Legislature(2005 - 2006)HOUSE FINANCE 519

04/26/2005 01:30 PM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 13 SCHOOL CONSTRUCTION BOND REIMBURSEMENT TELECONFERENCED
Heard & Held
+= HB 53 CHILDREN IN NEED OF AID/REVIEW PANELS TELECONFERENCED
Heard & Held
+ SB 67 CLAIMS AGAINST HEALTH CARE PROVIDERS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
= HB 275 TRANSPORTATION PROJECT BONDS
Moved CSHB 275(FIN) Out of Committee
HOUSE BILL NO. 13                                                                                                             
                                                                                                                                
     An Act relating to reimbursement of municipal bonds for                                                                    
     school construction; and providing for an effective                                                                        
     date.                                                                                                                      
                                                                                                                                
Co-Chair  Chenault MOVED  to ADOPT  work draft  #24-LS0062\X,                                                                   
Mischel,  4/26/05, as  the  version of  the  bill before  the                                                                   
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
REPRESENTATIVE  CARL GATTO,  SPONSOR,  noted that  HB 13  was                                                                   
introduced  to  "take  care of  a  fast  growing  community".                                                                   
Every  community  in the  State  has school  maintenance  and                                                                   
replacement needs;  Mat-Su has needs for  school construction                                                                   
because of the growing student numbers.                                                                                         
                                                                                                                                
HB 13  requests a 70/30  split for those construction  costs.                                                                   
The district would float bonds  in hopes of getting approval.                                                                   
Following a survey,  the approval rating for  the bonding was                                                                   
approximately  80%.   Since that  time, the  bill has  gotten                                                                   
"heavier".   He stressed that  the committee substitute  just                                                                   
adopted incorporates  a substantial revision to  the original                                                                   
proposed  HB 13.   The  intent of  the original  bill was  to                                                                   
build  space for children.   The  bill now  includes a  major                                                                   
revision of the  funding formula and threatens  the substance                                                                   
of the bill.                                                                                                                    
                                                                                                                                
Representative  Gatto  pointed out  that  a  study was  added                                                                   
under  the committee  substitute.   He  stressed  that SB  36                                                                   
changed the method  of funding from an instructional  unit to                                                                   
use of  a formula.   Mostly rural  school districts  suffered                                                                   
under SB 36.   That bill carried a "funding  floor" providing                                                                   
rural  schools grant  money and  an adjustment  was made  for                                                                   
those districts.                                                                                                                
                                                                                                                                
Representative Gatto  challenged the model used  for the air-                                                                   
study.  The  problem is that study deals with  facts, numbers                                                                   
and observations and  cannot be proven right.   The study was                                                                   
flawed.  Because of those flaws,  the Institute of Social and                                                                   
Economic  Research (ISER)  commissioned  a second  one.   The                                                                   
current  version  of  HB  13 resulted  from  that  study  and                                                                   
propose money be redistributed.                                                                                                 
                                                                                                                                
1:53:33 PM                                                                                                                    
                                                                                                                                
Representative  Gatto acknowledged  that  some districts  are                                                                   
underfunded.   HB  13  addresses redistribution  of  district                                                                   
funds.  He highlighted  the districts that would  not do well                                                                   
under HB 13:                                                                                                                    
                                                                                                                                
   ·    Anchorage school district would loose $24 million                                                                       
        dollars;                                                                                                                
   ·    Mat-Su schools district would loose $3 million                                                                          
        dollars, and                                                                                                            
   ·    Fairbanks school district would loose $6 million                                                                        
        dollars.                                                                                                                
                                                                                                                                
1:55:21 PM                                                                                                                    
                                                                                                                                
Representative Gatto  noted that he  spends a lot of  time in                                                                   
the  classroom in  his  district  and that  he  has a  strong                                                                   
association  with   his  school   district.    He   found  it                                                                   
astounding that  there are classrooms  with 35 students.   He                                                                   
believed  that the ISER  study would  make situations  worse.                                                                   
The Mat-Su district  is already very efficient,  using 90% of                                                                   
income for salaries, while other districts give only 65%.                                                                       
                                                                                                                                
