GENERAL SUBJECT(S): Review of Departments Accomplishments Department of Education and Early Development Alaska Aerospace Development Corporation Alaska Railroad Corporation The following overview was taken in log note format. Tapes and handouts will be on file with the House Finance Committee through the 21st Legislative Session, contact 465-2156. After the 21st Legislative Session they will be available through the Legislative Library at 465- 3808. Time Meeting Convened: 1:39 p.m. Tape(s): HFC 00 - 11, Side 1 HFC 00 - 11, Side 2 HFC 00 - 12, Side 1 HFC 00 - 12, Side 2 PRESENT: X Representative G. Davis absent Co-Chair Therriault X Representative Foster X Co-Chair Mulder X Representative Grussendorf X Vice Chair Bunde X Representative Moses X Representative Austerman X Representative Phillips absent Representative J. Davies X Representative Williams ALSO PRESENT: Pat Ladner, Executive Director, Alaska Aerospace Development Corporation (AADC), Department of Community and Economic Development; Laura Gould, Alaska Aerospace Development Corporation (AADC), Department of Community and Economic Development; Richard Cross, Commissioner, Department of Education and Early Development; Karen Rehfeld, Director, Division of Education Support Services, Department of Education and Early Development; Governor Bill Sheffield, President, Alaska Railroad Corporation; Yvonne Chase, Director, Division of Early Development, Department of Education and Early Development; Bruce Johnson, Deputy Director, Department of Education and Early Development; Representative John Coghill Jr.; Jerome (Jerry) Anderson, Alaska Railroad Corporation, Community and Economic Development. LOG SPEAKER DISCUSSION TAPE HFC 00 - 11 SIDE 1 000 Co-Chair Mulder Convened the House Finance Committee meeting at 1:39 p.m. 110 RICHARD CROSS, COMMISSIONER, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT Noted that the State Board of Education plays a role in guiding the Department of Education and Early Development. Emphasized that there needs to be coordination of missions with the Board of Education to assure that they are consistent. 387 Commissioner Cross Noted that the first graduation qualification exams would be given in 47 days. 432 Vice Chair Bunde Questioned how long the standards exam has been under construction. 469 Commissioner Cross Acknowledged that work on standards has been under way for 10-12 years. Emphasized that there is agreement on the items that children need to know. Students will be expected to demonstrate that they have the skills they need to be successful. 610 Vice Chair Bunde Pointed out that some people think that the exams are being sprung on the students. 641 Representative Phillips Recounted a letter she received from a high school student requesting funding for education. It that was so poorly written that it was embarrassing. 711 Representative Austerman Noted that he received two high school annuals from a school in his district. He indicated that the quality of the writing was poor. 796 Commissioner Cross Stressed that standards are designed to assure that students can express themselves appropriately. Noted that we will need to work together to use the results of the exams to assure that the standards are accomplished. Educators need to shift focus off the tests and on to the real benefits that they are intended to achieve. The tests are the best opportunity to focus on the common agenda to achieve performance. 1001 Commissioner Cross Important to accept responsibility but give up ownership. Emphasized the need to build support for the benefit of the students and recognize that there will be problems. 1076 Commissioner Cross The department is actively involved in trying to build support. People are aware of what is going on. Anchorage has put practice tests for the high school graduation-qualifying test on the internet. 1194 Commissioner Cross The test contains items that everyone thinks are important, like balancing a checkbook. 1218 Commissioner Cross Noted that there is support for the goal of achieving standards. Stressed that they are at an important point in the process. The test is not the final step. 1275 BRUCE JOHNSON, DEPUTY COMMISSIONER, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT Summarized accomplishments relating to the Quality Schools Initiative. Alaskans have done everything. Performance standards have been refined for math, reading and writing. Developmental profiles were administered to kindergartens throughout the state. Alaskans developed the assessment high school qualifying exam and benchmark exams. Standards were adjusted to be fair to all Alaskans. They were field-tested in Alaska. The questions that were considered fair across the state were used. There are enough questions for 3 tests. Books will be sent to school districts soon. 1392 Mr. Johnson The department conducted training workshops last December. 1456 Mr. Johnson The department is making an effort to assure that people have a chance to talk about assessments. Assessments will be administered in March. They are on time examinations. Students cannot mix during or between testing. 