Legislature(2005 - 2006)HOUSE FINANCE 519
04/04/2006 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB57 | |
| HB493 | |
| HB445 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 57 | TELECONFERENCED | |
| + | HB 445 | TELECONFERENCED | |
| + | HB 470 | TELECONFERENCED | |
| *+ | HB 493 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL 493
"An Act relating to reimbursement of municipal bonds for
school construction."
2:08:07 PM
PETER ECKLUND, STAFF TO REPRESENTATIVE KEVIN MEYER testified
regarding the bill. He explained that the bill proposes to
allow municipalities to bond for school construction and
renovation projections beginning November 1, 2006 and ending
November 1, 2008. He noted that under current legislation,
any municipality could ask their electorate to approve
funding for school capital projects. The principal and
interest payments would then be eligible for partial payment
by the State. Municipalities would be reimbursed for 60
percent of the cost of all projects that met all the space
allocation guidelines set forth by the Department of
Education and Early Development. Mr. Ecklund noted that a
40 percent reimbursement rate would apply to projects that
exceeded the space allocation guidelines. He stated that
currently there were over $146 million in projects submitted
to the Department that could qualify for this reimbursement.
Co-Chair Meyer asked for an explanation of how the 60/40
percent was arrived upon, rather than the previous 70/60
formula. Mr. Ecklund explained that in 2002, the passage of
HB 2003 opened a two-year period of school debt
reimbursement. He stated that $699 million of debt was
authorized to be reimbursed by the Department -- 55 percent
at the 70 percent rate, and 45 percent at the 60 percent
rate. It followed that nearly half of the schools took
advantage of the 60 percent rate. The Department concluded
therefore that the 60 percent rate must have proven fair and
attractive to municipalities.
Co-Chair Meyer referred to the current program, in which the
State paid for 70 percent of costs of a Department of
Education approved project, and asked if the program was
still in effect until October 1, 2006.
Mr. Ecklund stated that there was a non-capped program open
between December of 2002 and December of 2004. He noted
that currently there were $192 million of projects
authorized to be bonded until October of this year, with
different caps for schools with different enrollment rates.
He explained that the current program finances 70 percent of
the cost of approved projects, and 60 percent of unapproved
projects, expiring in October of 2006.
2:11:52 PM
Co-Chair Meyer clarified that under the proposed program, if
a project was on the approved list, it would qualify at the
60 percent rate, with no caps. He asked if the proposed
lower rates of reimbursement were related to the current
level of indebtedness. Mr. Ecklund stated that the debt
service payments for previously authorized debts was $94
million, which did not include the nearly $300 million in
projects that have been authorized but not requested. He
also noted that for every $100 million in debt authorized,
the State's debt service payments increased $6 million per
year for twenty years. He concluded that if all authorized
projects requested payments, it could increase the State's
debt payments by $18 million annually.
Responding to a follow-up by Co-Chair Meyer, Mr. Ecklund
confirmed that currently the debt level was uncertain.
2:13:40 PM
Co-Chair Meyer speculated that since this bill proposed the
lower rate, it would result in a lower overall debt.
Representative Stoltze observed that a project would need
to meet requirements after it was submitted. He expressed
certain frustrations with the capital project process of the
Department of Education and Early Development in terms of
waiting time and expense.
2:14:38 PM
Representative Joule asked if a tax relief or community
dividend bill might be a companion to this bill, and
observed that this seemed to pass a debt burden to
communities, which often resulted in higher property taxes.
He acknowledged that while his comment was somewhat
facetious, it also pointed out a real issue. He asked if an
earlier debt reimbursement bill connected to a General
Obligation (GO) bond. Mr. Ecklund confirmed that a GO
Bond package on the ballot in 2002 addressed previous debt
reimbursement.
2:16:31 PM
Representative Joule observed that there was current
construction in rural Alaskan schools that pertained to this
issue.
Co-Chair Meyer pointed out the $25 million in the budget to
complete maintenance items from the previous year, and his
awareness of other rural construction or repair projects
that would need to be addressed by the capital budget.
