Legislature(2023 - 2024)ADAMS 519
05/15/2023 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB140 | |
| SB48 | |
| SB77 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 48 | TELECONFERENCED | |
| + | SB 75 | TELECONFERENCED | |
| + | SB 140 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 178 | TELECONFERENCED | |
| += | SB 77 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
May 15, 2023
3:52 p.m.
3:52:05 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 3:52 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Neal Foster, Co-Chair
Representative DeLena Johnson, Co-Chair
Representative Julie Coulombe
Representative Mike Cronk
Representative Alyse Galvin
Representative Sara Hannan
Representative Andy Josephson
Representative Dan Ortiz
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
None
ALSO PRESENT
Tim Grussendorf, Staff, Senator Lyman Hoffman; Lisa Parady,
Executive Director, Alaska Council of School
Administrators; Lacey Sanders, Deputy Commissioner,
Department of Education and Early Development; Matt
Gruening, Staff, Representative DeLena Johnson; Alexei
Painter, Director, Legislative Finance Division; Brodie
Anderson, Staff, Representative Neal Foster; Rena Miller,
Special Assistant, Department of Natural Resources; Neil
Steininger, Director, Office of Management and Budget,
Office of the Governor; John Boyle, Commissioner,
Department of Natural Resources; Senator Forrest Dunbar,
Sponsor; Representative Jesse Sumner; Representative Mike
Prax.
PRESENT VIA TELECONFERENCE
Christine O'Connor, Executive Director, Alaska Telecom
Association, Anchorage; Amy Phillips-Chan, Director,
Division of Archives, Libraries and Museums; Heidi Teshner,
Acting Commissioner, Department of Education and Early
Development; Sandra Moller, Director, Division of Community
and Regional Affairs, Department of Commerce, Community and
Economic Development; Neil Steininger, Director, Office of
Management and Budget, Office of the Governor.
SUMMARY
HB 178 VILLAGE SAFE WATER FACILITIES
HB 178 was SCHEDULED but not HEARD.
SB 48 CARBON OFFSET PROGRAM ON STATE LAND
SB 48 was HEARD and HELD in committee for further
consideration.
SB 77 MUNI PROP TAX EXEMPTION/TAX BLIGHTED PROP
CSSB 77(FIN) was REPORTED out of committee with
nine "do pass" recommendations and with one "no
recommendation" recommendation.
SB 140 INTERNET FOR SCHOOLS
SB 140 was HEARD and HELD in committee for
further consideration.
Co-Chair Foster reviewed the meeting agenda.
3:52:56 PM
AT EASE
3:56:17 PM
RECONVENED
Co-Chair Foster continued to review the meeting agenda.
SENATE BILL NO. 140
"An Act relating to funding for Internet services for
school districts; and providing for an effective
date."
3:58:04 PM
TIM GRUSSENDORF, STAFF, SENATOR LYMAN HOFFMAN, briefly
reviewed SB 140, which was the companion bill to HB 193. He
explained that there were two differences between the two
bills. Firstly, the effective date had moved from FY 24 to
FY 25 and the Senate had attached a new fiscal note that
had been zeroed out [control code EChxI, offered by the
Department of Education and Early Development (DEED)](copy
on file). The Senate wanted to determine what the finances
would be in FY 25 before committing additional funds to the
bill. The Senate did not believe that many of the smaller
communities in the state would be able to implement the
necessary infrastructure to reach 100 megabytes per second
(MBPS) download speed in the near future. The large fiscal
note was likely unnecessary for the time being. The
legislature could revisit the topic in the subsequent year
and determine if more funds were needed.
Co-Chair Foster clarified that the fiscal note referenced
by Mr. Grussendorf was OMB component 3004. He understood
that the Senate zeroed out the fiscal note but saw that
$6,000 was requested for services. He asked Mr. Grussendorf
to explain the request in more detail.
Mr. Grussendorf explained that the $6,000 request was
simply intended to keep the program running.
Co-Chair Edgmon commented that there were three categories
of schools in Alaska: those with high internet, those on
the E-rate program that would not participate in SB 140,
and those that did not have money or the wherewithal to
implement speeds beyond 20 MBPS. There were about 722
schools in the state with E-rate compensation. There were
many variables that would have to line up in order to
facilitate schools to participate in the broadband program.
He predicted that in the future, virtually every school in
the state would have access to high download speeds and
upload speeds. Before the fiscal note was zeroed out, it
reflected the cost that would have been required if every
school in the state qualified for and participated in the
broadband program at the maximum rate, which was unlikely.
The E-rate number was also not attainable. He noted that
the legislature would have to return to the topic the
following year and appropriate the money to allow for the
schools to participate in the program. He thought the bill
was important but thought the change to the fiscal note was
"overblown." It was an issue of fairness to him, and he was
concerned about the divide that seemed to exist surrounding
the bill.
Co-Chair Foster noted that Representative Jesse Sumner was
in the audience.
4:05:46 PM
Representative Galvin commented that she had been long
concerned that rural Alaska would not have the opportunity
to access the necessary online learning for the governor's
performance scholarship. She thought it was unfair that
communities did not have access to particular classes and
subjects that were required for the scholarship because
access to reliable internet was not guaranteed. She
emphasized that everyone needed to have the same
opportunities. She supported getting high-speed internet to
all areas of the state.
Representative Ortiz commented that he was in support of
expanding broadband throughout Alaska. He asked if there
was a timeframe for qualification for the Infrastructure
Investment and Jobs Act (IIJA) funds and whether there was
a concern that some rural schools might not be able to
implement the necessary infrastructure within the required
timeframe.
Mr. Grussendorf responded that he did not know the answer,
but DEED might have a comment. He wondered if Co-Chair
Edgmon might be able to provide more information.
4:09:43 PM
Co-Chair Edgmon asked Representative Ortiz to repeat the
question.
Representative Ortiz asked if there were required
timeframes that might cause some schools to lose out on
opportunities for federal funds for broadband.
Co-Chair Edgmon responded that the E-rate program had
already been very successful in the state. He thought
around $130 million was distributed amongst schools and
libraries in the prior year. The state had been able to
match the federal E-rate funds since the beginning of the
program. In 2014, the Broadband Assistance Grant (BAG) was
established to directly allow schools to participate in the
program and receive 10 MBPS internet. He added that IIJA
had raised the benchmark from 10 MBPS to 100 MBPS. Schools
needed to have faster internet services and he thought
schools might have to rely on satellite programs. He did
not think the fiscal note was projecting into the future
because there would be a reduced number of schools and
services dependent upon an E-rate program. He noted that
the cruise ships in Juneau impacted internet services and
some communities experienced slow internet speeds year-
round. He thought the demand was real and schools would be
at a disadvantage without high-speed internet. There was no
immediate plan because the timelines were different
depending on the community. Fiber-optic cable projects were
planned in various areas of the state, but the timelines
were varied. The projects were in motion but there was
nothing to be done in the meanwhile. He was frustrated that
students were expected to perform at a certain level in
standardized tests when all schools did not have the same
resources.
4:14:40 PM
Representative Stapp commented that he had never seen a
fiscal note change to reflect the preferences of the Senate
Finance Committee. He asked if it was typical practice.
Mr. Grussendorf responded that it had happened before
although it was not necessarily typical. There were times
when a legislature received new information and might
disagree with a department's fiscal note. He thought it
seemed unlikely that every school district in the state
would be able to take advantage of the program immediately.
A similar situation had occurred in the past in which a
fiscal note regarding Power Cost Equalization (PCE) assumed
that every household in the state would increase its
kilowatt level to the maximum, which was unrealistic.
Representative Stapp thought the reasoning was sound and
agreed that it did not seem possible that all schools could
take full advantage of the program within the next fiscal
year. He noted that GCI had provided estimates (copy on
file) of household internet usages, and he wondered why the
estimates could not be used in lieu of offering an
indeterminate fiscal note.
Mr. Grussendorf responded that he thought there needed to
be more work done. The Senate Finance Committee asked DEED
to craft a more specific fiscal note but did not receive a
response. He thought it should wait until the estimates
were available.
Representative Stapp asked why the legislature should pass
the bill now if there still needed to be more work done on
the fiscal note, particularly considering that the
increases would not go into effect until FY 25.
Mr. Grussendorf responded that he did not know the answer
and it was a policy decision made by the Senate Finance
Committee.
Representative Stapp asked if DEED had weighed in on the
changes made to the fiscal note.
Mr. Grussendorf responded that he was not aware of a
response by the department. He was not sure if the
department would know how many schools would be able to
participate in the initial program.
4:19:52 PM
Representative Hannan stated that she was in support of
internet capabilities across the state, particularly in
rural areas. Her concern was that the bill took effect in
January of 2024. She wondered why the bill needed to be
moved rapidly now considering the effects would not be
immediate. She understood that the House and Senate
versions of the bills had not been introduced until the
first week of May and added that the first time she had
heard about the bill was when GCI came to her directly and
shared the company's support for the bill. She was more
understanding about schools needing the benefits provided
by the bill than about vendors' needs. She asked if an
element of the bill would be lost if it did not pass in the
current session.
