03/21/2024 03:30 PM Senate HEALTH & SOCIAL SERVICES
| Audio | Topic |
|---|---|
| Start | |
| HB89 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 89 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE HEALTH AND SOCIAL SERVICES STANDING COMMITTEE
March 21, 2024
3:32 p.m.
MEMBERS PRESENT
Senator David Wilson, Chair
Senator James Kaufman, Vice Chair
Senator Löki Tobin
Senator Forrest Dunbar
Senator Cathy Giessel
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 89(FIN)
"An Act relating to education tax credits for certain payments
and contributions for child care and child care facilities;
relating to the insurance tax education credit, the income tax
education credit, the oil or gas producer education credit, the
property tax education credit, the mining business education
credit, the fisheries business education credit, and the
fisheries resource landing tax education credit; renaming the
day care assistance program the child care assistance program;
relating to the child care assistance program and the child care
grant program; providing for an effective date by amending the
effective date of secs. 1, 2, and 21, ch. 61, SLA 2014; and
providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 89
SHORT TITLE: CHILD CARE: TAX CREDITS/ASSISTANCE/GRANTS
SPONSOR(s): REPRESENTATIVE(s) COULOMBE
02/27/23 (H) READ THE FIRST TIME - REFERRALS
02/27/23 (H) HSS, FIN
03/14/23 (H) HSS AT 3:00 PM DAVIS 106
03/14/23 (H) Heard & Held
03/14/23 (H) MINUTE(HSS)
04/25/23 (H) HSS AT 3:00 PM DAVIS 106
04/25/23 (H) Moved CSHB 89(HSS) Out of Committee
04/25/23 (H) MINUTE(HSS)
05/01/23 (H) HSS RPT CS(HSS) NEW TITLE 7DP
05/01/23 (H) DP: FIELDS, SUMNER, RUFFRIDGE,
MCCORMICK, MINA, SADDLER, PRAX
05/10/23 (H) FIN AT 1:30 PM ADAMS 519
05/10/23 (H) -- MEETING CANCELED --
05/11/23 (H) FIN AT 1:30 PM ADAMS 519
05/11/23 (H) Heard & Held
05/11/23 (H) MINUTE(FIN)
05/12/23 (H) FIN AT 8:00 AM ADAMS 519
05/12/23 (H) -- MEETING CANCELED --
01/25/24 (H) FIN AT 1:30 PM ADAMS 519
01/25/24 (H) Heard & Held
01/25/24 (H) MINUTE(FIN)
02/08/24 (H) FIN AT 1:30 PM ADAMS 519
02/08/24 (H) Moved CSHB 89(FIN) Out of Committee
02/08/24 (H) MINUTE(FIN)
02/12/24 (H) FIN RPT CS(FIN) NEW TITLE 7DP 3NR 1AM
02/12/24 (H) DP: GALVIN, COULOMBE, CRONK,
TOMASZEWSKI, FOSTER, D.JOHNSON, EDGMON
02/12/24 (H) NR: STAPP, HANNAN, JOSEPHSON
02/12/24 (H) AM: ORTIZ
02/28/24 (H) FIN CS ADOPTED Y39 N1
02/29/24 (H) TRANSMITTED TO (S)
02/29/24 (H) VERSION: CSHB 89(FIN)
03/01/24 (S) READ THE FIRST TIME - REFERRALS
03/01/24 (S) HSS, FIN
03/21/24 (S) HSS AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
REPRESENTATIVE JULIE COULOMBE, District 11
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 89.
ELEILIA PRESTON, Staff
Representative Coulombe
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Offered a presentation on HB 89.
BRANDON SPANOS, Acting Tax Director
Tax Division
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Answered questions on HB 89.
JESSICA PARKER, Superintendent
Little Mountain Movers
Anchorage, Alaska
POSITION STATEMENT: Invited testimony for HB 89.
STEPHANIE BERGLUND, CEO
Thread
Anchorage, Alaska
POSITION STATEMENT: Invited testimony for HB 89.
JEN GRIFFIS, Vice President
Policy and Advocacy, Alaska Children's Trust
Anchorage, Alaska
POSITION STATEMENT: Invited testimony for HB 89.
BRYANA GARCIA DELACRUZ, Member
Alaska Early Childhood Advocacy Group
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 89.
HILARY PORTER, Deputy Director
Division of Public Assistance
Department of Health
Juneau, Alaska
POSITION STATEMENT: Invited testimony for HB 89.
ACTION NARRATIVE
3:32:11 PM
CHAIR DAVID WILSON called the Senate Health and Social Services
Standing Committee meeting to order at 3:32 p.m. Present at the
call to order were Senators Dunbar, Tobin, Kaufman, and Chair
Wilson. Senator Giessel arrived thereafter.
