HOUSE FINANCE COMMITTEE January 15, 2001 1:47 PM TAPE HFC 01 - 7, Side A TAPE HFC 01 - 7, Side B TAPE HFC 01 - 8, Side A CALL TO ORDER Co-Chair Mulder called the House Finance Committee meeting to order at 1:47 PM. MEMBERS PRESENT Representative Con Bunde, Vice-Chair Representative Eric Croft Representative John Davies Representative Carl Moses Representative Richard Foster Representative John Harris Representative Bill Hudson Representative Ken Lancaster Representative Jim Whitaker MEMBERS ABSENT Representative Eldon Mulder, Co-Chair Representative Bill Williams, Co-Chair ALSO PRESENT Representative Gretchen Guess; Representative Craft, Representative Stevens; Representative Kevin Meyer; Yvonne Chase, Deputy Commissioner, Early Education, Department of Education and Early Development: Bruce Johnson, Deputy Commissioner, Department of Education and Early Development; Shirley Holloway, Commissioner, Department of Education and Early Development; Dan Fauske, Executive Director, Alaska Housing Finance Corporation, Department of Revenue; John Bitney, Legislative Liaison, Alaska Housing Finance Corporation, Department of Revenue; Les Campbell, Director, Budget, Alaska Housing Finance Corporation (AHFC). PRESENT VIA TELECONFERENCE There were no teleconference participants. GENERAL SUBJECT (S): Review of Departments Accomplishments  Department of Education and Early Development Alaska Housing Finance Corporation (AHFC) The following overview was taken in log note format. Tapes and handouts will be on file with the House Finance Committee through the 22nd Legislative Session, contact 465- 2156. After the 22nd Legislative Session they will be available through the Legislative Library at 465-3808. LOG SPEAKER DISCUSSION    TAPE HFC 00 - 7  SIDE A  099 SHIRLEY HOLLOWAY, Introduced staff. Provided members with a COMMISSIONER, handout on the missions and measures of DEPARTMENT OF the Department of Education and Early EDUCATION AND EARLY Development (copy on file). Complemented DEVELOPMENT the Committee for the movement to the performance approach. Noted that the department has moved toward standards to assess staff and students. Stressed the benefit of combining early development with education.  287 Commissioner Reviewed measures developed in SB 281. Holloway Explained that the focus is on early development and student performance.  382 Commissioner Highlighted performance in FY 01. Noted Holloway that the department implemented the benchmark assessment, regulation for comprehensive assessment, an education summit, streamlined licensing, and finalized SB 36 report.  535 YVONNE CHASE, DEPUTY Discussed measure relating to Early COMMISSIONER, EARLY Education. Review page 35.  EDUCATION, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT 712 Co-Chair Mulder Noted that licensing center came on line in Anchorage in 1999. He noted that the department asked for additional funding with the transfer of the early education function. Part of the increase was funded. There has been success in increasing childcare facilities across the state.  834 Co-Chair Mulder Explained the difference between a childcare home, group home and center.  865 Representative Croft Asked for clarification on the difference between 1998 and 1999 levels. Ms. Chase explained that not all the centers were not in the database. Co-Chair Mulder noted that number of licensed homes appears to have dropped between 1997 and 1998.  957 Ms. Chase Noted that there is no incentive for homes to license. They have moved toward self-registration, which does not require a home review.  1019 Co-Chair Mulder Questioned if reporting has changed. Ms. Chase did not think there was a significant change in reporting. Reiterated that providers do not have an incentive to license.  1071 Representative Croft Observed that the downward shift in licensing homes is the result of fewer homes licensing and more registrations.  1125 Ms. Chase Stated that registration serves a purpose but that there is no way to enforce standards in registered homes.  1157 Representative Asked for delineation by region.  Lancaster 1173 Representative Questioned if registered homes have to Hudson meet basic requirements. Ms. Chase stated that in theory they have to meet basic health and safety, but emphasized that there is no inspections; complaints are responded to.  1236 Co-Chair Mulder Referred to measurements for the Division of Early Development. Ms. Chase clarified that the measure in section 59 of SB 291 measures the capacity of the facilities. The capacity has not increased greatly.  