Legislature(2023 - 2024)ADAMS 519
04/23/2024 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Historical Capital Budget Information | |
| Presentation: Fy 25 Capital Improvement Projects School Major Maintenance Grant Fund and School Construction Grant Fund | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 187 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 23, 2024
1:34 p.m.
1:34:23 PM
CALL TO ORDER
Co-Chair Edgmon called the House Finance Committee meeting
to order at 1:34 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, 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 Neal Foster, Co-Chair
ALSO PRESENT
Alexei Painter, Director, Legislative Finance Division;
Michael Partlow, Fiscal Analyst, Legislative Finance
Division; Lori Weed, School Finance Manager, Department of
Education and Early Development; Laurel Shoop, Legislative
Liaison, Department of Education and Early Development.
PRESENT VIA TELECONFERENCE
Lisa Parady, Executive Director, Alaska Council of School
Administrators, Juneau; Terri Walker, Northwest Arctic
Borough School District, Kotzebue; Cynna Gubatayao,
Ketchikan Gateway Borough, Ketchikan; Andrew Ratliff, Chief
Financial Officer, Anchorage School District, Anchorage;
Kim Sweet, Director of Operations, Lower Kuskokwim School
District, Bethel; Scott Ballard, Superintendent, Yupiit
School District, Akiachak; Jamie Burgess, Superintendent,
Nome Public Schools, Nome; Tammy Dodd, Superintendent,
Bering Strait School District, Anchorage; Gary Eckenweiler,
Director of Facilities and Maintenance, Bering Strait
School District, Anchorage; Madeline Aguillard,
Superintendent, Kuspuk School District, Aniak; Clayton
Holland, Superintendent, Kenai Peninsula Borough School
District, Soldotna; Andy Degraw, Chief Operations Officer,
Fairbanks North Star Borough School District, Fairbanks.
SUMMARY
CSSB 187(FIN) am
APPROP: CAP; REAPPROP
CSSB 187(FIN) am was HEARD and HELD in committee
for further consideration.
PRESENTATION: HISTORICAL CAPITAL BUDGET INFORMATION
PRESENTATION: FY 25 CAPITAL IMPROVEMENT PROJECTS SCHOOL
MAJOR MAINTENANCE GRANT FUND AND SCHOOL CONSTRUCTION GRANT
FUND
Co-Chair Edgmon reviewed the meeting agenda.
CS FOR SENATE BILL NO. 187(FIN) am
"An Act making appropriations, including capital
appropriations, supplemental appropriations, and other
appropriations; making reappropriations; making
appropriations to capitalize funds; amending
appropriations; and providing for an effective date."
^PRESENTATION: HISTORICAL CAPITAL BUDGET INFORMATION
1:36:14 PM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
introduced himself.
MICHAEL PARTLOW, FISCAL ANALYST, LEGISLATIVE FINANCE
DIVISION, introduced himself.
Mr. Painter introduced the PowerPoint presentation
"Alaska's Historical Capital Budget Spending" dated April
23, 2024 (copy on file). He briefly offered an overview of
the presentation on slide 2. He continued to slide 3 and
detailed the unrestricted general fund (UGF) capital budget
and oil prices. The slide depicted a graph that compared
the UGF capital budget by year by oil price and there was a
relationship between the two. The capital budget amounts
often changed according to available revenue. During years
with significantly higher oil prices nearing $100 per
barrel, the capital budgets often reached over $1 billion
and sometimes over $2 billion. When the oil prices were
depressed, the capital budget dropped to $100 million.
Mr. Painter continued to slide 4 which depicted the FY 05
to FY 24 UGF and UGF-supported capital budgets. One of the
tools that had been utilized in the past for the capital
budget was bonding. The state constitution limited the
total amount that could be utilized for bonding for the
operating budget, but a general obligation (GO) bond could
be approved by voters for capital projects. There had been
several GO bonds approved in the past, but a GO bond had
not been posed to the voters since FY 15. The slide also
showed the UGF that was used for a match and UGF that was
not used for a match.
Mr. Painter advanced to slide 5 and explained that from FY
05 to FY 15, the capital budgets averaged just over $900
million of UGF and about $2.3 billion total. If GO bonding
was included, the average would be about $1.1 billion UGF
per year. The peak year was FY 13 with over $2 billion of
UGF and about $500 million of bonding. In total, the FY 13
capital budget was about $2.5 billion. There was depressed
revenue in FY 16 through 21 and capital budgets averaged
$123 million in UGF and about $1.5 billion in total. The
state could reappropriate lapsing balances of past projects
from peak spending years to new projects, which helped keep
spending afloat. As old projects were closed out, the
balances had dried up. There was currently much less
funding available for reappropriation than there was after
large capital budgets. From FY 22 through 24, capital
budgets increased as there had been slightly higher oil
prices. Capital budgets averaged $531 million per year over
the last few years.
1:40:32 PM
Mr. Painter returned briefly to slide 4 to point out that
there had been three eras of the capital budget over the
last 20 years. There was the era of relatively large
budgets through FY 15, the era of depressed budgets from FY
16 to FY 21, and the era of mid-size budgets in the last
three years. He suggested that FY 25 was likely to be in
the mid-sized range.
Representative Galvin understood that the price of oil
mattered, but there were elements at play as well. She
asked if there were nuanced oil and gas tax regimes
involved. She thought the way oil and gas were taxed would
also be relevant. The overall revenue from oil seemed to be
more relevant than the price of oil.
Mr. Painter responded that slide 3 incorporated three
distinct tax regimes, but the big driver of the change in
revenue was price. The years in which tax regimes had
changed coincided with years in which prices had changed
significantly. In the low revenue years, the impact of the
tax regime change was minimal. At current prices, UGF would
be about $300 million based on the fall forecast.
1:43:49 PM
Representative Hannan relayed that earlier in the week, she
had a conversation with someone about $42 million that had
been put aside for the Juneau Access Project. The money had
been sitting allocated to the project for eight to ten
years. She asked if the money could be reappropriated to
something else. She wondered how long the money would sit
untouched before it could be appropriated or whether it was
not in the control of the legislature.
Mr. Painter responded that he would address the question on
a later slide in the presentation.
Representative Ortiz referred to slide 3. He asked if there
was any connection between larger capital UGF spend and
greater advantages to the spend through federal dollars and
match dollars. He wondered if federal dollars were
sometimes more available even if there was less UGF
incorporated into the budget. He asked if it was relevant
to say that the more UGF in the budget, the easier it is to
leverage federal monies for capital expenditures.
Mr. Painter replied that the question was an appropriate
segue into the next few slides about UGF match.
1:45:37 PM
Mr. Painter continued on slide 6. From FY 06 to FY 15, an
average of about 8 percent of the UGF capital budget was
used to match federal funds. The state also occasionally
met the match through bonding. In FY 05, the matching
requirement was met almost completely through bonding. From
FY 16 through FY 21, match made up 44.5 percent of the
capital budget. The amount that was spent on match during
the time period did not vary significantly; the budgets
were simply smaller. From FY 22 to FY 23, the spend began
to decrease as the budgets became mid-sized. In FY 24 and
FY 25, there was more capital money and federal capital
money available. The FY 24 and FY 25 capital budgets were
larger and about half the budget was once again being used
for match because of the influx of federal funds.
Mr. Painter added that the state was not receiving more
federal funds than it was 10 years ago if inflation was
considered. The funding from the Infrastructure Investment
and Jobs Act (IIJA) appeared as a spike, but it made up for
over 20 percent of the inflation cost on the projects. The
state was not necessarily completing more projects, but it
had to spend more money to complete more projects to be
eligible for a federal match. In FY 25, the state had a
$143 million match requirement for $3.1 billion in federal
funds, which was larger than the average capital budget
from FY 16 to FY 21. The numbers are slightly misleading
because there was $1 billion in broadband dollars that did
not require a match and was a one-time appropriation that
would last for five years. Generally, the state had
received more federal funds and a higher match requirement
in recent years than 10 years ago.
