 2008 the legislature responded to high oil prices
and the impact the costs had on Alaska residents (slide 4).
She recalled that oil had reached $147 per barrel;
currently the price was approximately $110 per barrel,
which she noted was not significantly lower. She stressed
that prices continued to be high and that residents
(particularly those using diesel as a fuel source) were
suffering. The legislature had established the Home
Weatherization/Energy Rebate Program and the Renewable
Energy Grant Fund. Additionally, direct energy assistance
had been offered and the Special Committee on Energy had
been established.
1:15:55 PM
Senator McGuire read from slide 5, "Legislative History
2009-2010":
1. Senate Bipartisan Working Group held hearings
across Alaska to develop draft energy programs
and policy recommendations.
2. The Legislature passed the Omnibus Energy Bill
(SB 220 - Ch. 83 SLA 10) that addresses a wide
range of energy issues, ranging from energy
efficiency for public facilities to an emerging
energy technology fund and from heating
assistance to the leasing of state land for
renewable energy projects.
Senator McGuire added that a new fund had been created
under an omnibus energy bill that could be used for loans
related to energy retrofitting. She noted that to-date
there had been over 70 applicants for the $9 million in the
emerging technology fund.
Senator McGuire turned to slide 6, "Legislative History:
Summary":
1. The Senate Bipartisan Working Group has
aggressively led on energy issues through the
establishment of sound policies based on public
input and the investment of material state
resources in energy projects.
2. Significant challenges remain and SB 25 is an
additional component of the comprehensive
strategy the Bipartisan Working Group has
developed to address the energy needs of
Alaskans.
1:17:16 PM
Senator McGuire shared that access to capital had been
identified as a problem. The legislature had created more
grants and had helped residents weatherize and retrofit
homes, municipal buildings, and other. The remaining issue
was related to residents with innovative energy projects
who did not have access to capital. She stated that
nationwide, lenders had become conservative with loans
following the recession in 2008. She provided an overview
of several relevant documents beginning on slide 8 that
included a 2010 AEA report titled "Alaska Energy Pathway;
Toward Energy Independence." The report indicated that
between the present day and the upcoming ten years, just
under $2 billion in capital spending would be needed for
energy projects statewide.
Senator McGuire communicated that the first of the
innovative resource plans had come in on schedule from AEA
in February 2010 titled "Railbelt Integrated Resource Plan"
(slide 9). She pointed to the magnitude of projected
capital spending ranging from $13.625 billion to $21.109
billion over the upcoming ten years. She emphasized that
the needs were dire and she believed that in parts of the
Railbelt the situation was approaching emergency status
particularly in transmission and generation areas. She
pointed to some facilities that were 35 years old.
1:19:38 PM
Senator McGuire pointed to slide 10 titled "Southeast
Integrated Resource Plan (SEIRP)" and explained that AEA
had released the plan in December 2011. She understood that
Senator Egan, Representative Cathy Munoz, and others, had
vocalized criticism about some of the items included in the
plan, but she believed the overall message was that the
entire state was in dire need for capital. She read from
slide 10:
The low end capital cost estimates contained in the
refined screened potential hydro project table (p. 1-
15, 16) identify $1.327 billion in potential
expenditures.
The capital cost estimates in the results of
transmission interconnection economic evaluation table
(p. 1-19) identify $1.424 billion in potential
expenditures.
The SEIRP results of integrated cases - regional
summary table (p. 1-37) estimates capital spending for
the optimal hydro/transmission case at $1.407 billion.
Senator McGuire added that hydropower made up a substantial
portion of the energy structures in Southeast Alaska. She
addressed slide 11, "Summary: Capital Estimates":
Alaska Energy Pathway (AEA 2010) near term:
$1.999 billion.
Railbelt Integrated Resource Plan (AEA 2010) long
term:
$13.625 - $21.109 billion.
Southeast Integrated Resource Plan (AEA 2011) long
term:
$1.407 billion
Takeaway: there will be substantial spending on energy
infrastructure in Alaska over the next five to ten
years.
1:21:27 PM
Senator McGuire turned to slide 12 titled "Financing:
Legislative Intent." She discussed a 2011 legislative
statement of intent in regards to all capital
appropriations working forward in the future. She quoted
from the statement (slide 12):
It is the intent of the legislature that the state's
capital investment into energy generation projects not
exceed 50% of the total investment required to fully
complete those projects.
