Legislature(2015 - 2016)HOUSE FINANCE 519
03/24/2015 01:30 PM House FINANCE
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Audio | Topic |
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Start | |
Confirmation Hearings: Alaska Mental Health Trust Authority Board of Trustees | |
HB136 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+ | TELECONFERENCED | ||
*+ | HB 136 | TELECONFERENCED | |
+ | TELECONFERENCED |
HOUSE BILL NO. 136 "An Act relating to school bond debt reimbursement; and providing for an effective date." Co-Chair Thompson indicated that he would not be moving the bill out of committee today. REPRESENTATIVE STEVE THOMPSON, SPONSOR, read the sponsor statement for the bill. Under the current fiscal shortfall of $3.5 billion, the state must control expenses. It is imperative that the state not only find efficiencies and reduce the size of operational costs of the state, but also limit the potential growth of state spending. House Bill 136 (HB 136) will allow the state to control expenses. There are four major cost drivers in Alaska's statewide operating costs: K-12 education, Health and Social Services, debt service (PERS/TRS and bond payments), and employee salaries and benefits. HB 136 addresses the growth in state debt service expenses by suspending subdivisions of government's ability to bond without explicit state approval. House Bill 136 would sunset Alaska statutes relating to state aid for costs of school construction and major maintenance debt for five years. After five years, if the legislature does not take further action on these statutes, the reimbursement rates for school construction would be reinstated and reduced from 70% to 50% for eligible projects described under AS 14.11.100 (h), (i), (j) (2) - (5) and from 60% to 40% for eligible projects described under AS 14.11.100(h), (i), and (j) (2), (3), and (5). BRODIE ANDERSON, STAFF, REPRESENTATIVE STEVE THOMPSON, read the sectional analysis of the bill. *Section 1: Amends AS 14.11.014, adds new subsection (d) Sunsets the bond debt reimbursement provisions for school construction and major maintenance for five years, May 1, 2015 - July 1, 2020. *Section 2: Amends AS 14.11.100(a) Page 6, line 21 restricts reimbursement of bonds authorized after May 1, 2015. Page 7, lines 1 - 11, deletes language relating to bonds authorized after May 1, 2015. *Section 3: Amends AS 14.11.100(a) Page 12, line 17 - Page 13, line 2 inserts language relating to bonds authorized on or after July 1, 2020. (18) For projects approved under AS 14.11.100 (h), (i), and (j) (2) - (5) the reimbursement would be 50 percent. (19) For projects approved under AS 14.11.100 (h), (i), and (j) (2), (3), and (5) the reimbursement would be 40 percent. *Section 4: Amends AS 14.11.100 adds a new section (s) Restricts the Commissioner from approving an application for bond debt reimbursement between May 1, 2015 - July 1, 2020. *Section 5: Amends AS 14.11.102 adds new section (c) Restricts the Commissioner from approving an application for bond debt reimbursement between May 1, 2015 - July 1, 2020. *Section 6: Repeals sections 1, 4, and 5 of this act on July 1, 2020 *Section 7: Retroactivity clause Sections 1, 2, 4, and 5 of this act are retroactive to May 1, 2015 *Section 8: Section 3 of this act takes effect July 1, 2020 *Section 9: Sections 1, 2, 4, 5, and 7 of this act take effect immediately 2:25:55 PM Representative Guttenberg cited the multi-year allocation totals shown on the document titled, "Multi-year Allocation Totals - Operating Budget - FY 2016 Senate Structure" (copy on file) and asked whether the purpose was to point out the total amount of the state's obligation from 2007 through 2015. Mr. Anderson responded affirmatively. He indicated the information conveyed prior reimbursement obligations. Representative Guttenberg asked what the totals would be for FY 17 and FY 18 based upon past history. Mr. Anderson referred to an additional page in the committee packet titled, "Statewide Liability School Construction Debt Retirement, Updated 2/13/2015" (copy on file) that reported the debt from FY 15 through FY 34. He explained that based on the document the FY 16 total was approximately $108 million. Co-Chair Thompson interjected that the document showed that by paying off the debt through 2034 the state liability totaled $1,212,713,044. Mr. Anderson added that the totals only reflected bonds already issued. Vice-Chair Saddler inquired about the physical condition of the schools around the state. Mr. Anderson responded that he did not have the answer to that question and referred to the Department of Education and Early Development (DEED). Vice-Chair Saddler asked whether the state would be "abrogating" its responsibility if it did not fund at the level of the 70 percent 30 percent [state - local] reimbursement split. Mr. Anderson indicated he would have to review before he could answer. He added that the bill did not prohibit school districts from bonding. The legislation only restricted the state's reimbursement of the bonds. 