Legislature(2019 - 2020)ADAMS ROOM 519

05/07/2019 01:30 PM House FINANCE

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Heard & Held
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 7, 2019                                                                                             
                         1:30 p.m.                                                                                              
1:30:16 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Wilson  called the House Finance  Committee meeting                                                                    
to order at 1:30 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Tammie Wilson, Co-Chair                                                                                          
Representative Jennifer Johnston, Vice-Chair                                                                                    
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
David  Scott,  Staff,  Senator Bert  Stedman;  Kris  Curtis,                                                                    
Legislative Auditor,  Alaska Division of  Legislative Audit;                                                                    
Charles   Ward,  Marine   Pilot  Coordinator,   Division  of                                                                    
Corporations,    Business   and    Professional   Licensing,                                                                    
Department of Commerce,  Community and Economic Development;                                                                    
Norm  Wooten,  Executive  Director,  Association  of  Alaska                                                                    
School Boards; Justin Parish,  Self, Juneau; Alexei Painter,                                                                    
Analyst,  Legislative   Finance  Division;   Heidi  Teshner,                                                                    
Administrative  Services Director,  Department of  Education                                                                    
and  Early Development,  Office  of  Management and  Budget;                                                                    
Michael Johnson,  Commissioner, Department of  Education and                                                                    
Early Development.                                                                                                              
PRESENT VIA TELECONFERENCE                                                                                                    
John   Conwell,   Superintendent,   Unalaska   City   School                                                                    
District,   Unalaska;  Annemarie   O'Brien,  Superintendent,                                                                    
Northwest  Arctic  Borough  School District,  Kotzebue;  Amy                                                                    
Eakin, Northwest  Arctic Borough School  District, Kotzebue;                                                                    
Christine  O'Connor,  Executive   Director,  Alaska  Telecom                                                                    
HB 75     INTERNET FOR SCHOOLS; FUNDING                                                                                         
          HB 75 was HEARD and HELD in committee for further                                                                     
SB 29     EXTEND BOARD OF MARINE PILOTS                                                                                         
          SB 29 was HEARD and HELD in committee for further                                                                     
Co-Chair Wilson reviewed the meeting agenda.                                                                                    
SENATE BILL NO. 29                                                                                                            
     "An Act extending the termination date of the Board of                                                                     
   Marine Pilots; and providing for an effective date."                                                                         
1:30:52 PM                                                                                                                    
DAVID SCOTT,  STAFF, SENATOR BERT STEDMAN,  had finished his                                                                    
presentation  during an  earlier meeting  [May 7,  2019 9:00                                                                    
KRIS  CURTIS,   LEGISLATIVE  AUDITOR,  ALASKA   DIVISION  OF                                                                    
LEGISLATIVE  AUDIT,  reviewed  the audit  findings  for  the                                                                    
Board of  Marine Pilots. The  audit recommended  the maximum                                                                    
eight-year extension.  She referenced  the audit  report [A                                                                     
Sunset Review of the Department  of Commerce, Community, and                                                                    
Economic Development, Board of  Marine Pilots (board)  April                                                                    
20, 2018  Audit Control Number 08-20112-18]  dated April 20,                                                                    
2018  (copy  on file).  She  read  sections from  the  audit                                                                    
     The audit  concludes the board is  serving the public's                                                                    
     interest  by effectively  licensing  marine pilots  and                                                                    
     deputy  marine   pilots  and  approving   trainees  and                                                                    
     apprentices.   Board   meetings   were   conducted   in                                                                    
     compliance  with  laws, investigations  were  processed                                                                    
     timely, and  the board actively changed  regulations to                                                                    
    improve the industry and better protect the public.                                                                         
Ms.  Curtis  turned to  licensing  activity  displayed on  a                                                                    
table  titled  Exhibit  2   on  page 12  of  the audit.  She                                                                    
reported that  the total  number of  licenses as  of January                                                                    
31, 2018  was 103. She moved  to a table titled  "Exhibit 4                                                                     
on page  14 of  the audit showing  the Schedule  of Revenues                                                                    
and  Expenditures,  FY  14  through   March  31,  2018.  She                                                                    
indicated that the board had  a surplus balance of over $229                                                                    
thousand. She added that the  board fees were listed on page                                                                    
Ms. Curtis continued with the  recommendations on page 15 of                                                                    
the report. She read the following:                                                                                             
     Recommendation 1:                                                                                                          
     The Board  of Marine  Pilots (board) should  ensure all                                                                    
     applicable  documents   are  aboard   foreign  pleasure                                                                    
    crafts in accordance with regulatory requirements.                                                                          
     Specifically, 12  AAC 56.115 requires an  operator of a                                                                    
     pleasure  craft applying  for a  pilotage exemption  to                                                                    
     ensure the pleasure craft has  aboard documents such as                                                                    
     nautical  charts,  current   tidal  tables,  and  other                                                                    
     guides. Auditors  found five of the  seven applications                                                                    
     indicated  that  required  documents were  not  on  the                                                                    
     According to  the MPC, the  operators can  obtain these                                                                    
     documents at  port or electronically  while at  sea. It                                                                    
     has been  standard procedure for  the board  to approve                                                                    
     the   exemptions  with   the  understanding   that  the                                                                    
     applicant will  follow through and obtain  the required                                                                    
     documents later.  The board did  not consider  the need                                                                    
     for or importance of verifying  that the documents were                                                                    
     actually  obtained.  Additionally, the  exemption  does                                                                    
     not  include a  stipulation that  the applicant  obtain                                                                    
     the   required   documents   prior  to   entering   the                                                                    
     applicable   area.  Issuing   foreign  pleasure   craft                                                                    
     exemptions  without  verifying required  documents  are                                                                    
     aboard the vessel increases the risk to public safety.                                                                     
Ms. Curtis  moved to  Recommendation 2 on  page 16  and read                                                                    
the following:                                                                                                                  
     Th e  board should ensure the  Southeast Alaska Pilots'                                                                    