Senator McGuire highlighted that the bill contained
provisions that did not allow for greater than one-third of
the total project cost to be lent out by the Alaska
Industrial Development and Export Authority (AIDEA). She
added that the goal was for the state to have "skin in the
game" and for projects to pass creditworthiness; the bill
recognized a great need and AIDEA's unique authority as an
investment bank provided the ability to move forward. She
opined that in five years the legislature would be able to
look back with pride at opportunities that would be created
if the legislation became law. She stated that the bill
would help fill existing needs, create new jobs, and
increase access to energy transmission and generation. She
stressed that without the growth the state's economy had
the potential to stagnate and she pointed to the
overwhelming burden facing Alaskans related to energy
costs. She relayed that Hugh Short was the new chair of
AIDEA; she believed that the bill and his background in
Alaska growth capital would help instigate growth in the
economy.
1:23:50 PM
MICHAEL PAWLOWSKI, STAFF, SENATOR LESIL MCGUIRE, stated
that slide 13 "Financing, Alaska Energy Pathway: AEA July
2010" demonstrated that the gap experienced by many
utilities throughout the state was a result of large
capital costs and small rate bases. He elaborated that
there was a gap between what the utilities could finance
versus the demand and infrastructure need. He pointed to a
graph that showed projected capital expenditures were well
above both the high and low case debt capacities for the
Railbelt utilities (from the Railbelt Integrated Resource
Plan, slide 13). He explained that SB 25 was intended to
help finance energy infrastructure by filling the gap
between what utilities could do and existing needs.
Mr. Pawlowski pointed to the Southeast Integrated Resource
Plan (slide 14) and explained that debt service, principal,
and interest payments were a serious part of any project.
The bill proposed that retaining principal and interest
payments in-state was an opportunity that the state should
consider. He elaborated that the legislature had put a good
policy statement on the table and that there needed to be
skin in the game in the development of energy projects in
the state. The Alaska Energy Pathway and other documents
recognized the importance of financing and that access was
a major challenge facing utilities. He reiterated that SB
25 was designed to address the financing piece of energy
projects.
1:25:25 PM
Mr. Pawlowski relayed his intent to provide a sectional
analysis working in reverse from the end of the bill (slide
16). He explained that the material portions of the bill
were in Sections 14 and 15 (beginning on page 8, line 29).
He elaborated that page 8, line 29 through page 9, line 21,
established the Sustainable Energy Transmission and Supply
(SETS) development program within AIDEA. Page 9, lines 22
through 26 described how the fund balance could be used: to
finance and to assist in the construction, improvement,
rehabilitation, and expansion of energy projects. He noted
that the fund was limited specifically to energy projects.
Mr. Pawlowski moved to slide 17 titled "SB 25: Powers and
Limitations of SETS." The Powers and Duties section began
on page 9, line 27 through page 10, line 21; the bill
created a new fund in order to protect AIDEA's existing
credit rating and to provide the agency with extended
powers and limitations related to energy financing. He
moved to page 10, lines 1 through 3 of the legislation,
which allowed AIDEA to retain the collateral it needed to
finance investment projects.
Mr. Pawlowski shared that the bill would provide AIDEA with
the ability to defer principal payments or capitalize
interest on energy projects (page 10, lines 4 through 5);
the provision related to the period of time between the
construction stage and when a project began to generate
revenue and offered the ability to enhance the economics of
a project while protecting the return to the state.
Additional powers provided to SETS and the proposed
development fund (that differ from a traditional revolving
loan fund) were included on page 10, line 14; the provision
gave AIDEA (under its existing statute AS 44.88.090) the
ability to issue debt against fund proceeds. He pointed to
financing limitations on page 10, line 22; the limitations
were more stringent than those on AIDEA's current financing
opportunities. He elaborated that the bill contained a
threshold that would not allow AIDEA to finance more than
one-third the cost of a project without legislative
approval; the provision provided an additional level of due
diligence in order to ensure the protection of the state's
financial assets. He added that the loan guarantee language
that would require legislative approval in excess of $20
million was taken from the existing AIDEA programs.
