Legislature(1997 - 1998)

02/26/1998 03:06 PM House HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         HOUSE HEALTH, EDUCATION AND SOCIAL                                    
            SERVICES STANDING COMMITTEE                                        
                 February 26, 1998                                             
                     3:06 p.m.                                                 
MEMBERS PRESENT                                                                
Representative Con Bunde, Chairman                                             
Representative Joe Green, Vice Chairman                                        
Representative Al Vezey                                                        
Representative Brian Porter                                                    
Representative Fred Dyson                                                      
Representative J. Allen Kemplen                                                
Representative Tom Brice                                                       
MEMBERS ABSENT                                                                 
All members present                                                            
COMMITTEE CALENDAR                                                             
CS FOR SENATE BILL NO. 11(FIN)(title am)                                       
"An Act establishing a reimbursement program for municipal bonds,              
notes, or other indebtedness incurred for school construction;                 
relating to administrative costs of reimbursing municipal school               
construction debt; relating to municipal school construction                   
project eligibility requirements for receiving state reimbursement;            
and providing for an effective date."                                          
     - HEARD AND HELD                                                          
HOUSE BILL NO. 169                                                             
"An Act relating to welfare to work tax credits under the Alaska               
Net Income Tax Act; and providing for an effective date."                      
     - HEARD AND HELD                                                          
HOUSE BILL NO. 375                                                             
"An Act relating to children in need of aid matters and                        
proceedings; relating to murder of children, criminally negligent              
homicide, kidnaping, criminal nonsupport, the crime of indecent                
exposure, and the crime of endangering the welfare of a child;                 
relating to registration of certain sex offenders; relating to                 
sentencing for certain crimes involving child victims; relating to             
the state medical examiner and reviews of child fatalities;                    
relating to teacher certification and convictions of crimes                    
involving child victims; relating to access, confidentiality, and              
release of certain information concerning the care of children,                
child abuse and neglect, and child fatalities; authorizing the                 
Department of Health and Social Services to enter into an                      
interstate compact concerning adoption and medical assistance for              
certain children with special needs; authorizing the establishment             
of a multidisciplinary child protection team to review reports of              
child abuse or neglect; relating to immunity from liability for                
certain state actions concerning matters involving child protection            
and fatality reviews and children in need of aid; relating to                  
persons required to report suspected child abuse or neglect;                   
relating to foster care placement and to payment for children in               
foster and other care and the waiver of certain foster care                    
requirements; relating to the access to certain criminal justice               
information and licensure of certain child care facilities;                    
amending Rule 218, Alaska Rules of Appellate Procedure; amending               
Rules 1, 3, 15, 18, and 19, Alaska Child in Need of Aid Rules; and             
providing for an effective date."                                              
     - BILL HEARING POSTPONED                                                  
(* First public hearing)                                                       
PREVIOUS ACTION                                                                
BILL: SB  11                                                                   
SHORT TITLE: SCHOOL DEBT REIMBURSEMENT                                         
SPONSOR(S): SENATOR(S) HALFORD, Phillips, Green;                               
REPRESENTATIVE(S) Kohring                                                      
Jrn-Date    Jrn-Page           Action                                          
01/13/97        16     (S)  PREFILE RELEASED 1/3/97                            


01/13/97 16 (S) HES, FIN 02/26/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205 02/26/97 (S) MINUTE(HES) 03/21/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205 03/21/97 (S) MINUTE(HES) 03/24/97 (S) MINUTE(HES) 03/24/97 831 (S) HES RPT CS 3DP 2NR SAME TITLE 03/24/97 831 (S) DP:WILKEN, GREEN, WARD; NR:ELLIS, LEMAN 03/24/97 831 (S) ZERO FISCAL NOTE TO SB (DOE) 04/07/97 (S) FIN AT 9:00 AM SENATE FINANCE 532 04/07/97 (S) MINUTE(FIN) 04/08/97 (S) FIN AT 6:00 PM SENATE FINANCE 532 04/08/97 (S) MINUTE(FIN) 04/08/97 (S) MINUTE(FIN) 04/09/97 1048 (S) FISCAL NOTE TO CS (DOE) 04/22/97 (S) FIN AT 5:30 PM SENATE FINANCE 532 04/23/97 (S) FIN AT 8:00 AM SENATE FINANCE 532 04/24/97 (S) FIN AT 8:30 AM SENATE FINANCE 532 04/24/97 (S) MINUTE(FIN) 04/24/97 (S) MINUTE(FIN) 05/02/97 (S) FIN AT 9:00 AM SENATE FINANCE 532 05/02/97 (S) MINUTE(FIN) 05/02/97 (S) MINUTE(RLS) 05/02/97 1642 (S) FIN RPT CS 2DP 3NR 2AM NEW TITLE 05/02/97 1642 (S) DP: TORGERSON, PHILLIPS; NR: PEARCE, 05/02/97 1642 (S) SHARP, ADAMS; AM: PARNELL, DONLEY 05/05/97 1678 (S) INDETERMINATE FN (DOE) 05/05/97 1677 (S) RULES TO CALENDAR 5/5/97 05/05/97 1680 (S) READ THE SECOND TIME 05/05/97 1680 (S) FIN CS ADOPTED UNAN CONSENT 05/05/97 1681 (S) ADVANCE TO THIRD READING FLD Y14 N5 E1 05/05/97 1681 (S) THIRD READING 5/6 CALENDAR 05/06/97 1726 (S) READ THE THIRD TIME CSSB 11(FIN) 05/06/97 1726 (S) TITLE AM 1 ADOPTED Y10 N8 E1 A1 05/06/97 1727 (S) PASSED Y12 N7 E1 05/06/97 1727 (S) EFFECTIVE DATE(S) ADPTD Y17 N2 E1 05/06/97 1727 (S) LINCOLN NOTICE OF RECONSIDERATION 05/06/97 1735 (S) RECON TAKEN UP SAME DAY Y14 N5 E1 05/06/97 1736 (S) PASSED ON RECONSIDERATION Y12 N7 E1 05/06/97 1736 (S) EFFECTIVE DATE(S) ADPTD Y16 N3 E1 05/06/97 1766 (S) TRANSMITTED TO (H) 05/07/97 1594 (H) READ THE FIRST TIME - REFERRAL(S) 05/07/97 1594 (H) HES, FINANCE 05/08/97 1703 (H) CROSS SPONSOR(S): KOHRING 02/26/98 (H) HES AT 3:00 PM CAPITOL 106 BILL: HB 169 SHORT TITLE: WELFARE TO WORK TAX CREDITS SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR Jrn-Date Jrn-Page Action 03/05/97 543 (H) READ THE FIRST TIME - REFERRAL(S) 03/05/97 543 (H) HES, STATE AFFAIRS, FINANCE 03/05/97 543 (H) INDETERMINATE FISCAL NOTE (DHSS) 03/05/97 543 (H) FISCAL NOTE (REV) 03/05/97 543 (H) ZERO FISCAL NOTE (LABOR) 03/05/97 543 (H) GOVERNOR'S TRANSMITTAL LETTER 05/02/97 (H) HES AT 3:30 PM CAPITOL 106 05/02/97 (H) MINUTE(HES) 05/06/97 (H) HES AT 4:00 PM CAPITOL 106 05/06/97 (H) MINUTE(HES) 02/24/98 (H) HES AT 3:00 PM CAPITOL 106 02/24/98 (H) MINUTE(HES) 02/26/98 (H) HES AT 3:00 PM CAPITOL 106 WITNESS REGISTER BRETT HUBER, Legislative Assistant to Senator Rick Halford Alaska State Legislature Capitol Building, Room 121 Juneau, Alaska 99801-1182 Telephone: (907) 465-4958 POSITION STATEMENT: Presented sponsor statement for CSSB 11(FIN)(title am). BILL BURROWS, President Fairbanks Board of Education 13 Haines Avenue Fairbanks, Alaska 99701 Telephone: (907) 451-0985 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). GAYLE WILSON-PHILLIPS 4960 Hovey Drive Wasilla, Alaska 99654 Telephone: (907) 373-1070 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). TODD HESS, Principal Baxter Elementary School 2991 Baxter Road Anchorage, Alaska 99504 Telephone: (907) 333-6559 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). BOB DOYLE, Finance Director Matanuska-Susitna School District 