1522 Mr. Johnson Discussed the next milestone, 63 Alaskans will be brought together to determine the cut-line or passing score. Benchmark decisions will also be made by a group of Alaskans and will come out in the fall. 1565 Co-Chair Mulder Clarified that the cut-line will not be known prior to the exam. 1580 Mr. Johnson Explained "bookmaking", which will be used to determine the cut-line or pass score. The test questions will be ordered from the easiest to the hardest based on test scores. The last question will be the one that students found to be the most difficult (the fewest correct answers). The bookmarking group will not know the percentage of students that answered a question correctly. They will go through the answers and decide where the cut-line should be drawn. 1666 Representative Phillips Expressed concern with the bookmarking approach. She felt that a standard should be set. 1699 Co-Chair Mulder Questioned if the objective is to have 70 percent of the children pass. He felt the lack of a marker could screw the objective. 1724 Mr. Johnson Reiterated that the group will evaluate the questions to decide at what level the standard should be set based on what they think a high school graduate should know. 1764 Representative Williams Expressed concern with the bookmarking system. 1813 Representative Austerman Expressed confusion regarding the bookmarking approach. 1821 Commissioner Cross In response to a question by Representative Williams, Commissioner Cross discussed the recent national grade assessment of the state of Alaska. He maintained that the state received a poor grade due to a misunderstanding of the state's system. He explained that one of the things that is being worked on is the appropriate way to state a measure. The national group felt that the state's standards (mission) were too vague. What they did not understand is that there is another level of standards (performance measures). 1934 Commissioner Cross Discussed bookmarking. He noted the difference between percentages and bookmarking. Percentages are tailored so that there is an appropriate scale for the level of the students being taught. Bookmarkers will not determine how many students pass or fail. What they will determine is what is an acceptable level on a passing scale, without knowing how many will pass or fail. 2105 Mr. Johnson In response to a question by Vice Chair Bunde, Mr. Johnson explained that a bookmark would establish a bar rather than a curve. 2114 Vice Chair Bunde Stated that he is not concern that teachers will test to the test. 2160 Commissioner Cross Acknowledged that there is nothing wrong with teaching to the test if the test is made up of the items that students should understand. 2193 REPRESENTATIVE JOHN COGHILL Asked if there is a comparison with national or international exams. 2290 Mr. Johnson Responded that there is no national or international comparison. The tests are uniquely Alaskan, but he assured the Committee that the tests are as higher or higher than other standard tests. 2229 Representative Foster Questioned what will be done for students that do not pass the exams. 2286 Commissioner Cross Emphasized that education is delivered through the districts and that the department is unable to impose results. 2313 Commissioner Cross Accountability lies first with the student. Quality initiatives rate schools and how well they are improving the performance of their students. The department plans to bring districts together at the end of September to share results and discuss strategies. TAPE CHANGE, HFC 00 - 11, SIDE 2 92 Representative Grussendorf Suggested that there are more people that can land a plane than can pass the test. Asked if there should be a horizontal line before a vertical line. Expressed concern that standards are going to be set before they are sure of their instruments. 213 Commissioner Cross Pointed out that if there is a high level of certificates of attendance instead of diplomas the department will have failed. Maintained that the standards exist. 322 Mr. Johnson Stressed that the standards have been established. Emphasized The point is within the standard how high do we want the student to achieve before graduation. There are degrees of difficulty (within multiplication problems how high should the student perform). Should students be able to multiply 2 place, 3 place or more numbers. 422 Representative Foster Pointed out difficulties that rural students have. Many do not have access to equipment or laboratories needed for chemistry or other subjects. Expressed concern that they will not have the teaching facilities or teachers to meet their needs. Emphasized that rural students cannot compete with Anchorage and Fairbanks students. 586 Commissioner Cross Acknowledged that there are tough issues. Stressed that the skills that are being tested are skills that the students need to have regardless of where they live. If the students aren't receiving the skills then the department is going to have to figure a way to get them to the students. Emphasized the need for benchmarks. 747 Vice Chair Bunde Observed that many legislators have GED's. 787 Representative Williams Questioned what is being fixed by the standards. 917 Representative Coghill Pointed out that there are a lot of students of military families in the state's system. 950 Representative Austerman Agreed that the standards should be the same for all students. 