HB 89-CHILD CARE: TAX CREDITS/ASSISTANCE/GRANTS
3:32:40 PM
CHAIR WILSON announced the consideration of CS FOR HOUSE BILL
NO. 89(FIN) "An Act relating to education tax credits for
certain payments and contributions for child care and child care
facilities; relating to the insurance tax education credit, the
income tax education credit, the oil or gas producer education
credit, the property tax education credit, the mining business
education credit, the fisheries business education credit, and
the fisheries resource landing tax education credit; renaming
the day care assistance program the child care assistance
program; relating to the child care assistance program and the
child care grant program; providing for an effective date by
amending the effective date of secs. 1, 2, and 21, ch. 61, SLA
2014; and providing for an effective date."
CHAIR WILSON stated that the sectional analysis for HB 89 would
not be shared in committee due to its length and members could
review it on their own.
3:33:27 PM
REPRESENTATIVE JULIE COULOMBE, District 11, Alaska State
Legislature, Juneau, Alaska, sponsor of HB 89 gave the following
introduction:
House Bill 89 is designed to help make Alaska more
affordable for families. Part of that vision for
Alaska is making child care more affordable, more
accessible, and higher quality. Child care is a
workforce issue. Many Alaskans would return to work,
take on more work, and become more reliable workers if
we had more quality, affordable care. We are all aware
of our workforce shortages and the outward migration
of our young working families. The jobs are here, but
for many reasons, including housing, education,
training, and certainly the availability of child
care, we face a workforce shortage. It's estimated
that the lack of child care costs Alaskan employers
$152 million in employee absences and turnover per
year. This is an issue we can help solve. HB 89 is a
call to the private sector to look at child care as an
employee benefit, and to the public sector to update
the way we support families and regulate the industry.
As a member of the governor's task force on child
care, I've heard the problems that surround the child
care sector. I've talked with private businesses that
are open to and willing to help their employees with
child care, but don't know where or how to even start.
I've talked with child care facilities, both large and
small, that have shared with me how cumbersome
regulations have weighed them down, and paperwork can
keep their businesses from thriving.
Recommendations that came from the task force address
these issues. HB 89 moves the industry in the same
direction as the task force recommendations. Our
economy is desperate for workers and our children are
struggling to be ready to learn when they enter
kindergarten. So, what can government do to help these
problems? From my perspective, it's not the
government's responsibility to provide child care.
However, it is my belief that government can create an
environment that encourages businesses to offer child
care benefits. Government can remove burdensome and
unnecessary regulations to make it easier for those
who want to, to start a child care business, and also
can encourage communities to create innovative choices
for different kinds of care. Government can also
assist parents who want access to child care. For
those who want or need assistance to grow their
household income. My bill does not propose to spend a
lot of short-term money, but to provide a long-term
incentive for our communities to solve the problem. It
strengthens the child care system in several ways:
3:36:24 PM
REPRESENTATIVE COULOMBE continued:
It creates a tax exemption for businesses for child
care expenditures.
Expands the number of families who can access
assistance by raising the income level to qualify and
raises the cap on the percentage of income a family
spends on child care.
Provides an opportunity to align the assistance level
to reflect the actual cost of care, instead of using a
market study.
Offers an option for the child care program office to
give grants to high performing, high quality child
care providers.
It provides that the department will develop a sliding
fee scale for families who increase their household
income without losing all the child care assistance
all at once.
So, in wrap up, HB 89 will make Alaska more affordable
for families by helping to create affordable, quality
child care that is accessible to families. It also is
a call to the private sector to look at child care as
an employee benefit and encourage people to open child
care facilities. As long as Alaska's energy, housing,
and groceries keep increasing in price, parents will
have to work to keep up. It's time for us to provide a
smart solution, to engage our partners in the private
sector, to help Alaskans in that effort.
3:37:44 PM
ELEILIA PRESTON, Staff to Representative Coulombe, Alaska State
Legislature, Juneau, Alaska, said she would give a presentation
on HB 89. She moved to slide 2 discussed the problem HB 89 seeks
to solve:
[Original punctuation provided.]
What is the Problem?
Lack of affordable, quality child care
• Worsens labor shortages
• Endangers children
• Undermines families' economic security
• Decreases workforce participation
3:38:27 PM
MS. PRESTON moved to slide 3 and said HB 89 provides a solution
to strengthen the child care sector to improve access for
families and help parents return to the workforce.
3:38:39 PM
MS. PRESTON moved to slide 4 and said Alaska's child care is in
crisis as a result of labor shortages, a declining number of
child care providers, and low wages.
3:38:57 PM
MS. PRESTON moved to slide 5 and said HB 89 provides a multiple
approach to solve these problems:
[Original punctuation provided.]
HB 89 Solution
• Expands the number of families who can use child care
assistance Incentivizes tax breaks for employers to
donate to child care facilities
• Increases the maximum tax credit
• Aligns the assistance level to reflect the actual cost
of care
3:39:30 PM
CHAIR WILSON asked if expanding the number of families eligible
for child care assistance would increase demand without a
corresponding increase in the supply of child care providers.
