HOUSE STANDING COMMITTEE ON HEALTH, EDUCATION AND SOCIAL SERVICES January 30, 1997 3:03 p.m. MEMBERS PRESENT Representative Con Bunde, Chairman Representative Joe Green, Vice Chairman Representative Al Vezey Representative Brian Porter Representative Fred Dyson Representative J. Allen Kemplen Representative Tom Brice MEMBERS ABSENT All members present COMMITTEE CALENDAR *HOUSE BILL NO. 66 "An Act giving notice of and approving the entry into, and the issuance of certificates of participation in, a lease-purchase agreement for a centralized public health laboratory facility." - HEARD AND HELD *HOUSE BILL NO. 54 "An Act establishing the Alaska education technology program; and providing for an effective date." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 66 SHORT TITLE: APPROVE CENTRALIZED PUBLIC HEALTH LAB SPONSOR(S): HEALTH, EDUCATION & SOCIAL SERVICES JRN-DATE JRN-DATE ACTION 01/15/97 66 (H) READ THE FIRST TIME - REFERRAL(S) 01/15/97 66 (H) HES, FINANCE 01/30/97 (H) HES AT 3:00 PM CAPITOL 106 BILL: HB 54 SHORT TITLE: EDUCATION TECHNOLOGY PROGRAM SPONSOR(S): REPRESENTATIVE(S) KOTT,Grussendorf,Kemplen JRN-DATE JRN-DATE ACTION 01/13/97 42 (H) PREFILE RELEASED 1/10/97 01/13/97 42 (H) READ THE FIRST TIME - REFERRAL(S) 01/13/97 42 (H) HEALTH, EDUCATION & SOCIAL SERVICES 01/30/97 (H) HES AT 3:00 PM CAPITOL 106 WITNESS REGISTER GREGORY V. HAYES, DR. P.H, M.P.H., M.S.,C.L.D., Chief Laboratories Division of Public Health Department of Health and Social Services P.O. Box 110613 Juneau, Alaska 99811-0613 Telephone: (907) 465-3019 POSITION STATEMENT: Testified in support of HB 66 DR. MICHAEL PROPST, Medical Examiner Division of Public Health Department of Health and Social Services 5700 East Tudor Road Anchorage, Alaska 99508 Telephone: (907) 269-5090 POSITION STATEMENT: Testified before the committee FORREST BROWN, Debt Manager Treasury Division Department of Revenue P.O. Box 110405 Juneau, Alaska 99811-0405 Telephone: (907) 465-3750 POSITION STATEMENT: Testified on HB 66 ELMER LINDSTROM, Special Assistant Office of the Commissioner Department of Health and Social Services P.O. Box 110601 Juneau, Alaska 99811-0601 Telephone: (907) 465-3030 POSITION STATEMENT: Testified on HB 66 GEORGE DOZIER, Legislative Aide to Representative Kott Alaska State Legislature Capitol Building, Room 204 Juneau, Alaska 99801 Telephone: (907) 465-3777 POSITION STATEMENT: Testified on HB 54 KAREN JORDON, President Alaska Society for Technology in Education Juneau School District, Technology Coordinator 11575 Mendenhall Loop Road Juneau, Alaska 99803 Telephone: (907) 789-1803 POSITION STATEMENT: Testified in support of HB 54 BOB BARTHOLOMEW, Deputy Director Income and Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, Alaska 99811-0420 Telephone: (907) 465-2320 POSITION STATEMENT: Testified on CSHB 54(HES) LARRY WIGET, Director of Government Relations Anchorage School District coordinator, Public Affairs 4600 Debarr Road Anchorage, Alaska 99519 Telephone: (907) 269-2955 POSITION STATEMENT: Testified in support of HB 54 ACTION NARRATIVE TAPE 97-5, SIDE A Number 0000 CHAIRMAN CON BUNDE called the House Health, Education and Social Services Committee meeting to order at 3:03 p.m. Members present at the call to order were Representatives Bunde, Vezey, Porter, Dyson, Kemplen and Brice. Representative Green arrived at 3:07 p.m. This meeting was teleconferenced to Anchorage and Kenai. CHAIRMAN BUNDE announced that the agenda included HB 66, Approving a Centralized Public Health Lab and HB 54, Education Technology Program. HB 66 APPROVE CENTRALIZED PUBLIC HEALTH LAB Number 0048 CHAIRMAN BUNDE said HB 66 is a reprise of what the committee looked at last year and added that last year's bill did not go through the Senate. He said HB 66 has been introduced on the House side with a companion bill introduced on the Senate side discussing the need for a centralized public health lab in Anchorage. GREGORY V. HAYES, DR. P.H, M.P.H., M.S.,C.L.D., Chief, Laboratories Division of Public Health, Department of Health and Social Services, was first to testify. He said that he has been in the State of Alaska for three years. Formerly, he was the Director of the Public Health Laboratories for the State of Indiana. He received his doctorate in Public Health Laboratory management through a cooperative program with the National Centers for Disease Control and the University of North Carolina at Chapel Hill. Prior to that time, he was a research microbiologist at the Centers for Disease Control. DR. HAYES thanked the committee for this opportunity to address the Department of Health and Social Service's (DHSS) desire to construct a new consolidated Public Health Laboratory facility. This new facility would be located in Anchorage. It would include the functions of the Juneau and Anchorage Public Health Laboratories and the Medical Examiner's Laboratory. Design and construction costs would be paid through debt financing. Through the sale of certificates of participation for a lease-purchase of the facility. DR. HAYES said the services of the State Public Health Laboratory are unique and are directed toward prevention and control of disease in the community and therefore differ from the services of clinical laboratories directed an individual patient care. The laboratories are focused on communicable disease testing and work in partnership with the National Centers for Disease Control and private laboratories in the state. Labs fulfill an assessment, policy development and assurance role. They perform advanced testing for infectious agents not routinely performed in the private sector. Focusing on hard to test for pathogens which are unusual, exotic, rare, and sporadic. DR. HAYES said the laboratories assist private laboratories in the state with difficulties in identification and confirm unusual results they obtain. They are constantly collecting data for targeted disease