Legislature(2009 - 2010)
04/17/2010 05:22 PM FIN
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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 revenue." 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 percent. Co-Chair Hawker added that the committee had heard the bill before. 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 statewide. 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 inequity. 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 program. 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 14.11.100(a)" 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 higher. 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 14.11; (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 include (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 requested; (2) make recommendations to the board concerning school construction grants and make recommendations to the commissioner concerning projects for which bond reimbursement is requested; (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 projects; (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 (E); *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 provision. 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.