Legislature(1993 - 1994)

02/03/1993 01:42 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                        February 3, 1993                                       
                            1:42 p.m.                                          
  MEMBERS PRESENT                                                              
  Senator Steve Rieger, Chairman                                               
  Senator Bert Sharp, Vice-Chairman                                            
  Sentor Loren Leman                                                           
  Senator Mike Miller                                                          
  Senator Jim Duncan                                                           
  Sentor Judy Salo                                                             
  Senator Johnny Ellis                                                         
  MEMBERS ABSENT                                                               
  All Present                                                                  
  COMMITTEE CALENDAR                                                           
  SENATE BILL NO. 59                                                           
  "An Act  relating to  school construction  grants and  major                 
  maintenance grants to school districts; providing for school                 
  district participation  in the cost  of school  construction                 
  and major  maintenance; creating  a major  maintenance grant                 
  fund; and providing for an effective date."                                  
  SENATE BILL NO. 60                                                           
  "An Act  making  appropriations for  construction and  major                 
  maintenance  of  schools;  and providing  for  an  effective                 
  PREVIOUS SENATE COMMITTEE ACTION                                             
  SB 59 - No previous action to record.                                        
  SB 60 - No previous action to record.                                        
  WITNESS REGISTER                                                             
  Jerry Covey, Commissioner                                                    
  Department of Education                                                      
  801 West 10th Street, Suite 200                                              
  Juneau, Alaska 99801-1894                                                    
  POSITION STATEMENT:  Testified on SB 59 and SB 60.                           
  Gary Bader, Director                                                         
  Administrative Services                                                      
  Department of Education                                                      
  801 West 10th Street, Suite 200                                              
  Juneau, Alaska 99801-1894                                                    
  POSITION STATEMENT:  Testified on SB 59 and SB 60.                           
  Duane Guiley, Director                                                       
  School Finance                                                               
  Administrative Services                                                      
  Department of Education                                                      
  801 West 10th Street, Suite 200                                              
  Juneau, Alaska 99801-1894                                                    
  POSITION STATEMENT:  Testified on SB 59 and SB 60.                           
  ACTION NARRATIVE                                                             
  TAPE 93-7, SIDE A                                                            
  Number 001                                                                   
  CHAIRMAN  RIEGER  called the  Senate  Health,  Education and                 
  Social Services Committee meeting to order at 1:42 p.m.                      
  The  Chairman announced the committee would be hearing SB 59                 
  (SCHOOL  CONSTRUCTION  &  MAINTENANCE   GRANTS)  and  SB  60                 
  (APPROP:SCHOOL CONSTRUCTION GRANT FUND)                                      
  JERRY  COVEY,  Commissioner, Department  of  Education, came                 
  forward  to  give  an  overview  of  the  legislation.    He                 
  explained that the state currently  has a crisis with school                 
  facilities.    As the  department  has been  working  to put                 
  together a comprehensive  education plan over the  last year                 
  and a half, throughout  the state there was a lot of concern                 
  expressed about school  facilities and  the need to  address                 
  problems.     Commissioner  Cover  explained  that  a  group                 
  consisting of superintendents,  architects, engineers,  cost                 
  estimators,  legislators,  and  staff  addressed  the  issue                 
  through  the  Alaska  2000 process.    They  developed about                 
  twelve  recommendations.    The final  recommendations  were                 
  built into a plan for school construction.                                   
  Commissioner Covey explained that many  schools in rural and                 
  urban Alaska  are overcrowded and are in need of repair.  In                 
  the urban areas many schools were over built and were far in                 
  excess of what  the actual  needs were.   He indicated  that                 
  many of the rural schools were built hastily and were poorly                 
  Commissioner  Covey  informed  the committee  there  are 286                 
  portable classrooms, in sixteen school districts, which have                 
  been in  use for  up to  ten years.   The  use of  portables                 
  further compounds the crises in school facilities in that in                 
  the current method  that is used to  identify capital needs,                 
  portable classrooms count  as regular classrooms.   Students                 
  in portable classrooms are being counted as though they  are                 
  in regular classrooms  which reduces  the apparent need  for                 
  classroom space, while the need is great.                                    
