Legislature(2023 - 2024)ADAMS 519
02/08/2024 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB89 | |
| HB178 | |
| HB193 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 89 | TELECONFERENCED | |
| += | HB 193 | TELECONFERENCED | |
| += | HB 178 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 8, 2024
1:47 p.m.
1:47:04 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:47 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
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
None
ALSO PRESENT
Leah Van Kirk, Healthcare Policy Advisor, Department of
Health; Gene McCabe, Director, Division of Water,
Department of Environmental Conservation; Carrie Bohan,
Facilities Program Manager, Department of Environmental
Conservation; Karen Morrison, Director of School Finance
and Facilities, Department of Education and Early
Development,; Laurel Shoop, Special Assistant and
Legislative Liaison, Department of Education and Early
Development,; Madeline Aguillard, Superintendent, Kuspuk
School District,; Kim Hanisch, Superintendent, Unalaska
School District; Lisa Parady, Executive Director, Alaska
Council of School Administrators,; Karen Morrison, Director
of Finance and Support Services, Department of Education
and Early Development,; Laurel Shoop, Special Assistant and
Legislative Liaison, Department of Education and Early
Development.
PRESENT VIA TELECONFERENCE
Michael Williams, Deputy Director, Tax Division, Department
of Revenue, Anchorage; Amy Eakin, Director of Technology,
Northwest Artic Borough School District; Jennifer Eller,
Director of Educational Technology and Infrastructure,
Bering Strait School District, Unalakleet; Christine
O'Connor, Executive Director, Alaska Telecom Association,
Wasilla.
SUMMARY
HB 89 DAY CARE ASSIST./CHILD CARE GRANT PROGRAM
HB 89 was REPORTED out of committee with seven
do pass recommendations, three no
recommendations, and one amend recommendations
and with two new fiscal impact notes from the
Department of Health and the Department of
Revenue.
HB 193 INTERNET FOR SCHOOLS
HB 193 was HEARD and HELD in committee for
further consideration.
HB 178 VILLAGE SAFE WATER FACILITIES
HB 178 was HEARD and HELD in committee for
further consideration.
HOUSE BILL NO. 89
"An Act relating to the day care assistance program
and the child care grant program; and providing for an
effective date."
Co-Chair Foster reviewed the meeting agenda.
1:49:20 PM
Co-Chair Foster noted that there were two amendments.
1:49:31 PM
Representative Coulombe MOVED Amendment 1 (copy on file):
Page 22, line 4:
Delete "January l, 2025"
Insert "January 1, 2026"
Page 22, line 18:
Delete all material.
Renumber the following bill sections accordingly.
Page 22, lines 22 - 23:
Delete "secs. 40 and 41 of this Act, this Act takes
effect January 1, 2024"
Insert "sec. 40 of this Act, this Act takes effect
immediately under AS O 1.10.070( c )"
Co-Chair Foster OBJECTED for the purpose of discussion.
Representative Coulombe explained that the amendment would
change two dates. One date was an error in drafting and was
changed to 2026.
1:50:25 PM
LEAH VAN KIRK, HEALTHCARE POLICY ADVISOR, DEPARTMENT OF
HEALTH, indicated the department was requesting a date
change because it aligned with the federal childcare
development fund application deadline and approval. The
department would submit its 3-year plan in July 2024. There
was not a specified time for the Administration for
Children and Families to respond.
1:51:32 PM
Representative Josephson asked about the deadline for the
federal government to review whether the state could move
to a cost of care model. He deemed that it could not be
done within 6 months of the completion of the state's
supplementary report on July 2024. Ms. Van Kirk responded
that in discussions with the childcare program office, she
determined that the typical response time was approximately
six months. She noted that it could be implemented sooner
if the state was approved for an alternative methodology
prior to implementation.
Co-Chair Foster WITHDREW the OJBECTION. There being NO
OBJECTION, it was so ordered.
Amendment Number 1 was adopted.
1:52:48 PM
Representative Galvin MOVED amendment 2 (copy on file):
Page 1, line 2, following "facilities;":
Insert "establishing a child care grant program tax
credit;"
Page 6, following line 13:
Insert a new bill section to read:
"* Sec. 7. AS 43.20 is amended by adding a new section
to read:
Sec. 43.20.019. Child care grant program tax credit.
(a) A taxpayer is allowed a credit against the tax due
under this chapter for contributions of cash accepted
for the child care grant program established under AS
47.25.071.
(b) The amount of the credit is 100 percent of
contributions, not to exceed $3,000,000.
(c) A contribution claimed as a credit under this
section may not
(1) be the basis for a credit claimed under
another provision of this title;
(2) also be allowed as a deduction under 26
U.S.C. 170 against the tax imposed by this
chapter; and
(3) reduce a person's tax liability under this
chapter to below zero for any tax year; an
unused credit or portion of a credit not used
under this section for a tax year may not be
sold, traded, transferred, or applied in a
subsequent tax year.
(d) Beginning January 1, 2030, and every five years
thereafter, the Department of Labor and Workforce
Development shall adjust the dollar limit on credits
under
(a) of this section for inflation, using 100 percent
of the change over the preceding five calendar
years in the Consumer Price Index for all urban
consumers for urban Alaska, compiled by the 1
Bureau of Labor Statistics, United States
Department of Labor."
Renumber the following bill sections accordingly.
Page 21, line 28:
Delete "sec. 24"
Insert "sec. 25"
Page 21, line 31:
Delete "sec. 24"
Insert "sec. 25"
Page 22, line 7:
Delete "sec. 24"
Insert "sec. 25"
Page 22, line 18:
Delete "Section 39"
Insert "Section 40"
Page 22, line 19:
Delete "sec. 24"
Insert "sec. 25"
Page 22, line 22:
Delete "secs. 40 and 41"
Insert "secs. 41 and 42"
Co-Chair Foster OBJECTED for discussion
Representative Galvin was supportive of the bill and
thought it was a good start in addressing the lack of
childcare. She was grateful for all the work that had been
done. She thought the amendment would make the effort
stronger and expand it beyond the bills limited program
that supported employers and their beneficiaries' children.
She elaborated that the state tax credit also applied to
the state child care grant program. The program was
currently in existence and the bill would remove the
existing cap. The amendment allowed for tax credits to be
issued if the private sector chose to utilize the state
childcare program. She felt that it was important, and it
could change the whole landscape for childcare
opportunities. A fully funded childcare grant program would
increase opportunities to expand new childcare facilities
at home or for faith based care. She pointed to the
Amendment 2 backup she provided titled "HB 89 Day Care
Assistance/Child Care Grant Program, Coulombe (H)FIN
DOH, PA Appropriation, Child Care Benefit Allocation" (copy
on file) that explained the amendment and provided an
example of the work that the childcare grant program could
accomplish based on how Juneau implemented a successful
similar program that was modeled after the state program.
She noted that the state program was not funded enough to
offer the same level of services as the Juneau program. The
Juneau program offered more opportunities for families that
needed the extra stipend, increased the number of childcare
providers, and increased the average salary for childcare
workers from $12 to $18 per hour. She related that the task
force identified wages as a major area of concern. The
success of the Juneau program was the impetus for
Representative Galvin to integrate the same opportunity
into HB 89. Her amendment offered that same sort of
public/private partnership as in the Alaska state run grant
program.
1:57:31 PM
Representative Coulombe spoke against the amendment. She
appreciated Representative Galvin's passion for the issue.
However, she would not support the amendment because she
was trying to get the private sector to take care of its
workers and to view childcare as a benefit. She did not
think it would be helpful to divert funding to a state fund
that was managed by a "middleman."
Representative Cronk asked if there would be any additional
fiscal notes with the amendment. Representative Galvin
responded in the negative. Representative Cronk asked
whether the proposal would need increased funding.
Representative Galvin replied that the program was already
in existence, and they would not need any new
administration to implement the proposal. She offered that
the funding would be diverted to the broader statewide
program versus the employee program.
1:58:58 PM
Representative Stapp was confused about the amendment
description. He asked for more information. He understood
that amendment 2 allowed the tax credits to go to the state
childcare grant program. He asked what the actual
difference was between the state and Juneau childcare grant
programs. Representative Galvin answered that the Juneau
program was not funded by the state program. She reiterated
that it was modeled after the state program. The goals were
the same in attempting to expand childcare opportunities in
Juneau. It was also administratively modeled the same way
as the state except it was managed by Southeast Alaska
Association for the Education of Young Children (SEAEYC).
The amendment would not take away the opportunity for
businesses to support their own employees in childcare.
Amendment 2 merely offered another option in case there was
a business entity that wanted to impact all childcare in
Alaska. The proposal was also built around a public private
partnership, which she endorsed.
2:00:50 PM
Representative Coulombe understood that the Juneau program
subsidized wages for childcare workers. Representative
Galvin responded that she did not think it was done that
way. She understood that the wage increases were due to
more dollars for childcare. She explained that the families
received a stipend and could afford to pay more for
childcare. The funding was also used to help childcare
startups by providing new materials for beginning childcare
businesses. Representative Coulombe noted that there was a
Juneau representative on the taskforce and recalled hearing
Juneau was subsidizing wages. She did not believe in
subsidizing wages, whether it was happening in the Juneau
program or not. She wanted the marketplace to fix the
problem. Representative Galvin countered that via the
program, average salaries increased from $12 to $18 per
hour. She did not receive any information that the wages
were subsidized.
2:03:10 PM
Representative Josephson supported the amendment. He was
concerned that the bill may be underutilized because of the
self-interest of the employers, which he understood. He
referenced subsidized wages and thought that indirectly,
wage increases were the desired result favored by many
legislators and Juneau had succeeded in that result. He
mentioned the generous grants received during COVID that
were applauded," including the $7.5 million awarded in the
current year and he mentioned concerns over losing that
funding. He remarked that THREAD, Alaska Childrens Trust,
and other stakeholders were seeking $30.5 million. The
legislation was effective in opening up opportunities, that
was done in part to encourage employment, which was not a
compulsion to pay $18 per hour, but a hope that one result
would be higher wages and help support the industry more
broadly.
