Legislature(2019 - 2020)ADAMS ROOM 519
05/11/2019 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB139 | |
| HB87 | |
| SB74 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 139 | TELECONFERENCED | |
| + | SB 74 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 87 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 74(FIN)
"An Act relating to funding for Internet services for
school districts; and providing for an effective
date."
10:27:28 AM
Co-Chair Wilson reported the companion bill HB 75 had been
heard previously and public testimony had been taken.
MARIDON BOARIO, STAFF, SENATOR LYMAN HOFFMAN, , discussed
the sponsor statement for SB 74 (copy on file):
SB 74 increases the broadband requirement for schools
from 10 megabits per second (Mbps) to 25 Mbps of
download speed and provides funding to help schools
reach the 25 Mbps through the School Broadband
Assistance Grant (BAG).
Districts that qualify for discounted rate for
internet services under the Federal Universal Services
Program are eligible.
The Universal Service Administrative Company, Schools
and Libraries Program, commonly known as "E-rate,"
provides discounts of up to 90 percent to help
eligible schools and libraries in the United States
obtain affordable telecommunications and internet
access.
The School BAG was established in 2014 and created to
assist schools to reach internet download speeds of 10
Mbps. Currently the grant funds may be used to cover
eligible costs incurred by the school districts for
schools that have less than 10 Mbps each fiscal year.
Since 2014 new and improved technologies and increases
to internet services have allowed for more and faster
delivery of internet services. Because the cost of
internet in some rural districts has decreased, the
annual internet costs have fallen below the 2014
benchmark established by state law. To allow school
districts to utilize these advances, SB 74 will
increase the minimum requirement of Mbps from 10 to 25
which will increase the amount of Broadband Assistance
Grants (BAG) that the state can pay to school
districts.
In 2019, 80 schools in 20 school districts will
benefit from the school BAG awards.
The funding leverages federal E-rate funds at
approximately 8:1. The program allows for leverage for
up to 9:1 based on a formula for free and reduced
lunch calculation by district.
Thank you for your consideration of SB 74 to help
bring improved broadband services to rural Alaska and
improve service for schools across the state.
I urge your support of this legislation to provide
Alaskan students, classrooms and teachers and all
educators better access to the digital world.
10:30:25 AM
Ms. Boario indicated that the state BAG (Broadband Access
Grant)program was designed to help schools cover their
share of the E-rate costs of approximately 20 percent. The
legislature implemented the program to increase internet
speeds by helping school districts cover their broadband
expenses after the federal E-rate subsidy was applied. She
added that the program was voluntary, and the grants were
awarded in August each year. She noted that the grant could
serve up to 170 schools in 30 school districts totaling
over 20 thousand students.
Co-Chair Wilson asked for an explanation of the changes in
the Senate Finance Committee Substitute version. Ms. Boario
explained that a question arose about whether the increased
funding for the grant program would impact the disparity
test for the federal impact aid. In addition, the funding
was not distributed equally across the districts which
could affect the disparity test. Co-Chair Wilson asked what
districts were included in the disparity test. Ms. Boario
replied that because the funding was different due to the
higher broadband costs in some districts; districts paying
more received higher federal subsidy and BAG grant awards,
which could affect the disparity test. The districts did
not receive equal funding. Co-Chair Wilson asked Ms. Boario
to cite where in the bill the changes were made. Ms. Boario
answered that on page 1, line 10, Section 2 and page 2,
line 6, Section 3 additional conditional effect language
was inserted as follows:
Sec. 2. The uncodified law of the State of Alaska is
amended by adding a new section to read:
CONDITIONAL EFFECT; NOTIFICATION. (a) Section 1 of
this Act takes effect 13 only if, on or before January
1, 2020, the Department of Education and Early
Development has received certification from the United
States Department of Education that E-rate funding
under the federal universal services program may be
excluded from the federal 1 disparity test 2 under 34
C.F.R. 222.160-169, as amended.
Sec. 3. If, under sec. 2 of this Act, sec. 1 of this
Act takes effect, it takes effect the day after the
date the commissioner of education and early
development receives certification from the United
States Department of Education.
Co-Chair Wilson asked how long it took to get the
certification and whether it was requested in the past. Ms.