3:39:49 PM
REPRESENTATIVE COULOMBE replied that if capital is infused from
the private sector, it could lead to the creation of more child
care centers. She noted that many existing centers already have
the capacity to serve more children but are unable to do so due
to staffing shortages. By engaging the private sector as a
partner, she hopes to first fill the vacant spots in current
child care centers and then expand further.
MS. PRESTON added that one of the invited testifiers will share
how she plans to double the size of her center.
3:40:45 PM
MS. PRESTON moved to slide 6 and stated that, according to the
U.S. Chamber of Commerce, Alaska is losing $152 million annually
due to employee turnover and absences related to child care
issues. She said in doing research for HB 89, they visited
various child care facilities, including those located within
businesses. She mentioned a bank with an on-site child care
facility and noted that the benefit extended beyond just the
parents using the service; the entire organization experienced
positive effects, demonstrating that it was profitable for
everyone.
3:41:23 PM
MS. PRESTON moved to slide 7 and added that during research for
HB 89, they discovered that child care assistance needed to be
tied to the actual cost of care. Currently, the state's rate is
based on a market rate study. The Alaska Department of Health is
contracting with the McKinley Group to complete this study by
July 31, 2024, but the results will still require approval from
the federal government.
3:41:49 PM
SENATOR TOBIN asked whether the Department of Health is
currently conducting a market rate study or a cost of care
study.
3:42:04 PM
MS. PRESTON replied it is doing a cost of care study.
3:42:07 PM
SENATOR TOBIN asked if the legislation would be impacted by the
cost of care study.
3:42:23 PM
REPRESENTATIVE COULOMBE confirmed that the legislation will be
impacted by the cost of care study. She explained that the
market rate study reflects what is currently being charged for
child care, while the cost of care study examines the actual
expenses involved in providing care. She said originally, she
had money for the cost of care study, but the Department of
Health absorbed the cost and initiated the study, which is
expected to be completed by July 31. She noted that if the
legislation passes, the impact of this study will need to be
discussed, as the current subsidy is based on the market rate
study. Transitioning to the cost of care model would require
federal approval of the methodology, and the state would then
need to decide whether to continue using the market rate or
shift to the cost of care for subsidies.
3:42:55 PM
SENATOR GIESSEL joined the meeting.
3:43:28 PM
CHAIR WILSON asked if there is current information about the
market rate for child care or if any invited testifiers can
speak to the going rate and demand in Anchorage or other areas.
He also inquired how this compares to what the state is paying.
3:43:28 PM
REPRESENTATIVE COULOMBE replied that the Department of Health
(DOH) could probably speak to the question later.
3:44:04 PM
MS. PRESTON moved to slide 8 and explained how HB 89 will help
solve the child care problem in Alaska by comparing the
situation now to the changes HB 89 would create:
[Original punctuation provided.]
Who is eligible for assistance?
Now:
• Families up to 85 percent State Median Income:
• $60, 144 in Alaska for one earner.
• Leaves most of middle-class without affordable
care
• Lack of affordable care = severe labor shortages
in every industry
• There is a 9 percent cap
HB 89
• Raises eligibility threshold to 105 percent State
Median Income: $73 ,920 in Alaska for one earner
• Departments will scale subsidy level based on
need
• Expands number of families who can afford care =
more Alaskans going back to work
• Will change cap to 7 percent of family income
3:45:29 PM
SENATOR DUNBAR asked for more detail on what is being capped.
3:45:23 PM
REPRESENTATIVE COULOMBE explained that the current cap is set at
9 percent of a family's income, meaning the cost of child care
cannot exceed that percentage. However, only about 7 percent of
eligible families are using the subsidy. She stated her belief
that this is partly because when families have multiple children
or the child care costs exceed the subsidy, their copay becomes
too large. She mentioned that by working with the department and
hopefully lowering the cap it will encourage more families to
participate in the subsidy program. She said by raising the
threshold and lowering the cap, she hopes to see an increase
from the current 7 percent participation rate, which she
described as very low.
3:46:28 PM
SENATOR DUNBAR inquired whether a 7 percent cap means that the
state covers 93 percent of the child care cost or if there is a
combination of other payers covering the remaining amount. He
also asked if the 7 percent cap applies per child, wondering if
that means a family with three children would receive a larger
subsidy compared to a family with just one child.
3:46:28 PM
REPRESENTATIVE COULOMBE explained that the current child care
subsidy is around $500 per month on average, though the exact
amount varies depending on the family's income. For example, if
a child care center cost is $1,000 a month, a family might
receive $500 to $600 in subsidy, leaving them responsible for
the remaining amount. However, as child care costs have
increased, families are now paying a larger portion of the
difference, which includes the copay and any additional costs
above what the state covers. For instance, if the state allows
$900 per month per child and pays $500, the family must cover
the remaining $400. This financial burden, especially for
families with multiple children, has made the copay difficult to
manage, leading to a decline in participation in the subsidy
program. Participation rates have dropped to single digits, with
only about 7 percent of eligible families currently using the
program.