Representative Ortiz asked if Representative Galvin used
the situation in Juneau as a model for the amendment and
how the wages in Juneau increased. He asked what the forces
were that caused it to happen if it was not a direct
subsidy. Representative Galvin responded that there was a
fund put together by the City and Borough of Juneau (CBJ).
She delineated that CBJ asked SEAEYC to manage the fund.
The fund was used to help licensed daycare providers to
purchase materials and provide subsidies for families who
could not afford childcare. The subsidies for infants was
$4 hundred for full-time care and for preschool it was $100
per month for full-time care. She understood that there
were more dollars in the entire universe of childcare in
Juneau and the program lowered the need. She announced that
there was no problem for families to be able to get
childcare in Juneau. She believed that it was a "huge
change" that happened within 4 years. Sometimes it took
money to solve a problem, and this was how Juneau
distributed it. She reported that the state had been hard
at work on the issue but the amount it could spend was
capped. She indicated that state dollars could currently go
straight into the fund or also to those who were
experiencing childcare problems throughout the state. The
amendment provided an option to impact the greater need.
She shared that children were showing up between one and
two years behind in kindergarten. She spoke of the
importance to have children ready for school. She would
love to see the state program funded to provide the same
results as Juneau.
2:08:33 PM
Representative Stapp opposed the amendment. The reason was
he viewed the problem as an employee benefit issue. He
liked that the bill preserved the tax reduction for the
employer. He deduced that there was a two-piece solution
via incentives for the employer to think about childcare
coupled with Section 125 Flexible Spending Accounts (FSA),
that allowed employees to use pre-tax earnings to pay for
dependent childcare costs, which was underutilized. He
shared that he asked his local Chamber of Commerce to poll
their own members to see if they used the program. He
believed that if HB 89 was adopted as the sponsor designed
it was a "really good package" incentivizing the employer.
He thought that childcare was an employee benefit. He felt
that more parents would start utilizing Section 125.
Representative Hannan spoke in support of the amendment.
She related that many employees in Juneau were state
employees. She believed that putting the money in the hands
of the parent allowed the childcare providers to increase
wages since it served private and public sector workers.
Increased wages were not a direct subsidy, but people were
able to pay a higher price for childcare. She noted that
the mines in Juneau were the largest private sector
employers, with a large non-resident workforce. However,
they could choose to either put the tax benefit into the
entire community or solely into their own employees via
Amendment 2.
Representative Tomaszewski was not in favor of the
amendment. He thought it sounded like a great idea but
without the proper fiscal note and actual cost laid out, he
could not vote for it. He thought the amendment would be
better as its own bill and be thoroughly vetted.
2:12:11 PM
Representative Galvin appreciated the discussion and
thought it was important to discuss the challenges of
childcare. She reiterated that the reason that it did not
have a fiscal note was because there were no extra
administrative costs since the state had a childcare grant
fund and the tax credits would go toward the state program.
The option for the employer to only support their employees
still existed. She believed that distributing funds to
parents created more demand for childcare and natural
market forces would increase the costs until supply
stabilized demand. She offered that supply would equalize
when the providers were making a living wage. She wanted to
benefit all Alaskans especially rural Alaskans. She was
grateful for the comments and was supportive of the bill.
2:14:08 PM
Co-Chair Foster WITHDREW the OBJECTION.
2:14:12 PM
Representative Stapp OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Galvin, Hannan, Josephson, Ortiz
OPPOSED: Edgmon, Foster, Johnson, Coulombe, Cronk, Stapp,
Tomaszewski
Amendment 2 FAILED 4/7.
2:15:11 PM
Co-Chair Foster noted that there were two fiscal notes and
asked for a review.
2:15:32 PM
Ms. Van Kirk discussed both fiscal notes from the
Department of Health. She referred to the fiscal note
allocated to Child Care Benefits dated February 7, 2024.
She explained that the new fiscal note amounted to
approximately $6.1 million. She pointed to the Grants and
Benefits line that represented the majority of the costs.
The expenses were for the cost of providing a subsidy to
families with income not exceeding 85 percent and up to 105
percent of the state median income. She detailed that
approximately 18,000 additional children aged 12 and under
would meet the eligibility criteria with the increase to
105 percent. The department developed a series of
assumptions to provide the projections based on the average
state rate and the 7 percent cash copay and calculated the
total based on a 7 percent utilization rate of all eligible
children, which mirrored the current childcare assistance
program utilization rate totaling $5.6 million. She
furthered that the Child Care Program Office required one
Accounting Technician 1 to administer the increase to
eligibility standards and process payments to the
providers. The Childcare program Office utilized grantee
organizations to determine eligibility, which required
increasing grant funding to four Child Care Assistance
Program grantees so each grantee can fund one new
Eligibility Technician to administer the program on behalf
of the state. In addition, one Program Coordinator 1
position was required to implement the program to partner
with private sector entities to create employer incentives
to develop onsite or near site childcare. She communicated
that the positions were eligible to be funded by 50 percent
federal funds and 50 percent general fund (GF) match.