     Association improves procedures for tracking drug test                                                                     
     In  a  sample  of  nine   drug  test  donors  from  the                                                                    
     Southeast Alaska  Pilots' Association, the  audit found                                                                    
     three  donors5 notified  by mail  were  not tracked  by                                                                    
     date and  recipient. Therefore,  the timeliness  of the                                                                    
     drug tests could not be confirmed.                                                                                         
     The Southeast  Alaska Pilots'  Association relied  on a                                                                    
     third party  contractor to notify selected  donors that                                                                    
     were out-of-state  or out-of-town. The  association was                                                                    
     not aware  the mail  notifications were  not adequately                                                                    
     tracked. Drug test requirements  under 46 CFR 16.230(h)                                                                    
     specify that  each marine employer shall  ensure random                                                                    
     drug tests  are unannounced. Inadequate  procedures for                                                                    
     tracking drug  test notifications limit the  ability to                                                                    
     verify timeliness  of drug tests and  increase the risk                                                                    
     to public safety.                                                                                                          
     We  recommend the  board  ensure  the Southeast  Alaska                                                                    
     Pilots'  Association improves  procedures for  tracking                                                                    
     drug test notifications.                                                                                                   
Ms. Curtis  noted that the  responses to the audit  began on                                                                    
page  25, from  both the  Department of  Commerce, Community                                                                    
and Economic Development (DCCED)  and board and relayed that                                                                    
both  agreed with  the recommendations.  She added  that the                                                                    
boards   chair at  the  time was  also  the commissioner  of                                                                    
DCCED [Mike Navarre].                                                                                                           
1:34:50 PM                                                                                                                    
Co-Chair Wilson OPENED and CLOSED public testimony.                                                                             
Co-Chair Wilson  asked to  hear from  the department  on the                                                                    
fiscal note.                                                                                                                    
CHARLES   WARD,  MARINE   PILOT  COORDINATOR,   DIVISION  OF                                                                    
CORPORATIONS,    BUSINESS   AND    PROFESSIONAL   LICENSING,                                                                    
DEPARTMENT OF COMMERCE,  COMMUNITY AND ECONOMIC DEVELOPMENT,                                                                    
was available for questions.                                                                                                    
Co-Chair Wilson  discussed a  fiscal note  attachment titled                                                                    
 Board   of  Marine   Pilots   Schedule   of  Revenues   and                                                                    
Expenditures   (copy  on  file)that   was  included  in  the                                                                    
members   packets that  contained the  boards  expenses  and                                                                    
1:36:14 PM                                                                                                                    
AT EASE                                                                                                                         
1:37:20 PM                                                                                                                    
Co-Chair Wilson noted that the  fiscal note reported the use                                                                    
of  Designated General  Funds (DGF)  only,  which meant  the                                                                    
boards expenses were paid by licensing fee receipts.                                                                            
Representative  Knopp referenced  hearing concern  expressed                                                                    
by the  marine pilots over the  size of one the  new largest                                                                    
cruise ships maneuvering in high  winds. He wondered how the                                                                    
issue was  addressed. Mr.  Ward answered  that the  topic of                                                                    
VLS (Very  Large Cruise Ships)  had been discussed  at board                                                                    
meetings for  the past year.  He relayed that the  board was                                                                    
aware  of the  navigational concerns  raised. The  Southeast                                                                    
Alaska Pilots  Association would  be piloting the  ships and                                                                    
had been  working with the  cruise agencies on how  to bring                                                                    
ships  into   ports.  The  entities  were   developing  best                                                                    
practices with the  ship captains and Coast Guard  on how to                                                                    
navigate the ships safely into  Southeast Alaska and Alaskan                                                                    
waters.  Representative  Knopp  inquired whether  the  ships                                                                    
would be allowed  to dock if any  uncertainties remained due                                                                    
to  high winds.  Mr. Ward  answered in  the affirmative.  He                                                                    
indicated  that  the  pilot and  the  ships   captain  would                                                                    
confer  on a  navigation  plan. If  conditions prohibited  a                                                                    
safe approach, a safe port would be found for docking.                                                                          
1:40:17 PM                                                                                                                    
Vice-Chair Ortiz  interjected that  there was  a recognition                                                                    
amongst  the   pilot  association  that  larger   tugs  were                                                                    
necessary to provide  service to the VLS  coming into ports.                                                                    
The larger  tugs meant  a larger  investment in  the support                                                                    
infrastructure.  The  discussions   were  ongoing  with  the                                                                    
pilots,  cruise lines,  and  local  communities. He  offered                                                                    
that  the  local  communities  had   a  vested  interest  in                                                                    
assuring that  the expensive port facilities  were protected                                                                    
in high  wind situations.  The issues  regarding VLS  were a                                                                    
significant concern.                                                                                                            
Representative Merrick  looked at  the fiscal  note analysis                                                                    
and  noted  that  total  revenue  collected  from  the  fees                                                                    
equated to  the regulatory costs.  She cited a  balance from                                                                    
the  scheduled revenues  and expenditures  of close  to $300                                                                    
thousand. She wondered whether there  was something else the                                                                    
money was  used for.  She noted that  the pilot's  fees were                                                                    
$2.5 thousand each year. She  thought that the fees were too                                                                    
high. Mr.  Ward answered  that the  board had  a significant                                                                    
fee  reduction  in  2018.  The  new  pilots   fee  was  $1.5                                                                    
thousand and agent fees were  reduced from $1 thousand to $5                                                                    
hundred  and test  and application  fees  were reduced.  The                                                                    
board and  division were  aware of  the healthy  surplus and                                                                    
was engaged in  lowering fees and using some  of the surplus                                                                    
to offset  any other board  costs that arose. He  noted that                                                                    
investigations were  costly, and the board  wanted a reserve                                                                    
to  cover the  costs in  the  event of  an investigation.  A                                                                    
