Legislature(2021 - 2022)DAVIS 106
02/04/2022 08:00 AM House EDUCATION
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| Audio | Topic |
|---|---|
| Start | |
| HB18 | |
| HB259 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 164 | TELECONFERENCED | |
| *+ | HB 259 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 18 | TELECONFERENCED | |
HB 259-PERMANENT FUND DIVIDEND; 25/75 POMV SPLIT
3:35:27 PM
CO-CHAIR STORY announced that the final order of business would
be HOUSE BILL NO. 259, "An Act relating to use of income of the
Alaska permanent fund; relating to the amount of the permanent
fund dividend; relating to the duties of the commissioner of
revenue; relating to funding for state aid for school districts,
the state boarding school, centralized correspondence study, and
transportation of pupils; and providing for an effective date."
3:36:05 PM
REPRESENTATIVE IVY SPOHNHOLZ, Alaska State Legislature, as prime
sponsor, presented HB 259. Through a series of slides, she
discussed the state of education funding in Alaska; [a slide
presentation on the topic given to the next committee of
referral, which correlates with this presentation of HB 259, is
available on the state's website "BASIS"]. Representative
Spohnholz stated that HB 259 is designed to update the permanent
fund dividend (PFD) formula "to create a dedicated, stable, and
growing funding" for PFDs, education funding, and other
essential state government services. She emphasized the impact
over the last several years of unstable funding of education.
She talked about the value of base student allocation (BSA) and
the effect of inflation. She said Alaska is spending
approximately $500 less per child today than it did in 2008.
She remarked that education is a bi-partisan concern, and she
noted that there have been, at certain years, additional
appropriations made to fund education.
REPRESENTATIVE SPOHNHOLZ explained that HB 259 proposes to take
a percentage of the permanent fund and apply it directly to
public education. She said Article 5, Section 1, of the
Constitution of the State of Alaska requires the state to fund
public education. She described children as the state's most
important natural resource. She acknowledged the value of the
state's "hard" natural resources, but said the fluctuations
therein make its use in funding volatile. She said Senate Bill
26, passed in 2008, allowed the legislature to use no more than
5 percent of the permanent fund to pay not only the PFD but also
government services. She remarked on the lack of predictability
and transparency to the public and the uncertainty of the
legislature as to what it will have to work with from year to
year.
REPRESENTATIVE SPOHNHOLZ noted that in the Third and Fourth
Special Sessions in 2021, the House Special Committee on Ways
and Means began looking at various formula amounts for draws
from the permanent fund and how they might affect the budget.
She showed a slide depicting the updated numbers of the fall
2021 forecast, and she explained the baseline budget and the
surplus that was in the budget before paying the dividend. She
said she thinks the people of Alaska think they should continue
to be paid a dividend, and she agrees. With lower oil prices, a
75 percent of market value (POMV) to 25 percent PFD balance was
necessary; with higher oil revenue projections in fiscal year
2022 (FY 22) modest surplus could be produced with a 33/66
percent POMV/PFD draw. The governor's plan would use a 50/50
draw, which she said would result in a significant deficit
moving forward.
3:43:32 PM
REPRESENTATIVE SPOHNHOLZ brought attention to further slides
that explain how HB 259 would work. She reiterated that the
proposed bill would rewrite the dividend formula and create a
stable and growing dividend for Alaskans with a 5 percent POMV
from the permanent fund, which would be split as follows: 25
percent to dividends, producing a $1,301 PFD in FY 24; and 75
percent from the undesignated general fund (UGF) available for
essential government services. Of that 75 percent, 50 percent
would go to the public education fund for the foundation formula
and pupil transportation; and 50 percent would go to the general
fund. She explained that if the percentage allocated to
education does not fully fund the foundation formula, then the
remaining need will be met with UGF. Conversely, if the
percentage allocated to education exceeds the amount required by
the foundation formula, then the excess will be distributed
directly to school districts according to the foundation
formula. She remarked that this plan would offer transparency
to the people of Alaska. She said she does not think it is good
to be negotiating over the dividend formula every year. She
pointed out that under HB 259, the dividend would rise to $1,608
in FY 31. She said the bill would also create stable funding
for Alaska's schools. She indicated a slide showing POMV draw
in FY 24 at $3.6 billion and rising to about $4.6 billion in FY
31. She noted that the minimum amount to meet the foundation
formula obligation is $1,239.4 billion in FY 24 and rising to
$1,423.7 billion in FY 31. Next she pointed out that HB 259
would produce a modest surplus. It would fully fund education,
and a modest surplus would be distributed to school districts
according to the foundation formula. The plan would also
produce a surplus that would allow strategic and capital
investments that are needed.
