Legislature(2023 - 2024)SENATE FINANCE 532
04/26/2023 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB113 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 113 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
April 26, 2023
9:07 a.m.
9:07:02 AM
CALL TO ORDER
Co-Chair Olson called the Senate Finance Committee meeting
to order at 9:07 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Donny Olson, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Jesse Kiehl
Senator Kelly Merrick
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Ken Alper, Staff, Senator Donny Olson.
SUMMARY
SB 113 REAA FUND: MT. EDGECUMBE, TEACHER HOUSING
SB 113 was HEARD and HELD in committee for
further consideration.
Co-Chair Olson relayed that Senator Wilson was away on
other state business.
SENATE BILL NO. 113
"An Act relating to the regional educational
attendance area and small municipal school district
fund; relating to Mt. Edgecumbe High School; and
relating to teacher housing."
9:07:26 AM
Co-Chair Olson relayed that it was the first hearing of SB
113, a bill by the Senate Finance Committee which pertained
to the Regional Educational Attendance Area (REAA) Fund and
Mount Edgecumbe High School (MEHS).
9:08:02 AM
KEN ALPER, STAFF, SENATOR DONNY OLSON, discussed a
PowerPoint presentation entitled "Senate Bill 113 -
Regional Education Attendance Areas" (copy on file). He
showed slide 2, "What Does SB113 Do?":
Currently, the Department of Education uses the
"Regional Educational Attendance Area and Small
Municipal School District Fund" for grants to school
districts within REAAs, or to small municipal school
districts
o"Small" is defined as districts with Average
Daily Membership < 300 and full assessed property
value per ADM < $500,000
SB113 Expands the eligible uses of the fund:
1. Construction and major maintenance projects at
Mt. Edgecumbe High School
2. Major maintenance on teacher housing in eligible
areas that is owned by the district or by the state
3. Also removes the "cap" on the size of the fund,
which is currently $70 million
Mr. Alper noted that the REAA funding from the state was
tied by formula to the school bond debt reimbursement paid
to urban schools. Since there had been a moratorium for
several years on new school bond debt reimbursement from
the state (which would expire in 2025), there would be a
jump in bond debt reimbursement which would carry a
commensurate jump to the REAA Fund appropriation. Removing
the cap on the fund would ensure that there was adequate
room for the fund to receive the additional funding.
9:10:31 AM
Co-Chair Olson asked how close the fund was to the $70
million cap.
Mr. Alper relayed that he had a chart that would address
Co-Chair Olson' question. He estimated that there was about
$36.9 million available in the fund at the end of FY 22
after deposits and spending during the year. There was some
thought that the deposits would get larger in future years.
Co-Chair Olson asked about the history of the fund balance.
Mr. Alper thought the Department of Education and Early
Development (DEED) could speak to the fund history in
greater detail. He described that generally speaking the
money came in every year, and the same amount was committed
during the year. He thought DEED did not try and maintain a
balance, although could save a balance over years for a
larger project. He did not believe that DEED intended to
carry a balance beyond preparing for a future project. He
did not think a $70 million cap had been problematic in the
past, but it could be in the future.
Mr. Alper turned to slide 3, "Background: the REAA Fund
(code 1222)":
REAA Grant Fund was created in response to Kasayulie
v. State (1999)
SB237 (2010) Section 1: LEGISLATIVE FINDINGS. The
legislature finds that
(1) the Alaska Superior Court, Third Judicial
District, in Kasayulie v. State of Alaska, Case No.
3AN-97-3782 (1999), determined that
(A) the method of funding capital projects for school
construction and major maintenance does not provide
rural schools with adequate or equitable funding
opportunities; and
(B) while urban schools are adequately funded through
existing mechanisms including bond debt, taxes, and
appropriations, a comparable mechanism for funding
rural schools does not exist;
(2) the mechanisms that currently exist in statute to
provide construction funding to regional educational
attendance areas have not resulted in sufficient
funding for projects approved for those districts.
Mr. Alper explained that the Kasayulie v. State of Alaska
case was an education equity lawsuit brought by rural
Alaska residents asserting that the state did not fairly
pay for the schools the way the urban schools were funded.