Representative Josephson asked what the current grant
program budget was without the $6 million request. Ms. Van
Kirk answered that the Childcare Assistance Program
received approximately $22 million in federal funding, with
a required 75 percent for direct services, that were
subsidies for families. Representative Josephson
ascertained that currently the state contribution to the
$22 million was zero and under the bill GF would increase
to $6 million.
2:19:39 PM
Representative Stapp wondered whether the range 12
accounting technician would qualify for the childcare
grant. Ms. Van Kirk would make the assessment based on the
family size.
2:21:12 PM
MICHAEL WILLIAMS, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE, ANCHORAGE (via teleconference), reviewed the
new fiscal note from the Department of Revenue (DOR)
allocated to the Tax Division dated February 9, 2024. He
read from the analysis on page 2 of the fiscal note.
Background
The education tax credit is a credit for qualifying
contributions to Alaska universities and accredited
nonprofit Alaska two- or four-year colleges for
facilities, direct instruction, research and
educational support purposes; donations to a school
district or a state- or regional-operated technical and
training school for vocational education courses,
programs and facilities; and donations for Alaska
Native cultural or heritage programs for public school
staff and students; and a facility in the state that
qualifies as a coastal ecosystem learning center under
the Coastal American Partnership.
The credit is available to be claimed against
insurance premiums tax, title insurance premiums tax,
corporate income tax, oil and gas production tax, oil
and gas property tax, mining license tax, fisheries
business tax, and fishery resource landing tax. The
credit for any one taxpayer cannot exceed $1 million
annually across all tax types. The credit is
currently scheduled to be repealed effective January
1, 2025.
This bill would expand the education tax credit to
include donations made to childcare facilities
(employer run or nonprofit) for the children of the
taxpayer's employees, or for payments made to an
employee of the taxpayer for the purpose of offsetting
the employee's childcare costs. The new provisions
would take effect 90 days from being signed into law
(est. July 1, 2024). This bill also would increase
the credit limit from $1 million to $3 million
annually per taxpayer. The bill extends the sunset
provisions to January 1, 2028.
Revenue Impact
The change in revenues reflected in this fiscal note
only include those eligible tax programs administered
by the Department. The bill's fiscal impacts can be
divided into three categories: (1) expansion of the
education tax credit to childcare facilities and
employer costs, (2) increase to the annual tax credit
limit, and (3) extending the credit repeal date.
(1) The revenue impact of the expansion of the credit
to childcare facilities and costs cannot be determined
because the Department of Revenue does not have
Alaska-specific data to estimate how many taxpayers
will claim the expansion of the credit, how many
taxpayers currently pay their employees' child care
costs or make donations to child care facilities for
the children of their employees, or how many taxpayers
will start paying their employees' child care costs or
making donations to child care facilities for the
children of their employees.
(2) The revenue impact of the increase in the credit
limit is estimated by applying historical information
at higher credit limits and interpolating the impact
of the $3 million annual credit limit. See the table
below.
(3) The revenue impact of the increase in the
extension of the repeal date is estimated by using the
average of the last three years of actual credits
claimed as a basis going forward. See the table below
[The table contained the estimated revenue impact in
millions of dollars from FY 2025 through half of FY 20228.]
Other sources of uncertainty stem from the high
contribution limits and high cost of care in Alaska,
as well as the fact that the credit is available
against multiple tax types in Alaska.
Implementation Cost
This legislation would require the Department of
Revenue to make minor changes to its Tax Revenue
Management System ("TRMS"). Resources required to
implement this bill would include staff time to
updated tax forms, TRMS, and Revenue Online, and other
miscellaneous costs when applicable. These costs will
be absorbed by the Tax Division using existing
Mr. Williams noted that the fiscal note would be updated to
reflect the adopted amendment.
2:25:11 PM
Representative Josephson recounted that Amendment 2 would
have constrained the credit by noting that the deduction
was not also allowed under 26 usc 170 [any charitable
contribution under the U.S. Tax code] and the deduction was
disallowed to drive the liability under zero dollars. He
cited that the language was in Section 5 of the bill but
not elsewhere. He wondered whether there was a concern
regarding the language in the failed amendment that was not
included in the bill. Mr. Williams responded that most of
the statutory language in AS 43.220.014 of the corporate
income tax code stating the constraint under 26 usc 170
remained unchanged by the proposed language of the bill.
The constraint remained in law with passage of HB 89.
2:26:45 PM
Representative Stapp relayed an antidote regarding an
unrelated employee pretax deduction. He wondered if an
employer who operated its own childcare and deducted their
state corporate income tax and their employees dependent
care pretax was legal. Mr. Williams offered to provide the
answer after researching the matter.
Representative Galvin referenced the analysis stating that
it was difficult to predict the rate of participation and
therefore difficult to predict the amount of decreased
revenue. Mr. Williams confirmed the statement.
Representative Galvin asked how many corporations had a
corporate tax bill of $3 million or larger. Mr. Williams
would provide the information.
2:29:59 PM
Co-Chair Johnson MOVED to REPORT HB 89 as amended from
committee with individual recommendations and accompanying
fiscal notes and allow Legislative Legal services make
technical and conforming changes.
2:30:23 PM
Co-Chair Foster OBJECTED for the purpose of discussion.
