SENATE HEALTH, EDUCATION & SOCIAL SERVICES COMMITTEE February 26, 1997 9:00 a.m. MEMBERS PRESENT Senator Gary Wilken, Chairman Senator Loren Leman, Vice Chairman Senator Lyda Green Senator Jerry Ward Senator Johnny Ellis MEMBERS ABSENT All members present. COMMITTEE CALENDAR SENATE BILL NO. 11 "An Act relating to state aid for school construction debt; and providing for an effective date." - HEARD AND HELD PREVIOUS SENATE COMMITTEE ACTION SB 11 - No previous Senate action. WITNESS REGISTER Senator Halford State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Prime Sponsor of SB 11. Don Moore, Manager Mat-Su Borough 350 Dahlia Palmer, Alaska 99645 POSITION STATEMENT: Discussed the Mat-Su Borough area. John Stoltz PO Box 878738 Wasilla, Alaska 99687 POSITION STATEMENT: Supported SB 11. Charles Huggins, Member Mat-Su School Board PO Box 878115 Wasilla, Alaska 99687 POSITION STATEMENT: Discussed the Mat-Su situation. Maureen Swed, Chair Renovation/Addition Committee for the Talkeetna Elementary School PO Box 646 Talkeetna, Alaska 99676 POSITION STATEMENT: Discussed the Mat-Su commitment to education. Larry Wiget, Director Government Relations for the Anchorage School District 4600 DeBarr Road Anchorage, Alaska 99519 POSITION STATEMENT: Supported SB 11. John Cyr, President NEA-AK Second Street Juneau, Alaska 99801 POSITION STATEMENT: Indicated support of SB 11. Eddy Jeans, Manager School Finance Section Department of Education 801 W 10th Street, Suite 200 Juneau, Alaska 99801-1895 POSITION STATEMENT: Discussed DOE's fiscal note. Mike Morgan, Manager Facilities Section Department of Education 801 W 10th Street, Suite 200 Juneau, Alaska 99801-1895 POSITION STATEMENT: Discussed the Bond Reimbursement Grant Review Committee. ACTION NARRATIVE TAPE 97-20, SIDE A SB 11 SCHOOL DEBT REIMBURSEMENT  Number 001 CHAIRMAN WILKEN called the Senate Health, Education & Social Services Committee (HES) to order at 9:00 a.m. and introduced SB 11 as the only order of business before the committee. SENATOR HALFORD , Prime Sponsor, noted that in 1990 the ongoing program of bond reimbursement for education was frozen and the cash capital expenditures on education was rewritten. At that time, the list was to represent the organized and unorganized areas and be able to deal in cash which Senator Halford preferred. Since that time, the results can be illustrated by the School Construction Grant Fund list and the Major Maintenance Grant Fund list. The system is not working. Unless something is done for the organized areas, Senator Halford would not vote for any capital expenditure any where. SB 11 is a conservative effort, going back to the 50 percent point. The 50 percent approval and voter approval knowing that the local community must pay back 50 percent and is liable for the entire amount if not appropriated is an appropriate safety valve. Senator Halford believed that the Department of Education (DOE) has a proposed amendment broadening the things that could be used under the proposal which seems reasonable when at 50 percent. Senator Halford said that he would like to see the reimbursement at 70 percent, but any more than that would offer potential problems with DOE's amendment. Number 102 SENATOR LEMAN noted that Colony and Sky View schools were not filled when first built, but are now in use. There is a school for five children in Southeast Alaska in which the community is pleased, but the community only requested a restroom. Senator Leman indicated that care should be taken that actual needs are addressed. SENATOR HALFORD directed the committee to the yellow sheet, the Major Maintenance Grant Fund list. On that list, the largest single appropriation, number three, is to the richest municipal government in North America. CHAIRMAN WILKEN referred to page 3, line 29 which says "1997," when asking if SB 11 would pick up those bonds that have already been approved at 70 percent. SENATOR HALFORD was not sure. Senator Halford believed that SB 11 created 50 percent reimbursement going forward, but indicated that he would like it if the bill were amended to pick up those bonds at 70 percent. In response to Chairman Wilken, Senator Halford explained that Mat-Su went to the ballot with $31 million worth of projects which were approved on a 70 percent basis. The money would have been available if Fairbanks voters voted their bond proposal down. Number 176 DON MOORE , Manager of the Mat-Su Borough, noted that the Mat-Su Borough is one of the fastest growing areas in Alaska, particularly the school age population. Based on the demographics, the Mat-Su Borough would need to construct an elementary school a year. Currently, students are housed in over 60 portables. The geographic size of the area and the demographics make it difficult to shift lines of attendance to address over crowding. Mr. Moore commented that schools in the Mat-Su are based on prototypical designs which meet basic needs. The Talkeetna school, an upgrade of a 30 year old building, is the highest priority project. Mr. Moore stated that Mat-Su has made use of the state bond reimbursement program in the past and would like to continue. Mr. Moore appreciated the comparisons between the organized and unorganized areas with regard to basic need. JOHN STOLTZ , Meadow Lakes citizen, said that his district would be most effected by SB 11. There is a school at a Big Lake which was built for 400 students, but has an enrollment of over 690. Many of the children in that school are from the Meadow Lakes area. Meadow Lakes is scheduled for a school. It is number 47 on the list. Mr. Stoltz informed the committee that as a result of overcrowding some students were going to be bused over an hour to equalize the schools. Students will be bused by some schools to be placed in other schools in order to make the numbers work. Mr. Stoltz supported SB 11 and stressed the need to fund the bill as well. Number 260 CHARLES HUGGINS , Mat-Su School Board Member, said that the current situation is confusing. Mr. Huggins stated that some schools are facing over 40 percent over crowding and now the busing issue creates further fiscal issues. The people of Mat-Su want to help themselves, but it is practically impossible to receive 100 percent reimbursement through a bond issue in an organized area. Mr. Huggins emphasized that the average person would agree that 70 percent is better than 50 percent which is better than 0 percent. MAUREEN SWED , Chair of the Renovation/Addition Committee for the Talkeetna Elementary