Legislature(2023 - 2024)BELTZ 105 (TSBldg)
03/13/2024 03:30 PM Senate EDUCATION
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| Audio | Topic |
|---|---|
| Start | |
| SB158 | |
| SB221 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 158 | TELECONFERENCED | |
| *+ | SB 221 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 158-SCHOOL GRANTS AND BOND DEBT REIMBURSEMENT
3:32:10 PM
CHAIR TOBIN announced the consideration of SENATE BILL NO. 158
"An Act relating to funding for school construction and major
maintenance; relating to school bond debt reimbursement; and
providing for an effective date."
3:32:29 PM
SENATOR ROBERT MYERS, District Q, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 158 paraphrased the following
statement:
[Original punctuation provided.]
SB 158 - Sponsor Statement
SCHOOL GRANTS AND BOND DEBT REIMBURSEMENT
" An Act relating to funding for school construction
and major maintenance; relating to school bond debt
reimbursement; and providing for an effective date."
For years, communities across Alaska have faced
significant challenges in maintaining and upgrading
educational facilities to meet the evolving needs of
our students and educators. The health and safety of
our children, as well as the quality of their
educational environment, are foundational to their
success and, by extension, to the future prosperity of
our state. One avenue the state has established to
help with the aforementioned maintenance challenges is
the allowance of school bond debt reimbursement.
Unfortunately, due to serious revenue shortfalls the
legislature placed a moratorium on the issuance of new
school bond debt in 2015 and extended the moratorium
again in 2020.
School bonds are an important tool for districts to
help build new schools and keep older facilities
running. Bonds pay for a variety of construction and
maintenance projects, such as new boilers, roof
replacements, security improvements, and more. School
districts spend a substantial amount on regular
maintenance out of their operating budgets to keep
their buildings in good repair and their students and
staff in safe and healthy schools. In the past there
have also been cases where bonding was used for
purposes that could be described as luxuries and not
critical infrastructure. The goal of this legislation
is to establish trust that the program is only being
used for vetted and critically needed programs and not
new playground equipment or school concession stands
as has been used in the past.
SB 158 amends existing statutes to enhance the
eligibility criteria for grants and bond debt
reimbursement. This includes a more structured
approach to planning ensuring that projects are not
only necessary but are also executed with foresight
and fiscal responsibility. Furthermore, the
modifications proposed in SB 158 to the criteria for
bond debt reimbursement are designed to prioritize the
most critical projects while encouraging
municipalities to engage in thorough planning and
maintenance practices. This ensures that the support
provided by the state is both effective and equitable,
maximizing the impact of public funds on our
educational environment.
SENATOR MYERS added that SB 158 limits school bond debt
eligibility to a district's number one priority on Department of
Education and Early Development's (DEED) school construction
list and or the top two projects on DEED's major maintenance
list for each district. If a district has a major maintenance
project that is among the top twenty major maintenance projects
statewide, it is also eligible for school bond debt
reimbursement. The hope is that these changes will maximize
returns on investments and makes the reimbursement program more
sustainable over the long-term.
3:35:11 PM
DAWSON MANN, Staff, Senator Robert Myers, Alaska State
Legislature, Juneau, Alaska, offered the sectional analysis for
SB 158:
[Original punctuation provided.]
SB 158 v. B Sectional Analysis
SCHOOL GRANTS AND BOND DEBT REIMBURSEMENT
" An Act relating to funding for school construction
and major maintenance; relating to school bond debt
reimbursement; and providing for an effective date."
Section 1: Page 1, Lines 4-14, Page 2, Lines 1-21
This section moves the deadline for districts to
submit their six-year capital improvement plan from
September 1 to July 1 to align with the start of the
fiscal year and allow the department more time to
review applications.
Section 2: Page 2, Lines 22-31, Page 3, Lines 1-7
This section directs the bond reimbursement and grant
review committee to only review and approve one
project on DEED's school construction list and/or the
top two projects on DEED's major maintenance list for
each district. If a district has a major maintenance
project that is among the top 20 major maintenance
projects statewide it is also eligible for school bond
debt reimbursement.