control efforts. The laboratories set-up to apply state of the art technology for the rapid testing of large numbers of specimens in the event of an epidemic and are specialized in disease surveillance and the recognition of new and re-emerging diseases. DR. HAYES said the following are some examples of how the Public Health Laboratory has benefited Alaskan citizens. In 1991, there was an major epidemic of gastrointestinal illness involving a large seafood processor at Dutch Harbor. Due to their expertise and ability to rapidly process specimens; the state laboratory was essential in establishing the cause of the outbreak; in both ill individuals and the local water supply which was being used to process king crab. This allowed appropriate antibiotics to be quickly administered and water supplies to be treated, ensuring the safety and world-wide reputation of Alaska's seafood products. DR. HAYES said in May of 1992, there was a widespread outbreak of gastrointestinal illness, affecting tourists visiting Alaska during the height of the tourist season. Tourists became ill, on cruise ships, bus tours, the Alaska railroad, and in Anchorage and Fairbanks hotels. The state laboratory was able to tract down the agent causing this outbreak quickly, allowing for rapid treatment of tourists and disinfection. The state avoided a major disruption of the summer tourist season and huge losses of tourist revenue and good will. DR. HAYES said in 1994, there were widespread outbreaks of tuberculosis in rural villages. The investigation required a comprehensive collaborative effort to assess the presence and severity of disease and to arrange for appropriate treatment. Monitoring the status of these outbreaks continues today. DR. HAYES said the ability of the state to control tuberculosis depends on an effective, integrated program that includes a viable State Public Health Laboratory. DR. HAYES said in June of 1995, a rabid dog exposed 26 people to rabies in Pilot Point. Due to the expertise of our virologist, it was determined that the rabies virus had not yet reached the salivary glands of the dog and thereby eliminated much of the fear related to this exposure. The state laboratory is the only laboratory in the state which performs very specialized rabies testing. DR. HAYES said the state laboratory provides essential services for disease surveillance, control and prevention, as well as recognition of new and re-emerging infectious disease agents that threaten the public's health and welfare. Examples include: measles, influenzae, diphtheria, hepatitis B, rubella, pertussis, salmonella/shigella, and sexually transmitted diseases including HIV. DR. HAYES said the State Public Health Laboratory is an essential component of the state and national public health system with a different mission than private laboratories. It provides scientific and technical information for disease prevention and is Alaska's first line of defense in recognizing and controlling the spread of communicable diseases. The labs core functions include; support of disease control and prevention programs. It provides maternal, child, and family health programs. It also provides environmental health programs and epidemiological programs. DR. HAYES said the laboratories also focus on the development, of methods for testing when those methods are not readily available, and transfer this technology to the private sector. They perform diagnostic product evaluations, data collection, testing of high quality at a reasonable cost. The laboratories also provide: training, laboratory expertise and reference services to the private laboratory community in the diagnosis of diseases of public health significance. DR. HAYES said the laboratories provide for a national surveillance link. These functions are very different from the role of a private clinical laboratory. He questioned whether the State's Public Health Laboratory should be privatized and said even the most ardent supporters of government privatization are reluctant to argue for privatizing the public health laboratory function. All 50 states and U.S. territories have public health laboratories and none have been privatized. This is because the services they provide are inherently public. They do not merely perform tests and provide results to health care providers as private labs do, but are an essential component of public health policy determination. DR. HAYES said the following criteria are commonly used by state governments to determine whether privatization is appropriate. He said you do not privatize if the service provided is a core function of government such as policy making. Policy development is a core function of the State Public Laboratory. He said you do not privatize if tasks are uncertain and prone to revision. This is certainly the situation with an outbreak or an epidemic. You do not privatize if the value of output is hard to measure and said the value of emergency preparedness is very hard to measure. DR. HAYES said you do not privatize if the government provider is the most knowledgeable about accomplishing the task, and the transfer of such expertise would be difficult. He said that the Public Health Laboratory staff are specifically trained for participating in public health investigations and have many years of experience. He said you do not privatize if the process is as important as the result. The state laboratory staff works rapidly and closely with the state's epidemiologist during investigations from the initial point of determining what needs to be sampled; how the samples are to be obtained; and how the samples are to be tested; frequently changing protocols and modifying algorithms as the situation requires. Samples are not just dropped off to be tested as is the case in a private laboratory. Public health laboratories go well beyond what one could expect a private contractor to do and