2:30:19 PM Vice-Chair Saddler restated his question about the general condition of the schools in the state. ELIZABETH NUDELMAN, DIRECTOR, SCHOOL FINANCES AND FACILITIES, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, answered that the condition of the schools varied. She elaborated that the condition of a school was based on the "useful life of the components" which created a continued need for repair. However, many buildings were in very good condition based on maintenance and repair needs being met. Representative Wilson asked about the history of the school bond debt reimbursement program and the reasoning behind the program. Ms. Nudelman replied that the bonding program was initiated sometime in the 1970's. She determined that upon examination of the previous statute, the state partnered with school districts and municipalities to construct and repair schools around the state. The program mandated that the municipalities carried the debt and the state reimbursed a portion of the debt under eligibility requirements. She confirmed that the bill did not prohibit municipalities from bonding. Representative Wilson asked about the bonding ability of schools that were not in municipalities. Ms. Nudelman responded that Regional Education Attendance Area (REAA) schools were located in unorganized boroughs and did not have the "legal capacity" to bond. She added that some schools located in small municipalities could not obtain the backing to bond for school construction or repair. She detailed that a second statutory program was a school grant program called the CIP Program (capital improvement project). The department received applications each year and ranked the projects according to need and forwarded the list to the governor and legislature for funding from the capital budget. Representative Wilson reported that from 2005 through 2015 the grant program totaled $763 million. She wondered whether with passage of the bill, the districts would switch over to the grant program instead of bonding without reimbursement from the state. Ms. Nudelman assumed that the grant program would receive more applications in the absence of the debt reimbursement program. Representative Wilson commented that she hoped the grant program would also be reexamined by the legislature and include all school construction. Co-Chair Thompson remarked that the school debt reimbursement program was subject to appropriation by the legislature and therefore, some sideboards were in place. He agreed with Representative Wilson's latter comment and noted that the point of the bill was to completely halt bonding for a period of time until the state could "get our financial house in order." Representative Wilson wanted to ensure that the legislation was applied equally throughout the state. 2:37:14 PM Co-Chair Neuman asked whether the bill would affect the construction of the last Kasayulie School. Ms. Nudelman responded that the bill did not apply to the Kivalina School. Co-Chair Neuman expressed more concern about the bill affecting the Kasylie case mandate and asked for further clarification. Ms. Nudelman relayed that the debt reimbursement program timeline eligibility happened when the voters authorized the debt. She expounded that debt that was authorized in 2011 would remain in the program. The Kivalina School was part of the Kasayulie settlement resolved in 2011. In the FY 2016 budget the governor appropriated approximately $4.7 million for design of the school. In order for the bill to affect the Kivalina project, either the governor or legislature would have to deny funding for the project. The Kivalina School was a separate issue from the legislation. Co-Chair Neuman indicated he wanted to ensure that the bill would not create a legal issue with the mandated Kasayulie settlement. Vice-Chair Saddler asked whether the legislation would prompt lawsuits for the state from municipalities or school districts. Ms. Nudelman responded that she "did not have a basis" to form an opinion about the potential for lawsuits. She maintained that the legislature held the authority to appropriate funds and create statute. 2:41:35 PM Representative Kawasaki wondered what portion of the overall state debt belonged to schools versus other bonding debt. Co-Chair Thompson answered that the state's total bond payments in FY 15 was approximately $264 million, of which $114.6 million was attributed to school debt. Co-Chair Neuman stated that total debt bond reimbursement was actually $228 million. Representative Kawasaki expressed concern about the May 1, 2015 effective date of the bill. He indicated that every other school district except Anchorage would be excluded from the program this year base on the date. He wondered whether any discussion ensued in regards to changing the effective date. Mr. Anderson relayed that both the Bristol Bay Borough and the Anchorage School District was holding school debt bonding elections before May 1, 2015. He confirmed that every other school district "would be impacted" by passage of the legislation. Co-Chair Thompson reminded the committee that reimbursement of any school debt bond package was subject to legislative appropriation. He cautioned that both school districts needed to remember that with passage of the bond issue, they still might be required to pay 100 percent reimbursement. Representative Kawasaki asked whether other school districts were planning on having a bond measure as part of elections in the fall. Ms. Nudelman was uncertain. However, she did know of one other school district that was anticipating a new bond proposal at some point. Representative Kawasaki asked whether many districts would rush to add school bonding proposals as part of the upcoming elections in the fall if the date was changed. Ms. Nudelman was not certain but thought that it was possible. 