3:48:44 PM
SENATOR DUNBAR acknowledged his misunderstanding and stated he
now recognizes it is not 7 percent of the cost of child care but
rather the cost cannot exceed 7 percent of an individual's
income. Therefore, whatever the difference is the state will
make it up.
3:49:10 PM
SENATOR TOBIN asked for clarification about how the child care
subsidy program works. She specifically wanted to understand how
it would impact low-income families, particularly those with no
income, who are trying to find employment. She asked how
unemployed families would access the subsidy to place their
children in child care while they search for work or secure a
job.
3:49:43 PM
REPRESENTATIVE COULOMBE deferred to the department, but said it
is her understanding that individuals need to have employment or
look for work to receive the subsidy.
3:50:20 PM
MS. PRESTON moved to slide 9 -10 and highlighted another key
component of HB 89 is a child tax credit. She explained that the
child tax credits in HB 89 mirrors those from House Bill 223,
allowing the corporations listed on the slide to participate:
[Original punctuation provided.]
Credits offset taxes
State net income tax (Corporate)
Mining License tax
Fisheries Business Tax
Fishery Resource Landing Tax
Oil and Gas Production tax
Oil and Gas Property tax and Insurance tax
MS. PRESTON stated that since HB 89 is an innovative bill, the
exact economic impact is uncertain, but they expect the credits
to function similarly to those in House Bill 223.
3:51:02 PM
REPRESENTATIVE COULOMBE moved to slide 11 and provided
background on House Bill 223, which involves the educational tax
credit. She explained that the child care tax credits in HB 89
were modeled after the educational tax credit, maintaining the
same 50/50/50 split. While the cap for the educational tax
credit is currently $1 million, she raised it to $3 million for
the child care tax credit after consulting with the Department
of Revenue. Businesses would be able to combine both educational
and child care credits up to this cap. She emphasized that her
intent was not to reduce educational investments, which is why
she increased the cap to $3 million.
3:51:55 PM
MS. PRESTON highlighted a few items from the sectional analysis
[CS for HB 89 (RLS), version U] that were not specifically
mentioned in the presentation:
[Original punctuation provided.]
Section 22: Amends AS 47.05.030(a) is conforming
language to change "day care" to "child care."
Section 33: Adds new subsection AS 47.25.071(i) to
allow the department to award grants to child care
facilities that are the highest performing and highest
quality.
Section 39: Amends session laws SLA, chapter 61, 2014
and 2018 SLA chapter 40 to change the effective date
of January 1, 2028. Fisheries education tax credit
expired but was extended in section 39 in the bill.
Section 40: Its it an effective date clause that takes
effective on the day after the date the United States
Department of Health and Human Services approves the
plan.
Section 41: Effective date effective immediately
3:53:15 PM
SENATOR GIESSEL referred to Section 33 and said "highest
performing" and "highest quality" are vague terms. She asked how
they are measured.
3:53:28 PM
REPRESENTATIVE COULOMBE deferred to Thread stating the
organization has standards based on educational activities,
nutrition, and safety.
3:53:58 PM
SENATOR DUNBAR expressed confusion about the fiscal note, which
indicates a $4.8 million reduction in tax revenue. He sought
clarification, noting that with the increase in the cap from $1
million to $3 million for a company's tax write-off, and
assuming it applies to multiple companies, the reduction in
revenue seemed relatively small. He questioned why the projected
reduction in corporate tax income was not larger, asking if it
was because only a few companies in the state would take
advantage of the provision. He expected that if multiple
companies participated, the reduction would be more significant.
3:55:00 PM
BRANDON SPANOS, Acting Tax Director, Tax Division, Department of
Revenue, Anchorage, Alaska, directed attention to page two of
the fiscal note, which includes a table with three components to
the analysis. The first component involves expanding the credit
to cover child care facilities, which is marked as
"indeterminate" because there is not enough data on how many
taxpayers are already paying for child care services or
contributing towards their employees' child care. This lack of
data makes it difficult to estimate the additional revenue
deduction. The second component is the increase in the annual
credit from $1 million to $3 million, and the third is the
extension of the repeal date beyond January 25.
3:56:15 PM
SENATOR DUNBAR expressed concern that the first change might
result in the state paying more for things that are already
happening, questioning whether it would truly lead to an
increase in the number of people accessing the benefit. He
acknowledged the fiscal note's "indeterminate" status but asked
for a sense of the potential scale. He inquired whether the
impact would be in the hundreds of thousands, millions, or tens
of millions of dollars, seeking a better understanding of the
overall fiscal impact.