Representative Josephson was grateful for the bill, and
thought it opened up some beneficial avenues for childcare.
He expressed concern regarding Representative Stapp's
remarks that he viewed it as an employee benefit issue. He
was concerned about economic sectors like retail and how
their employees' children would benefit from the tax
credits in the bill. He wanted something more than an
employee benefit bill and believed that people would be
left out. However, he concluded that the legislation was
headed in the right direction.
2:31:59 PM
Representative Galvin appreciated the bill and felt that
the childcare benefits to families was expanding as well as
the need for childcare. She deduced that the corporate
credits would help with the expanded need to a certain
degree. She viewed it as a first step in ensuring children
were getting high quality childcare and there was much more
work to do.
Representative Tomaszewski remarked that Representative
Coulombe had worked arduously on the bill and thanked her
for the work.
Co-Chair Foster WITHDREW the objection. There being no
other OBJECTION, it was so ordered
HB 89 was REPORTED out of committee with seven "do pass"
recommendations, three "no recommendations", and one
"amend" recommendations and with two new fiscal impact
notes from the Department of Health and the Department of
Revenue.
HOUSE BILL NO. 178
"An Act relating to village safe water and hygienic
sewage disposal facilities."
2:35:12 PM
Co-Chair Foster referenced a letter from the Department of
Environmental Conservation (DEC) Village Safe Water Program
(VSW) (copy on file) regarding the change to the scoring
system, which was the main provision in the bill.
GENE MCCABE, DIRECTOR, DIVISION OF WATER, DEPARTMENT OF
ENVIRONMENTAL CONSERVATION, voiced that VSW heard the
request from the legislature and starting with the current
funding cycle DEC had eliminated the use of Operations and
Maintenance Best Practices (O&M Best Practices) scores for
eligibility criteria for VSW funding. The issues of
capacity and sustainability would be discussed as part of
project development as the process moved along. The
management practice scores would be reviewed if they were
voluntarily submitted as part of the evaluation process but
would not be a perceived barrier.
2:36:48 PM
Representative Hannan noted that she did not have a copy of
the letter.
2:37:34 PM
AT EASE
2:42:25 PM
RECONVENED
Co-Chair Foster indicated that the committee received the
letter and had it in their possession. He recounted that
the impetus for the bill was in response to small
communities around the state without water and sewer or in
need of upgrades and concerns shared by entities
representing the communities like the Alaska Health Board
and the Alaska Native Tribal Health Consortium (ANTHC). Due
to the cost of developing the infrastructure, capacity was
an issue. If there was no one to maintain it would develop
into a larger issue over time, which was the motivation
behind the scoring system. However, scoring was an issue
for small communities that lacked capacity but needed water
and sewer systems the most; some communities lacked modern
water and sewer systems for many years. He characterized
the issue as a Catch 22. He remarked on the frustration
over the slow progress on developing rural water and sewer
systems. He believed that the systems should be supported.
He voiced that the bill was one way to speed up the
progress and figure out the problems later. He read the
email from DEC's Office of the Commissioner that was
attached to the letter:
Good morning,
DEC has heard the concerns expressed by communities
and partners regarding the implementation of
Operations and Maintenance Best Practices (O&M Best
Practices) assessment tool for Capital Improvement
Project (CIP) funding eligibility. To more effectively
meet the needs of communities, collaborate with our
partners, and ensure the efficient and timely use of
the available funds, DEC will no longer use O&M Best
Practices as an eligibility criteria for VSW CIP
funding.
Below you will find an email that will be shared with
Stakeholders shortly regarding VSW Best Practice
scoring. Please let me know if you have any questions.
Thank you and have a great day.
Co-Chair Foster wanted to ensure that the letter was on the
record since the bill had been introduced, but the
situation appeared to be resolved. He asked the department
to explain how it will proceed without the scoring system.
2:46:59 PM
CARRIE BOHAN, FACILITIES PROGRAM MANAGER, DEPARTMENT OF
ENVIRONMENTAL CONSERVATION, noted that DEC was not
eliminating the best practices tool altogether but was
removing the score as a criterion for funding. She believed
that it was an important tool and the partners at the Rural
Utility Business Advisor agreed. She delineated that the
department needed a way to gauge how the communities were
performing in the financial, managerial, and technical
categories to determine how to allocate resources to
provide the proper support. The department had programs and
worked collaboratively with programs in the Department of
Commerce, Community and Economic Development (DCCED) and
outside technical agencies that received federal funding to
provide support in the ongoing effort to build capacity.
She indicated that communities may choose not to
participate in the opportunity to use the tool. The best
practices tool would be used as a component of project
scoring but the bulk of the score was based on the health
impact of the project. Unserved and underserved communities
received additional points in acknowledgement that their
need was crucial. She hoped that the perception of the tool
would change overtime and become viewed as a resource. The
division would continue to assess the metrics for their
effectiveness. She wanted to move the tool away from a
measure of eligibility to a resource available to help
communities.
Co-Chair Foster surmised that there was a gray area; the
tool was not being eliminated but would not be a barrier to
funding or less so.
Representative Hannan wanted to know who wrote the letter
since there was no signature. Ms. Bohan answered that she
crafted the letter that was sent to stakeholders via email.