Mr. Pawlowski continued to discuss limitations of SETS
(slide 17). He turned to page 10, lines 27 through 30 of
the bill; financing terms were limited to the life of a
project; however, 50 years was allowed for transmission and
hydroelectric projects, given their different financing
life-cycle. He moved to the beginning of the bill and
relayed that Section 1 established the bill's short title
on page 1. The intent for capitalization of $250 million
was located in Section 2, page 1, lines 9 through 12.
Section 3, page 1, line 13 through page 3, line 22 added
the word "energy" into AIDEA's existing authorizing
statutes, where the agency's purpose and mission were
established. Section 4 contained additional conforming
language related to the inclusion of the word "energy." He
relayed that the conforming changes had been made in order
to draw a nexus between AIDEA's authorizing statutes and
the fund to indicate that the agency was expected to
finance energy projects in particular.
Mr. Pawlowski communicated that Section 6 contained an
adjustment to AIDEA's existing loan participation program.
He explained that the agency primarily financed through
either a direct investment or the private sector. The
section allowed AIDEA to work in conjunction with the
commercial financing sector to prevent unfair competition.
Section 6 would allow AIDEA to participate in financing
through its loan participation program, if a private
financial institution wanted to finance an energy project.
Page 4, lines 28 through 30, included a change in the loan
participation program related to the inclusion of a loan
for financing improvements and energy efficiency. He
expounded that the legislature had done a significant
amount of work in the individual home, public, and
municipal sectors, but it had not been able to "crack" the
commercial or multi-family residential sectors. The
provision would allow AIDEA to participate with private
sector lending institutions to guarantee energy efficiency
loans for larger commercial developments.
Mr. Pawlowski looked at Sections 7 through 12 and explained
that when AIDEA invested or loaned money it was required to
make an interest rate of return. The sections amended each
variation of the lending abilities through AS 44.88.159 to
require that the same interest rate is earned. Section 13
(page 8, line 9) would allow the agency to offer an
incentive interest rebate of not more than 1 percent to
encourage rural development, job creation, renewable energy
development, and other.
1:33:38 PM
Mr. Pawlowski concluded his remarks and relayed that
Senator McGuire would explain why AIDEA had been selected.
Senator McGuire communicated that there had been some
questions about why she had selected AIDEA and not the
Alaska Housing Finance Corporation or AEA. She shared that
one of the reasons AIDEA had been selected was because its
obligations were not obligations of the state (slide 19).
She elaborated that AS 44 lay out that the bonds issued by
the authority did not constitute indebtedness or other
liability of the state. Another reason the authority had
been selected was due to the dividend it paid (slide 20).
She read from slide 20:
Since inception, AIDEA has paid $324,500,000 in
dividends to the state of Alaska and has net assets of
nearly $1 billion. AIDEA was capitalized with the
transfer of $384,500,000 in general funds and loans
beginning in 1981.
Senator McGuire added that AIDEA had come close to
returning back the entire amount of funds that had been
used to create it. She furthered that $20 million in
dividends had been returned in 2011 alone. She explained
that when dividends were put back in the general fund they
were recirculated for allocation to meet the state's needs.
1:35:16 PM
Senator McGuire lauded AIDEA for its talented staff and
board members. She believed that Mr. Short, the new chair,
would bring much to the agency. She shared that the
agency's strong credit rating was another reason it had
been selected (slide 21). She read from slide 21:
The most recent ratings report for AIDEA (Standard and
Poor's, December 13, 2010) reaffirmed AIDEA's "AA-"
rating due to:
1. A pledged portfolio of private activity economic
development loans;
2. A currently low loan delinquency rate;
3. Projected cash flows and debt service coverage
that meet Standard and Poor's requirements for
the 'AA' category for state revolving fund
programs;
4. Strong legal covenants, including an additional
bonds test requiring either in excess of 1.50x
annual debt service, or the maintenance of
unrestricted surplus equal to $200 million or
principal outstanding and never less than $100
million; and
5. Covenants to maintain what we view as good
liquidity in the authority's unrestricted cash
equivalents balance.
