HOUSE BILL NO. 287 "An Act making appropriations for public education and transportation of students; making appropriations under art. IX, sec. 17(c), Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date." 9:10:05 AM Co-Chair Foster relayed that his office had not received any amendments from committee members. ARNOLD LIEBELT, STAFF, REPRESENTATIVE PAUL SEATON, introduced himself. ALEXEI PAINTER, ANALYST, LEGISLATIVE FINANCE DIVISION, introduced himself. Co-Chair Foster noted the testifiers were available for questions. 9:11:23 AM Representative Thompson stated the bill concept was a good idea, but he believed it had not been sufficiently vetted. He thought it was premature to force the legislature into a three-quarter vote to use Constitutional Budget Reserve (CBR) funds before the legislature had determined what it wanted to do with the entire budget. He stated there had not been many meetings on the bill where the committee had been able to hear from the entire public. He noted the only testimony had been invited, such as school superintendents. He thought the bill usurped the budget process. He asked if the committee was doing the finance subcommittee's work. He reiterated that it was a good idea, but it was too early. He asked for the current CBR balance. Mr. Painter replied that that the CBR balance was projected to be $2.146 billion at the end of FY 18. Representative Thompson reiterated that he was not comfortable with considering the legislation so early in the legislative session, which would force a three-quarter vote [by the legislature]. Representative Pruitt believed the funding amount in the bill was the same amount proposed by the governor. He asked for the accuracy of his statement. Mr. Liebelt replied in the affirmative. Representative Pruitt asked if anyone had spoken with the Senate to determine if the amount was a bone of contention. Co-Chair Seaton replied that he had spoken with members of the other body, including finance members, who had indicated they did not plan further cuts to K-12 education. He stated that the amount in the legislation was the same funding level as the prior year. He remarked that the other body had not taken any action on the issue because it had not received the budget. The charts in member's packets showed a slight drop in the budget from the preceding year due to lower than projected pupil enrollment. The FY 18 management plan was estimated to be the governor's number and the number in HB 287 based on the actual amount funded in FY 17. The charts showed a slight dip, but it did not represent a real dip because it was the actual number paid out based on the precise student count. Representative Pruitt did not propose cuts to education either. He believed the only argument for the passage of the bill was related to expectation there would be a failure in understanding the amount that would be available. He stated the committee had heard in a presentation the prior week that there were several dates associated with education budgets, including May 15 (pink slip deadline for nontenured teachers) and May 31 (pink slip deadline for tenured teachers). He thought the bill represented an expectation of failure by the legislature to get a budget passed in 90 days. Yet, the legislature had an understanding on education. He agreed that the budget could be planned on the data in the bill. He also believed the legislature would finish its work in 90 days. He believed the bill was unnecessary. He thought the bill merely bifurcated the budget and he wondered was next. Representative Pruitt questioned whether other items such as health and public safety would be pulled from the overall budget for separate consideration. He noted that the budget would be piecemeal. He added that the [Department of Revenue] spring forecast, which would provide a better representation of the state's full revenue source would not come out until April. He noted the release date also depended on whether the administration chose to hold onto the forecast longer as it had the previous year. He asked what the need for the bill was at present. He stated that if there was alignment he did not understand the need for the bill. Co-Chair Seaton discussed early funding of education in order for municipalities and school districts to construct their budgets. He did not believe there was complete agreement on all budgetary items, knowledge of what the spring forecast would be, or agreement on the amount to be taken from the [Permanent Fund] Earnings Reserve Account (ERA). He did not believe school districts and municipalities could plan their budgets around the belief that the House and Senate and the governor all agreed on what the number would be. He compared the unknown situation to a scenario where the legislature passed a bill that was signed by the governor. He noted that signed legislation was security that had not been provided by the legislature in the past, which had been a problem. 9:19:15 AM Co-Chair Seaton continued to address Representative Pruitt's question. There had always been the insecurity of leaving the education budget to the last item [to be negotiated]. He stated that unless a separate bill was passed with money attached that the governor could sign, the legislature would not be early funding education. Assuming there would be agreement on the amount that would be passed was not the same thing as a passed budget. He stated that until legislators voted on something it was not possible to know what would happen. The purpose of the bill was to take the issue off the table and prevent layoffs or districts from having to construct two budgets because things changed in midstream. He stated that if the legislature wanted to early fund education, they should early fund it; if not, education should be left in the regular budget. He believed education should be early funded. He stated that education funding was vital, and the bill would fund it at the last year's level. 