CS FOR SENATE BILL NO. 74(FIN) "An Act relating to funding for Internet services for school districts; and providing for an effective date." 2:20:22 PM Co-Chair Johnston relayed that the committee had already heard the bill during the prior session. 2:20:42 PM MARIDON BOARIO, STAFF, SENATOR LYMAN HOFFMAN, provided a brief review of the bill. She highlighted that SB 74 increased the broadband requirement for schools from 10 megabits per second (Mbps) to 25 Mbps of download speed and provided the funding through the School Broadband Assistance Grant (BAG). Schools applied for a subsidy commonly known as "E-rate," that provided discounts of up to 90 percent of the schools internet costs and the BAG grant helped cover the remainder of the costs. She reported that about 170 schools in 30 school districts around the state would be impacted. Co-Chair Johnston noted that Representative Sara Rasmussen had joined the meeting. 2:21:50 PM Representative LeBon asked if some schools were being left out of the program. Ms. Boario responded that any school that still operated under 25 Mbps were included. She noted that some schools already had access to higher bandwidths. Representative LeBon asked whether all schools would be at a minimum of 25 Mbps and would be satisfied if the bill passed. Ms. Boario responded that the increase was a start. 2:23:04 PM Vice-Chair Ortiz asked if all schools in Alaska would be bumped up to 25 Mbps. Ms. Boario responded that 172 schools were not at 25 Mbps and would be covered under the bill. 2:23:57 PM Representative Josephson inquired whether the money would supplant the money schools were currently spending on bandwidth. He wondered if schools would see a savings or an offset of funds for other purposes due to the program. Ms. Boario responded that currently a school applied for the federal grant program and a school district paid for the difference. The bill allowed for a school to apply for the increased bandwidth through the federal program and the BAG grant would cover the remaining costs. Co-Chair Johnston interjected that the Department of Education and Early Development (DEED) would explain the program further. 2:25:46 PM Representative Knopp recalled a discussion he had previously with a representative from GCI explaining the satellite technology and informing him that the infrastructure to increase the schools bandwidth was already in place. He was concerned about the $7 million cost considering the current fiscal situation. He suggested that internet rates tend to increase and worried about the state sustaining the cost into the future. He was uncertain of his support for the bill. Co-Chair Johnston commented about an article from the Alaska Journal of Commerce. She shared that Alaskas first low orbital satellite was going into operation in the current year that could possibly provide 80 Mbps to everyone in the entire state. She believed that it would be a game-changer. She invited DEED to report on the disparity test and discuss the fiscal note. 2:29:09 PM PATIENCE FREDERIKSEN, DIRECTOR OF LIBRARIES, ARCHIVES AND MUSEUMS, Department of Education and Early Development, introduced herself and reported that the fiscal note was approximately $7 million, which was necessary to serve all the schools at 25 Mbps. She explained that the program was in existence since FY 2015. Every year the number of schools participating in the program was reduced. The schools discovered through the bid process that it was possible to get over 10 megabits at a lower cost than the amount of the BAG grant. Each year the number of schools needing the grant to get to 10 megabits decreased. She expected the scenario to keep repeating going forward. She expounded that as the broadband infrastructure in the state grew it increased bandwidth and lowered the cost of internet. She thought that the 10 megabit BAG program would wither away. The program started at 135 schools in 2016 and was currently down to 72 schools needing support in 2020. She thought the current trajectory would continue with the 25 Mbps program. 2:31:57 PM Representative Carpenter noted that she had reported a decline in the 10 Mbps recipients. He wondered why participation decreased, if the price was declining or the school districts had budgeted more money for internet. Ms. Frederiksen reported that she was certain that it was due to the decreasing costs of internet in rural areas. She added that the program was strictly set at 10 Mbps and the schools could get higher amounts for less. Representative Carpenter wondered whether the schools currently paying for 25 Mbps or higher that were not currently on the list could apply for the program. Ms. Frederiksen responded that eligibility was established at under 25 Mbps. Schools at 25 Mbps or above were ineligible for the program. She anticipated that 173 schools were eligible to