Legislature(2005 - 2006)SENATE FINANCE 532
05/05/2006 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB105 | |
| HB16 | |
| HB381 | |
| HB484 | |
| HB399 | |
| HB377 | |
| HB426 | |
| HB13 | |
| HB334 | |
| HCR30 | |
| HB426 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 105 | TELECONFERENCED | |
| += | HB 16 | TELECONFERENCED | |
| + | HB 13 | TELECONFERENCED | |
| + | HB 381 | TELECONFERENCED | |
| + | HB 426 | TELECONFERENCED | |
| += | HB 484 | TELECONFERENCED | |
| + | HB 334 | TELECONFERENCED | |
| + | HB 399 | TELECONFERENCED | |
| + | HB 377 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HCR 30 | ||
5:29:41 PM CS FOR HOUSE BILL NO. 13(RLS) am "An Act relating to reimbursement of municipal bonds for school construction; increasing the base student allocation used in the formula for state financing of public education; relating to the district cost factors for state funding of public education; relating to school improvement funding; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. 5:30:31 PM REPRESENTATIVE CARL GATTO, sponsor of the bill, testified that this bill would authorize reimbursement of construction bonds at a rate of 70 percent for schools that meet Department of Education and Early Development requirements, and at a rate of 60 percent for other schools. AT EASE 5:31:40 PM / 5:32:20 PM Co-Chair Green offered a motion to adopt SCS CS HB 13, 24- LS0062\T, as a working document, and objected to receive an explanation. [NOTE: Although no further action was taken on this motion, it is assumed that the intent of the Committee was to ADOPT the committee substitute Version "T".] AT EASE 5:32:42 PM / 5:32:49 PM Representative Gatto informed that the bill contained $2 million intended to include the North Slope district in the existing reimbursement program. The bill would increase the Base Student Allocation (BSA) by $461 to a total of $5,380 per student, for an overall increase of more than $96 million. It would also fund the Institute for Social and Economic Research (ISER) study recommendations at 25 percent, which includes a "hold harmless" provision at a cost of over $24 million. The ISER study "hold harmless" provision and associated cost increases are currently funded for a single year only. 5:34:27 PM CODY RICE, Staff to Representative Carl Gatto, directed attention to Section 5 of the bill, which contained the 25 percent implementation language. Section 6 included the effective date, and Section 11 provided the repeal date of July 1, 2007. 5:34:57 PM Representative Gatto reported that a School Improvement Grant provision similar to old Learning Opportunities Grants (LOGS), would add $81 per student, which amounts to approximately $10 million in additional costs. Representative Gatto calculated the bill's total increases as $131 million, which did not include the changes proposed in the committee substitute. The Finance Committee substitute contained provisions for the public school performance incentive program, which was not part of the sponsor's original legislation. 5:35:37 PM Senator Bunde stressed that although he was aware school districts have cost differential struggles, the proposed bill represented a one-time temporary assistance grant. The one-time increment provided for in the legislation was not calculated into the BSA, and should not be considered a reduction in funding if not repeated the following year. 5:36:23 PM Co-Chair Wilken indicated he was involved in negotiations to reach a "middle ground" regarding school funding. He asserted, however, that he did not intend for his agreement to the proposed legislation to be interpreted as an indication of his recognition that the ISER study is valid. Rather, he opined, the study was not "worth the paper it is written on." Co-Chair Green realized it would be necessary the following legislative session to review the school funding formula. The current legislature had simply run out of time to fully address the issue. 5:37:42 PM Senator Stedman reiterated that the proposed legislation was a "temporary solution to an almost permanent problem." He vowed to address the issue of school funding in a more permanent fashion the following year. 5:38:03 PM Co-Chair Wilken interjected that the foundation funding formula was not broken, but actually functioning well. The complications arise from one component of the formula that does not recognize diminished class sizes. Some districts have had reduced enrollment, and the current formula does not address spreading the fixed costs of a school over a smaller student body. He recognized that aspect of the formula needs attention. Otherwise, the formula works well. The proposed bill recognizes that while funding per student is increasing, student enrollment is equal to what it was in 1999. Changes to the formula must incorporate an understanding that some districts would see increases in enrollment while others would experience declines. 5:39:24 PM Senator Stedman declared that although the funding formula may not be broken in some districts, it is definitely broken in Senate District A. 5:39:42 PM Senator Dyson was "startled at the cost" of the proposed legislation. He had received information that suggested the State may have spent the entire "surplus" of FY 06 revenues and could possibly be creating a deficit. Legislation such as this bill could exasperate the situation. 5:40:21 PM Co-Chair Green reminded that the State had $600 million in two different savings accounts and nearly $600 million in an account designated for pre-funding of K-12 education. 