Legislature(2013 - 2014)

04/11/2014 04:29 PM FIN


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                 SENATE FINANCE COMMITTEE                                                                                       
                      April 11, 2014                                                                                            
                         4:29 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
4:29:19 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Meyer  called the Senate Finance  Committee meeting                                                                    
to order at 4:29 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Kevin Meyer, Co-Chair                                                                                                   
Senator Anna Fairclough, Vice-Chair                                                                                             
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Michael  Hanley, Commissioner,  Department of  Education and                                                                    
Early  Development;  Elizabeth  Nudelman,  Director,  School                                                                    
Finances and  Facilities, Department of Education  and Early                                                                    
Development;  Bruce  Johnson,   Executive  Director,  Alaska                                                                    
Council  of School  Administrators;  Ron Furrer,  President,                                                                    
NEA-Alaska;  Norm Wooten,  Director, School  Improvement and                                                                    
Governmental   Relations,  Association   of  Alaska   School                                                                    
Boards, Juneau;  Dr. Bob Urata, American  Heart Association,                                                                    
Juneau;  Michael  Patterson,  Self,  Juneau;  Lincoln  Bean,                                                                    
Alaska  Native Health  Board, Kake;  Emily Nenon,  Director,                                                                    
Alaska Government Relations,  American Cancer Society Cancer                                                                    
Action Network; Senator Peter Micciche.                                                                                         
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Sunni  Hilts,   President,  Association  of   Alaska  School                                                                    
Boards, Seldovia.                                                                                                               
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 209    REGULATION OF SMOKING                                                                                                 
                                                                                                                                
          SB 209 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
CSHB 278(FIN) am                                                                                                                
          EDUCATION                                                                                                             
                                                                                                                                
          CSHB 278(FIN) am was HEARD and HELD in committee                                                                      
          for further consideration.                                                                                            
CS FOR HOUSE BILL NO. 278(FIN) am                                                                                             
                                                                                                                                
     "An Act increasing the base  student allocation used in                                                                    
     the  formula for  state  funding  of public  education;                                                                    
     relating  to  the  exemption   from  jury  service  for                                                                    
     certain  teachers;  relating  to   the  powers  of  the                                                                    
     Department   of   Education  and   Early   Development;                                                                    
     relating to  high school  course credit  earned through                                                                    
     assessment;  relating  to school  performance  reports;                                                                    
     relating to  assessments; establishing a  public school                                                                    
     and  school   district  grading  system;   relating  to                                                                    
     charter  schools and  student transportation;  relating                                                                    
     to residential school  applications; relating to tenure                                                                    
     of  public school  teachers;  relating to  unemployment                                                                    
     contributions for  the Alaska technical  and vocational                                                                    
     education  program;  relating  to earning  high  school                                                                    
     credit for  completion of vocational  education courses                                                                    
     offered   by  institutions   receiving  technical   and                                                                    
     vocational  education  program   funding;  relating  to                                                                    
     schools  operated by  a federal  agency; relating  to a                                                                    
     grant for  school districts; relating to  education tax                                                                    
     credits;   establishing  an   optional  municipal   tax                                                                    
     exemption for  privately owned real property  rented or                                                                    
     leased  for  use as  a  charter  school; requiring  the                                                                    
     Department of Administration to  provide a proposal for                                                                    
     a salary  and benefits  schedule for  school districts;                                                                    
     making  conforming  amendments;  and providing  for  an                                                                    
     effective date."                                                                                                           
                                                                                                                                
4:31:40 PM                                                                                                                    
                                                                                                                                
MICHAEL  HANLEY, COMMISSIONER,  DEPARTMENT OF  EDUCATION AND                                                                    
EARLY DEVELOPMENT,  relayed that department  staff Elizabeth                                                                    
Nudelman would walk the committee  through the Department of                                                                    
Education  and Early  Development (DEED)  current bond  debt                                                                    
reimbursement program.                                                                                                          
                                                                                                                                
ELIZABETH   NUDELMAN,   DIRECTOR,    SCHOOL   FINANCES   AND                                                                    
FACILITIES, DEPARTMENT  OF EDUCATION AND  EARLY DEVELOPMENT,                                                                    
communicated that  the DEED  debt reimbursement  program was                                                                    
included  under  AS  14.11.100.  She  detailed  that  as  of                                                                    
January  30, 2014  there was  approximately $1.7  billion in                                                                    
school  construction and  major  maintenance  debt that  had                                                                    
been  used  to  construct,  build, and  repair  the  state's                                                                    
schools.  Based  on  the  current  reimbursable  rates,  the                                                                    
state's share was approximately  $1.1 billion. She explained                                                                    
that  the  program  was  funded  on  an  annual  basis  with                                                                    
operating  budget   funds;  the  current   operating  budget                                                                    
included approximately $127 million for the program.                                                                            
                                                                                                                                
Ms. Nudelman discussed the two  rates that were reimbursable                                                                    
by the state  under the debt program. She  elaborated that a                                                                    
municipal school  qualified for  a 70  percent reimbursement                                                                    
rate  when  it built  within  the  maximum allowable  square                                                                    
footage in  regulation for  the program.  Alternatively, the                                                                    
60 percent  reimbursement rate applied to  projects that did                                                                    
not meet the square footage calculation.                                                                                        
                                                                                                                                
4:34:38 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer asked  how much  had  been spent  on the  60                                                                    
percent/40   percent   (60/40)   program.   He   asked   for                                                                    
verification that the state had  little, if any control over                                                                    
the program.                                                                                                                    
                                                                                                                                
Ms.  Nudelman  replied  that  the  60/40  program  had  more                                                                    
flexibility  and  less  criteria   than  the  70  percent/30                                                                    
percent   (70/30)   program.   Both  rates   had   statutory                                                                    
requirements  related   to  the   refunding  of   bonds  and                                                                    
requiring bonds  to be sold  over a  period of at  least ten                                                                    
years.  Additionally,  both  rate  programs  districts  were                                                                    
required   to   maintain  their   preventative   maintenance                                                                    
program.  The  70/30  program  had  additional  requirements                                                                    
including space  and designating  need in  other categories.                                                                    
She referenced a handout in  members' packets titled "Alaska                                                                    
Statute  14.11.100 State  Aid Costs  of School  Construction                                                                    
Debt" (copy on  file). The handout showed that  for the past                                                                    
3.5  years $510.5  million was  70 percent  debt and  $139.6                                                                    
million was 60 percent debt.                                                                                                    
                                                                                                                                
                                                                                                                                
4:36:34 PM                                                                                                                    
                                                                                                                                
Senator Dunleavy  communicated that he  was a member  of the                                                                    
committee that  dealt with school construction.  He recalled                                                                    
prior  discussions  related  to the  amount  of  outstanding                                                                    
major maintenance  on the  state's public  school buildings.                                                                    
He noted that  the figures were not precise,  but costs were                                                                    
estimated  to be  upwards of  $2 billion.  He addressed  the                                                                    
life expectancy for some of  the buildings. For example, the                                                                    
construction  of  a school  in  rural  Alaska may  cost  $60                                                                    
million due  to location, weather, and  other. He questioned                                                                    
how  long the  school would  last. He  believed the  life of                                                                    
some  of the  schools was  30 years.  He observed  that cost                                                                    
outweighed  benefit in  those  situations.  He commented  on                                                                    
DEED's implementation of a major  maintenance program in the                                                                    
past several years;  however, there may not  be a systematic                                                                    
method  of  continually  upgrading   and  dealing  with  the                                                                    
buildings.                                                                                                                      
                                                                                                                                
Senator  Dunleavy  believed  it was  pertinent  to  consider                                                                    
whether  the  70/30  debt reimbursement  was  something  the                                                                    
state wanted  to continue. He  wondered if the  state needed                                                                    
to  look at  the concept  of prototypical  school design  in                                                                    
order to  save money on  design and engineering.  He thought                                                                    
the state should  contemplate how it wanted  to view, build,                                                                    
and  locate  buildings.  He suggested  that  in  some  rural                                                                    
locations it may be more  cost-effective to build one school                                                                    
for several communities that were  in close proximity to one                                                                    
another.  He stressed  that  currently  the state  currently                                                                    
churned out schools every year,  but their longevity was not                                                                    
known. He  stated that the  legislature was  responsible for                                                                    
establishing  and maintaining  a  public  school system.  He                                                                    
believed the issue required consideration.                                                                                      
                                                                                                                                
4:40:15 PM                                                                                                                    
                                                                                                                                
Co-Chair   Kelly  appreciated   the   comments  of   Senator                                                                    
Dunleavy.  He   was  disturbed  that  the   legislature  had                                                                    
discussed  the issue  many times,  but had  never taken  any                                                                    
action.  He   surmised  that  the  Alaska   Housing  Finance                                                                    
Corporation  (AHFC)  or another  state  housing/construction                                                                    
entity  could  conduct  a  study  on  how  the  state  built                                                                    
schools. He  thought it was  possible to provide  funding in                                                                    
the current year to have the issue studied.                                                                                     
                                                                                                                                