1990 Porcupine Trail Wasilla, Alaska 99654 Telephone: (907) 373-3172 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). BEV PRUITT, Principal Scenic Park Elementary 3933 Patterson Anchorage, Alaska 99504 Telephone: (907) 337-1571 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). LEE HINES P.O. Box 878172 Wasilla, Alaska 99687 Telephone: (907) 892-6490 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). DAVID COMBS, Principal Creekside Park Elementary School 1925 Beaver Place Anchorage, Alaska 99504 Telephone: (907) 337-9504 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). TOM STARR P.O. Box 870053 Wasilla, Alaska 99687 Telephone: (907) 373-7317 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). CHRISTINE UTTER, Teacher Creekside Park Elementary 9612 Newhave Loop Anchorage, Alaska 99507 Telephone: (907) 522-1391 POSITION STATEMENT: Testified on behalf of the Creekside Parent Teacher Association on CSSB 11(FIN)(title am). PATRICIA PURCELL, President Finger Lake Elementary PTA HC 32, Box 6692 Wasilla, Alaska 99654 Telephone: (907) 373-1777 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). DAVE WERDAL, Member Anchorage School Board 6842 Serenity Drive Anchorage, Alaska 99502 Telephone: (907) 248-8533 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). LYNNDEEN KNAPP, Principal Big Lake Elementary P.O. Box 520230 Big Lake, Alaska 99652 Telephone: (907) 892-6019 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). BARBARA WEIL 4800 Talus Drive Anchorage, Alaska 99516 Telephone: (907) 345-3361 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). CHARLIE HUGGINS P.O. Box 1292 Palmer, Alaska 99645 Telephone: Not Provided POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). LOU KUSTIN, Principal Oceanview Elementary School 11911 Johns Road Anchorage, Alaska 99515 Telephone: (907) 349-4608 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). TAMMY CLAYTON P.O. Box 1825 Palmer, Alaska 99645 Telephone: (907) 745-9624 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). CHERYL TURNER, President Matanuska-Susitna Council of Parent Teacher Associations P.O. Box 1292 Palmer, Alaska 99645 Telephone: Not Provided POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). JOHN STOLTZE, President Meadow Lakes Community Council P.O. Box 878737 Wasilla, Alaska 99687 Telephone: Not Provided POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). KARLYN DAENZER, Principal Taku Elementary School 710 East 72nd Avenue Anchorage, Alaska 99518 Telephone: (907) 349-4453 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). MIKE SCOTT 350 Dahlia Palmer, Alaska 99645 Telephone: (907) 745-9689 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). MICHAEL MORGAN, Manager Facilities Section Education Support Services Department of Education 801 West Tenth Street, Suite 200 Juneau, Alaska 99801-1894 Telephone: (907) 465-1858 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). JOHN CYR, President NEA-Alaska 114 Second Street Juneau, Alaska 99801 Telephone: (907) 586-3090 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). BOB JUETTNER 1600 A Street, Number 103 Anchorage, Alaska 99501 Telephone: (907) 274-7555 POSITION STATEMENT: Testified on CSSB 11(FIN)(title am). RON KREHER, Special Assistant Division of Public Assistance Department of Health & Social Services P.O. Box 110640 Juneau, Alaska 99811-0640 Telephone: (907) 465-3349 POSITION STATEMENT: Testified on HB 169. BOB BARTHOLOMEW, Deputy Director Income & Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, Alaska 99811-0420 Telephone: (907) 465-2320 POSITION STATEMENT: Testified on HB 169. BILL EHLERS, Program Coordinator Work Opportunity Tax Credit Program Division of Employment Security Department of Labor P.O. Box 25509 Juneau, Alaska 99802-5509 Telephone: (907) 465-5925 POSITION STATEMENT: Testified on HB 169. ACTION NARRATIVE TAPE 98-14, SIDE A Number 0001 CHAIRMAN CON BUNDE called the House Health, Education and Social Services Standing Committee meeting to order at 3:06 p.m. Members present at the call to order were Representatives Bunde, Green, Vezey, Porter and Dyson. Representatives Kemplen and Brice arrived at 3:07 p.m. and 3:12 p.m., respectively. CSSB 11(FIN) (title am) - SCHOOL DEBT REIMBURSEMENT Number 0027 CHAIRMAN BUNDE announced the first item on the agenda was CSSB 11(FIN)(title am), "An Act establishing a reimbursement program for municipal bonds, notes, or other indebtedness incurred for school construction; relating to administrative costs of reimbursing municipal school construction debt; relating to municipal school construction project eligibility requirements for receiving state reimbursement; and providing for an effective date." He asked Brett Huber to present the sponsor statement on behalf of Senator Halford. Number 0068 BRETT HUBER, Legislative Assistant to Senator Rick Halford, sponsor, testified that SB 11 was introduced to reestablish a program for the state to share in the cost of school construction in the municipal school districts. Over the years, the state has shared in the costs of constructing schools in the organized areas of the state through school bond debt reimbursement. Alaska Statute 14.11.100 provides a mechanism by which the local government is reimbursed for a portion of their debt service on school construction projects, providing those projects and bond packages have been approved by the Department of Education (DOE) and have been passed by the local voters. In contrast, school construction in the unorganized areas is generally done by capital appropriation. Without local participation, the state pays the entire cost of school construction in the unorganized area. In the early 1970s, the state's share of the school bond debt reimbursement was set at 50 percent. Then during the period of increased state revenues during the oil boom, the state's share was increased to 90 percent. Over time the state's share has been subsequently reduced to 80 percent and then to 70 percent. This statute was last amended in 1993 and that amendment authorized $250 million of new projects in various allocations specific to community size, after which the program was closed to new projects. Since the closing of this program, municipal school districts and their taxpayers have been left with virtually no state assistance for school construction. Passage of this bill would reopen the debt reimbursement program to new projects, allowing municipal school districts and their taxpayers help in meeting the demands of growing student populations. Number 0196 MR. HUBER offered to briefly describe the operative sections of SB 11. He said pages 1-4, through line 10, is restating existing statute for technical and number changes that correspond to the operative sections. Section 1(a)(8), beginning on page 4, line 11, provides for 50 percent reimbursement for school construction indebtedness authorized by local voters on or after July 1, 1997. Section 2 adds language prohibiting the Department of Education (DOE) from charging an administrative fee on the reimbursement program. He explained this is only clarifying language as the DOE does not currently charge an administration fee, but this amendment was added in the Senate Health, Education and Social Services Committee (HESS) to clarify there should be no administrative fee in the future. MR. HUBER said that Sections 3 and 4 are renumbering and technical amendments. Section 5 on page 6, lines 15-19, adds two new criteria that a local district can use to demonstrate need for a proposed project. This adds a category of projects that would reduce operating costs sufficiently to justify the cost of the project as well as projects needed to improve the instructional program. That amendment was also adopted in the Senate HESS Committee. Section 6 is an immediate effective date clause. MR. HUBER stated there is a technical error in the bill version before the committee. He explained when the retroactive portion of the bill was removed by the Senate Finance Committee, they errantly failed to remove the language on page 4, line 2, "but before July 1, 1995". Number 0337 CHAIRMAN BUNDE noted the committee needed to adopt CS 0-LS0151\L.a as the working document and then the erroneous date could be amended out. Number 0390 REPRESENTATIVE BRIAN PORTER made a motion to adopt CS 0-LS0151\L.a as the working document. There being no objection, that version was before the committee. MR. HUBER explained