HOUSE FINANCE COMMITTEE MAY 5, 1995 8:40 A.M. TAPE HFC 95 - 113, Side 1, #000 - end. TAPE HFC 95 - 113, Side 2, #000 - #476. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 8:40 A.M. PRESENT Co-Chair Hanley Representative Kohring Co-Chair Foster Representative Martin Representative Mulder Representative Navarre Representative Brown Representative Parnell Representative Grussendorf Representative Therriault Representative Kelly ALSO PRESENT Senate President Drue Pearce; Dan Twohing, Marine Pilot Coordinator, Department of Commerce and Economic Development; Wendy Redman, University Relations, University of Alaska; Senator Bert Sharp; Jerry McBeath, Fairbanks North Star Borough Board of Education, Fairbanks; Wilson Condon, Commissioner, Department of Revenue; Dan Fauske, C.E.O., Alaska Housing Finance Corporation, Department of Revenue. SUMMARY SB 88 An Act establishing a pilot program for charter schools; and providing for an effective date. CS SB 88 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Education dated 3/9/95. SB 130 An Act relating to marine pilots and the Board of Marine Pilots; extending the termination date of the Board of Marine Pilots; and providing for an effective date. CS SB 130 (RLS) was HELD in Committee for further consideration. HB 281 An Act ratifying an agreement between the Alaska 1 Housing Finance Corporation and the commissioner of revenue and making certain pledges to obliges of the corporation regarding that agreement; relating to the authorization for and the issuance of bonds by the Alaska Housing Finance Corporation to pay for the costs of repair and rehabilitation of student housing facilities of the University of Alaska; and providing for an effective date. HB 281 was placed in Subcommittee with Chair Representative Therriault and members Representative Martin and Representative Brown. HB 309 An Act approving the University of Alaska's plans to enter into long-term obligations to borrow money from the Alaska Housing Finance Corporation for the acquisition of student housing facilities; and providing for an effective date. HB 309 was placed in Subcommittee with Chair Representative Therriault and with members Representative Martin and Representative Brown. SENATE BILL 130 "An Act relating to marine pilots and the Board of Marine Pilots; extending the termination date of the Board of Marine Pilots; and providing for an effective date." SENATE PRESIDENT DRUE PEARCE spoke in support of SB 130. She noted that SB 130 was designed to extend the Board of Marine Pilots and to provide housekeeping changes to the Marine Pilotage Act of 1991 aimed at reducing the level of litigation surrounding the marine pilotage industry and providing a stable regulatory environment for determining rate for pilotage services. Senator Pearce added that the legislation was the result of extensive negotiations and compromises between pilots, the shipping industry and the Administration. The legislation is supported by all of those groups. Senator Pearce concluded that passage of SB 130 would ensure that the health, safety and welfare of the Alaskan people would be met through the State's regulation and oversight of marine pilotage. Representative Brown asked the changes made which would affect liability. DAN TWOHING, MARINE PILOT COORDINATOR, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, responded that the 2 changes involved for the liability for marine pilots in the 1991 bill was limited to $250 thousand dollars. That law was written to relate to anything the pilot could have done to have a sanction for the license. He concluded that amount of money given a major marine accident would diminish rapidly. The pilots, through the Alaska Pilots Alliance, requested to have the statute amended so that pilots would loose their liability only in incidence of proven gross negligence or incompetence resulting from chemicals or alcohol. Any remaining items for which they could loose liability were removed. Representative Brown thought that "incompetence" was being removed. Mr. Twohing advised that incompetence is a matter of law. Within the scope of maritime investigation and prosecutions, the real question would be gross negligence which could lead to an incompetent situation. He added that the actual word "incompetence" was too vague for the Department of Law. Representative Mulder asked how the proposed legislation would promote competition. Senator Pearce commented that the 1991 Law created competition amongst pilotage groups in so much as it allowed for separate groups. Currently, two separate groups exist. Representative Mulder questioned the need of a pilotage group. Mr. Twohing explained that State licensed marine pilots have knowledge of the waters and ship handling experience. That information is in the State's best interest and that pilots "speak" the same language internationally. Representative Therriault asked if there was opposition to the legislation in the