                                                                                                                                
Senator Dunleavy  commented on the complexity  of building a                                                                    
school.  He pointed  to  statutory mandates  to  put art  in                                                                    
schools, design  committees comprised of  community members,                                                                    
and  other.  He   observed  that  there  was   a  system  of                                                                    
regulations and  laws embedded in  the process.  He believed                                                                    
determining what  laws currently  required would  enable the                                                                    
legislature to  identify laws and  processes that  needed to                                                                    
be changed in the future.                                                                                                       
                                                                                                                                
Co-Chair   Meyer  asked   Commissioner  Hanley   to  provide                                                                    
additional  comments  on school  construction.  Commissioner                                                                    
Hanley  recognized  the  challenge   facing  the  state.  He                                                                    
relayed  that  there  were  over  500  buildings  that  were                                                                    
largely supported/funded  by the  state. He agreed  that how                                                                    
the schools  were designed and developed  was complex; there                                                                    
was  not  a simple  fix.  He  surmised  that it  would  take                                                                    
direction to find a solution  to the components currently in                                                                    
statute and  the way  the schools  were currently  built. He                                                                    
discussed the state's responsibility  to keep the schools in                                                                    
place  and safe.  He communicated  that some  schools lasted                                                                    
for 30  years, while others only  lasted 15 to 20  years. He                                                                    
believed another  part of  the conversation  revolved around                                                                    
finding a way  to incentivize and find  needed resources for                                                                    
maintenance. He noted that  the maintenance expertise around                                                                    
the state  was not  equal; some communities  may not  have a                                                                    
person  with the  skills needed  to maintain  a $30  million                                                                    
building. He believed the state  may want to consider how to                                                                    
incentivize and support high quality maintenance.                                                                               
                                                                                                                                
4:44:40 PM                                                                                                                    
                                                                                                                                
Senator  Bishop  agreed  with   the  previous  comments.  He                                                                    
believed that schools  should be built to last  50 years. He                                                                    
opined that a  lifespan of 15 to 30  years was unacceptable.                                                                    
He recalled the  remodeling of a territorial  high school in                                                                    
Southeast; subsequently,  it had  become a great  school. He                                                                    
thought the school may be good for another 20 to 30 years.                                                                      
                                                                                                                                
Senator Hoffman  noted that  local hire  encouraged students                                                                    
to take  better care  of schools  when they  had a  sense of                                                                    
ownership   over   the    facilities.   He   discussed   his                                                                    
chairmanship  of the  Bethel Native  Corporation Board.  The                                                                    
corporation had  built schools and other  projects and aimed                                                                    
to have a minimum of  50 percent local-hire. He acknowledged                                                                    
that constitutionally  Alaska-hire could not be  included in                                                                    
contracts, but  he thought that  incentive to  hire in-state                                                                    
would help  to give  communities a sense  of pride  in their                                                                    
schools. He believed when parents  worked on the schools the                                                                    
schools were better maintained.                                                                                                 
                                                                                                                                
4:47:58 PM                                                                                                                    
                                                                                                                                
Senator Bishop  commented that the  Department of  Labor and                                                                    
Workforce  Development  had  a provision  where  90  percent                                                                    
local-hire  could  be encouraged  if  the  project used  100                                                                    
percent  state funding.  He  agreed  with Senator  Hoffman's                                                                    
comments.                                                                                                                       
                                                                                                                                
Vice-Chair   Fairclough  observed   that  two   issues  were                                                                    
currently  before the  committee. The  first was  related to                                                                    
the  70/30 and  60/40,  which was  encouraging  debt in  the                                                                    
larger communities. She discussed  reasons project costs may                                                                    
be higher  than normal.  She believed a  conversation should                                                                    
take  place  about whether  debt  should  be encouraged  and                                                                    
whether  the  state should  continue  to  encourage debt  to                                                                    
refurbish some  of the communities  that had the  ability to                                                                    
tax  themselves. She  reasoned  that if  a  change was  made                                                                    
there  could  be  more  application   for  the  state  grant                                                                    
proposal that had  been blocked by the  Kasayulie case [1997                                                                    
Kasayulie  v.  State]  due  to need  in  rural  Alaska.  She                                                                    
remarked that the state was  currently in transition and was                                                                    
considering  a  substantial draw  from  savings  to tide  it                                                                    
over.  She  did  not  believe local  communities  should  be                                                                    
encouraged to  take on more  debt. She encouraged  the state                                                                    
to  consider buying  down the  debt to  relieve some  of the                                                                    
responsibility  to make  room in  local budgets.  She opined                                                                    
that the  70/30 and 60/40  loans were encouraging  voters to                                                                    
approve bonds  that had $0.30  on the $1.00,  which property                                                                    
tax paid  for. She  did not  mean to say  she would  not pay                                                                    
more  as a  property tax  payer.  She believed  there was  a                                                                    
different perspective if someone  was paying every $1.00 for                                                                    
the  construction;  it  would   be  challenging  for  school                                                                    
districts  to  bring   a  dollar-for-dollar  payment  before                                                                    
voters.                                                                                                                         
                                                                                                                                
Vice-Chair  Fairclough  addressed   the  second  longer-term                                                                    
issue, which related to what  the schools the state financed                                                                    
should  look  like.  She discussed  that  schools  in  rural                                                                    
communities  were actually  community centers.  She observed                                                                    
that the state  failed to recognize that the  schools may be                                                                    
emergency  shelters,   food  distribution  centers,   and  a                                                                    
community's  only  library.  She  agreed  with  a  prototype                                                                    
approach,  but believed  dialogue was  needed pertaining  to                                                                    
square footage  allotments for the schools.  She opined that                                                                    
it would  be nice to  have a  separate door for  health aide                                                                    
nurses to  allow for private  entry into the office  and for                                                                    
school nurses to share the  office separated by a partition.                                                                    
She  suggested   working  with  cold  climate   research  to                                                                    
determine  the appropriate  weatherization  on  some of  the                                                                    
facilities. She  reiterated that  the debt  financing should                                                                    
be discussed by the legislature.                                                                                                
                                                                                                                                
4:52:18 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer addressed prior  conversations related to the                                                                    
debt  ratios. He  noted that  in  some ways  DEED liked  the                                                                    
70/30 because the department had  to agree to the debt prior                                                                    
to  taking it  on.  He recalled  that  the commissioner  had                                                                    
relayed the  debt had  been a useful  tool to  help complete                                                                    
school  maintenance.   Whereas,  the  60/40   provided  less                                                                    
control  for  the  state  and  more  flexibility  for  local                                                                    
municipalities, which  meant the  municipalities may  not be                                                                    
using  the  money  for  things  the  state  would  like.  He                                                                    
wondered if  the commissioner  would rather  see a  ratio of                                                                    
50/50, 40/60, or other.                                                                                                         
                                                                                                                                
Commissioner  Hanley referenced  the handout  titled "Alaska                                                                    
Statute   14.11.100   State   Aid  for   Costs   of   School                                                                    
Construction Debt" (copy on file).  He pointed to the second                                                                    
bullet  point   on  page  2   related  to  the   70  percent                                                                    
reimbursement. He  relayed that  to be  eligible for  the 70                                                                    
percent  reimbursement   a  municipality  was   required  to                                                                    
demonstrate need  [for the  project] and  to fit  within the                                                                    
space  requirements. He  relayed that  the requirements  did                                                                    
not  apply to  the  60 percent  reimbursement  rate; the  60                                                                    
percent reimbursement had  less oversight and accountability                                                                    
for the space.  He could speak to the fiscal  aspects of the                                                                    
70  percent, but  it was  difficult  to speak  about how  it                                                                    
impacted communities,  the value it held,  and a community's                                                                    
ability  to maintain  its schools.  He communicated  that at                                                                    
the 60 percent rate the  state still had significant buy-in,                                                                    
but with  little say; the facilities  were typically outside                                                                    
the  square footage  requirements and  had not  demonstrated                                                                    
need.                                                                                                                           
                                                                                                                                