2:17:21 PM
Representative Joule asked for clarification about the
section of the bill that was funded at 40 percent. Mr.
Ecklund responded that during the last two-year period,
there were 70 and 60 percent debt reimbursement provisions.
He reiterated that during that time, 45 percent were paid at
the 60 percent level for unapproved projects.
2:18:19 PM
Representative Stoltze noted an earlier proposal with a
50/50 proposition in the interior, but noted that these
could not be determined without certain agreements. He
expressed concern over whether this represented a "bidding
war".
2:19:06 PM
Co-Chair Meyer noted that this was the highest amount the
State felt they could reimburse based upon current debt
loads. He suggested that in the past years, with a lower
debt load, the State was able to reimburse up to 70 percent,
but that currently, a 60 percent ratio seemed more
reasonable.
Representative Stoltze commented that the Matsu Borough and
School Board had experienced frustration in trying to
receive the State funding needed to adequately house
students. He expressed the need for discussion about the
proper ratio of reimbursement funding.
2:20:32 PM
EDDY JEANS, DIRECTOR, EDUCATION SUPPORT SERVICES, DEPARTMENT
OF EDUCATION AND EARLY DEVELOPMENT testified regarding the
bill. He complimented Mr. Ecklund for his explanation of
the bill's history. He then pointed out the indeterminate
fiscal note prepared by his Department, since it was
currently unclear which schools or projects would apply for
this reimbursement. In response to an earlier question
about how many projects were currently outstanding, he
stated that currently $100 million had been authorized by
voters and the Department of Education. He noted that
municipalities had not yet issued these bonds. He also
stated that an additional $200 million had been authorized
last year, partially approved by the Department and by
voters. He confirmed Mr. Ecklund's earlier observation that
for every $100 million in the 70 or 60 percent reimbursement
ratio, the estimated annual debt payment to the State was $6
million for approximately 20 years. He emphasized that
currently the State's debt burden was $94 million, with an
additional $18 million estimated for the next two years,
putting the State's debt reimbursement program at
approximately $112 million.
2:21:51 PM
Mr. Jeans then pointed out that at the ratios in the
proposed legislation, the State's debt program would drop to
approximately $5 to $5.5 million per $100 million
authorized.
Co-Chair Meyer referred to a handout pertaining to State
Capital Funding, provided by the Department of Education,
and asked if the Department recommended the 60 percent
ratio.
Mr. Jeans responded that the recommendation made in the
report was for a greater variance between reimbursement
levels for those projects that met, as opposed to exceeded,
the Department approved space guidelines. He pointed out
that nearly half of the projects authorized under HB 2003
exceeded space guidelines, leading the Department to
conclude that a ten percent differential did not seem to
matter to districts. They therefore recommended a larger
span between percentages.
Co-Chair Meyer concluded that the Department was concerned
more with the span than the actual percentages. Mr. Jeans
stated that the Department would leave it to the legislators
to decide the reimbursement levels, but pointed out that the
impression that a ten percent differential would deter
districts from department from space guidelines had proven
untrue.
2:24:10 PM
Representative Kelly asked whether the amount of projects
exceeding space guidelines created a financial burden. Mr.
Jeans responded that when HB 2003 was passed in 2003, the
Department knew there were projects that exceeded space
guidelines, but did not anticipate that nearly half the debt
reimbursement would fall under that category. He reiterated
that the ten percent difference did not seem to deter
districts from building outside space guidelines.
2:25:06 PM
Representative Stoltze referred to past contention over the
development of criteria, and asked if enough weight had been
placed on areas with documented rates of growth. He asked
if in effect there existed a penalty for pre-planning.
Mr. Jeans acknowledged that in the current system there was
not a provision to encourage future planning in
municipalities. He noted that they currently focused on
reacting to problems of overcrowding. He noted however that
they did allow for six or seven year enrollment projections
when applying for new space. He conceded that in areas like
Matsu, the system was not currently able to keep up with the
level of growth.
