Legislature(2013 - 2014)SENATE FINANCE 532
03/14/2013 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB38 | |
| SB62 | |
| SB21 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 62 | TELECONFERENCED | |
| + | SB 38 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 21 | ||
SENATE BILL NO. 62
"An Act relating to grants for school construction."
9:40:02 AM
Senator Olson stated that time was of the essence regarding
the bill because of the school construction that was going
on, particularly related to the small municipalities, and
scheduling problems related to the funding.
Mr. Scott introduced SB 62 and stated that it allowed 5
school districts be become eligible to use the Regional
Educational Attendance Area (REAA) School Construction
Fund, which had been established in 2010 by the 26th
Legislature in SB 237. He explained that the impetus behind
the REAA Fund was the Kasayulie Case.
Mr. Scott presented a brief sectional analysis. He stated
that Section 1 added the words "to small municipal
districts" to the name of the REAA Fund. Section 2 defined
what a small municipal school district was, which was "a
district in the state that has an average daily membership
(ADM) of not more than 300 and the full value per ADM was
not more than $500,000." Section 3 added "small municipal
districts" to the name of the REAA Fund and Section 4
delineated that small municipal school districts had the
definition that was pointed out in Section 2.
9:43:11 AM
Vice-Chair Fairclough observed that the fiscal notes
appeared to propose $35 million per year. She inquired why
the appropriation was not standing alone and why the
Kasayulie case was part of the discussion. Mr. Scott
replied that there was a new revised fiscal note and that
he would try to answer the question. He shared that the
REAA Fund dealt with the Kasayulie case regarding how there
was inconsistent funding for Rural Alaskan schools and
pointed out that there was formula in law, which was in AS
14.11.025(b) and Section 1 of the bill, that determined the
$35 million amount; the formula used the total amount of
annual debt service divided by the percentage of the
schools that were located in the district and multiplied by
a .244 quotient.
Vice-Chair Fairclough thought that the Kasayulie case was
resolved with setting up the REAA funds. She understood the
issue, but did not understand why the Kasayulie case was
being discussed in reference to a bill that was adding
additional aid.
Co-Chair Meyer noted that Senator Hoffman knew the issue
well.
Senator Hoffman stated that the Kasayulie case was
legislation that he had worked on for about 10 years, and
believed that he had piggy packed on a bill of Co-Chair
Meyer's in order to resolve the case. He stated that the
Kasayulie case was brought forward for REAAs, but noted
that there continued to be school districts in Alaska that
were not REAA's and did not have the capacity to sell
bonds; furthermore, Tanana and St. Mary's were first class
cities that did not have this designation or authority, but
still had a responsibility to build new schools. He
explained that the 2 cities had led the way in accepting
the responsibly in funding education, but did not have the
foresight to realize that they would be responsible for new
school construction. He furthered that the Kasayulie case
had been primarily addressed to REAA Rural Alaskan schools
and pointed out that the case had been decided against the
State of Alaska; the judgment basically stated that the
difference in funding between REAA and urban schools was
arbitrary and inadequate.
Senator Hoffman continued to speak to the Kasayulie case
and related that the focus of SB 237 was to address the
plaintiffs' issues of inadequate funding for REAA schools;
however, there was still an issue of contention regarding
how the governor had submitted his capital budget the
previous year. He explained that as required, there was $32
million or $33 million that went into the REAA fund, but
that that during the negotiations, there were 10 rural
schools that needed to be addressed prior to the fund
kicking in; between 2010 and the last year, 7 of those
schools had been funded directly through the General Fund
mechanism. He related that the prior year, the legislature
had changed the way the governor had approached the funding
for the Kasigluk and Emmonak schools to have those schools
be funded through General Funds. He observed the governor
trying to do the same thing with the last school, which was
Nightmute and noted that he was planning on meeting with
Mr. Begich and Co-Chair Meyer in order to rectify the issue
the same way as the previous year. He pointed out that the
REAA case was settled for REAA schools, but that it did not
address the other 5 school districts in SB 62 that
ultimately had the responsibility to fund those schools;
furthermore, these 5 school districts were small rural
districts that did not have the capacity to build the
schools.