1020 Commissioner Cross In response to a question by Representative Austerman, Commissioner Cross noted that 32 percent of the state's students are where 25 percent of the nation's students are. ALASKA RAILROAD CORPORATION 1328 GOVERNOR BILL SHEFFIELD, PRESIDENT, ALASKA RAILROAD CORPORATION Stated that the Alaska Railroad corporation (ARRC) is a professionally run, self-sustaining, full service railroad serving ports and communities from the Gulf and Alaska to Fairbanks. It has been owned by the State of Alaska since 1985, the railroad is overseen by a seven member Board of Directors appointed by the Governor. Referred to derailments that resulted in oil spills. He spoke to the preventative actions that the railroad has undertaken. There has been a letter sent that detailed all the changes that the railroad has undertaken. Next Tuesday, there will be a full report available regarding the operations of the railroad. 1531 Governor Sheffield Noted that the cabooses are back on the railroad for positive train control. 1587 Co-Chair Mulder Asked for a statement of the Alaska Railroad Corporation's mission. 1596 Governor Sheffield The mission is defined as providing safe, high quality transportation services for the State of Alaska. 1623 Governor Sheffield Added that the mission is to provide safe transportation to visitors and residents of the state and develop and foster long term growth in the state. He stressed that, for the investment, the state receives increased jobs and improved infrastructure. 1680 Governor Sheffield Outlined the state's investment. The railroad is a tax-exempt entity. It is the only full service rail in the nation operating passenger and freight service. 1755 Governor Sheffield Stressed the importance of the railroad to provide safe transportation and foster economic growth. The railroad has not required state funds since it was purchased. Railroad employees are not on the state's payroll or retirement system. 1832 Governor Sheffield The railroad generates approximately $9 million dollars in annual income. 1883 Governor Sheffield An ongoing capital investment is needed to take advantage of improved technology. 1910 Governor Sheffield In 1989, an audit recommended the revamping of the Alaska Railroad Corporation's safety program. The railroad was able to reduce their rate of injuries in the last half of 1999. 1977 Governor Sheffield Reviewed financial indicators. Profits go back into the railroad to increase its operation. The railroad increased in value from $22.3 million in 1984 to $101.2 million dollars in 1999. Ridership has grown. Since 1995, the railroad has shipped 2.76 million metric tons of coal in the last year. 2055 Governor Sheffield The railroad has approximately 650 employees in 2000. The railroad pays $36.2 million dollars in wages. 2085 Governor Sheffield Noted capital improvements. Fixed assets have increased to over $180 million dollars. The railroad receives $10 million dollars a year from Congress for ties and other expenses. 2113 Governor Sheffield When the state purchased the Alaska Railroad Corporation it assured that passenger service would be continued. A private owner would only operate profitable lines. 2152 Governor Sheffield Reiterated that the railroad is tax exempt entity. He emphasized the importance of the service where people have no other transportation. 2210 Co-Chair Mulder Pointed out that it costs approximately $2,200 per person for rail service in one area of Alaska during the winter. Stressed the need to evaluate the cost. 2263 Governor Sheffield Noted that there is no way to charge enough to make it economical in some areas. 2282 Co-Chair Mulder Observed that the House Finance Committee has to make policy decisions and set direction. 2302 Vice Chair Bunde Noted that some of the individuals that live in remote areas (where the railroad operates a deficit) are among those that cry the loudest that they are not receiving state services and should not pay taxes. TAPE CHANGE, HFC 00 - 12, SIDE 1 51 Co-Chair Mulder Observed that the federal government is providing a large amount for railroad maintenance. 120 Governor Sheffield Responded that 120,000 railroad ties can be bought with the federal funding the railroad receives. In two to three years the Alaska Railroad Corporation will only require 35,000 replacement ties a year. 196 Governor Sheffield With the savings the railroad can do other maintenance and buy more locomotives. New locomotives are more powerful and will save money by allowing trains to operate with fewer locomotives. He discussed other efficiencies that can occur through further investments. All the money made in a year goes into the next summer's capital budget to make the railroad safer and more efficient. 435 Representative Austerman Asked about the Anchorage railroad station expansions. 448 Governor Sheffield Noted that the Anchorage railroad expansion was built to increase the number of passengers using the service. 549 Governor Sheffield Discussed the plan to increase tourism's use of the rail. He estimated that $2 million dollars could be gained through the Anchorage expansion. 608 Governor Sheffield Noted that there is a chance that coal contracts could be lost. The cash generated from coal contracts have decreased. Passenger increases will help to make up for the loss of revenue from coal. 709 Representative Austerman Asked the cost to operate the Anchorage station. 