9:21:12 AM Representative Pruitt surmised that it sounded like there was a failure to communicate. He clarified he had not stated there was alignment on everything, but from what he understood, there was alignment on education funding. He did not understand the need to push the bill from committee at present when it sounded like there had been multiple conversations with members from the Senate about their alignment on the topic. He did not understand why they could not wait a few days to determine whether there was alignment in the Senate as a whole. He cited May 15 and May 31 as failure dates, which were 30 days after the legislature was supposed to be finished with its work. Representative Pruitt remarked the bill would pull $800 million more from the CBR than the estimate provided in the initial presentations. He stated that it would mean pulling more money out of an account than was potentially needed. He stated that on July 1 it would mean pulling $1.2 billion out of an account that earned 1.86 percent in 2017 instead of using money from the General Fund, which could be pulled out over the course of the year. He detailed the General Fund had made 1.56 percent in 2017. He remarked that the difference may not seem substantial, but 1 percent of billions was significant. He thought they were pushing forward on something without communicating with the other body. He reasoned that if there was alignment the bill reflected an expectation of failure. He requested to hold off on taking action for several days in order for a discussion to take place with the Senate. 9:23:30 AM AT EASE 9:26:51 AM RECONVENED Co-Chair Foster noted there were several questions and that a slide had been put up on the screen. He relayed his intent was to hold the bill a couple of days to hear public testimony on Thursday. He wanted to allow extra time to communicate any concerns. Vice-Chair Gara stated that the most important professionals in the state were becoming demoralized. They were leaving positions with the University and the education system because they did not know whether they would have jobs the following year. He remarked that the past few years there had been legislators asking for $67 million in education cuts at the last minute. He believed if legislators were all agreeable that no one would do that during the current session, they should deal with the education budget at present. He spoke to the concept of passing a budget on time. He supported that goal but pointed out that there had not been a great history of passing a budget on time in recent years. He did not want to send pink slips to teachers. He stressed that some of the best teachers were leaving the state. He reasoned that when those individuals were lost it meant the state's education system suffered. Vice-Chair Gara lauded Co-Chair Seaton for filing the bill because it reflected a discussion the legislature had been having for a long time. He spoke about threats that individuals would lose their jobs. He supported the bill. He stated that unfortunately with the differing opinions about a fiscal plan something had not passed. He supported a fiscal plan. He pointed to decisions made by the legislature the previous year when the savings account had been drawn down substantially. He stated that the remaining sources of revenue were very controversial. He believed the bill had to pass. He was glad to hear that others did not want to further cut education. He supported an inflation adjustment for the losses in education funding. He believed the bill was something all legislators could agree on. 9:31:28 AM Co-Chair Foster repeated that he planned to hold the bill until Thursday for more public testimony. The committee would hear public testimony during the current meeting as well. Representative Neuman thanked Co-Chair Foster for the opportunity to ask questions. He asked how to prioritize funding of teachers over state troopers and everyone else. He spoke about decisions that needed to be made included what funds to use to fund a budget. He detailed that the previous year there had been a decision made by the House Majority not to fund any budgets until taxes and use of the Permanent Fund Dividend bills were passed. He stated the legislature could pass a bill like HB 287 and it would still not matter. He asked about how to utilize the current fund. He agreed that giving industry and schools an idea of what the funding would be would be helpful as soon as it was possible to do so; however, the state was experiencing difficult financial times and the decisions were difficult. He thought tying up the available funds in the different pots of money could be very difficult for the legislature. He wanted to get more information on the topic. Representative Neuman spoke about personnel costs - it had been mentioned that the bill was highly supported by many members. He was not able to support the bill due to questions he had. He stated there was no reason why the Senate and House could not get together early on to give the education industry an idea of what the funding would be. He reiterated his thanks for the time to consider the bill. Co-Chair Foster reiterated that public testimony would be reopened later in the meeting and on Thursday. 