5:40:41 PM Senator Dyson agreed, but noted that the Committee had witnessed $300 million in "surprises" in the previous several days, and maintained his concern. 5:41:02 PM Senator Stedman recounted that the legislature had committed a substantial amount of money to an investment account for the proposed natural gas pipeline, and more into a trust for future health and energy needs. He pointed out that these actions could be considered significant savings. 5:41:34 PM Co-Chair Wilken reminded members that the anticipated revenue sharing appropriations to municipalities would provide the assemblies of organized areas that contribute financially to their local schools with a supplement. He urged members representing those areas to mobilize the education populace of their communities to claim that supplement as "education money". 5:43:04 PM Representative Gatto spoke of deductions of more than $24 million in addition to $10 million distributed through the grant provision, resulting in a base of $35 million less than what was appropriated in the current fiscal year. As the funding base would be smaller, he suggested the legislature continue the ISER funding. 5:43:55 PM Co-Chair Wilken directed attention to AS 14.11.100(p)(2)(H) amended by Section 3 of CSHB 13(RLS) am, the version passed by the House of Representatives. That section would provide for a $2 million "set-aside" for municipalities with student populations between 1,501 and 1,799 individuals. The "set-aside" was specific to the North Slope Borough, as those residents "felt slighted" or excluded from the bonding and grants that were allocated the previous legislative session. Co-Chair Wilken explained that the North Slope Borough had not been ignored, for no request for capital funding for education was made for that area. For that reason, the language granting the $2 million set- aside was deleted. AT EASE 5:46:00 PM / 5:47:13 PM 5:47:16 PM Senator Hoffman commented that the Committee had not addressed school construction funding for rural schools. He reminded members of the Kasayulie case, which found disparities in school construction funding between rural and urban districts. By failing to address the school construction issue, the problem and the lawsuit would be "exasperated". He hoped the school construction issue would be addressed in the capital budget in the House of Representatives. Were construction needs of schools in Rural Alaska not addressed, the problems revealed in the Kasayulie case would continue to escalate. 5:48:46 PM Senator Olson opposed the removal of the $2 million set-aside detailed by Co-Chair Wilken. Bond debt reimbursement is used to fund schools the borough electorate had voted to build, and may not be included in a list of identified projects compiled by the Department of Education and Early Development. He recalled schools receiving bond funding the previous year that did not appear on any "list", and requested the Department testify to the validity of the North Slope Borough's financial needs. 5:50:09 PM EDDY JEANS, Director, School Finance Division, Department of Education and Early Development, stated the he had not had an opportunity to review the request lists. He relayed that the North Slope had held a bond election in November of 2005 and approved a $2 million bond proposition for district-wide maintenance. The House of Representatives felt it appropriate to include reimbursement for the bond in this bill. 5:51:04 PM Senator Olson remarked on the existence of school districts throughout Alaska attempting to make local contributions to their schools, as the bond vote in the North Slope Borough illustrated. 5:51:28 PM Co-Chair Wilken referred to a February 28, 2006 report prepared by the Department titled School Debt Reimbursement Program [copy on file]. The report detailed the expenses of the bonding program. He overviewed the spreadsheet, which listed bond amounts through 2026, and noted a total bond amount of $825 million and interest totaling $485 million. He suggested the interest amount may indicate that "we may want to pay cash for things like that". The report also listed the numerous schools participating in the bond program, and he concluded that although it is an expensive program, it is also making the Alaska education system a "great system." 5:53:07 PM Amendment #1: This amendment adds a new bill section to amend AS 14.11.100(p)(2) by inserting new language to read as follows. (H) $2,000,000 to projects in a municipality with a public school enrollment of at least 1,501 but less than 1,800 students in fiscal year 2005, as determined under AS 14.17.500 This language is contained in CS HB 13(RLS)am. Senator Olson moved for adoption. Co-Chair Wilken objected. AT EASE 5:53:52 PM / 5:54:43 PM Co-Chair Wilken reminded that the Committee had discussed bond reimbursement in detail the previous year and had received no request from the North Slope Borough. He objected to funding requests that did not abide by the legislative committee process. 5:56:14 PM Senator Olson conceded Co-Chair Wilken had "valid points", but countered that schools which were not "on any list" the previous year received funding in the current year, as did a project rated 20th on a priority list. He recognized the process but understood that "extenuating circumstances" sometimes warranted exceptions, and appealed to the Committee to reinstate the language. 