Commissioner  Hanley directed  the committee's  attention to                                                                    
page  3, which  contained a  list of  projects. He  detailed                                                                    
that  just  because a  project  fell  under the  60  percent                                                                    
eligibility and  did not  have to  demonstrate need  did not                                                                    
mean it  was a bad  project. He  remarked that in  a summary                                                                    
level  conversation  he  would   be  much  more  comfortable                                                                    
reducing the amount in the  60/40 reimbursement rate than in                                                                    
the 70/30  rate simply  because there was  no identification                                                                    
of need. He  believed it was important to  consider what the                                                                    
impact of  reducing the  rates would be.  He thought  that a                                                                    
significant  reduction would  mean some  projects would  not                                                                    
come forward any longer. He  reasoned that there also may be                                                                    
increased efficiencies  in designs. He hypothesized  that if                                                                    
a school district  was receiving less than  70 percent maybe                                                                    
some of the extra features  should be excluded. He suggested                                                                    
that  a more  modest  design may  be  available without  the                                                                    
other prototypical  models in place;  he was  not suggesting                                                                    
cutting down  on quality. He  reiterated that in  the future                                                                    
project requests  may be  reduced because due  to a  lack of                                                                    
affordability.  Additionally,   more  modest   requests  may                                                                    
increase  because more  responsibility  was  falling to  the                                                                    
local municipalities.                                                                                                           
                                                                                                                                
4:57:02 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  requested when the  applications were                                                                    
received  and  how  the state  committed  to  projects.  She                                                                    
wondered when  the department would implement  any potential                                                                    
change  to  the  reimbursement  rates  if  approved  by  the                                                                    
legislature.  She noted  that Anchorage  had recently  had a                                                                    
bond  package; page  5 of  the handout  included a  notation                                                                    
that FY 15 debt projects  for Anchorage [at 60 percent] were                                                                    
not included  in the  figures listed  because they  were not                                                                    
voter approved, but had been approved by the department.                                                                        
                                                                                                                                
Ms.  Nudelman replied  that applications  could be  received                                                                    
throughout the year for the  debt program. She believed that                                                                    
if  any changes  were  made, the  wording  and structure  of                                                                    
statute   would  need   to  be   designed  to   capture  any                                                                    
outstanding projects that  had been approved or  were in the                                                                    
queue.  She reasoned  that if  a  change was  made it  would                                                                    
identify the timelines for implementation.                                                                                      
                                                                                                                                
Vice-Chair  Fairclough  emphasized  that an  effective  date                                                                    
needed to  be determined if  a change  was made in  order to                                                                    
avoid  a rush  to  get  bonds included  on  a November  2014                                                                    
ballot. Alternatively, the state could  allow the rush to go                                                                    
forward  with the  knowledge that  its  annual debt  payment                                                                    
would  increase.  She   referred  to  Commissioner  Hanley's                                                                    
testimony  that $127  million of  annual debt  payments from                                                                    
the state  supported the $1.1  billion in debt carried  at a                                                                    
local level.  She asked  the committee  to consider  that in                                                                    
2015 the  state would begin  analyzing the debt  that should                                                                    
go  on the  balance books  of cities  across the  state. She                                                                    
noted  that  school districts  were  part  of the  financial                                                                    
picture  in   some  cases.   She  referred   to  Anchorage's                                                                    
enterprise funds  and relayed that when  the debt allocation                                                                    
went into effect on of  the state's fiscal "houses" would go                                                                    
upside  down;  the  debt  owed   in  the  Public  Employees'                                                                    
Retirement System  (PERS)/Teachers' Retirement  System (TRS)                                                                    
calculation would  be greater than  the assets,  which would                                                                    
impact the leverage of its  ability to bond. She referred to                                                                    
her prior suggestion  to buy down some of the  local debt to                                                                    
avoid a reduction to cities' credit rating.                                                                                     
                                                                                                                                
5:00:32 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer inquired  if the state placed  limits or caps                                                                    
on municipalities,  school districts, or  specific projects.                                                                    
Ms.  Nudelman  replied  that  there  were  no  currently  no                                                                    
statutory limits or  caps on the debt  program. She detailed                                                                    
that at  times over  the past  25 years  limits or  caps had                                                                    
existed.  Cost  estimates  were done  at  the  municipal  or                                                                    
school  district  level  for   specific  projects  and  were                                                                    
forwarded to  the department for review.  She expounded that                                                                    
costs  were  generated   based  on  professional  estimates.                                                                    
Typically large communities such  as Anchorage managed their                                                                    
levels  of debt  (as projects  were completed,  new projects                                                                    
were brought on).                                                                                                               
                                                                                                                                
Senator Dunleavy  commented that  a building  constructed in                                                                    
Constantinople in the year 537  was still in use at present.                                                                    
He remarked  that a building  that deteriorates in  20 years                                                                    
was  often considered  a consumable  structure;  it was  not                                                                    
looked at  as an investment.  He believed the  bill provided                                                                    
an opportunity  for the state  to reinvent how it  looked in                                                                    
the  future. He  pointed to  opportunity for  public/private                                                                    
partnerships.  He referred  to requests  for building  funds                                                                    
from charter  schools. He  thought the  bill may  provide an                                                                    
opportunity  to  change  the paradigm.  He  noted  that  the                                                                    
legislature  may  come  up  with funds  for  rent  or  lease                                                                    
offsets.  He concluded  that there  would be  an opportunity                                                                    
for  various things,  which would  not be  completed in  one                                                                    
year;  the new  direction could  potentially save  the state                                                                    
significant  money  while  ensuring adequate  buildings  for                                                                    
students in the future.                                                                                                         
                                                                                                                                
Ms. Nudelman  continued with  her presentation.  She pointed                                                                    
out that  under the  70 percent debt  reimbursement program,                                                                    
many of the  projects were aimed at  increasing the lifespan                                                                    
of  buildings.  She  explained that  major  maintenance  for                                                                    
items  such as  roofs were  part of  the debt  reimbursement                                                                    
program.  She referred  to information  she had  provided to                                                                    
the  committee including  total debt,  the state's  share of                                                                    
the debt, and  the annual cost that ran  through the state's                                                                    
operating  budget out  to the  school  districts. The  final                                                                    
page of the handout included a breakout by school district.                                                                     
                                                                                                                                
5:04:58 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer  commented that a  couple of years  earlier a                                                                    
change had  been made  to mill  rates. He  referenced public                                                                    
testimony requesting  an increase  in flexibility  for local                                                                    
communities.  He expressed  frustration that  the state  had                                                                    
made  the  change  to  mill  rates;  however,  it  had  been                                                                    
criticized for  not funding more.  He communicated  that the                                                                    
state  had picked  up  significant  responsibilities of  the                                                                    
municipalities including school  construction, PERS/TRS, and                                                                    
the change  in mill  rates. He asked  for an  explanation of                                                                    
the mill rate process.                                                                                                          
                                                                                                                                
Ms. Nudelman replied that years  back the mill rate had been                                                                    
set  at a  local minimum  requirement that  school districts                                                                    
would contribute  4 mills  of the  assessed value  for their                                                                    
community as a minimum local  effort to the school district.                                                                    
She  detailed that  10  to 12  years ago  there  had been  a                                                                    
change to  statute, which provided  that as  assessed values                                                                    
increased  the required  contribution would  be half  of the                                                                    
increase.  Over time,  as communities  grew, the  mill rates                                                                    
for the  required local contribution across  Alaska began to                                                                    
decrease from the  4 mills down to 2.65 mills  at the lowest                                                                    
contribution  level (there  were  various  mill rate  levels                                                                    
across  the  state  including  3.2,  2.9,  and  other).  She                                                                    
elaborated that the required  local contribution was smaller                                                                    
in mill  rate, but not  in actual dollars.  She communicated                                                                    
that a couple of years  back legislation had used the lowest                                                                    
mill  rate  of  2.65  for the  foundation  program  for  the                                                                    
minimum required  local effort for all  districts except for                                                                    
three (that  had a  different convention  due to  tax base).                                                                    
Additionally, the  legislation had eliminated  the statutory                                                                    
language  allowing  for  a  50   percent  reduction  as  the                                                                    
assessments grew. In order to set  the mill rate at 2.65 the                                                                    
state  had   picked  up  the   remaining  share   (the  cost                                                                    
represented $1  million for some municipalities);  the total                                                                    
cost to the state was $20 million.                                                                                              
                                                                                                                                
5:09:06 PM                                                                                                                    
Co-Chair  Meyer  noted  that  theoretically  under  the  old                                                                    
method, there would  be $20 million in savings  to the state                                                                    
that could  be put in  the Base Student Allocation  (BSA) to                                                                    
equate  a $100  per child  increase. Ms.  Nudelman indicated                                                                    
yes,  and clarified  that  savings under  the  rates from  2                                                                    
years  back  would  be $20  million;  savings  would  vastly                                                                    
exceed $20  million under the  rates used 20  years earlier,                                                                    
before the rate started dropping.                                                                                               
                                                                                                                                
Co-Chair Meyer asked for verification  that the mill rate of                                                                    
2 years  ago had been  set at  2.9.  Ms.  Nudelman confirmed                                                                    
that the average was approximately that.                                                                                        
                                                                                                                                
Co-Chair  Meyer  wondered  aloud  if  the  savings  to  each                                                                    
community  was   in  the   millions,  and   speculated  that                                                                    
Anchorage had a savings of $7 million.                                                                                          
                                                                                                                                