costly  investigation with  a small  board membership  could                                                                    
quickly  increase  licensing  fees  and  the  reserve  would                                                                    
offset the situation.                                                                                                           
Co-Chair Wilson  asked if  the money  could be  utilized for                                                                    
anything other  than what  the board  was authorized  to do.                                                                    
Mr. Ward replied in the negative.                                                                                               
Co-Chair Wilson  set an  amendment deadline  of 9:00  am the                                                                    
following day.                                                                                                                  
SB  29  was   HEARD  and  HELD  in   committee  for  further                                                                    
HOUSE BILL NO. 75                                                                                                             
     "An Act relating to funding for Internet services for                                                                      
     school districts; and relating to the Alaska higher                                                                        
     education investment fund."                                                                                                
1:44:11 PM                                                                                                                    
Co-Chair Wilson relayed that public  testimony had been left                                                                    
open  during   the  morning  meeting.  She   relayed  public                                                                    
testimony would continue.                                                                                                       
JOHN   CONWELL,   SUPERINTENDENT,   UNALASKA   CITY   SCHOOL                                                                    
DISTRICT,  UNALASKA   (via  teleconference),   testified  in                                                                    
support  of   the  legislation.  He  relayed   stories  from                                                                    
personal  experience  regarding  technological  advances  in                                                                    
schools.  He reported  that the  schools shared  20 megabits                                                                    
(Mbps) of  bandwidth between two buildings  and 425 students                                                                    
and in  the evening,  it shifted to  the public  library for                                                                    
the  OWL (Online  With Libraries)  program.  The school  was                                                                    
able  to  offer a  distance  class  with the  University  of                                                                    
Alaska  Fairbanks  (UAF);  Writing 111.  He  indicated  that                                                                    
during the  class it was  necessary to cut the  internet off                                                                    
to the  other buildings.  The insufficient  bandwidth worked                                                                    
for the  class, but it  caused an inconvenience  for others.                                                                    
He  reported that  he  hired a  substitute  teacher for  two                                                                    
weeks  to carry  out assessment  and performance  evaluation                                                                    
tests  in pencil  and paper  due  to lack  of bandwidth.  He                                                                    
encouraged the committee to support the bill.                                                                                   
Co-Chair  Wilson asked  how much  the cost  would be  if the                                                                    
district had to  pay for the cost itself.  Mr. Conwell would                                                                    
follow  up.   He  acknowledged  that  the   district  had  a                                                                    
 scalable contract   with the provider but  needed to review                                                                    
the contract to answer the question.                                                                                            
Co-Chair Wilson thanked the testifier.                                                                                          
1:49:26 PM                                                                                                                    
ANNEMARIE O'BRIEN, SUPERINTENDENT,  NORTHWEST ARCTIC BOROUGH                                                                    
SCHOOL  DISTRICT, KOTZEBUE  (via teleconference),  testified                                                                    
in support of  the bill. She communicated  that the internet                                                                    
played  a  critical  role in  the  delivery  of  instruction                                                                    
across the school district that  included a range of over 38                                                                    
thousand square  miles with 11  schools. She  reiterated the                                                                    
importance of  the internet in  relation to  giving students                                                                    
the educational opportunities they deserved.                                                                                    
1:51:01 PM                                                                                                                    
AMY  EAKIN,   NORTHWEST  ARCTIC  BOROUGH   SCHOOL  DISTRICT,                                                                    
KOTZEBUE (via  teleconference), testified in support  of the                                                                    
bill.  She  relayed the  various  internet  speeds that  the                                                                    
districts  schools  received and noted the  bill would allow                                                                    
the remaining  12 schools to  reach 25 (Mbps).  In addition,                                                                    
some  district schools  had a  high latency  connection that                                                                    
performed  at speeds  under the  actual bandwidth  speed the                                                                    
schools  purchased.  Currently,  the  district  received  90                                                                    
percent  E-rate  funding  and no  funding  from  the  School                                                                    
Broadband Assistance  Grant (BAG)  program. The cost  to the                                                                    
district was $50 thousand each  month totaling $600 thousand                                                                    
each year  of uncovered  broadband expenses.  She delineated                                                                    
that the cost of internet  had decreased since the inception                                                                    
of  the BAG  program  and some  district  schools no  longer                                                                    
qualified  for the  program.  Some  village internet  speeds                                                                    
were very  low, which affected  testing at school  sites and                                                                    
increased the length of time it  took to carry out the test.                                                                    
The testing  disrupted class  instruction time.  She relayed                                                                    
stories  of  how  the   disruption  affected  some  district                                                                    
schools. Currently, students across  the region were able to                                                                    
take  video teleconference  classes  (Virtual School).  Only                                                                    
one  quality connection  was available  to each  school. The                                                                    
virtual  school  system  allowed access  to  pre-algebra  in                                                                    
eighth grade for  students to qualify for  the Alaska Native                                                                    
Science  and  Engineering  Program (ANSEP).  She  elucidated                                                                    
that  the  increased bandwidth  would  allow  more than  one                                                                    
concurrent virtual  class each class hour  and increased the                                                                    
educational opportunities  for the  students to  achieve the                                                                    
Alaska Performance  Scholarship. She emphasized  the benefit                                                                    
of the virtual instruction that  included a live teacher and                                                                    
cohort of  district peer students.  She elaborated  that the                                                                    
district  would  spend  $1.75   million  more  per  year  to                                                                    
increase  each school  to 25  (Mbps), which  was essentially                                                                    
unaffordable for the district.                                                                                                  
1:56:56 PM                                                                                                                    
Co-Chair  Wilson  asked  for  clarity  regarding  the  $1.75                                                                    
million.  Ms. Eakin  answered that  currently, the  district                                                                    
spent  $5.9 million  per year  on internet;  90 percent  was                                                                    