Senator Hoffman pointed out that instead of addressing the
issue in a different way, Senator Olson was proposing the
change in the SB 62, which seemed reasonable. He stated
that the problem he had was that the individual REAA
schools that had brought the Kasayulie case forward could
potentially experience a dilution in REAA funds as a result
of the additional 5 smaller schools. He noted that rural
schools had a cost between $30 million and $50 million and
that the plaintiffs of the REAA case would in essence be
sharing the settlement with the smaller schools districts;
however, he did not have much "heartburn" with that
approach if the state could at least fund the last school
with general funds. He opined that the issue should be
addressed without having to open up the Kasayulie lawsuit
again.
9:50:54 AM
Vice-Chair Fairclough supported making sure that rural
schools were treated with fairness and agreed that the
Kasayulie case should be closed. She added that her issue
was that the Kasayulie case should be closed period and
that the state should look at equitable funding across the
state "with that lens." She shared Senator Hoffman's
concern that adding other schools could dilute the
compromise of Kasayulie case and observed that the money
contribution would be annual, which represented a win in
the end.
Co-Chair Meyer noted that Senator Hoffman had taken his
good bill and made it better and requested that Senator
Hoffman refresh the committee on how he had dealt with the
Kasayulie case in the legislation. Senator Hoffman offered
that he had taken a good bill and made it much better. He
related that the bill had been in the Senate Finance
Committee at the time and recalled asking the
administration for assistance in developing a formula,
which never developed. He relayed that the committee knew
the state was on the hook for 70 percent of the funds to
pay for urban schools and that the committee had written a
formula on a percentage basis of how much the State of
Alaska was paying for urban schools; a percentage of that
was taken to pay for rural schools. He shared that a
problem had been that the first 10 schools had substantial
construction costs and that there was an understanding that
those schools would be funded so that the smaller schools
could be addressed. He thought that if the Nightmute school
was addressed through the current year's capital budget and
this legislation was changed, the state would be able to
get to the St. Mary's school this next year. He offered
that St. Mary's was the only school on the list, but others
could submit evaluations and be evaluated; all of these
schools were funded on an evaluation basis on which ones
were in the most need of repair or replacement. He
commented that there were no provisions to address the
major maintenance issue.
9:54:15 AM
Vice-Chair Fairclough stated that she was 100 percent
behind appropriate funding for Rural Alaskan schools, but
did not understand why there was not a road between Toksook
Bay and Nightmute. She pointed out that the road was needed
for public safety issues, but also because the state was
building 2 schools that were in very close proximity to
each other. She understood that Toksook Bay and Nightmute
were 2 distinct communities that wanted to remain distinct,
but observed that as money started to constrict those were
decisions that the state would have to make. She
acknowledged that a road would be expensive and might
create too many public safety issues, but that it could
connect that community to a school that was already
improved.
Senator Hoffman stated that he agreed with Vice-Chair
Fairclough and related that he had recently been discussing
additional ways to save to money for rural schools with
Senator Dunleavy. He stated that there were several issues
in both rural and urban schools that continued to need
attention such as increased education opportunities,
increased scores, and possible ways to save.
Senator Olson observed that many school districts in his
district were single-school districts that did not qualify
as REAAs; however, some of the districts were dealing with
the same situation that had been addressed in the Kasayulie
Case, particularly Galena. He discussed inconsistent
funding of certain school needs in Alaska. He concluded
that the intent of the bill was to ensure that school
districts across the state were not overlooked and rectify
the problem in districts where this may have been
occurring.
Co-Chair Meyer recalled Vice-Chair Fairclough's comments
regarding the possibility of building a road from Toksook
Bay to Nightmute instead of building another school and
inquired what the distance was between the 2 communities.
Vice-Chair Fairclough thought that the distance was less
than 5 miles.
Senator Olson thought that the distance was about 7 miles,
but that the route would have to cross the river. He
pointed out that the rising tide was a factor on the river
delta and that building a bridge would be complicated. He
opined that the state would have to consider a way to get
the 2 communities connected, not only for schools, but also
for needs like electricity.
Senator Hoffman noted that the villages on the river delta
were now represented Senator Gary Stevens.
