Legislature(2017 - 2018)ADAMS ROOM 519

04/18/2018 09:00 AM House FINANCE

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SENATE BILL NO. 102                                                                                                           
     "An Act relating to funding for Internet services for                                                                      
     school districts; and relating to the Alaska higher                                                                        
     education investment fund."                                                                                                
2:08:18 PM                                                                                                                    
SENATOR ANNA MCKINNON, SPONSOR, explained  that SB 102 was a                                                                    
mirror image  of a bill  that was  passed in 2014  to create                                                                    
better  equity  among school  districts  and  being able  to                                                                    
provide and  communicate over an  internet system.  In 2004,                                                                    
the  legislature  created  the  Broadband  Assistance  Grant                                                                    
(BAG) program and  chose a speed of 10  megabits per second.                                                                    
The  bill  before the  committee  moved  the speed  from  10                                                                    
megabits to  25 megabits. She  chose the number  because she                                                                    
had been  told that school  districts around Alaska  had the                                                                    
infrastructure,  the hard  units, available.  The nationally                                                                    
and federally  recommended speed  was 100 megabits.  She was                                                                    
shooting  for that  number  but  was a  long  ways off.  She                                                                    
relayed  that  SB 102  was  written  to provide  educational                                                                    
equity to rural schools. She  wanted to provide rural access                                                                    
with   similar    abilities   to   virtual    education   or                                                                    
communication  as urban  schools currently  had. She  argued                                                                    
that  the best  thing the  bill did  presently was  that for                                                                    
every  dollar the  state contributed,  it leveraged  $8 from                                                                    
the  federal  government  to  try  to  create  equal  access                                                                    
opportunities for Americans.                                                                                                    
Senator MacKinnon  surmised that the most  contentious issue                                                                    
relating to  SB 102 was  the funding source from  the Alaska                                                                    
Higher Education  Fund. There was concern  that, because the                                                                    
legislature had  reduced the interest rate,  the risk level,                                                                    
and  the return  plans for  the Higher  Education Fund,  the                                                                    
bill would somehow  erode the value of  the Higher Education                                                                    
Fund specifically as  it paid out to  the Alaska Performance                                                                    
Scholarship. There  was another bill  that sat in  the House                                                                    
Education Committee  that she did  not think would  move. It                                                                    
tried to  streamline the fund  so that  it only paid  out to                                                                    
the top tier. The committee  chairman, who had the bill, was                                                                    
a  huge advocate  of  education. The  Senate  had offered  a                                                                    
suite of bills,  and SB 102 was  a part of that.  It was the                                                                    
Senate's  belief  that  the Alaska  Performance  Scholarship                                                                    
needed  retooling. She  reported that  the Higher  Education                                                                    
Fund was earning  interest that would meet  the current call                                                                    
on cash  that was  anticipated. For  the following  10 years                                                                    
there  should not  be  a problem  in  providing access.  She                                                                    
referenced  the  Kivalina  School  as an  example.  She  had                                                                    
blamed adults about fighting over  the location or structure                                                                    
of  the building  while students  were sitting  with buckets                                                                    
and water  dripping through their  ceilings. As  adults were                                                                    
arguing  about  such  things,  students  were  put  in  very                                                                    
different  positions.   She  relayed  that  the   state  had                                                                    
designated  general funds  that  had been  spent to  improve                                                                    
education that were  sitting in the Higher  Education Fund -                                                                    
the reason the Senate  Finance Committee recommended the use                                                                    
of those dollars for the project  in SB 102. It leveraged $1                                                                    
to  $8 for  the state's  students at  a time  they currently                                                                    
needed it.                                                                                                                      
Senator  MacKinnon reported  that she  could not  ask for  a                                                                    
general  fund  spend.  She  relayed that  if  the  bill  was                                                                    
changed to reflect  a fund source of general  funds, she was                                                                    
doubtful  there   would  be  enough  support   for  it.  She                                                                    
clarified that  her comment was  not meant as a  threat, but                                                                    
rather as a statement of fact.  The state had some money set                                                                    
aside for  education, and the  Senate chose the  fund source                                                                    
from the Higher  Education Fund because the  BAG was already                                                                    
coming from  that fund.  The state  did not  have additional                                                                    
general fund  dollars to spend on  increased internet speed.                                                                    
She deferred to the committee.                                                                                                  
2:13:32 PM                                                                                                                    
Co-Chair Foster listed individuals available for questions.                                                                     
Representative  Wilson asked,  aside from  the 191  schools,                                                                    
who paid for the internet for the other schools.                                                                                
BRITTANY  HARTMANN,  STAFF,  SENATOR  ANNA  MCKINNON,  asked                                                                    
Representative Wilson to restate her question.                                                                                  
Representative   Wilson   indicated   that  the   bill   was                                                                    
addressing  191 schools.  The  Senator  had mentioned  other                                                                    
school districts making it equal.  She asked about the other                                                                    
schools that  had a  higher megabit  speed. She  wondered if                                                                    
the schools with the higher speeds  paid out of their BSA or                                                                    
other grants.  Ms. Hartmann answered  that their  funds came                                                                    