Representative  Gatto emphasized  his concern  that the  ISER                                                                   
study and  the proposed legislation  not be married as  it is                                                                   
unreasonable  and  unfair  to penalized  districts  that  are                                                                   
crowded, while sending  money to districts that are  not.  He                                                                   
believed that crowding is the  single most important issue in                                                                   
the classroom.                                                                                                                  
                                                                                                                                
1:58:19 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer understood  that the original bill  did have a                                                                   
70/30 change and  that the proposed committee  substitute did                                                                   
include the ISER study.  He requested  that Co-Chair Chenault                                                                   
address the changes.                                                                                                            
                                                                                                                                
Co-Chair Chenault apologized for  "hi jacking" Representative                                                                   
Gatto's bill.   He noted for  the record that  he understands                                                                   
the need for  the Mat-Su school district and  their expanding                                                                   
population.    He  referenced   the  inequities  in  his  own                                                                   
district  and agreed with  the inequities  resulting  from SB
36.   He  pointed  out that  his  own district  suffers  huge                                                                   
concerns with  the cut backs that have  dramatically affected                                                                   
the  district.   He added  that  his district  has a  nursing                                                                   
option  only one  time per  week; there  are no  kindergarten                                                                   
aids,  and that  most  of the  schools  have between  400-500                                                                   
students.   Co-Chair  Chenault  questioned  how the  inequity                                                                   
problems could be fixed statewide.                                                                                              
                                                                                                                                
2:02:17 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault  agreed that  the proposed scenario  is not                                                                   
the right answer and stressed  that every study has looked at                                                                   
cost differentials; they are all  are flawed.  Everything has                                                                   
been postponed and the school districts can no longer wait.                                                                     
                                                                                                                                
2:03:28 PM                                                                                                                    
                                                                                                                                
Co-Chair  Chenault  agreed  that  taking money  away  from  a                                                                   
school  district,   forces  that  district  to   become  more                                                                   
efficient.   Because his  district has  become so  efficient,                                                                   
they have been penalized.  SB 36 is flawed.                                                                                     
                                                                                                                                
2:07:14 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault pointed out  that the Kenai School District                                                                   
is composed  of both urban and  rural schools.  The  time has                                                                   
come to  fix these  problems and  HB 13  is the beginning  of                                                                   
that fix.   Legislators  must come  together to determine  an                                                                   
agreement regarding the issues.                                                                                                 
                                                                                                                                
2:08:35 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault hoped that HB  13 could make it through the                                                                   
House  and  Senate  and  become  a  vehicle  for  opening  up                                                                   
discussion on these issues.                                                                                                     
                                                                                                                                
2:09:02 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer  understood that  the change made  by Co-Chair                                                                   
Chenault was to Section 3.  Co-Chair Chenault said yes.                                                                         
                                                                                                                                
2:09:17 PM                                                                                                                    
                                                                                                                                
Co-Chair  Chenault  acknowledged  that  the ISER  report  was                                                                   
added to  the original bill  and he thought  it would  be the                                                                   
fairest way to make a difference.  It would provide a four-                                                                     
year phase in beginning this year.  It would:                                                                                   
                                                                                                                                
   ·    Help the State's budget process,                                                                                        
   ·    Allows districts to determine their costs; and                                                                          
   ·    Allow time for legislative committees to determine                                                                      
        if the numbers were correct.                                                                                            
                                                                                                                                
Co-Chair  Chenault  noted  support  for  the  original  bill,                                                                   
realizing there  are other  districts with similar  concerns.                                                                   
He  emphasized   that  these   statewide  problems   must  be                                                                   
addressed.                                                                                                                      
                                                                                                                                
2:11:03 PM                                                                                                                    
                                                                                                                                
EDDY JEANS, DIRECTOR, EDUCATION  SUPPORT SERVICES, DEPARTMENT                                                                   
OF  EDUCATION AND  EARLY DEVELOPMENT,  noted  that the  total                                                                   
cost  of ISER  proposed  differential  would  be $82  million                                                                   
dollars.                                                                                                                        
                                                                                                                                
2:12:03 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer understood  that Anchorage  would remain  the                                                                   
same for  all four years.   Mr. Jeans  stated that  Section 3                                                                   
would phase  in the  cost differential  recommended  by ISER,                                                                   
over a four-year period.  Doing  the phase-in, there would be                                                                   
an  annual   cost  of  approximately  $20   million  dollars.                                                                   
Anchorage is at zero because it acts as the baseline.                                                                           
                                                                                                                                