5:10:40 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer inquired  about the  commissioner's thoughts                                                                    
on  the  bill itself,  including  areas  of concern  or  for                                                                    
adjustment.  Commissioner Hanley  responded that  there were                                                                    
several things  the governor wanted  included that  had been                                                                    
removed  from the  bill  on  the House  side.  He noted  the                                                                    
removal of the  boarding school/residential school stipends.                                                                    
There was a  suggested increase to reflect the  true cost of                                                                    
these  schools;  the  same  increase  that  was  before  the                                                                    
legislature the  previous year and  was also included  in SB
113  [2014 legislation  sponsored  by  Senator John  Coghill                                                                    
related  to  increasing  the  stipend  for  boarding  school                                                                    
students.]                                                                                                                      
                                                                                                                                
Commissioner Hanley  stated that  the other area  of concern                                                                    
was a size factor for  charter schools - when the enrollment                                                                    
dropped below  150, the funding  level drops slightly  to 95                                                                    
percent. By  changing the enrollment  number to  75, schools                                                                    
could remain  at the  full funding  level. The  change would                                                                    
particularly  affect small  communities  and  would make  it                                                                    
more feasible to have smaller charter schools.                                                                                  
                                                                                                                                
Commissioner Hanley stated that  the third component was the                                                                    
inclusion  of  the  SAT/ACT; in  addition  to  the  WorkKeys                                                                    
assessment  system, it  would allow  students  a choice  and                                                                    
give them a  score that would not only qualify  them for the                                                                    
Alaska Performance  Scholarship but  also would  enable them                                                                    
to get into a college of their choice.                                                                                          
                                                                                                                                
Co-Chair  Meyer  asked  whether that  would  go  along  with                                                                    
eliminating the  high school exit exam.  Commissioner Hanley                                                                    
responded in the affirmative and  noted that ultimately they                                                                    
would like to  see the repeal of the  High School Graduation                                                                    
Qualifying  Exam  (HSGQE).   The  HSGQE  repeal would  be  a                                                                    
decrement  of $2.7  million,  and would  cover  the cost  of                                                                    
approximately $500 thousand for the SAT/ACT.                                                                                    
                                                                                                                                
5:13:29 PM                                                                                                                    
                                                                                                                                
Senator  Hoffman  requested  a   brief  description  of  the                                                                    
eliminated  provisions, as  well as  why they  were removed.                                                                    
Commissioner Hanley  noted that the components  were removed                                                                    
in a committee substitute  rather than through amendments in                                                                    
committee,  so  there  was  no chance  to  see  the  impacts                                                                    
directly.  He concluded  that the  concerns  had related  to                                                                    
fiscal components.                                                                                                              
                                                                                                                                
Senator Olson  expressed concern  that the governor  had not                                                                    
included any  funding for the  major maintenance  of schools                                                                    
to  enhance longevity.  Commissioner  Hanley responded  that                                                                    
there  had  been  an   ongoing  conversation  with  Governor                                                                    
Parnell, and there  was a list of  expenditures to consider.                                                                    
He postulated  that it had  been the intent of  the governor                                                                    
to put  something forward that was  fiscally responsible, in                                                                    
hopes  that  the legislature  would  weigh  in on  areas  of                                                                    
needed maintenance.                                                                                                             
                                                                                                                                
5:15:14 PM                                                                                                                    
                                                                                                                                
Senator  Olson  commented  that  the  fiscal  responsibility                                                                    
seemed somewhat  lacking if the  current buildings  were not                                                                    
being   maintained.  He   opined  that   the  Commissioner's                                                                    
explanation  was  a  poor characterization  of  the  missing                                                                    
maintenance items.                                                                                                              
                                                                                                                                
Senator  Hoffman agreed  with Senator  Olson and  noted that                                                                    
there seemed to be selective  decision making when there was                                                                    
money  in  the  budget  for  deferred  maintenance  for  the                                                                    
University  of Alaska  and other  facilities throughout  the                                                                    
state,  yet the  only  area  that did  not  receive a  major                                                                    
component was schools.                                                                                                          
                                                                                                                                
Senator Dunleavy referred  back to the subject  of the HSGQE                                                                    
and  mentioned  recent  testimony  by  former  Alaska  State                                                                    
Senator  Con  Bunde,  who  had   been  instrumental  in  its                                                                    
creation.  He  inquired  if  it   had  been  the  intent  to                                                                    
eliminate  the exit  exam as  part  of the  diploma-granting                                                                    
process, or rather  to eliminate the test  itself because it                                                                    
was outdated.  Commissioner Hanley  replied that  the intent                                                                    
had  been  a  little  bit   of  both.  When  the  HSGQE  was                                                                    
originally put into place, it  was a primary evaluative tool                                                                    
to measure student  progress and preparation.   In the years                                                                    
since,   other  measures   had   been  developed   including                                                                    
formative assessments that  guide instruction.  Commissioner                                                                    
Hanley  further opined  that the  state still  had the  same                                                                    
remediation needs which were  originally a motivating factor                                                                    
for development  and implementation  of the test.   Further,                                                                    
it had not  been a good indicator of  graduation outcomes or                                                                    
success following high school.                                                                                                  
                                                                                                                                
5:19:12 PM                                                                                                                    
                                                                                                                                
Senator  Dunleavy inquired  as to  how the  DEED would  know                                                                    
that  a graduating  senior was  ready to  leave the  system.                                                                    
Commissioner  Hanley responded  that  the department  relied                                                                    
heavily  on the  school districts  to determine  preparation                                                                    
through course grades and credit requirements.                                                                                  
                                                                                                                                
Senator Dunleavy inquired  if the HSGQE was put  in to place                                                                    
as  a result  of any  federal compliance  issues such  as No                                                                    
Child Left Behind  (NCLB) funding requirements. Commissioner                                                                    
Hanley  replied no,  only half  of  the states  had a  high-                                                                    
stakes exam such as the HSGQE.                                                                                                  
                                                                                                                                
5:20:49 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
5:23:08 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
BRUCE JOHNSON, EXECUTIVE DIRECTOR,  ALASKA COUNCIL OF SCHOOL                                                                    
ADMINISTRATORS (ACSA),  spoke to four components  of HB 278.                                                                    
He stated that  the council was supportive  of course credit                                                                    
mastery, but limited to subject  areas that were more easily                                                                    
assessed  by  conventional  exams (math,  English,  science,                                                                    
social  studies   and  world  languages).     He  cited  the                                                                    
difficulty   of   assessing    areas   that   involve   more                                                                    
subjectivity and how it subsequently  creates a challenge to                                                                    
maintain  equitable treatment  for  all students  throughout                                                                    
the  districts  and state.  He  reiterated  support for  the                                                                    
credit component of the bill  and further explained it would                                                                    
help students  move forward more quickly  in their education                                                                    
and perhaps even move into  earning dual credit. He spoke to                                                                    
school and  district designations  and stated that  the ACSA                                                                    
supports the  current star rating  system; he noted  that it                                                                    
was  new and  still  being tried  out.   He  also noted  its                                                                    
efficacy  and characterized  it  as  being about  continuous                                                                    
progress.   He stated  the ACSA  was split  on the  issue of                                                                    
teacher tenure; in part it  was reconciled by the other body                                                                    
as  they   considered  school   municipalities,  first-class                                                                    
cities, and Rural Education Areas  under 5,500 population to                                                                    
be  able  to grant  tenure  in  three  years and  the  other                                                                    
districts would then move to five.   The rationale is one of                                                                    
recruitment. He  noted that some  ACSA members  believe many                                                                    
new teachers  are unconcerned  with retirement  during their                                                                    
first years of work.                                                                                                            
                                                                                                                                
Mr.  Johnson  noted  that  the ACSA  had  heard  from  large                                                                    
population districts that it would  be helpful to have extra                                                                    
time with  tenure, particularly with hard  to fill positions                                                                    
and unique circumstances.  He went on to  describe a concept                                                                    
they had discussed  under which tenure would  not be granted                                                                    
until after  the third year  (which takes care  of districts                                                                    
that are  involved in municipalities and  first-class cities                                                                    
under 5,500);  other districts could grant  tenure after the                                                                    
third,  fourth,  or  fifth year  depending  upon  individual                                                                    
growth of  the teacher.  The  value added is the  extra time                                                                    
in   which  to   evaluate  teacher   growth.  He   cited  an                                                                    
illustrative example  of two special education  teachers who                                                                    
had not been retained after  their third year for reasons of                                                                    
imposed tenure  consideration despite uncertainty  about the                                                                    
capability of  the employee. He  concluded that  the concept                                                                    
could work  in Alaska,  and had been  considered by  some of                                                                    
the council members.                                                                                                            
                                                                                                                                