1340 Representative Croft Questioned if the quality is measured through the quantity. Co-Chair Mulder stressed that the assumption is that licensing enforces quality.  1427 Representative Croft Stressed the need to assess how many children are being harmed in childcare.  1447 Vice-Chair Bunde Emphasized that the number is needed.  1546 Ms. Chase The cost for licensed and registered facilities is close. Some states establish a volunteered starring system to allow parents to have a sense of what they are choosing.  1506 Ms. Chase Explained in response to a question by Representative Lancaster, that the State created legally exempt as a federal requirement.  1538 Representative Questioned if it is too soon to tell what Harris the current numbers are.  1576 Co-Chair Mulder Stressed the need to have the numbers to refine the measurements. Ms. Chase pointed out that the department does not have a direct knowledge of number of licensed facilities and children in licensed care.  1625 Co-Chair Mulder Reviewed the number of children in Head Start. The intent is to increase by 2 percent.  1711 Representative Questioned where extra money should be Hudson spent  1733 Ms. Chase Responded that money should be spent on adding programs. The majority of the programs would be in small communities.  1771 Ms. Chase Reviewed the measure of staff in childcare facilities. She noted that the data will be collected on a statewide basis and would be available in the future.  1795 Ms. Chase Observed that 57 percent of the eligible population is served in the federal food program. There are only 8 school districts that do not participate. There are about 56,000 students being served.  1866 BRUCE JOHNSON, Outlined the key measures for teaching DEPUTY COMMISSIONER, and learning support, reviewed page 7. He EDUCATION, discussed benchmark assessments. He DEPARTMENT OF observed that proficient and advance EDUCATION AND EARLY students are often lumped together.  DEVELOPMENT 1980 Representative Questioned why the math proficiency drops th Harris between 6 and 8 grades. Mr. Johnson could not identify the factors.  2051 Representative Asked if the numbers reflect statewide Hudson trends. Mr. Johnson confirmed that the numbers are for the entire state. The department's web site will have each district delineated.  2084 Representative Croft Clarified that the categories are appropriate to the grade level. He observed that it is the advanced level students that fall off.  2113 Mr. Johnson Speculated that the drop is spread across the whole curriculum.  2160 Vice-Chair Bunde Noted that young children enjoy school more than older children.  2193 Representative John Agreed that there is a complicated Davies tapestry of societal factors. He noted that it is possible that the bar is too high.  2225 Mr. Johnson Stated that the department is comfortable with the exam and the passing score, but that they are assessing the reaction to the passing score.  2259 Mr. Johnson Responded to a question by Representative Whitaker regarding math standards.  2357 Vice-Chair Bunde Noted that members of the community established the standards.   TAPE HFC 01 - 7,  Side B  12 Mr. Johnson Discussed page 9. He noted that the California Achievement Test 5 (CAT 5) was moved from grade 8 to 7, since the benchmark test is given in grades 4 and 8.  121 Representative Croft Observed that results are consistent from grades 4 to 7, but they fall off in the 8th grade benchmark.  207 Mr. Johnson Noted that this will be the subject of an education discussion.  234 Representative Croft Questioned if the national standards also thth fall off between 7 and 8 grades. Mr. Johnson could not answer the question. He noted that the CAT 5 test does not drive the Alaska benchmark test.  rd 363 Co-Chair Mulder Observed that the Alaska benchmark in 3 th grade and the 4 grade CAT 5 tests are consistent.  400 Representative Asked if the expectations nationally are Lancaster different from the state standard. Mr. Johnson responded that the Alaskan standards are unique.  486 Representative Questioned if there were unified Hudson standards in Alaska previously. Mr. Johnson observed that standards vary by school district, school and classroom. The current approach is to standardize expectations.  563 Representative Expressed concern that a normal social Whitaker phenomenon is not being reflected.  650 Mr. Johnson Acknowledged that it is an interesting thought. Standards try to establish what th an 8 grader should have in order to be prepared for high school.  