9:35:01 AM Representative Tilton echoed comments made by her colleagues. She wondered about the funding priorities for the different departments and agencies. She mentioned the education subcommittee process and questioned whether the bill put the cart before the horse. She spoke to the remaining CBR balance and available funding and asked if figures accounted for increased oil prices. Mr. Painter replied in the negative. The projections of the CBR balance at the end of FY 18 assumed the [Department of Revenue] fall forecast, which he believed used a $56 per barrel price in FY 18. Representative Tilton remarked that the projection was at $56 per barrel, but the other day the price was $70. She asked if her statement was accurate. Mr. Painter replied in the affirmative. Representative Tilton surmised there was an opportunity for some increased balances in state savings accounts. Mr. Painter answered that if prices held at $70 for the remainder of the fiscal year there would be an additional $200 million in the CBR; the balance would be $2.3 billion instead of $2.1 billion. Co-Chair Seaton spoke to an earlier question about whether the legislation was taking over the responsibility of the finance subcommittee. The portions included in the bill were in statute including the Base Student Allocation (BSA) and pupil transportation, which were not considered by the finance subcommittee. He clarified that the bill did not fund the entire education budget including pre-K, teacher mentor programs, and the Department of Education and Early Development (DEED) - those items were still under the purview of the education subcommittee. Co-Chair Seaton furthered that the bill also considered other portions where people were required to receive layoff notices by state law including boarding schools and Mount Edgecumbe. The bill funded basic K-12 education, which was where the agreement resided. He stated there was no agreement on things like bond debt reimbursement for schools. The bill addressed the portion of education and employees that were different than state troopers. He detailed that state troopers were not required to receive layoff notices May 15 through June. Troopers may go on furlough on July 1 if a budget was not finished, but the bill pertained to the only segment of government where there was a law requiring advanced layoff notices. The bill's purpose was to ensure the school districts and municipalities working to fulfill state law were not negatively impacted. Co-Chair Seaton clarified there were four groups within the legislature (two in the Senate and two in the House). He elaborated that no caucus had a three-quarter vote within its membership. He explained that if the items were left in the operating budget they would need agreement between the four groups without a vote. He did not know that the option was a secure way to ensure the funding for education. The purpose was to identify a funding source and agree or not agree to fund education early. He explained it would mean the education funding would be a known amount, which would be attached to the funds identified in the budget bill. The way to gain full knowledge and security was to have a vote. He appreciated Co-Chair Foster reopening public testimony. 9:41:18 AM Representative Ortiz responded to an earlier question about whether the bill bypassed the subcommittee. He relayed that the subcommittee had discussed the issue and had already heard all portions of the sections included in the bill with the exception of Mount Edgecumbe. The subcommittee was scheduled to hear about Mount Edgecumbe the following day. He relayed the subcommittee had not been bypassed. Representative Neuman stated that generally the supplemental budget could get rolled into the capital or operating budget. He asked if the bill was a standalone appropriations bill. Co-Chair Seaton replied in the affirmative. The bill was a complete budget bill that identified the funding sources. He explained that if it passed it would go to the governor for his signature. The bill's passage would result in the removal of the sections in the general operating budget. He detailed that HB 287 was an operating budget bill for basic K-12 education. The bill was a way to fund education early. Representative Neuman stated that the legislature was statutorily required to pass an operating budget. He noted there were ways to interrupt the bill if desired. He elaborated that the legislature had statutorily required budgets it had to pass every year. He asked if the bill would fall under the same statutory requirement. Co-Chair Seaton answered in the affirmative. The bill was a portion of the operating budget and would have the same qualifications as any other. 