staff are specifically trained for public health investigations. DR. HAYES said a further test is to look at criteria in favor of privatization. He said you privatize if specific performance expectations can be set forth. If results are more important than the process. If outputs are easy to measure. If problem providers can be readily replaced. If activity is short-term or intermittent in nature. If the private sector has specialized expertise or skills that give operational efficiency and effectiveness. Or if the activity has been successfully privatized in other states. None of these criteria fit the State Public Health Laboratory. Once we understand that policy making and epidemiological functions are a core responsibility of public health laboratories. DR. HAYES said if testing were privatized multiple contracts would be necessary since no one laboratory performs all types of testing currently performed at the State Public Health Laboratory and for many tests no private laboratory is available. It also needs to be noted that from conversations with private providers, the few tests which they could perform, would simply be added to their current workload that is already being sent out-of-state. Number 0927 DR. HAYES asked why is a new laboratory was necessary. Two of our facilities are in urgent need of repair, having mechanical and structural inadequacies for conducting laboratory testing. The laboratories are in leased space, have poor facility layouts, and space limitations for future growth. Our Juneau and Anchorage laboratories were constructed as office space and currently have major health and safety concerns such as inadequate ventilation systems for working with infectious organisms and inadequate electrical wiring. DR. HAYES said that in 1990, the Anchorage Laboratory almost burned down due to faulty wiring and one staff person contracted tuberculosis thought to be due to the totally inadequate air handling system. The heating system in our Anchorage facility has failed twice since November and because many tests have temperature requirements, no testing could be performed during these heating failures. Also, the pipes in our TB laboratory burst in December flooding the highly infectious contained area where TB testing is performed. DR. HAYES said, additionally, a permanent home must be found for the Medical Examiner. Currently this program is occupying temporary space at the Department of Public Safety's Crime Detection Laboratory. The crime laboratory needs this space to develop a much needed DNA analysis laboratory. DR. HAYES said construction of a new facility would save the state money. An unrecoverable investment would be necessary to repair our current facilities and consultants have told us that even then they could not bring these facilities up to code. A new facility would maintain an essential public service more cheaply and more efficiently. There would no longer be the need for duplication of activities at multiple locations. Number 0880 DR. HAYES said new advances in technology such as DNA testing, newly emergent diseases and federal regulations for conducting infectious disease testing require a safe, well-designed, adaptable, and modern facility. We need a new facility to see us through the 21st century. He asked what problems a new facility would solve. The problem of fragmentation of services and reduced efficiency. The problem of leased and temporary space. The problem that our facilities are not designed for current operations. The problem that significant capital investment would be required to fix and maintain our current facilities, and they still would not meet code. And simply that the state does not need, nor can it afford four separate laboratories. One Lab in Juneau, two Labs in Anchorage and one Lab in Fairbanks. DR. HAYES said existing laboratory conditions in the Anchorage and Juneau Laboratories are inadequate, unsafe and in major need of repair to leased space. The Medical Examiner is occupying borrowed space and Public Safety needs this space. Our Fairbanks laboratory is also in leased space, which is old and inflexible, but it was designed as a laboratory and it is currently safe. DR. HAYES said the Department of Health and Social Services has a long history of analyzing the problems. We know what the problem are and we know how to solve them. We have studied the problems extensively and we gave taken a good government approach by engaging in long range planning, analyzing needs and reviewing all alternatives and have developed a comprehensive workable solution. Number 0978 DR. HAYES said there have been fourteen separate studies since 1985 regarding how to correct problems, and how to position the States Laboratories for the future. The conclusion of these studies strongly supports the construction of a new laboratory facility. Solving the problem of inadequate Public Health Labs in Juneau and Anchorage. Solving the problem of permanent housing for the Medical Examiner, increasing operational efficiency and saving operating costs. We can't afford four separate laboratories. We don't need four separate laboratories and we must find a permanent home for the Medical Examiner. Number 0978 DR. HAYES said last year HB 529 was on the Senate calendar the last night of the legislative session. Unfortunately, the legislature adjourned prior to taking a vote. This bill combined the Anchorage and Juneau Public Health Laboratories with the Medical Examiner's program in a newly constructed facility. The Fairbanks laboratory was to remain operating. DR. HAYES said in the first year a new laboratory is occupied it would save the state approximately $293 thousand dollars. It would save the Department of Health and Social Services close to $218 thousand in personnel and lease costs; and save the Department of Administration $75 thousand in lease costs. Number 1031 DR. HAYES said the cost