3:49:15 PM
REPRESENTATIVE SPOHNHOLZ, in response to Representative Prax,
acknowledged there are a number of bills currently in
circulation related to the PFD, and it remains to be seen which
will "get legs." In response to a follow-up question, she
specified her intent to use the word "designate" rather than
"dedicate" as pertains to funds.
REPRESENTATIVE PRAX stated that conceptually, the legislature
has "forever" treated a designated fund as a dedicated fund. He
pointed out there are needs other than education. He observed
that if [the budget] is "less than" the education foundation
funding formula, then "the remaining has to come from the
general fund," which will create a problem [funding] everything
else.
REPRESENTATIVE SPOHNHOLZ responded that the BSA is separate law,
which HB 259 does not propose to change. She reviewed that HB
259 is designed to result in surplus funds for the state. She
explained that it is her expectation that if there was a fiscal
plan that balances the budget, then the legislature would honor
the law [that requires the state to fund education]. She
acknowledged that there are areas other than education that also
need funding, and she expressed that HB 259 proposes a plan to
create a surplus in the budget such that the legislature would
not have to "make those difficult choices" and could begin to
make strategic investments.
REPRESENTATIVE PRAX said he understood but did not share
Representative Spohnholz' point of view.
3:54:52 PM
REPRESENTATIVE HOPKINS questioned whether the bill sponsor had
considered what needs to be done with the BSA funding "to catch
up to inflation" and whether HB 259 would "cover how far we have
fallen behind."
REPRESENTATIVE SPOHNHOLZ deferred to Co-Chair Story.
3:55:47 PM
CO-CHAIR STORY offered her understanding that $500 million "is
the number."
REPRESENTATIVE HOPKINS calculated that a $500 million shortfall
would not be covered by HB 259, but speculated the bill is
"trying to catch up and doing a good job of stable funding." He
asked for confirmation that HB 259 would "sort of level out the
funding," thus would not be "a roller coaster" and "would not be
based on one-year increases or drops in the market."
REPRESENTATIVE SPOHNHOLZ confirmed that is correct. She
emphasized that the cost of funding state services does not
change with the price of oil, so the state should be saving
money when the price of oil is high, then using a stable, five-
year rolling average to produce income to pay for those
services. In response to a follow-up question, she confirmed
that HB 259 does not propose a constitutional amendment.
3:59:31 PM
REPRESENTATIVE SPOHNHOLZ, in response to Representative
Drummond, restated the various POMV/PFD formulas.
4:01:27 PM
CO-CHAIR STORY commended the bill sponsor's consideration of
"people transportation." She asked Representative Spohnholz if
she had considered how other essential services would be
effected.
REPRESENTATIVE SPOHNHOLZ said she considered "a status quo
budget" and fully funding education, while providing "a
meaningful dividend." She mentioned various public services
from which everyone benefits and how they are adversely affected
by austere budgets.
CO-CHAIR STORY said she likes the proposed bill's intent of
providing stability and certainty not only for education but
also for other services in the state. She mentioned the
restraint of government spending and insurance of a larger
dividend, and she asked whether the bill sponsor had considered
a provision to increase the share for dividends under certain
conditions.
REPRESENTATIVE SPOHNHOLZ said she is open to discussing various
"triggers."
4:08:07 PM
The committee took an at-ease from 4:08 p.m. to 4:10 p.m.
4:10:30 PM
REPRESENTATIVE SPOHNHOLZ added that the proposed bill would
allow the legislature "to appropriate as needed in extraordinary
situations."
4:12:05 PM
MEGAN HOLLAND, Staff, Representative Ivy Spohnholz, Alaska State
Legislature, on behalf of Representative Spohnholz, prime
sponsor, presented the sectional analysis to HB 259 [included in
the committee packet].
4:17:20 PM
REPRESENTATIVE SPOHNHOLZ, in response to a question from
Representative Hopkins, indicated the reason for proposing the
effective date of 2023, rather than 2022, was because of the
time it would take to implement the provisions under HB 259.
4:17:44 PM
CO-CHAIR STORY announced the committee would hear invited
testimony.
