Legislature(2009 - 2010)

04/17/2010 05:22 PM FIN

Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 237(FIN)                                                                                               
     "An Act  establishing a formula  and a fund  for school                                                                    
     construction  grant  funding for  regional  educational                                                                    
     attendance   areas;   extending    the   deadline   for                                                                    
     authorizing school construction  debt reimbursed by the                                                                    
     state; and requiring a report  from the commissioner of                                                                    
9:17:52 PM                                                                                                                    
JOHN  BITNEY, STAFF,  REPRESENTATIVE  JOHN HARRIS,  SPONSOR,                                                                    
described  the  bill as  an  attempt  to provide  a  funding                                                                    
mechanism  for school  construction  and maintenance  across                                                                    
the state.  He reported  that provisions in  the legislation                                                                    
referenced litigation the state has faced since 1999.                                                                           
Mr. Bitney  provided an  overview of the  sections of  the Q                                                                    
version of the bill. Section  1 consists of the findings; no                                                                    
changes  have  been  made  in the  CS.  Section  2  contains                                                                    
provisions of HB 180 sponsored  by Representative Joule that                                                                    
attempts to  deal with contribution rates  required by local                                                                    
communities to match school  projects; some communities were                                                                    
having difficulty meeting the  30 percent matching rates, so                                                                    
the formula in the CS would  bring the match rate down to 20                                                                    
Co-Chair Hawker added that the  committee had heard the bill                                                                    
Mr. Bitney characterized Section 3  as the main provision of                                                                    
the bill.  The section  establishes a funding  mechanism for                                                                    
schools in Regional Education  Attendance Areas (REAAs). The                                                                    
litigation  addressed  the fact  that  there  is no  statute                                                                    
mechanism  other   than  annual   legislative  appropriation                                                                    
decisions to provide funding for  the REAA schools; the bill                                                                    
would provide that mechanism.                                                                                                   
Mr. Bitney explained that the  formula (subsection (b), page                                                                    
2) would  help identify  basic need related  to the  cost of                                                                    
building new schools.  The formula is derived  by taking the                                                                    
annual  legislative  payments  to  municipalities  for  debt                                                                    
service (not  the total amount of  indebtedness). The number                                                                    
(which is just  over $100 million in the  current budget) is                                                                    
divided by the percentage of  REAA schools. The intent is to                                                                    
arrive at  a number representing  the total cost  of schools                                                                    
9:22:27 PM                                                                                                                    
Mr.  Bitney   identified  the  percent  calculated   by  the                                                                    
department  as  0.683,  which is  further  multiplied  by  a                                                                    
number  on top  of  page 3,  or 0.244;  the  total would  be                                                                    
approximately $38 million.                                                                                                      
Mr.  Bitney  referred to  two  Department  of Education  and                                                                    
Early  Development  (DEED)  fiscal  notes.  Co-Chair  Hawker                                                                    
pointed  out  that the  fiscal  note  represented about  $38                                                                    
million per  year coming into  the program. He  had concerns                                                                    
about language  missing from the  fiscal note.  He explained                                                                    
that the  formula was  contrived to  result in  enough money                                                                    
going into  the fund  to pay  for one  school on  the school                                                                    
construction list [per year] for  the foreseeable future. He                                                                    
noted that the debt service  referred to was the annual debt                                                                    
service  on  the  DEED   bond  debt  reimbursement  program;                                                                    
language in the  CS made that clear and he  wanted it in the                                                                    
fiscal note.  The bond debt  was approximately  $106 million                                                                    
per  year currently;  he believed  that dividing  it by  the                                                                    
percentage of  all schools  would impute  the number  up. He                                                                    
claimed  that  the  0.244  percent   figure  was  a  reverse                                                                    
calculation number to make a  permanent source for the REAAs                                                                    
based on  urban school funding.  The formula dealt  with the                                                                    
9:26:26 PM                                                                                                                    
Representative Austerman asked whether  the section was new.                                                                    
Co-Chair  Hawker  responded  that the  calculations  in  the                                                                    
previous version of the bill were not clear.                                                                                    
Representative Doogan inquired whether  all schools in rural                                                                    
school  districts would  qualify  whether or  not they  have                                                                    
debt.   Co-Chair  Hawker   responded  in   the  affirmative.                                                                    
Representative Doogan asked whether  the numbers would still                                                                    
work out  if five hypothetical schools  were built. Co-Chair                                                                    
Hawker responded that the numbers  would be the same because                                                                    