  Commissioner Covey  explained that  there are  sophisticated                 
  facility  systems,  especially in  rural  Alaska.   They are                 
  located  in  parts  of the  state  where  there  is not  the                 
  infrastructure  to support them.   It dramatically increases                 
  the cost of maintaining those  facilities as people have  to                 
  travel from urban centers to rural Alaska to handle  systems                 
  such  a pneumatic  heat systems,  fire suppression  systems,                 
  Commissioner Covey explained that based on the Department of                 
  Labor's predictions, there is a projected 4 percent increase                 
  in enrollment.   It was projected that there would be a need                 
  of up to  $100 million annual increase to take  care of just                 
  new enrollment.                                                              
  Commissioner Covey discussed  the need of major  maintenance                 
  to school facilities and obtaining  the funding.  Because of                 
  the way the  CIP process  is structured,  the projects  have                 
  jumped from categories 3 and 4  to category 1.  He explained                 
  that  category 2 is  unhoused students.  It  is time for the                 
  state to  develop a  comprehensive plan  to address all  the                 
  problems and the department's plan attempts  to do that.  He                 
  said a lot of time and effort has been put into it and he is                 
  bringing it to  the legislature with the  understanding that                 
  the legislature  is faced with the problem of finalizing the                 
  plan and coming up with the  funding scheme.  The department                 
  and  the  governor  propose using  of  the  earnings of  the                 
  permanent fund  as the funding  mechanism.  It  was realized                 
  early last fall that about $150 million would be needed each                 
  year, for the next few years, to address the plan.                           
  Commissioner Covey explained  there are some changes  in the                 
  current  CIP process  which would factor  a higher  level of                 
  accountability  at  the  local  school  district  level   to                 
  maintain  facilities.   Other  technical  changes relate  to                 
  local contributions by  all school districts based  on their                 
  ability to  pay.   He said  although the  funding source  is                 
  highly sensitive to all Alaskans, it  is a valid request and                 
  an appropriate use of the funds.                                             
  Number 196                                                                   
  SENATOR LEMAN  explained he is aware of significant needs in                 
  the Anchorage area  and said the most  overcrowded school is                 
  Sand Lake Elementary  School and  another is the  Turnagain.                 
  He  referred to the prioritizing of  projects and asked what                 
  the rationale was.   COMMISSIONER  COVEY explained that  the                 
  present  system  has  been  one  method  of  funding  school                 
  construction.     In   addition,   through   other   capital                 
  appropriations, some school  districts have had  their needs                 
  addressed.  Not all projects that have been funded have gone                 
  through the  process.   Some school  districts  have made  a                 
  greater use of  the process than other  school districts and                 
  that  is  why it  appears  that  some of  the  districts are                 
  represented better than other districts.  Commissioner Covey                 
  explained  that Anchorage  appears to  be under  represented                 
  because of a number  of things; such as, they  have obtained                 
  funding in other ways and didn't  utilize the process to the                 
  extent that other districts have.   If the proposed  process                 
  is funded appropriately, there will be significant  activity                 
  by school districts all over the state to get their projects                 
  listed in the CIP process                                                    
  Number 274                                                                   
  CHAIRMAN RIEGER referred  to Commissioner Covey's  testimony                 
  regarding  the participation  of  the school  districts  and                 
  asked him  to  discuss his  comment  regarding some  of  the                 
  school districts having made much greater use of the process                 
  than other school  districts.  COMMISSIONER COVEY  explained                 
  that the department  believes that some districts  have been                 
  very active in seeking  projects and getting them  placed on                 
  the  list and others have not.   He said he has been told by                 
  some  districts that the  highest priority they  have on the                 
  list  is  not their  highest  priority and  if  funding were                 
  available, they would  want to redirect it,  at the district                 
  level, to other projects.                                                    
  SENATOR SALO asked if a district is  allowed to get a health                 
  and safety grant  and then use  it for a preferred  project.                 
  COMMISSIONER COVEY indicated that the answer is "no."                        
  Commissioner Covey explained  that the  major area that  the                 
  department  is seeking to change  in the process is reducing                 
  the priorities, under  the capital plan, down  to about four                 
  or five categories rather than seven or eight.  He said they                 
  would  like to  build in major  maintenance funding  so that                 
  annually, instead of just taking care of the worst problems,                 
  other problems of  a minor nature are  also being addressed.                 