745 Mr. Johnson The cost per student in meeting the measures.  820 Mr. Johnson Spoke to the number of dropouts. Some students are reclassified at their grade level. He noted that 79% of the current Junior class has met the expectation of the standardized test.  906 Mr. Johnson Addressed the benchmark assessments. Not speaking of students failing out of high school at this time. Examinations are designed for those students leaving high school.  949 Representative Asked about the measure of determining Harris the true percentage of those kids that will really graduate.  984 Mr. Johnson Suggested those students that graduate in  year 2002 will be the ones that determine the number.  1022 Mr. Johnson In response to Vice-Chair Bunde, agreed that semantics are important. They do not want the student to take the test in their sophomore year. They could fall short.  1060 Co-Chair Mulder Asked if the student could re-take the test in the fall after failing it in the previous spring.  1093 Mr. Johnson Replied that the student has six opportunities to take the test. Taking the test if voluntary. There is no state law, which declares when the test must be taken.  1154 Co-Chair Mulder Where do the private school students take it?  1165 Mr. Johnson There is no requirement for a private school student to take the test. The law requires that in a public school, the test be given every year.  1223 Representative Asked about home schooling.  Hudson 1232 Mr. Johnson Students receiving public funds would be required to take the test.  1250 Representative Asked if once the test is passed, would Whitaker the child ever have to take the test again.  1270 Mr. Johnson Replied that once taken, it is not taken again if the student passes it. The test is costly to administer.  1294 Representative Croft Asked about the national average scores in math, which shows that Alaskans are above average.  1325 Mr. Johnson Stated that the standards need to be continually analyzed and made better. The statistics nationally show that some students excel in certain areas and fail others. He referenced Arizona and noted that legislators are now conducting hearings. Standards could be abandoned.  1406 Commissioner Stated that the Department is preparing a Holloway list that indicates each state and the standards that they recommend. Some states have scraped the standards.  1465 Mr. Johnson Concluded his remarks and performance measures.  1498 REPRESENTATIVE Asked about the costs associated with the STEVENS testing.  1516 Mr. Johnson Replied that each district covers the local district costs. The Department only pays some of the costs.  1577 Representative Asked if additional staff had been added Hudson to the Department to execute the program.  1592 Mr. Johnson Replied that there are 2 full time staff working on the program. Have attempted to do the work through the technical review committee.  1620 Representative Referred to federal standards and noted Hudson that the federal government is investing in state standards.  1706 Vice-Chair Bunde Spoke in support of standards as a way of evaluating how money is being spent. Recounted funds spent on education and stressed that without standards spending would continue to increase indefinitely.  1771 Co-Chair Mulder Spoke in support of continuing standards  1784 Representative John Acknowledged the good of standards but Davies expressed concern that they create a high stakes approach that will result in insurmountable barriers for some children.  1838 Commissioner Concluded that the state Board of Holloway Education is eager to work for solutions to special needs children, English as a second language and children of military families.  1874 Co-Chair Mulder Stated that the committee would like an overview of the foundation formula.  1905 ALASKA HOUSING FINANCE CORPORATION (AHFC)   1930 Dan Fauske, Introduced staff. Provided members with a Executive Director, booklet, AHFC Draft FY2002 Budget (copy Alaska Housing on file).  Finance Corporation, Department of Revenue 2049 Mr. Fauske Reviewed the performance measures on page 22. Noted that 5.82 percent of the money generated is used for administrative response. The federal receipts and interagency receipts have increased resulting in a small increase in the administrative cost.  2122 Mr. Fauske Reviewed the second performance of maintaining net income. He reviewed changes since 1998. One major change is the use of market value. There has been an increase from FY 99.  