they are  not based on the  number of schools built  but the                                                                    
relative number  of urban and rural  schools. Representative                                                                    
Doogan  restated  the  question. Co-Chair  Hawker  responded                                                                    
that  the variable  would move  slightly with  more schools;                                                                    
the calculation  would also respond  to debt  service moving                                                                    
up  or  down; if  the  amount  of  annual funding  for  debt                                                                    
service under  the debt reimbursement program  goes down (or                                                                    
up), the  amount of money  going to the rural  schools would                                                                    
go down (or up).                                                                                                                
Representative Doogan asked how  robust the legislation was.                                                                    
He  wondered how  flexible  the number  would  be if  school                                                                    
districts  stopped  bonding  or   if  more  districts  built                                                                    
schools.  Co-Chair  Hawker  responded that  the  number  was                                                                    
infinitely flexible.                                                                                                            
Representative Doogan wondered whether  the program would be                                                                    
at  risk because  of other  changing  variables. Mr.  Bitney                                                                    
offered  that the  variable would  increase  if a  municipal                                                                    
school district used  local bonds to build a  new school. He                                                                    
noted  that the  sunset date  had been  removed so  that the                                                                    
program  would  continue  and  become  a  matter  of  annual                                                                    
approval by DEED and subject to approval by local voters.                                                                       
Co-Chair Hawker added that  he thought Representative Doogan                                                                    
was looking for information  about volatility. He emphasized                                                                    
that  the  formula was  designed  to  make sure  that  rural                                                                    
schools receive a  fair and just portion of  state money for                                                                    
school debt  construction. He added  that the  formula would                                                                    
not  be   volatile  as  the  variables   evolve  with  added                                                                    
districts or changed debt.                                                                                                      
9:31:26 PM                                                                                                                    
Representative  Gara thought  the  bill was  a balanced  and                                                                    
reasonable  approach and  stated  that he  supported it.  He                                                                    
believed the intent  was to do more in years  when the state                                                                    
had more money.                                                                                                                 
Co-Chair Hawker  stressed that the  formula was  intended to                                                                    
be   reasonable  and   understandable  and   to  result   in                                                                    
predicable funding for rural schools.                                                                                           
Mr. Bitney turned  to Section 3; the last part  asks DEED to                                                                    
provide an  annual report beginning  in February  2012 (tied                                                                    
to the July 1, 2012 effective date).                                                                                            
Representative Joule  queried the  purpose of  the effective                                                                    
date. Co-Chair  Hawker responded  that the sponsor  felt the                                                                    
two-year-out  date was  appropriate as  there are  currently                                                                    
other schools in  the bond debt package; he did  not want to                                                                    
overheat   the   construction   process  in   rural   areas.                                                                    
Representative Joule  pointed out  that the date  would also                                                                    
give  the administration  time to  settle  the Kasayulie  v.                                                                    
State of Alaska case.                                                                                                           
Mr.  Bitney  continued  with  Section  4,  the  school  debt                                                                    
reimbursement  program statutes,  which are  lengthy because                                                                    
various authorizations  done over the years  have never been                                                                    
repealed as  the bonds go  on until  they are paid  off. The                                                                    
changes begin  on page 8. The  amendment on page 8,  lines 6                                                                    
to 7 is a technical  change to a previous authorization. The                                                                    
heart of  the section is  the removal of the  limitations on                                                                    
line 14 and  line 22; there would be no  ending date for the                                                                    
authorizations   for   the  municipal   debt   reimbursement                                                                    
Co-Chair Hawker detailed  that the sunset on  the urban bond                                                                    
debt reimbursement program would be eliminated.                                                                                 
Mr.  Bitney turned  to Section  5,  a retroactive  provision                                                                    
applying  to Section  2 and  going  back to  when the  local                                                                    
contribution rates were enacted.                                                                                                
9:36:09 PM                                                                                                                    
Mr. Bitney  explained that the  department had  modified the                                                                    
two projects in the current capital  budget up to a total of                                                                    
$32,000 to reflect  the change in the  contribution rates in                                                                    
Nome.  He noted  that  in the  fiscal  notes, the  committee                                                                    
would need  to address  rates for  projects funded  over the                                                                    
last two fiscal years.                                                                                                          
Mr. Bitney concluded that Section  6 addresses the effective                                                                    