receive assistance to get to 25 megabits. Representative Carpenter deduced that some schools were paying for their own internet and the state was paying for up to 25 megabits of internet for other schools. Ms. Frederiksen responded that the BAG program was freezing a schools internet bill. She provided an example of a school paying $1 thousand per month for 20 Mbps. The BAG program was freezing the schools bill at the 20 Mbps cost and BAG was paying the remainder to 25 Mbps in combination with the E-rate. The schools bills would not increase through the life of the program. She related the same was true for the 72 remaining schools in the 10 Mbps program; their bills were frozen at 2014 levels and the E-rate and BAG programs were paying the rest of the bill. 2:35:26 PM Representative Knopp looked at the situation in a different way. He suggested that the schools and state would stay on the program indefinitely if 25 Mbps was the highest amount of bandwidth available. 2:36:29 PM Ms. Frederiksen explained the ways eligibility for the program was certified. The school district would apply for every school operating under 25 Mbps. The superintendent certified the application with their signature and submitted the application. The district simultaneously applied for the federal E-rate program. The departments E- rate coordinator reviewed the E-rate applications. The E- rate paid 70 percent to 90 percent of the bill for internet. She emphasized that both applications were scrutinized. The penalty for false information on the E- rate application could prohibit a school from receiving the E-rate. Representative Knopp was not suggesting any questionable behavior would take place. He voiced that if 25 Mbps was the highest bandwidth available in the state, a school could not purchase a higher amount at a reduced rate like the schools currently paying for their own bandwidth at 15 Mbps instead of remaining in the BAG program at 10 Mbps. Under the 25 Mbps scenario, participants would not drop out of the program if it were the highest bandwidth available in the state under the current infrastructure. Ms. Frederiksen believed that there were areas in Alaska where higher than 25 megabits was available. She reported that it depended on the pressure from each school. She determined that if a school discovered 40 Mbps was available in their area and they could afford to pay for it with their own resources and the E-rate, they would likely exit the BAG program. She stated that the upward pressure for more bandwidth from schools and libraries was unstoppable due to advances in technology. Co-Chair Johnston reiterated the low orbit information she shared earlier in the meeting. 2:40:04 PM Representative Carpenter remembered in the prior year 25 Mbps was considered a benchmark. He reasoned that in the future the benchmark would grow higher and the demand due to new technology would require an increase above 25 Mbps bringing additional costs. Currently, 25 Mbps was a mid- level of the amount the schools would need. Ms. Frederiksen replied that the amount was a very basic level of bandwidth. She elucidated that the more students, internet testing, and distance education the more bandwidth was necessary. The 25 Mbps amount was the Federal Communications Commission (FCC) standard, but the commission was moving beyond the figure in other states where bandwidth was easily accessible. The low orbit satellites would bring more competition in rural areas that would draw prices down. The satellite and other providers would be in competition for schools. The e-rate had been designed to create the infrastructure and progress bandwidth development around the country. The state of Alaska would never be on the cutting edge of bandwidth. She deemed that currently, 25 Mbps would be a boon to the schools but in 5 or 10 years the schools would want more. Representative Wool referred to the rate sheet [FY 2019 School BAG Awards by District and School (copy on file)] in members packets and asked whether the costs were based on 10 Mbps. He provided Whittier as an example. Ms. Frederiksen answered in the affirmative. She added that the table showed the annual cost of internet for each school, the E-rate paid portion, the school paid portion, and the BAG portion. 2:43:10 PM Representative Wool guessed that the rate for 25 Mbps was higher and as bandwidth increases content increases. He imagined the demand would continue to grow. He wondered if the school would pay the entire cost of internet if there was higher bandwidth available. Ms. Frederiksen explained that prior to School BAG the districts paid for internet from a combination of E-rate ranging from 70 to 90 percent and the districts funding. The BAG was an additional source of funding to meet the internet needs. She delineated that if the cost of internet were to decrease and a district wanted to increase over 25 Mbps the district would exit the BAG program if they could afford it. She reminded the committee that the district would continue to receive E-rate subsidies. 