2:45:56 PM Representative Edgmon clarified that the debt reimbursement program had "historically come and gone in the past." Recently, there had not been a sunset date attached to the program. He stated that the grant program was highly competitive. He offered that the Ketchikan lawsuit was focused on the K - 12 funding formula and the operational side of education funding. He also indicated that he had some "conflicted feelings about the bill." He understood the reason from the standpoint of "fiscal discipline." However, from the standpoint of the small Bristol Bay Borough School District, he thought that it would be the last opportunity for the school to take advantage of the program. He added that the school was in desperate need of repair and that repairs would render the school more energy efficient and overtime could save money. He wondered whether a "rush" of school districts were expected to attempt to qualify before the program would sunset. Ms. Nudelman believed that school districts were restricted by its voters who understood the larger fiscal crisis facing the state and thought that the voters would need convincing before a bond issue was passed. Mr. Anderson responded that through his research in anticipation of the legislation he discovered that the municipal school bonding process was lengthy and could last months. He observed that "in regards to the bum rush" scenario, current evidence of that would be apparent. 2:50:21 PM Representative Edgmon wondered whether the committee had a legal opinion from the Department of Law regarding the legality of imposing a definitive cut-off date. Mr. Anderson reported that no legal memo existed regarding HB 136. Co-Chair Thompson informed Representative Edgmon that Alaska Housing Finance Corporation (AHFC) had a program applicable to public buildings, including schools that was being utilized in many rural areas. He explained that the program was focused on energy efficiency and weatherization and the grant would be repaid through guaranteed savings from lower energy costs achieved overtime. Co-Chair Neuman interjected that private entities also offered the same energy efficiency type programs. Vice-Chair Saddler remarked that in response to the suggested "land office rush" for the remaining school debt program , he thought that the notion of the "generous state reimbursement coming to an end" would not be surprising to the school districts given the state's financial condition. Representative Munoz asked whether non-REAA schools can apply for the grant funding. Ms. Nudelman replied in the affirmative. Representative Munoz asked what the number of applications the department received for the grant program in a given year was versus the number of awarded grants. Ms. Nudelman responded that DEED received approximately 160 to 200 applications and that in the FY 2016 budget four applications were awarded totaling $13 million exclusive of the capital construction project for the Kivalina School design. She noted that the number of applications typically decreased during leaner budget years. 2:55:12 PM Representative Munoz asked whether all of the funds for the grant program was state funding. Ms. Nudelman responded that the grant program required a percentage of matching funds based on the assessed value per ADM (average daily membership). Representative Gattis believed that over the 40 year period of the reimbursement program it incentivized the school districts to overbuild buildings which all required maintenance. She felt that the school districts were moving into a period of necessary maintenance and with passage of HB 136, were getting its source of funding revoked, which was not planned for. She asked for the total amount of deferred school maintenance in the state. Ms. Nudelman responded that one way that the department assessed deferred maintenance was reviewing the insurance value for all of the school buildings statewide. She elaborated that DEED also required six year plans from school districts regarding maintenance needs. She thought that both methods gave the department a good indication of general maintenance needs of the schools. Representative Gattis wondered whether the district had a specific number. Ms. Nudelman had access to a report with the numbers that she would provide to the committee. Representative Kawasaki notified the committee that a 2010 report on school construction and major maintenance funding had been distributed. Representative Munoz stated that charter schools became eligible for the school debt reimbursement program. She wondered whether charter schools were included in the bill. Mr. Anderson was uncertain. HB 136 was HEARD and HELD in committee for further consideration. He discussed the agenda for the next day. 3:00:46 PM ADJOURNMENT The meeting was adjourned at 3:00 p.m.
Document Name | Date/Time | Subjects |
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Mental Health Trust - Smith #1.pdf |
HFIN 3/24/2015 1:30:00 PM |
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Mental Health - Michael #4.pdf |
HFIN 3/24/2015 1:30:00 PM |
|
Mental Health - Cooke #3.pdf |
HFIN 3/24/2015 1:30:00 PM |
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HB 136 Sectional Analysis.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
HB 136 Sponsor Statement.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
HB 136 Fiscal Note EED.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
HB 136 Support Material - State Debt Liability.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
HB 136 Support Material - MultiYearAllocationTotals.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
HB 136 Supporting Documents - May 1 Date Only - Letter From Bristol Bay Borough.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
HB 136 Opposing Documents - FNSB School Debt Reimbursement Letter.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
HB 136 DEED 6 YR Plan 2015 Final.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |
HB 136 DEED Response to Rep. Gattis.pdf |
HFIN 3/24/2015 1:30:00 PM |
HB 136 |