She followed with a mailed letter to all the communities
eligible for Village Safe Water (VSW) funding and informed
them of the changes in the way the program would be
administered.
2:50:56 PM
Co-Chair Foster felt that VSW was moving in the right
direction. The outcome would become more measurable moving
forward. He appreciated VSW's work on the issue.
Co-Chair Edgmon thanked DEC for moving forward with an
alternative method. He related that the tool was effective
when there was not significant funding for the program.
However, with the current influx of funding over the
current and prior fiscal year totaling roughly half a
billion dollars for water and sewer facilities, a solution
that was not prohibitive for small communities that lacked
the operational capabilities to maintain its utilities was
warranted. He personally thanked Ms. Bohan for taking the
lead on the issue. He stated that "the devil was in the
details" and he wanted the results monitored. He emphasized
it was imperative that small communities in need must
receive the funding. He hoped the effort was a step in the
right direction. He wanted to avoid a situation that
happened in Bethel in the prior year where a $19 million
project was halted because the community was unable to meet
a certain criterion in a very prescriptive scoring
mechanism. He offered that he would be monitoring the
results closely.
Representative Cronk voiced that he had many communities
served by VSW and thanked the department for addressing the
issue.
2:53:40 PM
Co-Chair Foster noted the bill would be set aside
indefinitely.
HB 178 was HEARD and HELD for further consideration.
2:53:45 PM
HOUSE BILL NO. 193
"An Act relating to funding for Internet services for
school districts; and providing for an effective
date."
Co-Chair Foster moved to the next bill on the agenda.
2:54:24 PM
Co-Chair Edgmon provided a brief overview of the bill. He
reminded the committee that the bill was last heard on May
11, 2023. He summarized that the bill would allow school
districts to utilize state programs that were implemented
in 2014 and apply for higher levels of internet capability
via increased megabytes per second (MBps). He detailed that
the program began at 10MBps, progressed to 25MBps in 2020,
and the bill proposed 100MBPS. He explained that through
the Broadband Assistance Grant (BAG) program primary and
secondary schools and libraries applied to qualify to
access federal money through the Federal Universal Services
program. Every state dollar was matched by $8.00 or $9.00
of federal funds. The program needed a change in statute.
2:55:50 PM
Co-Chair Foster OPENED Public Testimony.
2:57:19 PM
MADELINE AGUILLARD, SUPERINTENDENT, KUSPUK SCHOOL DISTRICT,
testified in support of the bill. She reported that under
the current 25MBps the district had to stagger state
testing among the different schools in the district. The
district had to arrange schedules and monitor internet use
with the bandwidth at maximum capacity every day. In
addition, the district had approximately 50 classes online
with 310 students participating. It represented a large
percentage of core classwork because the district lacked
enough teachers. She emphasized how crucial internet was to
the district for students to have access to an education
and that the district was very reliant on broadband.
3:00:02 PM
KIM HANISCH, SUPERINTENDENT, UNALASKA SCHOOL DISTRICT,
testified in support of the bill. She informed the
committee that the district had access to fiber optics in
the prior year and had the potential to reach 100MBps. The
district opted to increase it to 50MBps in order to retain
its e-rate funding but had lost a lot of the funding.
Currently, it cost the district more to provide 50MBps and
she characterized the situation as counter intuitive.
However, at 50MBps the district was able to provide more
services and resources the students could access. She
encouraged the committee to support the bill.
3:01:43 PM
Representative Galvin thanked Ms. Hanisch for all her hard
work.
Representative Ortiz asked Ms. Hanisch how long she had
been the superintendent in Unalaska. Ms. Hanisch replied
that it was her first year. Representative Ortiz asked if
broadband had improved. Ms. Hanisch answered in the
affirmative. She added that it was the first year of the
increase to 50MBps and it made a huge positive impact.
Representative Ortiz thanked her for her testimony.
3:03:04 PM
Representative Stapp relayed that John Conwell was an
amazing prior superintendent. He thought it was a highly
successful school.
3:03:57 PM
LISA PARADY, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, testified in favor of HB 193. She offered
that the council represented all superintendents, school
officials, principals, and school districts. She remarked
on how significantly important the bill was for remote
rural schools. She indicated that the bill would raise the
cap for BAG to the FCC minimum standard for bandwidth in
schools. She believed that the students deserved the
increase. The COVID pandemic highlighted the "digital
inequity" between rural and urban schools and their ability
for urban schools to switch to digital learning while rural
schools could not. She thought that the situation was an
equity issue and with the new infrastructure money coming
in it was time to support rural districts. She voiced that
even 100MBps was low given levels in Anchorage. She
concluded that access to bandwidth was necessary and vital
for learning and innovation. In addition, increased
bandwidth created efficiencies and supported communities
for online health services. She did not think geography
should determine learning opportunities. She urged for
passage of the bill.
Co-Chair Foster asked when the application deadline was.
Ms. Parady responded that the date was February 27, 2024,
due to a month prior notification requirement, it was a
"drop dead" deadline.