9:44:10 AM Vice-Chair Gara remarked that the committee was not really supposed to talk about what the Senate would do per the Mason's Manual. He emphasized that individuals impacted by the legislature's failure to pass a budget on time were angry. He stated that for three years in a row the legislature had told teachers they would possibly face $67 million in education cuts. The legislature had an opportunity to tell teachers they would not face cuts in the current year. He shared that a teacher friend was leaving the state because he was fed up with the threats of cuts and receiving pink slip notices. He underscored that the state was losing its best teachers. He detailed that state employees receiving pink slips took the issue seriously. The bill provided an opportunity to communicate to the education system that they would not face cuts in the current year. He underscored that the state was losing its teachers. The bill was an attempt to ensure that the best teachers remained in Alaska. He hoped the legislature could come together in agreement that further cuts to education were not appropriate. 9:46:25 AM Representative Guttenberg remarked that the committee had ample opportunity to have discussions. He requested to hear public testimony if people were waiting. Representative Grenn asked about the timing and need to get the bill passed and to the governor as soon as possible. He stated that May 15 was the statutory deadline regarding nontenured teachers. He relayed that the Anchorage School District had to report its budget to the municipality by March 1. He believed securing funding by that point would provide morale for the district to know the legislature was focused on education as a priority for Alaska. He detailed that due to years of pink slips the morale was low. He believed the bill would go a long way in showing the legislature's support. He supported moving the legislation quickly. Representative Pruitt spoke to a comment about an earlier statement about trying to get the four caucuses together on a CBR vote. He thought the bill appeared to be trying to take the CBR discussion off the table at present, which he viewed as a usurpation of the power of the Minority in some cases. He recalled a letter written on May 20, 2015 signed by several members including the co-chairs, which indicated that five days after the pink slip date for nontenured teachers they wanted to continue the negotiations with the Minority caucus to obtain the number of votes needed to access the CBR instead of using the ERA. He noted that the ERA would be utilized without the vote of the people for which they requested. Representative Pruitt continued that even then there had been an argument from members of the House that usurping the power of the Minority was not something they wanted to go forward with. He believed what he had heard about HB 287 was the desire to get the issue off the table so there was an ability in the long run to (after $800 million was pulled from the CBR - more than was necessary based on prior testimony) go forward without the need or necessity of having the voices of the people that may find themselves not in the Majority. He believed the issue should be laid on the table if it was a concern from the past. He stated that the House Majority [in 2015] had taken the other members' concerns into account and had allowed the Minority to continue to play the role everyone would expect. He believed it was important to take into consideration. He reiterated the current discussion seemed like an attempt to eliminate the House Minority's ability to participate in the full budget process. 9:50:31 AM Co-Chair Seaton spoke to the $800 million and reminded the committee that they were talking about a potential ERA draw that was unsustainable, which was based on a 6.95 percent annual return. He elaborated that the Alaska Permanent Fund Corporation (APFC) Board of Trustees had adopted the actuarial amount of 6.5 percent, which was essentially 0.5 percent down in the board's long-term projection in return on investment. He wanted to make sure the issue was considered. Representative Pruitt stated that Co-Chair Seaton had just highlighted why the issue was challenging. He continued that the bill tried to put together pieces of a puzzle without knowing what the puzzle looked like. He explained that going forward with the bill would make certain assumptions and force certain things to be the reality when it came time to put the budget together. It was part of the reason he believed the budget needed to move forward together instead of in pieces. He reasoned they did not know exactly what the revenue or spending pictures would be all at the same time, which made it very difficult to put the whole thing together. 9:52:23 AM Representative Thompson remarked on a statement made by Co- Chair Seaton that if the bill passed, the sections would be removed from the full budget. He wondered what would happen if the legislature decided it needed to add more money to the education budget for something like pupil transportation. He reasoned it would mean the need for another standalone bill. He stated the subcommittee process had not been completed to determine whether changes would be needed. He was concerned about pulling the items from the budget. Co-Chair Seaton clarified that nothing precluded the budget from having additional money on the topics. For example, the legislature could choose to add additional pupil transportation funding if it chose to do so. The bill would fund the BSA and pupil transportation at the prior year levels. He explained that the legislature could put something else in the budget if decided to do so. The bill would be signed by the governor as the specific amounts, but nothing prevented additional funds in the operating budget. Representative Neuman had heard from the sponsor that the bill would be a standalone operating appropriations bill that would be required statutorily just as the operating budget was. He asked for