Senator McGuire recognized that with the passage of the
bill there would continue to be projects in need of grants;
however, the bill provided an opportunity for projects that
were "on the fence" and could undergo a commercial process
and creditworthiness analysis to put skin in the game and
develop a more superior project.
1:37:32 PM
Mr. Pawlowski communicated that under AIDEA's current
leadership it had moved to a more formalized process. He
addressed slide 22 titled "AIDEA has developed a process
for evaluating and initiating financing decisions." He
detailed that the slide illustrated the current schematic
that would be adopted by the agency in order to provide for
multiple "no-go" decisions, fiscal reviews, and checks and
balances to a project. He elaborated that the legislation
provided AIDEA powers to develop fiscal controls for the
fund that it would establish. He stressed that it was the
sponsor's intent that strong fiscal controls would be
instituted to ensure that state assets would be protected.
Mr. Pawlowski provided a brief review on how the proposed
structure would work (slide 23, "How SETS will work within
AIDEA"). The structure had multiple steps: (1) the state
would establish SETS and capitalize it with an
appropriation, (2) AIDEA would use proceeds within SETS to
finance energy projects, (3) energy projects would repay
the fund (AIDEA had the power to borrow money against
proceeds from the capital markets in order to return money
to the fund that could be loaned to more projects), and (4)
AIDEA would pay a dividend back to the state based on 25
percent to 50 percent of its earnings. He relayed that the
point was to put some of the state's money to work within
the state that would earn a rate of return, provide
financing to projects, and generate additional revenues for
the state's treasury.
Mr. Pawlowski emphasized that SB 25 would fill a portion of
the puzzle that the Senate had addressed for several years
related to energy problems within the state.
1:40:03 PM
Senator Thomas observed that some projects had significant
upfront and long-term costs, but had a dramatic impact on
the state's economy. He wondered whether consideration had
been given to what the state received from some lesser
interest rates compared to the annual interest rate that
would be achieved from internal and external investment
managers of AIDEA funds. He asked whether the sponsor had
looked at some of the lower interest rates that the state
received from long-term bonds.
Mr. Pawlowski replied in the affirmative. He shared that
the decision had been made to moderate the interest
incentive to the existing economic development that may
allow for an interest rate of up to 1 percent. Related to
statewide benefits, the theory was that because most
projects would need legislative approval, once a financing
plan was in place and came before the legislature for
approval, the ancillary benefits could be thought through
at the legislative level. He furthered that the bill would
not give AIDEA the power to delve into questions of that
nature. The goal had been to keep AIDEA to a commercial
lending decision base to protect its credit rating and to
protect the return to the treasury. He added that there
would always be a need for additional capitalization in
addition to what SB 25 would provide.
1:43:10 PM
Senator McGuire emphasized that the purpose behind the
creation of AIDEA was that it would support state
infrastructure, which was the reason it had been selected
for the location of the proposed fund. She referenced other
provisions that would allow AIDEA to defer principal
payments and other. She was open to proposed changes that
would not change the intent of the bill in major ways. She
believed it was important that a return was generated and
given back as a dividend. She recognized the dramatic
impact renewable energy projects in particular would have
to the state. She hoped that the board would analyze
projects for their potential benefit to the state.
Senator Thomas appreciated a memorandum that had been
provided to members related to some projects that were more
politically motivated rather than economically motivated.
1:45:15 PM
AT EASE
1:46:32 PM
RECONVENED
1:46:37 PM
BOB LOESCHER, ALASKA TECHNOLOGY DEVELOPMENT GROUP, JUNEAU,
testified in support of SB 25. He discussed his involvement
in energy and economic development for rural and Native
communities; he had also served on the AIDEA board for two
terms as a public member. He believed AIDEA was the
appropriate location for the fund and that the agency was
vital to the economic development and infrastructure
support of Alaska. He relayed that AIDEA was involved in
port development, commercial development of tourism
facilities, malls, airports, and other. He stressed that
the agency's contribution to the state had allowed for the
utilization of Alaska's financial resources and had brought
in capital from national institutional investors. He
emphasized that AIDEA had protocols to balance investments
from various enterprises across the state. He relayed that
there were needs in rural and urban areas that needed to be
balanced as Alaska committed to investments. He urged the
committee's support of SB 25.
