Legislature(2015 - 2016)HOUSE FINANCE 519
03/24/2015 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearings: Alaska Mental Health Trust Authority Board of Trustees | |
| HB136 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 136 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 136
"An Act relating to school bond debt reimbursement;
and providing for an effective date."
Co-Chair Thompson indicated that he would not be moving the
bill out of committee today.
REPRESENTATIVE STEVE THOMPSON, SPONSOR, read the sponsor
statement for the bill.
Under the current fiscal shortfall of $3.5 billion,
the state must control expenses. It is imperative that
the state not only find efficiencies and reduce the
size of operational costs of the state, but also limit
the potential growth of state spending. House Bill 136
(HB 136) will allow the state to control expenses.
There are four major cost drivers in Alaska's
statewide operating costs: K-12 education, Health and
Social Services, debt service (PERS/TRS and bond
payments), and employee salaries and benefits. HB 136
addresses the growth in state debt service expenses by
suspending subdivisions of government's ability to
bond without explicit state approval.
House Bill 136 would sunset Alaska statutes relating
to state aid for costs of school construction and
major maintenance debt for five years. After five
years, if the legislature does not take further action
on these statutes, the reimbursement rates for school
construction would be reinstated and reduced from 70%
to 50% for eligible projects described under AS
14.11.100 (h), (i), (j) (2) - (5) and from 60% to 40%
for eligible projects described under AS 14.11.100(h),
(i), and (j) (2), (3), and (5).
BRODIE ANDERSON, STAFF, REPRESENTATIVE STEVE THOMPSON, read
the sectional analysis of the bill.
*Section 1: Amends AS 14.11.014, adds new subsection
(d)
Sunsets the bond debt reimbursement provisions for
school construction and major maintenance for five
years, May 1, 2015 - July 1, 2020.
*Section 2: Amends AS 14.11.100(a)
Page 6, line 21 restricts reimbursement of bonds
authorized after May 1, 2015. Page 7, lines 1 - 11,
deletes language relating to bonds authorized after
May 1, 2015.
*Section 3: Amends AS 14.11.100(a)
Page 12, line 17 - Page 13, line 2 inserts
language relating to bonds authorized on or after
July 1, 2020.
(18) For projects approved under AS 14.11.100
(h), (i), and (j) (2) - (5) the reimbursement
would be 50 percent.
(19) For projects approved under AS 14.11.100
(h), (i), and (j) (2), (3), and (5) the
reimbursement would be 40 percent.
*Section 4: Amends AS 14.11.100
adds a new section (s) Restricts the Commissioner
from approving an application for bond debt
reimbursement between May 1, 2015 - July 1, 2020.
*Section 5: Amends AS 14.11.102
adds new section (c) Restricts the Commissioner
from approving an application for bond debt
reimbursement between May 1, 2015 - July 1, 2020.
*Section 6: Repeals sections 1, 4, and 5 of this
act on July 1, 2020
*Section 7: Retroactivity clause
Sections 1, 2, 4, and 5 of this act are
retroactive to May 1, 2015
*Section 8: Section 3 of this act takes effect July
1, 2020
*Section 9: Sections 1, 2, 4, 5, and 7 of this act
take effect immediately
2:25:55 PM
Representative Guttenberg cited the multi-year allocation
totals shown on the document titled, "Multi-year Allocation
Totals - Operating Budget - FY 2016 Senate Structure" (copy
on file) and asked whether the purpose was to point out the
total amount of the state's obligation from 2007 through
2015. Mr. Anderson responded affirmatively. He indicated
the information conveyed prior reimbursement obligations.
Representative Guttenberg asked what the totals would be
for FY 17 and FY 18 based upon past history. Mr. Anderson
referred to an additional page in the committee packet
titled, "Statewide Liability School Construction Debt
Retirement, Updated 2/13/2015" (copy on file) that reported
the debt from FY 15 through FY 34. He explained that based
on the document the FY 16 total was approximately $108
million.
Co-Chair Thompson interjected that the document showed that
by paying off the debt through 2034 the state liability
totaled $1,212,713,044.
Mr. Anderson added that the totals only reflected bonds
already issued.
Vice-Chair Saddler inquired about the physical condition of
the schools around the state. Mr. Anderson responded that
he did not have the answer to that question and referred to
the Department of Education and Early Development (DEED).
Vice-Chair Saddler asked whether the state would be
"abrogating" its responsibility if it did not fund at the
level of the 70 percent 30 percent [state - local]
reimbursement split. Mr. Anderson indicated he would have
to review before he could answer. He added that the bill
did not prohibit school districts from bonding. The
legislation only restricted the state's reimbursement of
the bonds.
2:30:19 PM
Vice-Chair Saddler restated his question about the general
condition of the schools in the state.