various pilot groups. Senator Pearce explained that each pilot group had compromised their needs and that SB 130 was legislation resulting from that compromise and was supported by all interests. SB 130 was HELD in Committee for further consideration. HOUSE BILL 309 "An Act approving the University of Alaska's plans to enter into long-term obligations to borrow money from the Alaska Housing Finance Corporation for the acquisition of student housing facilities; and providing for an effective date." Representative Martin spoke in support of HB 309. He stated that HB 309 was in response to the current shortage of student housing at the University of Alaska statewide 3 system. Specifically, the University of Alaska, Anchorage campus houses only 7% of the full-time student population compared to the national average ranging from 35-50% housing accommodation. Coupled with the shortage, is the limited housing at the Juneau campus of University of Alaska, Southeast (UAS), and the absence of any housing at the Ketchikan campus. He added that the University of Alaska has the ability to repay the principal of the money borrowed from Alaska Housing Finance Committee (AHFC), although they cannot raise housing rates sufficient to pay market interest rates. The proposed legislation would solve that problem. WENDY REDMAN, VICE-PRESIDENT, UNIVERSITY RELATIONS, UNIVERSITY OF ALASKA, noted that the proposed legislation was the culmination of several years discussion with AHFC in trying to find an appropriate way that they could involve themselves with the University and the housing problem. She pointed out that University students fall within the preview of the old Alaska State Housing Authority (ASHA) portion of AHFC. This legislation would allow AHFC to go forward so that it would be consistent with their mission. Ms. Redman added that a proposal has been worked out that would allow AHFC to go forward with the University providing the debt service. The legislation would require AHFC to let 3% revenue bonds to help with the housing interest rate subsidy. Ms. Redman emphasized that AHFC from the very beginning has made it clear to the University that unless HB 281 is also passed, AHFC will not be in a position to help the University. She continued that passage of the legislation would provide to the Anchorage area a total of six hundred new beds plus a commons facility for eating. She referenced the Juneau area, noting the less than .5% vacancy rate, pointing out how restricted housing is for incoming student. HB 309 was HELD in Committee for further discussion. SENATE BILL 88 "An Act establishing a pilot program for charter schools; and providing for an effective date." SENATOR BERT SHARP testified in support of CS SB 88 (FIN). He stated that the issue of charter schools was discussed at length during the two years of the 18th Legislature. Unfortunately, charter schools was just one part of SB 61, which in all aspects was an "omnibus education bill". The bill tried to address diverse issues, each of which were 4 controversial and in some way tainted the other by association. He continued that all charter school proposals must be submitted to the local school board for consideration and upon their approval, forwarded to the Commissioner of the Department of Education for review and compliance to state law. All staffing of charter schools must be done on a volunteer basis. Senator Sharp added that a charter school would not dilute the amount of money available to school districts other schools. By challenging students to achieve at their highest capabilities, the charter schools may lead the way to a more effective education system for the next century. He urged the Committee to support the legislation. Senator Sharp noted that the project would sunset in ten years. Co-Chair Hanley asked if the project would be optional for each school district. Senator Sharp stated that it would be optional and would need to be approved by each school board. Co-Chair Hanley referenced Section 3, Page 3, which implies that the local school board would "have" to provide the charter school with a budget. He asked if that language would require the school district to have a charter school. Senator Sharp noted that the application for charter school would need to be submitted by the group to the school board. The school board would then consider the entire packet. Co- Chair Hanley reiterated that he understood that the local school board would have to forfeit to the State Board of Education applications for a charter school that have been "approved or denied". Senator Sharp emphasized that the intent of the legislation defines that the Commissioner of Education would have to approve the agreement that the charter group would meet the statutory requirements for public education. Representative Grussendorf expressed concern with the financial obligation of deferred maintenance for the charter schools and asked if those causes