Mr. Painter continued to slide 7 and explained that the
federal match was allocated to three main areas: the
federal aid highway match of $87.2 million to match $822.4
million of federal funds; the federal aid aviation state
match of $39.9 million to match $404.7 million of federal
funds; and the Village Safe Water (VSW) and wastewater
match of $22.9 million to match $265.3 million of federal
funds. He explained that VSW expanded substantially under
IIJA, but the matching requirements had not increased for
the state. The state's match requirements had also not
increased for Department of Transportation and Public
Facilities (DOT) projects. However, the federal UGF
requirement had increased substantially with the increased
amount of funds available.
1:48:49 PM
Representative Josephson understood that if it was 2016,
the state would need to take advantage of all the IIJA
funds and related infrastructure dollars. The state would
either need to draw from the Constitutional Budget Reserve
(CBR) or pay out a smaller dividend. He asked if he was
correct.
Mr. Painter responded in the affirmative. The state would
need to come up with additional funds to fully meet the
federal match. The state would either need to reduce
funding in other areas or raise revenue. He noted that
projects were about 20 percent cheaper about five years
prior. He thought that DOT had seen price escalations more
than inflation alone. He suggested that the state's revenue
had perhaps not grown with inflation. Although oil had some
statistical relationship with inflation, it was not
overwhelmingly strong. There had been an increased demand
for spending without compensatory revenue increases,
although coincidentally, oil prices were higher than they
were five years ago.
Mr. Painter advanced to slide 8 and relayed that over the
last 20 years, the total UGF match averaged about 21.5
percent of UGF and bonded capital budgets. There were a few
significant items beyond a federal match. One of the items
that received funding was construction maintenance lists,
which were prioritized lists that he would discuss over the
next couple of slides. The lists' funding averaged 15.4
percent of the capital budgets from FY 05 to FY 24. The
items that had received the largest percentage of funding
over time had been agency projects, which were projects
that were being undertaken by a state agency, such as the
Department of Fish and Game (DFG) purchasing a vessel or
building an engineering building at the university. The
projects aimed to create or maintain state assets.
Additionally, grants to non-state recipients averaged 20.7
percent of UGF and bonded capital budgets from FY 05 to FY
24. The grants were provided to entities other than state
government to create or maintain a capital asset. For
example, the grants could be provided to municipalities, a
named recipient, like a nonprofit, or school districts.
Mr. Painter advanced to slide 9 which showed through a
graph how much the capital budget had changed by UGF
category from FY 05 to FY 24. The blue bar on the bottom
represented the match and the red bar represented the
priority lists. The main lists were for school construction
and the deferred maintenance of state facilities. The green
bar represented the grants to non-state recipients and the
purple represented state assets, which was the largest
category. The graph showed that there had been almost no
grants to named recipients for several years. The capital
budget was almost entirely matched. The big spike in non-
state recipients was because there were a couple of large
projects in the FY 23 budget for the Don Young Port of
Alaska and the Nome Port. The ports were considered named
recipients because the funding was being provided to
municipalities, and the funding represented a large portion
of the capital budget. Agency projects had increased as
well over the last couple of years because there had been
larger capital budgets over the last few years.
1:53:34 PM
Mr. Painter continued to slide 10 and the UGF funding
through priority lists. The main priority projects were
deferred maintenance projects and were currently funded by
the executive branch conducting a statewide prioritization
of projects. The governor's office was provided with the
funds and the office then distributed the funds to state
agencies. The judiciary branch, school construction and
school major maintenance, and renewable energy projects
were funded through the Renewable Energy Grant Fund (REGF)
or through UGF appropriations to the program. The Harbor
Matching Grant Program (HMGP) was also utilized. The
priority lists were developed by state agencies to remove
political considerations from the project selection
process. The legislature would often fund however as many
projects as it deemed appropriate based on available funds,
but the legislature was not "picking and choosing" the
projects. The goal was for the selection process to be
based on objective criteria and not political factors.
Mr. Painter moved to slide 11 which included a graph of the
deferred maintenance funding by fund group from FY 05 to FY
25. In FY 18, there was legislation that designated the
capital income fund to be used for deferred maintenance,
which had since become the largest source used for deferred
maintenance. There was an initiative during the Governor
Sean Parnell Administration to spend about $100 million per
year on deferred maintenance from FY 12 through FY 15.
Apart from the initiative, the state had spent
significantly less on deferred maintenance over the years.
Currently, there was $28 million allocated for the
governor's office as well as the Alaska Court System. Many
of the federal receipts were for the Department of Military
and Veterans Affairs (DMVA). There had been a substantial
shift from deferred maintenance being funded through UGF to
being primarily funded via the capital income fund.
Representative Hannan commented that she was curious why
the state fell off the cliff on FY 11 deferred maintenance
because it did not seem to correlate with any of the
state's low capital budgets or spend years.
Mr. Painter replied that he did not want to speak for the
FY 11 legislature, but sometimes in the past, there had
been concern that when a large amount of money was
allocated to deferred maintenance and the spend rate was
not as fast as desired, then agencies would delay starting
the projects. He suggested that the reason for the delay
was that more time was needed after FY 10, which was a year
with a higher spend.
Co-Chair Edgmon commented that when he first joined the
House Finance Committee, retirement costs were increasing
considerably and there might have been some reallocation.
The operating budget was increasing significantly as well.
The 80s were an era of significantly depressed spending.
The number of Alaska State Troopers fell considerably in
the early 2000s as oil prices increased, and competition in
the job market in 2010 was likely intense. The Renewable
Energy Grant was first funded in 2008 and weatherization
alone would receive $300 million, while in 2007 it received
$3 million. The changes in spending in the operating budget
and capital budget had shifted the trajectory of overall
agency spending.
1:58:08 PM
Representative Josephson asked for more information on the
original capitalization and draw of the Capital Income
Fund. He asked how the fund was being spent.
Mr. Painter replied that the Capital Income Fund contained
proceeds from the Amerada Hess deposit into the Permanent
Fund. He explained that $424.5 million in proceeds were set
aside in a fenced-off account that was not supposed to be
used for Permanent Fund Dividends. The fund was initially
designated for any purpose other than dividends, which
meant it was spent freely on the capital budget. In FY 18,
it was designated specifically for deferred maintenance to
provide a more consistent source for deferred maintenance
spending, which was one of the expenses that was cut in FY
16 and FY 17. The fund was considered a UGF source in the
past because it could be used for any purpose other than
dividends. He explained that the amount in the fund was
simply the revenue derived from $425.5 million in proceeds.
Representative Josephson asked what a sustainable amount
would be to draw from the fund.
Mr. Painter responded that because the state was not
growing the deposit, the dollar amount had remained the
same since the initial deposit was made. Essentially, all
of the income could be spent every year. The fund was not
connected to the dividend and could be spent separately and
in its entirety. The fund was sweepable and the entire
balance of the fund or the entire deposit into the fund was
appropriated in the language section to the governor's
office to fully capture all the receipts based on current
projections. On average, about $28 million a year would be
allocated to deferred maintenance based on realizing about
7 percent income; however, the amount would vary depending
on the realized income of the Permanent Fund each year.
Mr. Painter continued on slide 12 and detailed school
construction and major maintenance. The blue bar
represented the one-time appropriation in FY 05 for the
design, construction, and maintenance of schools. Since
then, the state had appropriated funds mostly through the
major Maintenance Grant Fund or the School Construction
Grant Fund. There was an additional fund source that could
be used, which was the Regional Education Attendance Area
(REAA) fund or REA fund, which was capitalized in the
operating budget. The statutes governing the way school
major maintenance and construction appropriations could be
used had changed over time, but funds could currently be
used for either school construction or major maintenance in
either the REAAs or small rural districts that did not
necessarily have a tax base. He noted that the state funded
significant appropriations in the past totaling over $200
million at its peak in FY 09. The state spent over $150
million in FY 11 on school construction and major
maintenance. Spending dropped off during low capital budget
years but had been on the incline for the last few years.
2:02:23 PM
Mr. Painter continued to slide 13 and detailed funding for
renewable energy from FY 05 to FY 25. When revenue
decreased, renewable energy funding became nonexistent.