ELIZABETH NUDELMAN, DIRECTOR, SCHOOL FINANCES AND
FACILITIES, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT,
answered that the condition of the schools varied. She
elaborated that the condition of a school was based on the
"useful life of the components" which created a continued
need for repair. However, many buildings were in very good
condition based on maintenance and repair needs being met.
Representative Wilson asked about the history of the school
bond debt reimbursement program and the reasoning behind
the program. Ms. Nudelman replied that the bonding program
was initiated sometime in the 1970's. She determined that
upon examination of the previous statute, the state
partnered with school districts and municipalities to
construct and repair schools around the state. The program
mandated that the municipalities carried the debt and the
state reimbursed a portion of the debt under eligibility
requirements. She confirmed that the bill did not prohibit
municipalities from bonding.
Representative Wilson asked about the bonding ability of
schools that were not in municipalities. Ms. Nudelman
responded that Regional Education Attendance Area (REAA)
schools were located in unorganized boroughs and did not
have the "legal capacity" to bond. She added that some
schools located in small municipalities could not obtain
the backing to bond for school construction or repair. She
detailed that a second statutory program was a school grant
program called the CIP Program (capital improvement
project). The department received applications each year
and ranked the projects according to need and forwarded the
list to the governor and legislature for funding from the
capital budget.
Representative Wilson reported that from 2005 through 2015
the grant program totaled $763 million. She wondered
whether with passage of the bill, the districts would
switch over to the grant program instead of bonding without
reimbursement from the state. Ms. Nudelman assumed that the
grant program would receive more applications in the
absence of the debt reimbursement program. Representative
Wilson commented that she hoped the grant program would
also be reexamined by the legislature and include all
school construction.
Co-Chair Thompson remarked that the school debt
reimbursement program was subject to appropriation by the
legislature and therefore, some sideboards were in place.
He agreed with Representative Wilson's latter comment and
noted that the point of the bill was to completely halt
bonding for a period of time until the state could "get our
financial house in order."
Representative Wilson wanted to ensure that the legislation
was applied equally throughout the state.
2:37:14 PM
Co-Chair Neuman asked whether the bill would affect the
construction of the last Kasayulie School. Ms. Nudelman
responded that the bill did not apply to the Kivalina
School. Co-Chair Neuman expressed more concern about the
bill affecting the Kasylie case mandate and asked for
further clarification. Ms. Nudelman relayed that the debt
reimbursement program timeline eligibility happened when
the voters authorized the debt. She expounded that debt
that was authorized in 2011 would remain in the program.
The Kivalina School was part of the Kasayulie settlement
resolved in 2011. In the FY 2016 budget the governor
appropriated approximately $4.7 million for design of the
school. In order for the bill to affect the Kivalina
project, either the governor or legislature would have to
deny funding for the project. The Kivalina School was a
separate issue from the legislation. Co-Chair Neuman
indicated he wanted to ensure that the bill would not
create a legal issue with the mandated Kasayulie
settlement.
Vice-Chair Saddler asked whether the legislation would
prompt lawsuits for the state from municipalities or school
districts. Ms. Nudelman responded that she "did not have a
basis" to form an opinion about the potential for lawsuits.
She maintained that the legislature held the authority to
appropriate funds and create statute.
2:41:35 PM
Representative Kawasaki wondered what portion of the
overall state debt belonged to schools versus other bonding
debt. Co-Chair Thompson answered that the state's total
bond payments in FY 15 was approximately $264 million, of
which $114.6 million was attributed to school debt.
Co-Chair Neuman stated that total debt bond reimbursement
was actually $228 million.
Representative Kawasaki expressed concern about the May 1,
2015 effective date of the bill. He indicated that every
other school district except Anchorage would be excluded
from the program this year base on the date. He wondered
whether any discussion ensued in regards to changing the
effective date. Mr. Anderson relayed that both the Bristol
Bay Borough and the Anchorage School District was holding
school debt bonding elections before May 1, 2015. He
confirmed that every other school district "would be
impacted" by passage of the legislation.
Co-Chair Thompson reminded the committee that reimbursement
of any school debt bond package was subject to legislative
appropriation. He cautioned that both school districts
needed to remember that with passage of the bond issue,
they still might be required to pay 100 percent
reimbursement.
Representative Kawasaki asked whether other school
districts were planning on having a bond measure as part of
elections in the fall. Ms. Nudelman was uncertain. However,
she did know of one other school district that was
anticipating a new bond proposal at some point.
Representative Kawasaki asked whether many districts would
rush to add school bonding proposals as part of the
upcoming elections in the fall if the date was changed. Ms.
Nudelman was not certain but thought that it was possible.