He mentioned SB 237, which had created the REAA fund as a
formal mechanism formula for the funding. He explained that
the REAA Fund was created to equalize funding.
Mr. Alper advanced slide 4, "Background: the REAA Fund
(code 1222)":
Annual appropriation to the fund is set by statute (AS
14.11.025(b))
• Take the school bond debt service reimbursement
payable per the formula in AS 43.11.100(a);
• divided by the percentage of schools in a city or
borough school district that are not in small
municipal districts;
• multiplied by 24.4%
In the "Fund Capitalization" section, Sec. 45(i), of
the current SCS to the budget:
(i) The sum of $27,897,000 is appropriated from
the general fund to the regional educational
attendance area and small municipal school
district school fund (AS 14.11.030(a))
This money can be disbursed by DEED without
further appropriation
Mr. Alper discussed school bond debt reimbursement payments
through which the legislature appropriated funds. Various
school districts accrued debt from school construction and
the state would agree to pay a percentage based on the
statute in effect at the time. Every year in the operating
budget there was a line item where money was appropriated
to municipalities to cover the states share. He reiterated
that the sum to be appropriated to the REAA Fund was 24.4
percent of what was appropriated to the urban
municipalities. He mentioned the school bond debt number
had decreased and so had the REAA Fund number.
9:15:21 AM
Mr. Alper addressed slide 5, "Why is this change needed?":
Mt. Edgecumbe, located in Sitka, is a boarding school
owned and operated by the Department of Education, but
it is not legally a school "district"
o They do not have bond debt, and do not have an
established process to apply to be on the "major
maintenance" list
o When the school has needed a capital project,
they've typically worked directly through the
governor's office and applied to the state
through the capital budget process
In many parts of rural Alaska, teacher housing is an
essential component of the school system.
o Much of it is older and in need of capital
improvement, but currently these costs are not
eligible for the primary state funding mechanism,
the REAA fund
Mr. Alper explained that MEHS was not in a school district
or in an REAA. The school had its own process for capital
projects, but fell between the cracks in many ways. The
intent of the legislation was to make MEHS eligible for
capital needs funding from the REAA Fund because they were
a school with students predominantly from rural areas. He
understood that the school facilities were aged and in need
of repair.
Mr. Alper addressed rural teacher housing as listed on the
slide. He reminded that schools (many of which were in Co-
Chair Olson's district) often had to provide housing for
teachers that were not permanent residents in the
community. Much of the housing was old and in disrepair,
and was part of the school itself but not able to be
upgraded and maintained by REAA funds.
Mr. Alper addressed slide 6, "Fiscal Impact?":
DEED is requesting $278,600 for two new staff to
implement the bill
• One of these people would be tasked with figuring
out Mt. Edgecumbe's needs and applying for grants.
o The person doing the applications has to be
separate from the existing DEED staff that review
and score the applications, so as to avoid
conflicts of interest
• The other person would have expertise in housing, to
better judge the teacher housing applications
Mr. Alper explained that he was paraphrasing from the
fiscal note.
Co-Chair Olson asked if Mr. Alper was discussing teacher
housing throughout the entire state.
Mr. Alper clarified that the funding would be for teacher
housing in areas eligible for REAA funding.
Co-Chair Olson asked about teacher housing in Anchorage and
Fairbanks and other first-class cities.
Mr. Alper affirmed that teacher housing in urban school
districts would not be eligible for the changes
contemplated in the bill.
Co-Chair Olson asked if anything had occurred recently to
make teacher housing changes a priority.
Mr. Alper understood that there was a lot of need for
teacher housing, much of which was older and in need of
repair. He thought district administrators were scrambling
to find funds to address the issues.
Co-Chair Olson understood that there had been issues with
many communities having water and sewer problems and major
issues with freeze-up of water lines.
9:19:22 AM
Senator Bishop referenced slide 5 and teacher housing,
which was a topic before the committee when it had
considered the Alaska Reads Act a year or two previously.
He mentioned conversation tying teacher housing to the act
and increasing outcomes in schools. He referenced Co-Chair
Hoffman's commentary about some villages that did not have
running water. He emphasized the importance of teacher
housing and thought there should be an emphasis and
priority on districts that had the least amount of housing.
Co-Chair Olson agreed with Senator Bishop, and stressed the
importance of teacher housing for teacher longevity.