of the new facility is estimated to be $18,440,000. Annual payments would be approximately $2,420,000 for ten years, with a total estimated Debt of $24,130,000. He said this is somewhat over the proposal last year, but costs from last year's proposal have been adjusted for inflation and the assumption of Coroner responsibilities by the Medical Examiner's program. Number 1055 DR. HAYES said it is critical that the Medical Examiner's laboratory be near Public Safety's Crime Detection Laboratory due to their close interaction and cooperation. Therefore several alternatives for state-owned land are being considered immediately adjacent to the Crime lab. He requested the committee's support for this very important project. Number 1080 REPRESENTATIVE JOE GREEN said last year's bill did not include combining the Fairbanks laboratory with the Anchorage and Juneau. Number 1110 DR. HAYES said the original bill was for a centralized laboratory, that is the version that made it out of the House. The bill was modified in the Senate. Number 1123 CHAIRMAN BUNDE said HB 66 is a compromise bill. Number 1131 REPRESENTATIVE TOM BRICE asked if the site for the State Public Health Laboratory was going to be on the Division of Motor Vehicles or on the Department of Transportation and Public Facilities (DOT/PF) site. Number 1157 DR. HAYES said the site they prefer is the one listed as DOT/PF because it is closer to the crime lab. He said the medical examiner is in daily interaction with the crime lab. He referred to Slide 26 of the handout supplied to the committee members. Number 1175 REPRESENTATIVE BRICE asked how many medical examiners would be brought into the new facility. Number 1199 DR. MICHAEL PROPST, Medical Examiner, Division of Public Health, Department of Health and Social Services, testified via teleconference from Anchorage. He said in the Medical Examiner's office the two forensic pathologist include himself and his deputy, Dr. Norman Thompson. He said an additional staff of eight people are also located in the office. Number 1234 REPRESENTATIVE BRICE asked how many procedures are performed per year. MR. PROPST said his office does approximately 500 hundred to 600 hundred procedures per year where the pathologist is involved in putting hands and eyes on a deceased remain. Number 1284 REPRESENTATIVE AL VEZEY referred to the tables under the Department of Revenue fiscal note. He said on page two there is a current interest rate table and on page three there is a current rate plus 75bp. Number 1299 FORREST BROWN, Debt Manager, Treasury Division, Department of Revenue (DOR), said DOR ran the debt service schedules at current interest rates which translates to a true interest cost over the ten years of a 4.9 percent tax-exempt financing. He said because interest rates are quite volatile, every day they bounce around. This has been increasingly so in the last year or so. He clarified that bp means basis points. He said to test the sensitivity of what would happen if there was an increase in interest rates, three-quarters of a point higher, DOR ran the same number and then came up with the higher debt service. In that instance the debt service would exceed slightly the amount listed in HB 66. If that was the amount authorized, then the financing would have to be cut back by approximately $400,000. He said DOR is calling this information to the laboratory people to tell them that they run some risk of interest rates going against them in this period, in which case they might not have all the funds they need. Number 1382 CHAIRMAN BUNDE asked whether, cumulatively speaking, Dr. Hayes mentioned the amounts that would be saved came to close to half a million dollars per year; $200,000 in one department, $200,000 in another and then $75,000 in another. Number 1403 DR. HAYES said it was $293,000 a year in personnel savings and lease costs. Number 1406 CHAIRMAN BUNDE asked if he had taken the total and had broken it down into three components. Number 1418 DR. HAYES said it was $293,000 total savings in terms of lease cost and personnel; $218,000 from DHSS and $75,000 from Department of Administration which pays one of the leases. Number 1428 REPRESENTATIVE BRIAN PORTER asked Mr. Brown, from his experience, whether this proposal was a little bit risky to add a limitation that wouldn't provide for an interest rate increase. Number 1447 MR. BROWN said that no one can forecast what interest rates are going to be. He said he would feel more comfortable, as their de facto financing partner, if he had a little more flexibility. He said when DOR is going to go out and bid this financing he expects a good reception from Wall Street. If the rates are truly higher than they are now, it could force a difficult decision on the operating people. He said if they go forward with the project and scale it back they might need to go back in a year for a supplement or do they postpone it. MR. BROWN said, if he had a preference, he would have a little more flexibility to meet whatever the market is. In other words by financing this amount and certainly putting a ceiling on the amount that could be spent on the project is appropriate, but it should also recognize that interest rates are very volatile and could go the other way. He said DOR could end up with a 4 percent effective cost to capital in which case you might spend $2.1 million a year instead of $2.4 million. Number 1489 REPRESENTATIVE PORTER said in reading this, it says the anticipated total construction and other costs are not to exceed $18,440,000. "The total anticipated annual amount of rental is and the total anticipated lease payments for the full term total up to be...I guess to give that the best light interpretation, I think it implies that you could adjust the rate, but the total cost of the project would be $18.4 million." Number 1514 MR. BROWN said because a legislative requirement states