5:29:09 PM                                                                                                                    
                                                                                                                                
Mr.  Johnson addressed  the subject  of funding  and related                                                                    
that the  ACSA was cognizant about  Alaska's changing fiscal                                                                    
future and the importance of  using the state's funds in the                                                                    
most  advantageous way  to improve  education for  all kids.                                                                    
He  noted that  ACSA membership  preferred the  money within                                                                    
the BSA  for obvious reasons.   The organization appreciated                                                                    
funds outside the formula,  honored the unique circumstances                                                                    
of school districts,  and put the money  through the formula                                                                    
as  funds were  awarded. He  went on  to relate  that school                                                                    
districts  have looked  at potential  cost savings  with the                                                                    
insurance  health  pool,  including 100  percent  of  school                                                                    
districts participating.  He noted  that this was an example                                                                    
of their  commitment to cost  saving measures, and  that the                                                                    
ACSA was  open to  exploring new  approaches and  would work                                                                    
with the  legislature to explore  possibilities in  light of                                                                    
the fiscal situation.                                                                                                           
                                                                                                                                
Senator Dunleavy inquired as to  where the ACSA stood on the                                                                    
tenure issue. Mr. Johnson responded  that the council agreed                                                                    
with  the three-year  span in  small/rural  districts -  the                                                                    
districts  thought this  was necessary  in order  to attract                                                                    
individuals  to   their  district  with  the   potential  of                                                                    
achieving tenure  more quickly.  He noted  that many  of the                                                                    
larger districts preferred a longer  time frame, which could                                                                    
be a helpful tool in some situations.                                                                                           
                                                                                                                                
Senator Dunleavy inquired if they  would support a statewide                                                                    
salary  study as  well as  a healthcare  study. Mr.  Johnson                                                                    
responded that  the ACSA was  ready to explore any  of those                                                                    
possibilities. He also noted that  he knew the committee had                                                                    
communicated that  if there  were not  cost savings  and the                                                                    
proposed  element was  not  a  good idea,  it  would not  be                                                                    
implemented.                                                                                                                    
                                                                                                                                
5:34:44 PM                                                                                                                    
                                                                                                                                
RON  FURRER,  PRESIDENT,   NATIONAL  EDUCATION  ASSOCIATION-                                                                    
ALASKA  (NEA), related  that he  had nothing  to add  to his                                                                    
prior testimony, but that he was ready to answer questions.                                                                     
                                                                                                                                
Co-Chair Meyer noted that  Vice-Chair Fairclough had several                                                                    
questions.                                                                                                                      
                                                                                                                                
Mr.  Furrer  hoped  that  the  committee had  a  copy  of  a                                                                    
document  dealing  with  teacher terminations  [NEA  Teacher                                                                    
Tenure  Chart, dated  April 10,  2014 (copy  on file).]  Co-                                                                    
Chair Meyer noted  that the committee did  have the document                                                                    
in question.                                                                                                                    
                                                                                                                                
Vice-Chair  Fairclough  inquired  about  NEA's  position  on                                                                    
tenure, and noted  that Mr. Furrer had  gone quickly through                                                                    
his testimony. Vice-Chair Fairclough  reiterated some of the                                                                    
items  she   thought  he  addressed,  but   asked  for  more                                                                    
clarification.  She  further asked Mr. Furrer  if there were                                                                    
specific things he  did not like in the bill  and to propose                                                                    
an option for fixing any problems being addressed.                                                                              
                                                                                                                                
Mr.  Furrer  replied  that   NEA-Alaska  believed  that  the                                                                    
current tenure  process was  not broken.  He was  aware that                                                                    
some think that  tenure must be given or  denied after three                                                                    
years;  however, he  disagreed. He  had worked  with several                                                                    
teachers that  did not  meet or  exceed the  state standards                                                                    
after three  years. The teachers had  been put on a  plan of                                                                    
improvement  and  had  another   year  to  show  they  could                                                                    
perform. He noted that when  Alaska was recruiting teachers,                                                                    
it would  be difficult to  get a teacher to  consider Alaska                                                                    
with  one of  the  highest  tenure laws  in  the nation.  He                                                                    
related  that  the  defined contribution  plan  was  another                                                                    
disincentive.  He  referred  to  some  statistics  from  the                                                                    
Alaska Retirement  Management Board, citing that  since July                                                                    
2006, Alaska had  hired 3,037 teachers.  However  by June of                                                                    
2012, only  632 of those  teachers had stayed in  Alaska for                                                                    
more than  five years;  about a  20 percent  retention rate.                                                                    
Of the 12,297 PERS employees  hired in the same period, only                                                                    
989  stayed  for five  years  or  more, which  represents  a                                                                    
retention rate of  approximately 8 percent. In  the last two                                                                    
years  defined contribution  employees who  had left  public                                                                    
employment, in both PERS and  TRS, have withdrawn almost $33                                                                    
million from the  system, much of which has  left the state.                                                                    
He  stated  that  according  to the  rules  of  the  defined                                                                    
contribution  plans,  at  the  end  of  five  years,  public                                                                    
employees as well  as teachers can take 100  percent of what                                                                    
they contributed  to the  plan and 100  percent of  what the                                                                    
employer has  contributed. He characterized the  issue as "a                                                                    
merging  of  disincentives,"  and   noted  that  having  the                                                                    
ability  to  attract  and  retain  the  best  and  brightest                                                                    
teachers was  the primary reason  for the  concern regarding                                                                    
moving to a five year tenure.                                                                                                   
                                                                                                                                
5:40:49 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  referred to Section 30  through 41 of                                                                    
the bill and asked Mr. Furrer  if he wanted to expand on his                                                                    
testimony  regarding  expanding  tax  credits  to  K-12  for                                                                    
public  or  private  non-profit  agencies  or  schools.  Mr.                                                                    
Furrer  noted  that in  the  current  and previous  sessions                                                                    
there had been concerns  regarding public monies and private                                                                    
institutions; the NEA wondered  if for-profit companies were                                                                    
getting  a  tax  credit  for monies  that  went  to  private                                                                    
institutions or  K-12, and expressed its  concerns about the                                                                    
constitutionality.                                                                                                              
                                                                                                                                
Co-Chair  Meyer  thought that  he  recalled  that the  state                                                                    
currently  allowed  tax  credits  for  vocational  technical                                                                    
education  in   high  school  and   post-secondary.  Senator                                                                    
Dunleavy noted that that was  correct, and that the Governor                                                                    
is adding some  additional recipients of the  tax credits in                                                                    
his bill.                                                                                                                       
                                                                                                                                
Co-Chair Meyer inquired if any  state had zero tenure in its                                                                    
system.  Mr. Furrer  replied that  Washington  D.C. was  the                                                                    
only state he  could identify with no  policy. He summarized                                                                    
differing state tenure policies.                                                                                                
                                                                                                                                
5:43:35 PM                                                                                                                    
                                                                                                                                
Senator Bishop  inquired if the information  that Mr. Furrer                                                                    
was referencing  could be  provided to  the committee.   Co-                                                                    
Chair Meyer thought that there  was some misinformation with                                                                    
regard to the document.                                                                                                         
                                                                                                                                
Vice-Chair Fairclough  referred to the statewide  salary and                                                                    
benefits section, and reiterated  that Mr. Furrer had spoken                                                                    
in  opposition to  a statewide  salary and  benefits survey.                                                                    
She  queried how  to solve  the issue  of maintaining  local                                                                    
control  while at  the same  time coming  to the  state when                                                                    
they  cannot   pay  the  bill.   Mr.  Furrer   responded  by                                                                    
revisiting  the issue  of  student  achievement and  teacher                                                                    
proficiency.    With  regard to  the  statewide  salary  and                                                                    
benefits  survey, he  stated he  believed the  $600,000 plus                                                                    
would be more  useful in looking at  the foundation formula.                                                                    
He mentioned that  a statewide salary could  place rural and                                                                    
urban  areas in  competition  for teachers,  which could  be                                                                    
challenging for rural communities.                                                                                              
                                                                                                                                
5:46:46 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  noted that  the question was  how the                                                                    
state  controlled the  budget and  maintained local  control                                                                    
without the revenue  to do so. She  expressed optimism about                                                                    
the future but emphasized the  need for a holding pattern in                                                                    
the current  fiscal climate.  She used  the analogy  of kids                                                                    
with  a  credit  card  to illustrate  the  current  spending                                                                    
patterns. She noted that the  two finance committees did not                                                                    
currently have a way to  manage the spending side of things.                                                                    
She queried  Mr. Furrer as  to whether  there was a  way for                                                                    
them to manage spending together.  She revisited the idea of                                                                    
setting a salary schedule, which  would let people know what                                                                    
to expect  in terms  of spending, and  furthermore currently                                                                    
constituted  85  to  90  percent   of  what  the  state  was                                                                    
investing in schools.                                                                                                           
                                                                                                                                
