Legislature(2023 - 2024)ADAMS 519
03/17/2023 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: School Bond Debt Reimbursement and Regional Educational Attendance Area | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 17, 2023
1:32 p.m.
1:32:29 PM
CALL TO ORDER
Co-Chair Johnson called the House Finance Committee meeting
to order at 1:32 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative DeLena Johnson, Co-Chair
Representative Julie Coulombe
Representative Mike Cronk
Representative Alyse Galvin
Representative Sara Hannan
Representative Andy Josephson
Representative Dan Ortiz
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
Representative Bryce Edgmon, Co-Chair
ALSO PRESENT
Heidi Teshner, Acting Commissioner, Department of Education
and Early Development; Joe Willhoite, Facilities Manager,
Department of Education and Early Development; Elwin
Blackwell, School Finance Manager, Department of Education
and Early Development; Lori Weed, School Finance
Specialist, Department of Education and Early Development.
SUMMARY
PRESENTATION: SCHOOL BOND DEBT REIMBURSEMENT AND REGIONAL
EDUCATIONAL ATTENDANCE AREA
Co-Chair Johnson reviewed the meeting agenda.
^PRESENTATION: SCHOOL BOND DEBT REIMBURSEMENT AND REGIONAL
EDUCATIONAL ATTENDANCE AREA
1:33:51 PM
HEIDI TESHNER, ACTING COMMISSIONER, DEPARTMENT OF EDUCATION
AND EARLY DEVELOPMENT, introduced the PowerPoint
presentation "State-Aid for School Capital Projects: Grant
and Debt," dated March 17, 2023 (copy on file). She began
on slide 2 and briefly detailed the mission of Department
of Education and Early Development (DEED). She quickly
advanced to slide 3 and summarized the department's five
main priorities for education in Alaska, referred to as
Alaska's Education Challenge. She explained that the
majority of the work done by the department was rooted in
one or more of the five priorities. The presentation would
focus specifically on priority five, which was to improve
the safety and well-being of students through school
partnerships with families, communities, and tribes.
Co-Chair Johnson asked Ms. Teshner to slow down.
Ms. Teshner continued on slide 3 and reiterated that the
priorities guided the work done by the department. She
advanced to slide 4 which was a historic look at the
capital funding for schools. The funding types included
federal funding, state funding mechanisms for bonds,
grants, and debt reimbursement, and the Local Education
Agency (LEA). She stated added that LEA sourced funding
through capital reserves to help fund deferred maintenance
needs on school facilities. She turned the presentation
over to her colleague.
1:36:52 PM
JOE WILLHOITE, FACILITIES MANAGER, DEPARTMENT OF EDUCATION
AND EARLY DEVELOPMENT, continued the presentation on slide
5. He explained that the annual report, referred to as SB
237 (copy on file), detailing school construction and major
maintenance funding was released in February of each year.
The report from February of 2023 revealed $1.5 billion in
funding, which included the total project value for debt
projects and state grant projects.
Mr. Willhoite advanced to slide 6. The current funding
options were as follows: the School Construction Grant Fund
(SCGF), the Major Maintenance Grant Fund (MMGF), the
Regional Education Attendance Area (REAA), the Small
Municipal School District Fund (SMSDF), and school debt
reimbursement (DR) funding. The first three options fell
under his purview.
Co-Chair Johnson asked if Mr. Willhoite could explain the
terms in more detail, particularly REAA.
Mr. Willhoite responded that REAA applied to all school
districts in unorganized boroughs that were not able to
fund projects through the municipal government. For
example, unorganized boroughs were not able to use bonding
as a funding strategy. The only means through which
unorganized boroughs could receive funding was REAA.
Co-Chair Johnson commented that she had heard that
unorganized boroughs were governed directly by the state
legislature. She asked if Mr. Willhoite could explain the
relationship between unorganized boroughs, REAA, and the
legislature.
Mr. Willhoite deferred the question to his colleague.
1:40:41 PM
ELWIN BLACKWELL, SCHOOL FINANCE MANAGER, DEPARTMENT OF
EDUCATION AND EARLY DEVELOPMENT, responded that prior to
1975, the unorganized areas of the state were all
considered to be under one unorganized borough. The
legislature had authority over the unorganized borough and
it was referred to as a state operated school system. The
school system was considered to be one large school and was
administered as such. In 1975, a bill was passed that
authorized DEED and the Department of Commerce, Community,
and Economic Development (DCCED) to coordinate the division
of the unorganized borough into smaller regional areas. The
regulations behind the change were found in AS 14.08. There
were two more REAAS that were formed after 1985 that
combined five smaller communities: three communities formed
one REAA, one community formed another REAA, and the final
community decided to join an existing REAA.