that when DOR comes in and provides numbers before getting legislative approval on any real estate lease financing. He said DOR indicates these three numbers; the total amount of the financing, the total anticipated amount of the annual payments and the total amount of payment over the term of the loan. The bond counsel is consulted and has to give an opinion on the tax exempt nature of these bonds when DOR floats them. He said the counsel has looked at this legislation in the past as being a maximum, that they would not be comfortable with certifying that DOR followed the law and that the bonds were tax exempt without DOR staying at or under the amount specified here. So, even though it reads anticipated, the legal folks have taken a narrower interpretation of that amount and so DOR has taken that direction and become conservative in their approach. Number 1555 REPRESENTATIVE VEZEY said DOR did a calculation based on current interest rates which were 4.9 percent on tax exempt. Number 1567 MR. BROWN said DOR did this a couple of days ago and went to each year of the maturity. In this type of financing, in a ten year financing you issue serials, ten different maturities. He said DOR looked at a single A credit of comparable deals that were offered that particular day and priced it on that basis. He said on the day DOR did it, the best estimate was that the payments would be what is shown on that schedule and that the overall true interests are, when you discount that back and you meld in the varying maturities and the various interest rates for each of those serial maturities, it would be 4.92 percent. He said DOR did the same thing if interest rates had gone up 75 basis points to 5.67 percent overall and carefully worked that assumption in to each of those ten maturities to determine that it would be somewhat over the anticipated amount. It is not a way of forecasting what is going to happen, but DOR wanted to indicate that there was some risk of interest rates with the current language of HB 66. Number 1625 REPRESENTATIVE VEZEY asked him when they were thinking of doing this. Number 1629 MR. BROWN said DOR, assuming that HB 66 was approved, would go to work on the financing and would issue the certificates of participation, delivering them on February 1, 1998. He clarified that DOR was forecasting a year ahead of time. REPRESENTATIVE VEZEY asked if we have seen three-quarters of a percent fluctuation in interest rates in the past year. Number 1651 MR. BROWN said in December of 1995, the interest rate "would have been around 440 and we have been as high, last summer, as 525, 530 on a ten year. So, that's a fluctuation of 60 to 70 basis points just in the past year. So, it's partially on that basis that we selected 75 basis points as the one to test the sensitivity, figuring that if it happened in the past year it well could happen again. We have no way of knowing, from time to time the fed tightens things up and the overall level of interest rates goes up. And even though the tax exempt rates are about 80 percent of what the taxable rates are they still follow very, very closely." Number 1690 REPRESENTATIVE BRICE asked Dr. Hayes for clarification of the inclusion of the coroner duties with the medical examiner's office. Number 1713 DR. HAYES said the coroner's responsibilities is a new program for the medical examiner program. Number 1720 DR. PROPST said HB 520 which passed in the last session, becoming effective on September 23, 1996, eliminated the Office of Coroner statewide. He said the medical examiner's office took many of the responsibilities for accepting and reporting of sudden and unexpected deaths. Number 1743 REPRESENTATIVE VEZEY asked if HB 66 was included in the Governor's Budget Proposal to the legislature which was given in mid-December. DR. HAYES said he did not believe so. Number 1824 ELMER LINDSTROM, Special Assistant, Office of the Commissioner, Department of Health and Social Services, was next to testify. He said there would be no impact on the fiscal year 1998 budget, the first payment would appear in fiscal year 1999 and would appear in the front section of the operating budget along with similar such debt service items. The project is figured into Office of Management and Budget's (OMB) six year capital plan and, likewise, it has been figured into the Administration's assumptions and plans for fiscal year 1999. Number 1802 REPRESENTATIVE PORTER referred to the language as addressed the three numbers; the cost and the interest, total payments and the total costs and said if there is any concern whether it might not be appropriate and asked if they would entertain something that would make it appropriate. MR. LINDSTROM said they would be prepared to discuss that on Tuesday. CHAIRMAN BUNDE said in the perusal of the information that if questions came up the committee members should contact Mr. Lindstrom so that he could answer them on Tuesday. Number 1843 DR. HAYES said the handout, located in the committee file, follows the slides that his office was going to show. He said his presentation followed each slide. HB 54 EDUCATION TECHNOLOGY PROGRAM Number 1896 GEORGE DOZIER, Legislative Aide to Representative Kott, the sponsor of HB 54 testified before the committee. He said the bill creates an education technology program and fund. He said it is Representative Kott's position that the world economy is rapidly evolving, evolving of one being manufacturing based to one of increased technological change and information management. Alaska is part of the world economy, we are not a separate enclave. What happens in the rest of the world directly affects us and we must compete with other components of the world economy. MR. DOZIER said, to be competitive, Alaska must be more sophisticated in the use of technology and that it requires education. Alaska has always had a strong commitment to providing education