Mr.  Furrer  replied  that  he had  been  told  that  school                                                                    
district  settlements  negotiated  at the  local  level  had                                                                    
achieved smaller increases than  those settled by the state.                                                                    
He clarified that  this is was what he has  been told and he                                                                    
was not in possession of backup information.                                                                                    
                                                                                                                                
5:49:11 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough noted that  based on that information,                                                                    
the council  should advocate for  letting the state  set the                                                                    
scale. Mr. Furrer responded that he guessed so.                                                                                 
                                                                                                                                
Senator Bishop wondered if there  were other states in which                                                                    
their   education   association  negotiated   a   collective                                                                    
bargaining  agreement with  the  state.  Mr. Furrer  replied                                                                    
that he believed Hawaii was  the only state with a statewide                                                                    
salary schedule.                                                                                                                
                                                                                                                                
Senator Dunleavy  clarified that  the reason was  that there                                                                    
was only one (statewide) school district in Hawaii.                                                                             
                                                                                                                                
Senator Dunleavy  thanked Mr. Furrer  for his  testimony and                                                                    
noted that he and the NEA  "have not always been on the same                                                                    
side of  things." He commented  that one of the  things that                                                                    
Vice-Chair Fairclough was  getting at was that  Alaska was a                                                                    
very unique  state with regard  to how it  funded education,                                                                    
whereas  in  the Lower  48  there  were many  county  school                                                                    
districts  with  the   power  to  tax  and   bond  for  both                                                                    
operations and capital. He further  described them as local-                                                                    
controlled districts with an  elected board, and responsible                                                                    
to  the people  for fiscal  issues. He  also noted  that the                                                                    
recent  negotiated  salary  increases  in  state  have  been                                                                    
small, but there had not  necessarily been any controls over                                                                    
it.   He continued to  explain a hypothetical scenario  of a                                                                    
district negotiating a raise that  was not sustainable, then                                                                    
coming  to   the  state  for   additional  funds.   He  also                                                                    
referenced an issue in Copper  River many years ago in which                                                                    
the district  tried unsuccessfully  to file  for bankruptcy.                                                                    
He  summarized the  concern of  determining  how to  control                                                                    
costs  so  that  the  state would  have  enough  funding  to                                                                    
continue to provide education throughout the state.                                                                             
                                                                                                                                
Mr. Furrer noted  that he was hoping that  someone would ask                                                                    
what  the   one  thing  was   that  would   improve  student                                                                    
achievement.  He explained that as  a group the NEA was very                                                                    
concerned about  attendance. He  noted frustration  with the                                                                    
compulsory attendance  law stating  that students  must only                                                                    
attend until they are 16.                                                                                                       
                                                                                                                                
Senator  Bishop  commented  that   had  an  idea  he  wanted                                                                    
everyone  to  work towards.  He  expressed  concern that  an                                                                    
Alaskan  born  individual  could  go to  the  University  to                                                                    
become a teacher  and then could not get hired  in the state                                                                    
of Alaska, yet could get hired out of state.                                                                                    
                                                                                                                                
5:54:04 PM                                                                                                                    
                                                                                                                                
Senator  Dunleavy  inquired how  Mr.  Furrer  would fix  the                                                                    
attendance issue in schools. Mr.  Furrer referred to his own                                                                    
experience as  a teacher and the  resultant frustration with                                                                    
students not attending school. He  brought up the importance                                                                    
of accountability in students, which was lacking.                                                                               
                                                                                                                                
Senator Olson commented that in  Golovin he had noticed that                                                                    
there was  an upsurge in  attendance with the offering  of a                                                                    
school  breakfast program.  He added  that there  were other                                                                    
reasons  that  contribute to  absenteeism  such  as lack  of                                                                    
sleep,  parental   neglect,  and  parental   disinterest  in                                                                    
education.                                                                                                                      
                                                                                                                                
5:58:03 PM                                                                                                                    
                                                                                                                                
SUNNI HILTS, PRESIDENT, ASSOCIATION  OF ALASKA SCHOOL BOARDS                                                                    
(AASB), SELDOVIA  (via teleconference),  stated that  in the                                                                    
interest of time  she would address only one  portion of the                                                                    
bill.   She  related that  school board  members took  their                                                                    
stewardship  of  public  money  seriously.  She  added  that                                                                    
salary  negotiation was  one of  the  most difficult  issues                                                                    
they dealt with; but they  understood the reasonability they                                                                    
had  been given  and try  and  keep costs  down while  still                                                                    
affirming the  importance of their teachers,  support staff,                                                                    
and   administrators.  She   reiterated   the  request   for                                                                    
additional funding  inside the foundation formula,  of which                                                                    
salaries were a part.   She recognized the state deficit and                                                                    
expressed that  the AASB  wanted to be  part of  a solution.                                                                    
She  related that  currently increasing  costs required  the                                                                    
AASB  to   eliminate  programs  needed  to   ensure  student                                                                    
success.  She again urged the  committee to add money to the                                                                    
foundation formula.                                                                                                             
                                                                                                                                
NORM WOOTEN,  DIRECTOR, SCHOOL IMPROVEMENT  AND GOVERNMENTAL                                                                    
RELATIONS,  ASSOCIATION  OF  ALASKA  SCHOOL  BOARDS  (AASB),                                                                    
JUNEAU,  described  that  AASB  represented  all  53  school                                                                    
districts across  the state, and noted  that Alaska's school                                                                    
boards  were  made  up   of  elected  officials  statutorily                                                                    
charged with  governance oversight of the  school districts.                                                                    
He  reported that  each year  AASB  members coalesce  around                                                                    
positions that  affect students,  and that he  would briefly                                                                    
walk through  the bill section  by section to  address areas                                                                    
on  which the  AASB  had  taken a  position.  In Section  2,                                                                    
regarding  testing  out  of   courses,  the  AASB  supported                                                                    
challenge tests  to give  students credit  for mastery  of a                                                                    
subject.  In Section  8, Mr.  Wooten indicated  AASB support                                                                    
for staying  with the  star system  of school  rating rather                                                                    
than  changing  to  a  letter  grade. He  noted  that  as  a                                                                    
requirement of the NCLB waiver,  it seemed to be adequate to                                                                    
let  communities  know  how their  schools  measured  up  in                                                                    
relation  to  other  schools.   In  Section  9,  Mr.  Wooten                                                                    
expressed  that  AASB  members across  the  state  supported                                                                    
charter schools as an option  as part of the school district                                                                    
under the governance of a  local school board.  He clarified                                                                    
that the AASB  did not support an appeal of  the denial of a                                                                    
charter that  went outside the  authority of a  local school                                                                    
board. In Sections 11 through  13, Mr. Wooten reiterated the                                                                    
AASB's support for  charter schools, as well  as its support                                                                    
of  efforts to  make  them more  successful.  He noted  that                                                                    
facilities  were   the  greatest  challenge   that  Alaska's                                                                    
charter schools  faced, and  the right  of first  refusal to                                                                    
lease  district space  would help  alleviate that  challenge                                                                    
somewhat.  Additionally, the  startup  grant  would ease  up                                                                    
some  of the  initial challenges  of opening  a new  charter                                                                    
school.  In  Section  16,  regarding   the  State  Board  of                                                                    
Education reporting to the legislature  on ways that schools                                                                    
could  be improved,  Mr. Wooten  relayed that  the AASB  had                                                                    
always supported  any effort to  improve schools  and create                                                                    
efficiencies. He  further noted that the  AASB would welcome                                                                    
the  opportunity to  work with  the department  towards that                                                                    
end.                                                                                                                            
                                                                                                                                
Mr. Wooten  addressed Section  17, regarding  charter school                                                                    
pupil  transportation, and  reiterated  support for  charter                                                                    
schools and for the provisions.  He then noted that the AASB                                                                    
found  themselves at  odds with  the  National School  Board                                                                    
Association  (NSBA) on  the subject  of charter  schools. He                                                                    
expressed that  as a state  we believed in offering  as many                                                                    
educational choices as possible,  while the NSBA perhaps did                                                                    
not  understand the  various options  that  exist in  Alaska                                                                    
including   but  not   limited   to   charter  schools   and                                                                    
correspondence.                                                                                                                 
                                                                                                                                