9:59:44 AM
DAVID HERBERT, SUPERINTENDENT, ST. MARY'S SCHOOL DISTRICT,
ST. MARY'S (via teleconference), voiced the district's
strong support of SB 62. He related that St. Mary's School
District had originally been part of the Kasayulie case,
which had recognized that the method of funding new school
construction in Alaska's schools needed to be fair and
equitable. He reported that during the final negotiations
of the settlement, the St. Mary's School District had been
excluded from the list of schools that were eligible to
receive funds through the Kasayulie funding mechanism; the
exclusion was due to the fact the St. Mary's was considered
a first class city school district instead of an REAA
district. He explained that a first class city school
district such as St. Mary's required the city to make a
mandatory local contribution to the school district each
fiscal year to help offset the costs of running the school
district; whereas, REAAs did not have a mandatory
contribution requirement. He stated that St. Mary's was
surrounded by REAA school districts that were benefitting
from the Kasayulie new school construction funds. He
expressed that St. Mary's was disappointed to have been
excluded from the settlement during the final hours of the
negotiations because it was the only first class city
school district in the lawsuit.
Mr. Herbert related that the St. Mary's School District had
then taken the necessary steps to improves its position on
the new school construction list through the Department of
Education and Early Development and had written a quality
application; additionally, the district had been frugal and
fiscally responsible in order to make the additional
investments needed to improve the quality of its
application and had followed all the steps to ensure that
it met all requirements to move up to the top of the new
school construction list. He pointed out that currently,
St. Mary's was the only small municipal school district on
the school construction list that SB 62 would apply to;
therefore, the impact of the legislation would be minimal
to the state, but would be greatly important to the St.
Mary's School District because without the bill, the
district's chances of being funded for new school
construction would be greatly diminished.
Mr. Herbert related that currently, most municipalities in
the state had bonding capacity, which meant they were
eligible to pass bonds and receive up to 70 percent
reimbursement from the state for new school construction
projects. He stated that the Kasayulie case funding
mechanism in SB 237 provided a funding source for Rural
Alaskan schools that did not have the capacity to bond and
were REAA schools; however, there was 1 small group of
school districts that were not included with the urban or
REAA groups, which was the group that were the small
municipal school districts as outlined in SB 62. He opined
that the St. Mary's School District had demonstrated its
ability to provide quality education in Rural Alaska, had
outperformed surrounding schools academically, had
demonstrated sound fiscal management, and was ensuring that
its students became contributing and productive citizens.
He urged the committee to pass the legislation.
Co-Chair Meyer CLOSED public testimony.
10:06:15 AM
Co-Chair Meyer inquired if the administration supported SB
62.
ELIZABETH NUDELMAN, DIRECTOR, SCHOOL FINANCE AND
FACILITIES, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT,
responded that the administration did not have a formal
position on the legislation. She furthered that the
administration had reviewed the bill and did not see any
outstanding unanswered questions.
Co-Chair Meyer inquired if Ms. Nudelman had prepared the
fiscal note. Ms. Nudelman responded in the affirmative. Co-
Chair Meyer noted that the bill's estimated cast was
$618,000 and requested an explanation of the amount. Ms.
Nudelman responded that the Department of Education and
Early Development (DEED) had spoken to the Legislative
Finance Division and had made a revised fiscal not for the
presentation. She shared that the calculation for the
funding for the REAA Fund was the annual school debt that
the state spent, divided the percentage of municipality
schools in Alaska, multiplied by a constant of .244; this
created the proportion of funding that supported the REAA
funding stream. She explained that the $618,000 was
generated when 5 of the municipal school were moved into
the REAA group, which changed the percentage slightly; the
existing funding was about $35 million annually, which the
bill would change by about $600,000.
Co-Chair Meyer inquired if the funds would be in the
capital budget. Ms. Nudelman responded in affirmative and
pointed out the funds being capital was one of items that
the Division of Legislative Finance had pointed out in the
original draft of the fiscal note.
Co-Chair Meyer inquired if the $618,000 was on top of the
$35 million that was already in the capital budget. Ms.