2206 Mr. Fauske Discussed the percentage of AHFC owned housing per privately owned housing. There has been a significant increase over FY 99, from 33 to 43 percent. Activities have been increased through  arbitrage.  2265 Vice-Chair Bunde Observed that AHFC focuses on people that might not qualify for other programs. He questioned if the increase in AHFC activity is a reflection of Alaska's economy.  2293 Mr. Fauske Responded that the amount of income has decreased in some occupations such as fishing. Interest rates affect the ability to buy homes. Delinquency rates are decreasing.  2333 Co-Chair Mulder Questioned if the assumption that AHFC caters to low-income buyers is adequate.  2357 Mr. Fauske There were 28,000 loans in the portfolio. He concluded that the number of loans has broadened.    TAPE HFC 01 - 8,  Side A  24 LES CAMPBELL, Responded to a question by Co-Chair DIRECTOR, BUDGET, Mulder.  ALASKA HOUSING FINANCE CORPORATION 106 Vice-Chair Bunde Stressed that AHFC should not be competing with private sector loans.  160 Mr. Fauske Clarified that AHFC is not in competition with City Mortgage and other mortgage companies.  252 Co-Chair Mulder Stressed that local banks only have a small percentage of loans in the state.  287 Representative Croft Observed that an increase in the measure could mean a downturn in the private sector and questioned if the benchmark needs to be changed.  396 Co-Chair Mulder Stressed that the mission is to be profitable and to provide affordable loans to a sector of the public that may not be able to find them in other ways.  446 Representative Questioned if there is a downside to Whitaker increasing the percentage of AHFC housing. He did not think there was a downside, but stated that he would review the issue.  490 Representative Observed that realtors like AHFC because Lancaster they pay a dividend.  549 Mr. Fauske Stressed that some analysis must be given to the dividend. He noted that AHFC does not participate in service relief.  th 659 Mr. Fauske Discussed the 4 performance measure: High Performer of the Public Housing Management Assessment Program (PHMAP) score. This score has dropped some, but he felt comfortable with the rating of  92.9 percent.  783 Representative Referred to page 23, number of rural Hudson loans. He noted that the number has dropped.  838 Mr. Fauske Responded that there has been some disruption in the market relating to how the money is coming into housing authorities from the federal government.  901 Mr. Campbell Observed that the rural housing authorities can make or combine loans without going through AHFC.  941 Mr. Fauske There is some interaction with AHFC to maximize dollars. Over a $100 million federal dollars go into tribal organizations for housing.  1017 Co-Chair Mulder Pointed out that the scope the same.  1045 Mr. Campbell Smaller, same in that they want to provide safe affordable housing in their local areas.  1061 Mr. Fauske Bonding mechanism to leverage money is a potential to enhance and strengthen dollars.  1098 Mr. Bitney Explained that some tribes collect the block grant directly. This number is growing.  1133 Co-Chair Mulder How much interaction with federal funding to tribal organizations.  1160 Mr. Bitney Explained that there is not a great amount of coordination. He observed that there are only 2 housing authorities that are certified to offer AHFC housing loans.  1224 Vice-Chair Bunde Stressed that there are millions of federal dollars coming to Alaska without passing through the General Fund.  1287 Mr. Fauske Spoke to tobacco securitization. He noted that the true interest cost was 6.5 percent and was the first of its type.  1374 Mr. Fauske Felt that the market place would accept additional securitizations. He did not think there was a federal movement to prohibit or suspend the activity.  1537 Representative Stressed the need to have legal Hudson foundation to the question of the federal government's ability to affect the process.  1561 Representative Croft Questioned where the risk fell.  1579 Mr. Fauske Explained that the risk was transferred to the investor. The bonds will be paid off by 2015. He observed that the average bond payment is $18 to $20 million dollars.  1715 Co-Chair Mulder Noted that only 40 percent was obligated.  1725 Representative Croft Summarized that in the event of total default the state would still keep the remaining amount.  1755 Vice-Chair Bunde Summarized that the ability of future legislatures to use the money is inhibited until 2015.  1792 Mr. Fauske Continued to discuss tobacco securitization.   ADJOURNMENT The meeting was adjourned at 4:02 p.m.