3:07:40 PM
Co-Chair Edgmon thanked Ms. Parady for her leadership on
the issue. He noted that in the near future 100MBps would
likely be the floor instead of the ceiling. Ms. Parady
recalled working on the 10MBps BAG bill with Co-Chair
Edgmon, Senator Olson, and Senator Hoffman and thanked Co-
Chair Edgmon for his leadership on the bill.
3:08:46 PM
AMY EAKIN, DIRECTOR OF TECHNOLOGY, NORTHWEST ARTIC BOROUGH
SCHOOL DISTRICT (via teleconference), testified in support
of the bill. She related that access to broadband was a
fundamental necessity for education, especially in remote
regions and played a critical role. The current 25MBps was
insufficient with the increased online curriculum, testing,
and business operation needs, which had escalated
dramatically. Currently, the internet was "frustratingly"
slow and inhibited use for all district users. She cited a
Five Year Internet Action Plan published in September 2023,
that reported Broadband Now's annual ranking; Alaska ranked
fifty-first for Alaska internet coverage, speed, and
availability. She asked the committee to image living with
25MBps at home and the difficulty it would impose. She
relayed the size of the district's schools all sharing
25MBps. The district had to establish extensive measures to
operate at the limited capacity like website blocking, per
device access throttling, restricting personal devices, and
scheduling software updates after 3:30pm all to ensure
uninterrupted access to essential resources during school
hours. She indicated that testing was limited to 20
students at a time with staggered start times. She
continued to describe the negative impacts during testing
and school hours with 25MBps. She shared that the district
hub, Kotzebue, lost its fiberoptic cable temporarily. She
turned to Starlink as a temporary measure. The district had
13 schools which spans a geographic area similar to the
state of Indiana. She mentioned the harsh climate that
impacted structures and travel. The technology department
consisted of 5 individuals and heavily relied on the
district internet service provider, who was under contract,
to keep things operational; Starlink did not provide
support services and dish placement on roofs was unsafe due
to roof access during the winter. She described another
district school's issues and inefficiencies due to
insufficient broadband access who supplemented its
broadband and lost its BAG money. She continued that if
district schools supplemented with Starlink it jeopardized
future grant funding but without it learning and operations
were a "constant struggle" on a daily basis. She mentioned
more issues with mounting the disc and voiced that Starlink
was not a long-term viable option for the district. She
reiterated the negative impacts of 25MBps on operations and
student learning and stressed that the children deserved an
equitable education. She urged for support to meet the
bill's deadlines.
3:16:52 PM
Representative Stapp thanked Ms. Eakin for her testimony
especially related to using Starlink. He asked who the
internet service provider for the district was. Ms. Eakin
responded that it was GCI.
3:17:53 PM
JENNIFER ELLER, DIRECTOR OF EDUCATIONAL TECHNOLOGY AND
INFRASTRUCTURE, BERING STRAIT SCHOOL DISTRICT, UNALKLEET
(via teleconference), supported the legislation. She shared
her credentials and that she worked for the district for
4.5 years. She related that the BAG program made it
possible for districts to increase internet speeds while
reducing the financial burden on districts. Increasing
internet capacity would not be financially possible without
the BAG program. The cost of internet access was not always
accounted for in the BSA leaving small rural school
districts relying on the BAG program to cover the
substantial portion of internet costs. She related that
Internet access was a necessity, and it was imperative in
order to provide a modern equitable educational experience.
The cost of internet should not be the driver of the
inequity. She communicated that according to the state's
digital equity plan, 80 percent of Alaskans could not
obtain internet access at an affordable price and 20
percent lacked access to a high-speed plan. Schools were
community anchors, and for many students it was their only
access to high-speed internet. She emphasized that if rural
schools wanted to stay in the roll of community anchor by
playing a key role in decreasing digital equality by
providing increased bandwidth it would be through passage
of HB 193. She also spoke of staggering testing time and
the disruptions it brings to schools. She urged for passage
of the bill.
3:21:50 PM
Representative Stapp asked who the internet service
provider was for the district. Ms. Eller responded that it
was GCI.
Co-Chair Foster CLOSED public testimony.
Co-Chair Foster requested a fiscal note review.
3:23:43 PM
KAREN MORRISON, DIRECTOR OF FINANCE AND SUPPORT SERVICES,
DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, spoke to the
published fiscal impact fiscal note (FN1 (EED) from the
Department of Education and Early Development (DEED)
allocated to Broadband assistance Grants dated January 24,
2024. She explained that the bill amended AS 14.03.127
funding for internet services that provided authority to
the department to provide state funded grants to Alaska
school districts with funding for the purpose of increasing
download speed for internet services for eligible schools
to reach up to 100 megabytes per second (Mbps). She
delineated that in FY 2023 the legislature appropriated
$6.6 million for Alaska BAG. The program provided grant
funding to 151 eligible Alaska schools to reach up to 25
Mbps. In FY 2024, the legislature appropriated $6.7 million
for BAG to 136 eligible Alaska schools to reach up to 25
Mbps download speeds. She furthered that the department
posted a request for information (RFI) on the state's
online public notices website titled "School Internet
Service Increased Costs Estimate." The department sought
input from Alaska's internet service industry to estimate
the total projected funding needs for schools to increase
their internet speeds from the maximum allowable from
25MBps to 100MBps. Although the department received
responses that provided general descriptive pricing
changes, the information was limited due to confidential
proprietary processes. It was unknown how many newly
eligible schools would apply if the funding cap was
increased to 100MBps. The fiscal note reflected its
understanding of the potential impact to DEED for the
program if more newly eligible schools applied for the
program. In FY 2025, DEED estimated that $39.4 million in
grant funding would be needed for all eligible BAG schools
to reach up to 100Mbps download speeds. A 1.5 percent
indirect rate adjustment for administration of the program
was included.