Mr. Wooten referred to Sections  18 and 19 and expressed the                                                                    
board's  support  for  residential  boarding  schools.    In                                                                    
Section  20, 21  and 22;  dealing with  the increase  to the                                                                    
BSA,  he expressed  the board's  great appreciation  for the                                                                    
increase  inside the  foundation  formula.   He stated  that                                                                    
they are  also grateful  for a three  year increase,  as was                                                                    
indicated  in those  sections. He  added  that the  increase                                                                    
would help  them plan  for the coming  years. He  noted that                                                                    
the amount  still did  not meet  the budget  shortfalls that                                                                    
exist in districts all across the  state.  In Section 23 and                                                                    
24, regarding  teacher tenure, Mr.  Wooten related  that the                                                                    
board had  a resolution supporting  the increase in  time to                                                                    
acquire  tenure.  In  Section   26,  regarding  dual  credit                                                                    
vocational  courses  (TVEP),  the   board  was  strongly  in                                                                    
support. He  noted that students  should be able  to advance                                                                    
as quickly  as they  can while being  challenged.   He added                                                                    
that students  would rise to whatever  standards were placed                                                                    
on them.                                                                                                                        
                                                                                                                                
Mr.  Wooten   referenced  Section   29,  which   dealt  with                                                                    
municipal  tax exemptions  for  rental  property of  charter                                                                    
schools, and expressed his support  as he identified it as a                                                                    
means  of  assisting  and  meeting   the  needs  of  charter                                                                    
schools.                                                                                                                        
                                                                                                                                
6:08:26 PM                                                                                                                    
                                                                                                                                
Mr.  Wooten addressed  Sections 30  through 40,  which dealt                                                                    
with  tax  credits,  and  remarked that  the  AASB  was  not                                                                    
specifically  opposed  to  tax credits,  however  they  were                                                                    
opposed  to  the use  of  public  money to  support  private                                                                    
schools.   In referring to  Section 48, a one-time  grant of                                                                    
$30 million  to districts  with money  outside the  BSA, Mr.                                                                    
Wooten noted the board's great  appreciation and support. He                                                                    
went on  to recognize  the legislature's  additional support                                                                    
through    PERS,   TRS,    major   maintenance,    bond-debt                                                                    
reimbursement,  and categorical  funding. He  continued that                                                                    
the  board also  recognized the  proposal by  the Senate  to                                                                    
fund schools with $100 million over  the next two years.  He                                                                    
thanked the committee and stated  he was available to answer                                                                    
questions.                                                                                                                      
                                                                                                                                
Senator Dunleavy  clarified that the tax  credit concept was                                                                    
not public money,  and in fact tax credit  never touched the                                                                    
public treasury. He noted that  many people still considered                                                                    
them public money, but the courts had ruled on the matter.                                                                      
                                                                                                                                
HB  278  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
6:12:12 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
6:13:16 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Meyer noted that  Vice-chair Fairclough and Senator                                                                    
Dunleavy  had been  working during  the  interim on  various                                                                    
education  related subjects  that  are germane  to the  bill                                                                    
itself.                                                                                                                         
                                                                                                                                
Vice-Chair Fairclough  referred to  a contract with  the Hay                                                                    
Group, insurance  pooling, and  controlling costs  in school                                                                    
districts in  the state.  She noted  that she  would release                                                                    
the reports  in a  moment and  inquired if  Senator Dunleavy                                                                    
wanted to make any comments first.                                                                                              
                                                                                                                                
Senator Dunleavy added that Co-Chair  Kelly was also part of                                                                    
this process  over the summer  and fall;  it was part  of an                                                                    
expanded Senate Finance Subcommittee  on Education. He noted                                                                    
that he was  looking forward to the release  of the reports,                                                                    
and the information wherein.   He reiterated that we want to                                                                    
exhaustively  pursue   educational  issues  and   make  sure                                                                    
there's nothing in  the policy that doesn't  work for Alaska                                                                    
and Alaskans.                                                                                                                   
                                                                                                                                
6:15:09 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough read  from a report (copy  on file) in                                                                    
association  with SB  90.  She noted  that  the Hay  Group's                                                                    
contract has been  extended to June 30, 2014;  and that they                                                                    
intend to  continue the  discussion and  work on  the rising                                                                    
costs of healthcare for school  districts across Alaska. She                                                                    
stated that there are cost savings  to be had, but there are                                                                    
some concerns with school districts  that they are committed                                                                    
to  working out  before  making changes  in the  legislative                                                                    
session.                                                                                                                        
                                                                                                                                
Co-Chair  Meyer noted  that  he was  also  involved in  this                                                                    
process, in  addition to  Senator Dunleavy,  Co-Chair Kelly,                                                                    
and  Vice-Chair  Fairclough.   Vice-Chair  Fairclough  added                                                                    
that Senator  Gardner and Senator Stevens  also participated                                                                    
as  well as  an  extended group  that  drafted the  original                                                                    
Request  for Proposal  to start  acquiring the  information.                                                                    
She continued that  it was a group effort  including all the                                                                    
school  districts that  participated.  Co-Chair Meyer  noted                                                                    
that  there  was  100  percent  participation  in  the  data                                                                    
gathering.                                                                                                                      
                                                                                                                                
Senator Dunleavy  relayed that  the legislature  is mandated                                                                    
by the  constitution to establish  and maintain a  system of                                                                    
public  schools.   He pointed  out the  differing levels  of                                                                    
engagement and involvement of  legislatures over time, using                                                                    
the example  of the 1997  writing of the  Foundation Formula                                                                    
with  the  help of  Senator  Wilkens  and his  staff  Sheila                                                                    
Peterson. He continued  by relating that due  to our current                                                                    
revenue projections  and our oil  commodity status,  that we                                                                    
need to  become more  actively involved in  "untangling" the                                                                    
education system to be  sustainable and maintain/improve the                                                                    
quality. He noted  that it would take some  time and charged                                                                    
the legislature with looking at  items such as construction,                                                                    
healthcare  and  salaries/benefits  in  order  to  make  the                                                                    
system sustainable for the next 50 years.                                                                                       
                                                                                                                                
6:19:46 PM                                                                                                                    
                                                                                                                                
Vice-Chair    Fairclough    expressed    appreciation    for                                                                    
legislative  staff, department  staff, and  school districts                                                                    
for their work and participation in the process.                                                                                
                                                                                                                                
 Co-Chair  Meyer  inquired  as  to the  next  steps  on  the                                                                    
subject. Vice-Chair  Fairclough noted that there  are summer                                                                    
plans  to continue  the conversation.   She  reiterated that                                                                    
there were cost  savings to be had, but  there are contracts                                                                    
in place  with a staged  exit and other issues  to evaluate.                                                                    
She pointed out  that they were currently  acquiring all the                                                                    
associated data to examine.   She expressed that they wanted                                                                    
to honor  collective bargaining agreements that  exist.  She                                                                    
noted the  importance of understanding the  ramifications of                                                                    
cost  savings,   and  cited  an  example   of  incorporating                                                                    
Fairbanks  school districts  without  consideration for  the                                                                    
impacts.  She noted  that they  may  revisit extending  this                                                                    
contract or asking  for a new one, but  currently having the                                                                    
latitude to  move forward this  summer to  examine insurance                                                                    
pooling.                                                                                                                        
                                                                                                                                
Senator Dunleavy noted  that the advancement of  SB 90 won't                                                                    
take  place  this year  due  to  time constraints,  but  the                                                                    
concept  will  survive  through   the  summer  and  it  will                                                                    
continue to be pursued in the future.                                                                                           
                                                                                                                                
6:22:54 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer                                                                                                                  
                                                                                                                                
SENATE BILL NO. 209                                                                                                           
                                                                                                                                
     "An Act prohibiting smoking in certain locations; and                                                                      
     providing for an effective date."                                                                                          
                                                                                                                                
6:23:33 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer  relayed that the committee  would begin with                                                                    
public testimony.                                                                                                               
                                                                                                                                
DR.  BOB URATA,  PHYSICIAN  AND  AMERICAN HEART  ASSOCIATION                                                                    
VOLUNTEER, JUNEAU,  spoke in  support of SB  209. He  was in                                                                    
favor of  the inclusion of  e-cigarettes and hoped  that the                                                                    
opt-out provision  would be removed.  He relayed  that every                                                                    
34  seconds an  American died  of a  heart attack;  every 40                                                                    
seconds  an American  died  of a  stroke.  He stressed  that                                                                    
cancer and  cardiovascular disease  were the number  one and                                                                    
two causes  of death  in Alaskans respectively.  He detailed                                                                    
that secondhand smoke  killed approximately 50,000 Americans                                                                    
annually.  He  cited that  the  Center  for Disease  Control                                                                    
(CDC)   reported  that   secondhand   smoke  exposure   cost                                                                    
Americans  $5.6 billion  annually in  lost productivity.  He                                                                    
continued that  annually tobacco cost the  U.S. $133 billion                                                                    
in direct medical  care for adults and $156  billion in lost                                                                    
productivity.  He  believed  that smoke-free  air  workplace                                                                    
laws  were an  important  part in  improving  the health  of                                                                    
Americans.  He  emphasized  that  clean  air  reduced  heart                                                                    
attacks, strokes,  cancer, and lung disease.  He provided an                                                                    
example that in  Pueblo, Colorado there had  been a decrease                                                                    
in heart  attacks due  to an implementation  of a  clean air                                                                    
act.  He  referenced an  Institute  of  Social and  Economic                                                                    
Research  (ISER)  report  documenting  Anchorage's  positive                                                                    
business experience that  occurred when a clean  air act was                                                                    
implemented. He opined that  e-cigarettes should be included                                                                    
under the  legislation due to  serious questions  related to                                                                    
their   safety.   He   detailed  that   the   Federal   Drug                                                                    
Administration  had  found  known  toxins  in  nicotine.  He                                                                    
thought the approach  should be to do no harm.  He asked the                                                                    
committee  to  imagine how  many  lives  would be  saved  if                                                                    
cigarettes had  been properly studied prior  to being placed                                                                    
on the market;  he believed the same  went for e-cigarettes.                                                                    
He  stated that  the bill's  positive impacts  would benefit                                                                    
many individuals  in a  short period of  time. On  behalf of                                                                    
the  American Heart  Association he  urged the  committee to                                                                    
support the bill.                                                                                                               
                                                                                                                                