Section 3: Page 3, Lines 7-21
This section outlines that the commissioner may not
approve a school bond debt reimbursement project
unless they meet the same standards outlined in
section 2.
Section 4: Page 3, Lines 22-31, Page 4, Lines 1-6
This section outlines that the commissioner may not
allocate funds to a municipality for a school bond
debt reimbursement project unless they meet the same
standards outlined in section 2.
Section 5: Page 4, Line 7
Repeals the school bond debt reimbursement moratorium
in alignment with implementation of this bill.
Section 6: Page 4, Lines 8-15
Amends the uncodified law outlining the applicability
of the amended sections of this act after the
conclusion of the school bond debt reimbursement
moratorium.
Section 7: Page 4, Line 16
Establishes an effective date of July 1, 2025.
3:37:08 PM
SENATOR KIEHL stated that the moratorium had shifted the state's
responsibility to maintain public schools significantly onto
local taxpayers. He said one of the communities he represents
spends over a million dollars annually, or more, in local taxes
on large-scale major maintenance projects with no bond debt
reimbursement. He mentioned another community in a similar
situation with no bond debt reimbursement. He requested
clarification on how the proposed structure would impact
districts unable to issue bonds compared to those where
municipalities could bond.
3:38:25 PM
SENATOR MYERS replied that SB 158 would not affect districts
outside municipalities, Regional Educational Attendance Areas
(REAAs), as those districts are not able to bond. He stated that
SB 158 aims to help districts that can bond by encouraging them
to prioritize projects. He noted that if the state offered
unlimited school bond debt reimbursement, it could lead to
districts delaying maintenance in favor of waiting for
reimbursement. SB 158 would especially support smaller districts
outside major metropolitan areas by assisting them with projects
they cannot afford immediately.
SENATOR MYERS explained that the goal is for the state to
prioritize items at the top of the major maintenance and
construction lists, while bonding would still be available for
less critical projects. SB 158 also incentivizes districts to
maintain facilities using their budgets. SB 158 aims to balance
proactive planning and support for unexpected costs,
particularly for projects in the top twenty, which are often
from smaller districts needing additional state support. SB 158
is designed to shift the state's focus toward assisting these
high-priority projects.
3:41:28 PM
SENATOR KIEHL said that although the sponsor views SB 158 as an
incentive to address rural projects at the top of the list, an
opposing argument is that every dollar allocated to bond debt
reimbursement from state funds directs only 23 cents to the
rural major maintenance fund. This could mean that bond debt
reimbursement might limit the funds available for rural
projects. He asked for the sponsor's thoughts on this
perspective.
3:42:21 PM
SENATOR MYERS deferred to the Department of Education and Early
Development (DEED) to explain the specific fund and its
mechanics. However, he argued that the situation could also be
viewed differently: every dollar used for bond debt is a dollar
that cannot be used for grants, which also come from the same
project lists. He noted that if bonding is not directed towards
the best projects, particularly in larger areas that can afford
it, funds could be better allocated. He cited Fairbanks, which
held bond elections in 2009, 2011, and 2013, resulting in
multiple projects each year rather than the limited number
suggested in SB 158. He added that this was money the state
could have potentially saved and redirected as grants through
major maintenance or school construction lists.
3:43:33 PM
SENATOR GRAY-JACKSON questioned how SB 158, Section 2 would
function, as Anchorage typically seeks bond debt reimbursement
for all projects in a bond package, not just for the top one or
two projects.
3:44:19 PM
SENATOR MYERS outlined the process in a timeline format. He
explained that currently, the deadline to submit plans to the
Department of Education and Early Development (DEED) to get on
the major maintenance or construction list is September 1. Under
SB 158, they propose moving this deadline back to July 1. For
example, if a project is submitted by July 1, 2024, DEED would
create preliminary lists, which should be ready by approximately
November 1 and finalized by February 2025.
SENATOR MYERS acknowledged that the timing might be more
challenging for Anchorage, given that elections are in April,
while in Fairbanks they are in October. He explained that, based
on those finalized lists, the district would choose projects
such as project number 26 or 37and include them in a bond
package. For Fairbanks, this bond package would be finalized by
July 2025 and then placed on the October 2025 ballot. He noted
that for Anchorage, the timeline would be more compressed
because of the April election date, but the same general process
would apply.
