Legislature(2021 - 2022)DAVIS 106

02/04/2022 08:00 AM House EDUCATION

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled but Not Heard
Heard & Held
-- Invited & Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 18(EDC) Out of Committee
Meeting will recess at 8:30 am and reconvene at
3:30 pm
        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                                                               
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                                                               
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                                                               
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                                                               
REPRESENTATIVE SPOHNHOLZ  said she is open  to discussing various                                                               
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                                                               
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                                                               
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                                                               
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