Co-Chair Johnson asked if there was one school board for
multiple REAAs.
Mr. Blackwell responded that the REAAs had their own school
boards and members were elected to the boards every few
years. Every ten years, after the release of new census
data, the department was responsible for working with DCCED
to do any necessary reapportioning of REAA school board
seats.
Co-Chair Johnson explained that she asked the question in
order to highlight the topic.
Representative Hannan asked if the data that the department
was providing in the presentation and the information in SB
237 was based on projects that had already been funded. She
assumed that the report was based on a particular fiscal
window but that it did not include any major maintenance
projects.
Ms. Teshner responded that the SB 237 report (copy on file)
encompassed what was included on a district's capital
improvement plan (CIP) and not all of the projects were not
funded by the legislature. It encompassed what had already
been funded in addition to the requests that had been made
ever since the development of the report. For instance, the
table on page 6 of the SB 237 report showed that for FY 11,
the total eligible state share across 35 projects was $411
million.
Representative Hannan thought there was a printing error as
she did not have the relevant page of the report.
1:45:36 PM
AT-EASE
1:49:49 PM
RECONVENED
Co-Chair Johnson commented that the committee would return
to the question when it received the corrected version of
the report.
Mr. Willhoite reviewed slide 6 and quickly advanced to
slide 7. The slide listed some measures used by the
department to determine the CIP eligibility and showed how
school construction and major maintenance project fit
within each eligibility category. He explained that school
construction referred to projects that would be adding
square footage and major maintenance referred to projects
that renovated or repaired an existing structure. He
emphasized that major maintenance was not preventative
maintenance.
Co-Chair Johnson commented that the corrected version of
the report was now available and asked Ms. Teshner to
respond to Representative Hannan's earlier question.
Ms. Teshner noted that table 4 on page 6 of the report
displayed 35 construction projects in 2011 for a total of
$411 million. Three of the projects were funded for a total
of $128.5 million. The table showed both the funding
request and the actual appropriation approved by the
legislature.
Representative Hannan asked for more information on the
total number of projects listed for each school district on
table 3 on page 5. She asked if the number of projects was
a cumulative figure.
Ms. Teshner responded that it was a cumulative report. It
showed the latest data on how many projects had been funded
from 2011 through 2023. The report illustrated the number
of projects requested by each district and how much funding
each district actually received.
Representative Ortiz asked whether all of the projects [in
table 3] fell under the category of major maintenance.
Ms. Teshner responded in the affirmative.
1:54:59 PM
Representative Hannan asked for confirmation that the
Alaska Gateway district had only ever asked for funding for
one project and had received zero dollars in funding.
Ms. Teshner responded that not all districts applied to be
on the CIP list. The table only included districts that had
actually applied to be on the list and received funding.
She explained that Alaska Gateway had one major maintenance
project that was funded, but there was an endnote that she
would find to offer more information.
Representative Hannan commented that the $0 figure was
throwing her off.
Ms. Teshner responded that according to the endnote the
funding was showing as $0 because the funding was
reappropriated.
1:56:41 PM
Mr. Blackwell moved to slide 8, which was a matrix that
showed the way in which the funding applied to the
different project types and different entity types. He
noted that the CIP applications fell under the first two
columns: REAA fund and school construction/major
maintenance fund.
Mr. Blackwell continued on slide 9 and detailed the CIP
eligibility. He explained that the requirements were
intended to act as filters to ensure that districts had the
appropriate documentation prior to filling out a CIP
application. The requirements were as follows: a six-year
capital improvement plan, a functioning fixed asset
inventory system (FAIS), proof of required property
insurance, a certified preventive maintenance and facility
management program, identified capital projects, and
participating shares. If a school or district was not
performing well, it could be placed on a provisional list
which would still allow it to present its CIP application
in the hope that it would be able to come off the
provisional list.
Mr. Blackwell advanced to slide 10 and detailed grant
participation and eligibility. The CIP application was due
annually on September 1 and the application materials were
posted on the department's website. The department would
review the applications after it had filtered the
applications through the requirements on slide 9. The
department would then craft a project ranking, which was in
accordance with criteria in AS 14.11 and 4 AAC [Alaska
Admin Code] 31. The projects were eventually passed along
to the legislature for approval. The initial CIP priority
lists were released annually on November 5 and final lists
were released after appeals for reconsideration were
finalized. There were nine different divisions in the CIP
ranking and 54 different questions in the application
process. The list would be reviewed by three separate
rankers and then consolidated.
2:02:04 PM
Representative Galvin asked to return to slide 9. She
understood that for a project to be eligible for the CIP
list, it would need to have a certified preventative
maintenance and facility management program. She asked how
the program would look for the REAA districts.
Mr. Blackwell responded that it was incumbent upon each
district to provide funds for maintenance. The smaller
districts usually also had smaller schools; therefore, the
costs were smaller as well. Schools would have to document
their maintenance plans, procedures, and the previous
projects that had been completed.
Representative Ortiz asked if the major maintenance grant
fund would be discussed during the presentation.
Ms. Teshner responded that she would address it later in
the presentation.
Representative Coulombe asked for the definition of "BRGR."
Ms. Teshner responded that BRGR was the bond reimbursement
grant review.
Representative Coulombe asked if the nine divisions within
the CIP helped the department prioritize the projects.
Mr. Blackwell responded that prioritization was part of the
standard format for the CIP application. The divisions
acted as filters to ensure that a project was eligible.
Every applicant had to adhere to the same format and
application process which allowed for the most objective
process possible.
Representative Coulombe asked for an explanation of the
process of an appeal for reconsideration.
Mr. Blackwell responded that the reconsideration hearings
were a formal way for the districts to contest a score or
request that an element of the application be reconsidered.
There were usually some requests for reconsideration every
year. The department tried to be as fair as it could in
regard to each application and reconsiderations. If a
compromise could not be reached, a district could still
enter into the appeals process, which was primarily handled
by attorneys. The situation was rare because the process
was considered to be fair.
2:07:26 PM
Representative Cronk asked how much it would cost each
district to go through the CIP application process. He
understood that it was quite costly.
Mr. Blackwell responded that there was no application fee.
There were some requirements such as schematic construction
drawings and cost estimates would require the districts to
supply a certain amount of money; however, he was confident
that the districts would have to pay for these items even
if they were not applying for CIP but were developing the
projects on their own. The department simply required the
plans upfront which could make it appear more costly.
Mr. Blackwell moved to slide 11 and detailed grant
participation and eligibility from FY 14 through FY 24. It
showed the total CIP grant applications broken down by
major maintenance, school construction, and ineligible
projects. The vast majority of applications were for major
maintenance projects.
Mr. Blackwell advanced to slide 12 which described the
grant awards from FY 14 through FY 23.
Representative Galvin asked why an application might be
considered ineligible, as seen on slide 11.
Ms. Teshner responded that of the four projects that were
deemed ineligible in FY 24, the associated district had
submitted an application but the application was not
identified within the district's six-year plan. Another
example might be that a district did not follow the proper
procurement requirements for construction projects.
Representative Galvin understood that there was no common
theme related to ineligible projects.
Ms. Teshner responded in the affirmative.
Mr. Blackwell continued on slide 13 and detailed the total
eligible grant projects and actual grant funding by fiscal
year. It showed the number of projects that were put
forward and the number of projects that were actually
funded as well as the amount funded.
2:12:57 PM
Representative Ortiz noted that there were 21 major
maintenance projects funded in FY 23 [totaling $47
million]. He thought that the legislature appropriated
funds for the entire list of requested projects but the
governor had vetoed some of the projects. He asked if his
understanding was correct.
Ms. Teshner responded that the legislature did not fund the
full list. She moved to slide 14 to continue responding to
the question. The appropriated amount for FY 22 plus the
supplementals was $101 million inclusive of additional
supplemental money and major maintenance money. The
additional funds were intended for the REAA fund and helped
fund the $47 million in FY 23.
Representative Ortiz asked for confirmation that the full
list of requested projects was not appropriated for FY 23.
Ms. Teshner responded that the final appropriation in the
final budget did not fund the entire list of projects.
Mr. Willhoite advanced to slide 14 which showed the
appropriation amount into the REAA and small municipal
school district fund for each year since 2013. He moved to
slide 15 which detailed the allocations amounts by project
from the REAA and small municipal school district fund
since FY 14.
Mr. Willhoite advanced to slide 16. He clarified that when
projects were divided between school construction and major
maintenance, the first determination was deciding whether
it was a disaster or emergency project. If it was an
emergency, the project was still considered too important
to be considered in the CIP ranking or application review
process due to the urgent nature of the project.
Representative Josephson noted that he taught in an REAA
high school until 1994 and in 1995, a fire destroyed the
high school. He asked if the project to fix the school
would have moved to the top of the list as it would have
been an emergency or disaster project.
Mr. Willhoite responded in the affirmative.
2:17:45 PM
Mr. Blackwell added that in the scenario mentioned by
Representative Josephson, the school would have had to have
had replacement cost insurance which would have covered the
cost of the structure. He could only imagine the project
ending up on the CIP prioritization list if there was a
significant shortfall in funding in the insurance proceeds.
He understood that insurance had covered the cost of
reconstruction when schools burned down in rural Alaska.
Mr. Willhoite added that was the reason for the filter for
eligibility related to insurance.
Representative Cronk commented that he had experience where
he had to tear down a building and rebuild it using
reusable pieces of the old building. He thought reusing the
old pieces cost twice as much as it would have to simply
build a new building. He asked if engineering contractors
had a responsibility to ensure the safety and efficiency of
a building.
Mr. Willhoite responded that there should be a value
analysis on whether a project was viable. He would have to
return to the committee with a complete answer. He was not
sure if he should speak to liability and responsibility on
the record but would be happy to speak to Representative
Cronk privately.
Co-Chair Johnson suggested going through the debt
reimbursement portion of the presentation before taking
more questions.
2:22:16 PM
Mr. Blackwell continued the presentation on slide 16 which
detailed the establishment of the debt reimbursement
program, established in AS 14.11.100. The CIP debt
application could be received at any time during which the
debt reimbursement program was open. He explained that the
debt application was the same as the standard CIP
application and there was no priority list associated with
debt because it could be approved at any time. Any
municipality that had bonding authority could participate
in the debt reimbursement program. To be eligible,
districts must have developed a six-year plan, a fixed
asset inventory system, adequate property loss insurance,
and a preventive maintenance and facility management
program certified by the department.
Mr. Blackwell advanced to slide 17 which displayed a
breakdown of the debt reimbursement trends over time. When
the program began in 1971, it was reimbursing projects at
100 percent. In 2015, SB 64 implemented a moratorium and HB
106 in 2020 extended the moratorium through FY 25. When the
moratorium ended, the reimbursement rates would be at 50
percent if a district qualified for major maintenance and
40 percent if it did not.
Mr. Blackwell moved quickly through slide 18 which offered
project values by percent reimbursement. He continued on
slide 19 and the state share of outstanding debt projected
from FY 24 to FY 42. The yellow bar on the chart
represented the principal and the blue represented the
outstanding interest. The line running through the chart
showed the state's portion of the reimbursement.
Mr. Blackwell advanced to slide 20 which detailed debt
reimbursement trends from 1976 through projections for FY
24. The information was also available in Handout 3 and
Handout 4 (copies on file). There had been many years where
the debt reimbursement program was fully funded and a few
years during which the program was underfunded. He noted
that FY 17, FY 21, and FY 22 were all underfunded; however,
due to the appropriation in 2022, the municipalities were
reimbursed up to 100 percent of what they were intended to
have received in the underfunded years. The department
anticipated full reimbursement for FY 23 and FY 24, but the
numbers were currently still projections.
Mr. Blackwell advanced to slide 21 which gave an overview
of the two types of bonds within the debt proceeds and
refunding process. The first type was initial bonds, which
were bonds that were sold and the spending had been
approved by voters. If the municipality decided to include
other types of projects into the bond issuance, the school
portion of the bond would be isolated and the bond would be
prorated with a different reimbursement rate. The second
type was refunding bonds. There were instances after the
initial bond issue wherein the municipality could reissue a
new bond and save on the initial interest rate. In order to
be eligible, there must have been an annual savings between
the refunding and the initial bond.
2:30:55 PM
Representative Galvin asked about federal American Rescue
Plan Act (ARPA) money. She understood that the funds could
be used for construction work but wondered if any of the
funds were used for major maintenance and health and safety
purposes.
Ms. Teshner responded that there were some districts that
used ARPA funds for construction and major maintenance
projects. She did not have the data with her but could
provide it at a later date.
Representative Galvin asked if any funds were used to
backfill some of the work that had been completed
previously in 2019 and 2020.
Ms. Teshner responded that the federal funds were not used
to backfill previous projects because the funds were
intended to address needs that came about due to the COVID-
19 pandemic.
Representative Hannan understood that the school bond debt
reimbursement share was 50 percent; however, her
understanding did not match the information on the chart on
slide 17. Due to the moratorium, there was a gap in debt
reimbursement from FY 25 through present day. She asked if
the school bond debt reimbursement share in FY 19 through
FY 22 was 70 percent or 50 percent.
Mr. Blackwell responded that if the bonds were approved by
the voters before the moratorium and were then issued, then
the bonds as sold would be reimbursed at either 70 percent
or 60 percent. The reimbursement percentage would remain
the same until the bond was paid off. The program was
currently closed and no new projects could be approved.
Once the program opened again the new reimbursement rates
would be applicable.
Representative Hannan commented that it had always been
described to her that the share was 50 percent. She noted
that she might have been confused.
2:35:00 PM
Representative Stapp asked about the catastrophic loss of
the school in Kaktovik due to a fire in 2020. He thought
the insurance claim was about $20 million, which was not
close to the replacement value of the school. He asked if
Mr. Blackwell could speak to the situation.
Co-Chair Johnson suggested that the committee finish the
presentation before addressing Representative Stapp's
question.
Ms. Teshner continued on slide 22. She highlighted that all
REAAs had a 2 percent participating share and small
municipalities were categorized between 10 and 20 percent.
Under school construction and major maintenance grant
funds, the participating share ranged from 2 percent to 35
percent.
Ms. Teshner moved to slide 23 which included links to other
resources and DEED's website. She concluded the
presentation.
Co-Chair Johnson suggested Representative Stapp ask his
earlier question again.
Representative Stapp offered to ask his question again if
necessary.
Mr. Willhoite responded that one of the requirements for a
project to be eligible for the CIP process was insurance.
Although it was required, the district's insurance policy
was not necessarily scrutinized by the DEED. He thought it
was the responsibility of the district to be educated on
its own insurance policy. The districts would not always
insure the entire value of the school.
Representative Stapp commented that he normally would agree
that DEED should not get involved; however, he thought it
was in the best interest of the state to guarantee that the
school districts were fully insured.
Ms. Teshner agreed and suggested that the department make
the change.
2:39:19 PM
Representative Coulombe read from slide 16: Districts must
have a six-year plan, a fixed asset inventory system,
adequate property loss insurance, and a preventive
maintenance and facility management program certified by
the department. She thought that the requirements would be
cumbersome for some of the rural districts. She asked if
DEED helped smaller districts in the preparation process.
Ms. Teshner responded that slide 16 was focused only on the
debt program. She explained that REAAs did not have bonding
authority and did not qualify for the debt program. The
smaller districts could utilize the Southeast Regional
Research Center (SERRC) with their applications. The
facilities manager would travel to rural areas and help
districts in person.
Representative Coulombe commented that Mr. Blackwell had
used the term "underfunded" when explaining debt
reimbursement trends on slide 20. She asked for a
definition of the term.
Mr. Blackwell responded that underfunded meant that funding
was lower than 100 percent. If the department had put forth
a budget request for $100 million and the appropriation was
only $90 million, some programs would need to be prorated.
Representative Ortiz asked if all of the funding came
through the capital budget.
Ms. Teshner responded that school construction, major
maintenance, and the REAA fund were all considered CIPs.
The debt program was funded through the operating fund and
the REAA fund was capitalized through the operating fund.
Representative Ortiz asked what the current proposed
funding level was for the major maintenance grant fund.
Ms. Teshner replied that it was about $32 million. However,
there was no direct appropriation for major maintenance or
school construction in the governor's FY 24 budget because
the funding came through the REAA fund.
Representative Ortiz asked if the major maintenance grant
fund list [handout 6, copy on file] included both REAAs and
rural school districts.
Ms. Teshner responded in the affirmative.
Representative Ortiz understood that REAA school projects
were the only projects addressed by the current budget and
all other projects would continue to need funding.
Ms. Teshner replied that any projects that were not funded
by the final budget would continue to be considered
outstanding needs. Districts would need to reapply for
funding in the following years. The proposed transfer into
the REAA fund for FY 24 was about $28 million and the
transfer was about $32 million in FY 23.
Representative Cronk referred to Representative Stapp's
earlier question and asked for an update on the school in
Kaktovik. He wondered how much money had been supplied to
the school.
2:45:51 PM
LORI WEED, SCHOOL FINANCE SPECIALIST, DEPARTMENT OF
EDUCATION AND EARLY DEVELOPMENT, replied that the Kaktovik
school had been receiving insurance proceeds but she had
not inquired as to the exact amount. The proceeds had been
utilized to provide temporary school facilities and the
design process for new facilities had begun.
Co-Chair Johnson understood that the school had used the
monies from insurance to rebuild classrooms to act as a
temporary facility. She wondered if the school should have
received grant funding. She asked what Ms. Weed would
suggest the school do to explore more funding options.
Ms. Weed responded that she would hope that the insured
value would provide the school with enough funds to fully
rebuild the facilities. The department would have to
evaluate the situation further if the school applied for
the grant funding program to determine if it would qualify
for supplemental funding that would not have otherwise been
covered by insurance. She commented that the department was
"two steps removed" from the insurance negotiation process
as Kaktovik was a borough and not an REAA with a state-
owned facility.
Co-Chair Johnson suggested that it would be costly to
rebuild older facilities that were out of date.
2:49:09 PM
Representative Josephson asked about the major maintenance
project at Service High School. He noted that school
reported that it had health and safety improvement needs
and was seeking $4.6 million to cover the costs. He asked
if the report meant that the department had reviewed the
application and approved the funding.
Mr. Willhoite responded in the affirmative.
Representative Josephson commented that the legislature
funded just over $100 million in the capital budget in 2022
and the governor approved around $30 or $40 million of the
funding. He asked whether any urban schools in the current
capital budget were being given major maintenance grant
funding.
Ms. Weed responded that it was correct that there was no
major maintenance funding identified in the current capital
budget.
Representative Josephson commented that slide 22 indicated
that the participating share for REAAs was 2 percent. He
asked from where the 2 percent share originated.
Ms. Weed responded that the department approved a
recommended project value. The 2 percent figure represented
2 percent of the approved project value and the state share
was the remaining 98 percent.
Representative Josephson asked if citizens who lived in the
project area needed to contribute 2 percent of the cost.
Ms. Weed responded that the funds came from the capital
reserves of a school district and the costs were primarily
funded through the foundation formula.
Representative Stapp asked if the intent was to bond school
facilities with a larger square footage and fewer students.
Mr. Blackwell responded that if a municipality was willing
to accept a lower participation from the state, it would be
able to build a school facility that was larger than
necessary for the number of students. If a school wished to
add square footage to the facility but was not qualified
for the additional space as there were no unhoused
students, the debt reimbursement program would allow the
school to participate but it would participate at a lower
reimbursement level. He clarified that there could be an
incentive for a district to build larger school facilities
if it was willing to accept a lower reimbursement level
from the state.
2:53:56 PM
Representative Galvin commented that there were a few
projects of concern listed in handout 6. She wanted to
ensure that the projects were providing health and safety
measures and meeting the mission of DEED. She understood
that the legislature had an obligation to establish and
maintain a system of public schools that were open to all
children of the state. There was still significant work to
be done to ensure that all schools in the state were being
properly maintained and many of the facilities needed
significant repairs. She appreciated the extended
presentation on the topic.
Representative Hannan wondered if $80 million was
hypothetically allocated to major maintenance, would it
fund projects 1 through 41 on handout 6.
Mr. Blackwell nodded in agreement.
Representative Hannan noted that that she had recently seen
that several schools had burned down in the state. She
asked how many schools were considered emergency projects
and needed to be replaced entirely.
Mr. Willhoite confirmed that there had been several
facilities that had burned down. There were at least two
that burned down within the last six months, two that were
subsiding due to beach erosion, and several others that
were close to being no longer habitable. He agreed that
many of the schools were in danger.
Representative Hannan wanted to separate the facilities
that might already be on the maintenance list. There were
some that had burned, one that collapsed. She thought that
if a school was gone, it was more of a serious emergency
than schools that were nearly inhabitable. She asked how
many schools were in an emergency crisis that were lost to
fire, flood, or collapse.
Mr. Willhoite would provide a list to the committee.
2:59:28 PM
Representative Cronk asked if anyone in the department had
proposed to build "pre-engineer schools" that all had the
same boiler system, sewer system, HVAC system, electrical
system, and so on. He asked if the state would save money
on maintenance if the facilities were identical.
Mr. Willhoite responded that prototype schools worked for
certain repeatable facilities, such as fast food chains
that could be built simultaneously. However, school
facilities would not break down at the same time and the
prototype model would not lend itself to inconsistent
needs. A prototype that worked in two years' time might not
work in four years. Although it was a good idea, it would
not work for a slow replacement model.
3:01:54 PM
Mr. Blackwell interjected that the department produced a
study several years ago about prototypical schools and
systems. In more homogenous states, prototypical schools
worked fairly well; however, Alaska had such a diverse
building environment and each environmental area had
different needs. The building techniques and foundation
systems across the state were vastly different and hundreds
of designs would likely be needed. One of the other issues
was that as soon as a particular system was mandated, it
would become out of date. He recognized that there were
complex systems in the state that were difficult to
maintain in a sustainable manner, particularly in rural
areas. He thought each district would need to have
discussions with design professionals about its particular
needs.
Mr. Willhoite commented that the department encouraged
districts to have standardization within their systems as
the state could not provide one uniform system that would
work statewide.
Representative Cronk thought that there were some areas of
the state that were geographically the same. He asked if
the department had considered looking into new technologies
regarding flat or semi-flat roofs. He thought it could save
the state millions of dollars as roofs often needed to be
replaced.
Mr. Willhoite responded that over his thirty-year career,
he had not found a single system that was flawless and all
buildings were perishable. It was not possible to take a
building out of the elements. It was up to the school
system based on the recommendations of consultants,
architects, and engineers to provide the most suitable roof
system for the particular area. A roof was a perishable
item and at some point, it would need to be replaced. The
same roof system would not necessarily work in all areas of
the state.
3:07:31 PM
Representative Cronk asked if the state had identified
roofs that were close to needing to be replaced and tried
some new strategies to repair the roofs.
Mr. Willhoite responded that the most robust roofing system
that he had encountered was called an EPDM [ethylene
propylene diene terpolymer] product roof. It was a
rubberized product that had no seams and was secured to the
roof. There were no systems to his knowledge that exceeded
the capabilities of EPDM product roofs and most projects in
the state used the system.
Representative Cronk thought that the problem was that some
schools did not receive enough funding due to the Base
Student Allocation (BSA) and the schools were still costly
to maintain. He thought it was problematic if a school were
to build a larger than necessary facility and request money
from the state to maintain the facility.
Mr. Blackwell responded that it would cost more money to
maintain a large building and the funds would come from a
school's foundation funding.
Co-Chair Johnson referred to slide 17 and the mention of SB
64 [implementing the moratorium on additional debt
reimbursement through FY 20] on the slide. She also noted
that HB 106 extended the moratorium on additional debt
reimbursement through FY 25. She wondered if school
districts had been harmed by the moratorium. She asked what
impact an additional moratorium would have if it were to be
implemented after FY 25.
Mr. Blackwell responded that if the moratorium were to be
extended, there were municipalities that would be permitted
to issue bonds for school construction projects. He noted
that Anchorage was already using bonds for school
construction projects. For smaller municipalities, the
capital needs would be shifted to the construction or major
maintenance list and would receive funds from the capital
grant system.
Co-Chair Johnson commented that 10 years was a long period
of time for there to be a moratorium in place.
Mr. Willhoite added that the debt reimbursement was also
tied to the REAA fund. The longer the moratorium lasted,
the less money the REAA fund would have in reserve.
3:13:18 PM
Representative Tomaszewski drew attention to slide 2. He
noted that Alaska ranked number 49 out of the 50 states in
regard to reading and mathematics. He asked if DEED had
considered examining the reasons behind the challenges in
academic outcomes and whether it had strategized ways to
improve the system. He recognized that it was a large
question and might warrant a separate presentation.