2:26:29 PM
Representative Stoltze suggested that it might be helpful to
provide reimbursement for land acquisitions in advance. He
noted the increasing difficulty to find adequate parcels, as
well as contentious legislative efforts in the past
attempting to lower costs.
2:27:18 PM
Representative Joule asked if grant funding to schools
unable to bond had ever exceeded space guidelines. Mr.
Jeans responded that there had not. Representative Joule
followed up by observing that negotiating space differences
occurred prior to the Department issuing its priority list
for the year.
2:28:20 PM
Mr. Jeans noted that grant projects must fall within space
guidelines, and only under HB 2003 and SB 73 last year did
the State allow debt reimbursement for projects that
exceeded space guidelines.
2:28:43 PM
Responding to a question by Representative Kelly, Mr. Jeans
confirmed his Department's belief that a 20 percent
differential would affect the number of projects that
exceeded space guidelines.
2:29:03 PM
LARRY WIGET, DIRECTOR OF GOVERNMENT RELATIONS, ANCHORAGE
SCHOOL DISTRICT testified online. He commented on the
success of the school debt reimbursement program, and
pointed out that higher reimbursement numbers made it easier
to pass bonds with voters. He confirmed that the School
District supported the bill, but stated that they would like
to extend the time for the new program, from November 1,
2008, to November 30, 2008 to allow for the election to
occur that year for approving bonds without holding a
special election.
Co-Chair Meyer proposed that they create CONCEPTUAL
AMENDMENT changing the end date of the legislation.
2:31:17 PM
Representative Hawker asked whether, if they approved the
shift in percentage reimbursements, it would reflect poorly
on the legislative support of schools.
2:31:46 PM
Mr. Wiget expressed appreciation of the program being
currently put forth by the legislation. He reiterated that
the greater the level of participation by the State the
easier it was for districts to pass bonds, but expressed
appreciation for the reimbursement program.
2:32:31 PM
Representative Stoltze noted that the April election in
Anchorage, as opposed to an October election in other parts
of the State, seemed to cause problems of non-conformity, in
this case necessitating an amendment.
Co-Chair Meyer expressed the desire to HOLD the bill in
order to address further amendments.
2:33:27 PM
Representative Holm referred to very large school projects,
and asked if a more standard school system in Alaska was
more cost effective for the state, rather than individual
designs.
2:34:15 PM
Mr. Jeans explained that the Bond Reimbursement Review
Committee had examined the issue of prototype schools. They
found that in larger communities like Anchorage, protypes
worked well at the elementary school level, since there were
so many schools. However, the State has not adopted a
standard prototype for high schools.
2:35:24 PM
Responding to another question by Representative Holm, Mr.
Jeans noted that examination of this issue led to prototypes
being used in Anchorage and Fairbanks. He noted that there
was not enough construction in the state of large schools to
make prototype models economically favorable.
Representative Holm observed that all schools have a similar
function, and suggested that the cost for construction
should not change by changing the appearance of a unique
school. He expressed that a $54 million high school made
him uncomfortable.
2:36:43 PM
Mr. Jeans reiterated that the Bond Reimbursement Review
Committee had examined prototype schools and found them
ineffective at the high school level. He stressed that they
used such models effectively for elementary schools in
Anchorage and Fairbanks.
2:37:48 PM
MARY FRANCIS, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, (ACSA), testified regarding the bill. She
noted a resolution in support of extending the bond debt
reimbursement program and expressed appreciation to the
committee. She also stated that ACSA members would like to
see a higher reimbursement rate.
Co-Chair Meyer closed public testimony.
Co-Chair Meyer MOVED Amendment #1, 24-LS1752\G.1, Mischel,
3/20/06, changing the end date of the legislation from
November 1, 2008, to November 30, 2008. There being NO
OBJECTIONS the Amendment was ADOPTED.
HB 493, as Amended, was HEARD and HELD.
2:40:07 PM
Representative Stoltze, following up on the discussion on
school design uniformity, asked for a list of schools and
populations to be provided by Mr. Jeans. He noted that in
his district, school populations ranged from 700 to 2,200.
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