Mr. Alper reviewed slide 7, "Sectional Analysis":
Sec. 1.Amends language in AS 14.11.025(a) that
authorizes the Department of Education and Early
Development to make grants from the REAA fund to REAA
districts and small municipal school districts.
1)Adds Mt. Edgecumbe to the eligibility list for
school construction and major maintenance grants.
2)Adds eligibility for major maintenance projects
for teacher housing in eligible areas that is
owned by the district or by the state
Sec. 2: Amends language in AS 14.11.030(a) that adds
Mt. Edgecumbe High School and major maintenance for
teacher housing to the description of the purpose of
the REAA fund.
Sec. 3: Deletes language in AS 14.11.030(b) that the
unobligated and unexpended cash balance of the fund
may not exceed $70,000,000.
Co-Chair Olson asked for the reason for the cap being $70
million.
Mr. Alper did not know why the $70 million cap was
established for the REAA Fund. He thought one of the co-
chairs might have insight into the matter.
Co-Chair Olson referenced slide 5, which explained that
when MEHS had a capital project request it had to go
through the governor's office, which he thought was
cumbersome. He mentioned facilities in need of repair.
Mr. Alper referenced statutes that described the operation
of MEHS, which included how it was treated as a quasi-
school district as well as direction to work with the
governors office for capital needs. He did not think it
was a well-defined process, and the bill tried to embed the
process into the bigger picture with rural school needs.
9:23:16 AM
Senator Merrick asked if there was a history of vetoes of
the fund capitalization for the REAA Fund.
Mr. Alper answered affirmatively and noted that there had
been vetoes in parallel with school bond debt funding. He
mentioned that the courts had been strident on the
matter, and when both Governor Dunleavy and former Governor
Bill Walker had vetoed some or part of the school bond debt
reimbursement, they had also vetoed a portion of the REAA
capitalization at the same ratio. He continued that the
previous year the legislature had appropriated a large
amount of money in the supplemental budget to essentially
pay back the municipalities and REAAs from past years when
there was partial or non-funding. There was around $220
million of back-paid bond debt that went to school
districts, and there was $83 million that went to the REAA
Fund. The large lump sum deposit was in the FY 22
supplemental budget and was deposited to the REAA Fund, the
bulk of which went to a new school in Akiak.
Co-Chair Olson referenced a document circulated by DEED
that related to some school construction and a deposit to
the fund. He asked Mr. Alper to speak to past
appropriations from the fund and the school in Napakiak,
which had a high outstanding balance.
Mr. Alper agreed to speak to the topic. He noted that he
had a spreadsheet document with a ten-year history of the
REAA Fund (copy on file), which included appropriations to
the fund as well as funded projects. He cited that there
was a $35 million appropriation in both FY 13 and FY 14,
and spending of $70 million on three schools in Nightmute,
Quinhagak, and Kwethluk. In FY 21, because of a veto, there
was zero appropriation. In FY 22 there was a supplemental
appropriation resulting in a fund balance of almost $100
million, $55 of which went to Napakiak. He discussed other
projects. The largest single item was a school project in
Mertarvik. At the end of FY 23 it was anticipated there
would be $22.9 million left in the fund.
Co-Chair Olson understood that the school in Mertarvik was
not a replacement, but rather a new school.
Mr. Alper relayed that that the school was listed as a
relocation/replacement.
9:27:13 AM
Co-Chair Stedman thought the bill was a good start and
brought forward some issues from MEHS that indicated it was
the odd school out. He thought the school had been at a
disadvantage for advocacy, particularly with maintenance
and upgrades. He discussed the pathway necessary for MEHS
projects, which included going through DEED and the Office
of Management and budget. He identified a lack of advocacy.
He considered the school's exceptional performance, and
contrasted it with the World War II bunkhouse that housed
students. He emphasized that the school was in need of
classroom expansion as well as site remediation and clean-
up. He mentioned adjacent buildings that were unsafe and in
an advanced state of disrepair. He did not think the
property looked good for the state or the school.
