SENATE BILL NO. 74 "An Act relating to funding for Internet services for school districts." 9:07:01 AM Co-Chair von Imhof relayed that the committee had heard the bill on April 24, 2019. Her office had received no amendments from committee members, however, the Legislative Finance Division (LFD) had raised several concerns. 9:07:46 AM ALEXEI PAINTER, ANALYST, LEGISLATIVE FINANCE DIVISION, discussed the changes to the bill. He explained that the federal disparity test functioned to determine whether the state could deduct federal impact aid from its share of the foundation formula for education, which was worth approximately $80 million to $90 million per year to the state. He said that the ability to deduct the aid was contingent on passing the disparity test each year. He shared that the test compared the highest funded districts in the state to the lowest funded; the E-rate money from the federal government was counted in the test, the bill would greatly increase E-rate funding in certain districts already at the top of the test list. The qualifying percentage for funding was 25 percent and passage of the bill would raise the percentage in those districts to 40 percent causing them to fail the disparity test. Mr. Painter stated that a possible solution had been discussed with the Department of Education and Early Development (DEED) but was contingent on federal approval. The department had requested to exclude e-rate funding from inclusion in the disparity test but had yet to hear a response from the federal government. In the interest of time, a conditional effective date had been added to the bill; the bill would only come into effect if the federal government approved the request to exclude E-rate from the federal disparity test. 9:10:19 AM Co-Chair Stedman asked for a more definitive explanation. He understood the general nature of the disparity test but wanted more detail about the potential funding imbalance. Mr. Painter detailed that the disparity test was a comparison for school districts based on the average daily membership. He furthered that based on state funding, there would not be a disparity; however local funding could potentially breach the 23 percent cap and raise the total disparity above 25 percent. Since E-rate funds fell outside of the funding cap and was concentrated in few districts, those districts would rise to the top, beyond 25 percent. The top school that was the cutoff in 2018 was the Lower Kuskokwim, which was a district that did not have a local contribution and would normally not be at the top of the list, but they receive a disproportioned amount of E-rate funding. The department projection showed that the district would rise too high to pass the disparity test. He noted the other small districts received E-rate money but not to the scale of some of the districts in Western Alaska. 9:12:42 AM Co-Chair von Imhof asked about the effective date of the bill being contingent upon agreement with the federal government. She asked whether there was a cut off date for implementation of the bill. Mr. Painter informed that there was a cutoff date of January 1, 2020. The date would give districts a chance to apply for FY 2021. 9:13:34 AM JULI LUCKY, STAFF, SENATOR NATASHA VON IMHOF, explained that the changes in the CS would not change the fiscal note, unless the federal government failed to approve the states request. She commented that there had been confusion about the e-rate program at previous meetings. She clarified that the federal program subsidized internet service only, and did not provide for infrastructure, all remaining yearly funds were returned. She shared that burden was shared between the federal and state governments; the E-rate was the federal program and the BAG Program was the state program. The BAG program allowed the state to help districts that could not reach the minimum number of megabits specified under current law. The bill would change the minimum amount form 10 megabits per second to 25 megabits per second, which would increase the number of eligible schools. She clarified that the bill would not put infrastructure in schools. She reiterated that the money was applied for annually and was given to districts on a monthly basis to pay for service, any unused money was returned to the state at the end of the year. 9:16:18 AM Co-Chair Stedman MOVED to ADOPT proposed committee substitute for SB 74, Work Draft 31-LS0600\K (Caouette, 5/1/19). There being NO OBJECTION, it was so ordered. Co-Chair Stedman MOVED to report CSSB 74(FIN) out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSSB 74(FIN) was REPORTED out of committee with a "do pass" recommendation and with one new fiscal impact note from the Department of Education and Early Development.