currently covered  by E-rate and the  district spent $50,000                                                                    
per month on internet. The  $1.75 million was the additional                                                                    
cost per year to increase each school to 25 Mbps.                                                                               
Co-Chair Foster  referenced Ms.  Eakin's testimony  that the                                                                    
district  could get  one quality  connection  for an  online                                                                    
class. He  wondered if one  quality connection worked  for a                                                                    
small school that only received  10 Mbps. Ms. Eakin answered                                                                    
in the affirmative.  She elucidated that the  district had a                                                                    
great number  of restrictions on  all its internet use;   it                                                                    
blocked internet use for personal  devices. One phone update                                                                    
prevented other  students from carrying out  school studies.                                                                    
Currently,  the  district  had dedicated  internet  for  one                                                                    
secure connection  that offered  a standard feed  to provide                                                                    
one virtual class per school.                                                                                                   
Co-Chair  Foster surmised  that the  district would  have to                                                                    
shut  access down  for everything  else to  provide the  one                                                                    
1:59:23 PM                                                                                                                    
Vice-Chair   Johnston  asked   if  Quintillion   [commercial                                                                    
internet  provider]  had  a  trunk   [fiber  optic  internet                                                                    
service]   into  Kotzebue.   Ms.  Eakin   answered  in   the                                                                    
affirmative.  She  detailed  that  the  service  applied  to                                                                    
Kotzebue only and was not  offered to villages. Roughly half                                                                    
of the  villages had microwave  tower access and  5 villages                                                                    
had  satellite  connections.  Vice-Chair Johnston  asked  if                                                                    
bill  passage would  allow the  district to  use the  E-rate                                                                    
funds to  increase the  Kotzebue schools to  25 Mbps  and if                                                                    
the   cost  would   be  reasonable   due  to   fiber  optics                                                                    
technology.  Ms. Eakin  responded  in  the affirmative.  She                                                                    
emphasized that  Kotzebue schools  were some of  the largest                                                                    
schools in the region.                                                                                                          
Representative  Carpenter asked  about  the bandwidth  speed                                                                    
for schools  on fiber optic  cable. Ms. Eakin  answered that                                                                    
each   Kotzebue   school   currently   received   10   Mbps.                                                                    
Representative  Carpenter noted  that  fiber  could be  much                                                                    
faster. He asked  what the limiting factors  were. Ms. Eakin                                                                    
replied that cost was the limiting factor.                                                                                      
2:01:46 PM                                                                                                                    
NORM  WOOTEN,  EXECUTIVE  DIRECTOR,  ASSOCIATION  OF  ALASKA                                                                    
SCHOOL BOARDS,  testified in support of  the legislation. He                                                                    
relayed his personal experience  of changing technology used                                                                    
in  schools. He  opined  that the  most important  education                                                                    
technology in  classrooms today was the  internet. He looked                                                                    
forward  to   releasing  students  from   the   confines  of                                                                    
textbooks  and  offer open source information.  He supported                                                                    
virtual  textbooks that  were always  updating. He  believed                                                                    
that  one  of  the  greatest inequities  in  the  state  was                                                                    
bandwidth capacity. Every district  in rural and urban areas                                                                    
experienced  bandwidth  shortages;  however, the  issue  was                                                                    
most noticeable  in rural areas. He  discussed that internet                                                                    
crashes  during  testing  was routine.  The  districts  were                                                                    
using  work  around fixes.  He  characterized the bill  as a                                                                    
 baby step,  but it was a  baby step in the right direction.                                                                    
He  was  aware that  the  desired  amount of  bandwidth  was                                                                    
unaffordable  but  with  continued legislative  support  the                                                                    
equity gap  would continue  to close. He  noted that  he had                                                                    
spent  time researching  members' questions  from the  days                                                                     
earlier meeting.  He provided answers  to the  questions. He                                                                    
discussed the three schools that  did not participate in the                                                                    
grants to  increase internet speed  from 3 Mbps to  10 Mbps.                                                                    
He         relayed          that         the         Tenakee                                                                    
Springs  School in  the Chatham  School District  was closed                                                                    
due  to insufficient  enrollment. The  district operated  an                                                                    
independent learning  center for  the 8 students  3 mornings                                                                    
each  week  via  correspondence  and  served  special  needs                                                                    
students  through speech  and  occupational therapy  online.                                                                    
The  school  was not  eligible  to  participate through  the                                                                    
grants due  to the closure.  He informed the  committee that                                                                    
the  Karluk  School  in the  Kodiak  Island  Borough  School                                                                    
District had closed  and paid for an aide to  help with home                                                                    
support for 7  students and the district was  paying for the                                                                    
internet   and  teaching   cost   out-of-pocket.  The   Port                                                                    
Alexander  School in  the Southeast  Island school  district                                                                    
did  not apply  for  the  federal e-rate  funding  due to  a                                                                    
provider  error.  The  error  had  been  corrected  and  the                                                                    
application  to   increase  the  speed  was   submitted.  He                                                                    
responded  to  the question  of  what  would happen  if  the                                                                    
federal   e-rate   funding   program  was   eliminated.   He                                                                    
ascertained that  it was highly unlikely  the federal e-rate                                                                    
funding would be abolished because  the funding did not rely                                                                    
on  a congressional  appropriation; the  program was  funded                                                                    
through the Universal Services Fund.                                                                                            
2:09:13 PM                                                                                                                    
Mr.  Wooten continued  that the  federal Universal  Services                                                                    
Fund surcharge  was assessed to  every phone bill.  The fund                                                                    
was  established   in  the  1930's   with  passage   of  the                                                                    
Telecommunications  Act and  updated in  1996. The  fund was                                                                    
originated to provide underprivileged  areas equal access to                                                                    
phone  lines.   The  update   expanded  the   definition  of                                                                    