  Another change would be to build into the plan a maintenance                 
  component that  would require  a district  to demonstrate  a                 
  good maintenance program to qualify for any funding.                         
  Senator Salo referred to SB 60 and said the department would                 
  over  see and mandate  that there  be a  maintenance review.                 
  She asked  what the implications would be  if the department                 
  were to  take on  that responsibility.   Commissioner  Covey                 
  said he would like to defer the question to his staff.                       
  Number 333                                                                   
  GARY BADER, Director, Administrative Services, Department of                 
  Education, showed the committee a book with pictures of some                 
  maintenance  projects  that  the  department  is  trying  to                 
  address.  He discussed the two  primary components of SB 59.                 
  The first is to  separate the existing grant component  into                 
  two categories - school construction and  major maintenance.                 
  Another  component  is to  establish the  local match.   Mr.                 
  Bader explained that  the participating share in  cities and                 
  boroughs is based on the per pupil amount and the full value                 
  of  taxable  property  within  the  school  district  bounds                 
  divided  by  the  average  daily  membership of  the  school                 
  district.  The categories of the share requirement under the                 
  bill are attempted to  be equitable based on the  ability to                 
  pay.  He noted for FY 94 the share would range from 5 to  40                 
  percent for city and borough  school districts, depending on                 
  the amount of wealth in the school district.   Over the next                 
  three years, the  district's share would increase  another 5                 
  percent each year,  so there  would ultimately be  30 to  55                 
  percent match.   Mr. Bader referred  to REAAs and  explained                 
  their participating share is zero  the first year, 1 percent                 
  the second year, escalating up  1.4 percent each year  until                 
  it gets to a maximum participation of 3.8 percent.                           
  Mr.  Bader  referred  to  SB  60  and explained  it  is  the                 
  companion bill to  SB 59  and it  gives SB 59  meaning.   He                 
  referred  to  information  in the  member's  files  entitled                 
  "Capital Improvement  Program Budget Request"  and said  the                 
  projects are placed  into categories as they  are submitted.                 
  They are then ranked based upon standard ranking scales.  He                 
  explained that after the ranking is completed, the districts                 
  are notified.   The districts  have the ability  to ask  the                 
  department to  reconsider their placement  on the list.   He                 
  continued to review the  "Capital Improvement Program Budget                 
  Request"  information   dated  January  21,   1993,  in  the                 
  committee members' files.                                                    
  CHAIRMAN  RIEGER  asked   if  the  qualifications  for   the                 
  different categories are in statute.   It was indicated that                 
  the statute was 14.11.013                                                    
  SENATOR SALO asked how often the  list can be changed.   Mr.                 
  Bader explained that the list is reconstructed each year.                    
  COMMISSIONER COVEY said  that the  department believes  that                 
  the list of projects are all valid projects.  He said  he is                 
  confident that they are  real needs.  Senator Salo  said she                 
  believes that all  the projects are valid  projects, but are                 
  they  the  projects  that  have   the  most  serious  needs.                 
  Commissioner Covey said  the process of rating  the projects                 
  begins in  September when the districts send requests to the                 
  department.    The department  holds  hearings  from October                 
  through  this week.   He  explained that  by the end  of the                 
  fiscal year,  all projects  through FY  95 will  have a  new                 
  scale that will go from seven categories  down to four.  The                 
  maintenance  requirement  will  also  be  brought  in.    He                 
  explained that the message will be given to the districts in                 
  the  spring  and that  time frame  will  allow them  time to                 
  develop their list for next year.                                            
  CHAIRMAN  RIEGER  asked  if  he is  correct  in  saying  the                 
  regulations  that the  Department of  Education has  adopted                 
  have basically taken statute in that the department  must go                 
  through  the  first category  before  moving to  the second.                 
  Commissioner Covey said that is his understanding.  However,                 
  the  statute  does  say  that the  department  may  use  its                 
  judgement in  terms  of setting  priorities.   He  said  the                 
  department believes  that absent that  regulation, they have                 
  the authority to move between categories of projects.                        