Mr. Grussendorf responded that the delay in the effective
date of the bill was because many of the schools were still
in the midst of the time consuming grant writing process.
By the time IIJA funds were available, the majority of the
bill would be in place and districts could start applying
for the money.
Co-Chair Edgmon added that the competition for the federal
E-rate program had increased tremendously. The state needed
to be organized in order to receive money from the federal
government due to IIJA money and a renewed emphasis on the
E-rate program. Schools could be positioned to participate
in the E-rate cycle that would take effect in 2024 if the
bill were to pass in 2023. If the legislature waited to
pass the bill until 2024, there would be an entire year of
lost time. He was convinced that there would be a
significant difference between passing the bill in 2023 and
waiting until 2024.
Representative Ortiz understood that it was unlikely that a
large number of school districts in the state would be
applying for the broadband funds. He asked what would be
different that would permit more districts to have access
to broadband in the following year. He understood that
there was a lack of infrastructure, but wondered what other
changes would be enacted to encourage a wider availability
of broadband. He was unsure what the timeframe and order of
operations should be.
Co-Chair Foster suggested that Ms. Lisa Parady respond to
the question.
4:26:28 PM
LISA PARADY, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, responded to Representative Ortiz's
question. She noted that DEED Deputy Commissioner Lacy
Sanders was also available for questions. School districts
needed to apply for the BAG program by March of each year
to qualify for service in the following year. She
acknowledged that Co-Chair Edgmon was correct in that
districts' ability to access the grant would be pushed to
the following year if the bill was not passed in the
current year. The state had missed the March deadline, but
she hoped the passage of the bill would allow districts to
apply by March of 2024 for service in 2025. She explained
that the emphasis of IIJA was on the communities that did
not have service and many of the schools to which Co-Chair
Edgmon spoke were in unserved areas. She did not want to
create a situation in which the unserved districts would be
artificially capped at 25 MBPS. The E-rate was a formula
unique to each school district and largely tied to poverty.
She agreed that the fiscal note would not accurately depict
the uses because not all districts were ready to access the
dollars. She thought the bill would provide equity to
students in rural areas as the districts became more able
to access the funds, which would look different for each
district. There would also be price compression as more
infrastructure was built; however, more providers would be
able to offer services which would bring about competition
and alleviate price compression. The department crafted a
fiscal note on what it knew to date, but it was not able to
determine which district would be able to build the
necessary infrastructure in time.
Co-Chair Foster asked whether the deputy commissioner would
like to respond to the question as well.
LACEY SANDERS, DEPUTY COMMISSIONER, DEPARTMENT OF EDUCATION
AND EARLY DEVELOPMENT, clarified that the E-rate
application period was open from January through March.
After the application period was over, the department used
the information to develop the broadband grants
application. The application period had opened in April and
districts were working on applications for FY 24. As
currently written, the bill would apply to the 2025
application period.
Co-Chair Foster asked whether Ms. Christine O'Connor would
like to respond to the question as well.
4:31:54 PM
CHRISTINE O'CONNOR, EXECUTIVE DIRECTOR, ALASKA TELECOM
ASSOCIATION, ANCHORAGE (via teleconference), responded that
if the legislature waited to pass the bill until the next
session, it would push schools' eligibility for broadband
speed increases back to July 1 of 2025. She added that the
state already had over $600 million in federal grant
funding and over $50 million in private capital to help the
state fund projects. The funds had already been allocated
to Alaska before IIJA funding and the state would see the
impacts of IIJA funding on broadband over the course of the
following year. As the infrastructure at the schools was
upgraded, the schools would not be limited to 25 MBPS as
long as the broadband grant program was in place because
the schools would be able to access a fiber connection as
soon as it was available. She noted that pricing for
broadband had been dropping dramatically in recent years
and the drops were expected to continue. The cost of
broadband on a fiber network would be different than what
schools currently paid for satellite service. She concluded
that broadband would become less and less expensive and
there would be more competition. Every broadband provider
in the state was building network or planning to build
network which would also contribute to lowered rates.
Co-Chair Foster thought that the timing of the rollout of
the program had been explained thoroughly. He noted that
there were other individuals available for questions if
needed.
4:35:17 PM
Representative Hannan understood the timing and the need to
pass the bill in the current session. She asked why the
bill was not introduced until May 1. She wondered if it was
not known whether the state would have the capacity to
reach 100 MBPS. She assumed that any school without the
infrastructure to implement the program in January of 2023
would still not have the infrastructure in May of 2023. She
asked what changed that offered assurance that the state
could reach the 100 MBPS capacity.
Ms. Parady responded that the bill began with 10 MBPS in
2014. She lived on the North Slope at that time and had
seen the impact on teachers and schools unable to work with
the internet. She had worked with senators at the time to
set the floor at 10 MBPS, which was monumental for remote
and rural areas. About five years ago, she worked with Co-
Chair Edgmon and others to lift the floor to 25 MBPS, which
was still very slow. She explained that it was decided that
it would make sense to again incrementally lift the floor
to 100 MBPS given the emphasis on infrastructure due to
IIJA and other similar programs. Increasing internet speeds
in schools was a goal for the Alaska Council of School
Administrators every year. When students were learning
remotely due to COVID-19, students who did not have more
than 25 MBPS internet speeds were doing paper and pencil
packets for almost two years.
Representative Hannan supported the bill. She could not
imagine that any district with lower internet speeds would
not be "hounding" their legislators to introduce the bill
by January 1. She was irritated that the bill was
introduced so late in the session and thought mistakes
could be made if it were to be rushed. She was confused as
to why the bill was not pre-filed.
Representative Cronk agreed with Co-Chair Edgmon that the
bill was needed in rural districts. He had taught in very
remote areas and it was difficult to navigate the internet
capabilities. Higher speed internet was key to helping
students learn.
Co-Chair Edgmon commented that the topic of increasing
internet speeds in schools had always been "out there," but
the emphasis for many schools was on an increased Base
Student Allocation (BSA). There were many schools that felt
that advocating for both a higher BSA and increased
internet speeds would be unrealistic in the current
political environment.
4:41:37 PM
Representative Galvin asked if schools were using a portion
of classroom budgets to cover internet services or if it
was an entirely separate budget item.
Ms. Parady deferred the question to Ms. Sanders. She did
not think that classroom budgets were used for internet.
Ms. Sanders responded that she agreed with Ms. Parady.
School districts received a grant for internet and
individual classrooms were not paying for internet
services.
Representative Galvin understood that if a district was
short on the E-rate money, the monetary shortfall would be
a completely separate issue from the need for BSA
increases. She wanted to clarify that the two would be
considered completely different needs.
Ms. Parady responded that the state provided broadband
assistance grants, but the school districts could use other
funding towards the negotiated contract districts had with
their service provider.
Representative Galvin asked if all of the funding that
would be allocated through SB 140 would be specific to
internet services. She understood that the money would be
returned to the state if all of the funds were not used.
Ms. Parady responded that the department would have a few
options if it had an appropriation that was not sufficient
to meet all of the applications received for broadband
grants. One option would be to prorate the funding and a
second option would be that the department could ask for a
supplemental for the shortfall, which would mean that the
department would need to make a request to the legislature.
The school districts entered into a grant agreement with
the department and the funding was only used for the
broadband grants. If the school did not use the entirety of
the funding, it would be returned to the department.
Representative Galvin asked if the minimum speed was
changed from 25 MBPS to 100 MBPS but the state could not
deliver the speed, would the state be set up for an
"unfunded mandate."
Ms. Sanders responded that school districts signed the
contracts with the service providers and if the broadband
funding was not sufficient, the districts would have to
determine how to pay for the remaining balance, whether
that be through local contributions, funding from the BSA,
or another funding source.
4:46:53 PM
Representative Stapp read AS 13.03.127(b):
If insufficient funding is appropriated to provide
funding authorized under this section, the state share
shall be distributed pro rata to eligible school
districts.
Representative Stapp understood that the bill would amend
the statute. He understood that under SB 140, the district
would apply for a grant and the legislature would
appropriate the funds. He did not think the legislature
would be able to appropriate the necessary amount of funds
to the program given the confusing situation regarding the
fiscal note. He understood that the district would
distribute the grants and then likely return to the
legislature to request a supplemental if more funds were
needed. He presumed that the cost in the fiscal note would
not matter because there would likely be another cost in
the supplemental budget. He asked if his understanding was
correct.
Ms. Sanders responded that requesting a supplemental was a
policy call; however, Representative Stapp was correct that
the first step would be to determine whether proration was
to occur and that an option would be to return to the
legislature and identify the shortfall.
Representative Coulombe referred to a spreadsheet titled
"Federal E-rate Program Report Summary" (copy on file)
provided by DEED. She noted that on page 10, the Lower
Kuskokwim School District (LKSD) was being charged $28
million for internet. She asked if she was reading the
spreadsheet correctly.
Ms. Sanders deferred the question.