universal services in four different  areas; one area called                                                                    
the   Schools and  Libraries  Support  Mechanism  or  E-rate                                                                    
program.  He  read  the  mechanisms   definition,   provides                                                                    
telecommunication  services which  includes  local and  long                                                                    
distance  calling  high  speed  lines  internet  access  and                                                                    
internal connections  that is the  equipment to  deliver the                                                                    
services to  eligible schools and libraries.   He offered to                                                                    
give  members   a  copy  of  the   universal  services  fund                                                                    
Co-Chair Wilson noted that the  committee had been hearing a                                                                    
significant amount  about virtual schools in  the state. She                                                                    
asked  if there  was anything  that would  prevent a  school                                                                    
district  from  using   out-of-state  virtual  schools.  Mr.                                                                    
Wooten  replied  that  no provision  existed  to  prevent  a                                                                    
district  from doing  so.  He detailed  that  more and  more                                                                    
districts in Alaska were providing virtual services.                                                                            
2:12:34 PM                                                                                                                    
CHRISTINE  O'CONNOR,  EXECUTIVE   DIRECTOR,  ALASKA  TELECOM                                                                    
ASSOCIATION (via teleconference), spoke  in support of HB 75                                                                    
that  would allow  districts to  increase broadband  speeds.                                                                    
She    revealed    that    the    association    represented                                                                    
telecommunication   providers    offering   landline,   long                                                                    
distance,  wireless, and  broadband service  to Alaska.  The                                                                    
bill would  allow schools  to better  access the  federal E-                                                                    
rate  program  and more  robust  broadband  networks in  the                                                                    
entire  community. The  schools  broadband  connection could                                                                    
be leveraged  to allow the  community library to  access it.                                                                    
The  association reviewed  the  list of  schools that  would                                                                    
benefit  from  the  legislation. She  confirmed  that  every                                                                    
school could receive the upgrade.  Some upgrades may require                                                                    
changes to remote end equipment  or other equipment specific                                                                    
to each  site, but  costs would be  low. She  reiterated the                                                                    
associations support of the bill.                                                                                               
2:14:38 PM                                                                                                                    
Co-Chair Wilson asked  that if the state  paid $100 million,                                                                    
every school could increase beyond  25 Mbps. She ascertained                                                                    
that the capacity  to provide higher speeds  existed and the                                                                    
limiting factor was cost. She  asked for the accuracy of her                                                                    
statement. Ms.  O'Connor answered the statement  was broadly                                                                    
correct.  She clarified  that some  schools would  need some                                                                    
equipment changes  and upgrades  necessary at the  cite. She                                                                    
equated the  need to changing  a router in  a home but  on a                                                                    
larger scale.  She did  not expect the  upgrade costs  to be                                                                    
major.  Co-Chair Wilson  shared that  she paid  one-third of                                                                    
what  her son  paid who  was  a heavier  internet user.  She                                                                    
asked  whether every  districts  bills  would increase  with                                                                    
the  increase to  25 Mbps.  Ms. O'Connor  answered that  she                                                                    
would not expect  that to occur. She  expounded that schools                                                                    
submitted  a  request  for   proposal  (RFP)  that  included                                                                    
competitive bidding  for the  contracts. Every  school could                                                                    
be  served by  two or  three providers;  the costs  had been                                                                    
dropping  due  to  competition.   The  bidding  process  was                                                                    
Vice-Chair  Johnston  asked for  the  status  of the  Alaska                                                                    
Plan. She believed it was a  10-year plan. She asked for the                                                                    
status. Ms.  O'Connor answered that  the plan  was currently                                                                    
in  year  three.  She elaborated  that  companies  had  been                                                                    
reporting  the locations  they  served  through an  internet                                                                    
portal. Every  company was  meeting the  goals with  7 years                                                                    
remaining. She  had queried the companies  recently and they                                                                    
had  collectively   spent  over  $270  million   in  capital                                                                    
expenditures. She  voiced that  the networks  were building.                                                                    
Vice-Chair Johnston  asked for an explanation  of the Alaska                                                                    
Plan. Ms. O'Connor replied that  the Alaska Plan was part of                                                                    
the  Universal Services  Fund. She  provided further  detail                                                                    
about the plan.  The fund was divided into  4  buckets.  She                                                                    
listed the divisions  as follows: Lifeline -  for low income                                                                    
consumers; Rural  Healthcare   for  healthcare connectivity;                                                                    
E-Rate  Program -  for schools  and  libraries; the  Connect                                                                    
America  Fund  (High  Cost  Fund)     to  help  operate  and                                                                    
construct networks in  high cost areas. The  Alaska Plan was                                                                    
part  of the  Connect America  Fund. She  detailed that  the                                                                    
Alaska Plan  was adopted in  2016 to stabilize  the funding.                                                                    
The  Federal Communications  Commission  (FCC)  in a  reform                                                                    
attempt,  disadvantaged Alaskas   providers through  funding                                                                    
cuts.  However, the  E-rate funding  was  not affected.  The                                                                    
Alaska  Plan was  currently stabilized  in cooperation  with                                                                    
the FCC.                                                                                                                        
2:20:01 PM                                                                                                                    
Representative Merrick  shared that she had  a standard cell                                                                    
phone plan.  She asked  how many megabits  that would  be if                                                                    
she used a hotspot on  her phone. Ms. O'Connor answered that                                                                    
the answer  varied by  type of  use. She  guessed that  at a                                                                    
minimum usage  level, the use was  100 Mbps and could  be as                                                                    
high  as 1  Gbps if  she was  streaming in  high definition.                                                                    
Representative Merrick  asked if  a teacher using  their own                                                                    
cell phone  to show a video  in class using a  cell hot spot                                                                    
violated terms  of use. Ms.  O'Connor answered that  she was                                                                    
2:22:00 PM                                                                                                                    
JUSTIN  PARISH, SELF,  JUNEAU, testified  in support  of the                                                                    