SENATOR GRAY-JACKSON said she would like a more in-depth
conversation later.
3:46:09 PM
SENATOR MYERS added that if a district or municipality wants to
bond for more than just the top projects, they are still allowed
to do so, such as including six projects in a bond. However,
only the top couple of projects would be eligible for bond
reimbursement. He explained that on the ballot or in the voter
pamphlet, the cost breakdown would indicate that while there is
a total cost, only part of it would be reduced by bond
reimbursement, and that reduction would apply only to the top
projects, not the entire list.
SENATOR GRAY-JACKSON replied the additional explanation answered
her question.
3:46:51 PM
CHAIR TOBIN questioned whether limiting bonding to only one or
two projects per school district would reduce the resources
going to rural schools, noting that for every dollar put into
school bond debt relief, additional resources are allocated to a
fund for Regional Educational Attendance Area (REAA) schools.
SENATOR MYERS said he would defer the question about the
mechanics of additional funds to the department. He noted that
there are still the major maintenance fund and the school
construction fund, which are where these project lists
originate. He explained that the funds could either go directly
to the REAA fund or be distributed as grants. He added that if
major municipalities are removing their projects from the top
portion of the list through bonding, then more REAA projects
would move up on the list, making it more likely for them to
receive funding through the major maintenance funding process
conducted each year. Regarding the specific REAA grant list, he
deferred that to the department for further clarification.
3:48:23 PM
SENATOR KIEHL clarified that he did not intend to suggest that
anything would eliminate the need for the legislature to
appropriate funds for the major maintenance list for rural
Alaska; the legislature still needs to determine the amount. He
raised an equity issue, noting that he represents a single-site
school district, which will always have a top project whenever a
need arises, meaning SB 158 would not be much of a barrier for
such districts. He pointed out that colleagues represent
districts with multiple facilities and asked if the sponsor was
open to a proportional approach, rather than allocating one
project for a single-site district and one for a multi-site
district.
3:49:12 PM
CHAIR TOBIN commented that Anchorage is 40 percent of public-
school children in Alaska.
SENATOR KIEHL clarified that he was referring to the number of
school buildings.
CHAIR TOBIN quipped that Anchorage would probably still
represent 40 percent.
3:49:22 PM
SENATOR MYERS acknowledged the point that a single-site school
district would always succeed in getting a top project approved.
However, he suggested that these districts also typically have
much smaller capacity to manage their needs independently,
meaning that equity considerations could apply both ways. He
questioned whether it was right for the state to favor smaller
districts simply because they automatically qualify and
suggested that it might indeed be justified because these
districts have a harder time managing larger projects on their
own.
SENATOR MYERS addressed the concern that some districts might
take advantage of this by proposing less urgent projects, like
replacing a cafeteria oven annually. He emphasized that it is
important for districts to be able to address legitimate needs,
such as replacing a leaking roof. He stated his belief that
DEED's process of evaluating and ranking projects would ensure
that the most deserving projects rise to the top, while less
critical ones might not even make it onto the list.
3:51:02 PM
CHAIR TOBIN said this might be a two-part question. She noted
that due to the years of the school bond debt moratorium and
shifts in staffing capacity, the major maintenance and school
construction lists have become quite lean. She explained that
districts are having difficulty inputting all necessary
information and are prioritizing their time differently. She
requested clarification on the applicability language in SB 158,
asking if it would require every school district to reapply and
how it would affect school districts that have not been
applying.
3:51:37 PM
SENATOR MYERS deferred to the department but mentioned that he
was informed there was a possibility smaller districts might
receive additional support. He noted that currently, districts
do not receive assistance with creating bond packages, but they
do get some help from the department for preparing school
construction and major maintenance packages. Therefore, his
understanding was that SB 158 might benefit smaller districts
more. Regarding the question of reapplying, he asked if Chair
Tobin could elaborate further on her question.
3:52:17 PM
CHAIR TOBIN clarified her question, asking if the existing list
would be used under SB 158 or if districts would need to apply
under a new process as part of the regulation writing.