4:49:20 PM
AMY PHILLIPS-CHAN, DIRECTOR, DIVISION OF ARCHIVES,
LIBRARIES AND MUSEUMS (via teleconference), responded that
the pre-E-rate cost for LKSD was about $28 million. She
noted that E-rates would pay between 20 percent and 90
percent of an eligible district's cost for internet
services. In 2023, LKSD received just under $2 million from
the E-rate program.
Representative Coulombe asked if it was $28 million per
school in LKSD.
Ms. Phillips-Chan responded that she did not have the
particular spreadsheet in front of her, but she understood
that $28 million was the total cost for the district.
Co-Chair Foster asked for clarification that he was looking
at the correct spreadsheet.
Representative Coulombe noted that the spreadsheet was
provided by DEED and had yellow shading. She supported
better internet rates for schools and was intimately aware
of the issue due to being on the DEED Finance Subcommittee.
She asked where the accountability was for providers as far
as the rates being charged. She asked whether there was a
limit to the amount the federal government would pay. She
thought it seemed like a significant amount of money.
Ms. Sanders deferred the question to Ms. Phillip-Chan as
she did not know the limits.
Ms. Phillips-Chan responded that she had the conversation
with the E-rates coordinator when the bill was first
introduced. The question was posed if schools would be
eligible for increased funding through the E-rate program.
Through the conversation, it was agreed that the schools
would be able to receive additional funding from the
program if the internet speed increased to 100 MBPS. The
total award amount for each school district was based on
the poverty levels of students as measured by their free
lunch or reduced lunch eligibility.
Ms. Parady elaborated that there had been leftover money in
every year in which the 25 MBPS level was achieved. The
department had not needed to come forward with an
additional supplemental request.
4:53:34 PM
Co-Chair Foster announced that the committee would take an
at ease that might be extended. He had just received word
that there was a 5:00 p.m. meeting and the committee would
reconvene after the meeting.
4:54:16 PM
RECESSED
6:43:40 PM
RECONVENED
Co-Chair Foster called the meeting back to order. He
reminded the committee of items on the agenda.
6:44:54 PM
AT EASE
6:46:02 PM
RECONVENED
Co-Chair Foster asked if members had any more questions
about SB 140.
Representative Galvin thought the costs associated with the
bill could vary widely. She wondered if there was a way to
ask for a specific type of process in coordination with the
E-rate program.
Co-Chair Edgmon responded that the federal E-rate program
and its process, the BAG program and its process, and the
school districts' decisions covered Representative Galvin's
question and any autonomy that could be outside of the
three elements he listed.
Co-Chair Foster understood that the bill was time
sensitive. He noted that there was one amendment but if
other members wanted to craft more amendments, he could set
an amendment deadline for the following day.
6:49:11 PM
AT EASE
6:51:22 PM
RECONVENED
Co-Chair Johnson MOVED to ADOPT Amendment 1, 33-LS0687\S.2
(Klein, 5/15/23) (copy on file):
Page 1, line 1, following "districts;":
Insert "relating to transportation of students;"
Page 1, line 10:
Delete all material and insert:
"* Sec. 2. AS 14.09.010(a) is repealed and reenacted
to read:
(a) A school district that provides student
transportation services for the transportation of
students who reside a distance from established
schools is eligible to receive funding for operating
or subcontracting the operation of the transportation
system for students to and from the schools within the
student's transportation service area. Subject to
appropriation, the amount of funding provided by the
state for operating the student transportation system
is the amount of a school district's ADM, less the ADM
for the district's correspondence programs during the
current fiscal year, multiplied by the per student
amount for the school district as follows, for the
school years beginning July 1, 2023:
DISTRICT PER STUDENT AMOUNT
Alaska Gateway $2,536
Aleutians East 378
Anchorage 531
Annette Island 222
Bering Strait 60
Bristol Bay 3,257
Chatham 342
Copper River 1,934
Cordova 409
Craig 515
Delta/Greely 2,019
Denali 2,203
Dillingham 1,484
Fairbanks 995
Galena 310
Haines 763
Hoonah 364
Iditarod 258
Juneau 735
Kake 331
Kashunamiut 6
Kenai Peninsula 1,115
Ketchikan 886
Klawock 712
Kodiak Island 974
Kuspuk 797
Lake and Peninsula 468
Lower Kuskokwim 338
Lower Yukon 1
Matanuska-Susitna 1,109
Nenana 716
Nome 757
North Slope 1,365
Northwest Arctic 30
Pelican 88
Petersburg 457
Saint Mary's 235
Sitka 522
Skagway 44
Southeast Island 1,408
Southwest Region 728
Tanana 581
Unalaska 790
Valdez 897
Wrangell 854
Yakutat 907
Yukon Flats 322
Yukon/Koyukuk 365
Yupiit 2.
* Sec. 3. Section 1 of this Act takes effect January
1, 2024.
* Sec. 4. Section 2 of this Act takes effect July 1,
2023."
Co-Chair Foster OBJECTED for discussion.
Co-Chair Johnson explained that the amendment would
increase the districts' transportation per-student funding.
Transportation funding generally came from the BSA. The
amendment would alleviate some of the pressure some
districts were feeling and ensure that students were able
to get to school on time. The projected pupil
transportation funding was estimated to be $72,568,348 and
the amendment increased funding to $88,079,805. The funding
would come from a general fund transfer to the education
fund. She had ensured that the amendment was single-subject
compliant with the underlying bill and asked for members'
support.
Representative Ortiz referred to page 3 of the amendment.
He asked which version of the bill would be changed by the
amendment.
Co-Chair Johnson deferred the question to her staff.
6:53:51 PM
MATT GRUENING, STAFF, REPRESENTATIVE DELENA JOHNSON,
explained that Amendment 1 was referring to Section 1 of
the underlying bill (SB 140). The bill had a delayed
effective date of January 1, 2024, and the amendment would
change the effective date of the pupil transportation
portion of the bill to July 1, 2023.
Representative Ortiz asked if the impact of the amendment
would be one year or two years of transportation funding.
Mr. Gruening responded that he understood it to be one year
of transportation funding but asked if an available
testifier could confirm the information.
Co-Chair Foster asked Mr. Gruening if he wanted a response
from Ms. Lacey Sanders. He was unsure if Ms. Sanders was
still available.
Mr. Gruening responded in the affirmative. He added that
the appropriation process would occur annually and the
funding would need to be paid out year by year.
Representative Hannan understood that the Senate had
included pupil transportation in its version of the
operating budget. She asked if the dollar amounts in the
amendment were identical to the numbers put forth by the
Senate. She wondered if the funding would include every
district that offered pupil transportation.
Co-Chair Johnson responded that the amendment would allow
all districts to get transportation. She was unsure what
figures the Senate had put forth in its version of the
operating budget.
Mr. Gruening responded that the pupil transportation
funding was paid out annually based on a statutory formula
and the figures in the amendment were identical to those in
the Senate's bill.
6:57:05 PM
Representative Galvin understood that the bill would cause
a net positive extra expense to the current year's budget
of over $7 million. She noted that the disparity between
the districts was quite large; for example, the Alaska
Gateway was at $2,536 while Bering Strait was $60. She
asked if the figures were proportionate based on number of
students, number of miles, or another measurement.
Mr. Gruening responded that the figures in SB 52, which had
been passed by the Senate, were used to derive the figures.
He was not certain how the increases were decided upon but
thought that DEED would have more information.
Representative Galvin relayed that she had heard from a
superintendent that it might be based on half of the
Consumer Price Index (CPI) and about 11 percent for every
district. She asked if her understanding was correct.
Mr. Gruening asked if there was anyone from DEED available
to answer the question.
Co-Chair Foster responded that he did not think anyone was
available.
Co-Chair Johnson understood that the figures were based on
the number of miles in the district. Some students in
districts such as the Alaska Gateway lived further from the
schools than students in other districts. She thought that
transportation needed to reflect the needs of each
individual district.
Representative Stapp was confused by the amendment. He
thought that the proposed increase for the Anchorage School
District was not proportionate to the number of students in
the district. He understood that the increase in the
amendment would total $7.5 million but the underlying bill
had an indeterminate fiscal note. He did not understand how
the $7.5 million figure had been derived.
Mr. Gruening responded that the numbers came from Fiscal
Note 7 from SB 52 [control code VbdAN by DEED](copy on
file), which was the fiscal note that increased pupil
transportation funding.
Co-Chair Foster asked if the fiscal note represented the
net change.
Mr. Gruening responded in the affirmative.
Representative Stapp understood that there would be a $7.5
million indeterminate fiscal note if the amendment were to
be adopted.
Mr. Gruening responded in the negative and explained that
DEED had calculated the increase for each school district.
He added that it was technically a zero fiscal note because
the funding would come from the public education fund, but
the increased cost was identified in the analysis and would
total about $7.5 million.
Co-Chair Foster suggested that Ms. Heidi Teshner respond to
the question.