bill. He  supported the  bill. He  believed that  remote and                                                                    
virtual classrooms  were vital to  the future of  the state.                                                                    
He shared  his one  concern regarding the  tremendous amount                                                                    
of profiteering  on the part  of the telecom  companies like                                                                    
GCI, that tended  to wield monopolistic power  in the state.                                                                    
He commented  that there  was a good  bit of  very difficult                                                                    
negotiation on the part  of telecommunication companies that                                                                    
was often monopolistic. He relayed  that in 2017, one school                                                                    
district with 700  students spent an excess  of $230,000 per                                                                    
month, which  was approximately $300  per student.  He found                                                                    
the  costs  unconscionable.   He  suggested  that the  state                                                                    
regulate  telecommunication companies  the  same as  utility                                                                    
companies. The  telecommunication companies would  receive a                                                                    
reasonable  rate   of  return  on  investment   rather  than                                                                    
 sticking the public with the bill.                                                                                             
2:25:01 PM                                                                                                                    
Co-Chair Wilson CLOSED public testimony.                                                                                        
Co-Chair Wilson  asked to hear from  the Legislative Finance                                                                    
ALEXEI  PAINTER,  ANALYST,   LEGISLATIVE  FINANCE  DIVISION,                                                                    
spoke to the  disparity test issue. He  explained that there                                                                    
were  three sources  of funding  for  the school  foundation                                                                    
formula;  one was  federal impact  aid.  Federal Impact  aid                                                                    
amounted to $80 million to $90  million per year in aid that                                                                    
was allotted to  school districts and was  deducted from the                                                                    
states  share of  the K-12 formula. The  deduction saved the                                                                    
state  money. The  state had  to  pass a  disparity test  to                                                                    
qualify for the impact aid.  The test ensured that the state                                                                    
had  an equitable  funding formula.  He elaborated  that the                                                                    
test  demonstrated that  the difference  in funding  between                                                                    
the highest  and lowest  funded districts  in Alaska  was no                                                                    
higher than  25 percent  and was normally  somewhere between                                                                    
22 to 23  percent. The federal government  allowed the state                                                                    
to  remove  5  percent  of the  highest  and  lowest  funded                                                                    
districts  so that  outliers did  not affect  the test.  The                                                                    
number was  the reason  for the 23  percent cap  on optional                                                                    
local  effort in  the foundation  formula. The  complication                                                                    
for the  disparity test  was that  the state  received funds                                                                    
outside  of state  or  local government  -  the largest  was                                                                    
federal E-rate  funding, which was counted  in the disparity                                                                    
test, but  was not subject to  the 23 percent local  cap. He                                                                    
observed that the  test had been reshaped  with the increase                                                                    
in E-rate funding.  In the FY 18 test, the  top district was                                                                    
the  Lower  Kuskokwim,  which  was  a  Regional  Educational                                                                    
Attendance  Area  (REAA)  and had  no  local  contributions,                                                                    
which  made  it likely  the  district  would rank  so  high.                                                                    
However, the  E-rate funding floated  the school to  the top                                                                    
of the list. The bill  would further increase federal E-rate                                                                    
funding to the Lower  Kuskokwim among other districts. Since                                                                    
the   money  did   not  flow   equally  to   all  districts,                                                                    
disproportionately   providing   more   funding   to   Lower                                                                    
Kuskokwim  would   likely  cause  the  state   to  fail  the                                                                    
disparity    test.   He    relayed    that   the    district                                                                    
superintendents   testimony  that   stated  Lower  Kuskokwim                                                                    
received $28  million in E-rate  funding and  the districts                                                                     
total subject to the cap  was approximately $108 million. He                                                                    
furthered  that if  the bill  caused the  districts  funding                                                                    
to double  the state  would test at  a 40  percent disparity                                                                    
versus  the  25 percent.  The  Department  of Education  and                                                                    
Early  Development (DEED)  had requested  that the  state be                                                                    
allowed  to disregard  the federal  disparity test  to avoid                                                                    
the failure. The  department was waiting for  an answer from                                                                    
the  federal government.  A  contingent  effective date  had                                                                    
been added  to the Senate  version of the bill,  meaning the                                                                    
bill would  only become effective if  the federal government                                                                    
allowed the  state to waive  the disparity test.  The waiver                                                                    
would resolve  any complications  from the bill.  He offered                                                                    
that the  waiver was  the way the  Senate had  addressed the                                                                    
2:30:04 PM                                                                                                                    
Representative  Josephson  asked   whether  there  were  any                                                                    
regulations granting  an exemption  from the  E-rate similar                                                                    
to the  Medicaid waiver  program or if  DEED made  a special                                                                    
request.  Mr.  Painter  answered  that  the  department  may                                                                    
better  address   the  question.  He  understood   that  the                                                                    
disparity test regulations allowed  for some flexibility due                                                                    
to local circumstances but were not specific.                                                                                   
HEIDI TESHNER, ADMINISTRATIVE  SERVICES DIRECTOR, DEPARTMENT                                                                    
OF  EDUCATION AND  EARLY DEVELOPMENT,  OFFICE OF  MANAGEMENT                                                                    
AND  BUDGET, replied  that  the request  was  not a  special                                                                    
waiver. The  E-rate was included  in the definition  of what                                                                    
was  considered  a  current   expenditure  as  part  of  the                                                                    
disparity  test  regulations,   which  allowed  the  federal                                                                    
Department  of   Education  to  determine  whether   not  to                                                                    
consider E-rate  as part of  the definition.  The definition                                                                    
included  excludable items.  She  noted that  she failed  to                                                                    
bring the  list of  items and  could provide  the definition                                                                    
later. The  request was clarifying the  definition to ensure                                                                    
the E-rate did  not fit the definition of  what was included                                                                    
in the disparity test.                                                                                                          