731 Governor Sheffield Stated that the cost would be about $300 thousand dollars a year. 815 Governor Sheffield In response to a question by Representative Grussendorf, Governor Sheffield noted that severe weather and bad track conditions caused a derailment near Hurricane. 962 Governor Sheffield Discussed cabooses. He noted that cabooses help when the train has to back out of sight and assist in switches 1083 Governor Sheffield In response to a question by Representative Phillips, Governor Sheffield noted that the railroad uses a line of credit of up to $10 million dollars to address problems. 1116 Representative Phillips Observed that there is an obligation to keep the deep-water ports open in Seward. 1170 Representative Phillips Discussed other obligations to the federal government. Noted that Whittier also needs to stay open. 1184 Co-Chair Mulder Asked Representative Phillips to work on a mission statement. 1201 Governor Sheffield In response to a question by Representative Foster, Governor Sheffield noted that the derailment has cost $3 million dollars so far and may cost up to $5.5 million dollars. 1231 Representative Foster Noted that the Alaska Railroad Corporation is seeking legislative changes. 1281 Governor Sheffield Discussed legislation relating to an agreement with the city of Whittier. He added that the railroad has been busy with land trades. There is no money involved. 1354 Co-Chair Mulder Asked if legislation has been drafted. 1366 Governor Sheffield Stated that the legislation has not been drafted. 1445 Vice Chair Bunde Asked what measures are being taken for spill response prevention. 1459 Governor Sheffield Noted trains contain spill response equipment. They are working to increase spill response. 1508 Vice Chair Bunde Referred to the railroad dock in Seward. Asked how rates will compare to those charged by the city of Seward. 1523 Governor Sheffield Did not know the city's rate. Noted that tariffs have not been increased in many years. Railroad tariffs will be increased this year. Acknowledged competition with the city of Seward. 1641 Governor Sheffield Spoke to hauling freight. Discussed railroad transportation into Canada and mining in the Yukon Territory. 1750 Co-Chair Mulder Questioned if the state could do a bond issue for continuation of the railroad to the Arctic. 1763 Governor Sheffield No, not through revenue bonds. 1772 Co-Chair Mulder Asked if there would be people to buy those bonds. 1781 Governor Sheffield Stated that work has not been done at this point. 1794 JEROME (JERRY) ANDERSON, ALASKA RAILROAD CORPORATION, COMMUNITY AND ECONOMIC DEVELOPMENT Stated that the state could bond if there was a revenue stream. It would not tie into the Alaska Railroad, as we know it today. 1841 Governor Sheffield Stressed the value of coal resources and the need for access to that resource. 1856 Representative Foster Noted that the coal north of Kotzebue could supply the world for 400 years. He spoke to the idea of private ownership of the railroad. He asked if the privatization committee had any suggestions on privatizing the railroad. 1912 Governor Sheffield Stated that he was waiting for that data to be released. 1924 Co-Chair Mulder Asked that the safety issues on realignment in Fairbanks and limits of visibility be addressed for Rep. Coghill. 1945 Governor Sheffield Stated that there was a plan to address those concerns. He spoke to the route outside of Ft. Wainwright, which is a $22 million dollar project, supported by Senator Stevens. He commented on a new tracking system for hauling missiles. Funding for these projects are being considered and would solve the problem of the refinery. 2056 Governor Sheffield Stated that the best thing that the legislature could do would be to approve the land trade negotiations. 2100 Co-Chair Mulder Stressed that he does not want to jeopardize the future of Ft. Richardson or hold up that base. Expressed concern that the work continues. Observed that there can be no development along Cluney Lake. 2137 Governor Sheffield Agreed that should not be a decision that the legislature should have to make. The railroad got caught in the middle of that concern. 2165 Representative Foster Spoke to the long-term vision of the railroad. 2189 Co-Chair Mulder Asked when the state could anticipate a dividend from the railroad. Stated that he would like to see a dividend of approximately $5 million dollars a year from the railroad. 2212 Governor Sheffield Replied that the railroad would feel good if they were in a position to pay a dividend. The goal is to establish a time within the next year of when payback can be expected. He added that the railroad does a lot to help municipalities. TAPE HFC 00 - 12, SIDE 2 ALASKA AEROSPACE DEVELOPMENT CORPORATION 000 PAT LADNER, EXECUTIVE DIRECTOR, ALASKA AEROSPACE DEVELOPMENT CORPORATION (AADC), DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT Noted that the mission of the Alaska Aerospace Development Corporation is to promote aerospace-related economic growth and develop corresponding technologies and support services. Discussed programs and contributions to the mission. The Kodiak Launch Complex (KLC): a state-owned, AADC managed rocket launch complex developed to support both commercial and government launch activity. Fairbanks satellite ground stations: an AADC effort to facilitate private development of satellite ground stations for polar orbiting satellites. Discussed the Challenge Learning Center in Kenai. He estimated that the Center would be operational in the next summer. 