there was a retroactive provision contained in the bill in Senate Finance that paid on bonds that were approved and passed between July 1, 1995, and July 1, 1997. He said, "This phrase actually could pose a problem with the Fairbanks bond issue that was passed last year, was the remainder of the '93 allocation that was passed in Senate Bill 7. In leaving this language in without the retroactive section poses a problem for that, so it ought to be removed." CHAIRMAN BUNDE asked if everyone understood the reason for the need to delete the language. Number 0464 REPRESENTATIVE JOE GREEN made a motion to delete "but before July 1, 1995," on page 4, lines 2-3. There being no objection, the amendment passed. CHAIRMAN BUNDE announced there were a number of people wishing to testify via teleconference. He asked Bill Burrows of Fairbanks to present his testimony. Number 0521 BILL BURROWS, President, Fairbanks Board of Education, testified the Fairbanks Board of Education supports any funding mechanism that helps build schools, but expressed concern with it being 50/50. He noted that it took Fairbanks three tries to pass a bond election at 30/70. Many of the residents expressed their support for schools, but thought it should be 100 percent, 90/10, or 80/20 and that the borough should wait until it went back up. From his experience over the last six or seven years, he did not believe that a bond election would pass in Fairbanks on a 50/50 split; it needs to be 30/70. He expressed concern with the window of opportunity. He explained that Fairbanks currently has a number of projects underway, as well as a number of other related projects somewhere in the neighborhood of $35 million, which has been responsibly spread out over the next five years. He said, "Considering how deliberate our conservative voters are in effecting these needs and approving them, I think if we have anything like a three year window of opportunity like the last time, we'd probably miss out and not get it done in time." Number 0619 MR. BURROWS also expressed concern, much for the same reason, about there being a specific allocation for the Interior. He said if it was just a pot of money Fairbanks had to compete for, they would probably miss out as it was his understanding that a number of communities had already passed bond elections and were ready to go. Number 0649 MR. BURROWS concluded that Fairbanks needs a 30/70 split, a significant window of opportunity and a specific allocation for the Fairbanks area. He noted the voters of Fairbanks are conservative and their argument is their ability to pay their own way. For example, he understood that Anchorage had passed bonds that were 100 percent of their own money, but in Anchorage one mill is about $13 million, which is the cost of one prototypical 600 student elementary school. In comparison, it would take over four mills in Fairbanks to build that same school. He pointed out the total mill rate for education in total is about 8.5 mills in Fairbanks, so it would be a significant increase. Number 0842 CHAIRMAN BUNDE thanked Mr. Burrows for his testimony and asked Gayle Wilson-Phillips to testify from Mat-Su. Number 0871 GAYLE WILSON-PHILLIPS testified from Mat-Su via teleconference in support of this legislation. She said ideally, 70/30 would best address the overcrowding conditions, but 50/50 would at least address maintaining and updating of some facilities. She emphasized the health, safety and welfare of the students has not been taken care of through funding. She stressed that funding is needed on a regular basis. CHAIRMAN BUNDE asked Todd Hess to present his comments at this time. Number 0928 TODD HESS, Principal, Baxter Elementary School, testified from Anchorage and said the learning environment for many students is less than optimal. Student populations continue to expand and the schools are aging in that community. He said that substantial investment in repairs and classrooms is an issue that needs to be addressed now. The needs are critical and cannot be postponed. Specific to Baxter Elementary School, he has identified 15 separate areas in school that leak, there are heating and ventilation problems, electrical upgrades are needed, asbestos in wallboard and ceiling tiles, PCV issues in 25-year-old lighting fixtures and the list goes on and on for Baxter Elementary alone. Currently, Baxter Elementary is on the upcoming bond proposal for voters in Anchorage in the April election. Even without renovations that might be included in that bond proposal, Baxter is in need of $3.5 million to $4 million in just maintenance repairs alone. Rather than ignoring the issue of maintenance of schools, the Anchorage School District is one of the few areas in the state that has taken on the challenge of school maintenance and classroom expansion. It's his opinion that it is time for the legislature to assist Anchorage citizens in this process through the passage of debt reimbursement. MR. HESS said that Anchorage schools have critical needs. The maintenance of the facilities and construction of new classrooms is behind the curve. Soon Anchorage voters are going to be asked again to contribute to the construction of new schools and classrooms. Again, he believed the state could send a significant message to the Anchorage community by passing debt reimbursement before the municipal election in April. CHAIRMAN BUNDE thanked Mr. Hess for his testimony and asked Bob Doyle to testify from Mat-Su. Number 1086 BOB DOYLE, Finance Director, Matanuska Susitna School District, testified via teleconference urging the committee to follow through and support the joint resolution from the local assembly and school board in full support of 70/30 funding. He noted that since the last school was built in 1992, there's been an increase of 3,000 students and there's no end in sight. There were 400 new students this year and 300 more projected for next year. Mat-Su has 62 portables that house over 1,000 students that don't have a permanent school home. He said the needs are great in the Mat-Su area and encouraged committee members to amend the bill to 70/30. He referred to page 4, lines 13-14, and suggested "or sold by the municipality" be inserted following "other indebtedness authorized by the qualified voters". Number 1174 CHAIRMAN BUNDE remarked the testimony from Fairbanks suggested that the 50/50 would not be useful for them and asked Mr. Doyle if he was saying that in Mat-Su it has to be 70/30 or it wouldn't be useful. MR. DOYLE responded the assembly and school board had considered that question and had resolved that 70/30 would be in the best interest of the children in that area. CHAIRMAN BUNDE asked Bev Pruitt to present her testimony. Number 1200 BEV PRUITT, Principal, Scenic Park Elementary, testified via teleconference from Anchorage and encouraged committee members to put more state assistance in the area of debt reimbursement. Scenic Park has received a lot of upgrades for next year from the Anchorage voters. While she is excited and grateful for the improvements to a 36-year-old facility, she was still concerned about the east side schools. The majority of the east side elementary schools are older, overcrowded and face many of the same problems with maintenance and repairs as Scenic Park Elementary. The maintenance budget is being drained by having to do structural repairs rather than just maintaining. She is continually reminded by the population in the Scenic Park Elementary area that they pay the highest mill in Anchorage. She would like this same population that supported Scenic Park Elementary to feel comfortable supporting other schools and she believed that matching funds would encourage Anchorage voters to continue to participate. Number 1296 CHAIRMAN BUNDE commented he taught at Scenic Park Elementary as a speech therapist in 1968. He asked Lee Hines to present his testimony from Mat-Su. Number 1319 LEE HINES testified via teleconference from Mat-Su that a bond issue was passed three or four years ago for building facilities in the Meadow Lakes community. Inflation proofing, funding for implementation and future or deferred maintenance decreases in the state funding levels below the 70/30 split will cause further delays in construction, further extending or preventing progress. Mr. Hines said he, as well as others in the community would support additional taxation to fund the school. CHAIRMAN BUNDE thanked Mr. Hines for his