would be binding for the State. Senator Sharp replied that the school district can at any point terminate the contract if the charter school deviated from the prescribed budget. Representative Brown questioned if there would be any change on the teachers' tenure accumulation requirements or their employment conditions. Senator Sharp noted that any teachers participating in the charter school program would continue to be subject to collective bargaining agreement terms and would continue to be employees of the school 5 district. Representative Brown asked if religious education would be authorized through the proposed legislation. Senator Sharp pointed out that Page 4, Line 14, specified that the charter school would be "nonsectarian". JERRY MCBEATH, FAIRBANKS NORTH STAR BOROUGH BOARD OF EDUCATION, FAIRBANKS, spoke in support of CS SB 88 (FIN) and urged Committee members to support the legislation. (Tape Change, HFC 95-113, Side 2). Representative Therriault MOVED to report CS SB 88 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. CS SB 88 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Education dated 3/9/95. HOUSE BILL 281 "An Act ratifying an agreement between the Alaska Housing Finance Corporation and the commissioner of revenue and making certain pledges to obliges of the corporation regarding that agreement; relating to the authorization for and the issuance of bonds by the Alaska Housing Finance Corporation to pay for the costs of repair and rehabilitation of student housing facilities of the University of Alaska; and providing for an effective date." HOUSE BILL 309 "An Act approving the University of Alaska's plans to enter into long-term obligations to borrow money from the Alaska Housing Finance Corporation for the acquisition of student housing facilities; and providing for an effective date." Co-Chair Hanley noted that HB 281 and HB 309 would be placed in Subcommittee with Representative Therriault as Chair and with members Representative Martin and Representative Brown. Representative Mulder asked the long term plans for the University of Alaska Southeast (UAS). He indicated that campus was not affordable and suggested spending those requested funds in other locations. Ms. Redman responded that the Juneau campus has intentionally been kept very small and focused. It offers only undergraduate degrees in 6 four different areas. She pointed out that it was the strongest campus in terms of student growth. She added that students from Southeast Alaska do not want to move to Fairbanks, pointing out the low enrollments of Southeast students moving to Anchorage or Fairbanks for school. Ms. Redman noted that most of those students tend to go "outside" if they do not attend UAS. She emphasized that the long term plan for Juneau would be to keep it small and focused. Representative Mulder asked the number of students that go to UAS. Ms. Redman noted that there were approximately 2000 students. Representative Kelly asked if there was a loss to the state by the number of students that leave for school. Ms. Redman replied that students that leave the state usually do not return which results in a net loss to the State. Representative Mulder asked the total cost per university student at each of the three campuses. Ms. Redman stated that the tuition was the same at all campuses. The Juneau campus does cost the State less than the cost of Anchorage or Fairbanks. She added that cost was reflective of what UAS offers, with no laboratory courses, faculty are paid on a lower wage rate and no graduate programs. Representative Martin pointed out that last year a detailed study had been provided on the costs associated with each campus. Ms. Redman stated that the Southeast campus was the most efficient campus with the lowest administrative cost. Representative Therriault questioned the fiscal note. Ms. Redman explained that the $970.2 thousand dollars was the appropriation amount and represented the University's share of the debt service on the dormitories in Anchorage. The University is required to get authorization to spend any of their own debt service that exceeds over $1 million dollars per year on a revenue bond. Representative Kohring asked if the University supported combining the two bills. Ms. Redman advised that the preference would be to leave the pieces of legislation separate and that HB 309 would be contingent on the passage of HB 281. Representative Kohring asked what the bond rate would have been if it had not been subsidized. Ms. Redman replied that the rate would be close to 6.7%. Representative Kohring pointed out that would be an interest rate subsidy. WILSON CONDON, COMMISSIONER, DEPARTMENT OF REVENUE, spoke in 7 support of HB 281. He stated that the bill had been introduced by the Governor. He provided the Committee members with a position paper regarding the statewide system. [Attachment #1]. He also provided members with the "University of Alaska Deferred