SB 11 SCHOOL DEBT REIMBURSEMENT SENATOR HALFORD, Sponsor, testified on behalf of the bill. Also testifying were MICHAEL MORGAN, LARRY WIGET and CARL ROSE. SENATOR PHILLIPS MOVED Amendment #1. SENATOR DONLEY objected, then withdrew his objection. SENATOR PARNELL objected. Amendment #1 was ADOPTED by a 5 to 1 vote. SENATOR TORGERSON MOVED Amendment #2. There being no objection, Amendment #2 was ADOPTED. SB 11 was HELD for further consideration. SENATE BILL NO. 11 "An Act relating to state aid for school construction debt; and providing for an effective date." COCHAIR SHARP noted that representatives from the Department of Education were present to speak to the bill, as was the bill sponsor. He invited Senator Halford to address the committee. SENATOR HALFORD indicated he was available for questions. SENATOR ADAMS inquired about the retroactivity clause and its effect on long term financial goals. SENATOR HALFORD responded that retroactivity applied to reimbursement of up to seventy percent for bonds sold with prior approval. It would apply to Mat-Su and Anchorage, and there had been a question regarding North Slope projects. It was not intended to apply to anything that had already been accomplished. It would apply to projects that had been approved but not yet had bonds sold. If bonds had already been sold, but departmental approval had not been received, they could go back to the department to get approval. SENATOR ADAMS had another concern which was covered in a draft amendment being copied for submittal to the committee, according to SENATOR HALFORD. SENATOR ADAMS asked for comments on a proposal to reduce the percentage from seventy-five to fifty. SENATOR HALFORD responded that fifty percent of something was worth more than seventy-five percent of nothing. SENATOR ADAMS expressed interest in merging other legislation into the bill so there would be equity among school districts, particularly for rural Alaska. SENATOR HALFORD responded briefly about the nature of the problem. MICHAEL MORGAN, Facilities Section Manager, Department of Education, testified in opposition to the legislation based on two reasons. The first related to continued advocacy for legislation that addressed statewide needs, whereas SB 11 only addressed needs for communities with the ability to bond. The other reason was that it ignored the prioritization process currently used by the department which the legislature put in statute. In response to a question from SENATOR ADAMS about a proposal to reduce the percentage to fifty, MR. MORGAN supported it because it potentially freed up money for communities not addressed by the bill. In response to a question from SENATOR PHILLIPS, he said he was speaking on behalf of the department and not the entire administration. There were requests for the department's priority list of projects. MR. MORGAN informed the committee that the department had been recommending $100 million annually for statewide construction. SENATOR PARNELL brought up an April 15 ballot in Anchorage with a list of school projects to be 100 percent funded by city taxpayers. The retroactivity clause would make some of the projects available for reimbursement. He questioned the wisdom of reimbursement versus using the money to further fund additional projects. SENATOR HALFORD provided additional explanation. LARRY WIGET, Director, Government Relations, Anchorage School District, addressed the committee. He brought up the issue of willingness of a community concerning overall indebtedness. By providing retroactive reimbursement at seventy-five percent, it lowered bonded indebtedness which would allow communities to take on greater debt in the future, or increase bond capacity. Research showed there would be greater likelihood for voters to support bond measures if they knew the funds were available. There was additional discussion about departmental approval of projects. MR. MORGAN offered explanation of timing differences concerning approval. In response to a question from SENATOR PARNELL, MR. MORGAN explained there was no cap and districts could bond for as much as they chose. There had been a statutory limit in the past. With the cap there had been a prioritization process, but under the legislation there would be none, so communities could submit the projects they chose. In response to a question from SENATOR ADAMS, MR. MORGAN stated the fiscal note addressed a portion of the retroactivity clause but did not include the proposed amendments which had been discussed. There was additional discussion about the indeterminate amount of the fiscal note. SENATOR ADAMS believed the North Slope Borough would be eligible, but the bill still needed to be made equitable for rural schools. He reiterated his concern about how it would impact the long range financial goal. The presence of Senator Donley was noted. SENATOR HALFORD informed the committee about the applicability of the amendment. It was not intended to pay back prior expenditures and had a narrow window. COCHAIR SHARP called for further questions or comments. There being none, SENATOR PHILLIPS MOVED Amendment #1 and explained that it dropped the reimbursement percentage from seventy-five percent to fifty percent. SENATOR DONLEY objected for sponsor comment. SENATOR HALFORD briefly reiterated his position. SENATOR DONLEY then withdrew his objection. SENATOR PARNELL objected. A roll call vote was taken on the MOTION to adopt Amendment #1. IN FAVOR: Donley, Adams, Phillips, Torgerson, Sharp OPPOSED: Parnell Amendment #1 was ADOPTED by a 5 to 1 vote. SENATOR TORGERSON MOVED Amendment #2. There being no objection, Amendment #2 was ADOPTED. A request was made of the department by COCHAIR SHARP to provide additional information regarding other school districts with bond issues that would be eligible under the retroactivity clause. He announced that SB 11 would be HELD for further consideration. CARL ROSE, Executive Director, Alaska Association of School Boards, addressed the committee, commenting that the bill had been somewhat divisive because it created haves and have nots. He didn't oppose the legislation, but noted it left out a large portion of the membership he represented, namely in the rural areas, because they lacked the capacity to issue bonds. The main issue was fairness and equity. Brief discussion followed MR. ROSE'S comments. The presence of COCHAIR PEARCE was noted. COCHAIR SHARP stated that SB 11 would be HELD for further consideration and took up HB 58.