Nudelman responded in the affirmative and added that the
$35 million in the capital budget would become about $35.6
million.
Co-Chair Meyer noted that the fiscal was unclear, but that
Ms. Nudelman had had clarified things.
10:08:53 AM
AT EASE
10:11:50 AM
RECONVENED
Vice-Chair Fairclough wondered what items were currently on
the major maintenance list. She recalled that before the
Kasayulie case had been settled, there had been schools
across the state that were trying to compete on the state's
list and that there had been a bottleneck at the top of
list of the schools, which were predominantly in the
Kasayulie case, that needed to be funded; as a result, no
other schools across the state could match the criteria
that was already established with those schools waiting to
be funded. She wondered what was left on the major
maintenance list and understood that St. Mary's School
District was number 2 on the remaining priority list. She
noted that someone was copying a draft of the list so that
the committee could examine the issue.
Co-Chair Meyer voiced agreement with Vice-Chair
Fairclough's request and stated that his office would make
sure that all the members received a copy of the list.
Vice-Chair Fairclough requested that the administration
provide the list of major maintenance. Co-Chair Meyer
agreed that it would be better if the list came from the
administration. Ms. Nudelman replied that DEED would
provide the requested information and added that the
department prioritized a list for major maintenance and a
list for construction each year, both of which were on the
department's website.
Vice-Chair Fairclough hoped that the committee would
receive both lists because both were important to all of
Alaska.
Co-Chair Meyer noted Mr. Begich was heavily involved in the
Kasayulie case and requested his thoughts on the record.
10:14:18 AM
TOM BEGICH, POLICY DIRECTOR, CITIZENS FOR THE EDUCATIONAL
ADVANCEMENT OF ALASKA'S CHILDREN, noted that Citizens for
the Educational Advancement of Alaska's Children was the
plaintiff group that had brought the Kasayulie suit forward
and that it represented 21 of the 53 school districts in
the state; furthermore, it represented 12 of 19 REAAs. He
reassured Vice-Chair Fairclough that the bill did not
attempt reopen litigation, but that it attempted to fix the
gap. He pointed out that there were schools that could
utilize the Municipal Debt Reimbursement Fund and those
that were covered under the REAA funding mechanism, but
that there were a number of small schools that had fallen
through the cracks that did not have the capacity to bond
or were not REAAs. He explained that the legislation
ensured that that any districts that fell under the
criteria of not having the capacity to bond or were not
REAAs would have access to the REAA funds. He addressed
Senator Hoffman's comments regarding possible concerns from
REAAs about a dilution of funding REAA funding, but
asserted that as the plaintiff group in the Kasayulie case,
the Citizens for the Educational Advancement of Alaska's
Children had made SB 62 its highest legislative priority
with the recognition that some of the other plaintiff
member districts had not been addressed. He reassured the
committee not to worry about a feeling that the bill would
diminish the REAA Fund.
Mr. Begich discussed the administration's priority list for
major maintenance and construction and related that
although St. Mary's could currently qualify for funding
through the General Fund, the REAA Fund was designed for
schools exactly like St. Mary's. He added that the bill's
particular formula was adopted to minimize the impact that
the legislation would have on the REAA Fund, which was why
it used a combination of value, divided by ADM and had an
ADM number of 300; this method ensured that only the
districts that could not bond would have access to the REAA
Fund. He explained that if a city's tax base expanded, it
could cause a district to be no longer eligible for funding
because eligibility was based on a formula and not on the
named communities; the formula was aimed at continually
focusing on equity regarding how schools were funded.
10:17:47 AM
Senator Hoffman recalled a previously mentioned list of
schools and stated that Nightmute was the last school that
was to be funded with General Funds. He recalled fixing the
funding for "the 2 schools" the prior year and switching
the funding mechanism to General Funds. He pointed out that
the governor was again trying to build schools with the
REAA Fund and offered that the legislature felt that those
top 10 schools should be funded with General Funds; he
requested Mr. Begich to address these comments. Mr. Begich
responded that there were 5 schools named in the consent
decree, 2 of which were put in the prior year's budget by
the governor to be funded by the REAA Fund; furthermore,
the Citizens for the Educational Advancement of Alaska's
Children and the governor had a disagreement regarding what
the consent decree stated. He explained that the Citizens
for the Educational Advancement of Alaska's Children
thought that intent of the consent decree was to fund these
schools that were extraordinary in costs with the General
Fund because it would otherwise wipe out the REAA Fund;
furthermore, this was also the position taken by the Senate
the prior year. He explained that the prior year, both of
"those schools" had been shifted from the REAA Fund as the
funding sources to the General Fund and that both schools
had been funded and supported by the governor in
consistency with the consent decree.