Boario answered that it had never been request for the E-
rate program. However, she was aware that the Department of
Transportation and Public Facilities (DOT) funds were
exempted from the disparity test.
HEIDI TESHNER, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT
OF EDUCATION AND EARLY DEVELOPMENT, OFFICE OF MANAGEMENT
AND BUDGET, answered that the certification waiver
requested from the United States (US) Department of
Education asked if the E-rate funding that districts
received could be moved to a special revenue fund or
removed completely from the calculation for the disparity
test.
Co-Chair Wilson asked how long the waiver process would
take. Ms. Teshner hoped that the certification would be
issued in several weeks. Co-Chair Wilson spoke to the BAG
awards for 2019. She observed that the grants were mostly
awarded to rural schools. She asked whether most urban
schools paid for their own internet.
10:34:40 AM
Ms. Boario answered yes "conditionally." Primarily rural
schools were affected due to the high cost of internet and
urban schools were able to obtain high speed internet much
cheaper than in rural areas and the grants applied to
schools only receiving 10 Mbps. Technically the grants
applied to all schools, but some schools were ineligible
due to better connectivity. Co-Chair Wilson had never known
her school district to not want money. She knew Fairbanks
had problems with its internet service at times and could
not perform testing in all schools on the same day. She
asked for clarification regarding eligibility for the
grant. Ms. Boario replied that the e-rate funding federal
subsidy was utilized by all schools in Alaska. The BAG
grant only provided additional funding to schools that
qualified to help increase their speeds to 25 Mbps. Co-
Chair Wilson wondered why the fiscal note was $7 million.
She determined that the $7 million would be added to the
$1 million and cover a number of years. Ms. Boario affirmed
her statement.
10:37:38 AM
Co-Chair Wilson stated that she misspoke. She reported that
the BAG grant covered 172 schools which increased the
megabit threshold for each School from 10 megabits to 25
megabits per second and continue paying the $7 million
amount for years to come. Ms. Boario affirmed her
statement. She acknowledged that it was a grant program,
but costs were expected to decline over the years as the
coverage increased. Co-Chair Wilson had heard from prior
testimony that most of the areas had more than one
provider. She did not believe the information was accurate.
She wanted to know what private company would be receiving
$7 million of state funds. Co-Chair Wilson wanted the
committee to understand that the state was paying an
additional $7 million each year with passage of the bill.
She was interested in information regarding the competition
that existed among internet providers for the $7 million.
10:40:10 AM
CHRISTINE O'CONNER, EXECUTIVE DIRECTOR, ALASKA TELECOM
ASSOCIATION, answered that there was a minimum of two
providers in every area according to a survey of the
association's members. There was a satellite provider that
covered the entire state and was very active in bidding on
e-rate contracts. In addition, all locations had existing
landline providers that bid on fixed broadband services.
She stressed that the e-rate rules required that all
landline providers bid on E-rate RFPs. In many areas there
were three or four providers. She offered the example of
vigorous competition among 4 providers in Nome for bidding
to provide E-rate service, which drove down the rates. She
noted a 37 percent decrease in broadband rates for schools.
The competition created new partnerships amongst the
providers and e-rate rules encouraged schools to bid
together as consortiums. She reported that the factors
happened within the last few years and were driving rates
down. However, gaps in service still existed due to the
need for and more infrastructure. Co-Chair Wilson asked for
more information. She had not seen a drop in internet costs
for schools. She wanted to better understand the
competition.
Representative Carpenter asked how the FY 19 10 mbps
program numbers predicted the FY 21 25 mbps numbers. Ms.
Teshner answered that the note used the average FY 19 BAG
grant in order to determine a cost if all 172 schools
applied for the grant. She mentioned that the average was
the best data the department had to approximate the cost to
raise speeds from 10 mbps to 25 mbps. Representative
Carpenter referred to the following language in the fiscal
note analysis:
This $1,487.5 will need to be funded in all of the out
years, in order to pay for 0-10mbps internet coverage
in tandem with current fiscal note that covers
10-25mbps. The entire program will continue as one
application for up to 25mbps.
Representative Carpenter wondered whether the actual total
was $8.6 million versus $7.1 million, which was not
reflected in the fiscal note. Ms. Teshner replied in the
affirmative.