7:02:52 PM
HEIDI TESHNER, ACTING COMMISSIONER, DEPARTMENT OF EDUCATION
AND EARLY DEVELOPMENT, (via teleconference), responded that
the $7.5 million figure was based on the 11 percent
increase per student amount that was already set out in
statute. The amounts were based on historical expenditures
by district and varied across districts based upon the per
student amounts.
Representative Stapp referred to lines 7 through 10 of the
amendment. He asked what the amendment would accomplish and
why $7.5 million was needed. He did not understand how the
figure was derived. He asked if transportation services
were being increased by 11 percent.
Ms. Teshner responded that was her understanding and
explained that SB 52 increased the current existing per
student amounts that were set in statute. The amounts were
then multiplied by the average daily membership (ADM) minus
correspondence programs. She explained that was the process
through which the $7.5 million figure was derived.
Representative Stapp responded that the amendment did not
indicate the information.
Co-Chair Foster reminded the committee that Mr. Alexei
Painter was available for questions. He noted that
Representative Mike Prax was in the audience.
Co-Chair Johnson asked Mr. Painter to respond to
Representative Stapp's question.
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
explained that the fiscal note was included in the Senate's
version of the operating budget and attached to SB 52. If
it passed in SB 140 instead of SB 52, the transportation
increases would still be funded through the public
education fund and set in statute.
7:06:57 PM
Representative Coulombe understood that the public
education fund had a strict formula that determined the
amount that could be drawn from the fund. She thought it
was based on a percent of market value (POMV) draw. She
asked Mr. Painter if he could clarify the process.
Mr. Painter responded that he thought Representative
Coulombe might be confusing it with the Public School Trust
Fund. The public education fund was an amount based on an
annual estimate of the expenditures for pupil
transportation costs and the foundation program.
Representative Tomaszewski thought that it seemed like the
amendment proposed a statute change. He understood that if
the statute were to be changed, the increase would occur
annually.
Mr. Gruening responded that it was a change to statute and
would be paid out every year but it would still be part of
the annual appropriation process.
Representative Tomaszewski asked if there was a fiscal note
associated with the change.
Mr. Gruening responded that the fiscal note would be
updated after the bill moved from committee.
Co-Chair Foster clarified that the fiscal note would be
identical to Fiscal Note 7 to SB 52. He suggested that
committee staff copy the fiscal note and distribute the
copies to committee members.
Representative Galvin asked for clarification that while it
would be an increase of $7.5 million, there had not been an
increase since 2016. She asked if the amounts could
decrease if there was a population decrease and there were
fewer students in any given district.
Mr. Gruening responded that he understood that the numbers
would adapt based on the formula. He asked DEED to confirm
the information.
Ms. Teshner responded that it was based on the actual ADM.
If the ADM was lower than the appropriation, the funding
would lapse back to the public education fund.
7:11:05 PM
Representative Josephson noted that there were larger
numbers for highway dependent communities. He asked why a
district such as Kuspuk requested $797 per student, but the
Lower Yukon School District (LYSD) was $1 per student.
Ms. Teshner responded that the per student amounts were
originally based on historical data of what the actual
transportation costs were in a given district. Some
districts did not provide a pupil transportation program
even though a dollar amount was designated in statute to
fund the program. Districts informed the department every
year whether or not they would be participating in the
transportation program and the department would provide
grants accordingly. If a district did not provide a program
in the time period during which the historical data was
calculated, the current per student amounts would be low.
Representative Josephson assumed that schools in LYSD would
play each other in sporting events and students would fly
from town to town. He wondered if such travel would be
considered pupil transportation.
Ms. Teshner responded in the negative and explained that
pupil transportation strictly referred to transportation to
and from school.
Representative Coulombe asked Mr. Painter how much money
was currently in the public education fund.
Mr. Painter responded that it was projected to be zero at
the end of the year. There was originally a forward funding
appropriation, but based on oil prices the fund was
projected to have a zero balance by the end of the year.
The two appropriations to the fund were the amount
necessary for the foundation program and the amount
necessary for the pupil transportation program. After the
two appropriations had been utilized, the balance would be
zero.
Representative Coulombe understood there was currently a
zero balance but money would come back in to pay for the
two appropriations.
Mr. Painter responded that the two appropriations were
transferred into the fund from the general fund. The fund
would then be spent without further appropriation according
to the formula. He clarified that the process was to
appropriate the amount necessary from the general fund to
the public education fund to cover the two appropriations,
which would then be distributed to the districts
accordingly.
7:14:39 PM
Representative Hannan asked about districts that had single
digit dollar amount increases for transportation. She
understood that the districts in question did not claim any
student transportation funds and the number acted as a
placeholder.
Ms. Teshner responded that Representative Hannan's
understanding was correct.
Representative Hannan asked if the 11 percent increases
were for districts that were actually offering pupil
transportation and if the remainder of the increases were
just placeholders.
Ms. Teshner responded in the affirmative.
Co-Chair Foster noted that Representative Jesse Sumner was
in the audience.
7:16:14 PM
Co-Chair Edgmon understood that the committee was hearing a
Senate bill [SB 140] that was amending another Senate bill
[SB 52]. He wondered if the bill before the committee was
necessary if the same information already existed in
another bill. He supported the intent of the amendment but
did not understand the purpose if it was already in another
bill.
Co-Chair Johnson responded that her intent was not to
impair either bill, but to make SB 140 more appealing and
more applicable to all areas of the state. She thought the
amendment would add dimension to the underlying bill and
wanted to ensure that the pupil transportation increases
would get funded regardless of the bill that passed. There
had been a significant shortage of bus drivers and the
drivers were going on strike in the Mat-Su Valley and there
was a need for funding increases. She wanted to ensure that
the transportation increases happened and the bus driver
shortage and strike were addressed.
Co-Chair Edgmon commented that the Mat-Su Valley would
receive a large sum if the BSA were to be increased and
some of the money could be used for pupil transportation.
He asked if SB 52 would insert the transportation increases
into statute in the same manner as Amendment 1 to SB 140.
He understood that the intent was to include the increases
in SB 140 because SB 52 might not pass. He asked if his
understanding was correct.
Co-Chair Johnson responded that her intent was to ensure
that pupil transportation was addressed in the current
year. She had not tracked the specifics of SB 52. She
thought that pupil transportation was separate from the BSA
and it was important that both were addressed.
7:20:52 PM
AT EASE
7:30:18 PM
RECONVENED
Co-Chair Foster explained that he checked with Legislative
Legal Services to ensure that it was legal to copy a
section of one bill and insert it into another bill. He
received confirmation that it was legal. He asked Ms.
Teshner to speak to the fiscal note.
Ms. Teshner did not have the information in front of her.
Co-Chair Foster asked Representative Tomaszewski to repeat
the question.
Representative Tomaszewski referred to Fiscal Note 5 to SB
52 [control code hGSaa by DEED](copy on file) which showed
an increase to the BSA. He relayed that he no longer had a
question on the fiscal note.
Co-Chair Foster asked if Ms. Teshner had any comments. He
asked staff to copy and distribute Fiscal Note 5 to the
committee.
Ms. Teshner responded that there would be a zero fiscal
note for SB 52 for the foundation program and a zero fiscal
note for the pupil transportation program. The pupil
transportation component was zero because the funding
originated from the general fund and was transferred into
the public education fund and not directly into the pupil
transportation component. The amount was shown in the
public education fund in Fiscal Note 5.
Co-Chair Foster asked if Fiscal Note 5 was no longer valid
after the introduction of Fiscal Note 7.
Ms. Teshner responded in the negative and relayed that both
were necessary. Both notes included the same analysis, but
Fiscal Note 7 was a zero fiscal note because the funding
was not directly appropriated into the formula and was
instead a general fund transfer to the public education
fund. The foundation program and pupil transportation
program were funded through a draw from the public
education fund.
Representative Tomaszewski asked if the appropriations
included any federal match funding.
Ms. Teshner responded that the pupil transportation program
did not have any federal match, but the foundation funding
had funding that could be considered a federal match.
Alaska was an equalized state and had an equalized formula,
which meant that federal impact aid funding was integral
when considering the amount of state aid paid that would be
paid out to districts. The funding could be considered a
federal match because the state was allowed to use the
funding to reduce the amount paid by the state.
Representative Tomaszewski asked if the match applied to
pupil transportation.
Ms. Teshner responded in the affirmative.
7:35:56 PM
Representative Coulombe asked how the 11 percent increase
was chosen.
Ms. Teshner responded that the Senate Finance Committee
(SFC) proposed the 11 percent increase.
Representative Coulombe asked if the figure was based on a
formula or something similar.
Ms. Teshner replied that she understood that it related to
the CPI adjustment, but she was not certain of the exact
formula.
Co-Chair Edgmon commented that he thought that 11 percent
represented half of the CPI increase that was put into
place by SFC. He did not know the reason why it was half of
the CPI and not 75 percent or 100 percent.
Co-Chair Johnson noted that the pupil transportation
program was usually the last component of education to be
funded. Pupil transportation was usually the first area to
suffer when there were financial shortfalls and she thought
the amendment made sense.