Co-Chair Stedman continued his discussion of MEHS and noted
that the department had never advocated for a site cleanup,
which he thought was due to a lack of prioritization. He
thought part of the impetus for the bill was to put MEHS on
a fair playing field with other schools. He discussed
time spent on analysis of school performance and emphasized
the need to support high-performing schools. He thought the
bill was a good start, and he asserted he would work with
Co-Chair Olson's office over the interim to address
concerns. He wanted to work on a structure to improve
advocacy for MEHS.
Co-Chair Hoffman also viewed the bill as an issue that was
long overdue in being addressed. He commented that many
people from his district, Co-Chair Olson's district, and
Senator Bishops district had attended MEHS, which was a
high-performing school. He thought it should be noted that
many Native leaders had graduated from MEHS and had
received a great education there. There was a waitlist of
students that wanted to attend MEHS, and he thought the
school should be used as an example of successful education
in the state.
Co-Chair Olson asked if Co-Chair Hoffman had gone to MEHS.
Co-Chair Hoffman relayed that he was a proud graduate of
Bethel High School.
Co-Chair Olson wanted to ensure there was no conflict of
interest, and noted that he had attended a different
boarding school. He considered the higher performance of
MEHS and thought it was fairly impressive that in spite of
the awkwardness of the funding pathway, the school had done
a remarkable job. He understood that over 90 percent of
MEHS graduates went on to college.
9:33:18 AM
Co-Chair Olson asked if the bill fixed all the issues that
Co-Chair Stedman could see.
Co-Chair Stedman thought that the bill would be a good
start. He thought that work over the interim would refine
the bill. He did not think the bill would solve every
issue, but it would be a good step forward if the change
brought about more capital needs advocacy for MEHS.
Senator Kiehl relayed that he had not gone to MEHS. He
referenced FN 1 from DEED and the request of a year-round
position needed to prepare applications. He understood that
most REAAs did not have such a position. Has asked if MEHS
needed a full-time year-round facilities person, and if the
position was something that could be fine-tuned.
Mr. Alper was not aware of the details of the position. He
noted that in conversations with the department, DEED had
mentioned the conflict of interest issue that he had
highlighted earlier in the presentation. He thought it was
likely MEHS could contract the work of the applications, or
suggested an existing position could take on the work. He
relayed that he agreed that the position request seemed
excessive for the task.
Senator Kiehl was a fan of efficiency in government. He
highlighted that the Senate Education Committee had
discussed the issue of teacher housing maintenance, and
wonder where it fell in the rankings of school major
maintenance, since it was from the same fund. He recalled
that there were things in existing law that would put
prioritization of new school construction and major
maintenance above teacher housing. He thought the committee
might want to address the topic in the bill.
Mr. Alper thought Senator Kiehl made a technically correct
point and offered that it was possible to find language to
clarify the equal standing of teacher housing if it was the
will of the committee.
9:36:28 AM
Senator Bishop relayed that he wanted to work with the co-
chair's office on the topic of teacher housing in the bill.
He referenced the fiscal note and wanted greater detail. He
referenced the REAA Fund history document and asked about
an $11 million project in Minto. He thought the numbers on
the document were stale and needed to be adjusted annually
for inflation. He emphasized the importance of having
accurate project numbers for project completion.
Co-Chair Olson asked if there was a date the information on
the fund history document.
Mr. Alper directed attention to the date of 24 August 2022,
at the top of the document. He noted that the document was
created when the FY 23 appropriation and FY 22 supplemental
appropriation had been finalized. He commented that the
legislature appropriated the funds to the REAA Fund, after
which the funds were expended without further legislative
process. He used the example of $11.8 million appropriated
for the Minto School, which was an internal transfer within
DEED that was possible once the fund was capitalized. He
assumed there was a process to apply for further funds if
there was a cost overrun but was not certain. He thought
DEED could address the question.
9:39:53 AM
Co-Chair Olson OPENED public testimony.
9:40:00 AM
Co-Chair Olson CLOSED public testimony.
SB 113 was HEARD and HELD in committee for further
consideration.
Co-Chair Olson discussed the agenda for the following
meeting.
ADJOURNMENT
9:40:27 AM
The meeting was adjourned at 9:40 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 113 DEED Resgional Education Attendance Area & Small Municipality Grant Fund Balance Spreadsheet.pdf |
SFIN 4/26/2023 9:00:00 AM |
SB 113 |