Legislature(2019 - 2020)ADAMS ROOM 519
04/08/2019 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB41 | |
| HB106 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 41 | TELECONFERENCED | |
| += | HB 106 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE BILL NO. 106
"An Act relating to school bond debt reimbursement."
2:14:04 PM
REPRESENTATIVE TAMMIE WILSON, BILL SPONSOR, invited
testifiers to the table. Her intent was to discuss a change
from how the program operated historically to make things
more efficient and effective for school districts.
HEIDI TESHNER, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT
OF EDUCATION AND EARLY DEVELOPMENT, OFFICE OF MANAGEMENT
AND BUDGET, had Elwin Blackwell and Tim Mearig with her to
provide as much information as possible about the debt
reimbursement program. Mr. Blackwell would start off by
providing a history of the program.
2:15:26 PM
ELWIN BLACKWELL, SCHOOL FINANCE MANAGER, DEPARTMENT OF
EDUCATION AND EARLY DEVELOPMENT, explained that the program
dated back to the early '70s when it was first enacted. In
the early days of the program the state was paying 100
percent in a reimbursement back to municipalities. It was
being done on a 2-year lagging basis. The municipality
would make the payment and 2 years later the state would
reimburse their payment. In the mid '70s the state changed
the statute providing less than 100 percent reimbursement.
The percentage of reimbursement decreased to 90 percent and
remained on a 2-year lagging basis. In the late '70s there
was a cash reimbursement portion of the program in which
municipalities could appropriate money for a project rather
than issuing debt. Municipalities could pay out of their
current resources and be reimbursed for their expenditures
by the state on a 2-year lagging basis. The cash
reimbursement portion of the program was shut down in the
late '80s.
Mr. Blackwell continued that in the early '90s the program
went to a 70 percent reimbursement, and the legislature
started putting some parameters on how much principle the
department could approve. Municipalities would issue
projects to the state, and once the principle threshold was
reached, the state would not accept any other projects. The
money was divided based on the enrollment sizes of a
municipality. The state decided to place a cap on the
amount of reimbursement. In 1983, the state shifted to a
current year reimbursement.
He reported that the state remained at 70 percent
reimbursement, and at different times the legislature would
open up the statute incorporating a new section with new
limits. Changes occurred 3 or 4 times. He reported that in
1999, the program was opened up and there was a slight
change. Prior to the change, a school would have to qualify
for space in order to receive reimbursement. For example,
if a municipality was adding additional space to its school
facilities, it had to show it had an unhoused student
population to qualify for the need for additional space.
For schools that did not qualify but wanted to develop
additional space, the state would help participate on a 60
percent basis. The program stayed in place but had
different amendments including different sunsets.
2:19:47 PM
Co-Chair Wilson asked Mr. Blackwell to define "unhoused."
She also asked why the state agreed to the 60-40 ratio if a
district could not demonstrate the need for additional
space. Mr. Blackwell responded that the "unhoused" question
had to do with the state's space guidelines. He expounded
that the size of a state school was determined by its
student population. If a student population was greater
than the size of a school, students were considered
"unhoused." A school would qualify for additional square
footage to provide adequate space based on the state's
space guidelines.
Mr. Blackwell recalled some schools that wanted to do
remodeling also wanted to add more space. The legislature
approved a lower split of 60/40 for schools without
unhoused students.
Vice-Chair Johnston thought the 60/40 ratio implementation
had to do with projected overcrowding. She asked if she was
correct. Mr. Blackwell responded in the negative. If a
municipality could not show that they would have an
unhoused student population but wanted more space, they
would qualify for the 60/40 reimbursement ration. It
allowed municipalities to add more space than they needed.
Co-Chair Wilson commented, "I am pretty sure we did it to
ourselves."
Representative Knopp recalled about 5 or 6 years ago the
department set new standards for square footage per student
driving up construction costs. He asked if the department
could comment.
2:23:04 PM
TIM MEARIG, FACILITIES MANAGER, DEPARTMENT OF EDUCATION AND
EARLY DEVELOPMENT, relayed that the space allocation
guidelines had not been revised since 2002. He was not
familiar with any change occurring within the timeframe the
representative referenced. He was happy to discuss space
guidelines - the legislature's primary way of allocating
resources for school projects and limiting the resource
allocations to where they were needed. There were
significant regulations and statutory language around the
topic.
Representative Knopp thought the timeframe might have been
longer. He queried the criteria for a new construction
project per square foot per student. Mr. Mearig relayed
that the state had 3 different measures. He indicated that
the square foot formula equated to approximately 165 square
feet per student. The state had one square footage for
elementary students (Kindergarten through 6th grade) of 124
square feet. The measures were spelled out in the state's
regulations. He continued that each had a base student
allocation with a supplemental allocation that helped to
account for things required by code like circulation
elements and mechanical spaces. The way the space standards
were applied made a difference. He mentioned long-term
storage needs in remote locations with limited barge
service. Generally, the system was robust and had been
looked upon with favor. Some constituent groups had
recommended a review of the space guidelines.