There was an appropriation to renewable energy of just over
$30 million in FY 13 but there were no other appropriations
until FY 23.
Co-Chair Edgmon understood that in FY 17, the legislature
passed waterfall legislation for the Power Cost
Equalization (PCE) Endowment Fund that contributed to
renewable energy funding in FY 23.
Mr. Painter responded in the affirmative. There were some
PCE funds available under the waterfall legislation for
renewable energy, which had contributed to the funding
increase. He turned the presentation over to Mr. Partlow.
2:04:03 PM
Mr. Partlow continued on slide 14. He explained that the
Legislative Finance Division (LFD) designated house
district locations for projects based on available
information. The locations were informational for the
legislature and not binding. He noted that 74 percent of
the Senate's version of the capital budget was classified
as statewide. Projects that did not have a specific
location or a specific impact limited to only one location,
would be given a statewide designation.
Mr. Partlow clarified that a statewide-designated project
did not necessarily have a statewide impact. Priority lists
were always classified as statewide, but the lists were
lengthy and there was usually only enough available funding
for one or two projects. While the funding was for
statewide purposes, it often would only be spent in one or
two specific locations. He noted that DOT had specific
allocations in both rural aviation and service
transportation. The UGF match portion was classified as
statewide. For each project, LFD could report on two sets
of information: physical location and impact. For example,
each University of Alaska (UA) campus was physically
located within a single district but would impact the
entire community. One type of report would explain exactly
where the project was located and the other report would
state the impact of the project.
Co-Chair Edgmon commented that his office had tried to
categorize funding by legislative district, by statewide
designation, by federal and state funding sources, and by
other sources. It was difficult to break the funding down
precisely by the district because a project could impact
multiple districts or could be based in one location but
impact populations all over the state, such as the Alaska
Native Medical Center (ANMC) skilled nursing facility in
Anchorage. He stressed that his office knew intimately how
difficult it was to quantify benefits by district. The
capital budget every year aimed to incorporate state
matching funds as well. He thought the slide was
interesting.
2:09:19 PM
Co-Chair Johnson added that she would like to know if a
district would be receiving funding from a project that was
not directly attributed to the district in the capital
budget. She assumed that it would be prudent if legislators
were alerted of any errors.
Mr. Partlow responded in the affirmative. The intention was
to provide information to legislators and feedback was
always appreciated.
Co-Chair Johnson added that she represented Palmer, which
had a significant court system. She thought it was hard to
understand that a courthouse that resided in Palmer was
considered a "personal project." She presumed that most of
her constituents do not often visit the courthouse. She
asked if there were any other lists that provided
information about the projects in a non-political manner.
She asked if there was any advice she could provide to the
courts on how to properly handle the situation.
Mr. Painter replied that the court system was a good
example of a situation in which the physical location of a
project was within one district while the impact of the
project was felt throughout the entire Mat-Su area and
perhaps beyond. He stated that there were two different
ways to report on the project: by location and by impact.
He stressed the importance of reporting that the project
would be impacting a larger area than Palmer. One of the
challenges was approximating the impact of the project
throughout Mat-Su. He noted that legislative districts were
not always necessarily geographic regions and LFD was
trying to make sense of the system.
Mr. Painter relayed that one of the projects that LFD had
struggled with was the Dalton Highway. The governor
submitted it as a statewide project and the highway spanned
from Representative Cronk's district to Representative
Thomas Baker's district, which were contiguous areas but
not within a distinct region. The project was designated as
statewide, but it was physically in two districts. He
thought that the process could often be subjective.
Compared to other states, Alaska's capital budget did not
have a particularly strong evaluative process due to the
volatility amount of money that was available to spend on
capital projects from year to year. In some years, the
state might have $100 million to spend on projects, and in
some years, $2 billion might be available. It was difficult
to have a baseline capital budget amount that dictated the
minimum annual spend required to maintain state facilities
and replace state facilities.
Mr. Painter added that an example was the Fairbanks Pioneer
Home which needed to be replaced at a cost of over $100
million. There was no plan or funding to allocate to the
project and the legislature would need to decide how to pay
for it. If the state had a $500 million capital budget
every year, it might be easier to plan the amount of
funding that would be allocated to various projects and be
able to plan out within that amount what the state would
spend each year. The volatility meant that the legislature
was often faced with difficult choices of how to allocate
funding and determine the state's priorities.
2:15:11 PM
Co-Chair Johnson asked if the governor had always moved the
court system funding forward in the past. She asked how the
process had historically worked.
Mr. Painter responded that the question would be best posed
to the court system. The court system was permitted to
submit its budget to the state separately because it was an
independent branch of government. The governor typically
submitted the legislative and judiciary budget to
streamline the process; however, the governor omitted an
item from the court system's recent budget submission,
which was a violation of an agreement made in the 1960s
stating that the governor would submit the court system's
budget on the court's behalf with no changes. The court
system thought that the omission seemed to be a preemptive
veto by not giving that to the legislature. He was not
certain if there was an agreement on how the capital budget
would be transmitted and whether it needed to be included
in the governor's budget or if the court system would
request it separately. There was an agreement in place
regarding the operating budget that the governor would
transmit the court system's budget with no changes.
Co-Chair Johnson asked if the agreement was available to
view and if there were related documents that she could
access.
Mr. Painter replied that he thought the courts had the
agreement stored somewhere. He had only heard a description
of the agreement and had not seen it.
Co-Chair Johnson found the agreement to be a curiosity.
2:17:49 PM
Representative Josephson commented that he had a friend
called Dr. Rick Steiner who was a retired naturalist and
professor who encouraged Representative Josephson to
initiate a resiliency fund. The fund could help respond to
things like fires, landslides, and floods and he thought it
was appropriate considering the comments about the Pioneer
Home. He asked what he could tell Dr. Steiner about how the
state planned to respond to the aforementioned occurrences.
He added that Dr. Steiner's focus was on climate mitigation
and climate change mitigation infrastructure. He asked if
there was an overarching system or if disasters were
responded to ad hoc.
Mr. Painter responded that to some extent, some of the
events would be responded to using disaster relief funds;
however, there were also associated capital implications.
There was an appropriation in the current capital budget
for stabilizing a dam in Wrangell that was of emergent
concern because of the Wrangell landslide. There were past
projects that came about after an Anchorage earthquake that
were not covered by insurance and did not qualify for
disaster relief funds that were generally funded through
UGF.
Representative Josephson asked if he was correct that other
states had a much more sophisticated approach through a
resiliency fund.
Mr. Painter responded that other states did have resiliency
funds. He explained that Alaska had larger budget reserves
than most states and currently had $2.7 billion in the CBR.
The state often did not have separate savings accounts,
partly because of Alaska's constitutional prohibition on
dedicated funds. He agreed that it was a common structure
in other states with different kinds of financial setups.
Co-Chair Edgmon asked if there was a formal definition of
deferred maintenance or a definition that was applied
uniformly across the university system.
Mr. Partlow responded in the negative.
Representative Galvin recalled that in the prior year,
someone gave a presentation about deferred maintenance and
the committee asked what the best practice was. She
understood that the committee was told that between 2.5
percent and 3 percent of the overall value of the property
would be the expected expenditure. She asked if her
recollection was correct.
Mr. Partlow responded in the affirmative. He explained that
the industry standard of the amount of money that should be
set aside for general maintenance to avoid creating
deferred maintenance was between 1 percent to 4 percent of
the value of a property.
Representative Galvin asked how much the state should set
aside.
Mr. Partlow responded that he was reluctant to do the math
on the spot, but estimated that it would be in the range of
$100 million.
Representative Galvin understood that $100 million would be
the average if the state were to be forward-thinking. For
example, the Palmer Court System needed to be replaced, and
many other projects needed attention. She asked if it would
make sense to take a different approach similar to the
strategy employed by Governor Sean Parnell's administration
and allocate a pre-determined amount of money for capital
spend. She asked if there were any other approaches the
legislature could consider.
Mr. Partlow replied that he could not speak to the policy,
but the deferred maintenance backlog was reduced under
Governor Parnell's program; however,it had since grown
substantially. He thought the reduction was a testament to
the effectiveness of a focused approach in addressing the
deferred maintenance backlog.