testimony and called on David Combs to present his comments. Number 1382 DAVID COMBS, Principal, Creekside Park Elementary School, testified from Anchorage that he is also a parent of a ninth grade student at Service High School. He stated that Service High School is extremely overcrowded with approximately 2300 students. Very shortly, Anchorage will need to build a high school in the south Anchorage area, as well as the Eagle River area. In order for these projects to be funded by the people of Anchorage, the state must share in the infrastructure costs of the Anchorage School District. Without state debt reimbursement, he was afraid the populous of the Anchorage community will not be able to continue to fund school constructions bonds. The Creekside Park Elementary School was built in 1959, opened in 1960 and there have been no major additions or renovations since 1983, yet the population has continued to increase. The school also houses two classes of multi-handicapped students and renovations are needed to comply with the Americans with Disabilities Act. He noted that Creekside Park Elementary is included on the bond issue in April. He discussed the rapid growth of the school population in Anchorage and the need for additional schools in the near future. In conclusion, he said the legislature needed to pass legislation that would fund school debt reimbursement at the 70 percent state/30 percent local level before April 14, which would allow the people of Anchorage and the Anchorage School District to give public notice before the April 21 bond issue. Number 1487 CHAIRMAN BUNDE asked Mr. Combs if a 50/50 would be useful, or would it not be useful unless it was a 70/30 split. MR. COMBS said from his perspective, 70/30 is probably what Anchorage really needs, but he certainly wouldn't turn down 50/50. CHAIRMAN BUNDE asked Tom Starr to present his comments. Number 1511 TOM STARR testified via teleconference from Mat-Su, where he has lived since prior to statehood and is a resident of the Meadow Lakes community. He expressed concern with anything lower than a 70/30 split will require the borough to go back to the ballot process, which will set the Mat-Su Borough back. In his opinion, a 50/50 split would not be useful. CHAIRMAN BUNDE asked Christine Utter to present her testimony from Anchorage. Number 1558 CHRISTINE UTTER, Teacher, Creekside Park Elementary, testified as representative of the Creekside Parent Teacher Association (PTA). She said that Creekside Park Elementary is facing problems that most families would not accept in their own home; e.g., poor lighting, poor air ventilation, inadequate heating system, cold water only, unvacuumed rooms, and the list goes on. It is imperative these conditions be taken into consideration in discussing this legislation. Financial assistance from the state will help give voters and families assurance that children's health and safety are a priority. The 70 percent state/30 percent local debt reimbursement would definitely be most helpful. She urged the committee to take action as soon as possible. Number 1607 CHAIRMAN BUNDE said one of his colleagues had just remarked that he was confused because of the conflicting messages being sent by public. The general message from the population has been to reduce state spending and the message now is that if state funding is not increased beyond the 50/50 level, people will not be happy and/or it will be of no use. He asked Pat Purcell to present her testimony at this time. Number 1634 PATRICIA PURCELL, President, Finger Lake Elementary Parent Teacher Association, testified via teleconference and asked that effort be made to pass this legislation because of the sad state of the Mat- Su schools. Schools are overcrowded now and even after money is made available for construction, that construction can't happen overnight. Schools are needed now; teachers can't effectively teach and children can't effectively learn in the overcrowded environment that currently exists. At Finger Lake Elementary, classrooms are set up in the gym locker room because every available space is being utilized, including the portables. She discussed the population growth in the Mat-Su Borough and emphasized that funding of education cannot continue to be ignored. CHAIRMAN BUNDE called on Dave Werdal to present his comments. Number 1690 DAVE WERDAL, Member, Anchorage School Board, testified via teleconference from Anchorage about the growing student population in Anchorage and the need for new facilities to keep ahead of the curve. His second concern was with the necessity to maintain the school buildings. He has some real fears about the bond issue of $71 million before the voters this year inasmuch as last year's $26 million bond passed by a 52/48 margin. He is hopeful that voters will be supportive, but he would feel much more comfortable if there was a state match before the vote. He mentioned the overcrowding problems at Service High and the upcoming problems at Dimond High where there is talk of imploding the school and starting over. He didn't know if that would be politically acceptable even if it would be the best cost situation. Number 1816 MR. WERDAL said the Anchorage School Board would be asking the voters for a fair amount of money in the next few years even if there is a match. With reference to the 50/50 or 70/30 split, the school board's position is that 50/50 would be fine. He understood that other parts of the state may need 60/40 or 70/30, but he's sensitive to the legislature's problems with decreasing oil prices and the tough decisions that need to be made. He noted the board was unanimous in supporting the 50/50 split. Number 1864 CHAIRMAN BUNDE expressed appreciation for the support of the 50/50 level. He asked Lynndeen Knapp to present her comments. Number 1892 LYNNDEEN KNAPP, Principal, Big Lake Elementary, testified on behalf of the students and the parents in the community. She discussed the overcrowding conditions at Big Lake Elementary last year where there was a total of 712 students in a facility that accommodates approximately 490 students. In the richest state in the union, she found it difficult to explain to students why they had to wait in line to go to the bathroom. The Big Lake community has worked hard to come up with some temporary solutions such as changing the busing routes so that some children were going to a school that had a couple of extra classrooms. It was difficult for her to understand why money could be allocated in certain places and not in others, and not determine that education is important. Big Lake is experiencing a temporary pause in the overcrowding issue, and is regrouping for the anticipated 7 percent to 10 percent growth next year. The Big Lake community, including the school board and the assembly, definitely support the 70/30 split. She encouraged committee members to support funding for the schools in Alaska. In conclusion, she reiterated her support for this bill, but believed it should be 70/30. Number 2033 CHAIRMAN BUNDE thanked Ms. Knapp for her testimony and asked Barbara Weil to present her testimony. Number 2044 BARBARA WEIL testified via teleconference from Anchorage from the viewpoint of an employee of the school district and as a parent. She has taught in several schools in the Anchorage area and has been the principal of schools in downtown Anchorage, east Anchorage and Fort Richardson. Currently, she is the principal at Nunaka Valley which is under reconstruction at this time due to the bond issue that passed. Each time she works in a 1954 vintage school, she realizes the limitations each year more so, in terms of technology, utilization of space and flexibility for achieving educational goals. She expressed concern for the deterioration of the conditions in schools in Alaska, as well as voters being asked to participate more and more with the various bond issues. In summary, she expressed the need for the state's continued support for education. CHAIRMAN BUNDE requested that Charlie Huggins present his comments. Number 2162 CHARLIE HUGGINS testified via teleconference from Mat-Su. He's a member of the school board, but he was commenting as a private citizen, who had been in Juneau the previous week meeting with the legislative delegation. He said there is an expectation in the Mat-Su Valley. He said that Mr. Burrows had commented with regard to what Fairbanks had done and what was needed, but he wanted to point