3:56:50 PM
MR. SPANOS explained that there is a $3 million cap per
taxpayer, which limits the amount that can be used. The
estimates provided are based on historical use of the education
tax credit, which this proposal essentially expands. He
expressed confidence in the figures for raising the credit cap
from $1 million to $3 million and extending the credit beyond
the repeal date. However, when it comes to the expansion into
child care, it would still be subject to the $3 million cap per
taxpayer.
MR. SPANOS offered to provide the committee with additional
analysis, such as what the impact would be if 100 percent of the
credit were used, based on historical use of the education tax
credit. Additionally, they could estimate the effect if every C
corporation filing a tax return were to use the credit to its
full capacity, keeping in mind that the amount of credit each
company could use depends on the tax they owe.
3:58:22 PM
SENATOR DUNBAR expressed interest in receiving more data and
requested information on how many companies in Alaska currently
pay $3 million in corporate income taxes. He estimated that the
number is likely fewer than 100, but asked for confirmation and
would appreciate having that data.
3:58:49 PM
REPRESENTATIVE COULOMBE explained that the sunset date for the
tax credit was set three years out, specifically to address the
uncertainty regarding its actual cost. Since the impact is
indeterminate, the sunset provision allows the legislature to
revisit the issue in 2028 and evaluate its effectiveness. She
acknowledged that it would be up to the legislature to decide on
the final sunset date.
REPRESENTATIVE COULOMBE noted that they had gathered information
on the number of companies paying corporate income tax but did
not have the list at the moment. She mentioned that taxes
eligible for the deduction include corporate income tax, mining
license tax, fishery business tax, fishery resource tax, and oil
and gas tax. She agreed that large corporations would likely
benefit most, reaching the $3 million cap, but emphasized that
many companies pay corporate income taxes. She suggested that
the Department of Revenue could provide more detailed data on
this and reiterated that setting the shorter sunset date was her
way of addressing concerns about the potential cost.
4:00:13 PM
SENATOR TOBIN expressed difficulty understanding the
relationship between the education tax credit and the proposed
changes, noting that other bills are being considered to revert
the tax credit to pre-2018 numbers, while some aim to abolish
the sunset date altogether. She asked for further clarification
on how these different pieces are intended to fit together.
4:00:41 PM
REPRESENTATIVE COULOMBE acknowledged that there are several
pieces of legislation related to the education tax credit and
noted that this creates some uncertainty. She mentioned that she
has seen discussions in committees about how different bills
might interact, with questions like "What if this passes before
that?" Ultimately, she suggested it will depend on which bill
crosses the finish line first. She explained that Representative
Ruffridge is proposing to eliminate the sunset date while
keeping the $1 million cap, whereas the Senate bill aims to
extend the sunset date and increase the cap. She clarified that
if HB 89 passes first, it might make the need for the other two
bills unnecessary, with the primary remaining question being
whether to eliminate the sunset date entirely. However, she
expressed that there may be reluctance to fully eliminate the
sunset date due to the uncertainty of the cost.
4:01:53 PM
CHAIR WILSON agreed and opined that it is an ongoing
conversation with a combination of ideations.
4:02:09 PM
SENATOR KAUFMAN stated his understanding that certain
requirements hinder a robust business climate for child care. He
asked whether HB 89 includes provisions to remove impediments.
He noted other states seem to have strong freelance child care
networks, for instance small daycares in neighborhoods. He asked
for thoughts on how HB 89 addresses this area.
4:02:52 PM
REPRESENTATIVE COULOMBE explained that during her time on the
child care task force, she learned about many of the issues
involving paperwork and regulations, including background
checks, licensing, and other administrative hurdles. She noted
that after multiple meetings with Commissioner Hedberg, they
concluded that many of these problems could be addressed at the
departmental level. She said she intentionally paused the bill
last year, knowing the task force would meet and potentially
uncover areas that needed to be added or changed.
4:03:30 PM
REPRESENTATIVE COULOMBE highlighted that the main issues
centered on cumbersome processes like background checks and the
need to print, fill out, and mail forms, which creates barriers
for both rural and urban areas. One feature of HB 89 is the
introduction of a liaison in the department's child care office
to help businesses navigate offering child care benefits. This
role would guide businesses on options other than building a
child care center, such as assisting employees with subsidies or
developing other child care benefits.
REPRESENTATIVE COULOMBE clarified that the HB 89 doesn't address
regulatory burdens, which are being worked on by the
commissioner as part of the task force recommendations. These
include efforts to streamline paperwork, improve child care
center ratios, and address other factors that impact the
financial survival of child care centers. She also mentioned
that she has been collaborating with the Anchorage child care
office on potential solutions specific to Anchorage, which is
the only location that licenses child care separately from the
state. However, those initiatives are separate from what is
included in HB 89.