Representative Tilton asked about the changes made in 1999
regarding qualifications for space for unhoused students
and the 60/40 ratio. She asked what percentage applied to
schools that did qualify for space for the unhoused
students. Mr. Blackwell replied that if a school qualified
for additional space, the department would participate at
70 percent reimbursement with the municipality.
Representative LeBon had been on the school board at a time
when the municipality renovated the Hutchinson Career
Center into a traditional stand-alone high school in 1998.
He recalled that the discussion revolved around expanding
the foot print of the building. The request the school
district made was to add a gymnasium. He thought it was a
good reason to ask for a waiver and expand a foot print.
Co-Chair Wilson interjected wondering whether the project
would fall under the 70/30 guidelines.
2:27:38 PM
Mr. Mearig responded that Representative LeBon's example
was appropriate. He referenced the Hutchinson Career
Center, a preexisting building, and the desire to repurpose
the space. There was a significant amount of space that was
not anticipated. Similar projects led the legislature to be
flexible with its limitations. He mentioned an area in
statute that defined 4 standards that had to be met in
order for a project to qualify at a higher percentage.
Co-Chair Wilson mentioned Ryan Middle School and indicated
that the project was essentially made into a 70/30 split
with the help of a grant from the legislature.
Representative Tilton spoke about eligibility for
reimbursement versus state aide provided. She noted it went
from 100 percent from 1991 through 2016 down to 80 percent
in 2017 and back up to 100 percent. She wondered what
happened in 2017.
2:30:18 PM
Co-Chair Wilson guided the committee to start in 1999
moving up to 2017 first before addressing Representative
Tilton's question.
Mr. Blackwell picked up where he had left off in 1999. The
state had limits on the amount of principle it could
approve for reimbursement. In 2006, the program added 2
sections that included 60 percent and 70 percent
reimbursements under the same kind of criteria. At the
time, there were no limits on the amount of principle the
department could approve. Originally, it was scheduled to
sunset in 2008. However, the legislature extended the
sunset date to 2010. In 2010, the sunset was removed
altogether leaving the program open to whatever projects
the municipalities could get the voters to approve, and
they began to grow substantially.
Mr. Blackwell continued that in 2014 the legislature was
looking to sunset the 60 percent portion in statute and add
a new section making the percentage 50 percent. In 2015,
SB 64 [Legislation regarding school bond debt
reimbursement] passed repealing 50 percent and shut down
the program until July 1, 2020. For a little over 5 years
the program would be shut down. He furthered that when the
program came back online, sections were added that gave
qualifying municipalities a 50 percent reimbursement, and
those that did not qualify received 40 percent. Looking
ahead, when the program reopened, the state would decrease
the reimbursement by 20 percent for municipalities falling
under either category.
Mr. Blackwell returned to Representative Tilton's question
about why the state dropped in 2017. He explained that 2017
was the year that Governor Walker vetoed 25 percent of the
debt reimbursement program. He further explained that the
reason it did not show as 75 percent and only 79 percent,
was that when districts provided their figures of
anticipated debt reimbursement for the following year, they
included items such as anticipated bond sales. Sometimes
the bonds were sold for less than they thought, the
interest rates were better, or because of timing issues
with the municipalities. Sometimes there was a small amount
of money in the program left over due to changes. The
department prorated the additional money the result of
which left a 25 percent cut, but municipalities received 79
percent of what would have been due had the program not
been cut at all.
2:34:48 PM
Representative Josephson asked if the legislature ever
declared it would not cover the amounts that had already
been promised.
Co-Chair Wilson relayed that it was Governor Walker who did
not cover the promised amounts. She wondered if the bond
reimbursement had not been paid at any other time in
history. Mr. Blackwell responded that in the 80s, when the
state had similarly challenging fiscal times, there were
conscious reductions to the program. He recalled that
Governor Cooper underfunded the program during his
administration. He had not asked for 100 percent of what
would have been needed. There were periods where the
reimbursements were less than 100 percent. In those
instances, they were conscious budget reductions. The
program was underfunded, and the state prorated it out to
the municipalities.
Co-Chair Wilson mentioned SB 64 that passed. It was her
understanding that the bill had a taskforce to talk about
options for streamlining designs. She asked about design
restraints and other sideboards prior to 2015. She wondered
what had been done since the passage of SB 64 and the
inception of the taskforce.
Ms. Teshner replied that it was actually HB 278 [An omnibus
education bill passed in 2014] that initiated the
prototypical design study by the department. The report
came out in October 2015. She asked Mr. Mearig to
elaborate.