out that Mat-Su went to bond in 1995 for three schools, but Fairbanks got the money. People in Mat-Su say they want new schools but as for the 70/30 or 50/50 split, it's a good question. At noon he'd had the opportunity to talk with a group of people about the 50/50 or 70/30 split. The response was mixed but the overwhelming response was they would support either one because of the great need for new schools. Last year his three children attended Lynndeen Knapp's school in Big Lake and a person had to experience the overcrowding firsthand in order to really understand the magnitude of the problem. He said the bottom line is the last school was built in this community in 1992 and there is just no place to put any more kids. He concluded, "Help us help ourselves." The community wants to enter into a partnership and will be good partners. CHAIRMAN BUNDE thanked Mr. Huggins for his comments and called on Lou Kustin to present his testimony. Number 2290 LOU KUSTIN, Principal, Oceanview Elementary School, testified via teleconference from Anchorage. He said the Oceanview community and the Anchorage School District supports reinstating school construction debt reimbursement. The Anchorage School District and other districts in the organized boroughs have almost no opportunity for school construction assistance from the state. Therefore, any new construction has to be fully funded by the local government by local taxpayers. The Oceanview community has been waiting a long time for an addition and renovation, which would assist other neighboring communities by alleviating the overcrowding of their facility. This legislation, if passed, would reopen bond reimbursement for municipal school construction projects, providing state funding for 50 percent, or the preferred 70 percent of the annual debt incurred. There is a significant need to address the state funding issue prior to the April election. CHAIRMAN BUNDE asked Tammy Clayton from Mat-Su to testify. Number 2334 TAMMY CLAYTON testified via teleconference requesting the committee's support in passing this legislation with a change in the language to a 70 percent debt reimbursement funding. Also, on page 4, line 14, she requested that "or sold by" be inserted after "qualified voters of". She reiterated previous comments about the rapid population growth in the Mat-Su Valley. TAPE 98-14, SIDE B Number 0001 MS. CLAYTON said school enrollment is anticipated to increase by 4 percent next year. There is a serious need for new schools in that community. In 1996, bonds were authorized by the voters for two new schools and an addition in Talkeetna that was predicated on 70 percent debt reimbursement. She urged the committee to pass this legislation with a 70 percent debt reimbursement. Number 0034 CHERYL TURNER, President, Matanuska-Susitna Council of PTAs, testified via teleconference that the Mat-Su Council of PTAs in cooperation with the Alaska State PTAs, has identified overcrowding and unsafe school conditions as a legislative priority. She urged the committee to look at the demographic uniqueness of the Mat-Su Valley. The Mat-Su School District is faced with great expenses in providing a quality education to the rural schools. At the same time, the (indisc.) schools are dangerously overcrowded and in drastic need of upgrading. She said support for retroactive reimbursement for current Mat-Su bonds is essential. She stated that Mat-Su PTAs are united in support of this legislation with an amendment to reinstate the 70/30 reimbursement program for school construction. CHAIRMAN BUNDE thanked Ms. Turner for testifying and asked John Stoltze to testify next. Number 0093 JOHN STOLTZE, President, Meadow Lakes Community Council, testified via teleconference. He said that Meadow Lakes Community Council covers the area in which one of the three schools in the 70/30 proposal is scheduled to be built. The community has been working for this school for over ten years. He indicated that education funding has gone to the rural areas, not in areas where the population is located. He suggested perhaps it was time to redirect where the money goes. For example, when $20 million is spent to build a school for 200 students in one area and there are over 1000 students in relocatables in another area, it's time to question the balance and priorities. He said it's time to put the money in schools where the kids are located. CHAIRMAN BUNDE observed this legislation would move part of the capital budget back to urban Alaska. He asked Karlyn Daenzer to testify next. Number 0226 KARLYN DAENZER, Principal, Taku Elementary School, testified from Anchorage that Taku Elementary recently received bond support of a much needed building project. While she was grateful, she recognized there were so many other needs and voiced her support of this legislation. CHAIRMAN BUNDE asked Mike Scott to testify from Mat-Su. Number 0252 MIKE SCOTT testified via teleconference expressing his appreciation to Senators Halford and Green for introducing this legislation. In answer to the question of would 50/50 be better than nothing, obviously something is always better than nothing. He stated, "However, what I'd like to emphasize is that, of course, there are many ways to handle the total amount of money that would be used for the debt reimbursement. In other words, if you put a cap on the amount as was done previously in 1993 with the moratorium of $250 million, you still could have 70 percent for say $250 million. If we're talking about 50 percent of $100 million - or that equates into a $100 million - perhaps you could change that percentage that way. I'd also ask you to consider especially for high growth districts like the Mat-Su -- and I believe you've got some handouts in front of you or in your packets that show you with a bar graph, what's going on in Mat-Su since the moratorium. If you allow for those districts with a 15 percent growth since the moratorium to have a 70/30 split, I think you could then address that need and those that have less of a need in that regard since the moratorium, perhaps in a 50/50 and the legislature's done that type of split before recognizing a high growth district." Number 0389 CHAIRMAN BUNDE suggested that individuals testifying by teleconference communicate their views and perceptions to their respective senators and representatives. Number 0413 MICHAEL MORGAN, Manager, Facilities Section, Education Support Services, Department of Education, testified the department opposes this legislation for two reasons. In advocating for all schools, the department is looking for a stable, long-term source of funding that would allow funding for the needs of all schools. There are needs, as have been heard, in high growth areas like Mat-Su and at the same time there are schools with very poor conditions, such as Kenny Lake in the Copper River School District. He stated, "At the same time, as we see limited funds in the state, continuing to allocate for a debt retirement program certainly limits the funds available to address the needs of schools in communities which do not have the ability to bond." He mentioned that an alternative is HB 352, which hasn't had a hearing yet, but offers larger communities of the state the 70/30 split that's been requested. CHAIRMAN BUNDE asked John Cyr from NEA-Alaska to present his comments. Number 0472 JOHN CYR, President, NEA-Alaska, testified that NEA-Alaska supports this legislation. He said it is imperative that construction in urban areas go forward considering the overcrowding situations and deferred maintenance issues in schools around the state. NEA- Alaska would certainly like to see this legislation amended to 70/30, but understands the reality of the state financial situation. Number 0511 CHAIRMAN BUNDE asked Mr. Huber to come back to the witness table. He noted there was a zero fiscal note and asked Mr. Huber to estimate how much money would be involved and where the money come from to fund this legislation. MR. HUBER stated that it's a prospective bill; it's a 50 percent reimbursement level and that reimbursement isn't paid until bonds have been sold, debt has been incurred, and there's actually a debt service payment on the bond. He didn't have a magic number of what total school need would be in the communities that have a bonding capacity. He noted that Mat-Su passed a bond on three schools already, Anchorage is going to the bond with $60 million or $70 million in