224 Mr. Ladner Noted that their existing customers include Lockheed Martin Corporation, the US Air Force and US Army. While not direct customers of AADC, the agency has worked with the following companies to develop ground stations in Fairbanks: Los Alamos Laboratories, Space Imaging Inc., the US Air Force 224 Mr. Ladner Discussed performance measures. Measure: Increase the number of launches from the Kodiak Launch Complex (KLC) to at least two in FY01. Demonstrate economic impact from KLC launch activities of at least $2 million in FY01. Continue to work with industry to locate more satellite ground stations in the Fairbanks area. 260 Mr. Ladner AADC is targeting two to three launches for FY2001, one for Lockheed Martin in September 2000 and two government missions in the first half of 2001. Contract negotiations are being finalized with Lockheed and discussions have commenced for the two government missions. Mr. Ladner Discussed the Northern Edge exercise. The inclusion of the space aspect would result in at least one launch from Kodiak. 341 Mr. Ladner Discussed a marketing/ commercialization grant received from the Alaska Science and Technology Foundation. The grant would be expended over a three-year period. The purpose of the grant is to reach out to as many potential customers as possible and solidify launch contracts for the KLC. A technical marketing component of the grant will assist in contract development and negotiation as well as explore KLC enhancements that could broaden the customer base. The launch control center is complete. It is occupied and being used. 544 Mr. Ladner The University of Alaska Anchorage, Institute of Social and Economic Research (ISER) performed an analysis of the inaugural launch from the KLC. Based on actual expenditures, ISER determined the total economic effect for the state to be $1.3 million in sales and $450,000 in payroll. A benchmark is being developed. 598 Mr. Ladner Discussed the Fairbanks satellite ground stations effort. They did not have to expend a lot of money for the five ground stations. They are working with data processing to assure a full product within the state. 693 Mr. Ladner Discussed FY99-00 Accomplishments. Noted that there were two successful launches from the KLC for the US Air Force prior to the completion of the facility. Scheduled first orbital launch from the KLC for Lockheed Martin Corporation. Maintained that the construction effort has been successful. The entire system is ready. 801 Mr. Ladner As the construction of the KLC comes to completion, AADC will transition the facility to a year-round operational mode. An aggressive marketing strategy aimed at increasing awareness of the facility, identifying potential customers and solidifying launch contracts will be implemented. The grant process would provide a technical director under contract to work closely with industry. 915 Mr. Ladner Discussed FY01 strategies/priorities, to increase local employment opportunities and to support aerospace activities. Lockheed Martin Corporation is currently working with the Chamber of Commerce. One of the largest suppliers is working with the community. 937 Representative Grussendorf Expressed a desire to see participation in the Northern Edge exercises. He noted that Sitka would be used. 974 Mr. Ladner Responded that space assets played a large role in the Gulf War. The role at KLC would be to launch a rocket over the ocean to simulate an enemy missile launch. 1090 Vice Chair Bunde Noted that there was an unsuccessful launch and asked if it would have an impact on the KLC. 1121 Mr. Ladner The recent test failure will have an impact on the development of the system. Anticipated a major effort to retest. Did not think it would have a major impact. 1161 Mr. Ladner The launch complex is the first of its kind. Finding out that this project is bringing an awareness of Alaska. NASA is making big plans for an up coming launch that will bring a different view of Alaska. 1301 Representative Phillips Questioned how many tests of ballistic missiles will occur before action by the President. 1342 Mr. Ladner Stated that the federal government was looking for two successful tests in a row. The recent failure is a minor set back. 1410 Co-Chair Mulder Who is the contractor involved. 1424 Mr. Ladner Boeing is the contractor. There are other subcontractors. 1447 Co-Chair Mulder Boeing showed an interest in utilizing Kodiak due to its position. 1508 Mr. Ladner Noted that Kodiak launches are realistic. 1519 Co-Chair Mulder What efforts have been made to attract Boeing to Kodiak? 1536 Mr. Ladner Met with the head of Boeing two years ago. Will brief them in the future. The dialog is occurring. 1590 Co-Chair Mulder Noted that Senator Stevens is sympathetic. 1607 Representative Austerman Asked if there is anything the board can do to expand other aspects of the aerospace industry. 1629 Mr. Ladner There is a long-range plan. The first thing to demonstrate is that there is a world class launch facility. The commercial satellite industry had slowed. They are working with a satellite builder on a bonding issue. 1715 Vice Chair Bunde ADJOURNMENT The meeting adjourned at 4:37 p.m. HOUSE FINANCE COMMITTEE LOG NOTES January 19, 2000 House Finance Committee 12 1/19/00