4:05:27 PM
SENATOR TOBIN noted that, from her understanding, only a few
organizations are currently able to utilize and apply the
education tax credit. She mentioned that there have been
discussions with legislative legal about expanding the credit to
include additional organizations, such as nonprofits, and asked
if similar challenges had been encountered with the changes
outlined in HB 89. She wanted to know if there had been similar
difficulties in opening up the child care tax credit for broader
use.
4:06:15 PM
REPRESENTATIVE COULOMBE asked if the question is what
organizations can apply for the tax credit.
4:06:27 PM
SENATOR TOBIN replied she is asking what organizations can use
the tax credit and what the tax credit can be applied to.
4:06:38 PM
REPRESENTATIVE COULOMBE responded that it's difficult to predict
specific challenges as the department has not tried to implement
the changes in HB 89 yet. She noted that HB 89 outlines specific
deductions but acknowledged that adjustments might be necessary
over time to make it easier to use. She pointed out that the
educational tax credit has been in place for a while and has
evolved, and she anticipates similar developments with the child
care tax credit.
4:07:11 PM
CHAIR WILSON announced invited testimony.
4:07:31 PM
DR. JESSICA PARKER, Superintendent, Little Mountain Movers,
Anchorage, Alaska, who oversees Little Mountain Movers Academy
and Mountain City Christian Academy in Anchorage, expressed
enthusiastic support for HB 89. She explained that her
organization is deeply involved in child care and educational
services. The demand for daycare, especially for infants, is
skyrocketing, leaving the center with a long year and a half
waitlist. Despite receiving approval to increase its capacity to
300 kids, regulations are hindering its ability to fully open.
Currently, it serves fewer than 120 children, while nearly 100
are on the waitlist, half of whom are infants.
MS. PARKER noted that staffing and space requirements for infant
care are particularly high, making it the most challenging area
to expand despite being the most in demand. However, she is
encouraged by the work the legislature and department are doing
to address the challenges and sees HB 89 as a potential game
changer. By tweaking the daycare assistance and Child Care Grant
Program, HB 89 will ease pressures by raising the income
threshold for families and adjusting grants to reflect actual
costs and local needs. She praised HB 89 for recognizing the
diverse needs of different regions, especially in a unique place
like Anchorage, and for offering real solutions. She expressed
her strong support for the legislation and encouraged more
initiatives like it.
4:09:52 PM
STEPHANIE BERGLUND, CEO, Thread, Anchorage, Alaska, said Thread
is Alaska's Child Care Resource and Referral organization. She
explained that Thread works to strengthen access to affordable,
high-quality early childhood education with a focus on child
care, serving over 10,000 families, 2,000 early educators, and
more than 400 programs annually. She emphasized that the child
care sector is fragile, with long-standing institutional
deficiencies, and that the challenges have increased over the
last four years. Since 2020, more than 25 percent of licensed
child care programs have closed across Alaska, and those that
remain open face staffing shortages, preventing them from
serving all the children they could. She warned that without
sustainable investment and policies, more programs are likely to
close. The child care workforce struggles with low wages and few
benefits, which is particularly challenging in Alaska's highly
competitive labor market. Fewer families can access affordable,
quality child care, and this negatively impacts the state's
economic infrastructure. Businesses struggle to recruit and
retain employees, and families face obstacles to workforce
participation. Research, in partnership with the Alaska Chamber
and the McKinley Group, shows that child care challenges lead to
employee absences and turnover, costing businesses an estimated
$152 million annually. She further explained that when Alaskans
cannot work due to child care issues, they lack financial
security, hindering their ability to support their families and
contribute to the economy. This cycle affects quality of life
and stalls Alaska's economic growth.
4:12:05 PM
MS. BERGLUND said she supported HB 89, which incentivizes
businesses to support child care and strengthens child care
assistance and subsidy programs. By allowing more families to
participate in child care assistance and creating flexibility in
resources, HB 89 aims to address many issues facing the sector.
She noted that too few families currently participate in the
child care assistance program, due to eligibility barriers and
the financial burden of copays and tuition differentials. She
pointed out that 51 percent of families in a recent survey
reported that the availability, quality, or cost of child care
affects their ability to work, a significant increase from 22
percent in 2019. This underscores the need for policy changes
like HB 89 to strengthen the workforce and economy.
Additionally, she highlighted that child care businesses are
reimbursed at rates based on the market rate survey, which
reflects the amount charged for care, not the actual cost of
providing quality care and education. This creates an unstable
foundation for the child care system. She expressed support for
current research on the true cost of care and was encouraged by
HB 89's inclusion of using cost-of-care data alongside market
rates in policy and fiscal planning. While endorsing HB 89 as a
critical step for improving affordability and access for
families, she also urged policymakers to consider further
investments to ensure families who qualify for assistance have
access to child care facilities. She encouraged the committee to
pass HB 89 this session, stressing that positive change for the
child care sector cannot come soon enough.
4:15:21 PM
CHAIR WILSON asked what percentage of child care facilities
accept clients using child care assistance, specifically in
terms of their overall payer mix within the facilities.