6:27:51 PM                                                                                                                    
                                                                                                                                
MICHAEL  PATTERSON, SELF,  JUNEAU,  spoke in  support in  SB
209. He shared  that he had been  chosen by the CDC  to do a                                                                    
nation-wide  campaign   on  chronic   obstructive  pulmonary                                                                    
disease  (COPD) because  there was  little  known about  the                                                                    
disease and it was killing  Alaska Natives at twice the rate                                                                    
of  any  other nationality  in  the  U.S. He  discussed  his                                                                    
personal experience living with  COPD, which had changed his                                                                    
life. He  shared that in the  past he had been  a smoker and                                                                    
had  objected  to  others  infringing on  his  rights  as  a                                                                    
smoker; he  no longer  felt the same  way. He  expressed his                                                                    
dedication  to  traveling  throughout  Alaska  to  speak  in                                                                    
schools about  COPD. He  agreed with  a Juneau  Empire story                                                                    
that  stated  he  faced the  anti-smoking  campaign  with  a                                                                    
"fever  of an  evangelist."  He stressed  the importance  of                                                                    
communicating with students and  others about the impacts of                                                                    
smoking.  He  discussed  how  difficult   it  was  to  avoid                                                                    
secondhand smoke. He emphasized  that the CDC had determined                                                                    
that   e-cigarettes   were   an   aerosol   that   contained                                                                    
carcinogens known  to cause cancer in  addition to ultrafine                                                                    
particles that  caused veins to constrict.  The e-cigarettes                                                                    
could cause  a person  with heart problems  to have  a heart                                                                    
attack;  they also  caused  exacerbation  attacks in  people                                                                    
with asthma, emphysema, and COPD.                                                                                               
                                                                                                                                
6:31:11 PM                                                                                                                    
                                                                                                                                
Mr.  Patterson  experienced   extreme  exacerbation  attacks                                                                    
caused  by  cigarettes  and   e-cigarettes,  which  were  so                                                                    
intense he had quit  smoking. He recalled extensive hospital                                                                    
stays  as a  result  of  the attacks.  He  stressed that  e-                                                                    
cigarettes were deadly and although  they had no smell, they                                                                    
could  cost a  person with  COPD  their life.  He asked  the                                                                    
committee  to  help him  in  his  mission to  help  children                                                                    
understand the  cost of smoking.  He emphasized that  he had                                                                    
not understood  what life  was until he  was faced  with his                                                                    
own death. He  urged the committee to consider  the bill and                                                                    
to  set  aside  thoughts  about  ramifications  to  business                                                                    
owners.  He   thanked  the  committee   for  its   time  and                                                                    
consideration and  underscored that  the issue was  a matter                                                                    
of life and death.                                                                                                              
                                                                                                                                
6:35:34 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer  thanked Mr. Patterson for  his testimony and                                                                    
agreed that the legislation had many merits.                                                                                    
                                                                                                                                
LINCOLN BEAN  SR, ALASKA NATIVE HEALTH  BOARD, KAKE, JUNEAU,                                                                    
spoke in support  of SB 209. He discussed  his membership on                                                                    
various boards.  He agreed with  comments made by  the prior                                                                    
testifiers.  He pointed  to his  membership on  the National                                                                    
Indian Health Board. He relayed  that Alaska had the highest                                                                    
cancer rate in the nation.  He believed the issue should get                                                                    
the  undivided  attention  of   the  state's  residents.  He                                                                    
recalled that  when he had  taken over at the  Alaska Native                                                                    
Tribal  Health  Consortium   (ANTHC)  the  organization  had                                                                    
needed  one  oncologist;  it  currently  required  four.  He                                                                    
stressed that  the statistics did  not lie.  He communicated                                                                    
the   Alaska  Native   Health   Board's   support  for   the                                                                    
legislation; the board had implemented  a similar policy and                                                                    
had seen a positive impact.  He relayed that the cancer rate                                                                    
was highest  among Alaska Natives  primarily due  to tobacco                                                                    
use.  He  communicated  that  prevention  was  the  key.  He                                                                    
discussed a recent board meeting  focusing on prevention. He                                                                    
emphasized that the news was not  all grim; less than one in                                                                    
five  (18  percent)  of  Alaska   Native  youths  smoked  at                                                                    
present. He  compared the number  to the 31 percent  who had                                                                    
smoked five years earlier. He  shared that non-smokers could                                                                    
be  sickened   by  secondhand  smoke  and   pointed  to  the                                                                    
successes  of  smoke-free  businesses.  He  appreciated  the                                                                    
committee's  time  and believed  that  speaking  out on  the                                                                    
issue could save lives.                                                                                                         
                                                                                                                                
EMILY   NENON,   DIRECTOR,  ALASKA   GOVERNMENT   RELATIONS,                                                                    
AMERICAN CANCER SOCIETY CANCER  ACTION NETWORK, testified in                                                                    
support of SB 209. She relayed  that she had been working on                                                                    
the  issue  in Alaska  for  13  years  in local  areas.  She                                                                    
mentioned barriers  to furthering local action  and stressed                                                                    
that  it was  time to  protect all  workers from  secondhand                                                                    
smoke  in the  workplace. The  organization did  not support                                                                    
the opt-out  provision in the  bill, but it did  support the                                                                    
continued public discourse and  moving the bill forward. She                                                                    
highlighted  a study  commissioned  by  the American  Cancer                                                                    
Society that looked at how  the law would impact states. She                                                                    
shared that  over five years a  comprehensive smoke-free law                                                                    
would be  expected to produce economic  benefits including a                                                                    
$3.69   million  savings   in   heart   attack  and   stroke                                                                    
treatments, $1.35  million in lung cancer  savings, $520,000                                                                    
in state  Medicaid savings, and $980,000  in smoking related                                                                    
pregnancy treatment savings. She stated that the e-                                                                             
cigarettes information had come forth  in the past couple of                                                                    
years due  to the  product's newness.  She relayed  that the                                                                    
organization had  been working  closely with  the Department                                                                    
of Health  and Social Services on  implementation plans; the                                                                    
department  would  be  able  to  implement  the  legislation                                                                    
smoothly with  the existing  community grant  program around                                                                    
the   state  with   a  focus   on   public  education.   She                                                                    
communicated that  everyone had the right  to breathe smoke-                                                                    
free air.                                                                                                                       
                                                                                                                                
Co-Chair  Meyer wondered  if there  were items  in the  bill                                                                    
such as the  opt-out provision that Ms. Nenon  did not like.                                                                    
Ms. Nenon  replied that the  American Cancer  Society Action                                                                    
Network  supported protecting  all  workers from  secondhand                                                                    
smoke in  the workplace. The organization  was confident the                                                                    
legislative process would continue to deal with the issues.                                                                     
                                                                                                                                
6:43:52 PM                                                                                                                    
                                                                                                                                
Co-Chair   Meyer  asked   how   many   Alaskan  cities   and                                                                    
communities had  become smoke-free.  Ms. Nenon  replied that                                                                    
Bethel  was  the first  community  to  become smoke-free  in                                                                    
1998.  Other smoke-free  communities included  Barrow, Nome,                                                                    
Dillingham,  Unalaska,  Anchorage, Juneau,  Palmer,  Haines,                                                                    
Skagway,  Petersburg,   and  Klawok.  She  noted   that  the                                                                    
information  was  included  in the  sponsor  statement.  She                                                                    
added   that  the   smoke-free  communities   accounted  for                                                                    
approximately half of the state's population.                                                                                   
                                                                                                                                
SB  209  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair  Meyer discussed  the  schedule  for the  following                                                                    
day.                                                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
6:46:54 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 6:46 p.m.                                                                                          
                                                                                                                                
                                                                                                                                

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