Representative  LeBon cited  the document  titled  2017-2018                                                                    
School Year  School District Bandwidth  Counts less  than 25                                                                    
Mbps  (copy on  file) included in the  members  bill backup.                                                                    
He  noted  that the  Juneau,  Mat-Su,  and Fairbanks  School                                                                    
Districts were  not included  in the  list. He  assumed that                                                                    
the  districts  were  at  the 25  Mbps  level.  Ms.  Teshner                                                                    
answered  in the  affirmative.  Representative LeBon  voiced                                                                    
that the  schools still maintained internet  expenses and he                                                                    
guessed the  districts were paying  for the  internet within                                                                    
their own  funding mechanisms  that included  federal, state                                                                    
and local  dollars. Ms. Teshner replied  in the affirmative.                                                                    
Representative LeBon  wondered that  if all  districts could                                                                    
tap the  BAG program, it  would come  at the expense  of the                                                                    
rural school  districts listed in  the document.  He deduced                                                                    
that  what made  the  bill important  was  the rural  versus                                                                    
urban  element.  Ms. Teshner deferred  to her colleagues for                                                                    
an answer.                                                                                                                      
Representative LeBon  repeated his  question and  added that                                                                    
he  viewed the  programs  goal  as bringing  internet parity                                                                    
between rural and urban school districts.                                                                                       
MICHAEL JOHNSON,  COMMISSIONER, DEPARTMENT OF  EDUCATION AND                                                                    
EARLY  DEVELOPMENT,  replied  that  he believed  it  was  an                                                                    
accurate assessment. He explained  that many urban districts                                                                    
had  access to  higher  speed internet  that  was much  less                                                                    
expensive  than the  cost in  rural communities.  He thought                                                                    
that  the program  acknowledged the  fact that  the cost  of                                                                    
internet  for rural  school districts  was much  higher than                                                                    
urban districts, even at the 25 Mbps limit.                                                                                     
Co-Chair Wilson  noted that part of  the committee's concern                                                                    
was considering the  cost for the upgrade up to  25 mbps and                                                                    
the  cost to  school districts.  Commissioner Johnson  asked                                                                    
for clarification.  Co-Chair Wilson  did not  understand who                                                                    
was chosen  first. She assumed  that a district had  to have                                                                    
funds  to  pay  their  portion. She  wanted  to  ensure  the                                                                    
districts  were not  increasing  class size  to obtain  more                                                                    
internet.   Commissioner    Johnson   answered    that   the                                                                    
application process  included information  regarding whether                                                                    
the district  could afford the  increase. He  disclosed that                                                                    
if the  district could not  pay, they lost their  ability to                                                                    
apply for the program.                                                                                                          
Co-Chair  Wilson  queried  about   the  legality  of  school                                                                    
districts  using an  out-of-state  virtual  school for  K-12                                                                    
2:38:40 PM                                                                                                                    
Commissioner  Johnson  answered  that there  were  currently                                                                    
many students in  the state taking courses  from vendors who                                                                    
provided the  courses from outside  the state.  The district                                                                    
was able to  utilize the vendors and ask  a district teacher                                                                    
to support  the students  using them. The  courses available                                                                    
were regular  and AP (advanced placement).  He reported that                                                                    
some  of the  companies spent  $500 thousand  developing the                                                                    
courses and  they were  very rigorous.  He added  that there                                                                    
was a growing field of  Career and Technical Education (CTE)                                                                    
classes     available.     Co-Chair    Wilson     referenced                                                                    
paraprofessionals  in  a  classroom.  She  asked  whether  a                                                                    
course  could currently  be taught  using a  virtual teacher                                                                    
with  only  a paraprofessional  in  a  classroom, or  if  it                                                                    
violated state  statute or regulation.  Commissioner Johnson                                                                    
answered that he  was reluctant to say there  would never be                                                                    
issues.  He affirmed  that there  was an  opportunity to  do                                                                    
what  Co-Chair Wilson  described at  present. A  teacher was                                                                    
required based  on current statute. However,  he exemplified                                                                    
that  in  small  school  districts, if  a  small  number  of                                                                    
students  had conflicts  with the  sole  English class,  the                                                                    
students  could  take  a virtual  class  with  the  school's                                                                    
English teacher as the teacher  of record. He indicated that                                                                    
the department was considering how  to modernize the teacher                                                                    
of record  concept to extend  the benefit of  great teaching                                                                    
to  many students.  Co-Chair Wilson  clarified that  she was                                                                    
not  talking about  replacing teachers.  She understood  the                                                                    
difficulties  and issues  in  small  schools with  accessing                                                                    
classes.  She  relayed  personal experience  observing  non-                                                                    
village teachers  traveling home for the  holidays or summer                                                                    
and  not   having  buy-in  in   the  community   versus  the                                                                    
paraprofessionals who  remained in  the community  and could                                                                    
provide additional  educational access to the  students. She                                                                    
considered that the issue was access.                                                                                           
2:42:38 PM                                                                                                                    
Commissioner  Johnson shared  that  technology could  extend                                                                    
the benefit  of a great  teacher to more and  more students.                                                                    
He  believed   that  the  discussion  centered   on  teacher                                                                    
quality. He  relayed a  story regarding a  friend who  was a                                                                    
pilot  for Alaska  Airlines who  had communicated  that they                                                                    
could land a plane in Juneau  in weather they could not land                                                                    
in  20  years  earlier.  He  declared that  it  was  due  to                                                                    
increased  technology, but  that navigational  aide did  not                                                                    
replace the  need for pilots.  He reiterated  that increased                                                                    
bandwidth  thereby   increasing  technology   enhanced  good                                                                    
teaching but in no way replaced the teacher.                                                                                    