4:15:40 PM
BERGLUND replied that she did not know the exact number but
suggested that most facilities accept child care assistance. She
estimated that approximately 80 to 90 percent of programs enroll
children who use the child care assistance subsidy system. She
added that accepting the subsidy also provides access to the
Child Care Grant Program, offering additional benefits and
resources for providers.
4:16:15 PM
CHAIR WILSON mentioned that he was hoping to get a quantifiable
number but noted that he would follow up with the department
later to see if they have the specific data.
4:16:23 PM
SENATOR TOBIN expressed curiosity about how HB 89 addresses the
issue of living wages for child care providers, who often
struggle with low compensation despite the important and
specialized work they do. She emphasized the need for providers
to be paid fairly and have the necessary training to care for
vulnerable children. She asked how HB 89 intersects with the
need for better wages and training within the child care
community.
4:16:57 PM
MS. BERGLUND explained that the bill allows for increased
support for quality child care by expanding the child care
assistance program to help offset costs for families. She noted
that with more stable income, child care businesses can provide
better support for their personnel, which is typically the
largest expense in the child care business model, including
wages and benefits. She referenced how, during the COVID-19
relief efforts, most child care businesses used the additional
funds to support their staff. She emphasized that when programs
receive additional financial support, they can direct it where
it's needed mostoften toward improving wages and benefits
without necessarily increasing costs for families, which is a
key goal of HB 89.
4:18:21 PM
JEN GRIFFIS, Vice President, Policy and Advocacy, Alaska
Children's Trust, Anchorage, Alaska, gave the following
testimony:
Alaska Children's Trust is pleased to offer our strong
support for House Bill 89 which would expand access to
child care assistance for parents. As the statewide
lead organization focused on the prevention of child
abuse and neglect, we support policies that increase
economic security for families and provide
foundational early education support for children. HB
89 does both by increasing access to quality,
affordable child care for Alaska's families.
Currently, the average family in Alaska is paying 15
to 35 percent of their income for child care, and 51
percent of families say they can't participate in the
workforce to the extent they would prefer due to child
care issues. According to Kids Count 2023, Alaska
ranks 44th in the nation for economic well being and
34 percent of Alaska children have parents that lack
secure employment. HB 89 would increase the
eligibility limits for child care assistance, allowing
more Alaska families access to affordable child care,
and providing more parents the opportunity to
participate in the workforce. Parents who are able to
access the child care they need report reduced stress
and increased economic stability, both important
societal factors for decreasing the risk of child
abuse and neglect, and quality child care allows
children to grow and develop to their full potential,
increasing their readiness for school and eventually
the workforce. While HB 89 does not solve all of the
challenges currently facing Alaska's child care
system, it is an important step towards revitalizing
our child care sector in a way that supports our
children, families, communities, and businesses. We
encourage your support for HB 89.
4:20:34 PM
CHAIR WILSON opened public testimony for HB 89.
4:20:57 PM
BRYANA GARCIA DELACRUZ, Member, Alaska Early Childhood Advocacy
Group, Fairbanks, Alaska, testified on behalf of the Alaska
Early Childhood Advocacy Group in support of House Bill 89. The
group, consisting of nine nonprofits, advocates for increased
investment and improved policies for Alaska's child care sector.
Over 51 percent of families cannot fully participate in the
workforce due to the lack of child care, and workers in the
sector earn an average of $29,500 annually. The average Alaska
family pays 15 to 35 percent of their annual income to child
care costs. Child care programs are closing, impacting children,
families, and the economy. While HB 89 doesn't solve all issues,
it expands eligibility for child care assistance and encourages
business investment through tax credits. The group urges support
for the bill to strengthen child care and benefit Alaska's
economy.
4:23:02 PM
CHAIR WILSON closed public testimony on HB 89.
4:23:30 PM
SENATOR TOBIN asked about the qualifications for a quality child
care program, including the curricula requirements, the
classroom environment, developmentally appropriate expectations,
and the necessary training. She sought clarification on what is
meant by "quality child care."
4:24:06 PM
HILARY PORTER, Deputy Director, Division of Public Assistance,
Department of Health, Juneau, Alaska, stated that she would
provide a detailed explanation in writing to the committee in
response to the question.
4:24:21 PM
SENATOR TOBIN mentioned one of her favorite programs is the
Multnomah County "Preschool for All" model, which sets a
benchmark for high-quality programs to receive additional
funding. This ensures that public funds are used effectively to
prepare young children for preschool and kindergarten.
4:24:42 PM
SENATOR TOBIN asked what the intersection is between child care
and Head Start access.
4:24:59 PM
MS. PORTER replied she get back to the committee with an answer.
4:25:11 PM
SENATOR TOBIN praised the Portland program for ensuring that all
children have access to child care regardless of socio-economic
status, ethnicity, or disability. She asked whether Alaska's use
of state funds for child care programs would ensure the same
level of accessibility and inclusivity, or if the current child
care assistance program already provides that level of access.