Mr. Begich continued to address Senator Hoffman's comments
and related that the in the current year, the governor had
introduced the Nightmute and Quinhagak schools both drawing
from the REAA Fund. He shared that the Citizens for the
Educational Advancement of Alaska's Children believed that
the Nightmute school should be funded through General Funds
and not through the REAA Fund, but that this represented a
decision the legislature would have to make. He pointed out
that if the Nightmute were funded through General Funds and
the legislation passed, it would ensure that St. Mary's
would draw from the REAA Fund this year and would help free
up the clogging of the list that had occurred over time. He
pointed out that there was 1 large school left on the list
that was not involved in the Kasayulie case and that once
it was funded, the list could be cleared rapidly.
10:20:32 AM
Co-Chair Meyer inquired how much money was in the REAA
fund. Mr. Begich replied that the prior year, about $35
million had been appropriated to the fund and that in the
current year, there would be about an additional $35
million. He noted that the fund was capped at $70 million
and that even if the legislation added $600,000 it had no
effect once the cap was reached. He clarified that if
nothing was spent out of the REAA fund in the current year,
the next year's deposit would be virtually nothing; even
though an appropriation was required, the fund would be
maxed out.
Senator Olson inquired why St. Mary's did not qualify as an
REAA school district and expressed concerns regarding
potentially making the same mistake with some of the school
districts that he represented. Mr. Begich replied that the
St. Mary's had chosen to organize and tax, which took care
of a lot of local education and other needs; however, what
the district had not addressed when it became incorporated
as a city was having to build schools. He explained that
St. Mary's did not have the property tax base needed to
bond and pointed out that bonding agencies looked at raw
numbers and values; in this instance, St. Mary's did not
have property tax base that any bonding agency would allow
it to issue bonds with.
Senator Olson queried why St. Mary's had not been included
and wondered if what was part of the negotiators'
reasoning. Mr. Begich replied that the mechanism for
getting the plaintiff and the state to come to the table
and negotiate was proposed in 2010. He explained that the
mechanism was a complex bill that was attached to another
complex bill and referenced earlier comments by Co-Chair
Meyer and Senator Hoffman; additionally, the bill had been
at risk of not passing. He shared that he could not speak
to what occurred during negotiations, but that it had been
simpler to look at the REAA number versus the bonded
numbers by those who were actually working in the
legislature on that bill; a result, a compromise had been
reached. He shared that at the time in 2010, "we all" had
brought up the question about the bonded schools and that
people had hoped to correct the issue before the
legislation came into play; however, this simply did not
happen. He stated that the Citizens for the Educational
Advancement of Alaska's Children had pursued SB 62 on St.
Mary's behalf, as well as other the schools, and were
hopeful that the legislation would pass.
10:24:42 AM
Senator Bishop inquired if the legislation would close the
donut hole on any other schools. Mr. Begich responded in
the affirmative.
BRUCE JOHNSON, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, stated that the membership was supportive
of the legislation.
Senator Olson inquired what the consequences of the bill
not passing in a timely manner would be. Mr. Johnson
replied that if the bill did not pass, the 5 school
districts that were being considered would be unable to
have some of their needs addressed regarding capital
projects because they did not have the money or the
capacity to raise it through a bond because of their
limited taxing authority.
10:27:45 AM
AT EASE
10:30:14 AM
RECONVENED
Co-Chair Meyer noted that the bill represented a lot of
money and that the committee would have further discussion
on the legislation.
SB 62 was HEARD and HELD in committee for further
consideration.
10:31:04 AM
RECESSED
3:17:16 PM
RECONVENED