Co-Chair Foster WITHDREW the OBJECTION.
Representative Coulombe OBJECTED.
7:38:05 PM
A roll call vote was taken on the motion.
IN FAVOR: Josephson, Ortiz, Cronk, Representative Stapp,
Galvin, Hannan, Edgmon, Foster, Johnson
OPPOSED: Coulombe, Tomaszewski
The MOTION PASSED (9/2). There being NO further OBJECTION,
Amendment 1 was ADOPTED.
7:39:09 PM
AT EASE
7:45:21 PM
RECONVENED
Representative Josephson relayed that he was interested in
moving a conceptual amendment. The amendment would be
relevant to AS 14.17.470 and the proposed increase to the
BSA to $6,640; however, due to the late introduction of the
bill, he suggested adopting the remainder of SB 52 apart
from the pupil transportation portion that had just been
adopted by the committee. [Although not explicitly stated,
Representative Josephson MOVED conceptual Amendment 1 to
Amendment 1.]
Co-Chair Foster OBJECTED for discussion.
Representative Josephson confirmed that Conceptual
Amendment 1 was to adopt Version D of SB 52.
Representative Stapp wanted to change the $680 per student
increase to $1,300 per student. He MOVED conceptual
Amendment 1 to conceptual Amendment 1 to Amendment 1.
Co-Chair Foster OBJECTED for discussion.
Co-Chair Edgmon called a point of order. He was not certain
if it was permitted to move a conceptual amendment to a
conceptual amendment.
7:48:01 PM
AT EASE
7:48:28 PM
RECONVENED
Co-Chair Foster relayed that it was not permitted to move a
conceptual amendment to a conceptual amendment.
Representative Stapp WITHDREW conceptual Amendment 1 to
conceptual Amendment 1 to Amendment 1.
Co-Chair Foster noted that conceptual Amendment 1 to
Amendment 1 was before the committee.
Representative Cronk opposed the conceptual amendment. He
understood the broadband funds would help rural Alaska and
he did not think a significant BSA increase belonged in the
bill.
Representative Tomaszewski commented that the committee had
just determined whether it was permittable to incorporate
the pupil transportation portion of SB 140 into SB 52. He
asked if it was allowable to incorporate the entirety of a
bill into another bill.
Co-Chair Foster reiterated that his staff spoke with
Legislative Legal Services and was informed that it was
legal to insert a portion of one bill into a separate bill.
He suggested that his staff speak to the matter in more
detail.
7:51:23 PM
BRODIE ANDERSON, STAFF, REPRESENTATIVE NEAL FOSTER,
explained that committees were permitted to make a wide
array of changes to bills. He acknowledged that if a bill
was on the floor, a separate bill could not be pulled from
another committee and brought to the floor in order to
combine the bills together. He noted that SB 52 was in the
possession of the House Finance Committee and therefore the
committee could make any changes it wanted to SB 52 and SB
140.
Co-Chair Foster commented that there was an upcoming
amendment by Representative Tomaszewski that would have
impacted both bills, but the representative was told he
should move the amendment on the floor rather than in
committee. He wondered if Representative Tomaszewski would
have been permitted to move the amendment in committee.
Mr. Anderson responded that he would not be comfortable
answering the question and suggested that a representative
from legal services could better respond.
Co-Chair Edgmon commented that the process was getting
complicated. He thought that the committee supported
Amendment 1.
Co-Chair Foster stated that he was in support of SB 52 and
supported conceptual Amendment 1.
7:54:04 PM
Representative Coulombe echoed Representative Cronk's
comments. She thought the inclusion of conceptual Amendment
1 would threaten the intent of SB 140. She thought the bill
should be straightforward which was the reason she gave for
opposing Amendment 1 and including the pupil transportation
program in the bill. She relayed that she was in opposition
to the conceptual amendment.
Representative Cronk commented that the bill would not pass
if the conceptual amendment was adopted. He was in support
of increased broadband services.
Representative Galvin thought that the conceptual amendment
was an odd way to accomplish the BSA increase but she
supported it. The House had already passed the $174 million
increase to the BSA and sent a budget to the Senate that
was not balanced. She thought it would help the education
system to have predictable funding and that the increase
seemed reasonable. She noted that the state needed better
broadband services and she supported the intent of both
bills as well as the conceptual amendment.
Co-Chair Foster understood that the questions of legality
had been answered but noted that legislative legal was
available for any further questions.
Representative Josephson clarified that SB 52 contained a
BSA increase of $680 and pupil transportation, an increase
to residential schools and stipends, and some necessary
cleanup to the Alaska Reads Act. He thought it was intended
to show the public that the money was well spent and that
the positive results would be evident.
Co-Chair Foster WITHDREW the OBJECTION.
Representative Cronk OBJECTED.
7:59:06 PM
A roll call vote was taken on the motion.
IN FAVOR: Edgmon, Foster, Galvin, Representative Hannan,
Josephson, Ortiz, Stapp, Tomaszewski
OPPOSED: Johnson, Coulombe, Cronk
The MOTION PASSED (8/3). There being NO further OBJECTION,
conceptual Amendment 1 to Amendment 1 was ADOPTED.
8:00:24 PM
Representative Stapp MOVED conceptual Amendment 3. He
suggested that the BSA increase change from $680 to $1,360.
Co-Chair Foster OBJECTED for discussion.
8:01:23 PM
AT EASE
8:33:31 PM
RECONVENED
Co-Chair Foster stated that he intended to set SB 140
aside.
Representative Ortiz asked if he could object to setting
the bill aside.
Co-Chair Foster thought Representative Ortiz could object
to the action. He suggested that the committee return to
the bill the following day.
8:34:44 PM
AT EASE
8:38:38 PM
RECONVENED
Representative Hannan asked whether the conceptual
amendment from Representative Stapp would still be before
the committee if it revisited the bill the following day.
Co-Chair Foster responded in the affirmative. He confirmed
that the BSA increase and the pupil transportation increase
had already been adopted.
Co-Chair Foster stated that SB 140 would be set aside.
Representative Ortiz OBJECTED [to setting the bill aside].
Co-Chair Foster commented that the committee was entering
new territory. He understood that if there were such an
objection, the chair would make a decision. He relayed that
the ruling of the chair was to set the bill aside but he
would put the action up for a vote.
Representative Galvin asked what the implications would be
to set the bill aside. She asked if the bill would have to
be returned to the other body. She wondered if there was
enough time to get the bill to the floor in order to vote
on it before the end of session.
Co-Chair Foster understood that if the intent was to move
the bill in the current year, it would need to pass out of
the committee; however, as the bill was not pending
referral, it would be pushed toward the end of the week. He
thought it would be difficult to get the bill to the floor
within the timeline of the current session.
Co-Chair Edgmon agreed with all of Co-Chair Foster's
comments.
Co-Chair Foster relayed that the question was whether the
ruling of the chair to set SB 140 aside would be sustained.
8:42:39 PM
A roll call vote was taken on the motion.
IN FAVOR: Coulombe, Cronk, Stapp, Tomaszewski,
Representative Galvin, Edgmon, Foster, Johnson
OPPOSED: Hannan, Ortiz, Josephson
The MOTION PASSED (8/3). There being NO further OBJECTION,
the ruling of the chair was sustained.
Co-Chair Foster reminded the committee of the remainder of
the agenda.
SB 140 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 48
"An Act authorizing the Department of Natural
Resources to lease land for carbon management
purposes; establishing a carbon offset program for
state land; authorizing the sale of carbon offset
credits; and providing for an effective date."
8:44:38 PM
RENA MILLER, SPECIAL ASSISTANT, DEPARTMENT OF NATURAL
RESOURCES, introduced the PowerPoint presentation "Senate
Bill 48: Summary of Changes/Sectional Analysis" dated May
15, 2023 (copy on file). She explained that she would
detail the changes to the bill that were made in the
Senate. She skipped to slide 3 and noted that the House
Resource Committee had heard the companion bill HB 49 six
times and amended it, the House Finance Committee heard the
bill five times, the Senate Resources Committee heard SB 48
four times and amended it, and the Senate Finance Committee
heard it five times and amended it. The bill passed the
Senate earlier in the day and her presentation would be the
first discussion of the bill as amended by the Senate.
Ms. Miller advanced to slide 4 and explained that she would
compare SB 48 with HB 49 as amended. The first change was
the title, which was revised to reflect amendments made in
the Senate. The changes were as follows: added "relating to
the powers and duties of the Alaska Oil and Gas
Conservation Commission" [Section 1]; and "relating to oil
and gas lease expenditures" [Section 16]. She noted that
Section 1 was new to SB 48 and was the same as Section 3 of
HB 50. It provided the Alaska Oil and Gas Conservation
Commission (AOGCC) with the authority to acquire primary
enforcement responsibility for Class VI wells from the
Environmental Protection Agency (EPA). She explained that
Class VI wells were used to inject carbon dioxide into deep
rock formations.
Ms. Miller continued that Section 2 was formerly Section 1
of HB 49 and provided a full exemption from the state
procurement code. It was amended to exempt only contracts
with registries. There was no change to Section 3.