and, as the economy evolves, we must increasingly emphasize education technology. We haven't done so heretofore, we must do more and as the pace of economic evolution increases we must increase our emphasis in this field. MR. DOZIER said HB 54 is a start in that direction. It creates the Education Technology Fund in the Department of Education (DOE), it provides a mechanism for channeling grant money to various schools and libraries, provides a mechanism to create access to various computer networks and also provides a mechanism for training educators and librarians in the use of this technology. He said HB 54 is not an appropriation bill. It does provide that the legislature may appropriate money into the fund but it does not actually make that appropriation. It envisions public and private donations to the fund. Number 1992 MR. DOZIER said, regarding this fund source, Representative Kott submitted a proposed committee substitute which was drafted in blank which he urged upon the committee. He said the proposed committee substitute doesn't change HB 54 except that it creates a tax deduction. He said Alaska corporations are paying Alaskan income tax. Money that would be donated into the Education Technology Fund would create a deduction for that taxpayer. It is believed that it would encourage donations to that fund. MR. DOZIER said it is common knowledge that many Alaskans are not prepared to deal with rapid technological changes and Representative Kott feels strongly that we must do something about this or Alaska will be left in the dust. He said HB 54 is a step in that direction and Representative Kott recommends this bill to the committee. REPRESENTATIVE VEZEY questioned why we need HB 54 as it doesn't seem to do anything that we can't do under existing law. Number 2047 MR. DOZIER said HB 54 creates a centralized authority that would be able to develop expertise in this area to provide guidance to the various entities it would service. REPRESENTATIVE VEZEY said, unless there is something here that he did not know, we do not need a law to that as we can do this under existing law. MR. DOZIER said HB 54 provides an encouragement to donate money to this fund. Number 2088 CHAIRMAN BUNDE asked what the impact the proposed committee substitute would have on the general fund. Number 2094 MR. DOZIER said he did not have information regarding that issue. He pointed out that it is not a tax credit, but a tax deduction. He did not envision that tax payers would be paying money into the fund in lieu of the general fund. Number 2116 KAREN JORDON, President, Alaska Society for Technology in Education, Technology Coordinator for the Juneau School District, was next to testify. She said over the last four years, Juneau has passed two bond initiatives to provide $6 million for eight schools and 5,500 students. She said technology is not a frill, it is a necessity. It is not merely a nice thing to do or something we do when we have some extra money to throw at a special pet project. Technology is now a complete and total necessity for every graduating senior. MS. JORDON said she has appeared the last seven years before the committee to testify for an educational technology bill. She said HB 54, in different forms, has been on the table for about seven years and several times the question has come up that it can be done without a bill. She said the answer is that it wouldn't be done without legislation. Money is not being put towards technology and added that the mechanism towards technology is not being put forward int the state. She said when basic clerical staff are hired in offices, it is expected that they have a high level of technology skills. Degrees or special training are not being sought, it is expected that high school graduates have enough technology skills to be able to come into offices and use the computers that are available. TAPE 97-5, SIDE B Number 0000 MS. JORDON said HB 54 is also about equal access to educational opportunity. In Juneau, voters have approved technology funding for all of their schools, Anchorage has not, and several rural areas are not able to pass bonds or not able to bond their constituents to fund technology. She said it does not mean that we should then fund technology at different levels throughout the state. MS. JORDON said HB 54 sets up a fund. She said money would available through federal grants and through donations such as the recent donation from BP (Alaska) Inc. This money would be coordinated through this fund. There are three things which have to happen statewide; network all of the schools, provide better telecommunications to rural areas and buy computers and software for student use. She said these three issues are not simple and are somewhat expense. It also takes a degree of technological knowledge that is not readily available in every school in the state which includes Anchorage as well as bush communities. MS. JORDON said, during the past Congressional session, $200 million of federal money was put into a federal technology literacy challenge fund and states can apply for that money. She said the biggest hole in Alaska's application is that the state has no mechanism for funding technology statewide and many other states do. She said when the application question arises of how the state is currently funding technology the answer is that we really aren't doing it or it is funded by districts who are able to come up with the money in their limited operations funds. Number 0094 MS. JORDON said there is a need for centralized help. She said she is not normally a proponent of centralized administration, but in this instance she is. She said she gets calls from all over the state looking for information on how they go about networking their school or what kinds of things they should look at in implementing a technology program. She said this is an area that needs a clearing house