projects this April, individuals from Fairbanks testified they're about $35 million away from fulfilling school needs, and others. He said, "I can tell, however, the sponsor's philosophy is that the bill was originally introduced at a 50 percent reimbursement level. Certainly, we've worked and tried to bring the bill back to something that would take in retroactively the Mat-Su schools because there is a huge need in the Mat-Su for those schools and that bond language was passed at a 70 percent. But Senator Halford believes that if the state's share of participation is pretty directly correlated to how many new schools everybody wants. If somebody is going to pay 90 percent of something for me, I'd probably have more wants than if they're paying 50 percent of something. Mr. Chairman, I think local voters that have sent the message to all of you that are down here representing them working inside of fiscal constraints, trying to deal with getting a handle on a budget that's out of balance and facing the oil prices, also are dealing with tough times, tough decisions at the local tax level, the family level, the groceries and the college level. And if you have a situation where you're paying half of the bill, I believe Senator Halford feels like the local voters are going to give good scrutiny to the projects that come forward. One of the problems I think we saw with the cap in the last go around - the $250 million level is - how fast can we build the schools to use up our share of the allocation before that allocation is changed. And I'm not saying that those projects went - or that money or those bonds went to bad projects - but it certainly puts pressure on spending the money quick before somebody else does. At a 50 percent level, if that's the prospective level that goes forward, I think you're going to see voters take a good hard look at what the needs are and you're also going to see the rate of school building dispersed over actual need instead of a rush to build the schools all at once. You have the initial cost concerns of how many bonds are going to be sold, you establish a rate of reimbursement in the legislation, and then you still have the option to annually, through the budget process as you all know, go back and determine at what percentage you're going to fund school bond debt reimbursement. So, there is a future check and balance. Although, my Senator is not advocating that's the way that you can deal with it, it certainly is an option as nobody, I think at this point last year, planned on $12.50 a barrel oil." Number 0676 CHAIRMAN BUNDE asked if the source of funds would be unrestricted general funds; capital dollars that could be found in the capital budget? MR. HUBER was of the opinion that school bond debt reimbursement is an operating budget item. Number 0711 REPRESENTATIVE TOM BRICE clarified the fiscal note from the Department of Education is not a zero note; it's an indeterminate fiscal note. MR. HUBER said the fiscal note would be zero in FY 99. If the program were to go into effect immediately, there still needs to be time to bond, sell the bonds, incur a bond payment and then meet an October 15 deadline for bond reimbursement for the following fiscal year. Number 0750 REPRESENTATIVE VEZEY inquired if the proposal that provides for 70 percent reimbursement for bonding before July 1, 1995, had been deleted in the amendment, so any bonding after April 30, 1993, would be at the 70 percent rate. MR. HUBER explained the statute had been amended many times over the years. He said, "This language was actually inserted in this section to help create the retroactive portion that was in the bill last year and came out in Senate Finance. If this language stays in the bill, it means, for example, the Fairbanks bonds that were sold after 1995 but were a part of the 1993 allocation in SB 7, would no longer qualify. So, although it then takes the outside year out, April 30, 1993, - after April 30, 1993, was the passage of SB 7 which was the $250 million allocation. Then in Section 8, you're coming in 'sold on or after July 1, 1997' and establishing the 50 percent. So, the 70 percent would exist between the '93 date and the '97 date; however, because of SB 7, it was capped at $250 million which effectively closed the program to new projects." CHAIRMAN BUNDE noted there were additional people waiting to testify via teleconference. Number 0873 BOB JUETTNER testified via teleconference from Anchorage that in terms of debt reimbursement, it was important that no school district be left out. He said by the time Aleutians East School District had made application for participation in the $250 million program, the allocation was used up so there was very little rural participation. He was distressed by the anti-rural rhetoric from some of the individuals who had previously testified. He noted that rural Alaska is quite a varied region of the state and under the debt forgiveness program that (indisc.), for every dollar received in debt forgiveness there is eight dollars in unforgiven debt service. He wanted the committee to be aware that there are rural municipal school districts that do pay their own way to maintain facilities. Number 0949 REPRESENTATIVE PORTER asked Mr. Huber to comment on the suggestions to insert the language, "or sold by". MR. HUBER was of the impression that inserting "or sold by" was an attempt to bring in the Mat-Su schools that were previously bonded in 1995, as those bonds have not been sold. He didn't think the insertion of that language would have the effect of including those bonds. He explained that when the retroactive provision was dealt with last year, it took actually closing the one program, reopening another program, and altering some of the criteria that had to met in that time frame. He indicated that an amendment could be prepared, but simply adding that language probably would not accomplish their intent which is to bring those previously sold bonds into the reimbursement program. Number 0997 CHAIRMAN BUNDE referred to page 4, line 14 and said July 1, 1997, should be changed to 1998. MR. HUBER replied, "Again, Mr. Chairman, we are dealing with this bill as last year's bill - the time period 1995 through 1997 - so if you're dealing with it as a prospective issue now it would conform to the rest of the bill at '98 instead of '97." Number 1031 REPRESENTATIVE GREEN made a motion to change "1997" to "1998" on page 4, line 14. REPRESENTATIVE VEZEY indicated the amendment would change the legislation substantially. CHAIRMAN BUNDE asked, "Mr. Huber is that the case, though that they have to bond, sell the bonds and then make the first payment, is that why it would be 1998?" Number 1059 MR. HUBER replied, "Mr. Chairman, July 1, 1997, would bring in the time period of bond sales between July 1, 1997, and now, as well as 1998 and now. However, the only bond sales that took place -- or will take place in that time period are going to be the Anchorage bonds that are coming up in April. Those bonds were not submitted to the DOE for approval and currently don't contain the bond language that would make them allowable for the reimbursement program. So unless there's other bonds in that time period that I don't know of, I don't think you're going to have an actual effect on bonds sold or facilities built." CHAIRMAN BUNDE asked if he was correct that the Anchorage bonds to be sold in April would not fall under this legislation. MR. HUBER pointed out there is other criteria that needs to be met under the existing statutes which includes Department of Education approval of the projects, as well as actual language on the bond proposition outlining the state's participation and the cost per hundred thousand of assessed valuation. Number 1119 REPRESENTATIVE GREEN withdrew his motion to amend the language on page 4, line 14. CHAIRMAN BUNDE announced that CSSB 11(FIN)(title am) would be held in committee to be discussed at a later date. HB 169 - WELFARE TO WORK TAX CREDITS Number 1172 CHAIRMAN BUNDE announced the next order of business was HB 169, "An Act relating to welfare to work tax credits under the Alaska Net Income Tax Act; and providing for an effective date." He noted this bill had been heard previously and asked Mr. Kreher to give the committee an update. Number 1201 RON KREHER, Special Assistant, Division of Public Assistance, Department of Health & Social Services, testified in support of HB 169. He said there