8:48:04 PM
Ms. Miller continued on page 5 of the presentation. She
indicated that Section 4 was also unchanged from HB 49 and
conformed to the new carbon management purpose lease
program. She explained that Section 5 was formerly Section
4 and detailed the new carbon management program. The
following was added to the section:
• DNR must solicit competitive interest on receiving
an application
• DNR to weigh revenue to state in case of competing
leases
• Leases must include performance benchmarks and will
be terminated if failure to meet
• In Best Interest Finding, DNR must consider impacts
on mining, timber and other resource development; the
known mineral potential in the area; and value to the
state
• State land will remain open to other resource
development
• Annual report to Legislature
Ms. Miller stated that Section 6 of SB 48 was unchanged and
was conforming to Section 5 of HB 49.
Ms. Miller advanced to slide 6. She relayed that Section 7
was new and was conforming to the requirement in Section 5
of HB 49 to solicit competitive interest. She noted that
Section 8 was formerly Section 6 and established the Carbon
Offset Program at the Department of Natural Resources
(DNR). The following was added:
• Additional criteria to evaluate in a Best Interest
Finding, including impacts to other resource
development sectors; assessment of mineral potential
in area; and potential revenue to the state
• State land to remain open to other resource
development
• Removal of new fund; credit sale revenue will go to
general fund
• Ability for DNR when considering contracts under the
procurement code to evaluate revenue and value to the
state
• Prohibition against contract commissions over 30%
• Annual report to the Legislature
• Revisions to definitions section to reflect the
evolving nature of the carbon offsets industry and
ensure statute durability
Ms. Miller advanced to slide 7. She relayed that Sections 9
through 11 of SB 48 were formerly Sections 7 through 9 of
HB 49 and there were no changes. Additionally, Sections 12
through 15 were formerly Sections 10 through 13 and there
were no changes. She shared that Section 16 was new and
would disallow carbon lease or project costs as oil and gas
lease expenditures. Finally, Section 17 was formerly
Section 14 and was unchanged. She expressed that the
department appreciated the Senate's changes to the bill and
thought that it made many improvements to the legislation
that addressed the concerns about the program. She believed
that the programs would be successful if the department
could be transparent with the legislature and with
Alaskans. She concluded her presentation.
8:54:58 PM
Representative Galvin appreciated the information and the
work the department had done. She noted that Ms. Miller had
referenced prohibition against a contract commission of
over 30 percent. She recalled that there were two various
potential contractors who had mentioned a contract
commission of 20 percent. She was curious about the
discrepancy of the two figures.
Ms. Miller responded that the two hypothetical scenarios
showed up in the department's crediting tables. In the
scenarios, the 20 percent figure was applied because it was
somewhat of a norm in the field, although it could vary
depending on the particular project. Some of the smaller
projects required a larger commission than some of the
larger projects. The department felt that the 30 percent
figure allowed for appropriate negotiating leeway that
could potentially include other terms that were of value to
the state. If a situation arose in which the 30 percent
figure was prohibitive, the department would return to the
legislature to discuss the issue.
Representative Galvin recalled that two different
organizations had presented before the committee about the
carbon program. She thought the organizations had told the
committee that the contract commission percentage was
somewhere between 18 and 20 percent. She asked Ms. Miller
to provide some examples of the other terms that could be
negotiated as a state. She understood that the norm was up
to 20 percent.
Ms. Miller responded she thought that the American Carbon
Registry (ACR) was one of the organizations that had
presented to the committee and had likely echoed 20 percent
as the norm. One of the negotiating terms that might
increase the percentage was developer training for DNR
staff in order to manage future projects in which the
department was the sole developer.
Representative Galvin relayed that she had done some quick
math for one of Ms. Miller's examples and the total was $60
million for one contractor. She was concerned about the
increased cost if the percentage was increased by 10
percent and thought it was a substantial sum to dedicate to
training purposes. She supported the bill but wanted to
ensure that the legislature was protecting Alaska's
interests.
9:00:07 PM
Representative Josephson recalled that there was an earlier
amendment sometime in the bill's hearing process that
included language about a $10 million spending cap, beyond
which the legislature would need to provide additional
oversight. He asked if his recollection was correct.
Ms. Miller responded that the Senate Resources Committee
had maintained the full exception to the procurement code
and had implemented an amendment that would require
legislative approval for contracts exceeding $10 million.
Ultimately, the Senate Finance Committee sought to remove
the requirement for legislative approval to foster a
process that would provide transparency, competition, due
process, and fairness.
Representative Josephson commented that he was aware that
the bill had always had an allowance for other potential
resource development. He asked how decisions would be made
about leaving forests intact in situations in which forest
had to be removed, such as in the case of Fort Knox [gold
mine].
Ms. Miller responded that the mineral estate was the
dominant estate. The bill would not change the fact that an
area could only be closed to minerals with the
legislature's action. The first step would be for the
department to assess the known mineral potential of an
area. When a project was created, it was important to know
where the high potential areas were and to project the way
the area might look in the future. An option would be to
exclude a forest from a project area in order to avoid
having to account for carbon loss within a project that
aimed to increase carbon stock increases. There were also
opportunities within a project area to accommodate surface
disturbance, including the potential for a subsurface mine,
which would help determine how many credits a project would
be able to generate.
Representative Hannan referred to Section 16 of the bill
which included descriptions of oil and gas industry lease
expenditure dialogue. She had a conversation with Ms.
Miller and was assured that the bill would be unrelated to
the sequestration apart from well primacy. She asked for
more information on the choices behind the language of
Section 16.
Ms. Miller responded that Section 16 amended AS
43.55.165(e) which the was current oil and gas tax credit
statute and it articulated items that could not be claimed
as lease expenditures. She clarified that the items all
related to oil and gas activity. There was only one example
in which costs were incurred as part of the capital
expenditure for a carbon management purpose or a carbon
offset project. The change was not related to potential
lease expenditures on underground storage projects. She
thought the issue would come before the legislature when
developing the leasing and regulatory framework for
underground carbon storage. There was concern in the Senate
that there could be a carbon lease or project on the same
surface area as an oil and gas development. If the
situation occurred, the Senate wanted to ensure that
capital expenditures for the carbon purpose were not to be
deducted as lease expenditures from the oil and gas
production tax.
Co-Chair Foster asked if there were additional questions.
Ms. Miller requested that Mr. Neil Steininger speak to the
details of the way in which the projects would be funded.
9:06:37 PM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, (via teleconference), expanded upon
the question. There were some amendments made in the Senate
related to the structure of the funding of the carbon
offset program. The revenue collected under the program
would be tracked as a separate fund code in the state
budget for the expenditures. The funds would live within
the general fund but would be accounted for separately. The
amount of revenue collected would be transparent to the
public and the legislature and would be published in the
Department of Revenue Revenue Source Book released
annually. It would be similar to the way in which
Department of Motor Vehicles (DMV) receipts were reported
upon and appropriated. Appropriations for the operating
side of the carbon offset program would be included in the
operating budget each year. As the revenues began to flow
into the state, expenditures would be transitioned over to
the direct expenditures of the new code that would be
established by the Legislative Finance Division (LFD).
Mr. Steininger continued that appropriations related to the
actual carbon offset project would be in the operating
budget; however, costs associated with specific projects or
credit projects would live within the capital budget which
would allow the department to spread the costs over
multiple years. There would be carry-forward language
beginning in FY 25 in the operating budget which would
allow the department to carry over more funds than the
amount that was strictly necessary for a given fiscal year.
Co-Chair Foster indicated that there were five fiscal notes
dated within the last week. He asked whether Ms. Miller
would like to speak to the fiscal notes.
9:09:45 PM
Ms. Miller commented that the committee was already
familiar with three of the fiscal notes dated within the
last week. The main change was revising the narrative to
reflect the elimination of the carbon offset fund. There
were two fiscal notes the committee had not yet heard. The
first was related to OMB component by the Department of
Commerce, Community and Economic Development (DCCED) with
the control code azWox (copy on file). The fiscal note
related to the addition of Section 1 of SB 48 which would
grant AOGCC the authority to pursue primacy from the U.S.
Environmental Protection Agency (EPA) over Class VI wells.
There was $908,000 in FY 24 and $888,000 in FY 25. She
noted that AOGCC had applied for grants from the EPA to
help with the costs of the responsibility of enforcement,
which would supplant the general fund.
Ms. Miller continued that the second new fiscal note was
OMB component 2888 by DCCED with the control code qqAuO
(copy on file). The fiscal note related to the Alaska
Energy Authority (AEA). She forgot to mention earlier that
the Senate had amended the bill so that 20 percent of the
revenue generated from the carbon offset program would be
deposited into the renewable energy grant fund [AS
42.45.045]. The change had generated the fiscal note, which
was indeterminate.
Representative Josephson asked if the carry-forward dollars
would be subject to the sweep.
Mr. Steininger responded that the monies would not be
subject to the sweep.