date  of July  1,  2012; the  rest of  the  bill would  take                                                                    
effect immediately.                                                                                                             
Representative Kelly  queried the  drop of the  sunset date.                                                                    
Co-Chair Hawker recalled that the  sponsor wished to end the                                                                    
Kasayulie Case.  The original version proposed  setting up a                                                                    
$100  million  fund; the  amount  has  been dropped  to  $70                                                                    
million  to  allow  for  latitude   after  the  $38  million                                                                    
projected for one school was spent.  He viewed the fund as a                                                                    
"mini capital  budget" to meet  the commitment  to construct                                                                    
one  school each  year.  He had  not  been comfortable  with                                                                    
letting the  fund build  to $100  million. In  addition, the                                                                    
annual numbers  were brought down,  in exchange  for letting                                                                    
go of the sunset date.                                                                                                          
9:40:10 PM                                                                                                                    
Vice-Chair  Thomas MOVED  to ADOPT  HCS CSSB  237(FIN), (26-                                                                    
LS1342\Q,  Mischel, 4/17/10)  as a  working document  before                                                                    
the committee. There being NO OBJECTION, it was so ordered.                                                                     
EDDY  JEANS,  DIRECTOR,   SCHOOL  FINANCES  AND  FACILITIES,                                                                    
DEPARTMENT OF  EDUCATION AND EARLY DEVELOPMENT,  stated that                                                                    
the  department was  neutral regarding  the legislation.  He                                                                    
stated that  remarks that had  been made in  committee about                                                                    
the bill were accurate.                                                                                                         
Co-Chair Hawker MOVED to ADOPT Conceptual Amendment 1:                                                                          
     Purpose: to clarify that "annual debt service" on page                                                                     
     2, line 30 means the annual debt service of the school                                                                     
     construction debt reimbursement program.                                                                                   
     Page 2, line 30, following "be the"                                                                                        
     Delete "annual debt service amount"                                                                                        
     Insert "annual debt service on debt incurred under AS                                                                      
Vice-Chair Thomas OBJECTED for discussion.                                                                                      
Co-Chair Hawker  explained that  the amendment  would affect                                                                    
page 2,  line 30. He  had been troubled with  the definition                                                                    
of "annual  debt service amount".  Since the state  has $375                                                                    
million each  year of  annual debt  service, he  thought the                                                                    
definition should be more specific.  He pointed out that the                                                                    
bond debt  reimbursement program statutes  (AS 14.11.100(a))                                                                    
are  located  in  Section  4  of  the  bill.  The  amendment                                                                    
clarifies  by  changing  "annual  debt  service  amount"  to                                                                    
"annual debt service  on debt incurred under"  the bond debt                                                                    
reimbursement program statutes.                                                                                                 
9:44:32 PM                                                                                                                    
Representative  Gara thought  the amendment  made sense.  He                                                                    
asked the opinion of the sponsor.                                                                                               
JAY LIVEY,  STAFF, SENATOR LYMAN HOFFMAN,  SPONSOR, spoke in                                                                    
support of the amendment.                                                                                                       
Vice-Chair  Thomas WITHDREW  his OBJECTION.  There being  NO                                                                    
further OBJECTION, Conceptual Amendment 1 was ADOPTED.                                                                          
Representative  Salmon referred  to page  3 and  queried the                                                                    
number (0.244). Mr. Livey explained  that the number used in                                                                    
the past was  0.27, but the entire basis of  the formula had                                                                    
been  changed  based  on  Co-Chair  Hawker's  analysis;  the                                                                    
number  had to  change to  accommodate the  new formula.  He                                                                    
stated that the sponsor agreed with the change.                                                                                 
Representative  Salmon  asked  how the  number  impacts  the                                                                    
amount.  Mr.  Livey replied  that  the  difference would  be                                                                    
about  $2 million  less  than the  previous  formula in  the                                                                    
original  bill.  Co-Chair  Hawker  thought  the  number  was                                                                    
9:48:01 PM                                                                                                                    
Vice-Chair   Thomas  MOVED   to  ADOPT   Amendment  2   (26-                                                                    
LS1342\C.6, Mischel, 4/17/10):                                                                                                  
     Page 1, line 1, following "Act":                                                                                           
          Insert "relating to energy consumption and costs,                                                                     
     operating  costs, and  energy efficiency  standards for                                                                    
     school  construction  and   major  maintenance  by  the                                                                    
     Department of Education and Early Development;"                                                                            
     Page 2, following line 5:                                                                                                  
          Insert new bill sections to read:                                                                                     
     "*Sec. 2. AS 14.07.020(a) is amended to read:                                                                              