5:57:06 PM Senator Stedman shared that communities in his district were not included on the bond reimbursement list last year, and did not receive funding. He had received no advance notice to add schools to the list for "major maintenance", and asked the process for obtaining reimbursement. 5:57:56 PM Mr. Jeans explained that the proposed legislation would fund future bond action. If the bill passed the legislature, the program would be extended an additional two years under the rates of the previous year's provision. The North Slope Borough would be required to hold another bond election and re-approve the project, as the bill was not retroactive and applied only to debt incurred in the current year. 5:58:25 PM Senator Stedman discussed the Schoenbar Middle School located in the election district he represents, which is undergoing a refurbishment and, upon completion, would be required to apply for addition to the major maintenance list and for debt reimbursement. He asked how this situation compared to the issues facing the North Slope. 5:59:00 PM Mr. Jeans replied that the work underway at Schoenbar Middle School was funded using the borough's own finances. If the proposed legislation is passed, the debt reimbursement program will be re-opened October 1, 2006, at which time the city or borough of Ketchikan could choose to hold an election to approve bonding for the project. Alternatively, the project could be submitted for inclusion in the capital improvements project list, where it would be ranked and prioritized along with all other state grant requests. 5:59:54 PM Senator Stedman surmised that the process for Ketchikan to be reimbursed for their work on the Schoenbar Middle School was similar to what would be required of the North Slope Borough. 6:00:06 PM Senator Olson asked if any projects in the North Slope district would qualify for reimbursement. 6:00:16 PM Mr. Jeans presumed many maintenance projects could qualify for reimbursement, but the Borough had not submitted any to the Department for consideration. 6:00:43 PM Co-Chair Wilken clarified that the legislature does not approve the projects, it is only charged with setting the reimbursement limit according to student populations. 6:01:08 PM Mr. Jeans affirmed that the bill passed the previous year established limits on specific districts. The proposed bill did not contain any limitations, and would be available for any project that had received voter approval and for which the application process for reimbursement was completed. The Department would determine whether the project qualified for 70 percent or 60 percent reimbursement. 6:01:42 PM A roll call was taken on the motion. IN FAVOR: Senator Hoffman and Senator Olson OPPOSED: Senator Stedman, Senator Bunde, Senator Dyson, Co-Chair Wilken and Co-Chair Green The motion FAILED (2-5) The amendment FAILED to be adopted. 6:02:18 PM Mr. Jeans continued his testimony and overviewed the fiscal notes. The first fiscal note was for the debt reimbursement program, and indicated indeterminate amounts as the Department did not know the amounts districts would submit for consideration. The second fiscal note related to the Alaska Military Youth Academy, as its funding is directly tied to the BSA. The next fiscal note represented the increase to the BSA, and totaled $96 million. 6:04:09 PM Senator Stedman requested information on the amount of the increase to the BSA over the previous four years, including the current year's adjustment. He estimated the increase at 40 percent. 6:04:38 PM Co-Chair Wilken reminded that the previous year the Committee undertook an "historic" effort to address all deferred maintenance requests. While that endeavor was successful, the deferred maintenance list had once again approached $200 million in the current year. 6:05:39 PM CARL ROSE, Executive Director, Association of Alaska School Boards, testified to thank the legislature for the efforts undertaken. He was aware of schools in other areas of the country that were forced to close due to unfunded retirement liabilities and an absence of state assistance. He thanked members for their support in that regard. 6:07:32 PM Representative Gatto excused himself for a previous commitment. STEPHANIE ALLISON, Alaska Kids Count Network, and parent, thanked the legislature for their efforts to maintain adequate staffing in schools. She had followed the proposed legislation and was supportive of its intent. 6:09:58 PM Senator Bunde referenced the chart titled "Student Dollar and Student Enrollment" provided by Co-Chair Wilken [copy on file], and noted that while student enrollment had declined, the student dollar had increased "dramatically". Despite that, an informal poll taken in his district indicated the majority of participants considered school funding "adequate" or "too much". 6:10:48 PM Co-Chair Wilken offered a motion to report SCS CS HB 13, 24- LS0062\T, from Committee with individual recommendations and new fiscal notes. Without objection SCS CS HB 13 (FIN) was MOVED from Committee with five fiscal notes from the Department of Education and Early Development: $96,020,900, dated 5/4/06, for the Foundation Program component; $35 million, dated 5/4/06, for the Foundation Program component; $646,900, dated 5/4/06, for the Special Schools component; $5.8 million, dated 5/5/06, for the New School Performance Incentive Program component; and an indeterminate amount for the School Debt Reimbursement component.
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