Representative Josephson asked if the reasoning was because
the legislature had fully appropriated the monies already.
Mr. Steininger responded in the affirmative.
Representative Stapp commented that his main concerns about
the bill were related to the procurement process, the lack
of oversight, and the competitive interest clauses. He did
not want the bill to be used as a capital expenditure in
order to sequester carbon and receive a state tax credit,
which he thought would have happened if the amendments in
the Senate were not passed. He asked if the committee was
"missing anything." He wondered if all concerns had been
addressed.
Ms. Miller responded that the department had heard similar
concerns from legislators in both bodies. The department
appreciated the Senate's collaboration in working towards
resolutions and finding ways to provide transparency and
responsiveness to the legislature and Alaskans.
9:15:03 PM
Representative Galvin drew attention to page 10, line 3 of
SB 48. She understood that a typical contract commission
agreement was 20 percent or less. She asked if the
department would be severely impacted if the figure
increased to 25 percent.
Ms. Miller responded that the department felt that 30
percent would offer flexibility and would avoid statutorily
contracting negotiated terms while preventing a potential
situation in which the prudency of entering into the
contract would be questioned. She noted that the industry
was rapidly evolving and she had heard that the allowance
was following norms. Some projects involving smaller
surface areas could generate more than 20 percent
commissions and the department would like the opportunity
to pursue such projects. Future projects could involve
environments like tundra and the department did not want to
limit itself.
JOHN BOYLE, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES,
responded that the intent was to maximize the amount of
revenue and value of the resources used in the projects. He
recalled that one of the slides in the presentation showed
the various types of carbon projects available. It could be
true that some organizations saw a certain commission
range, but if the state were to look to other types of
carbon projects, the projects might not fall into the same
parameters. The 30 percent figure seemed to be a good
compromise and would allow for the desired flexibility. For
example, kelp projects were nascent and accrediting bodies
were still crafting the logistics of the projects. It was
important to preserve the flexibility, but the Senate felt
that it was also important to implement a percentage cap.
9:19:24 PM
Representative Galvin asked for some examples of projects
that rose above 20 percent. She understood that the
committee had been told that the general cap was 20
percent. She was hoping for reassurance that the extra 10
percent was necessary. She reiterated that she was
supportive of the bill but wanted to ensure that the
legislature had set the correct guidelines.
Ms. Miller replied that she did not have additional data
because many of the project contracts were not available to
the public. She relayed that the committee had heard from
both ACR and the contractor Anew Climate, which both
related to the improved forest category, that the 20
percent figure was the norm for current projects. She noted
that the committee had also heard from potential developers
that for smaller niche projects, commissions could go
higher particularly because the project areas were smaller
which was something of which "they" wanted the department
to be aware.
Representative Galvin asked who "they" were. She understood
that ACR was aware of projects that would surpass 20
percent but the projects were not yet common.
Ms. Miller responded there were no protocols available at a
registry for a kelp project but developers and other
registries were actively working on fine-tuning the science
of how to verify the amount of carbon that kelp at the
bottom of the ocean had sequestered. She added that ACR had
shared that different projects could generate different
types of commissions.
Representative Galvin understood that the ceiling of 30
percent was being requested because there could be smaller
projects that could reach the figure and the department
would be limited. She asked if her understanding was
correct.
Ms. Miller responded in the affirmative and explained that
it was one reason for the request. A cap of 30 percent
would allow for some flexibility for the department to
pursue other projects that would be in the state's best
interest.
Co-Chair Foster set an amendment deadline for SB 48 for
11:30 a.m. on May 16, 2023.
SB 48 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 77
"An Act relating to municipal property tax; and
providing for an effective date."
9:26:12 PM
SENATOR FORREST DUNBAR, SPONSOR, gave a brief summary of
the bill. He explained that SB 77 was brought forward to
incentivize further economic development by providing local
government with two additional and optional tools. Firstly,
it would allow municipalities to fully exempt property
taxes for economic development purposes and secondly, it
would allow local governments to levy a "blight tax, which
was a temporary increase in property taxes for heavily
deteriorated properties that were negatively impacting the
surrounding neighborhoods. The tax would be capped at 50
percent of a property's value and could not be applied to a
primary residence. The blight tax would be removed once the
property owner submitted a remediation plan, received
approval from the local government, and began remediating
the property. Additionally, there were standards that a
property must meet in order to be designated as blighted.
He reiterated that both tools were optional and local
governments could decide whether it would like to utilize
the tools.
Co-Chair Foster understood that one of the concerns about
the blight tax was that it would apply to residential
properties. He asked if the tax would only apply to
commercial properties or if it would apply to residential
properties as well.
Senator Dunbar responded that it could apply to residential
properties. In Anchorage, it could apply to multi-family
housing or rental properties, but it could not apply to a
primary residence.
Representative Tomaszewski asked for clarity on whether the
tax could be up to 50 percent of the property value.
Senator Dunbar responded that he meant the tax could be up
to 50 percent of the existing tax paid by the property. In
other states the figure could be two or three times higher,
but he felt that a lower cap would be prudent for Alaska.
It was not intended to be a revenue-generating device, but
as an incentive for people to remediate their properties.
Representative Tomaszewski understood that if a property
paid $1,000 per year in property taxes, the blight tax
could add up to $500 per year.
Senator Dunbar responded in the affirmative.
Co-Chair Foster suggested that the committee hear the
fiscal note.
SANDRA MOLLER, DIRECTOR, DIVISION OF COMMUNITY AND REGIONAL
AFFAIRS, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, (via teleconference), referenced the fiscal
note by Department of Commerce, Community and Economic
Development with OMB component 2879 and the control code
qeRGn (copy on file). She explained that it was a zero
fiscal note.
Co-Chair Foster indicated that the committee would begin
the amendment process.
9:30:17 PM
Representative Tomaszewski MOVED to ADOPT Amendment 1, 33-
LS0416\U.4 (Dunmire, 5/12/23) (copy on file):
Page 1, following line 2:
Insert new bill sections to read:
"*Section 1. AS 29.45.030(c) is replaced and reenacted
to read:
(c)Property described in (a)(3) or (4) of this
section from which income is derived is exempt from
general taxation only if the income is from
(1) use of the property by a nonprofit
religious, charitable, or hospital group that is
exempt from federal taxation under 26 U.S.C.
501(c);
(2) use of the property by a nonprofit
educational group exclusively as classroom space;
(3) use of the property for fundraising for
a nonprofit religious, charitable, hospital, or
educational group; or
(4) the owner's leasing of the property to a
nonprofit organization or an individual in
pursuit of the property's exempt purpose and the
leasing is incidental to and reasonably necessary
for the accomplishment of the owner's exempt
purpose; this paragraph does not apply to
property owner by an educational group.
*Sec. 2. AS 29.45.030 is amended by adding a new
subsection to read:
(o) Property described in (a)(3) of this section
that is under construction or reconstruction and
intended to be used exclusively for exempt purposes
upon completion is exempt from general taxation if the
construction or reconstruction is completed within two
years after the date a building or zoning permit is
issued for the property. In this subsection,
construction or reconstruction is completed on the
first day the property is occupied and used for the
exempt purpose."
Page 1, line 3:
Delete "Section 1"
Insert "Sec.3"
Renumber the following bill sections accordingly.
Representative Josephson OBJECTED for discussion.
Representative Tomaszewski explained that the amendment
would add language in regard to nonprofit organizations. It
would clarify property taxation based on income by
nonprofit properties that would fall under AS 29.45.030.
The legislation was a result of conversation between
stakeholders of the former HB 70 [withdrawn by the sponsor
Representative Tomaszewski]. The intent was to reduce and
prevent litigation between nonprofits and municipalities in
the future. He directed attention to a document regarding
tax code that he had distributed to committee members (copy
on file). He indicated that AS 29.45.030(c)(1) was tied to
federal tax code 26 U.S.C 501(c) exemption and if
activities triggered federal taxes, the property would no
longer be exempt from taxes. He relayed that (c)(2) allowed
for exemption of general taxation for non-profit
educational groups on income derived from classroom spaces.
He continued that (c)(3) allowed for property exemption for
fundraising for qualifying nonprofits. He explained that
(c)(4) allowed for income derived from leasing to another
nonprofit in order to generate income if the income
generated also supported the mission of the organization.
Finally, Section 2 would allow for a grace period of two
years for construction or reconstruction of a nonprofit
facility.
9:32:52 PM
Senator Dunbar noted that HB 70 was only heard twice in its
first committee of referral. He noted that the House
Finance Committee was the final committee of referral for
SB 77 and the amendment would be a substantial policy
change. He did not support the amendment and reiterated
that the tools proposed by the bill were optional through
the adoption of a local ordinance. The amendment would be
automatically enacted upon passage and would impact the
entire state. He did not think the amendment had been
thoroughly vetted, unlike the underlying bill.
Co-Chair Edgmon shared that he had spoken with
Representative Tomaszewski about the fact that SB 77 would
be optional and a local government could determine whether
it wanted to participate. He asked why the provision in the
amendment needed to be put into law when the decision was
up to the local municipality.