1:49:50 PM
MARK DAVIS, DEPUTY DIRECTOR, ALASKA INDUSTRIAL DEVELOPMENT
AND EXPORT AUTHORITY, stated that SB 25 would create an
energy infrastructure bank that would be a new program
within AIDEA. The fund would be separate from the agency's
current Enterprise Development Fund, which was used to fund
AIDEA's loan participations and project development. He
stressed that the powers proposed in the legislation would
fit into the current financial markets. He remarked that
interest rates were currently at low levels and commodity
prices were at high levels, meaning that there was capital
seeking to invest in infrastructure that would earn a rate
of return. The type of return put forward in the bill was
consistent with market-based rates that AIDEA currently
used in loan participations. He believed the bill would
create the opportunity for leveraging money with private
capital in order to build energy projects. He relayed that
energy projects tended to be expensive; therefore, large
amounts of capital would be needed.
Mr. Davis listed important powers under the legislation
including the capitalization of interest to allow for
"patient capital." He provided an example of a project when
AIDEA provided bonds that were paid back over a long-term
period; the example was consistent with the type of
financing used for infrastructure. The bill would provide
AIDEA with the ability to make direct loans and allowed for
bond and loan guarantees. He explained that a bond
guarantee could be useful if a utility issued a bond based
on its overall financial condition because the guarantee
could allow the rate to be lowered; the lower rate could
save rate payers a significant amount of money with
relatively low risk.
PETER NAOROZ, MANAGER, KOOTZNOOWOO, JUNEAU, spoke in
support of SB 25. The organization believed the bill was
needed and that it would allow the public and private
sectors to come together. Kootznoowoo had been very
involved in the Southeast Integrated Resource Plan; he
recalled that it had been discussed throughout the drafting
process how expensive energy projects were and how Alaska
did not have enough money. He believed that Alaska is a
great investment and that the ability to invest in the
state would attract a substantial amount of private
capital. He provided an example related to land owned by
the organization. He emphasized that SB 25 provided a
mechanism to attract capital investment from inside and
outside of the state, which would be beneficial due to the
high infrastructure costs.
1:56:29 PM
DUFF MITCHELL, ALASKA INDEPENDENT POWER PRODUCERS
ASSOCIATION, JUNEAU, testified in favor of SB 25. He
believed the bill offered one portion of a portfolio of
opportunities that would allow the state to become energy
independent and would lower and/or stabilize energy costs.
He stated that the bill would enable the private sector to
invest capital and help projects reach development. He
furthered that a unique aspect of the bill was that
leveraging and syndicating a loan would allow AIDEA to
bring in state money, which would reduce risk for large
international and national firms to invest. The
organization believed SB 25 was good and responsible
legislation. He shared that infrastructure investment in
energy paid dividends in two ways: (1) it paid back the
loan and (2) it paid a dividend to lower or stabilize rates
for economically feasible long-term projects (e.g.
hydropower projects). He stressed that long-term projects
became feasible when dividends were paid back to citizens
over time. He reiterated the association's support for the
legislation. He believed increasing the capitalization
amount included in the bill would be beneficial; projects
of magnitude could evaporate the total fund rapidly.
1:59:32 PM
ROBERT WILKINSON, CHIEF EXECUTIVE OFFICER, COPPER VALLEY
ELECTRIC, GLENNALLEN (via teleconference), testified in
support of SB 25. He referenced a letter of support from
Copper Valley Electric (copy on file). He discussed the
company's current Allison Creek hydropower project that
would cost $40 million; the company had received $14
million in funding through the Renewable Energy Fund and
capital budget appropriations. He shared that the company
would likely borrow most or all of the remaining funds; SB
25 would allow it to borrow the money from the state. The
company believed that the bill was an opportunity for the
state to invest in worthy infrastructure projects and that
it would help achieve lower power costs for Copper Valley
members and would earn a return for the state treasury. He
noted that the legislature had created the Renewable Energy
Fund in 2008 and the Sustainable Energy Act in 2010. Copper
Valley believed that SB 25 was the next logical step in
fulfilling the vision that had been unfolding in recent
years. He urged the committee to pass the legislation.
2:01:53 PM
Senator McGuire thanked testifiers for their time and drew
attention to letters of support in members' packets (copies
on file). She opined that the bill represented the next
logical step following efforts that had been made.