has been a significant reduction in the public assistance caseload since last July and HB 169 would give the department an additional tool to further that progress. The early successes have been the easiest to gain and it is important for the department to use all the available tools to help move clients with limited skills and work experience into employment. Employer involvement is critical and the department needs to capitalize on the growing interest in the employer community to hire welfare recipients and other disadvantaged workers. He said this particular legislation develops a tax credit for employers who hire disadvantaged workers and in essence piggybacks two federal tax credits; the work opportunity tax credit and a welfare to work tax credit that targets specific disadvantaged workers, including long-term welfare recipients, disabled veterans, individuals in vocational rehabilitation, ex-felons and a number of other targeted populations. He pointed out that tax credits appear to work. Judging from the success in other states, it is a positive incentive for employers, attractive to small businesses that are very conscious of the bottom line, and generally reduce the tax burden of corporations that hire, train and retain disadvantaged workers. Number 1310 MR. KREHER noted that under the Governor's proposed legislation, corporations that are certified for the federal work opportunity tax credit and welfare to work tax credits would be eligible for this state's welfare to work tax credit, given amendments to this legislation. He pointed out the Alaska Chapter of the National Federation of Small Businesses, with over 3,000 members, recently conducted a survey and over 75 percent of the businesses surveyed, favored this legislation. There is an additional incentive for this legislation which is driven by the department's need to get as many people as possible into gainful employment to reduce welfare rolls and this will give another incentive for employers to hire disadvantaged workers. He added that representatives from the Departments of Revenue and Labor were on hand to answer questions concerning the legislation. CHAIRMAN BUNDE asked Bob Bartholomew from the Department of Revenue to comment. Number 1358 BOB BARTHOLOMEW, Deputy Director, Income & Excise Audit Division, Department of Revenue, said the division had prepared a revised fiscal note for the original version of the bill. He explained the tax credit is basically to allow businesses to claim 15 percent of the wages paid to a qualified employee, up to a $1,000 tax credit, or up to a $1500 tax credit if training is provided that meets criteria established in a program referred to in HB 169. The division's estimate shows that in the first two years a loss of revenue of $993,000 due to placing welfare recipients on the payroll; however, in 2001 and years forward, it's actually a positive fiscal note. He said, "How we get from the first two years and -- there is an amendment that would make this a three- year program, it was intended to be a three-year program last year -- and our original fiscal note showed three years of revenue loss, then if we amended it, this would become a three year program again and you'd see a revenue loss for three years. But what happens once the program expires, is we currently allow in our Alaska tax code, kind of by default we've adopted a federal credit that has been on the books for years, and whether you hire a worker in Alaska, California, Montana, you're eligible to take that federal credit against your state taxes on an apportioned basis. So the positive fiscal note starting in 2001 of where we would recover $262,000 a year, this bill repeals the adoption of the federal credit completely; it adopts a state credit for a limited number of years - two currently, the amendment would make it three - then both programs would go away, the federal one immediately and the state one at the end of three years. Then we would not be allowing employers who may hire in other states. And the primary beneficiaries of the credit have actually not been Alaska hires; they've been multistate corporations working in other states where they've had programs that have hired a lot of people that have qualified for the federal credits." Number 1561 CHAIRMAN BUNDE commented that it's basically revenue neutral at the end of the program. MR. BARTHOLOMEW pointed out it would be revenue positive to around $260,000 which is historically what the state has been losing to the federal credit. It was his understanding the intent of the legislation isn't to be revenue neutral; it is to recognize there is a cost to providing that additional incentive for helping take people off the welfare rolls. He didn't want to leave the impression that it was going to be revenue neutral; there is a cost to it and in bringing this forward, the position is that the benefit that's going to be gained outweighs the cost. Number 1636 REPRESENTATIVE PORTER referred to the analysis prepared by the department which projects to the year 2004, (indisc.) and asked do we know if the federal program is going to be there in 2004. MR. BARTHOLOMEW responded the assumption is the federal program would be in existence in 2004. He added the federal program has changed shape a couple different times, changing to whatever the current need is, but it has been maintained. Number 1688 REPRESENTATIVE PORTER said he assumed that based on the fiscal note, the federal programs don't provide the same level of credit that's being proposed in HB 169. MR. BARTHOLOMEW responded that page 5 of the fiscal note compares what an Alaska corporation would receive under the federal program versus the state program. For example, a 100 percent Alaska corporation could currently get a $432 benefit on the federal tax, whereas under HB 169 it could be up to a $1500 credit. In short, Representative Porter was correct in that the federal credit doesn't provide the same level of fiscal incentive. REPRESENTATIVE PORTER wondered if the federal program was viewed as ineffective or what was the reason behind this proposal to quadruple the credit? MR. BARTHOLOMEW said it would, in essence, triple for an Alaska- based corporation; mainly, because currently there is no Alaska incentive, it's a federal incentive. His understanding was the reason for the increase is to provide a bigger benefit to try to provide a bigger incentive to hire workers off the welfare rolls. Number 1828 BILL EHLERS, Program Coordinator, Work Opportunity Tax Credit Program, Division of Employment Security, Department of Labor, explained that on the federal side, an employer still receives a substantial credit off their federal income tax. The credit to the state income tax is reduced by this legislation, but the employer would still receive the full benefit of the federal program. Under the work opportunity tax credit, the maximum credit an employer can receive is $2400 and under welfare to work, an employer can receive up to $8500 (indisc.-paper shuffling). REPRESENTATIVE VEZEY asked how many for profit corporations there are in Alaska and how many people are employed by these corporations. MR. BARTHOLOMEW estimated the number of registered corporations at 12,000 but he didn't have the employment figures available at this time. REPRESENTATIVE VEZEY expressed concern that corporations are the only entity in the state that's assessed an income tax. The majority of employers in Alaska are not in the corporate entity form and the majority of employees in the state do not work for corporate entities. He wanted to know why corporations were being singled out to assist with the welfare program. MR. BARTHOLOMEW thought it was indicative of who pays for some of the state services. Only 55 percent of the corporations registered are subject to income tax because of federal provisions that allow an entity to be a subchapter S. The only way to provide an incentive to someone not paying into the state would be a grant. REPRESENTATIVE VEZEY pointed out that less than 6,000 of the registered corporations are subchapter C which are subject to income tax. MR. BARTHOLOMEW interjected there are about 7,000 C corporations. Number 2123 MR. KREHER noted the department is looking at other options for providing incentives to all employers to hire disadvantaged workers, particularly welfare recipients. Through research of other states, the department found that one of the biggest incentives for