for information, a central place for assistance. MS. JORDON said, as the legislature goes through the budget cutting and takes a careful look at how to prepare this state for the future, funding technology should be considered so that students in Alaska are prepared to support themselves. She suggested that HB 54 will help the state build the capacity for economic development, it will help people find jobs wherever they live in the state. Number 0184 REPRESENTATIVE GREEN asked her how the determination would be made as to how much of the grants went to what schools when all the schools were requesting the latest computer technology. Number 0223 MS. JORDON said there would be two initial steps; organizing materials in a clearinghouse of information which can be distributed to all of the sites and going after money for the fund. She said there is no appropriation for this fund, it is a zero fund at this point. The fund would seek out federal grants, Alaska Scientists and Technology grants and money from BP, ARCO, Exxon or whoever wants to fund technology in the state. After that as it is anytime you organize and administer any large project, determinations would have to be made on a needs basis, a capacity basis and said there are some places that are further along in their readiness. She said there are community people who have thought through how they would implement technology. Number 0287 REPRESENTATIVE GREEN said a couple of people would be established to look for funding and asked if there would be more incentive if the salaries were paid by the funds they collect. He said this could be done rather than establishing an organization which may or may not get something. He said it seemed to him that if the staff was self supporting, they might have more of an impetus to seek funds. Number 0323 MS. JORDON said it makes sense, but you have a start up costs. You cannot start a program with no people. She said she would support at least an initial year of funding and out years it could be funded by the fund itself. Number 0341 REPRESENTATIVE GREEN said the fiscal note shows a six year funding mechanism on the general fund. He asked if HB 54 needed to be re- drafted to eliminate this funding. MS. JORDON said to start the fund you would have to provide money for staff. Number 0375 REPRESENTATIVE GREEN asked if the first year couldn't be started with existing people. Number 0395 MS. JORDON said the DOE had a person that was paid for through Star Schools or some other grants, but that person was lost. She said DOE does not have anyone dealing with technology. Number 0394 REPRESENTATIVE FRED DYSON asked how many students homes have computers. Number 0410 MS. JORDON said she thought it was one-third and growing. Number 0417 REPRESENTATIVE DYSON asked if she felt the kids would independently pick up a level of proficiency without being in a formal class. Number 0425 MS. JORDON said some kids will pick up a level of proficiency. She said this fund not only talks about technology, so that students can sit down and someone can teach them to use the technology. She said kids pick up technology fairly quickly, but we are talking about technology for kids to use as tools throughout their daily work. She said, in Juneau, the quality of student work and products skyrocket as kids have access to technology tools, the internet, CDs and data bases that are in the schools now. She said Anchorage and other places are not able to do that. She said a system and a quantity of money is needed to set up this fund. Number 0485 CHAIRMAN BUNDE said the people in the Anchorage community decided that they did not want to invest, perhaps almost blindly, in funds for technology. He said just because you build it does not mean they will come. Number 0511 REPRESENTATIVE DYSON asked, "would it be fair to infer with what you said that kids that, children who learn on their own don't tend to have such a dramatic impact on their scholastic performance as those kids that learn in a more structured situation, or has more geared applications." Number 0540 MS. JORDON clarified that he was asking where would technology have more of an impact on academic performance and said she thought it would be both. She said it approves student's academic performance when they are able to use technology tools as it is a whole other media for teaching all students. When we talk about the amount of jobs that are basic entry level, non-skilled work, she said the state has to reach far more kids than are currently reached through basic text based resources. Number 0569 REPRESENTATIVE DYSON said we used to be able to correlate how a child performed academically based on whether or not the child came from a home where the parents were readers and there was a library in the home. He asked if there are segments of the Alaska population that have a disproportionate need for help in getting on board with technology. Number 0604 MS. JORDON said you could say that. In Juneau to address the fact that some kids have access to technology at home so that they can continue their work outside of school, the city looked at community access points; public libraries, community centers, housing projects and other places where students could go in other hours and get access to technology tools. She said in rural areas the school is a public access point and has longer hours than some of the more urban schools. Number 0641 REPRESENTATIVE DYSON asked her if she would extrapolate that the resources from this program might be more utilized in rural areas. Number 0654 MS. JORDON said she would not say that because the same condition exists in Anchorage as exists in some rural areas. She said Wendler Junior High has 15 computers for 1,200 students. She said Juneau has a four or five to one ratio. Number 0676 CHAIRMAN BUNDE said, if he could correctly quote what he read, that every high school student in