4:25:42 PM
MS. PORTER stated that the Governor's Task Force on Child Care
is focused on increasing access to child care and exploring how
the state and the department can support that effort. She added
that she would provide further information to the committee.
4:25:42 PM
SENATOR TOBIN said she just wants to ensure that when the
public's funds are used everyone in the public can access the
programs.
4:26:08 PM
SENATOR DUNBAR referenced art. VII, sec. 1, Constitution of the
State of Alaska, which says no public funds shall be used for
the direct benefit of religious or private educational
institutions. He asked how the state ensures that public funds
are not being directed toward religious instruction in early
child care programs, given that some are run by religious
organizations.
4:26:48 PM
MS. PORTER said she was unsure and would get back to the
committee with her response.
4:26:48 PM
SENATOR DUNBAR noted that his question was asked out of
curiosity about the existing program and recognized that HB 89
does not change the fundamental nature of the program.
4:27:11 PM
CHAIR WILSON asked about the percentage of child care assistance
enrollees relative to the total clientele in child care
facilities to understand the payer mix. He sought to determine
whether the state is the primary payer in many child care
facilities and questioned why there is such a high demand for
child care while facilities are closing. He speculated whether
more than 60 to 70 percent of payments come from the state and
if the market rates paid by the state are lower than fair market
rates. He also asked whether the market study will show the
upper bounds of what average families who don't qualify for
assistance are willing to pay. He inquired whether the task
force was examining the economic landscape of child care
facilities in Alaska to better understand the business aspects
of the sector.
4:28:41 PM
MS. PORTER stated that the hope is that the cost of care study,
conducted by the McKinley Group, will provide some of that data
and analysis. The study aims to look beyond just the rates
charged to families and should address some of the broader
economic questions around child care. However, the final report
is still a couple months away, and she expressed optimism that
these questions could be better answered once the study is
complete.
4:29:07 PM
CHAIR WILSON asked if there is data on the payer mix for child
care facilities, specifically what percentage of enrollees are
covered by the state of Alaska. He mentioned that, given
licensing and capacity information, the state should understand
how many enrollees are in these programs and how much of the
cost the state is paying for.
4:29:31 PM
REPRESENTATIVE COULOMBE apologized that the department
representative knowledgeable in that area was unavailable but
assured that the department would respond to all the committee's
questions. She shared her observations from visiting many child
care centers, noting that the payer mix varied and no distinct
pattern emerged, although area seemed to play a role. She
mentioned that center owners are aware of subsidies and assist
parents with applying, which helps create stability in their
operations. While it's not a formal cost of care study, she
estimated that approximately 25 percent of children in the
centers she visited were receiving some kind of subsidy.
4:31:10 PM
CHAIR WILSON explained that the rationale behind the line of
questioning is to better understand the business models of child
care centers and how various factors, including the state's
role, impact their success or failure. He emphasized the need to
see how reliant these centers are on state support and subsidies
and how that interplay affects their overall operations.
4:31:37 PM
REPRESENTATIVE COULOMBE mentioned that the child care grants
were discussed extensively, particularly the $7.5 million
allocated last year along with remaining COVID funds. She
explained that there has been debate within the task force about
whether to use the grants to subsidize wages. She shared her
preference not to subsidize wages, based on her field visits
where she learned that many child care centers did not use
COVID-related grants for wages. Instead, funds were used for
other needs such as buying vans, fixing roofs, or purchasing
equipment. While some centers did use the grants for training or
wages, she noted that it's difficult to ensure that grant money
is spent as intended. However, the grants were crucial for
keeping many centers open during COVID, even if they weren't
always directed toward wages or parental assistance as
originally intended.
4:33:19 PM
CHAIR WILSON brought up a question regarding recent meetings
with independent caretakers, noting that rates had been raised
twice. The caretakers had hoped these increases would go toward
wages. He mentioned pending federal legislation that would
require 80 percent of payments to go toward wages, up from the
current 50 percent rule. He asked whether the department is
considering any regulatory or statutory changes to ensure a
certain percentage of child care payments would be directed
toward wages.
4:33:56 PM
MS. PORTER confirmed that the department is looking at amending
both licensing regulations and child care assistance
regulations, and they are currently in that process.
4:34:20 PM
REPRESENTATIVE COULOMBE acknowledged that many want to address
all the issues facing child care right now but emphasized that
HB 89 is just one piece of the solution. It aims to involve the
private sector and improve the subsidy system. She expressed
confidence that the Commissioner of Health is addressing
concerns with licensing regulations. She stated her belief that
several key changes will help move things forward.
4:34:56 PM
CHAIR WILSON held HB 89 in committee.
4:35:31 PM
There being no further business to come before the committee,
Chair Wilson adjourned the Senate Health and Social Services
Standing Committee meeting at 4:35 p.m.