  Chairman Rieger referred to when the  statute passed in 1989                 
  and said the  House Finance minutes  state that there was  a                 
  concern that  absolute prioritization  not be  pursued.   He                 
  said he thinks  that Commissioner Covey is saying that there                 
  is  a  list of  projects  that  the school  districts  don't                 
  believe are  their top priorities, the  commissioner doesn't                 
  believe  that  they  are  top  priorities, but  because  the                 
  regulations and  paperwork have lead down this path, this is                 
  what must be  put forward.   The legislature is expected  to                 
  put $150 million towards it.                                                 
  Commissioner  Covey   said  he  believes   the  process  has                 
  credibility  and   some  school   districts  take   it  very                 
  seriously.  He said when some of the larger school districts                 
  have millions of dollars  of capital needs and they  see the                 
  state is putting somewhere between $20 and $30 million  into                 
  the process  annually, it is not something that builds their                 
  confidence  and inspires them to spend  a lot of time on the                 
  process.   They have  found ways  around it.   In  addition,                 
  Commissioner Covey said although the process was designed as                 
  well as it could  be, people have learned how  to manipulate                 
  it.  All it takes is to get an architect or engineer to make                 
  certain  claims  about  the  quality  or integrity  of  that                 
  structure.  He said  he believes that the priorities  at the                 
  top of the list  are valid.  There was  continued discussion                 
  regarding the categorization of projects.                                    
  Number 566                                                                   
  Chairman Rieger asked if it would be a fair statement to say                 
  that  the major maintenance portion  of SB 60 corresponds to                 
  the third  priority category  "C" which  says, "protect  the                 
  structure  of  existing  school  facilities."    MR.   BADER                 
  indicated it would be the third and fourth.                                  
  SENATOR MILLER asked if the department has addressed all the                 
  safety and  unhoused student  issues on  a statewide  basis.                 
  Mr. Bader  said the department  has covered all  the health-                 
  life  safety  issues  for  FY  94.    He  noted  there  were                 
  approximately twenty.                                                        
  Senator Miller asked  how many unhoused projects  there are.                 
  COMMISSIONER COVEY explained that there is over $200 million                 
  in  unhoused  student  projects alone.    The  department is                 
  taking  about  $75  million  out of  the  $150  million  and                 
  addressing all the  priority one  projects and  a couple  of                 
  unfinished projects.   Then the department is  attempting to                 
  split the remaining $75 million between priority 2, 3, and 4                 
  projects.  MR.  BADER indicated  that there are  fifty-eight                 
  unhoused student projects in FY 94.                                          
  TAPE 93-7, SIDE B                                                            
  Number 001                                                                   
  Commissioner Covey said  the projects will change  as people                 
  give greater  attention to the  process.  He  explained that                 
  the  bulk of next  year's funding will  be addressed towards                 
  the unhoused student situation.  SENATOR MILLER asked if the                 
  department will  be looking  at the  same source  of funding                 
  next year that they are looking at  currently.  Commissioner                 
  indicated that the answer is "yes."   Senator Miller said if                 
  the department is looking at the same source of funding, why                 
  not deal with the problem now.  Commissioner Covey explained                 
  that  they  are  trying  to  put  fourth  a  plan  that  the                 
  infrastructure  will  support.    Senator  Miller  expressed                 
  concern of  unhoused student  needs in  the Fairbanks  North                 
  Star School District.                                                        
  Commissioner Covey referred  to the rating process  and said                 
  the  projects  are rated  based  upon a  specific  number of                 
  criteria.  It  is the department's  intent, as they look  at                 
  revision of the  process, to work with  representatives from                 
  the school districts in reviewing the criteria.                              