2:45:56 PM
Representative Edgmon clarified that the debt reimbursement
program had "historically come and gone in the past."
Recently, there had not been a sunset date attached to the
program. He stated that the grant program was highly
competitive. He offered that the Ketchikan lawsuit was
focused on the K - 12 funding formula and the operational
side of education funding. He also indicated that he had
some "conflicted feelings about the bill." He understood
the reason from the standpoint of "fiscal discipline."
However, from the standpoint of the small Bristol Bay
Borough School District, he thought that it would be the
last opportunity for the school to take advantage of the
program. He added that the school was in desperate need of
repair and that repairs would render the school more energy
efficient and overtime could save money. He wondered
whether a "rush" of school districts were expected to
attempt to qualify before the program would sunset. Ms.
Nudelman believed that school districts were restricted by
its voters who understood the larger fiscal crisis facing
the state and thought that the voters would need convincing
before a bond issue was passed.
Mr. Anderson responded that through his research in
anticipation of the legislation he discovered that the
municipal school bonding process was lengthy and could last
months. He observed that "in regards to the bum rush"
scenario, current evidence of that would be apparent.
2:50:21 PM
Representative Edgmon wondered whether the committee had a
legal opinion from the Department of Law regarding the
legality of imposing a definitive cut-off date. Mr.
Anderson reported that no legal memo existed regarding HB
136.
Co-Chair Thompson informed Representative Edgmon that
Alaska Housing Finance Corporation (AHFC) had a program
applicable to public buildings, including schools that was
being utilized in many rural areas. He explained that the
program was focused on energy efficiency and weatherization
and the grant would be repaid through guaranteed savings
from lower energy costs achieved overtime.
Co-Chair Neuman interjected that private entities also
offered the same energy efficiency type programs.
Vice-Chair Saddler remarked that in response to the
suggested "land office rush" for the remaining school debt
program , he thought that the notion of the "generous state
reimbursement coming to an end" would not be surprising to
the school districts given the state's financial condition.
Representative Munoz asked whether non-REAA schools can
apply for the grant funding. Ms. Nudelman replied in the
affirmative. Representative Munoz asked what the number of
applications the department received for the grant program
in a given year was versus the number of awarded grants.
Ms. Nudelman responded that DEED received approximately 160
to 200 applications and that in the FY 2016 budget four
applications were awarded totaling $13 million exclusive of
the capital construction project for the Kivalina School
design. She noted that the number of applications typically
decreased during leaner budget years.
2:55:12 PM
Representative Munoz asked whether all of the funds for the
grant program was state funding. Ms. Nudelman responded
that the grant program required a percentage of matching
funds based on the assessed value per ADM (average daily
membership).
Representative Gattis believed that over the 40 year period
of the reimbursement program it incentivized the school
districts to overbuild buildings which all required
maintenance. She felt that the school districts were moving
into a period of necessary maintenance and with passage of
HB 136, were getting its source of funding revoked, which
was not planned for. She asked for the total amount of
deferred school maintenance in the state. Ms. Nudelman
responded that one way that the department assessed
deferred maintenance was reviewing the insurance value for
all of the school buildings statewide. She elaborated that
DEED also required six year plans from school districts
regarding maintenance needs. She thought that both methods
gave the department a good indication of general
maintenance needs of the schools. Representative Gattis
wondered whether the district had a specific number. Ms.
Nudelman had access to a report with the numbers that she
would provide to the committee.
Representative Kawasaki notified the committee that a 2010
report on school construction and major maintenance funding
had been distributed.
Representative Munoz stated that charter schools became
eligible for the school debt reimbursement program. She
wondered whether charter schools were included in the bill.
Mr. Anderson was uncertain.
HB 136 was HEARD and HELD in committee for further
consideration.
He discussed the agenda for the next day.
3:00:46 PM
ADJOURNMENT
The meeting was adjourned at 3:00 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Mental Health Trust - Smith #1.pdf |
HFIN 3/24/2015 1:30:00 PM |
|
| Mental Health - Michael #4.pdf |
HFIN 3/24/2015 1:30:00 PM |
|
| Mental Health - Cooke #3.pdf |
HFIN 3/24/2015 1:30:00 PM |
|
| HB 136 Sectional Analysis.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
| HB 136 Sponsor Statement.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
| HB 136 Fiscal Note EED.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
| HB 136 Support Material - State Debt Liability.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
| HB 136 Support Material - MultiYearAllocationTotals.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
| HB 136 Supporting Documents - May 1 Date Only - Letter From Bristol Bay Borough.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
| HB 136 Opposing Documents - FNSB School Debt Reimbursement Letter.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
| HB 136 DEED 6 YR Plan 2015 Final.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
| HB 136 DEED Response to Rep. Gattis.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |