Legislature(1993 - 1994)
03/23/1994 08:06 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CSSB 312(HES): An Act relating to school construction grants and to interscholastic school activities; and providing for an effective date. Amendment 3 pending from a prior Senate Finance meeting was withdrawn. Senator Rieger MOVED amendments 4 and 5. Discussion was had between Senators Rieger, Kerttula, Sharp, Co-chairs Frank, Pearce, and Duane Guiley, Director, School Finance, Department of Education, regarding reimbursement to schools for school construction debt, portable and temporary housing, and interest rate ramifications on bonds. Amendment 5 was amended on page 4, line 2, after "bond sells..." and before the words "...premium to par value", the words "an original issue" were added. In answer to information requested by Senator Jacko, Mr. Guiley provided Attachment A, dated April 15, 1994. Discussion followed. CSSB 312(FIN) was HELD in committee until March 24, 1994. CS FOR SENATE BILL NO. 312(HES): An Act relating to school construction grants and to interscholastic school activities; and providing for an effective date. CO-CHAIR PEARCE announced that SB 312 was before the committee. She said amendments 4 and 5 were proposed by Senator Rieger. She also noted that an April 1991 report from the Department listed portable units used in Alaska (see Attachment A, copy on file in the committee minute book). At that time, 16 of the 54 school districts reported having portable units in use. Anchorage had 98, 50 of which were over 20 years old. Matsu had 54. Fairbanks had 28, 17 of which were over 20 years. Kenai had 22, Craig and Unalaska, only one. Her objection to bringing in so many portable units was that it overpopulated a school, and the children did not have access to adequate library facilities, restrooms, etc. Schools would still be eligible for bonding even if portables met the per student square footage requirement. She asked Senator Rieger to move amendment 4. Senator Rieger MOVED amendment 4. He went on to explain the amendment. He called attention to the language "materially substandard," and said he would be comfortable with or without this in the amendment. Some examples of "materially substandard" could be an uncovered walkway from the portables to the rest of the school, inadequate plumbing, or inadequate heating. Senator Kerttula agreed that the department would need some leeway in judging this area. DUANE GUILEY, Director, School Finance, Department of Education, said that the amendments proposed were in-line with the bond reimbursement and grant review committee who had discussed the future. It also was in line with a request from the Department of Education Anchorage caucus suggesting that in all situations regarding portables, the population of students enrolled at the facility should not exceed 110 percent of the design capacity of the core area of the building. Senator Kerttula voiced his opinion that, with a rare exception, all new construction paid for by the state would be rural or in the bush because there were no existing basements in churches to house students. When a large number of students begin to be housed in portables, the Department of Education (DOE) should look at the reasons. He felt there had been a rapid shift in population in some districts and too large a percentage of students were being housed in portables. He wanted to solve and prioritize the problem. Co-chair Pearce reminded the committee that there was a motion on the floor to ADOPT amendment 4. No objection being heard, amendment 4 was ADOPTED for incorporation into CSSB 312(FIN). Senator Rieger said there had been concern about bonds issued that sold at a premium. He said amendment 5 would put a penalty on payback. He believed that there should be some kind of general dis-incentive for a district to issue bonds at premium. Senator Rieger MOVED amendment 5. Mr. Guiley understood the amendment to say that bonds might be available at 115 percent as compared to par, and would require the department to reduce the eligible reimbursement to the District by 200 percent of that 15 percent increase over par which would be a 30 percent reduction in the 70 percent reimbursement rate. That would provide a penalty for selling the bonds over par keeping in mind that the state reimbursed 70 percent of the principle amount as well as 70 percent of the interest amount. If the interest amount was higher than necessary, the district would be making themselves eligible for a greater level of reimbursement by the state. That would deter this from happening. Senator Rieger confirmed that the new higher debt service was what would be reduced by the additional 30 percent. Mr. Guiley said that was correct under the current statutory definition of cost of school construction. In answer to Senator Sharp, Mr. Guiley said he read the amendment to mean it would apply to all of the eligible reimbursement which would include the reimbursement of the principle amount as well. Everyone was amused when Senator Sharp said he felt that was a little severe. Senator Rieger MOVED an amendment to amendment 5 changing the wording on page 4, line 2, to read "by which a bond sells at an original issue premium to par value". No objection being heard, it was ADOPTED. At the request of Senator Sharp, Mr. Guiley turned the committee's attention to page 3, Section 3 (o). He read that section to mean that the total reimbursement to the district would be reduced by that fraction. Under current statutes, districts were eligible to receive 70 percent reimbursement of principle and associated financing costs. He would read this to mean the department would calculate the fraction. For example, a 30 percent reduction to the 70 percent reimbursement would result in a 21 percent reduction of the 70 percent, if he was reading it correctly. As stated earlier, the reimbursement amount of the principle would remain unchanged. The state's obligation on the interest for bonds that carry a higher interest rate than market value would place a greater obligation on the state at the point to which there would be a break even. Discussion continued by Senators Rieger, Kerttula and Sharp regarding reimbursement, school districts and bonding. Co-chair Pearce reminded the committee that there was a motion on the floor to ADOPT amendment 5. No objection being heard, amendment 5 was ADOPTED for incorporation into CSSB 312(FIN). In answer to Senator Rieger, Mr. Guiley said, to his knowledge, none of the old programs (2, 5, 7 year old bonds) had been sold with no material premium at all. Co-chair Pearce commented that amendment 3 had been pending and it was replaced with amendment 4 (which was adopted). Co-chair Pearce asked if Mr. Guiley had the answer to a question raised by Senator Jacko. Senator Jacko had wanted to know the dollar amount expended for local capital improvement projects by districts throughout the state. Mr. Guiley said he researched the most recent school district audits to determine how many dollars were recorded in school district audits for local cash expenditures of capital projects in fiscal year 1993. Based upon that analysis, there was a recording of $9,908,651 of local school construction projects not currently being reimbursed by the state through either a bond reimbursement or grant process. That was an estimate of what existed on the actual school district audits in one year of the three year suggestion for cash reimbursement process. The list included all 54 school districts under current statute. The ARA school districts would not be eligible for such reimbursement. He took three specific school districts and looked at three fiscal years. Of those three districts, the total was $1,061,863. He said he provided brief descriptions of the projects. Mr. Guiley went on to say that the old cash reimbursement program ended with projects that had to be approved prior to July 1, 1990. Therefore, there was a potential of double payment for projects incurred during the time period of April 30, 1990 through June 30, 1990. The issues he brought forth previously related to the two year lag process whereby expenses incurred by the district in 1990 under current programs would have been eligible for reimbursement in 1992. That fiscal year was currently closed out. Based on the wording under current statute, excluding the proposed amendment, the only expenses eligible for reimbursement would be those incurred in FY93 prior to April 1993. This would exclude any capital projects that were recorded on the city or borough books. He had requested the information but did not have access to those books. Co-chair Pearce asked if $10M in unreimbursed cash expenditures was a good estimate for 1993. Mr. Guiley said that was a conservative number in that the cities and boroughs were not required to actually record capital projects related to schools on the school audit. They were allowed to record them on their own audit because under state statute, they had responsibility for the buildings. This number would be understated by the amount of projects recorded in city and borough audits, and overstated in relation to the projects incurred by the REAAs. In answer to Senator Jacko, Mr. Guiley said that he had included all projects of all dollar amounts recorded in local capital projects. Discussion was had by Co-chairs Pearce, Frank and Mr. Guiley regarding projects in his report and different cities and boroughs relating to school districts. In answer to Co-chair Frank, Mr. Guiley said that this legislation could have an immediate impact on the general fund. Co-chair Frank remarked that more information was needed. Co-chair Pearce agreed with Senator Rieger to HOLD CSSB 312(FIN) for at least another day.
| Document Name | Date/Time | Subjects |
|---|