4:17:55 PM
LON GARRISON, Executive Director, Association of Alaska School
Boards, testified on behalf of the Association of Alaska School
Boards (AASB) in support of HB 259. He reviewed AASB's several
resolutions that support the proposed legislation. He spoke
about the need for education funds and the responsibility of the
legislature to provide them. He noted that while HB 259 is not
a BSA bill, it would create "a foundation for a possibility of
increasing education funding over time." He reported that the
BSA has not been increased since FY 17, while the necessary
expenses of education have all increased and will continue to do
so. He pointed to the structure of the bill that would address
times when the formula does not meet the BSA and times when it
goes beyond the BSA, and he opined this "seems to be a
reasonable solution." He said the bill would remove education
from competition with all other appropriations. It would end
the ongoing debate about funding the PFD, provide a stable
funding source for education, and allow districts to concentrate
"on educational innovation to improve student outcomes" rather
than cutting programs and staff as a result of funding
uncertainty. Mr. Garrison said AASB encourages the support of
HB 259.
4:23:08 PM
CO-CHAIR DRUMMOND asked Mr. Garrison to forward a list of AASB's
goals to the committee.
4:23:36 PM
REPRESENTATIVE PRAX returned to the idea that the funds are
dedicated because it seems the intent is to make the funding of
education a priority "over everything else."
MR. GARRISON confirmed it is the intent of AASB to prioritize
the funding of education as a constitutionally mandated
requirement. He mentioned the long-term effect that education
has on the prosperity of Alaska.
REPRESENTATIVE PRAX said he does not disagree. He then asked
why AASB is favoring [HB 259] over some other approach.
MR. GARRISON emphasized the importance of stability. He talked
about having the opportunity to have a conversation about this
issue and how HB 259 creates opportunity for that conversation
to take place. It sets up a roadmap, he said. He acknowledged
that the legislature always has the authority to appropriate.
He said the formula proposed under HB 259 may need to be
adjusted, and he hopes the conversation can continue.
4:30:12 PM
REPRESENTATIVE SPOHNHOLZ acknowledged that she had misspoken
earlier, using "dedicated" instead of "designated" when speaking
about funds. She encouraged Co-Chair Story to invite a
representative from Legislative Legal Services to speak.
4:31:24 PM
REPRESENTATIVE HOPKINS pointed to Section 6, on page 4 of HB
259, which clearly states that the legislature may
"appropriate". The words "dedicate" and "designate" are not
used.
4:32:58 PM
LISA PARADY, Executive Director, Alaska Council of School
Administrators, testified in support of HB 259. She said the
Alaska Council of School Administrators' (ACSA's) members work
together to develop joint position statements. While student
achievement remains the top priority, adequate funding remains
the most critical need, and HB 259 addresses that, she said.
She shared that ACSA supports that the proposed bill recognizes
the responsibility of the state to provide timely, reliable, and
predictable revenue for schools. She mentioned teacher
investment in public education and the effect of inflation, and
she noted there has been approximately a 16 percent decline on
the value of operating dollars since 2007. She advised that
early notification of funding and stable funding is crucial.
She said budget shortfalls in the state and nationally are
adversely affecting all aspects of education. She talked about
loss of teachers resulting from instability of funding. She
said HB 259 could help stabilize districts, as well as fund
service increases associated with economic development, deferred
maintenance, and inflation. She said ACSA looks forward to
partnering with all stakeholders and the House Education
Standing Committee as the bill moves forward, and she offered to
answer questions.
4:38:25 PM
CO-CHAIR STORY asked Ms. Nauman to speak on the difference
between designated and dedicated funds.
4:38:53 PM
EMILY NAUMAN, Deputy Director, Legislative Legal Services,
Legislative Affairs Agency, indicated that "designated" is a
[word] used to differentiate between the two types of funds but
is not a word that would be in statute. She mentioned
Wielechowski v. State of Alaska, which said the legislature has
the authority to appropriate the entire balance of the earnings
reserve account (ERA) each year; the money is subject to the
annual appropriation cycle of the legislature. Currently the
statutes say "shall", but in reality the legislature has to make
that appropriation every year. Ms. Nauman said that "the
workaround" in statute is to say that the legislature "may"
appropriate, which she explained is called designation, as
opposed to a dedication, which would be statute language stating
something must be appropriated. The use of "may" gives future
legislatures knowledge that it was the intent of the legislature
that set up the statute that that was the intent of the
legislation, but it is not a requirement. Ms. Nauman said there
are only a few funds that are constitutionally dedicated; they
are funds that "preexist the constitution" and "a few others
that are specifically mentioned in the constitution."