verification of his understanding. Co-Chair Seaton answered that the bill had the same parameters as a supplemental bill. He explained that a supplemental could change or add additional money. There was no constitutional or statutory requirement for the operating budget to be passed as one piece. Representative Neuman believed a statutory change would require a three-quarter vote on the floor and a public vote. Alternatively, he wondered if the bill was an operating budget bill that was statutorily required. He believed Co-Chair Seaton had answered in the affirmative. He stated that if the bill was like a supplemental that rolled into another budget or was included in an operating budget, the legislature could decide to fund it or not (as had occurred the previous year with other appropriations bills in the operating budget). He stated that the governor could decide to fund the bill at a lesser value as had happened with the Permanent Fund Dividend in the past. He did not know if it was possible and requested to find out. Co-Chair Seaton clarified that it would be a budget bill just like the fast track supplemental the legislature could pass. He did not mean that the legislature could not pass an appropriation without a statutory requirement. However, the bill under consideration in the Senate looked at a statutory requirement that future legislatures to pass budgets by certain times. He explained that HB 287 was the mechanism to accomplish the goal in the current year. Co-Chair Foster recognized that Representative Kawasaki had joined the meeting. Mr. Liebelt clarified there was an error on the last slide of a presentation [slide 8] he had provided ["HB 287 Education and Pupil Transportation: An Early and Stand- alone Appropriation Bill" dated January 25, 2018 (copy on file)]. He corrected that the slide should read that nontenured teachers had to receive notices by May 15 and tenured teachers had to be notified the end of the school year. 9:58:10 AM Co-Chair Foster OPENED public testimony [public testimony had also been heard the preceding week]. TIM PARKER, PRESIDENT, NEA ALASKA, spoke in favor of the legislation. He thanked the co-chairs and bill sponsors for the opportunity to express support. He stated that educators in Alaska cared a lot about student learning, it was the driving force that pushed educators. He spoke to the positive motivation in the classroom. He argued that HB 287 was poised to fix some problems with the particular situation. He recalled the delay in funding the previous year and how it had impacted school districts and specific schools. Districts had handed out pink slips in record numbers, with the thought that unfortunately the pink slips would be rescinded, which they had been. Mr. Parker detailed that between the time they issued pink slips and rescinded them many of the best and brightest teachers had left the state. He noted the ramifications of passing out those slips. He wanted to see the focus on the necessary things that were important to education. He mentioned the Alaska Education Challenge and noted there would be a press conference later in the day with the commissioner; NEA was trying to lean into things that would help districts make better decisions about how to increase and maximize student learning. Delayed funding meant districts were not focused on what they should be. He spoke to the importance of providing funding stability. He reiterated NEA's support for HB 287. 10:01:57 AM Representative Grenn stated that the Anchorage School District submitted its budget to the municipality by March 1. He asked if it was a common deadline throughout the state. Mr. Parker responded that that deadlines were not all the same, but it was common for budgets to be submitted by the districts early and then funding mechanisms were addressed with their boroughs. There had been discussion about whether April 1st was the right date. Experts had communicated that going anywhere after April 1 risked putting schools in positions of providing pink slips. Due to the various steps required in the school budget process, NEA had been told that April 1 was an important date to make sure the legislature had acted by that time. In past years education funding had been passed a bit later than April 1 and districts had managed to avoid pink slips. Co-Chair Seaton remarked that there had been some confusion on when tenured and nontenured teachers needed to be notified about layoff. He believed tenured [nontenured] teachers had to be notified by May 15. He asked if many of the contracts required that nontenured teachers be laid off prior to tenured teachers. He surmised that new teachers were laid off prior to laying off tenured teachers. Mr. Parker replied in the affirmative. He detailed that different districts had different contracts, but the net result was the same in most districts. The other factor was the number of nontenured teachers versus tenured teachers in a particular district - it varied by district. 10:05:14 AM PAUL KENDALL, SELF, ANCHORAGE (via teleconference), did not believe the past speaker should qualify as public testimony. He addressed the concept of pink slips. He thought it was malfeasance or corruption. He stated there were secret negotiations of public employees. He did not support unions. He stated that the legislature had stolen the dividend from residents. He believed the education industry was corrupt. He thought wages should be cut. He thought the entire system was mismanaged. Co-Chair Foster asked testifiers to not disparage other testifiers and to stick to the legislation. 