3:27:22 PM
Representative Stapp asked how many vendors responded to
the RFI.
3:27:47 PM
LAUREL SHOOP, SPECIAL ASSISTANT AND LEGISLATIVE LIAISON,
DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, answered
that subsequent to the public listing, DEED received five
responses from vendors, which many were narrative responses
that lacked concrete projections.
3:28:25 PM
Representative Galvin asked more about the RFI process. She
wondered whether the department considered that some
vendors had served areas of Alaska and not others. She
asked if DEED considered bifurcation. She wanted to
understand how the costs were anticipated and if the
assumption was the department would work with multiple
vendors. Ms. Shoop responded that there was a publically
available list of vendors with e-rate data. She delineated
that the department arrived at the fiscal note number by
using a linear projection.
Representative Stapp deduced that internet service
providers (ISPs) did not disclose private projections. He
asked what happened if the price was double the
projections. He wondered if there would be a request in the
supplemental budget. Ms. Shoop responded that the awards
would be prorated if the funding was not sufficient, which
was a DEED regulation. Representative Stapp asked if the
funding was pro-rated to the districts, what were the
results. He inquired whether the districts would receive
lower MBps. Ms. Shoop relayed that the funding distribution
would be proportionate to all of the awards and would be
based on a proration that was evenly distributed to all
districts. Representative Stapp wondered if DEED would know
the rates ahead of time, based on the contracts with the
ISP provider. Ms. Shoop responded that it was known how
much funding was appropriated by the legislature but DEED
would not necessarily know the funding cost of the
applications. She furthered that the majority of districts
were on contracts and were aware of their costs. However,
the department did not know what schools would apply.
3:33:05 PM
Representative Stapp understood that ultimately, the money
would be distributed to internet providers. He asked what
the price transparency for the ISPs was or if that
prevented them from charging any exorbitant amount. Ms.
Shoop replied that the e-rate program had an open data
source where all of the pricing was posted and was publicly
available.
Co-Chair Edgmon understood that the application process was
extensive and the criteria through the federal Universal
Services program was rigid. He shared that the number of
applicants decreased in the prior year to roughly 130 from
151 the year before. He viewed the program as a vital
bridge towards the future as other high speed capabilities
were established. He guessed that there could be less
applicants in the following years due to some schools
finding other means of high speed internet.
3:35:56 PM
CHRISTINE O'CONNOR, EXECUTIVE DIRECTOR, ALASKA TELECOM
ASSOCIATION, WASILLA (via teleconference), remarked that
more fiber networks were deploying across the state due to
infrastructure funding. The rates were decreasing due to
the deployment and much more capacity was available at the
same rates. The cost would not be simple and linear. She
indicated that more rate compression would happen with the
new networks. Another factor was the e-rate competitive
bidding process, which was rigorous and transparent through
district RFPs. She noted that more ISPs were responding,
which increased competition and decreased prices. There
were strict regulations for the competitive process, so the
rates were unknown until the RFP process played out. The e-
rates had decreased in every year of the program.
Representative Stapp asked how many people bid on the prior
RFP. Ms. O'Connor replied that she did not know the answer.
She added that every school district issued its own RFP and
there were dozens of RFPs. The Universal Service program
required that every telecom provider participating in the
program had to respond. She reminded Representative Stapp
that the data was available and easily accessible on the
public website.
3:39:24 PM
Co-Chair Foster wondered whether he should set an amendment
deadline or if the will of the committee was to move the
bill.
3:39:43 PM
Representative Ortiz thought the bill's deadline was
approaching and he sensed that there was broad-based
support in the committee. He favored moving the bill.
3:40:42 PM
Representative Coulombe stated that she was considering an
amendment.
Co-Chair Foster set the deadline for Tuesday, February 13,
2024, at noon.
3:41:10 PM
HB 198 was HEARD and HELD for further consideration.
Co-Chair Foster reviewed the agenda for the following
committee meeting.
ADJOURNMENT
3:41:31 PM
The meeting was adjourned at 3:41 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 89 Amendments 1-2.pdf |
HFIN 2/8/2024 1:30:00 PM |
HB 89 |
| HB 89 Galvin Amendment 2 Explanation.pdf |
HFIN 2/8/2024 1:30:00 PM |
HB 89 |
| HB 193 Public Testimony Rec'd by 020824.pdf |
HFIN 2/8/2024 1:30:00 PM |
HB 193 |
| HB 178 DEC Letter re Best Practices VSW 012524.pdf |
HFIN 2/8/2024 1:30:00 PM |
HB 178 |