2:23:52 PM
Mr. Partlow continued on slide 15 and offered a refresher
on the timeline and effectiveness dates of capital
projects. He explained capital projects were different than
operating appropriations and had a five-year timeline plus
substantial and ongoing work. If a state agency or grant
recipient was continuing to do substantial and ongoing work
on a capital appropriation, the project could go on for
years. He noted that capital appropriations could continue
for up to 20 years as long as the project was actively
being worked on. Once a capital project was completed, any
remaining balance could be reappropriated by the
legislature for another purpose. There was a political
agreement that when an appropriation in one district
lapsed, the appropriation would be reappropriated within
the same district.
Mr. Partlow explained that due to its extended timeline,
the capital budget was funded slightly differently than the
operating budget. Many of the items in the capital budget
could be funded as supplemental items if the funding was
available. Most of the in-district discretionary spending
in the Senate's current version of the budget was
accomplished through FY 24 items because of funding
availability. He added that the Office of Management and
Budget (OMB) released a document called the Capital
Appropriation Status Report (CASR) as a resource for
legislators, staff, and the public. The report was
assembled in the winter and released publicly in February.
The report offered an update on every single active capital
appropriation and the status of every project at the time
of the report's assembly. The report provided a contact
number for each capital project to receive an up-to-date
assessment of the status of the project and whether
potential funding would be lapsing.
Mr. Partlow recalled that Representative Hannan had asked
about Juneau Access Project appropriations and relayed that
there were a number of previous appropriations for the
project. As long as the funding was ongoing and there was
substantial project activity, the project could essentially
be in place indefinitely. The legislature had the ability
to reappropriate unobligated balances from any project. If
there was no contractual agreement for the funding, it was
at the discretion of the legislature to reappropriate the
funding for a different purpose.
2:27:16 PM
Representative Hannan asked what the term "ongoing and
substantial" meant. She asked whether DOT would determine
whether a project like Juneau Access was ongoing and
substantial. She asked when the money would become
available for reappropriation.
Mr. Partlow responded that it was a determination made by
OMB and it was often highly subjective.
Representative Galvin understood that $100 million would
need to be set aside if the state were to engage in best
practices. She asked what the state's current deferred
maintenance costs were.
Mr. Partlow responded that he did not know the specific
number off the top of his head but recalled that it was
around $45 million for all different funding sources.
Representative Galvin understood that the state had
remained at $45 million for the last three years, which was
a loss of roughly $60 million each year. She assumed that
costs continued to accumulate. She had one more question.
Co-Chair Edgmon requested that she hold the question.
Representative Galvin stated that she could hold the
question but it was important.
Co-Chair Edgmon noted that the committee would transition
to the next presentation.
2:29:29 PM
AT EASE
2:37:46 PM
RECONVENED
^PRESENTATION: FY 25 CAPITAL IMPROVEMENT PROJECTS SCHOOL
MAJOR MAINTENANCE GRANT FUND AND SCHOOL CONSTRUCTION GRANT
FUND
Co-Chair Edgmon noted that time for the presentation was
limited and he hoped that comments and questions would be
reduced. He encouraged committee members to speak with
department staff offline.
2:38:50 PM
LORI WEED, SCHOOL FINANCE MANAGER, DEPARTMENT OF EDUCATION
AND EARLY DEVELOPMENT, introduced herself.
LAUREL SHOOP, LEGISLATIVE LIAISON, DEPARTMENT OF EDUCATION
AND EARLY DEVELOPMENT, introduced herself.
Ms. Weed introduced the PowerPoint presentation "State-Aid
for School Capital Projects: Grant and Debt" dated April
23, 2024 (copy on file). She advanced to slide 3 and
detailed the state's historic school capital funding. There
were a few basic pieces of capital funding of schools:
federal, state mechanisms through the general fund, and
grants, including general obligations and Alaska Housing
Finance Corporation (AHFC) revenue bonds. Also available
was the reimbursement program and school funds, which she
would talk about in future slides. Additionally, the local
education agencies (LEA) and local contributions through
capital reserves or through municipal debt. More recently,
the legislature put into place a statutory requirement for
a school funding report.
Ms. Weed advanced to slide 4 and the annual report on
school construction and major maintenance funding in the
state. The report was first completed in 2013 and had been
presented annually ever since. There was approximately $1.7
billion in total funding in both the debt programs and the
grant, grant projects, and the state share.
Ms. Weed continued to slide 5 and explained that the next
slides would cover the information found in Handout #1
(copy on file), which discussed the most current report
required by SB 237 [passed by the 26th Alaska State
Legislature in 2010]. The report identified projects by
district and the funding amounts.
2:41:20 PM
Ms. Weed responded to Representative Galvin's earlier
question about deferred maintenance. The last page of the
report provided the estimated 3 percent that would be
matching the deferred maintenance for school districts,
which were separate from the state-owned facilities.
Ms. Weed continued to slide 6 and noted that there were a
couple of funding option mechanisms that were in place
through statute including the School Construction Grant
Fund (SCGF) and the Major Maintenance Grant Fund (MMGF).
More recently, the legislature put into place the Regional
Educational Attendance Area (REAA) and Small Municipal
School District School Fund (SMSDSF), which was indexed to
the debt funding that was provided to municipal school
districts and multiplied by a constant multiplier. The fund
was a relatively constant monetary stream and had allowed
the Department of Education and Early Development (DEED) to
phase funds and projects and then follow up in the
following year when the funds were available. The fund had
helped move forward projects on the school construction
list and helped fund major maintenance.
Ms. Weed moved to slide 7 and relayed that there were seven
different categories of projects divided into either the
school construction category or the major maintenance
category. Each project was color-coded by category on the
slide. She explained that the school construction projects
were intended to avert imminent danger or correct life-
threatening situations, to house students who would
otherwise be unhoused, or to modify an existing building to
better fit the educational program. Major maintenance
projects would be protection of structures, correction of
code deficiencies, or achieving operational cost savings.
Different entities were eligible for each of the different
funding streams.
Ms. Weed advanced to slide 8 and detailed the projects by
fund type. The school construction and major maintenance
projects were eligible for REAA funds. Debt reimbursement
was not part of the grants. There were currently three
small municipal districts and the districts had been
reducing in number. The small municipal school districts
were eligible for the REAA funds but larger cities and
districts were not. However, the larger cities and
districts were eligible for school construction major
maintenance funding and the debt reimbursement program.
2:45:12 PM
Representative Hannan noted that Handout #2 (copy on file)
listed the debt of 21 school districts and the state's
share of the reimbursement. She understood that not all
districts had debt. She asked if the 10 districts included
in the handout with no listed debt would still be eligible
for school debt reimbursement. She was confused as to why
some districts without debt were included on the list.
Ms. Weed responded that the districts likely had prior debt
but had not been removed from the chart. She noted that the
state was partially responsible for reimbursement for
Anchorage until FY 43. All other schools had zero debt for
several years prior to FY 43.
Representative Hannan asked if the data on the chart
included all of Anchorage's debt. She asked if the chart
went through FY 43 because it was inclusive of all of
Anchorage's debt or whether the state's debt obligation to
Anchorage extended beyond FY 43.
Ms. Weed responded that the chart represented the full debt
obligation for Anchorage.
Ms. Weed continued on slide 9 and explained that all school
districts were able to apply through the grant program to
be eligible for a Capital Improvement Project (CIP). All
districts needed to submit a six-year improvement plan,
have a functioning fixed asset inventory system, and
provide proof of the required property insurance. Districts
also needed a facility management program approved by DEED
to demonstrate that the requested project was a capital
project and not routine maintenance.
Ms. Weed advanced to slide 10 and relayed that CIP grant
applications were due to the department from the school
districts on or before September 1 of each year. The
application materials were available on the website for
public viewing. Projects would then be ranked according to
the criteria that were set out both in statute and
regulation. After eligibility was confirmed, the CIP
priority lists were issued on November 1 and final lists
were available after the reconsideration period.