Co-Chair Wilson asked why FY 20 did not show the over $1
million currently awarded to grants. Ms. Teshner answered
that when the department was told to only report the costs
necessary for the speed increase from 10mbps to 25mbps and
the $1.4 million figure was included in the analysis to
show that amount was needed to continue the 0 mbps to 10
mbps program as well. Co-Chair Wilson thought the entire
amount should be reflected in the FY 20 cost. She reported
that before the change from 10 mbps to 25 mbps the school
districts were asked to show how they were able to fund the
25 mbps increase. She asked why the grant was increased if
the school districts demonstrated they were able to fund
the increase. Ms. Teshner answered that the fiscal note was
an estimate. Co-Chair Wilson restated her question. She
clarified her question and asked why the grants would be
necessary. Ms. Teshner answered that the program was
voluntary and based on a baseline number and if costs went
below the baseline level the school district would no
longer qualify because the overall cost would decrease. She
deferred to Patience Frederickson, from the Division of
Library, Archives, and Museums who ran the program for
further clarification.
10:48:13 AM
Co-Chair Wilson was not blaming any school district for
getting funds. She pondered why the grants amounted to up
to $8 million when many districts could pay for internet
service.
PATIENCE FREDERICKSON, DIRECTOR, ALASKA DIVISION OF
LIBRARIES, ARCHIVES, AND MUSEUMS, DEPARTMENT OF EDUCATION
AND EARLY DEVELOPMENT, responded that the E-rate
application asks the school to certify that they can repay
the remaining portion of the bill. Therefore, school
districts only applied for the E-rate if they know the BAG
grant was available. The districts could not apply for 25
mbps in the current year because the bill did not exist
during the application period. Districts would be able to
apply for 25 mbps during the next application period
knowing that the BAG grant was available to pay for the
remainder of the E-rate. She reiterated that the
certification was not on the state application, it was on
the federal application. Co-Chair Wilson surmised that all
the bill was essentially doing was securing E-rate BAG
grant funding in the outyears. Ms. Frederickson answered in
the affirmative. She furthered that the program had been
designed to increase levels of internet speeds. Co-Chair
Wilson wondered why the legislature would not just increase
the Base Student Allocation (BSA).
10:51:13 AM
Ms. Frederickson replied that she was not conversant on the
BSA program. She suspected the reason was because it
included the federal E-rate funding. She detailed that the
genesis of the BAG program came out of the OWL (Online With
Libraries) program, which helped libraries achieve a
certain speed of internet to enable them to participate in
a video conference network. The idea behind the OWL program
was to combine E-rate, library, and grant funding to
increase the internet speeds. The BAG program was based on
OWL.
Co-Chair Wilson remarked that the OWL funding was
appropriated in all school districts. She asked whether she
was correct. Ms. Frederickson answered in the negative. The
OWL program video conference network was available in every
public library, but the subsidy went to approximately 20
public libraries. Co-Chair Wilson requested the list of
libraries involved in OWL.
Vice-Chair Johnston remembered that the Nome bidding war
happened because it was cheaper to provide the higher speed
25 mbps than the lower speed internet. She asked for
confirmation.
10:53:46 AM
Ms. O'Conner answered that she was unfamiliar with the
details but thought Ms. Fredericksons recounting made
sense. She acknowledged that Nome had relatively good
connectivity and multiple providers. Relatively large
bandwidth was purchased "in bulk" and 10 mbps was a very
small amount. Vice-Chair Johnston considered the fiscal
note and improved technology. She thought the scenario
could be repeated in the rest of the state with improved
satellite technology and as competition increased. She
deduced that the fiscal note was currently high, but it
could decrease with improved technology in the future. Ms.
O'Conner agreed with her conclusion. She indicated that
multiple projects were coming online in the near future in
Alaska. Every company was taking advantage of newly
stabilized federal funding for increased connectivity. She
noted that the lower orbit satellite technology was
untested and was not imminent.