SENATOR MYERS responded that DEED creates a new list every year
and that process is not changing.
3:52:39 PM
CHAIR TOBIN noted that the average age of school buildings in
Alaska is 60 years and said that nearly every school building
roof likely needs replacement at this point. She pointed out
that, as districts address their major maintenance needs, SB 158
is intended to incentivize them, but the current situation is
challenging, with numerous projects needing funding. She
mentioned that Anchorage alone has a bond list of about 20
schools, most of which involve roof replacements. She asked if
there were any concerns with creating and implementing a new
system within the next year and could SB 158 really impact the
ability for districts to potentially get a bunch of
reimbursements and additional dollars they have already put into
the system without relief.
3:53:36 PM
SENATOR MYERS said that this was the goal of SB 158. He
explained that while SB 158 may limit the number of projects a
district can undertake, it aims to ensure that the projects
funded are those most urgently needed. He emphasized that
essential projects, like roof replacements, would naturally rise
to the top of the list, whereas less critical itemssuch as new
playground equipment in his districtshould be lower in
priority. He acknowledged that while playgrounds are important,
roof repairs are more critical. The process established by SB
158 is intended to ensure that the most necessary projects
receive funding first.
3:54:24 PM
SENATOR BJORKMAN paraphrased his understanding, asking for
confirmation. He said that currently there is no availability
for districts to receive school bond debt reimbursement, and the
goal of SB 158 is to introduce some level of reimbursement. He
gave an example of having about 400 projects across the state
with none receiving reimbursement. The intention, he stated, is
to reduce that number so that each district has an opportunity
to receive some school bond debt reimbursement.
3:55:12 PM
SENATOR MYERS stated his belief that was a fair assessment. He
explained that the goal of SB 158 is to ensure that everyone has
an opportunity for bond debt reimbursement and to prevent future
moratoriums from impacting reimbursement. He noted that there
have been at least two moratoriums, including one in the late
1990s, with the current one ending next year. He added that it
was a significant burden on taxpayers in his district when the
state stopped bond debt reimbursement for approximately six
years, and SB 158 is an effort to prevent similar situations in
the future.
3:55:59 PM
SENATOR BJORKMAN asked if a total cap mechanism had been
considered for the annual statewide projects eligible for school
bond debt reimbursement.
3:56:14 PM
SENATOR MYERS stated that he had not considered a total cap
mechanism but was open to discussing it. He expressed concern
that funding needs vary greatly year to year, making a fixed cap
potentially problematic. He explained that a strict limit, like
$100 million, could result in denying necessary projects from
smaller districts while less critical projects might receive
leftover funds. He acknowledged the value of the concept but
questioned whether a hard cap was the best solution.
3:57:30 PM
CHAIR TOBIN invited the department to speak to fiscal notes.
3:58:10 PM
LORI WEED, Manager, School Finance and Facilities, Department of
Education and Early Development (DEED), Juneau, Alaska,
introduced herself.
3:58:17 PM
KAREN MORRISON, Director, School Finance and Facilities,
Department of Education and Early Development (DEED), Juneau,
Alaska, Provided the following overviews of SB 158 fiscal note
OMB components 153 and 2737:
Fiscal Note OMB 153
Affected Department: Debt Service
Appropriation: School Debt Reimbursement
Allocation: School Debt Reimbursement
This bill changes the date a school district applies
for a major maintenance or school construction grant
from September 1 to July 1.
The effective date for this legislation is July 1,
2025 (FY2026).
The fiscal impact of this legislation cannot be
determined because of the uncertainty of how many debt
reimbursement applications will be received after July
1, 2025, and the total requested project principal and
bond costs. State repayment of school bond debt
reimbursement projects that are voter-approved after
July 1, 2025, will be requested starting in FY2026.
Fiscal Note OMB 2737
Affected Department: Department of Education and Early
Development
Appropriation: Education Support and Admin Services
Allocation: School Finance and Facilities
This fiscal note includes a one-time cost of $6.0 for
legal fees associated with implementation of the
necessary regulation changes.
The effective date for this legislation is July 1,
2025 (FY2026).