          (a) The department shall                                                                                              
               (1) exercise general supervision over the                                                                        
          public schools of the state except the University                                                                     
          of Alaska;                                                                                                            
               (2) study the conditions and needs of the                                                                        
          public schools  of the  state, adopt  or recommend                                                                    
          plans, administer  and evaluate grants  to improve                                                                    
          school  performance  awarded under  AS  14.03.125,                                                                    
          and adopt  regulations for the improvement  of the                                                                    
          public schools;                                                                                                       
               (3)   provide   advisory   and   consultative                                                                    
          services to all public school governing bodies                                                                        
          and personnel;                                                                                                        
               (4) prescribe by  regulation a minimum course                                                                    
          of study  for the public schools;  the regulations                                                                    
          must provide  that, if a  course in  American Sign                                                                    
          Language  is  given,  the course  shall  be  given                                                                    
         credit as a course in a foreign language;                                                                              
               (5)  establish,  in   coordination  with  the                                                                    
          Department  of  Health   and  Social  Services,  a                                                                    
          program for  the continuing education  of children                                                                    
          who are held in  detention facilities in the state                                                                    
          during the period of detention;                                                                                       
               (6) accredit  those public schools  that meet                                                                    
          accreditation  standards prescribed  by regulation                                                                    
          by  the  department;  these regulations  shall  be                                                                    
          adopted  by the  department and  presented to  the                                                                    
          legislature  during  the  first  10  days  of  any                                                                    
          regular  session,  and  become effective  45  days                                                                    
          after presentation  or at the end  of the session,                                                                    
          whichever  is  earlier,  unless disapproved  by  a                                                                    
          resolution  concurred  in  by a  majority  of  the                                                                    
          members of each house;                                                                                                
               (7)    prescribe    by   regulation,    after                                                                    
          consultation with  the state fire marshal  and the                                                                    
          state  sanitarian,  standards   that  will  assure                                                                    
          healthful and  safe conditions  in the  public and                                                                    
          private   schools  of   the  state,   including  a                                                                    
          requirement    of   physical    examinations   and                                                                    
          immunizations   in  pre-elementary   schools;  the                                                                    
          standards  for private  schools  may  not be  more                                                                    
         stringent than those for public schools;                                                                               
               (8)  exercise general  supervision over  pre-                                                                    
          elementary  schools that  receive direct  state or                                                                    
          federal funding;                                                                                                      
               (9)   exercise   general   supervision   over                                                                    
          elementary  and   secondary  correspondence  study                                                                    
          programs offered by  municipal school districts or                                                                    
          regional   educational   attendance   areas;   the                                                                    
          department may  also offer  and make  available to                                                                    
          any  Alaskan   through  a  centralized   office  a                                                                    
          correspondence study program;                                                                                         
               (10)  accredit private  schools that  request                                                                    
          accreditation   and    that   meet   accreditation                                                                    
          standards   prescribed   by  regulation   by   the                                                                    
          department; nothing  in this  paragraph authorizes                                                                    
          the  department  to  require  religious  or  other                                                                    
          private schools to be licensed;                                                                                       
               (11)  review plans  for  construction of  new                                                                    
          public  elementary and  secondary schools  and for                                                                    
          additions to and  major rehabilitation of existing                                                                    
          public  elementary and  secondary schools  and, in                                                                    
          accordance   with  regulations   adopted  by   the                                                                    
          department,  determine and  approve the  extent of                                                                    
          eligibility   for   state    aid   of   a   school                                                                    
          construction  or  major maintenance  project;  for                                                                    
          the  purposes of  this paragraph,  "plans" include                                                                    
          educational  specifications,   schematic  designs,                                                                    
          projected energy consumption  and costs, and final                                                                  