employers was public recognition by doing their fair share in helping to move forward welfare reform initiatives. The department is also looking at wage subsidies and on-the-job training subsidies for employers who hire welfare recipients and put them into jobs as a way of offsetting the costs of hiring welfare recipients. He pointed out these incentives are still in nascent stages at this point. The department recognizes that many of these people will be moving into entry level jobs offered by smaller employers and smaller businesses, so it is important that some form of incentive be offered them as well. Number 2213 REPRESENTATIVE VEZEY said that Mr. Bartholomew had talked about this being a three year program, but he read it as a five-year program. MR. BARTHOLOMEW explained that HB 169 allows an employer three years of an active program and if there isn't enough liability to use the full credit within the three years, it can be carried forward two more years. So, the credit can be carried on a tax return for five years, but the active hire must have been made before that. He further explained there are three active years of the program in which a hire must have been made to be eligible for the credit, but as is typical with tax credits, a carry forward is allowed in the event the full credit isn't used. The department, for administrative purposes, made a short carry forward period. TAPE 98-15, SIDE A Number 0001 REPRESENTATIVE VEZEY observed this program appears to duplicate a number of programs already in existence and questioned why the state didn't take a pool of money and make it available for incentives to subsidize the minimum wage. MR. BARTHOLOMEW responded it would take an appropriation, which is an increase in the budget. He agreed that a reduction in revenue is the same thing as an appropriation, but it generally doesn't work that way in the budgetary process; credits have a better chance of passing than a direct appropriation. Number 0124 REPRESENTATIVE BRICE surmised that while the employers are receiving the tax credit for hiring these disadvantaged individuals, these individuals are losing their welfare benefits. MR. KREHER replied if the individuals are indeed employed and earning wages, there would be a reduction in their public assistance benefits. Ideally, the individuals would be earning enough money to take them off the welfare rolls quickly, so the department would be realizing program savings for every individual that's employed at one level or another, depending on the earned wages. Number 0196 REPRESENTATIVE BRICE said he didn't see the positive impact from the anticipated decrease in public assistance payments reflected on the fiscal note. MR. KREHER responded the department has no mechanism for projecting how many individuals would be hired. He said, "If I could speculate, if 100 individuals were hired - 100 adults off of 100 cases - and each one of those individuals received a job which paid them $10.50, which is probably unrealistic -- I won't even go at the minimum wage level because that's about what it would take in order for them to be ineligible for assistance based on their income. We paid last month - our average monthly benefit for a temporary assistance case was $720 so for those 100 individuals, it would be a sizeable chunk of change every year that we would save if those 100 cases went off assistance as a result of employment." Number 0299 REPRESENTATIVE J. ALLEN KEMPLEN said he was under the impression the department had previously come before the legislature and requested the program savings achieved from reduced caseloads be reinvested into the training of the welfare recipients. He wondered if the reinvestment funds couldn't be the pot of money referred to by Representative Vezey as incentives to subsidize the minimum wage. MR. KREHER said he really wasn't qualified to respond to that question, and added the department's budget indicates there are funds they would like to reinvest in a number of different areas; e.g., child care. He said there was considerable leeway in the use of the block grant under the federal welfare reform law, but the reinvestment of any money would be dependent on the legislature. Number 0390 REPRESENTATIVE KEMPLEN was of the opinion the legislature had used those funds last year as a way to reduce the operating budget. He pointed out the opportunity does exist however, for the legislature to consider Representative Vezey's proposal. It means that instead of those program savings being used to reduce the operating budget, it would be reinvested in the people of the state. REPRESENTATIVE VEZEY asked what the actual statistics were on the reductions in the welfare rolls. MR. KREHER referred to the division's monthly caseload and benefits summary report and said there is typically a spike in the winter months because it's a low employment period, but currently the public assistance caseload is the lowest since the early 1990s. There are under 11,000 temporary assistance cases currently. REPRESENTATIVE VEZEY observed reductions in food stamp recipients as well as temporary assistance cases; however, there are increases in the Medicaid program and adult public assistance program. MR. KREHER said the increases in the Medicaid and adult public assistance programs are largely driven by an aging population. The Medicaid program is largely federally funded and the expanding need for Medicaid services is what's driving those numbers up. The bulk of effort and costs are associated with the temporary assistance program, from the state's perspective. By focusing on that program in particular, the department believes the savings generated by caseload reductions will partially offset costs associated with growth in other areas. REPRESENTATIVE GREEN expressed concern that if the state gives a tax credit to employers hiring individuals coming off welfare, into what he presumed would be mostly entry level positions, would this be displacing other workers through the normal hiring process. MR. KREHER remarked that many of jobs are entry level jobs, and many of them are seasonal in nature. He pointed out that federal and state laws are very specific in terms of displacing current employees. He didn't believe that hiring disadvantaged workers in any job would necessarily displace other qualified individuals. He was of the opinion this legislation was a win/win situation for employers and for employees. Number 0854 REPRESENTATIVE KEMPLEN noted that many of the jobs are high turnover positions. Employers like Fred Meyers, Carrs and Safeway, which have high turnover positions such as checkers and baggers, viewed this credit as an incentive to train a disadvantaged worker for these entry level positions with the hope the individuals would move on to better jobs. Number 0950 CHAIRMAN BUNDE asked the wishes of the committee with respect to HB 169. Number 0960 REPRESENTATIVE BRICE stated he had a technical amendment for consideration. Number 0990 MR. KREHER explained that because HB 169 was introduced last year, the technical amendment simply changes the dates and adds language that includes the new federal welfare to work tax credit as one of the options. Number 1048 REPRESENTATIVE BRICE offered Amendment 1 which read: Page 1, line 10: Following "liability": Insert "(1)" Page 1, line 1: Following "51": Insert ", or (2) the welfare to work credit allowed as to federal taxes under 26 U.S.C. 51A" Page 2, line 2: Delete "1996" Insert "1997" Page 2, line 3: Delete "2000" Insert "2001" Page 2, line 8: Delete "1996" Insert "1997" Delete "2002" Insert "2001" Page 2, line 16: Following "for": Insert "either (A)" Page 2, line 17: Delete "1997" Insert "1998; or (B) the federal welfare to work credit under 26 U.S.C. 51A, as in effect on January 1, 1998" Page 2, line 24: Delete "1996" Insert "1997" Page 2, line 26: Following "federal": Delete "work opportunity credit" Insert "credits" Following "26 U.S.C. 51": Delete "is" Insert "or 26 U.S.C. 51A are" Page 3, line 8: Delete "1997" Insert "1998" Page 3, line 10: Delete "2002" Insert "2003" CHAIR BUNDE asked if there was any objection. There being none, Amendment 1 was adopted. CHAIRMAN BUNDE noted that House Bill 169, as amended, would be held in committee for further discussion. ADJOURNMENT Number 1060 CHAIRMAN BUNDE adjourned the House Health, Education and Social Services Standing Committee at 5:06 p.m.

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