Maintenance" brochure. [Copy on file]. Representative Martin commented on the deferred maintenance costs of student housing. Commissioner Condon explained that deferred maintenance would need to be housing related. DAN FAUSKE, (TESTIFIED VIA TELECONFERENCE), C.E.O., ALASKA HOUSING FINANCING AUTHORITY, DEPARTMENT OF REVENUE, ANCHORAGE, stated that deferred maintenance would be provided under AS 18:56 and that AHFC could be involved with the deferred maintenance. The key to maintaining financial stability of the package would be in continuing a good credit rating. He concluded that a strong AHFC will capture the capital needed to fund the projects. Representative Therriault asked how the $30 million dollars had been determined for the deferred maintenance bond authorization. Ms. Redman replied that the real number would be $35 million dollars as recommended in last year's legislation. Representative Therriault asked if $70 million dollars would be the transfer amount. Commissioner Condon replied that the agreement as negotiated between AFHC and the Department would transfer $70 million dollars in the next fiscal year and then followed by a $50 million dollar transfer for each of the following four fiscal years. This legislation would authorize that agreement. Representative Martin noted that the Senate had agreed with that amount. Representative Mulder disagreed with the proposal. He stated that this would take money "off the table" away from the Legislature's future use and "give" it to University priorities. Commissioner Condon countered that the bill would fund a project and would make a provision for a long term financial plan in order to protect the value of AHFC as an asset. Commissioner Condon continued that AHFC as an asset will produce roughly $100 million dollars a year in revenue that the Legislature can use. The legislation would commit those funds for use in bonding for one project. There would be no commitment in regards to the transfer plan. Representative Therriault asked if the legislation would limit the use to the assets and not the cash. Commissioner Condon did not know. He stated that the legislation would represent a policy judgement that roughly half of the net 8 available funds coming out of AHFC be reserved to meet the kinds of needs that have typically been met by AHFC and its programs. HB 281 and HB 309 were HELD in Committee for further consideration in Subcommittee. ADJOURNMENT The meeting adjourned at 10:00 A.M. HOUSE FINANCE COMMITTEE MAY 5, 1995 8:40 A.M. TAPE HFC 95 - 113, Side 1, #000 - end. TAPE HFC 95 - 113, Side 2, #000 - #476. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 8:40 A.M. PRESENT Co-Chair Hanley Representative Kohring Co-Chair Foster Representative Martin Representative Mulder Representative Navarre Representative Brown Representative Parnell Representative Grussendorf Representative Therriault Representative Kelly ALSO PRESENT Senate President Drue Pearce; Dan Twohing, Marine Pilot Coordinator, Department of Commerce and Economic Development; Wendy Redman, University Relations, University of Alaska; Senator Bert Sharp; Jerry McBeath, Fairbanks North Star Borough Board of Education, Fairbanks; Wilson Condon, Commissioner, Department of Revenue; Dan Fauske, C.E.O., Alaska Housing Finance Corporation, Department of Revenue. SUMMARY SB 88 An Act establishing a pilot program for charter schools; and providing for an effective date. CS SB 88 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Education dated 3/9/95. 9 SB 130 An Act relating to marine pilots and the Board of Marine Pilots; extending the termination date of the Board of Marine Pilots; and providing for an effective date. CS SB 130 (RLS) was HELD in Committee for further consideration. HB 281 An Act ratifying an agreement between the Alaska Housing Finance Corporation and the commissioner of revenue and making certain pledges to obliges of the corporation regarding that agreement; relating to the authorization for and the issuance of bonds by the Alaska Housing Finance Corporation to pay for the costs of repair and rehabilitation of student housing facilities of the University of Alaska; and providing for an effective date. HB 281 was placed in Subcommittee with Chair Representative Therriault and members Representative Martin and Representative Brown. HB 309 An Act approving the University of Alaska's plans to enter into long-term obligations to borrow money from the Alaska Housing Finance Corporation for the acquisition of student housing facilities; and providing for an effective date. HB 309 was placed in Subcommittee with Chair Representative Therriault and with members Representative Martin and Representative Brown. SENATE BILL 130 "An Act relating to marine pilots and the Board of Marine Pilots; extending the termination date of the Board of Marine Pilots; and providing for an effective date." SENATE PRESIDENT DRUE PEARCE spoke in support of SB 130. She noted that