Ms. Weed continued to slide 11 and offered an overview of
the grant participation and eligibility history from FY 15
to FY 25. The chart on the slide showed the number of total
grant applications that had been received for major
maintenance and school construction. It also showed the
number of projects that could have been determined
ineligible due to a variety of reasons, usually lack of
documentation.
Ms. Weed moved to slide 12 and a chart of the grant awards
from FY 15 to FY 24 in the SCGF, MMGF, and the REAA school
fund. There had been some variety between the three funds,
most consistently in the REAA fund which was primarily used
to fund school construction.
2:49:51 PM
Ms. Weed continued to slide 13 which included a chart of
the total eligible grant projects and actual grant funding
by fiscal year. The specific amounts funded were the new
appropriations which did not include re-appropriations from
existing funds, which was why some years show a $0 under
amount funded.
Ms. Weed continued to slide 14 and the appropriations into
the REAA and SMSDSF. There had been instances of partial
vetoes and full vetoes, which were made up in the FY 22
supplemental. The total amount since FY 13 that had been
provided to the REA was just about $470 million.
Ms. Weed advanced to slide 15 and stated that the debt
reimbursement program was established in AS 14.11.100 and
school districts were required to submit an application to
be eligible. The slide showed the allocations from the REAA
and SMSDF from FY 14 through FY 23.
Ms. Weed moved to slide 15 and explained that Debt
reimbursement was open to all cities except for "third
class" cities. All districts were required to 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.
Ms. Weed continued to slide 17 and offered an overview of
debt reimbursement trends over the years. The program began
in the 1970s during which time the annual debt service
reimbursement percentage was 100 percent. The percentage
had decreased over time and most recently was down to 60
percent to 70 percent.
Ms. Weed continued to slide 18 and quickly reviewed a chart
of the historic debt funding amounts by reimbursement rate.
She advanced to slide 19 which showed the current
outstanding debt in the debt reimbursement program. The
black line showed the state share of the anticipated debt.
2:53:24 PM
Ms. Weed continued on slide 20 which included a graph of
the debt reimbursement trends over time. There were some
periods of time in the 80s and 90s which the state aid did
not match the actual reimbursement. There were a couple of
instances in more recent years where the debt reimbursement
program was partially or fully vetoed, but the funding was
fully made up in the FY 22 supplemental.
Ms. Weed moved to slide 21 and explained that after bonds
were sold, the debt department identified how much of the
approved projects were funded by the new bond. A probation
for the bonds were established based on approved project
rates. Districts had the option to request a refund or
refinancing of the bonds. The department ensured that the
refundings would equate to a cost savings for the state and
the districts.
Ms. Weed continued to slide 22 and detailed a comparison
between various funding sources. She reiterated that REAA
funds were available to all REAA districts and three small
municipal districts. The projects were funded based on the
DEED priority lists. She noted that there were three
specific eligibility requirements for REAA: no new space
for major maintenance, only eligible space for school
construction, and priority to school construction. The
REAAs had a 2 percent participating share in statute, and
the three small municipalities range in the participating
share rate from 10 percent to 20 percent. The funding of
the REAA fund was tied to the annual appropriation for debt
reimbursement.
Ms. Weed continued that the school construction and major
maintenance grant funds were available to all school
districts. The funds were the state share of the project
costs and were ranked in the priority list by DEED. The
specific eligibility requirements were similar to the REAA
fund. Districts ranged in the participating share between
the 2 percent for REAAs and 5 percent to 35 percent for the
other school districts.
Ms. Weed added that the debt reimbursement funding program
was available to any municipality that had the ability to
bond. The funds were a portion of the annual municipal debt
payments. The local government would set its own priorities
for which projects get funded, meaning that projects that
would not otherwise be eligible for grants would not be
funded. The funds were particularly aimed at funding
projects that were not eligible for grants or eligible for
additional space. Districts' participating shares were 40
percent of the 60 percent bonds if projects were not
eligible for space, and 30 percent of the 70 percent bonds.
State funding was based on when the bond was passed and
subject to appropriation.
2:57:26 PM
Ms. Weed continued to slide 23 which included some links to
additional handouts. She encouraged committee members to
look through the resources.
Co-Chair Edgmon asked Ms. Weed to elaborate on the meaning
of participating share.
Ms. Weed responded that participating share was the
district's participating share that was calculated when the
department compiled the priority lists. The department
determined which portion of the district's requested amount
was eligible for funding in order to determine the
department's recommended amount. The recommended funding
amount was then divided into the aforementioned
percentages: the 2 percent for REAAs and 5 percent to 35
percent for the other school districts. The department then
allocated the participating share plus the state share,
which together equaled the total DEED recommended amount.
Representative Hannan asked which three small districts Ms.
Weed had been referring to throughout the presentation.
2:59:51 PM
AT EASE
3:00:16 PM
RECONVENED
Ms. Weed responded that Hydaburg, Kake, and St. Mary's were
the three small districts. There were two other districts
that were no longer involved.
Representative Hannan asked if the two districts that were
no longer involved had now grown into being considered a
city and were no longer eligible to be a small
municipality.
Ms. Weed responded in the affirmative.
Representative Hannan recalled that the slide show stated
that there were 19 REAA districts, three small districts,
and 31 city or borough districts, totaling 53 areas. She
understood that the fifty-fourth district was Mt.
Edgecumbe, which was not part of the lists because it was a
state agency and received state agency UGF funding.
Ms. Weed responded in the affirmative.
Representative Coulombe referred to slide 9 and shared her
understanding that the requirements for districts to build
CIPs was extensive. She thought the requirements seemed
especially cumbersome for smaller districts with fewer
resources. She asked if smaller districts received
assistance from DEED.
Ms. Weed replied that districts had to use their own
resources. The department was available as a technical
advisor, but it could not both assist with the applications
and fairly evaluate the applications.
Representative Coulombe asked what the vetting process was
for project estimates. She asked who was responsible for
determining the cost for each individual project and
whether DEED sometimes pushed back against the estimates.
She asked for more information on the process.
Ms. Weed responded that DEED reviewed the project costs.
Districts typically procured a cost estimation from either
a design firm or professional cost estimator. The
department provided a conceptual tool to offer a baseline
estimate and the professional estimates were compared to
the estimates from the tool. The department reviewed the
scope of the project to ensure that it met the construction
and design standards. The requested amounts on the major
maintenance and construction list were not always the
amount that was approved by DEED. She shared that DEED
sometimes determined that a project had an ineligible scope
or the cost was too high. There were some occasions in
which DEED increased a project's budget if the estimate
would likely not cover the scope of the project.
Representative Coulombe understood that if there was a
budgetary discrepancy, it would be adjusted by the
department. The applications with discrepancies were not
simply rejected, but the budgets were adjusted by DEED.
Ms. Weed responded in the affirmative.
3:04:28 PM
Representative Josephson noted that Handout #5 (copy on
file) stated that Anchorage was seeking site improvements
at Kincaid Elementary and he was aware that a bond package
was recently approved for Inlet View Elementary. He asked
why a district would not bond Kincaid and seek site
improvements for Inlet View. He asked for more information
about the strategic process.
Ms. Weed responded that she could not speak for the
districts, but the grant program allowed for reimbursements
of costs and many of the projects that Anchorage had put
forward were bonds that had been approved by voters. She
did not have information on district's decisions on which
projects to put forward to the voters.
Representative Cronk asked what the cost was for a district
to add a project to the major maintenance list.
Ms. Weed responded that it varied for each application and
the scope of a particular project. If a district were to
employ a grant writer, costs could add up quickly. She had
seen grant writing services priced at $2,000 to $3,000. The
grant approval process was designed to ensure that each
element was evaluated and the project was as cost-effective
as possible. The project costs were reimbursable if a
district needed to spend money to facilitate the completion
of a project.