2:12:57 PM                                                                                                                    
                                                                                                                                
Representative Hawker requested  backup for the fiscal impact                                                                   
to the individual  schools districts.  Mr. Jeans  said it was                                                                   
not available.                                                                                                                  
                                                                                                                                
Representative  Hawker asked the  funding level base  for the                                                                   
$82  million dollars.   Mr.  Jeans  replied it  was based  on                                                                   
student allocation,  A.S. 4576.  Representative  Hawker asked                                                                   
the  consequences  of  increasing  that amount.    Mr.  Jeans                                                                   
replied it would be approximately $90 million dollars.                                                                          
                                                                                                                                
2:14:07 PM                                                                                                                    
                                                                                                                                
Representative  Hawker  inquired if  there  would  be a  hold                                                                   
harmless for those  communities close to the  baseline factor                                                                   
or would there  be redistribution.  Mr. Jeans  stated that if                                                                   
the cost differentials  were implemented, without  the fiscal                                                                   
note being  adopted, there would  be redistribution  based on                                                                   
the  A.S. 4576,  prorating  the  student allocation  down  to                                                                   
equal the differentials.                                                                                                        
                                                                                                                                
Representative  Hawker questioned the  cost to the  Fairbanks                                                                   
School district.   Mr.  Jeans said it  would depend  if there                                                                   
were   a    full   implementation    or   graduated    scale.                                                                   
Representative  Hawker asked about  the full  implementation.                                                                   
Mr.  Jeans  did   not  have  that  number  available.     The                                                                   
redistribution,  if held  to A.S.  4576 appropriation  level,                                                                   
would have  an adverse  effect to  the Anchorage,  Fairbanks,                                                                   
Mat-Su, Ketchikan and Juneau School Districts.                                                                                  
                                                                                                                                
Representative   Hawker  stated  for   the  record   that  he                                                                   
associated  himself with  the  frustrations  recorded by  Co-                                                                   
Chair Chenault,  however,  proposing an  approach as  done by                                                                   
the Chair,  troubled him.   Solving problems by  taking money                                                                   
from one  school district and giving  it to another  is not a                                                                   
good model.                                                                                                                     
                                                                                                                                
2:16:13 PM                                                                                                                    
                                                                                                                                
Co-Chair  Chenault asked  if the State  continues to  bump-up                                                                   
the student  base allocation, what  would happen.   Mr. Jeans                                                                   
explained that  the proposal would  adjust the  existing cost                                                                   
differential by  one quarter of  the difference.   That would                                                                   
have an  annual cost  of approximately  $20 million  dollars.                                                                   
The  $20 million  would be  in  addition to  the $70  million                                                                   
dollars  currently  being  considered   under  HB  1  at  the                                                                   
discussed  level.   The  total  increase  to schools  in  the                                                                   
current  year if both  bills passed,  would be  approximately                                                                   
$90  million  dollars.    All  school  districts  would  have                                                                   
increased funding under that scenario.                                                                                          
                                                                                                                                
2:18:02 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault asked if school  funding was increased next                                                                   
year  by  $70 million  dollars  would  all  school  districts                                                                   
benefit.   Mr. Jeans explained  that the manner in  which the                                                                   
bill is currently  structured, the adjustment  would be built                                                                   
into  the base  next year.   If  the  Legislature elected  to                                                                   
increase  the base  student  allocation,  that would  provide                                                                   
additional  resources  to  all school  districts  across  the                                                                   
State.                                                                                                                          
                                                                                                                                
Co-Chair Meyer  pointed out  that SB  155 includes  the 70/30                                                                   
program.  Mr. Jeans  advised that SB 155 is  a grant program.                                                                   
Under  the Department's  school  construction grant  program,                                                                   
there is a participating share.   For the larger communities,                                                                   
their local match is 30%.  Similar  rules apply, however, the                                                                   
difference is, under  SB 155, the State is  providing for the                                                                   
grant  to 70%;  under  the  debt reimbursement  program,  the                                                                   
voters  would  need to  approve  the  project for  the  bonds                                                                   
issued.                                                                                                                         
                                                                                                                                