Vice-Chair   Johnston   spoke    to   technology   enhancing                                                                    
cooperation among  districts. She  shared that  her favorite                                                                    
subject was something that  Commissioner Johnson had started                                                                    
in his prior district that  enable a great teacher to expand                                                                    
his network through  technology. Commissioner Johnson shared                                                                    
that  there  were some  amazing  examples  in the  state  of                                                                    
extending great  teaching to more and  more students through                                                                    
technology.  He  noted  that  Ketchikan  and  the  Northwest                                                                    
Arctic School District were examples.  He spoke of a teacher                                                                    
in Kotzebue  that taught students  all around  the district.                                                                    
Extending  the  benefit  of  a  great  teacher  to  as  many                                                                    
students as possible was now  available. He noted that there                                                                    
were some other great examples.  He cited Seward High School                                                                    
that was full of  teachers providing instruction to students                                                                    
that may  or may not be  in the facility when  the class was                                                                    
2:46:11 PM                                                                                                                    
Vice-Chair   Ortiz  offered   that  the   developments  were                                                                    
positive  and should  be applauded.  He inquired  whether as                                                                    
the  state moved  towards the  opportunities  if there  were                                                                    
concerns  about cost  sharing among  districts. Commissioner                                                                    
Johnson  answered  that  the   question  had  arisen  around                                                                    
athletics.  He believed  that athletics  played a  wonderful                                                                    
role in  student life, but  often the coaches  were teachers                                                                    
and the  coach travelled with  the team making  a substitute                                                                    
necessary. He considered whether  the instruction was of the                                                                    
same quality. The  coach was taking time to  serve a limited                                                                    
number of  students and he  considered whether it  took time                                                                    
away  from  his classroom  students.  He  believed that  the                                                                    
question  was  important  and  not limited  to  the  use  of                                                                    
technology. Vice-Chair Ortiz commented  that the example was                                                                    
a bit  different since  the coach  was coaching  students in                                                                    
his district and not outside the district.                                                                                      
2:48:49 PM                                                                                                                    
Vice-Chair  Johnston spoke  to cost  sharing between  school                                                                    
districts.  She pointed  out  that  Anchorage was  currently                                                                    
cost sharing with  the Lower Kuskokwim and  Copper River was                                                                    
sharing with  Chugach. She  asked for  details. Commissioner                                                                    
Johnson clarified  that he  was not  suggesting the  need to                                                                    
open the foundation formula. He  stated that the application                                                                    
of  the formula  needed to  be reviewed.  He explained  that                                                                    
extending the benefit of great  teachers served students. He                                                                    
specified  that  if  the  way   the  state  applied  funding                                                                    
hindered a student from receiving  great teaching, it needed                                                                    
to be  addressed. He did  not want to penalize  any district                                                                    
for teaching across districts.                                                                                                  
Co-Chair  Wilson  clarified  that the  discussion  regarding                                                                    
the  education   formula  was   appropriate.  She   posed  a                                                                    
hypothetical scenario  where a teacher in  North Pole wanted                                                                    
to help  another district offer  trigonometry. She  asked if                                                                    
there  was  a  problem  for the  other  school  district  to                                                                    
reimburse the Fairbanks North  Star Borough School District.                                                                    
Commissioner   Johnson  answered   that  the   scenario  was                                                                    
possible. He communicated that  school districts could enter                                                                    
an agreement  and reimburse  one another  similar to  when a                                                                    
district had  a contract with  a vendor and paid  the vendor                                                                    
for  courses. He  delineated that  another approach  was for                                                                    
one  district school  to  enroll  the student  three-quarter                                                                    
time  and the  other district  school would  receive funding                                                                    
for one-quarter  time. He noted  that the scenario  was more                                                                    
common for high school but  could be done for elementary and                                                                    
middle  school.   He  deduced   that  there  may   be  other                                                                    
approaches to make the process easier and less complicated                                                                      
2:53:13 PM                                                                                                                    
Representative Carpenter considered the  $7 million per year                                                                    
fiscal note [FN1 EED]. He pointed  to the second page of the                                                                    
fiscal note analysis  that was based on  estimates. He asked                                                                    
if  Commissioner   Johnson  could  poll  his   districts  to                                                                    
determine what it  would cost to get to 25  mbps. He assumed                                                                    
that  the numbers  varied and  wondered  whether the  actual                                                                    
costs  were available.  Commissioner  Johnson  was sure  the                                                                    
information   existed  somewhere   and  was   part  of   the                                                                    
application process.  The department did not  currently have                                                                    
the  data  but  would  ask  the  school  districts  for  the                                                                    
numbers.  Representative  Carpenter   thought  it  would  be                                                                    
helpful to  know the  costs for  each district  to determine                                                                    
whether  the legislature  was approaching  the issue  in the                                                                    
right way.                                                                                                                      
Co-Chair  Wilson  wondered about  the  $7  million per  year                                                                    
cost. She thought that the  money would bring the schools up                                                                    
to 25  Mbps and  wondered why it  would be  needed annually.                                                                    
She thanked  the commissioner  for his  time. She  wanted to                                                                    
ensure  districts would  have  the ability  to  pay for  the                                                                    
HB 75 was HEARD and HELD in committee for further                                                                               
Co-Chair Wilson reviewed the schedule for the following                                                                         
2:56:51 PM                                                                                                                    
The meeting was adjourned at 2:56 p.m.                                                                                          

Document Name Date/Time Subjects
HB 75 E-Rate Consumer Guide FCC.pdf HFIN 5/7/2019 1:30:00 PM
HB 75
HB 75 School Bag Admin Code.pdf HFIN 5/7/2019 1:30:00 PM
HB 75
HB 75 Supporting Doc Broadband Networks map.pdf HFIN 5/7/2019 1:30:00 PM
HB 75
HB 75 YKSD Support letter.pdf HFIN 5/7/2019 1:30:00 PM
HB 75