4:00:17 PM
CHAIR TOBIN asked about DEED assisting districts with
applications for the potential grant program. She noted that the
bill sponsor mentioned this support, but she did not see a
related component in the fiscal analysis, unless it is provided
for under "existing capacity."
4:00:37 PM
MS. WEED replied that the School Finance Division and Facilities
section of DEED does assists districts with questions regarding
the grant application and debt programs when there is an active
allocation. She clarified that this support falls under existing
capacities. She added that DEED does not help write grant or
debt applications but provides guidance.
4:01:12 PM
CHAIR TOBIN asked why the department's major maintenance and
construction lists have seen attrition recent years.
4:01:24 PM
MS. WEED responded that it is difficult to determine the exact
reasons for the attrition. She noted that some projects have
come off the list in recent years, and districts might be
redirecting their limited resources elsewhere due to low funding
levels. She suggested that districts may be waiting for an
improvement in the state's fiscal climate but stated that the
department could not provide further insight into the lack of
participation.
4:01:56 PM
SENATOR KIEHL stated that he was considering the issue of
districts with different numbers of schools receiving one or
possibly two projects. He asked if there could be opportunities
to game the system. He observed that the major maintenance list
often includes specific projects like "school X stripped to the
studs and rebuilt" or "school Y roof replacement," while
sometimes projects are bundled, such as improvements at multiple
schools or replacing several roofs. He inquired about the rules
for bundling projects and whether any district can combine
multiple projects.
MS. WEED replied that there is a long history of bundling or
grouping district-wide projects into a single project. She
explained that the department requires districts to demonstrate
cost-effectiveness when grouping projects and sets limitations,
such as ensuring procurement is managed within one contract. If
there are multiple contracts, it would indicate a need for
multiple applications for distinct projects.
4:03:55 PM
SENATOR KIEHL said that a district-wide electrical code
compliance project seems straightforward, with one contract
being efficient to handle all tasks, at least theoretically. He
asked if there is any reason why the same contractor couldn't
handle replacing three roofs and a playground as part of one
project.
4:04:16 PM
MS. WEED replied that the department's review would question
such a request and might split the project or, in the case of a
debt project, engage in dialogue with the district to submit two
separate applications, as was done under the old program. She
added that without a current application process for debt
projects, it is difficult to determine exactly how the
department would handle bundling, especially since limiting the
bundling of unrelated projects is a relatively new stipulation
in the application process.
4:05:08 PM
CHAIR TOBIN stated that she was considering a multi-site school
project, such as in the Bering Strait School District. Instead
of electrical upgrades, she suggested energy retrofits like
updating boiler systems or replacing windows and doors. She
questioned whether a single contract for multiple sites within
one district would be permitted under the current application
process.
MS. WEED replied that it is difficult to address such a
hypothetical situation, as it would depend on the specifics of
the project. She stated that the department would review the
proposal and evaluate the justification for cost-effectiveness.
She noted that in some school districts, the justification is
less clear compared to others.
4:06:19 PM
CHAIR TOBIN opened public testimony on SB 158; finding none, she
closed public testimony.
4:06:40 PM
CHAIR TOBIN held SB 158 in committee.
4:07:02 PM
SENATOR BJORKMAN expressed support for the concept of a "fleet
reduction" approach to school bond debt reimbursement, calling
it a good idea. However, he raised concerns about the lack of
guidelines regarding the total cost of bond debt reimbursement
from year to year, given its variability and the constraints on
revenue. He noted the difficulty in committing to fund new
projects when current obligations are already a struggle. He
suggested considering a cap, setting aside a specific budget
amount for school bond debt reimbursement tied to a percentage
of the Base Student Allocation (BSA) for each district. This, he
explained, would provide consistency for both the state and
districts to plan around available funds, while the restrictions
in the bill could still apply within this model.
4:09:16 PM
SENATOR MYERS stated that he was open to considering ideas like
Senator Bjorkman's suggestion, finding it interesting. He
mentioned trying to visualize how such a plan would function
over the 20-year life of a bond and how it would adapt from year
to year. He acknowledged the challenge that state revenue and
needs fluctuate independently and often do not align. He
expressed interest in hearing more about how this concept could
be developed further and how it might work in conjunction with
the current framework under SB 158.