Mr. Mearig added that the department had initiated a
taskforce through a bill [SB 87 offered in 2017] that never
passed. There had been some activities around the same
themes with the current statutory committee put in place in
1993 by the legislature, the Bond Reimbursement and Grant
Review Committee. He spoke of the committee being active
every year which had worked to establish and improve the
application process for school capital grants and bond debt
reimbursement. The committee also reviewed the cost
effectiveness of school construction and did some work in
prototypical analysis. Over the prior 2 years the state had
experienced a significant uptick in some of the areas
including cost-effective school construction likely due to
the introduction of SB 87. He was happy to answer any
additional questions.
2:39:42 PM
Co-Chair Wilson asked if the department was looking at how
the state had done business. She suggested cost savings
such as standardizing certain equipment. She wonder about
the department's efforts in revamping the program.
Mr. Mearig relayed that the department previously had a
couple of initiatives. Throughout is tenure the department
had an active process in implementing legislative
parameters for controlling costs and getting the best value
with state dollars. The department had the ability to
review all applications and to adjust project requests in
order to achieve cost-effective school construction. The
department did an annual review of all applications that
came before the department for major maintenance and school
construction. The department had a qualified staff capable
of reviewing systems and design. However, it did not have
an active process in standardizing designs.
Representative Josephson asked how other jurisdictions
handled facilities management and construction. Mr. Mearig
had been with the National Council of School Facilities.
His membership had exposed him to the practices being used
in other parts of the nation. He would be happy to provide
information regarding other states' processes. The State of
Washington had a state level contribution to school
construction. The majority of the funding for schools in
Washington came through county-level government and bonds
passed in support of schools at the county-level.
Mr. Mearig continued that school districts in Washington
had their connection with those counties and autonomy and
had responsibility for schools within each district. Each
of them, much like in the State of Alaska, had autonomy to
operate and make decisions for their school districts. The
state had some standards in Washington that they had
implemented. They had developed a high-performance school
design criteria. The state had studied Washington's design
model. In 1994, the State of Washington had been invited to
help the Bond Reimbursement and Review Committee establish
and application and statewide need basis. Alaska had
partnered with Washington over the years.
2:44:57 PM
Representative Tilton wondered what type of criteria was
applied in districts losing or gaining population. Mr.
Mearig answered that the state required all applicants
wanting to add space to provide the department population
projections. The department allowed for those projects that
needed space additions to perform a 5-year post-occupancy
projection. The State of Alaska was very aware when the
information was not being provided. There could be growth
or decline in a district that the department was not aware
of because of a district not recently participating in the
annual cycle of submitting grant applications to the
department. The department had various tools to look at the
demographics around the state.
Representative Carpenter wanted to understand the
difference between qualifying and non-qualifying ratios
under SB 64. He wondered if it had to do with the unhoused
student population criteria from earlier in the discussion.
He asked for a definition for qualified and unqualified.
Mr. Blackwell responded that the representative was
correct. It would be based on whether a person qualified
for the space. It would determine whether the ratio would
be 40 percent or 50 percent - once the program reopened
again.
Representative Carpenter asked if there were figures
regarding the status of unqualified or qualified. He
wondered about the preponderance of need - unqualified or
qualified.
Co-Chair Wilson asked if the committee should be referring
to the report by the Department of Education and Early
Development.
Mr. Blackwell would have to look at how many projects were
splitting out at 60 percent and how many were splitting out
at 70 percent currently. He pointed to a handout in
member's packets showing estimated state aid with October
15th at the top of the page.
Ms. Teshner asked if Co-Chair Wilson had the handout.
2:49:28 PM
AT EASE
2:49:54 PM
RECONVENED
Co-Chair Wilson indicated that the information would be
posted on basis. She asked Mr. Blackwell to answer
Representative Carpenter's question.
Mr. Blackwell reported that about 75 percent of the open
reimbursements were at 70 percent and about 25 percent were
at 60 percent.
Ms. Teshner added that there was one district that had an
80 percent reimbursement and one district had a 90 percent
reimbursement under the old percentages. However, the
majority of them were under 70 percent.
Co-Chair Wilson relayed that the only change reflected in
HB 106 was to extend the moratorium to 2025. She hoped the
department would provide additional information about
whether it supported the legislation. She wondered if new
sideboards should be added. She referred to a report over
100 pages that provided additional information. She
conveyed that the bill had a zero fiscal note.
Vice-Chair Johnston MOVED to report HB 106 out of Committee
with individual recommendations and the accompanying fiscal
note.
Representative Josephson OBJECTED for discussion. He
thought the bill made sense based on the current fiscal
challenges. He noted speeches made on the House floor in
the current day about new revenue. He advocated new
revenues. He thought a 10-year moratorium was a long
duration but thought HB 106 was a good bill.
Vice-Chair Johnston thought it was important for policy
makers to have time to adequately review its policies.
Representative Josephson WITHDREW his OBJECTION.
There being NO OBJECTION, it was so ordered.
HB 106 was REPORTED out of committee with a "do pass"
recommendation and with one new zero fiscal note by the
Department of Education and Early Development.
Co-Chair Wilson reviewed the agenda for the following day.