School, acknowledged that Talkeetna is high on the list after four years of efforts to receive funding. She echoed that Mat-Su has shown its commitment to education. Ms. Swed hoped that the aforementioned amendment would be considered. Ms. Swed was pleased that SB 11 did not establish a cap which would allow communities to plan for the future. Ms. Swed asked if a general obligation bond from the state required statewide voter approval and if so, does it have to be in a general election, 1998. SENATOR HALFORD said that these are general obligations of the municipality. In response to Ms. Swed, Senator Halford explained that the municipality would seek approval for a bond from the Department of Education and the voters. Then a school is built with the proceeds from the bond and then the state pays a portion of the debt service on those bonds as the bonds come due. MAUREEN SWED hoped the Legislature would pass the capital improvements on educational facilities legislation on a timely basis. CHAIRMAN WILKEN announced that a brief at ease would be taken for a press conference. The committee recessed from 9:25 a.m. to 9:45 a.m. at which time the meeting resumed. Number 356 LARRY WIGET , Director of Government Relations for the Anchorage School District, supported SB 11. Mr. Wiget informed the committee of a school bond survey in Anchorage which resulted in more support for bonds with 50 percent state support. The results of the survey and discussion lead to the board's approval of a proposal for capital construction which was increased by the Assembly for $24,595,000. Currently, there is no state reimbursement for these bonds if the bonds passed. Therefore, Mr. Wiget requested that the effective date be moved back to an earlier date than July 1, 1997 or lift the maximum of AS 14.11.101. Mr. Wiget said that a 50 percent or higher state/local match provides an incentive to voters to approve bonds while allowing the dollar to be stretched to cover school construction. Further, the match demands public accountability by the local voters who are liable for at least 50 percent of the cost. Mr. Wiget emphasized that even with a 50 percent match, school districts will have to work to obtain voter support. Mr. Wiget urged the committee to reinstate the school construction debt reimbursement program at the suggested level or higher and consider a means for those bonds being considered this spring in Anchorage and those approved last fall in Mat-Su. SENATOR LEMAN stated he intended for the Anchorage bonds to be covered if approved as well as those approved in Mat-Su last fall. SENATOR HALFORD pointed out that the problem with the Mat-Su bonds is that the bonds were approved at a 70 percent reimbursement. He would like for those to be covered if there is a window of 70 percent which should cover the Anchorage bonds as well. The intent of SB 11 is to provide 50 percent going forward, and if possible 70 percent before June 1. Number 424 JOHN CYR , President of NEA-AK, said that clearly Mat-Su, Kenai, Fairbanks and Anchorage areas need the state's help to bond for new schools. Mr. Cyr agreed with Mr. Wiget's testimony that voters are not interested in 100 percent bonds. SB 11 just begins to address the problem. Mr. Cyr reiterated the desire to have a higher reimbursement level. Mr. Cyr favored picking up the approved bonds in Mat-Su and the upcoming bonds in Anchorage, if possible. EDDY JEANS , Manager of School Finance for DOE, explained that SB 11 amends AS 14.11.100 by adding a new section, under Section 8 of the bill, which allows reimbursement of up to 50 percent for school construction debt incurred after July 1, 1997. The department's fiscal note is zero because the range of participation cannot be anticipated. Mr. Jeans explained that under the debt retirement program, school districts must first submit projects to the department for consideration of eligibility and approval, then the projects must go before the voters of the municipality for approval. Then the school district must notify the department of intended reimbursement by October 15 preceding the year for which reimbursement is sought. Based on that analysis, DOE determined that the first year that the proposed amendment could have a fiscal impact on Alaska is FY99. Mr. Jeans interpreted SB 11 to bring closure to the 70 percent reimbursement and reopens the program at 50 percent reimbursement. SENATOR LEMAN asked Mr. Jeans if the Anchorage bonds were approved would the bond be covered at 50 percent. EDDY JEANS said if the projects were approved by the department with the proper process, the projects would be eligible for reimbursement at the 50 percent level. SB 11 brings closure of the 70 percent reimbursement and adds a new section establishing a reimbursement of 50 percent. SENATOR HALFORD interjected that the 70 percent is already closed due to the cap. The 70 percent only exists on the books. Number 485 MIKE MORGAN , Manager of the Facilities Section of DOE, informed the committee that the Bond Reimbursement Grant Review committee was established with SB 7. The committee was charged with reviewing the application process and implementing AS 14.11. The committee developed a ranking/scoring process which evaluated the need for school capital projects on a statewide basis with no regard to the location of the facility. The committee also reviewed issues such as prototypes, maintenance standards, facility appraisals, and conditional surveys. As the department implemented the review process, the process was implemented with regard to grants and resulted in the list for major maintenance and school construction. Mr. Morgan noted that on the bond side, the department recommended that the categories for approvable projects be expanded which would allow districts more freedom in applying for projects. CHAIRMAN WILKEN noted the handout passed out by Mr. Morgan. In order to clarify Senator Leman's question, SENATOR HALFORD believed that the date in the new paragraph (8) "  authorized by t qualified voter of the municipality on or after July 1, 1997, " would need to be amended depending upon what is determined with the 70 percent reimbursement of previously approved bonds or bonds approved before that date. Senator Halford said that Senator Leman's concern was correct and could not be fixed with an interpretation. CHAIRMAN WILKEN announced that SB 11 would be held for further clarification. There being no further business before the committee, the meeting was adjourned at 10:00 a.m.