          contract documents;                                                                                                   
               (12)  provide  educational  opportunities  in                                                                    
          the  areas of  vocational education  and training,                                                                    
          and basic  education to individuals over  16 years                                                                    
          of age who are no longer attending school;                                                                            
               (13) administer  the grants awarded  under AS                                                                    
               (14)  establish,  in  coordination  with  the                                                                    
          Department of  Public Safety, a school  bus driver                                                                    
          training course;                                                                                                      
               (15)  require  the reporting  of  information                                                                    
          relating   to  school   disciplinary  and   safety                                                                    
          programs under  AS 14.33.120  and of  incidents of                                                                    
          disruptive or violent behavior;                                                                                       
               (16) establish by  regulation criteria, based                                                                    
          on  low  student   performance,  under  which  the                                                                    
          department may  intervene in a school  district to                                                                    
          improve instructional  practices, as  described in                                                                    
          AS  14.07.030(14) or  (15);  the regulations  must                                                                    
                    (A) a notice provision that alerts the                                                                      
               district   to   the  deficiencies   and   the                                                                    
               instructional  practice  changes proposed  by                                                                    
               the department;                                                                                                  
                    (B) an end date for departmental                                                                            
               intervention,    as     described    in    AS                                                                    
               14.07.030(14)(A) and (B)  and (15), after the                                                                    
               district   demonstrates   three   consecutive                                                                    
               years of  improvement consisting of  not less                                                                    
               than   two  percent   increases  in   student                                                                    
               proficiency  on  standards-based  assessments                                                                    
               in math, reading, and  writing as provided in                                                                    
               AS 14.03.123 (f)(2)(A); and.                                                                                     
                    (C) a process for districts to petition                                                                     
               the    department     for    continuing    or                                                                    
               discontinuing the department's intervention;                                                                     
               (17)   notify   the  legislative   committees                                                                    
          having   jurisdiction    over   education   before                                                                    
          intervening   in  a   school  district   under  AS                                                                    
          14.07.030(14)   or   redirecting   public   school                                                                    
          funding under AS 14.07.030(15).                                                                                       
     *Sec. 3. AS 14.11.014(b) is amended to read:                                                                               
          (b) The committee shall                                                                                               
               (1) review the  department's priorities among                                                                    
          projects for which  school construction grants are                                                                    
               (2)   make  recommendations   to  the   board                                                                    
          concerning  school  construction grants  and  make                                                                    
          recommendations  to  the  commissioner  concerning                                                                    
          projects   for   which   bond   reimbursement   is                                                                    
               (3)  develop  criteria  for  construction  of                                                                    
          schools  in the  state;  criteria developed  under                                                                    
          this paragraph must  include requirements intended                                                                    
          to achieve cost effective school construction;                                                                        
               (4)  analyze  existing  prototypical  designs                                                                    
          for school construction projects;                                                                                     
               (5) establish a form for grant applications;                                                                     
               (6)  establish  a  method  of  ranking  grant                                                                    
               (7) recommend to  the board necessary changes                                                                    
          to  the approval  process for  school construction                                                                    
          grants   and   for   projects   for   which   bond                                                                    
          reimbursement is requested;                                                                                         
               (8) set  standards for energy  efficiency for                                                                  
          school  construction  and   major  maintenance  to                                                                  
          provide energy efficiency  benefits for all school                                                                  
          locations  in the  state and  that address  energy                                                                  
          efficiency  in  design  and  energy  systems  that                                                                  
          minimize long-term and operating costs.                                                                             
     *Sec. 4. AS 14.11.135(6) is amended to read:                                                                               
               (6)  "major  maintenance"   means  a  project                                                                    
          described in  AS 14.11.013(a)(1)(C), [OR]  (D), or                                                                  
     *Sec. 4. AS 14.11.135(7) is amended to read:                                                                               