2:45:08 PM Representative Wool clarified that E-rates would continue to be available. He observed that no matter how much band- width was available and competition increased, his cell phone and internet bill always increased. He was looking forward to new satellites, but he did not think internet costs would decrease especially for rural districts. Co-Chair Johnston requested discussion concerning the disparity test. HEIDI TESHNER, DIRECTOR, FINANCE AND SUPPORT SERVICES, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, pointed to Section 2 and Section 3 of the bill and noted that they addressed conditional language. She reported that the department worked with the federal Department of Education on the disparity test and received confirmation that the E- rate was excluded from the calculation. She elaborated that the issues in the prior spring regarding the disparity test were addressed. Co-Chair Johnston asked about the filing window. Ms. Frederiksen responded that the filing window for the federal E-rate awards was March 27, 2020. The regulations had been re-drafted and there were a couple of date issues that were necessary to address. The department was ready to address the school BAG regulations with the state Board of Education during the March 26, 2020 meeting. 2:48:18 PM Co-Chair Johnston asked whether the department would take the new BAG provisions to the state Board of Education if the bill was adopted and signed by the governor by March 26, 2020. Ms. Frederiksen confirmed that it would take the regulations before the board for approval. Co-Chair Johnston hoped that the state would make the deadline. 2:48:57 PM Representative Wool asked how many of the schools on the 2019 list had the 25 Mbps increase available to them. Ms. Frederiksen responded that she did not know the answer. She elaborated that with the inception of the 10 Mbps program many schools could not receive 10 Mbps in the first year of the program. The vendors had to insert some hardware into their networks and the schools need additional hardware. The highest number of participants was in FY 16. She relayed testimony from the prior year from Christine O'Conner, Alaska Telecommunications Association, stating that 25 Mbps would be available statewide. 2:50:40 PM DR. LISA SKILES PARADY, DIRECTOR, ALASKA COUNCIL OF SCHOOL ADMINISTRATORS, related that she was working with the internet providers and assured that 25 MBPS would be available to all the schools on the list. 2:51:07 PM Representative Josephson requested the matching amount for the E-rate. Dr. Parady responded that it was up to a 9 to 1 match. Ms. Frederiksen interjected that the amount of E-rate awarded a school was based on its school lunch program and the poverty rate. She noted that one school in Unalaska only received 50 percent but most of the schools received 80-90 percent. Representative Josephson asked what sort of federal resources the $7 million fiscal note would bring. Ms. Frederiksen replied that the E-rate at 86 percent was approximately $84.3 million. Representative Josephson mentioned the deadline and noted that $84 million was at stake. Ms. Frederiksen responded in the affirmative. She noted that the school districts would need to reapply, and she was uncertain how long that could take. The problem was that the legislature's schedule was similar to the E-rate application schedule. The department would work arduously on its end to help facilitate the process. 2:53:41 PM Representative Wool noted that $86 million would be coming to the state to internet providers who would greatly benefit from the program. Ms. Frederiksen responded affirmatively. Representative Wool asked if the E-rate contribution could change at the federal level. Ms. Frederiksen responded in the negative. She indicated that most other schools received a higher level of E-rate because costs were lower in the rest of the country. The E- rate program wanted Alaska to receive higher bandwidth. 2:54:37 PM Co-Chair Johnston noted the slight increase from the previous year on the fiscal note and wondered why. Ms. Frederiksen recalled that the services line increased but was unclear why. The School BAG program paid for the E-rate coordinator and some other services. Co-Chair Johnston asked Ms. Frederiksen to get back to the committee with the answer. Ms. Teshner interjected that the reason was reported on the fiscal note analysis. She communicated that the increase was for increased contractual hours and technical review of applications by DEEDs contractor. Co-Chair Johnston indicated amendments were due by Monday, February 10th. CSSB 74(FIN) was HEARD and HELD in committee for further consideration.