Representative Cronk referred to slide 15 and relayed that
he had worked on some of the projects on the slide. For
example, he was involved in the cooling and repairs project
for Sheldon Point. The team hauled millions of cubic feet
of gravel to fill a lake and poured a cement pad to build a
school on top of it. The team had to cut the floor out of
the school to access the pipes and now needed another $3
million to ensure that the cement pad would not sink;
however, it was likely to sink. He asked how the state
could afford to build schools costing hundreds of millions
of dollars across the entire state. He thought the school
sinking into the tundra spoke to poor engineering. The
Sheldon Point School would likely need to be replaced
because it would sink into a hole. He asked who was held
accountable for such problems. The state needed to ensure
the projects were being handled efficiently. He thought
that new schools needed to be built soundly and without
needing more money from the state every few years. He found
it especially frustrating that Sheldon Point School was
sinking.
3:09:57 PM
Ms. Weed responded that the department asked for Geotech
investigations before building schools as part of the
process to catch any errors. The department then reviewed
the majority of the investigations.
Co-Chair Edgmon remarked that the conversation was a
perfect segue into the Sleetmute school project, which was
currently number 23 on the priority list. The school was
not accessible and condemned. He asked why such a project
would not be higher up on the priority list.
Ms. Weed responded that there were several reasons why
projects move up and down the list. The Sleetmute project
had a request for its previous score to be reused to avoid
needing to submit a new application. There were other
projects that provided additional information, which
increased the project score. There were also several new
projects that were not on the major maintenance list in the
prior year that ranked above Sleetmute, causing it to drop
down the list. Ultimately, Sleetmute dropped in the
rankings by maintaining its score from last year.
Co-Chair Edgmon understood that it was a technicality in
which the real-world situation did not align with the
priority list. His frustration was not necessarily directed
at anyone in the department, but he was frustrated with the
process.
Ms. Weed responded that the Bond Reimbursement and Grant
Review Committee recently met earlier in the month and
decided to review the application process. The meetings
were publicly noticed and anyone was welcome to provide
comments in advance and participate in the meetings during
public comment periods.
Co-Chair Edgmon asked when the committee would next meet.
Ms. Weed responded that she did not think the next meeting
had been scheduled yet.
Co-Chair Edgmon asked if his office could be notified of
the next meeting. He understood that many events occurred
during the summer and that it was a busy time. He did not
understand why the Sleetmute school project had not been
tended to. He agreed with Representative Cronk's point that
spending $100 million on a single school made it very
challenging to work down the priority list. He recently
read an article stating that 31 communities in the state
were identified as needing to relocate.
Co-Chair Edgmon noted that there were several
superintendents and other representatives from school
districts online for invited testimony.
3:14:44 PM
LISA PARADY, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, JUNEAU (via teleconference), wanted to
focus on SB 187 and shed light on the critical need for
additional investment in major maintenance and capital
construction for school districts. The Alaska Council of
School Administrators (ACSA) joint submission statements
reflected the shared concerns of the council's diverse
membership, which included superintendents, principals,
school business officials, and education leaders across the
state. The safety of students, staff, and communities was
paramount, as was the recruitment and retention of high-
quality teachers and educators. She was grateful that the
committee would hear directly from school districts as it
would provide invaluable insight into the challenges urban,
rural, and remote school districts across Alaska were
facing.
Ms. Parady continued that the ACSA supported reliable,
adequate, and equitable investments and funding DEED's
school construction process for capital projects and major
maintenance to existing school district facilities. The
investments were essential to afford students and educators
a secure and conducive learning environment; however, the
state was not going far enough. Alaska's public school
infrastructure faced significant challenges with over 55
percent of facilities exceeding 40 years in age, and 71
buildings surpassing the 50-year mark. The maintenance
needs of the aging structures were mounting, but state
funding remained limited. The major maintenance lists
grappled with a backlog encompassing 95 critical projects,
which were only representative of the projects for which
school districts had submitted applications. There was a
"black hole" of additional projects that some districts
could not afford to contribute the amount of money required
to apply to be considered on the list.
Ms. Parady relayed that although the council appreciated
the funding allocated in the current capital budget for 15
projects, the funding barely scratched the surface of the
immense statewide maintenance requirements. Students
endured learning environments plagued by condemned
buildings, black mold, and leaky roofs, among other issues.
Without additional state support, the deferred maintenance
issues would only escalate in cost and severity over time.
Beyond the immediate safety concerns, the impact of
neglected maintenance extended to teacher recruitment and
retention. Substandard facilities and housing conditions
deter prospective educators from exasperating existing
challenges in attracting and retaining qualified staff.
Addressing the issues was just one important part of
safeguarding the integrity of Alaska's education system.
She implored the committee to consider additional
allocations for major maintenance projects and recognize
the urgency and magnitude of the need across the state. She
thought that a 12 percent allocation for 15 projects fell
far short of adequately addressing the widespread
infrastructure challenges faced by schools. She thanked the
committee for its time.
Representative Galvin noted that Ms. Parady mentioned that
55 schools were over 40 years old. She assumed the schools
were not all on the priority list. She asked what would
happen when the schools were in disrepair but still needed
to function. She asked where the money would come from and
whether it would be from the state or from community
efforts.
Ms. Parady responded that the funding often came from
operating costs, but it also often landed on municipal
partners. She relayed that Nils Andreassen, the Executive
Director of the Alaska Municipal League (AML) that AML
often had to come to the rescue of buildings that were near
collapse. The operating dollars were stretched as much as
possible and the flat budgets for the last decade had made
funding difficult.
Representative Hannan noted that Ms. Parady referenced that
the current list had funding for 15 projects. She asked if
she could conclude that the current version of the Senate's
capital budget would fund school major maintenance through
project 15 at an aggregate amount of $36.1 million.
Ms. Parady responded in the affirmative.
Co-Chair Edgmon offered a reminder that testimony would be
limited to three minutes to allow everyone the opportunity
to speak.
3:20:25 PM
TERRI WALKER, NORTHWEST ARCTIC BOROUGH SCHOOL DISTRICT,
KOTZEBUE (via teleconference), relayed that in FY 23, the
Northwest Arctic Borough School District (NWABSD) had a
$1.5 million deficit, in FY 24 it was at $8.2 million, and
the district's preliminary deficit in FY 25 was $14
million. The deficits were all due to increased costs. She
explained that the district had to provide a match or
participating share in order to move forward with a project
when the fund balance was used to help fund CIPs. The
district's six-year capital improvement needs had about six
projects on the list. One of the projects was the renewal
of the school in Selawik as the fire panel was not
currently functional. In the borough, about eight of the
schools did not have functional fire panels. She explained
that the fire panels were often outdated and when the
panels broke, the necessary replacement parts were no
longer available. Currently, an individual was hired to be
a 24-hour fire watchperson to monitor the building because
of the fire panels being nonfunctional.
Ms. Walker continued that another of the district's six
projects was replacing the Deering School for school
construction which was "bursting at the seams." Classrooms
in the district could only head up to 50 degrees when the
west wind was blowing and kids had to attend class in the
gymnasium. Many other unexpected costs had occurred over
the past year, such as issues with the pump house, water
pipe leaks, freeze-ups, backup generator problems, and
electrical issues. The buildings were over 30 years old and
were becoming safety risks. She thought the primary focus
for superintendents and staff members should be educating
students, but maintaining the operational integrity of the
buildings required a significant amount of work.
3:24:28 PM
CYNNA GUBATAYAO, KETCHIKAN GATEWAY BOROUGH, KETCHIKAN (via
teleconference), testified on behalf of the Ketchikan
Gateway Borough (KGB) to express the borough's support for
increased funding to the DEED major maintenance program.
Well-maintained facilities were an integral part of a
quality education program. The borough and the school
district worked together on major maintenance of the school
buildings and spent a significant amount of local funds on
school facilities. The major maintenance grants were
incredibly helpful and important to school districts and
municipalities around the state. Without the grants,
repairs often came from reserves or operating budgets.
Failing to adequately fund DEED's major maintenance program
deferred critical projects and facilities would eventually
fall into disrepair. She explained that it was much
costlier to catch up after buildings became nonfunctional.
She reiterated the need for additional funds for DEED's
major maintenance grants program.