10:55:57 AM
Ms. Frederickson concurred with Ms. O'Conner's assessment
and noted she had experienced lower costs with the BAG
program. She pointed out that in the program's early years
the average BAG grant was $30 thousand and fell to $17,000
within 5 years. She determined that as the cost of internet
decreased to get to 10 mbps the mathematical formula to
qualify remained at the 2014 benchmark and districts fell
out of the program due to decreased costs; in FY 19 awards
declined from 119 to 80.
Co-Chair Wilson pondered whether the funds belonged in the
BSA as an ongoing cost.
Representative Carpenter noted that the federal
government's standard was 100 mbps. He deemed that 100
mbps was currently cost prohibitive in Alaska. He imagined
that once districts obtained 25 mbps there would be later
discussions about increasing the speed to 50 mbps and
higher. He asked if currently low earth orbit satellites
were over Alaska. Ms. O'Conner answered in the negative.
Representative Carpenter recounted that in previous
testimony a school district testifier had been unaware of
what the cost had been to increase from 10 mbps to 25 mbps.
He inquired how it was known that the program would cost
$7.1 million. Ms. Frederickson answered that the fiscal
note was estimated from current costs. She observed that
the problem was the competitive bid process for the e-rate
application.
10:59:10 AM
Representative Carpenter understood the process of how it
was purchased but "we don't put a bid in to find out if we
can afford it." Ms. Frederickson replied that the process
was confidential, and she did not have access to the
information.
Co-Chair Wilson asked whether the information was
confidential to the school districts. She commented that
the school districts were queried about the costs and one
response was received. She hoped the districts knew how
much their portion of the E-rate costs would be when
applying for the BAG grant program since it was a separate
process from the federal E-rate program. Ms. Frederickson
responded that with passage of SB 74 she would establish
new benchmarks based on what the school districts were
paying in January 2020. Subsequently, the school BAG
program schools would never pay more than what they were
paying in January 2020. The costs would be frozen the
districts would rely on the BAG program for the remainder
of costs. She acknowledged that she was not answering the
question correctly.
11:00:46 AM
Representative Carpenter interposed an analogy to
illustrate the question. He exemplified a business that
wanted to increase its bandwidth from 10 mbps to 25 mbps.
The business would go to a provider for a quote to know if
it had the money available to pay for the increase. He
declared that the state had the opposite process and paid
over $8 million without knowing the actual costs. He
characterized the process as "backwards." He contended that
a district should know what the increased service would
cost. He wanted to know what the actual cost was but
discerned that the costs were unknown. Ms. Frederickson
agreed that the costs were unknown. She restated that the
cost was based on the current program "and some cocktail
napkin figures" and noted that "it was the best they could
come up with."
Ms. Boario understood the statements and questions by
Representative Carpenter. She explained that the confusion
sprang from receiving federal funding first. She thought
that knowing how the E-rate contracts went to bid might
provide more clarity.
Co-Chair Wilson stated that her issue was why the BSA did
not cover the costs. Additionally, the federal e-rate
program required to know whether the districts could cover
the remaining costs. It was her understanding the school
districts had the money for the increased bandwidth and
they relied on the BAG program to cover the remaining
costs. Ms. Boario clarified that it was rural school
districts that could not cover the costs on their own. Co-
Chair Wilson cited prior districts' testimony that they
could cover the costs. In addition, she was unaware that
the costs were ongoing each year.
11:05:03 AM
Representative Josephson asked for clarity regarding the
proprietary information. Ms. Frederickson answered that
when the school districts utilize the E-rate computer they
enter each school and the amount of broadband service
desired for each school. The internet service providers
submitted the bids for each school, which was the
proprietary information the state did not have. They could
not tease out the information that answered what the actual
costs were. She added that in the first year of the program
they had received $5 million from the legislature and only
$3.5 million had been used.
Co-Chair Wilson requested that the sponsor provide further
information regarding the committees questions.
Representative Josephson asked whether Regional Educational
Attendance Area (REAA) schools absorbed internet costs
through the BSA or if they dropped out of the BAG program.
Ms. Frederickson replied in the affirmative, but asked
members to bear in mind that if a district chose not to
apply it was because the competition had driven cost down.
Co-Chair Wilson recognized the many questions and concerns
about the bill. She asked members to keep an eye on the
schedule for future hearings.
CSSB 74(FIN) was HEARD and HELD in committee for further
consideration.