Ms. Teshner responded that the state's ranking was not
acceptable. She agreed that systematic changes were
necessary and that the Reads Act was one of the needed
changes. The department was also in the process of
developing a strategic plan to address shortfalls in
mathematics. There was a district that wished to remain
anonymous that went to an academic symposium in the prior
year and purchased a new curriculum. By implementing the
curriculum, the district was able to increase its test
scores over the course of one year at a rate higher than
the scores had increased over the course of ten years. She
thought it was imperative for districts to stick to a
program and implement it effectively in order to improve
academic achievement. The process would take time and would
take considerable conversations with each and every
district.
Representative Coulombe noted that there was an approved
project on the CIP list [handout 6] in Anchorage for fire
sprinklers for Abbott Loop Elementary School. She thought
that the school was intended to close down and assumed that
the project was requested prior to the decision to close
the school. She asked what follow ups were required when a
project was approved and if the district needed to prove
that it had used the money for the approved project. She
wondered what would have happened if the fire sprinkler
project had been approved and gone unnoticed and the
Anchorage School District still received the money.
Mr. Willhoite responded that there were a few things about
the fire sprinkler project that made it unusual. For
example, the timing of the project request occurred prior
to the closing of the school. Additionally, the school
raised the money itself as it was a debt-related project.
He offered reassurance that the department was aware of the
situation. The state would not fund the project, but he was
unsure what the district would do with the bond funds but
he thought the funds would return to the general
construction fund.
Ms. Teshner added that every project included a project
agreement which was signed by both the district and the
department. The department would then reimburse the
district when it met particular milestones and was
constantly working with the district throughout the life of
the appropriation to ensure the funds were going towards
the intended project.
Representative Coulombe understood that the funds could
still technically be used for a different project.
Ms. Teshner responded that the districts provided an annual
report that showed that the funds were spent on a
particular project.
Mr. Willhoite responded to Representative Galvin's earlier
comment regarding the upkeep of the CIP list. He indicated
that if a certain percentage of projects were not
addressed, the department would not stay ahead of the
preventative maintenance curve. He noted that many projects
became emergency needs because the projects were neglected.
3:21:45 PM
Co-Chair Johnson reviewed the agenda for the following
meeting.
Representative Ortiz asked Co-Chair Johnson when the
committee would hear an update on the spring revenue
forecast.
Co-Chair Johnson responded that an update was not yet
scheduled.
Co-Chair Foster noted that the Senate was scheduled to hear
the forecast in the near future and the committee would
receive an update shortly. He understood that it was
currently pending and would be scheduled soon.
Co-Chair Johnson saw that an update was scheduled for the
meeting on March 22, 2023.
Representative Ortiz appreciated the information.
ADJOURNMENT
3:24:01 PM
The meeting was adjourned at 3:24 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DEED Handout #1 - AS 14.11.035 SB237 Final 2023 Report.pdf |
HFIN 3/17/2023 1:30:00 PM |
SB 237 |
| DEED Handout #2 - FY2024 State Share Totals by District 12.09.22.pdf |
HFIN 3/17/2023 1:30:00 PM |
|
| DEED Handout #3 - Debt Actual % 1976-2024.pdf |
HFIN 3/17/2023 1:30:00 PM |
|
| DEED Handout #4 - FY2024 Anticipated School Debt Reimbursement.pdf |
HFIN 3/17/2023 1:30:00 PM |
|
| DEED Handout #5 - FY24ConstructionFinalList.pdf |
HFIN 3/17/2023 1:30:00 PM |
|
| DEED Handout #6 - FY24MaintenanceFinalList.pdf |
HFIN 3/17/2023 1:30:00 PM |
|
| (H)FIN DEED School Capital Funding 03.17.2023.pdf |
HFIN 3/17/2023 1:30:00 PM |
|
| AHFC Dividend Presentation Response to (H)Finance Committee from 3.17.2023_Sent on 3.20.2023.pdf |
HFIN 3/17/2023 1:30:00 PM |
|
| HFIN DEED Enclosure 1 - COVID-19 Relief Funding Legislative Report Maintenance and Construction 032123 .pdf |
HFIN 3/17/2023 1:30:00 PM |
|
| (H)FIN 3.17.23 DEED School Capital Funding Responses 040523.pdf |
HFIN 3/17/2023 1:30:00 PM |
HB 40 |