Galena has a power notebook. Number 0714 CHAIRMAN BUNDE said it was the chair's intention to form a subcommittee to look into the impact on the general fund by the proposed committee substitute. Number 0742 REPRESENTATIVE PORTER made a motion to adopt the proposed committee substitute for HB 54, Version B. Hearing no objection CHAIRMAN BUNDE announced that the committee had adopted CSHB 54(HES). REPRESENTATIVE PORTER said he would be interested to see what the impact on the general fund would be from the DOR. He said he would like someone from the DOR or DOE to tell the committee precisely why they can't perform these services using existing personnel. Number 0787 REPRESENTATIVE VEZEY asked if CSHB 54(HES) creates a fund, within the DOE, administered by the DOE which means that the Commissioner of Education is the trustee of the fund. Number 0825 MS. JORDON said she believed the fund would be in the DOR. Number 0815 REPRESENTATIVE VEZEY said CSHB 54(HES) creates in Title 14, the education statute, a fund in DOE. Number 0825 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division, Department of Revenue, was next to testify. He said CSHB 54(HES) sets up the fund within DOE and thus they would be the overseer of how it is implemented on the programmatic side. The role of DOR would be limited to the investment of the funds. Number 0846 REPRESENTATIVE VEZEY clarified that the dispersement of the fund would be up to the DOE. He said this would again create a centralized pool within the DOE with the whole state arguing over how to disperse it. Number 0863 REPRESENTATIVE J. ALLEN KEMPLEN asked if CSHB 54(HES) would serve as an incentive for local initiatives to develop and acquire computers and educational technology. Number 0883 MS. JORDON said she did not know if CSHB 54(HES) includes this provision. She said former versions of this bill used to have a match set up and then it would act as an incentive. She said it would be an incredible incentive to get people organized, have a plan in place and have figured out what their technology support and their training should be, etc. She said it would be a very big incentive. Number 0935 REPRESENTATIVE KEMPLEN asked if the fund would also serve as a vehicle for private sector contributions from corporations in the state. Number 0935 MS. JORDON said yes, and added that it would be a vehicle for contributions even without the tax deduction portion of CSHB 54(HES). She said the tax deduction would be a substantial incentive for corporations to choose this as a donation point. Number 0962 REPRESENTATIVE PORTER asked if it was customary, that the cost for DOR to administer a new fund, to come out of the fund itself rather than needing a new fiscal note. Number 0970 MR. BARTHOLOMEW said he was correct and the fiscal note from the Treasury Division is now zero because there is no money in the fund. He said the division states in the fiscal note that they would use the fund itself as a funding source, but there are some upfront costs that are charged to DOR as soon as the fund or account is set up. He said if, at that point, there was no money available money could be advanced with the idea that there would be contributions coming in. He said this would be a safe bet because... REPRESENTATIVE PORTER asked if there was a fiscal note from DOR. MR. BARTHOLOMEW said there should be a fiscal note from the DOR. He said that fiscal note addresses the Treasury Division's investment cost and added that the CSHB 54(HES) version would require a new fiscal note. Number 1025 CHAIRMAN BUNDE said a subcommittee could look at some of these questions including the general fund impact as a result of the tax deduction and the idea that if the fund could be operated on soft money so that whoever was administering the fund would have to raise money to pay their own way. He asked Representatives Kemplen and Vezey to serve on the subcommittee and Representative Green to serve as chair. He asked the subcommittee to report back to the committee a week from Tuesday, February 11, 1997. Number 1088 LARRY WIGET, Director of Government Relations, Anchorage School District, and coordinator of (indiscernible) and previous to that he was the coordinator of the library program (indiscernible) technology for the Anchorage District, testified via teleconference from Anchorage. He said the Anchorage School District supports the passage of HB 54 and said they have been working for several years to meet the needs of getting technology to their students and to students around the state. He said the needs are greater now than ever before and they can not be met through the state district budgets. For example, the entire Anchorage School District instructional technology budget, with a projected 48,000 students for next year, is about $33,000 or about 70 cents per student. He said instructional technology and getting this technology into the hands of teachers and student is a priority of the district. MR. WIDGET said they have a technology commission which will be looking at developing and further refining the district's technology. He said given the cost of technology and the budget constraints the district is unable to fund that money. MR. WIGET said CSHB 54(HES) will establish an endowment fund, it will not meet instructional technology needs. It will lay the foundation for teacher monies to be set aside for technology needs statewide. It recognizes the importance of technology to the future of Alaska and it recognizes that the local community technology increases by the use of a matching grant. He asked the committee to pass HB 54. Number 1184 CHAIRMAN BUNDE added that the subcommittee examine what the local match should be and if that was advisable. ADJOURNMENT There being no further business to conduct, CHAIRMAN BUNDE adjourned the meeting of the House Health, Education and Social Services Standing Committee at 4:10 p.m.