10:09:51 AM CHRIS BENSHOOF, TEACHER, FAIRBANKS, spoke in support of the legislation. He shared that a fellow teacher had routinely been given pink slips - she had been teaching for 11 or more years and the routine pink slips were demoralizing. The uncertainty meant teachers and students were uncertain about the following year. The uncertainty led to significant testimony to the local school board - teachers were concerned about their positions and programs and then students and families heard about the issues as well, which caused uncertainty for students. He referenced the Alaska Education Challenge - one of the commitments was that schools were safe places for students where safety and well-being was cultivated. Mr. Benshoof believed the instability students had to deal almost annually with was difficult. He shared that the previous year the district had been asked to create a plan for how to deal with flat funding. He detailed the plan had been two to four staff fewer, an increase in parent/teacher ratio, and a decrease in enrollment. About one week into that process they had been asked to make a plan b that would include an additional teacher cut. Ultimately, the district had been asked to come up with a plan c, d, and e over the remainder of the year. He was in favor of the bill and appreciated the committee's time and attention. 10:13:02 AM JAMES HARRIS, TEACHER, SOLDOTNA, testified in favor of the bill. He shared that he was the 2017 Alaska teacher of the year and he had spent most of the year focused on the issue. He explained that it was an issue for teachers, students, and communities. The Soldotna School Board had been faced with developing multiple budgets and administrators had made multiple plans. He discussed that the Soldotna High School had numerous initiatives it would like to offer, but it did not ever know if the ability was there. The high school did not ever know how many teachers may need to be cut and whether electives could be offered. He recalled that two years back the school had not known whether it could offer AP [advanced placement] classes, which created instability for students. He believed one thing that all Alaskans wanted was to provide stability for kids. He stated that kids felt undervalued - he believed the current generation of students needed to feel valued. He relayed that the borough assembly also had to hold off on its budget because it did not know how much it would be able to give to help the school district. He thanked the committee for its work. He supported stability for students in the long-term. Representative Guttenberg thanked Mr. Harris for being teacher of the year and for the efforts he had put into education. 10:15:29 AM AMY JO MEINERS, TEACHER, JUNEAU, testified in support of the bill. She shared that she was the 2016 Alaska teacher of the year and a mother of three daughters who had gone through the Juneau school system. She recognized that the school calendar did not fit neatly into a fiscal calendar or a January/December timeline. She stated that pink slips went out in May, but job fairs were held in March. She explained that teachers booked travel in February for the March job fairs. The instability played out for students in many ways. She shared that her youngest daughter was a senior and had given tours to incoming freshman who were deciding between the two Juneau high schools. Many of the questions had been about what courses were offered and what teachers would be there. All the instability played out in the spring. She thanked the sponsor for putting the bill forward and thanked the legislature for the discussion it was having about education. She hoped the headlines would read about the positive movement for education going forward. She thanked the committee for its consideration of passing an education bill that would stabilize the options for children. 10:17:33 AM PATRICK MAYER, SUPERINTENDENT, WRANGELL, spoke in support of the legislation. He thanked everyone who had a hand in sponsoring the bill. He stressed the importance of the bill for the stability of education in Alaska. Early funding allowed districts to get teacher contracts signed early enough so they were not lost to other states. He spoke to statistics suggesting that if teachers were given pink slips they would leave for jobs in other states. Additionally, there were fewer job candidates. He shared that he had been in Alaska since 1982 and believed the discussion was long overdue. He applauded the committee for taking the issue on. He urged the committee to support the bill. Representative Guttenberg spoke to the process of going through a school district budget. He asked if the delays, teacher pink slips, and other had a measurable cost to the school district. Mr. Mayer answered that the district currently had two vacant positions in math and art. The lack of budgetary certainty was causing the district to delay filling the positions. Other districts throughout the state experienced the same problem. The issue was especially important in small districts because they may have access to a smaller pool of candidates. The issue was a continual concern throughout its budget drafting process. 10:20:50 AM Co-Chair Foster CLOSED public testimony with intent to reopen it on Thursday afternoon. HB 287 was HEARD and HELD in committee for further consideration. 10:21:33 AM AT EASE 10:25:29 AM RECONVENED