SB 25 was HEARD and HELD in Committee for further
consideration.
2:02:25 PM
AT EASE
2:04:51 PM
RECONVENED
CS FOR HOUSE BILL NO. 250(ENE)
"An Act relating to the renewable energy grant fund
and recommendation program; and providing for an
effective date."
2:04:51 PM
Co-Chair Hoffman turned the meeting over to Co-Chair
Stedman. Co-Chair Stedman relayed that CSHB 250(ENE) had
not previously been heard by the committee. The intent was
to introduce the legislation, hear public testimony, and
set the bill aside for further review.
CASEY SCHRODER-HOTCH, STAFF, REPRESENTATIVE BILL THOMAS,
provided an overview of the legislation. She explained that
the bill would reauthorize the Renewable Energy Grant Fund
for an additional five years. The fund was established in
2008 and had funded around 200 projects statewide, with a
focus on areas with the highest energy costs. She furthered
that additional projects came forward on an annual basis;
21 projects were "on line" at the end of 2011. Estimates
showed that by 2013 the fund would be responsible for
displacing 6 million gallons of diesel fuel each year. She
relayed that the fund included a continuation of the intent
language expressed in the enabling legislation to fund the
program at $50 million per year.
Co-Chair Stedman noted the one fiscal note from the
Department of Commerce, Community and Economic Development
in the amount of $2,155,000 that had been included in the
governor's FY 13 operating budget.
2:07:08 PM
PAT LUBY, ADVOCACY DIRECTOR, AMERICAN ASSOCIATION OF
RETIRED PERSONS (AARP), JUNEAU, testified in support of HB
250. He shared that all AARP members were energy consumers
and customers; many Alaskans were having trouble paying
their energy bills. He observed that the state had a
history of developing successful renewable energy projects
through the fund. He stressed that renewing the fund would
provide Alaska and its citizens with more opportunities to
experiment with renewable energy projects. He urged support
for the legislation.
Co-Chair Hoffman requested that Chris Rose, Executive
Director of the Renewable Energy Alaska Project, provide
remarks on his participation in the program.
CHRIS ROSE, EXECUTIVE DIRECTOR, RENEWABLE ENERGY ALASKA
PROJECT (REAP), detailed that REAP was a coalition of
approximately 85 organizations in Alaska including
utilities, businesses, conservation, consumer groups,
Native organizations, and local, state and federal
entities. The coalition supported the reauthorization and
extension until at least 2018. He relayed that there had
been a significant number of projects in the pipeline. He
noted that of the 208 funded projects, approximately half
were feasibility and reconnaissance projects, which meant
that there were many projects that had not reached
construction. The coalition believed that there would be a
substantial number of construction projects in the upcoming
four to five years. He shared that the fund would displace
at least 6 million gallons of diesel fuel by the end of the
next year and the number would continue to expand.
HB 250 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 182
"An Act amending the amount of state funding provided
to school districts for pupil transportation."
Co-Chair Stedman relayed that SB 182 had not previously
been heard by the committee. The intent was to introduce
the legislation, hear public testimony, and set the bill
aside for further review.
2:10:55 PM
SENATOR KEVIN MEYER, SPONSOR, introduced SB 182. He
discussed that education and addressing complex issues
related to its delivery to students was a top priority of
the Senate. He shared that as co-chairs of the Senate
Education Committee both he and Senator Joe Thomas had been
looking for ways to improve the system, including the
passage of SB 171, which would increase the Base Student
Allocation. Another important and costly item was pupil
transportation that totaled approximately $62 million
annually. He elaborated that up to 2003 the state provided
funding for pupil transportation based on actual costs
(derived from annual financial audits) that were reported
to the Department of Education and Early Development
(DEED). Subsequent to 2003 reimbursement had been
determined on a per pupil basis; it had been determined
that the method was underfunding pupil transportation
costs, which had forced districts to take money out of
classrooms to fund transportation. Additionally, there was
no consistency between districts because they dealt with
the issue in different ways (e.g. newer versus older school
buses and other).