3:25:50 PM
ANDREW RATLIFF, CHIEF FINANCIAL OFFICER, ANCHORAGE SCHOOL
DISTRICT, ANCHORAGE (via teleconference), offered a brief
overview of the Anchorage School District's (ASD)
facilities and major maintenance needs associated with its
school buildings. The district managed 90 facilities and
leased an additional 10 to support over 130 schools and
programs. There were 84 school buildings and six other
support facilities for transportation, food service,
operations, maintenance, the purchasing warehouse, and the
IT data center. The average age of ASD's facilities was
about 37 years. There were 33 schools that were over 50
years old and 15 schools over 60 years old. Over the past
26 years, the district had replaced only six schools, and
another 19 schools had total renewals done. Other schools
had component renewals, such as roads and boilers, as well
as some much-needed security upgrades. The district closed
three elementary schools, combined programs together to
save money, and merged Alaska Middle College into King Tech
High School.
Mr. Ratliff continued that the district's current major
maintenance backlog currently exceeded $1 billion, which
was up from $77 million just 15 years ago. Over the same
15-year period, the district's bond debt had been reduced
from about $806 million to $473 million, as the appetite
for issuing voter-approved bonds had waned. Before 2015,
the state reimbursed districts between 60 percent and 70
percent of the cost of voter-approved bonds, which provided
districts with a vital offset to help maintain school
buildings.
Mr. Ratliff relayed that in 2015, the legislature shifted
the entire cost of new bonds onto the local taxpayers,
which made it less palatable for the school board to ask
for large bonds and the community to approve large bonds
for school improvement. The reduction in the ability to
bond in conjunction with flat funding had exacerbated the
growth of the major maintenance backlog, which put more
systems at risk of failure and increased costs when
emergency procurements were needed. In 2024 alone ASD had
boilers fail at four different schools which cost about
$600,000 to replace. The elevator at Bartlett High School
had failed and cost about $300,000 to replace and the water
tank at the student nutrition facility failed, which cost
another $300,000. The unplanned capital costs, coupled with
about $875,000 that was spent on unanticipated snow
mitigation efforts to direct the snow in Anchorage, had
taken other planned projects offline. He concluded that ASD
and other districts in the state heavily relied on the
state for much-needed major maintenance funding.
3:28:45 PM
KIM SWEET, DIRECTOR OF OPERATIONS, LOWER KUSKOKWIM SCHOOL
DISTRICT, BETHEL (via teleconference), relayed that the
status of the Lower Kuskokwim School District's (LKSD)
major maintenance needs was that LKSD currently had
approximately $14 million in deferred maintenance projects
on the major maintenance CIP list. The projects ranged from
number 11 to number 61. One of the projects was completed
several years ago and the district had been seeking
reimbursement for the project through the CIP process.
Ms. Sweet stated that additionally, LKSD had over $167
million in projects on the school construction CIP list,
all of which were incredibly important. One of the projects
was number 56 on the list, the Akiak School renovation. She
explained that Akiak School had numerous challenges related
to the age and condition of the facility. Two years ago,
the school gym experienced a partial roof failure and a
portion of the gym had remained closed since the event. The
closure had impacted students' use of the gym for classes
and for sports. The closure also impacted the community as
the gym was often used for larger community events. She
thought it was highly unlikely that the school would
receive funding for the renovation project anytime soon as
it was 56 on the priority list. The students lacked the
opportunity for meaningful gym classes and activities for
all ages during the school day, and students had to travel
to neighboring schools to use the gyms to participate in
after-school sports.
Ms. Sweet added that the district had another school
construction project to remodel Anna Tobeluk Memorial
School in Nunapitchuk. The project has been on the CIP list
for 10 years. In July of 2023, a ramp at the back of the
school reached complete failure and the district hired a
structural engineer to fully assess the foundations.
Several rotting beams were discovered and as a result, the
district had to close a few sections of the school
permanently until all beams could be replaced. The project
was moved up the CIP list in response to the urgent
situation. Each project she highlighted had been on the CIP
list for many years, and the longer a project remained on
the list, the more likely there would be structural
failures. The price to seek bids for projects continued to
rise and many of the bids received by the district were
either unresponsive or the difference was covered by LKSD
funds.
3:32:41 PM
SCOTT BALLARD, SUPERINTENDENT, YUPIIT SCHOOL DISTRICT,
AKIACHAK (via teleconference), relayed that the Yupiit
School District (YSD) had three schools upriver from
Bethel. He had been a teacher or principal for over 20
years and encouraged the committee to increase the
maintenance and construction funds. The district's top
priority right was to the operation of the Tuluksak School,
but also to the environment. The school was 60 years old
and needed some critical updates, such as the cleanup of
the existing tank fuel tank and tank farms, containment,
and installing new double-wall fuel tanks is critical. The
total cost of the project was $4,664,000. The district was
anticipating a budget deficit next year of $1.7 million,
which was down from the district's original budget which
would have been a debt of over $3 million. The district had
cut positions and were looking for creative solutions to
continue district operations with increased costs, fuel,
and utilities. He appreciated the committee's time and was
confident that members were doing their best for Alaska's
schools.
3:34:43 PM
JAMIE BURGESS, SUPERINTENDENT, NOME PUBLIC SCHOOLS, NOME
(via teleconference), explained that Nome Public Schools
(NPS) had two major campuses. The first campus was the Nome
Belts Campus, which was built in the mid-1960s and housed
the middle high school, the district office building, the
charter school, a department building, and the facilities
building. The second campus was about five miles away in
the town of Nome proper, which housed the elementary
school, which was completely rebuilt in the mid-1980s.
Currently, NPS's project of most concern was the roof
replacement for Nome Belts Middle High School. The last
time the roof was entirely replaced was in 1970. The school
had a partial roof replacement in 2003 and the other
portion of the roof needed to be replaced. There had been
several instances of small roof collapses within the
classrooms. The tiles would get wet and moldy, which caused
concern for students, staff, and community members. The
project was fully funded in the fall of 2019, but COVID-19
derailed the project. The funding was now included in a
supplemental request. The project was originally funded at
about $2 million but the total cost of the project was
estimated at about $6 million.
Ms. Burgess was in the process of preparing for the next
CIP run including a request to have the roof replaced at
Nome Elementary School, which was over 40 years old. The
cost of an engineer to evaluate the roof and write an
estimate was $15,000 to $20,000 and the school did not have
the resources to complete the applications in-house. There
was an opportunity to reuse the scores from the prior year,
which meant that the project would not be re-scored, but
the scores would be compared to all of the other scores for
all of the applications that year. Oftentimes when scores
were reused, a project would drop on the priority list,
which was what happened to the roof replacement project.
The project was not slated to be addressed in the current
appropriation that was available.
Ms. Burgess was grateful that a project to acquire a new
generator was set to receive an appropriation in the coming
year, which was critical in small communities that relied
upon generators in emergencies. The current generator was
undersized and was not suitable for significant emergency
events. In total, the school had four projects on the list
for approximately $6 million. There was another $8 million
in deferred maintenance for projects that had never been
submitted, and costs continued to rise. In some cases, the
roof issues were significant enough that the schools'
property insurance had to be engaged as an insurance claim,
which would continue to drive up property claims and
premiums every year, which had risen significantly.
3:40:27 PM
TAMMY DODD, SUPERINTENDENT, BERING STRAIT SCHOOL DISTRICT,
ANCHORAGE (via teleconference), explained that Bering
Strait School District (BSSD) consisted of 15 schools,
including schools on St. Lawrence Island and Little Diomede
Island. She introduced Mr. Gary Eckenweiler who would
provide more information.
GARY ECKENWEILER, DIRECTOR OF FACILITIES AND MAINTENANCE,
BERING STRAIT SCHOOL DISTRICT, ANCHORAGE (via
teleconference), relayed that like all rural school
districts, BSSD had major maintenance needs. The district
was able to keep up with regular maintenance fairly easily,
but major maintenance had been getting more difficult. They
had a capital projects account for years, but the account
was quickly depleting and the situation was becoming dire.