               (7)  "school  construction" means  a  project                                                                    
          described  in AS  14.11.013(a)(1)(A), (B),  [(E),]                                                                    
          (F), or (G)."                                                                                                         
     Renumber the following bill sections accordingly.                                                                          
     Page 8, line 5:                                                                                                            
          Delete "sec. 3"                                                                                                       
          Insert "sec. 7"                                                                                                       
Co-Chair Hawker OBJECTED for discussion.                                                                                        
Vice-Chair  Thomas explained  that energy  consumption costs                                                                    
are  projected   when  a  school  is   designed  and  energy                                                                    
efficiency standards  are set.  The amendment  would address                                                                    
the actual cost of designing a school.                                                                                          
Representative   Austerman   asked   whether   Amendment   2                                                                    
corresponded with version Q.  Co-Chair Hawker responded that                                                                    
it did.                                                                                                                         
Vice-Chair Thomas  further explained that  rural communities                                                                    
have high  energy costs. The  amendment would make  sure the                                                                    
schools  are   built  efficiently  and  are   affordable  to                                                                    
operate. He provided the example  of a rural school district                                                                    
that  designed a  new, smaller  school  but doubled  heating                                                                    
costs because of high ceilings.                                                                                                 
9:51:26 PM          AT EASE                                                                                                   
9:51:52 PM          RECONVENED                                                                                                
Mr. Livey stated that the sponsor supported the amendment.                                                                      
Mr. Jeans reported  that the department had  no problem with                                                                    
the amendment.                                                                                                                  
Co-Chair  Hawker  WITHDREW  his OBJECTION.  There  being  NO                                                                    
further OBJECTION, Amendment 2 was ADOPTED.                                                                                     
9:53:11 PM                                                                                                                    
Co-Chair Hawker  asked whether the  sponsor approved  of the                                                                    
bill as amended. Mr. Livey responded in the affirmative.                                                                        
Representative Doogan asked about the fiscal notes.                                                                             
Mr. Jeans explained the fiscal  notes. The first one was for                                                                    
$37,960,000;  the first  appropriation would  occur in  2013                                                                    
and  would  fund  the rural  education  school  construction                                                                    
grant program. The first expenditures  would occur in FY 13.                                                                    
The  other fiscal  note was  for $3,700,000,  the three-year                                                                    
average of  the actual  increases in the  debt reimbursement                                                                    
program. Due  to timing, he  anticipated the  first increase                                                                    
in the debt reimbursement program to occur in FY 13.                                                                            
Co-Chair Hawker  questioned whether  the second  fiscal note                                                                    
should be  indeterminate. Mr. Jeans responded  that the note                                                                    
should  be  indeterminate,  but   the  department  had  been                                                                    
informed  that indeterminate  notes were  not well  received                                                                    
and did their best to  estimate costs. Co-Chair Hawker noted                                                                    
that the numbers were informational only.                                                                                       
Representative Joule pointed out  that the new section might                                                                    
have  a  fiscal  component.  Mr. Jeans  explained  that  the                                                                    
school districts impacted  in the FY 11 budget  are the only                                                                    
two  projects affected.  He was  unsure how  the retroactive                                                                    
clause should be addressed.                                                                                                     
Mr.  Bitney detailed  that the  local contribution  rate has                                                                    
been  changed  from  30  to  20  [percent];  the  cumulative                                                                    
increase  in the  state share  for those  projects would  be                                                                    
$2,648,600.  He suggested  that  there could  be a  lump-sum                                                                    
fiscal   note  for   prior  fiscal   years.  He   had  asked                                                                    
Legislative Legal Services to  draft an amendment to correct                                                                    
past-year errors; the item could be a technical amendment.                                                                      
9:58:07 PM                                                                                                                    
Co-Chair Hawker  thought it was  a good idea to  include the                                                                    
amendment in the capital budget. Mr. Jeans concurred.                                                                           
Co-Chair  Stoltze   noted  that  he  preferred   the  sunset                                                                    
Vice-Chair Thomas MOVED to report  HCS CSSB 237 (FIN) out of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
HCS CSSB 237 was REPORTED out  of Committee with a "do pass"                                                                    
recommendation  and  with  two new  attached  fiscal  impact                                                                    
notes by the Department of Education and Early Development.                                                                     
Co-Chair   Hawker  directed   Legislative   Legal  to   make                                                                    
technical conforming changes.                                                                                                   

Document Name Date/Time Subjects