SB 130 was designed to extend the Board of Marine Pilots and to provide housekeeping changes to the Marine Pilotage Act of 1991 aimed at reducing the level of litigation surrounding the marine pilotage industry and providing a stable regulatory environment for determining rate for pilotage services. Senator Pearce added that the legislation was the result of extensive negotiations and compromises between pilots, the shipping industry and the Administration. The legislation is supported by all of those groups. Senator Pearce concluded that passage of SB 130 would ensure that the 10 health, safety and welfare of the Alaskan people would be met through the State's regulation and oversight of marine pilotage. Representative Brown asked the changes made which would affect liability. DAN TWOHING, MARINE PILOT COORDINATOR, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, responded that the changes involved for the liability for marine pilots in the 1991 bill was limited to $250 thousand dollars. That law was written to relate to anything the pilot could have done to have a sanction for the license. He concluded that amount of money given a major marine accident would diminish rapidly. The pilots, through the Alaska Pilots Alliance, requested to have the statute amended so that pilots would loose their liability only in incidence of proven gross negligence or incompetence resulting from chemicals or alcohol. Any remaining items for which they could loose liability were removed. Representative Brown thought that "incompetence" was being removed. Mr. Twohing advised that incompetence is a matter of law. Within the scope of maritime investigation and prosecutions, the real question would be gross negligence which could lead to an incompetent situation. He added that the actual word "incompetence" was too vague for the Department of Law. Representative Mulder asked how the proposed legislation would promote competition. Senator Pearce commented that the 1991 Law created competition amongst pilotage groups in so much as it allowed for separate groups. Currently, two separate groups exist. Representative Mulder questioned the need of a pilotage group. Mr. Twohing explained that State licensed marine pilots have knowledge of the waters and ship handling experience. That information is in the State's best interest and that pilots "speak" the same language internationally. Representative Therriault asked if there was opposition to the legislation in the various pilot groups. Senator Pearce explained that each pilot group had compromised their needs and that SB 130 was legislation resulting from that compromise and was supported by all interests. SB 130 was HELD in Committee for further consideration. HOUSE BILL 309 11 "An Act approving the University of Alaska's plans to enter into long-term obligations to borrow money from the Alaska Housing Finance Corporation for the acquisition of student housing facilities; and providing for an effective date." Representative Martin spoke in support of HB 309. He stated that HB 309 was in response to the current shortage of student housing at the University of Alaska statewide system. Specifically, the University of Alaska, Anchorage campus houses only 7% of the full-time student population compared to the national average ranging from 35-50% housing accommodation. Coupled with the shortage, is the limited housing at the Juneau campus of University of Alaska, Southeast (UAS), and the absence of any housing at the Ketchikan campus. He added that the University of Alaska has the ability to repay the principal of the money borrowed from Alaska Housing Finance Committee (AHFC), although they cannot raise housing rates sufficient to pay market interest rates. The proposed legislation would solve that problem. WENDY REDMAN, VICE-PRESIDENT, UNIVERSITY RELATIONS, UNIVERSITY OF ALASKA, noted that the proposed legislation was the culmination of several years discussion with AHFC in trying to find an appropriate way that they could involve themselves with the University and the housing problem. She pointed out that University students fall within the preview of the old Alaska State Housing Authority (ASHA) portion of AHFC. This legislation would allow AHFC to go forward so that it would be consistent with their mission. Ms. Redman added that a proposal has been worked out that would allow AHFC to go forward with the University providing the debt service. The legislation would require AHFC to let 3% revenue bonds to help with the housing interest rate subsidy. Ms. Redman emphasized that AHFC from the very beginning has made it clear to the University that unless HB 281 is also passed, AHFC will not be in a position to help the University. She continued that passage of the legislation would provide to the Anchorage area a total of six hundred new beds plus a commons facility for eating. She referenced the Juneau area, noting the less than .5% vacancy rate, pointing out