He recalled that Mr. Ballard from YSD spoke about the tank
farms and agreed that ensuring that the tank farms were up
to date was crucial. He shared that BSSD owned 15 tank farm
facilities and there were a couple of tank farms that
needed to be replaced. The tank farm in Teller was built in
1967 and stored 48,000 gallons of fuel oil, which was the
annual usage in Teller. The farm had always been on the
district's major maintenance list, but the cost was
prohibitive. One of the old tanks started seeping fuel, and
BSSD had to build a new tank farm for $2 million in Teller,
another one for $1.4 million in Wales, and clean up the
fuel spill. He relayed that fuel spills and other disasters
were more likely to occur when communities did not receive
funding assistance.
Mr. Eckenweiler understood that the committee aimed to fund
the top 20 projects on the CIP list, but if the committee
could fund the top 20 projects, over 15 different school
districts would be positively affected. He relayed that
BSSD did not apply for many major maintenance projects,
because it was unlikely to receive the funding.
3:44:46 PM
MADELINE AGUILLARD, SUPERINTENDENT, KUSPUK SCHOOL DISTRICT,
ANIAK (via teleconference), encouraged the committee to
increase the funding for major maintenance projects to $60
million to impact the backlog of requests and to address
the emergency repairs. She highlighted the need to complete
the Sleetmute project at a recommended cost of $1.6
million. She noted that the Kuspuk School District (KSD)
was an REAA and was reliant on the state to build the
initial schools in six of the district's seven villages and
to maintain all of the facilities. Five of the six schools
remained in use and the buildings were still owned by DEED.
The Sleetmute school was number 23 on the major maintenance
list, even though the district had submitted requests for
funding for 17 years. Each year the project was delayed,
the damage spread, the cost to repair the damage became
greater, and the potential threat to students and staff
increased. The deteriorating conditions of the schools were
a pressing concern. The foundation damage was threatening
the structural stability of the building, while the water
damage had caused considerable deterioration and mold
growth, impacting the health and safety of the students and
staff. Following an on-site inspection in the fall of 2023
in which an engineering team was monitoring the foundation
and structural deterioration, school district
administration received notice that significant portions of
the school facility should not be occupied for any other
use than light storage and to maintain the building until
repairs could be made.
Ms. Aguillard added that Alaska needed to get creative
about coordinating across agencies when talking about major
maintenance, specifically for rural schools. Four years
ago, the district secured an emergency construction grant
of almost $1 million through the Office of Impact Aid to
supplement the Sleetmute school repair costs. The emergency
application was developed and timed in anticipation of a
runway airport project that was to be completed in
Sleetmute, which the district recognized as a cost-saving
opportunity since equipment and supplies would need to be
barged up to Kuspuk and there would be a potential
contractor in the village who could complete both projects
simultaneously. However, the emergency amount awarded from
Impact Aid required a match, and without a tax base, Kuspuk
had been unable to generate a match without the state's
assistance.
Ms. Aguillard relayed that 2024 was the final year of the
runway airport project and the Impact Aid award would
expire in March 2025. Still determined to provide a safe
space, the district submitted a Capital Project Submission
and Information System (CAPSIS) request for assistance with
funding repairs for the school, which had been identified
by the Sleetmute Traditional Council for use during
emergency, crisis, and disaster situations. She emphasized
that if Kuspuk was unable to secure the funding needed to
complete the repairs, the Impact Aid funding would expire
and the contractor would leave Sleetmute. After 17 years of
asking for help and five years of meticulous planning to
leverage all possible cost savings, it might be the last
opportunity for this school to continue. An increase in
funding for major maintenance projects to $60 million would
not only make an impact on the backlog of requests, but the
funding would also address the emergency repairs needed to
complete the Sleetmute project.
3:49:32 PM
CLAYTON HOLLAND, SUPERINTENDENT, KENAI PENINSULA BOROUGH
SCHOOL DISTRICT, SOLDOTNA (via teleconference), expressed
strong support for increased funding for the CIP priority
list. Specifically, he urged for an expansion beyond the 15
projects allocated for major maintenance to include
additional projects. The Kenai Peninsula Borough School
District (KPBSD) spanned an area of almost 26,000 square
miles and included 42 schools and 17 communities. The
situation was dire. The average age of school facilities
was 48 years, and one structure in the district was 89
years old. The need for action was unmistakable. The
district currently had over $450 million in deferred
maintenance costs. Without heightened efforts to replace
aging schools, there would be an imminent crisis within the
next decade.
Mr. Holland explained that aging facilities demanded
extensive maintenance, which was a particularly daunting
task given the vastness of the district. He noted that DEED
recommended a strategic renewal and replacement schedule as
prolonged repair efforts proved ineffective. The result of
not receiving major maintenance funding was cascading
deficiencies. Addressing Alaska's aging schools promptly
preserved educational infrastructure and yielded ongoing
operational cost reductions. Delaying funding now would
lead to greater costs in the future. The emphasis needed to
shift from renovation to new school construction for
facilities older than 40 years. Investing in modern
infrastructure now would yield long-term cost savings
compared to prolonging the life of outdated buildings. The
level of education that was needed in the state was not
possible when the facilities were substandard or unsafe. He
thought that if everyone worked together, the state could
ensure that every student in Alaska had access to a safe,
modern, and conducive learning environment.
Representative Hannan asked which building was 89 years
old.
Mr. Holland responded that it was the Moose Pass School.
3:53:13 PM
ANDY DEGRAW, CHIEF OPERATIONS OFFICER, FAIRBANKS NORTH STAR
BOROUGH SCHOOL DISTRICT, FAIRBANKS (via teleconference),
testified in support of additional major maintenance funds.
He explained that Fairbanks North Star Borough School
District (FNSBSD) had 32 buildings totaling approximately
2.3 million square feet. The FY 25 major maintenance
backlog was approximately $250 million and the number was
expected to rise to approximately $335 million in the six-
year CIP plan in 2030. An increased investment in the
capital budget on behalf of school districts would directly
benefit the general fund budgets.
Mr. Degraw recalled that Representative Galvin had asked
where the funding came from when districts needed to update
systems, but could not obtain capital funding. Projects in
Fairbanks cost hundreds of thousands of dollars every year,
just in labor hours and the cost of parts. The cost would
be even higher if utilities and inefficiencies of old
buildings were considered. For example, a Phase 2 exterior
renovation project might seem like a simple aesthetic
upgrade of the exterior of a building; however, the project
could involve replacing a roof, updating the exterior
coating of the building, and replacing windows and doors.
Such a project would increase the energy efficiency of that
building, thus reducing the utility costs of the district.
Mr. Degraw explained that Fairbanks had anywhere from $7
million to $8 million in annual utility costs, and a small
percent reduction in utility costs was significant. He
appreciated the time and work of the committee.
3:56:06 PM
CSSB 187(FIN) am was HEARD and HELD in committee for
further consideration.
Co-Chair Edgmon reviewed the agenda for the following day's
meeting.
ADJOURNMENT
3:56:38 PM
The meeting was adjourned at 3:56 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DEED Handout #1 - AS 14.11.035 SB237 Final 2024 Report.pdf |
HFIN 4/23/2024 1:30:00 PM |
SB 187 SB 237 |
| 04-23-24 (H)FIN DEED FY25 School Capital Funding.pdf |
HFIN 4/23/2024 1:30:00 PM |
SB 187 |
| DEED Handout #2 - State Share Debt Reimbursements.pdf |
HFIN 4/23/2024 1:30:00 PM |
SB 187 |
| DEED Handout #3 - Debt Actual % 1976-2025.pdf |
HFIN 4/23/2024 1:30:00 PM |
SB 187 |
| DEED Handout #4 - FY2025 Anticipated School Debt Reimbursement.pdf |
HFIN 4/23/2024 1:30:00 PM |
SB 187 |
| DEED Handout #5 - FY25ConstructionFinalList.pdf |
HFIN 4/23/2024 1:30:00 PM |
SB 187 |
| DEED Handout #6 - FY25MaintenanceFinalList.pdf |
HFIN 4/23/2024 1:30:00 PM |
SB 187 |
| SB 187 HFIN Capital Bidget History LFD 042324.pdf |
HFIN 4/23/2024 1:30:00 PM |
SB 187 |
| Cap Budget Historical Info Response HFIN 4-24-24.pdf |
HFIN 4/23/2024 1:30:00 PM |
SB 187 |