SB 117-INSURANCE FOR SCHOOL DISTRICTS CHAIRMAN MILLER brought SB 117 before the committee. Number 124 MS. MEL KROGSENG, Staff Aide to Senator Taylor, explained that an inefficiency was discovered in the administrative regulations adopted by the Department of Education regarding property insurance for school facilities and equipment. The Yakutat school brought this to Senator Taylor's attention. The school is the emergency shelter in the area in the event of a tsunami, and it had to pay flood insurance under the current regulations even though it is situated on the highest point of land in the area. The department was given a directive in statute to require property insurance for all schools, and when DOE adopted regulations it didn't consider that there were schools in no particular flood hazard zone required to carry flood insurance. Yakutat has paid up to $47,000 a year for its insurance policy. During the current budget shortfall when looking for ways to reduce costs, Senator Taylor felt that school districts could evaluate their potential risk for flood and earthquake damage and determine whether they need to carry insurance. MS. KROGSENG pointed out a discrepancy in the regulations, quoting from 4 AAC 31.200 Loss Protection Required, "The district shall carry flood coverage for school facilities and equipment in a flood plain or flood-prone area." In a subsequent section, it states, "In addition to the requirements of A and B of this section, an insurance policy purchased by REAA for any school facility or equipment owned by the State shall include the State as an additional insured for earthquake, and (3) flood coverage regardless of whether the school facilities or equipment are in a flood plain or flood-prone area." MS. KROGSENG said it doesn't seem that much thought was given to the reasonableness of the regulation when it was adopted. Number 174 MS. CHRISTY MILLER, National Flood Insurance Program Coordinator, Department of Community & Regional Affairs, Anchorage, stated on- line that she would answer questions. MR. PAUL FUHS, representing the Yakutat School District, spoke in support of SB 117. He stated they had hoped to have a school official on-line today but were unable to arrange a telecon- ference. He explained Yakutat is on a glacial moraine, not a flood plain, and there is no danger of flood. There is danger of earthquake, and if this bill were to pass, the district would still buy earthquake insurance. Last year during the school funding formula discussions, Yakutat heard a lot about districts looking at ways to cut costs. The flip side of the funding formula is the cost of providing education. This mandate was very clear for Yakutat. He asked the committee's support for SB 117. SENATOR ELTON asked if the bill makes earthquake insurance optional so that if the district decided to shave costs in the future, it could discontinue earthquake coverage even though it's in a sensitive zone. MR. FUHS replied yes, it could, even though it would not be wise. MR. MICHAEL MORGAN, Manager of Facility Section in the Department of Education, stated that when the department made the regulation change two years ago, it was advised by Christy Miller as well as the Division of Risk Management. The regulations it passed stated that people in a flood plain or flood-prone area, not counting REAAs which have state-owned facilities, would have to buy insurance. The intent was if a city or borough such as Yakutat was not in a flood plain or flood-prone area, it would not be required to buy flood insurance. The requirement for those two designations was on advice that the Federal Emergency Management Agency (FEMA) requires flood insurance to participate in any federal disaster aid when a flood occurs. Number 216 SENATOR PEARCE asked if the Yakutat school district asked the department to clarify that under the regulations they don't need the insurance. MR. MORGAN answered if they're not in a flood plain or flood-prone area, they're not required to buy the insurance under current regulations. CHAIRMAN MILLER said he was confused and he asked if Yakutat is in a designated flood plain area. MR. MORGAN said he didn't know. The department designated "flood plain" or "flood- prone" area because flood plains are mapped areas; flood-prone areas are based on the history of the areas that may not have been mapped yet. SENATOR ELTON also admitted confusion, and asked what happens if they're not required to have flood insurance and there is a flood in the region. Would it affect FEMA's ability to participate in disaster relief outside of the school if the school doesn't have coverage? MR. MORGAN replied, no, it's on a facility by facility basis. The Federal Emergency Management Act states the Flood and Disaster Protection Act of 1973 requires the purchase of flood insurance as a condition for a particular facility. CHAIRMAN MILLER repeated he is confused about whether Yakutat is in a flood plain and he requested the sponsor's staff to clarify that. Number 245 MS. MEL KROGSENG stated she understood from the superintendent at Yakutat that the school was told they had to carry flood insurance. The regulation does differentiate between REAAs. Mr. Fuhs also told her he understood the school district was told by the department that they had to carry flood insurance. She suggested the interpretation and implementation of the regulation was different than it actually reads. SENATOR WILKEN asked if the bill says the school district does not have to carry insurance for earthquakes. MS. KROGSENG replied it does say that. SENATOR WILKEN asked who rebuilds the school if there's an earthquake in his district and the school district chose not to carry the insurance. MS. KROGSENG said the intent was that a major earthquake doing serious damage would enlist federal assistance to rebuild schools and other infrastructure. She asked Ms. Christy Miller to discuss the federal assistance California received during its major quake a few years ago. MS. CHRISTY MILLER replied she checked with Walt Robinson at FEMA Region 10 who told her there were no automatic deductions in federal assistance if earthquake insurance was not in place at the time of a disaster. However, districts may be required to obtain insurance in the future. Mr. Robinson also indicated federal law may be changing in the future, but right now there is no mandatory earthquake coverage requirement. CHAIRMAN MILLER asked Ms. Miller if Yakutat is in a flood plain or flood zone on the maps at DCRA. MS. MILLER said that Yakutat is not in a mapped area. CHAIRMAN MILLER remarked, the city is saying they were told by DOE they had to buy the insurance and DOE says they didn't tell the city that, "So we have a problem here." SENATOR WILKEN suggested that the committee hold the bill and come back with a CS that takes earthquakes out and clarifies language that if a school district is not in a flood plain it does not have to buy flood insurance. MS. KROGSENG repeated that not all areas of the state are mapped. Language would have to be included for "flood-prone" areas. Regarding earthquakes, there is an available map showing the areas that are part of the "rim of fire," and areas prone to earthquakes. She suggested language targeting areas more prone to earthquakes because insurance is very expensive. To require areas with no known problems to carry it would add an extra, possibly unnecessary, financial burden. CHAIRMAN MILLER asked Senator Taylor, who had joined the committee, to address the problem of reconciling the Yakutat city fathers saying they are mandated to buy flood insurance and DOE stating they are not. Number 315 SENATOR TAYLOR said perhaps he, his staff, the legal drafters and the city fathers misread the regulation that seemed to mandate it. CHAIRMAN MILLER responded that DOE said that was not the case, that it was not mandated coverage if you were not in these areas. SENATOR TAYLOR countered, that's more reason to pass legislation to avoid confusion in the future. CHAIRMAN MILLER said because of confusion and concern by committee members about earthquakes, he would like to bring SB 117 back next week with clear language about who needs to be covered and who does not. He offered to work with Senator Taylor's office and DOE to ensure the proper language is included.