how restricted housing is for incoming student. HB 309 was HELD in Committee for further discussion. SENATE BILL 88 12 "An Act establishing a pilot program for charter schools; and providing for an effective date." SENATOR BERT SHARP testified in support of CS SB 88 (FIN). He stated that the issue of charter schools was discussed at length during the two years of the 18th Legislature. Unfortunately, charter schools was just one part of SB 61, which in all aspects was an "omnibus education bill". The bill tried to address diverse issues, each of which were controversial and in some way tainted the other by association. He continued that all charter school proposals must be submitted to the local school board for consideration and upon their approval, forwarded to the Commissioner of the Department of Education for review and compliance to state law. All staffing of charter schools must be done on a volunteer basis. Senator Sharp added that a charter school would not dilute the amount of money available to school districts other schools. By challenging students to achieve at their highest capabilities, the charter schools may lead the way to a more effective education system for the next century. He urged the Committee to support the legislation. Senator Sharp noted that the project would sunset in ten years. Co-Chair Hanley asked if the project would be optional for each school district. Senator Sharp stated that it would be optional and would need to be approved by each school board. Co-Chair Hanley referenced Section 3, Page 3, which implies that the local school board would "have" to provide the charter school with a budget. He asked if that language would require the school district to have a charter school. Senator Sharp noted that the application for charter school would need to be submitted by the group to the school board. The school board would then consider the entire packet. Co- Chair Hanley reiterated that he understood that the local school board would have to forfeit to the State Board of Education applications for a charter school that have been "approved or denied". Senator Sharp emphasized that the intent of the legislation defines that the Commissioner of Education would have to approve the agreement that the charter group would meet the statutory requirements for public education. Representative Grussendorf expressed concern with the financial obligation of deferred maintenance for the charter schools and asked if those causes would be binding for the State. Senator Sharp replied that the school district can 13 at any point terminate the contract if the charter school deviated from the prescribed budget. Representative Brown questioned if there would be any change on the teachers' tenure accumulation requirements or their employment conditions. Senator Sharp noted that any teachers participating in the charter school program would continue to be subject to collective bargaining agreement terms and would continue to be employees of the school district. Representative Brown asked if religious education would be authorized through the proposed legislation. Senator Sharp pointed out that Page 4, Line 14, specified that the charter school would be "nonsectarian". JERRY MCBEATH, FAIRBANKS NORTH STAR BOROUGH BOARD OF EDUCATION, FAIRBANKS, spoke in support of CS SB 88 (FIN) and urged Committee members to support the legislation. (Tape Change, HFC 95-113, Side 2). Representative Therriault MOVED to report CS SB 88 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. CS SB 88 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Education dated 3/9/95. HOUSE BILL 281 "An Act ratifying an agreement between the Alaska Housing Finance Corporation and the commissioner of revenue and making certain pledges to obliges of the corporation regarding that agreement; relating to the authorization for and the issuance of bonds by the Alaska Housing Finance Corporation to pay for the costs of repair and rehabilitation of student housing facilities of the University of Alaska; and providing for an effective date." HOUSE BILL 309 "An Act approving the University of Alaska's plans to enter into long-term obligations to borrow money from the Alaska Housing Finance Corporation for the acquisition of student housing facilities; and providing for an effective date." Co-Chair Hanley noted that HB 281 and HB 309 would be placed in Subcommittee with Representative Therriault as Chair and 14 with members Representative Martin and Representative Brown. Representative Mulder asked the long term plans for the University of Alaska Southeast (UAS). He indicated that campus was not affordable and suggested spending those requested funds in other locations. Ms. Redman responded that the Juneau campus has intentionally been kept very small and focused. It offers only undergraduate degrees in four different areas. She pointed out that it was the strongest campus in terms of student growth. She added that