4:40:46 PM
REPRESENTATIVE PRAX said he does not get the point of telling
the legislature it has the ability to do something that it
already has the ability to do. He questioned the legal benefit
of "giving ourselves guidance."
MS. NAUMAN reiterated that it clarifies legislative intent, and
she said this is common across all statutes. That said, she
acknowledged that it is up to the legislature what to put into
law and to determine the value of the language.
CO-CHAIR STORY remarked that intent may need to be adjusted.
4:43:09 PM
REPRESENTATIVE SPOHNHOLZ observed that the legislature follows
the law when at all possible; the exceptions come with
"structural challenges that prohibit our ability to follow the
law." She said she thinks it is time to address the one part of
the budget that has no statutory stability. The law as
currently written is unaffordable, she opined. She spoke about
the affect of the PFD on the budget and seeking a dividend
formula the state can afford.
4:46:00 PM
NORM WOOTEN, Advocacy Director, Association of Alaska School
Boards, expressed excitement that [HB 259] addresses many of the
recommendations made by the fiscal policy work group, including
getting the PFD "off the table" and funding education. He said
that is the crux of AASB's support. He talked about a pro rata
provision in Title XIV, which states that if there is not enough
money, "it is spread across the foundation formula" and "effects
every school district in the state." He said that has always
been in place "and always will be."
4:50:17 PM
REPRESENTATIVE CRONK posited that there are "a lot of tough
questions that we refuse to talk about." He remarked that more
money may make things easier but does not necessarily make
things better. He said he views his job as figuring out how to
make things better. He asked where the data is that shows that
more money is needed. He emphasized the idea of increasing
outcomes and accountability. He mentioned PFDs being taken from
families and questioned whether those families have been asked
how that would affect them.
4:53:50 PM
MR. GARRISON, at the invitation of Co-Chair Story, responded
that Representative Cronk is right that those are difficult
questions that need to be answered, and he said he thinks that
is a conversation that will continue. He said costs have
increased, as well as have "the needs for educating our
children," while the funds necessary have not been available.
4:55:39 PM
REPRESENTATIVE SPOHNHOLZ recalled meeting Representative Cronk
when he was a school teacher requesting stable funding. She
talked about putting enough in to keep things going. She
emphasized the need for money to recruit and retain teachers and
spoke about evidence-based reading programs for children.
4:59:10 PM
CO-CHAIR STORY opened public testimony on HB 259.
4:59:34 PM
SARA DYKSTRA, representing self, testified that she is a parent
and educator who supports HB 259. She expressed the importance
of a stable and consistent fiscal plan for the state, one that
addresses inflation. She remarked on the inconsistency of
funding from year to year and the difficulty in making plans as
a result. She said educators are seeing increased learning gaps
and mental issues in students and are struggling to keep schools
open and avoid burnout. She encouraged the committee to
prioritize education funding by moving forward HB 259.
5:03:21 PM
CO-CHAIR STORY, after ascertaining that there was no one else
who wished to testify, closed public testimony on HB 259.
CO-CHAIR STORY expressed appreciation for the discussion.
[HB 259 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 259 Combined Documents.pdf |
HEDC 2/4/2022 8:00:00 AM |
HB 259 |
| HB 259 Fiscal Note, OMB.pdf |
HEDC 2/4/2022 8:00:00 AM HW&M 2/15/2022 11:30:00 AM HW&M 2/22/2022 11:30:00 AM |
HB 259 |
| HB 259 Letters of Support, 2.3.22.pdf |
HEDC 2/4/2022 8:00:00 AM |
HB 259 |
| HB 259 Sectional Analysis v. A.pdf |
HEDC 2/4/2022 8:00:00 AM |
HB 259 |
| HB 259 Presentation, 2.3.22.pdf |
HEDC 2/4/2022 8:00:00 AM |
|
| HB 259 Sponsor Statement v. A.pdf |
HEDC 2/4/2022 8:00:00 AM HW&M 2/15/2022 11:30:00 AM HW&M 2/22/2022 11:30:00 AM |
HB 259 |
| HB 259, v. A.PDF |
HEDC 2/4/2022 8:00:00 AM |
HB 259 |
| HB 259 Letter of Support, Great Alaska Schools.pdf |
HEDC 2/4/2022 8:00:00 AM |
HB 259 |