Senator Meyer communicated that SB 182 would recalibrate
the existing per pupil amount received by districts under
the current grant program up to more realistic levels. The
bill would change the per pupil program to an actual cost
or reimbursable program similar to the system that was in
place prior to 2003; the program would be based on annual
financial audits reported to DEED. Additionally, the bill
would give DEED oversight to control costs; the goal was
for the department to line up all school districts that
would allow a Request for Proposal (RFP) process to obtain
competitive bids on the busing system (currently school
districts were responsible for their own RFPs and rates
were high in some areas).
2:14:39 PM
Co-Chair Stedman noted the one fiscal note from DEED in the
following estimates: an FY 12 supplemental in the amount of
$8,103,300; an FY 13 appropriation for $10,450,300, which
was in addition to the $62,202,700 in the governor's
proposed FY 13 operating budget; and one additional full-
time position.
2:15:32 PM
DAVE JONES, ASSISTANT SUPERINTENDENT, KENAI PENINSULA
SCHOOL DISTRICT, KENAI (via teleconference), testified in
support of SB 182. He thanked the committee for addressing
the issue. He stated that transportation costs had risen
substantially and districts were forced to pull money from
classrooms if the costs were not met within the
transportation funding. He shared that the Kenai district
had attempted many strategies to entice additional vendors
to bid, but attempts had been unsuccessful. He stressed
that without the legislature's help there would be a
substantial deficit in the transportation fund. He urged
the passage of the bill.
2:16:48 PM
MIKE FISHER, CHIEF FINANCIAL OFFICER, FAIRBANKS NORTHSTAR
SCHOOL DISTRICT, FAIRBANKS (via teleconference), voiced
support for SB 182. He thanked the committee and sponsor
for the work done on the transportation issue. He shared
that the district bused over 7,000 students per day and
covered over 1 million miles annually. He emphasized that
the bill would help the district keep other critical
operating dollars in the classroom.
2:17:29 PM
STEVEN KALMES, DIRECTOR OF TRANSPORTATION, ANCHORAGE SCHOOL
DISTRICT, ANCHORAGE (via teleconference), testified in
support of SB 182. He communicated that the district had
seen significant increases in pupil transportation costs
that surpassed the amount provided under the grant system.
He pointed to steep fuel increases in recent years and
shared that in 2006 the district had a fuel cap of $2.50
per gallon in its contract; prices were currently over
$4.00 per gallon. Significant increases had occurred due to
rising fuel and school bus costs; bus cost increases were a
result of escalating costs for raw materials (3 percent to
5 percent annually). Additionally, bus costs had increased
7 percent to 10 percent in order to meet the 2010 federal
mandate on diesel emissions. He relayed that federal
requirements were growing; in the upcoming year the
district would spend almost $500,000 on the transportation
of homeless students. He stressed that due to the increased
costs and lack of funding, the district was eating into the
classroom funding; the shortfall was expected to be
approximately $2.2 million. He reiterated the district's
support of the legislation.
2:19:28 PM
KEN FOREST, MAT-SU BOROUGH SCHOOL DISTRICT, PALMER (via
teleconference), vocalized support for SB 182. The Mat-Su
district was experiencing notable increases in expenses
related to pupil transportation. He relayed that the
district had conducted a competitive bid the prior year
that had resulted in two bids; the low bid had been
selected and approximately $11 million had been saved over
the life of the contract; however, costs had still risen
substantially. He communicated that the district would be
eating into its general operating fund for about $3.4
million in the upcoming year. He thanked the committee for
its efforts to move the bill forward.
2:20:38 PM
BRUCE JOHNSON, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, JUNEAU, spoke in support of SB 182. He
recognized the school business officials that worked to
determine accurate per student amounts included in the CS.
He emphasized that the bill would help ensure that dollars
destined for the classroom would not be diverted to
transportation.
Senator Meyer provided closing remarks. He stated that when
the system moved from an actual cost basis to a per pupil
basis in 2003 the legislature thought the change would save
money; however, costs had increased and money had not been
saved. He opined that the system had created
inconsistencies between school districts related to busing
standards.
SB 182 was HEARD and HELD in committee for further
consideration.
Co-Chair Stedman discussed the schedule for the following
day.
ADJOURNMENT
2:22:57 PM
The meeting was adjourned at 2:22 PM.