students from Southeast Alaska do not want to move to Fairbanks, pointing out the low enrollments of Southeast students moving to Anchorage or Fairbanks for school. Ms. Redman noted that most of those students tend to go "outside" if they do not attend UAS. She emphasized that the long term plan for Juneau would be to keep it small and focused. Representative Mulder asked the number of students that go to UAS. Ms. Redman noted that there were approximately 2000 students. Representative Kelly asked if there was a loss to the state by the number of students that leave for school. Ms. Redman replied that students that leave the state usually do not return which results in a net loss to the State. Representative Mulder asked the total cost per university student at each of the three campuses. Ms. Redman stated that the tuition was the same at all campuses. The Juneau campus does cost the State less than the cost of Anchorage or Fairbanks. She added that cost was reflective of what UAS offers, with no laboratory courses, faculty are paid on a lower wage rate and no graduate programs. Representative Martin pointed out that last year a detailed study had been provided on the costs associated with each campus. Ms. Redman stated that the Southeast campus was the most efficient campus with the lowest administrative cost. Representative Therriault questioned the fiscal note. Ms. Redman explained that the $970.2 thousand dollars was the appropriation amount and represented the University's share of the debt service on the dormitories in Anchorage. The University is required to get authorization to spend any of their own debt service that exceeds over $1 million dollars per year on a revenue bond. Representative Kohring asked if the University supported combining the two bills. Ms. Redman advised that the preference would be to leave the pieces of legislation 15 separate and that HB 309 would be contingent on the passage of HB 281. Representative Kohring asked what the bond rate would have been if it had not been subsidized. Ms. Redman replied that the rate would be close to 6.7%. Representative Kohring pointed out that would be an interest rate subsidy. WILSON CONDON, COMMISSIONER, DEPARTMENT OF REVENUE, spoke in support of HB 281. He stated that the bill had been introduced by the Governor. He provided the Committee members with a position paper regarding the statewide system. [Attachment #1]. He also provided members with the "University of Alaska Deferred Maintenance" brochure. [Copy on file]. Representative Martin commented on the deferred maintenance costs of student housing. Commissioner Condon explained that deferred maintenance would need to be housing related. DAN FAUSKE, (TESTIFIED VIA TELECONFERENCE), C.E.O., ALASKA HOUSING FINANCING AUTHORITY, DEPARTMENT OF REVENUE, ANCHORAGE, stated that deferred maintenance would be provided under AS 18:56 and that AHFC could be involved with the deferred maintenance. The key to maintaining financial stability of the package would be in continuing a good credit rating. He concluded that a strong AHFC will capture the capital needed to fund the projects. Representative Therriault asked how the $30 million dollars had been determined for the deferred maintenance bond authorization. Ms. Redman replied that the real number would be $35 million dollars as recommended in last year's legislation. Representative Therriault asked if $70 million dollars would be the transfer amount. Commissioner Condon replied that the agreement as negotiated between AFHC and the Department would transfer $70 million dollars in the next fiscal year and then followed by a $50 million dollar transfer for each of the following four fiscal years. This legislation would authorize that agreement. Representative Martin noted that the Senate had agreed with that amount. Representative Mulder disagreed with the proposal. He stated that this would take money "off the table" away from the Legislature's future use and "give" it to University priorities. Commissioner Condon countered that the bill would fund a project and would make a provision for a long term financial plan in order to protect the value of AHFC as an asset. Commissioner Condon continued that AHFC as an asset will 16 produce roughly $100 million dollars a year in revenue that the Legislature can use. The legislation would commit those funds for use in bonding for one project. There would be no commitment in regards to the transfer plan. Representative Therriault asked if the legislation would limit the use to the assets and not the cash. Commissioner Condon did not know. He stated that the legislation would represent a policy judgement that roughly half of the net available funds coming out of AHFC be reserved to meet the kinds of needs that have typically been met by AHFC and its programs. HB 281 and HB 309 were HELD in Committee for further consideration in Subcommittee. ADJOURNMENT The meeting adjourned at 10:00 A.M. 17