2:21:32 PM                                                                                                                    
                                                                                                                                
In response  to a  query by Representative  Kelly,  Mr. Jeans                                                                   
understood that Kenai would experience a small drop.                                                                            
                                                                                                                                
2:22:42 PM                                                                                                                    
                                                                                                                                
Representative  Joule asked  why the  original bill  language                                                                   
had been deleted allowing for  the Rural Education Attendance                                                                   
Area (REAA) bonding.  Co-Chair Chenault did not know.                                                                           
                                                                                                                                
Representative  Joule  voiced his  concern  with  SB 155  and                                                                   
major  maintenance with  comparison  to HB  13, which  allows                                                                   
districts some construction costs.   The contingency language                                                                   
allows the  REAA's to  address new  school construction.   He                                                                   
said he would address those concerns with an amendment.                                                                         
                                                                                                                                
2:25:03 PM                                                                                                                    
                                                                                                                                
Representative Hawker raised concerns  regarding the basis of                                                                   
the numbers.  He noted that the  Legislative Budget Committee                                                                   
(LBA)  Committee  had contracted  for  the  air report.    He                                                                   
pointed out  that he was disappointed  with the flaws  in the                                                                   
ISER   evaluation   process.      To   determine   the   cost                                                                   
differentials,  ISER made  a judgmental  determination.   The                                                                   
reason  that  a  teacher  would   accept  a  job  in  certain                                                                   
locations is #5 on the teacher's lists.                                                                                         
                                                                                                                                
Representative Gatto remembered  the study, pointing out that                                                                   
salaries  were not  #1.   Representative  Hawker pointed  out                                                                   
that was one  of the driving factors  in the ISER study.   He                                                                   
indicated  he was  troubled with  the proposed  numbers.   He                                                                   
believed   that  the   closer   the  decision   was  to   the                                                                   
Legislature, the  better that decision could  be, looking for                                                                   
equivalency to level the playing field.                                                                                         
                                                                                                                                
2:30:35 PM                                                                                                                    
                                                                                                                                
Representative Croft  commented on the process  that occurred                                                                   
with passage of SB 36 seven years  ago.  He noted that he was                                                                   
the only  legislator from Anchorage  or Fairbanks  that voted                                                                   
against  SB 36.   That bill,  the education-funding  formula,                                                                   
was based  on false information.   The legislation  concluded                                                                   
that it cost  no more to put  a teacher in rural  Alaska than                                                                   
it does in  Anchorage.  That was  and still is false.   There                                                                   
were other  falsehoods in  the premise  of SB  36.   The ISER                                                                   
study  asked the correct  questions  by asking  how to  get a                                                                   
teacher out  to the village  area.  The  ISER puts  the State                                                                   
closer to the  truth regarding those costs.   To pretend that                                                                   
it does not does cost more to  have a teacher in rural Alaska                                                                   
is not true and does an injustice  to many of the students of                                                                   
the State.                                                                                                                      
                                                                                                                                
2:33:53 PM                                                                                                                    
                                                                                                                                
Representative  Hawker added  that the  ISER study based  its                                                                   
conclusions on  questions.  It  was acknowledged in  the ISER                                                                   
report that they  did not address whether  additional funding                                                                   
would result in the districts having additional personnel.                                                                      
                                                                                                                                
2:34:57 PM                                                                                                                    
                                                                                                                                
Representative  Kelly was concerned  with what was  happening                                                                   
in Co-Chair Chenault's  district but wanted to  know that the                                                                   
legislation would "make sense"  regarding cost differentials.                                                                   
                                                                                                                                
2:37:36 PM                                                                                                                    
                                                                                                                                
Representative Joule  stated that he would have  an amendment                                                                   
regarding  the contingent  effect  of the  needed  conforming                                                                   
sections for appropriations in the REAA's.                                                                                      
                                                                                                                                
HB 13 was HELD in Committee for further consideration.                                                                          
                                                                                                                                
                                                                                                                                
AT EASE:       2:39:22 PM                                                                                                     
RECONVENE:     2:43:45 PM                                                                                                     
                                                                                                                                

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