Representative Tomaszewski responded that the language
expressed the intent to illuminate grey areas within the
code itself. There was a case in Fairbanks that had been
going on for the past five years in which an assessor
thought that a property should be paying property taxes for
various causes. The case had gone to the Superior Court
which ruled in favor of the plaintiff and sent it back to
the borough. The borough then appealed the case to the
Alaska Supreme Court, which also ruled in favor of the
plaintiff and sent the case back again to the borough. He
relayed that the situation was just one example. The
situation that was the catalyst for the amendment was the
borough going after the local food bank and charging
property taxes for certain situations that the food bank
deemed to be unacceptable or exclusive. The next step for
the food bank was also to appeal to the Superior Court. He
clarified that his intent was to utilize the amendment
process to address grey areas in which a municipality or
nonprofit could work together to alleviate such differences
without appealing to the courts.
9:36:49 PM
Co-Chair Edgmon understood that Amendment 1 included the
content of the withdrawn HB 70.
Representative Tomaszewski responded that it was
essentially a committee substitute from HB 70 and there was
little left of the bill in the amendment.
Co-Chair Edgmon thought it should be a separate bill.
Representative Ortiz asked Representative Tomaszewski to
summarize (c)(1) and (c)(2) of the amendment.
Representative Tomaszewski responded that (c)(1) tied to
federal tax code. If activities triggered federal taxes,
the exemption would no longer apply. He explained that
(c)(2) was a property used by a nonprofit organization or
group and intended exclusively for classroom space. He had
heard from homeschools and charter schools that there would
be a loophole in the legislation without the language.
Representative Ortiz asked Representative Tomaszewski to
summarize (c)(3) and (c)(4).
Representative Tomaszewski replied that property exception
under (c)(3) and (c)(4) was allowed to be used for
fundraising for the used properties. He explained that the
food bank held an annual fundraiser where local ceramic
artists made bowls and donated the bowls to the food bank
and the public had the opportunity to purchase the bowls.
The entirety of the money from the sales was donated to the
food bank. The bank used a part of a building for the event
and a borough assessor determined that because a portion of
a building was used, it was no longer exempt from property
taxes. The food bank was taxed for the portion of the
building. The exemption would ensure that similar
fundraising would remain tax exempt.
Representative Ortiz asked for confirmation that it would
be tax exempt.
Representative Tomaszewski clarified that the property
taxes would be tax exempt. He was not speaking to income
taxes.
9:41:32 PM
Representative Coulombe commented that the amendment was
addressing a specific local issue. She thought it would be
better addressed at the local level rather than at the
state level. She would not be supporting the amendment.
Representative Tomaszewski responded that it was an issue
in Fairbanks at the moment but the issue would not stay in
Fairbanks in perpetuity. He argued that it would become an
issue in other areas of the state.
Representative Coulombe would like to see the
municipalities deal with the issue as it arose.
Representative Josephson asked if Alaska Municipal
League(AML) had offered its stance on the amendment.
Representative Tomaszewski responded that he collaborated
with a representative for AML to amend the language.
Representative Josephson noted there was an allowance in a
succeeding section of AS 29.45.050 that included
opportunities for nonprofit organizations. He had been told
that there were qualifying entities in Fairbanks. He asked
whether the food bank had sought an exemption through AS
29.45.050.
Representative Tomaszewski responded that he did not know
if the food bank had sought an exemption. He thought that
if there was duplicative language that Legislative Legal
Services would have caught it.
Representative Josephson commented that he was not certain
that it was a question of duplication. He was concerned
about the impacts on the large Providence Hospital campus
in Anchorage and the fair-assessed tax receipts from the
campus.
Representative Tomaszewski responded that he was not
familiar with the details of the organization.
Representative Josephson commented there was a vast amount
of caselaw on the question of exemptions and the amendment
would not solve the problem. All of the case laws would be
binding and would steer the parties to an answer and the
laws therefore served a useful purpose. He was concerned
that the exceptions might "swallow up" the rule.
9:46:28 PM
Representative Cronk commented that he was grateful to not
live in organized area. He thought it was mind-boggling for
there to be a tax on nonprofits. He noted that it was
outside of his area of expertise but that he would support
the amendment.
Representative Stapp shared that there was a saying in
Fairbanks of "the interior likes to stick together" and he
would vote for the amendment.
Representative Ortiz offered a hypothetical scenario in
which there was a church in a community that had a property
on which it paid taxes, but the church rented the property
out for vehicle rental space. He asked if the church would
be exempted from paying property tax if the amendment were
to pass.
Representative Tomaszewski asked for clarification that
Representative Ortiz was speaking about a parking lot owned
by a church that charged individuals to park their vehicles
in the lot.
Representative Ortiz responded in the affirmative and added
that the church would pay property taxes under current law.
Representative Tomaszewski replied that he did not think
the amendment would impact the situation. The scenario did
not involve fundraising and he thought it would trigger
federal tax code and the church would lose its tax
exemption. He noted that it was not his area of expertise
and he was not an attorney.
Senator Dunbar relayed that he respected the food bank in
Fairbanks and thought it did great work; however, he was
concerned about the impact of the amendment on other
nonprofits. For example, in 2016 the Providence campus in
Anchorage had about $400 million of untaxed property and
$100 in property on which the hospital paid property tax.
He was unsure how the amendment would impact the hospital
and he was not in support of it.
Representative Tomaszewski reiterated that the amendment
addressed a problem that been impacting Fairbanks for
several years. The amendment had been reviewed by
legislative legal and there were no identified legal
problems. He did not want nonprofits like a food bank to go
to court to defend itself when it was already a vulnerable
organization. He thought that an assessor removing the food
bank's tax exemption was uncalled for and there was
presently no recourse for a nonprofit other than to go to
court.
Representative Josephson MAINTAINED the OBJECTION.
9:52:15 PM
A roll call vote was taken on the motion.
IN FAVOR: Cronk, Stapp, Tomaszewski, Foster
OPPOSED: Galvin, Hannan, Josephson, Ortiz, Coulombe, Edgmon
Co-Chair Johnson was absent from the vote.
The MOTION to adopt Amendment 1 FAILED (4/6).
Representative Tomaszewski WITHDREW Amendment 2.
9:53:38 PM
Representative Coulombe MOVED to ADOPT Amendment 3, 33-
LS0416\U.3 (Dunmire, 5/4/23) (copy on file):
Page 2, line 13:
Delete "include the following requirements"
Insert "specify that a property is blighted if at
least one of the following applies
Co-Chair Foster OBJECTED for discussion.
Representative Coulombe explained that she was moving the
amendment on behalf of the sponsor and deferred to the
sponsor for an explanation.
Senator Dunbar explained that Amendment 3 and the
forthcoming Amendment 4 were cleanup amendments. He thought
Representative Hannan had pointed out that there was a
drafting error and the amendments would fix the issue. He
asked that the committee adopt both amendments.
Co-Chair Foster WITHDREW the OBJECTION. There being NO
further OBJECTION, Amendment 3 was ADOPTED.
9:55:04 PM
Representative Coulombe MOVED to ADOPT Amendment 4, 33-
LS0416\U.2 (Dunmire, 5/2/23) (copy on file):
Page 2, line 18:
Delete all material.
Reletter the following subparagraphs accordingly.
Page 2, line 21, following "property":
Insert "has been vacant for not less than one
year and"
Co-Chair Foster WITHDREW the OBJECTION. There being NO
further OBJECTION, Amendment 4 was ADOPTED.
9:55:50 PM
AT EASE
9:56:08 PM
RECONVENED
9:56:13 PM
Co-Chair Edgmon MOVED to report CSHB 77 (FIN) out of
Committee with individual recommendations.
CSSB 77(FIN) was REPORTED out of committee with nine "do
pass" recommendations and with one "no recommendation"
recommendation.
Co-Chair Foster reviewed the meeting agenda for following
morning.
ADJOURNMENT
9:57:36 PM
The meeting was adjourned at 9:57 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 77 Amendments 1-4 051323.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 77 |
| HB 178 ANHB White Paper - Ongoing Barriers to Access Water and Sanitation in Rural Alaska 2023.pdf |
HFIN 5/15/2023 1:30:00 PM |
HB 178 |
| HB 178 CS WORKDRAFT 050223 v.B.pdf |
HFIN 5/15/2023 1:30:00 PM |
HB 178 |
| HB 178 VSW DEC Water 042723.pdf |
HFIN 5/15/2023 1:30:00 PM |
HB 178 |
| SB 140 Supporting Document What does it cost.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 140 |
| SB 140 Public Testimony 051523.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 140 |
| CS for SB48(FIN) Sectional Analysis.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 48 |
| SB48 Summary of Changes in Senate committees.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 48 |
| SB48 DNR Presentation to House Finance Committee 5-15-23.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 48 |
| SB 140 Amendent 1 Johnson 051523 - S.2.doc.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 140 |
| SB 77 Public Testimony Rec'c by 051523.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 77 |