  Number 047                                                                   
  SENATOR SALO referred to requiring good maintenance programs                 
  and asked what incentive there  is for the school  districts                 
  to not allow  deterioration of their  facilities.  She  also                 
  referred to  the sliding  scale of  local contributions  and                 
  said she believes it will be  a real problem in places where                 
  districts will go out  to bond for the other portion  of the                 
  DUANE  GUILEY,  Director,  School   Finance,  Administrative                 
  Services,  Department of  Education, said  the incentive  to                 
  encourage   districts  to   improve   on  their   preventive                 
  maintenance plan and their regular  maintenance plan is that                 
  the department would write regulations  that would require a                 
  preventative  maintenance  plan  to  be  in place  that  was                 
  auditable  by  a   third  party.     That  would  serve   as                 
  justification  for participation  in  the major  maintenance                 
  fund distribution.  In other words, they could not apply for                 
  a project  under the  major maintenance  fund in  FY 95  and                 
  beyond unless they have in  place a preventative maintenance                 
  CHAIRMAN  RIEGER   referred  to  deliberations  on  the  new                 
  maintenance  fund  and  asked  if  the committee  considered                 
  separate  appropriations  in  the   foundation  formula  for                 
  maintenance versus  operations.  Mr.  Guiley indicated  that                 
  there  was discussion.  He said many states provide, through                 
  the general operating fund, a flat dollar amount per student                 
  for school construction.   In those states,  they provide as                 
  little as $30  per student and as high  as $300 per student.                 
  There are various plans throughout the states and in many of                 
  those plans there are  absolutely no restrictions as to  how                 
  those dollars are used.  He  said that subject was discussed                 
  by  the  committee and  given  the various  sizes  of school                 
  districts  in  the   state  and  the  existing   backlog  of                 
  structures, the best proposal was to fund the existing list.                 
  The committee  felt  very  strongly that  the  list  was  an                 
  appropriate  process.    The  disadvantage  to  the existing                 
  process  was  that  those projects  normally  classified  in                 
  categories 3 and 4, relating to the protection of  structure                 
  and  code upgrade,  have  stayed on  the  list and  remained                 
  unfunded, they  continued to  leap over  all the  priority 2                 
  unhoused student projects.                                                   
  Mr.  Guiley   explained  that  the   statute  requires   the                 
  department to submit a  list to the governor by  November 1,                 
  and to the  legislature within ten days  after the beginning                 
  of the legislature.  It also requires the department to rank                 
  those projects in a priority sequence.   Mr. Guiley said the                 
  statutes  further provides that  the department cannot award                 
  projects unless they are in  priority sequence.  Even though                 
  the  statute  provides  broad  classification  of  what  the                 
  department must consider in assigning those priorities, once                 
  the   department  transmits  that  list,  that  becomes  the                 
  priority list.   That list  can only be  changed though  the                 
  appeal   process   which   the   department   is   currently                 
  undertaking.  Mr. Guiley explained the statute also provides                 
  that if an appeal is pending at the time of an appropriation                 
  bill,  the  priority that  is assigned  on  the date  of the                 
  appropriation is the priority in effect.                                     
  Number 086                                                                   
  Chairman Rieger  said  that  as he  reads  the  statute,  it                 
  requires the department  to prioritize  projects and not  in                 
  categories.  Mr.  Guiley said that is a fair  statement.  He                 
  explained that what requires those projects to be funded  in                 
  a  specific   sequence  is   once  the   priority  list   is                 
  transmitted,  the  department  is  supposed  to  prepare  an                 
  estimate  of  the amount  of  money needed  to  finance each                 
  project,  as stated  in  AS 14.11.013.    The department  is                 
  supposed  to  provide  a  grant  schedule  with  a  proposed                 
  schedule of appropriations  to the  governor by November  1,                 
  and to the  legislature ten days  after session begins.   In                 
  preparing the grant schedule, the department shall establish                 
  priorities  among  the   projects  for   which  grants   are                 
  requested.  Further,  the department  shall award grants  in                 
  the order priority established.                                              
  MR. BADER referred to Senator  Salo's question regarding the                 
  sliding scale of  local contributions and said that  some of                 
  the  municipalities   have  indicated  that  the  scale,  as                 
  proposed, may  create some  difficulty in  terms of  getting                 
  voter  approval for bonding.   He indicated  it is currently                 
  under review.                                                                
  CHAIRMAN RIEGER said  it is  not his intention  to pass  the                 
  bill out of committee.  He indicated it would be heard again                 
  at a later date.                                                             
  Number 123                                                                   
  There  being no further  business to come  before the Senate                 
  HESS Committee,  Chairman Rieger  adjourned  the meeting  at                 
  2:43 p.m.                                                                    

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