from  the  federal  E-rate   program,  the  State  Broadband                                                                    
Assistance grant,  and from the  funding formula.  She noted                                                                    
that  the  federal E-rate  program  paid  70 percent  to  90                                                                    
percent of the internet bill.                                                                                                   
Representative  Wilson wondered  if the  difference was  the                                                                    
matching funds. She  wondered if the matching  funds paid by                                                                    
the other schools outside of  the 191 schools were paying it                                                                    
out of their formula monies.  The 191 schools would be given                                                                    
additional funding outside  of the BSA to  make the increase                                                                    
to 25 megabits.                                                                                                                 
Representative Grenn  asked for verification there  were 209                                                                    
schools  needing the  upgrade.  Ms.  Hartmann replied  that,                                                                    
from research  she had done with  the Federal Communications                                                                    
Commission, 197 schools would be upgraded.                                                                                      
Representative  Grenn  asked  about an  expected  turnaround                                                                    
time to get all of  the schools upgraded. Ms. Hartmann would                                                                    
have  to  direct  his question  to  the  telecom  companies.                                                                    
However, if  the money was  provided, the upgrades  would be                                                                    
purchased immediately or in the following year.                                                                                 
2:16:40 PM                                                                                                                    
Senator  MacKinnon noted  that each  school would  handle it                                                                    
differently.  The   money  was   for  the  speed,   not  for                                                                    
construction, hardwire, softwire, or  building out a system.                                                                    
That  was what  providers did  on their  own. The  providers                                                                    
could access  other grants at  the federal level to  be able                                                                    
to provide sources. The bill  was about purchasing speed for                                                                    
a school  district. Currently,  school districts  were using                                                                    
BSA money to  provide whatever speed they  deployed to their                                                                    
students. She  reported that  buffering was  occurring while                                                                    
live streaming videos and other  things. The bill provided a                                                                    
way,  if  the legislature  looked  at  virtual education  or                                                                    
classroom-to-classroom  peers  around  the  world,  Alaska's                                                                    
rural  communities would  have the  needed speed  to have  a                                                                    
conversation without latency and delay.                                                                                         
Representative Guttenberg  asked if Department  of Education                                                                    
and  Early Development  could  bring  a spreadsheet  showing                                                                    
what the state was currently  paying for what speeds, the E-                                                                    
rate,  the  local  contribution,   and  the  amount  of  the                                                                    
broadband  Access Grant  (BAG). Ms.  Hartmann answered  that                                                                    
she had  the information  containing the current  E-rate and                                                                    
BAG per school  district, and the total cost  to each school                                                                    
district. She  would provide  the information  following the                                                                    
Senator MacKinnon  noted there  was information  provided by                                                                    
Co-Chair Hoffman  in member  packets titled  "Alaska Schools                                                                    
Under  25MBPS  -  Federal Communication  Commission,  Public                                                                    
Reports,  2016"  (copy  on file)  that  showed  the  schools                                                                    
listed  with under  25 megabits  under the  federal program.                                                                    
She  could provide  a copy  if  he did  not have  it in  his                                                                    
Representative Guttenberg noted that  in statute speed would                                                                    
increase  to  25  megabits,  which was  not  a  standard  by                                                                    
itself. He  conveyed that upload speed,  download speed, and                                                                    
latency were almost  as critical as the  download speeds. He                                                                    
thought  she had  reported that  the additional  funds would                                                                    
not  be used  to pay  for upgrades.  If they  could pay  for                                                                    
upgrades  currently,  he wondered  why  they  were not.  The                                                                    
state would  not be  paying for fiber  or new  equipment. He                                                                    
wondered why they were not at a certain level.                                                                                  
2:19:57 PM                                                                                                                    
Senator MacKinnon answered that  all communities had to make                                                                    
choices about where they deployed  their assets. Some of the                                                                    
assets  were   being  deployed  in  classrooms   to  support                                                                    
teachers.  They were  making individual  financial decisions                                                                    
Some  schools had  1000 megabits  because the  community had                                                                    
taxing  ability  to  raise revenues.  She  deferred  to  her                                                                    
Representative Guttenberg  asked why  the ISP  providers did                                                                    
not  offer  the  1000  megabits presently.  He  stated  that                                                                    
everybody  on fiber  was capable  of  getting 1000  megabits                                                                    
including  Kenny  Lake. He  asked  what  was preventing  the                                                                    
providers  from  offering  higher  speeds  since  they  were                                                                    
available  without  needing  any  facility  change  outs  or                                                                    
additional capital projects.                                                                                                    
Senator  MacKinnon answered  it was  a business.  Businesses                                                                    
offered  a suite  and  a  package for  a  certain amount  of                                                                    
money.  There   was  a  contract  established   between  the                                                                    
district and  the provider based  on the cost to  deploy the                                                                    
resource at a  particular location. There was  fiber in some                                                                    
areas, satellite  in other areas, and  microwave stations in                                                                    
other  areas. Each  area  had  its own  costs.  There was  a                                                                    
relationship  with someone  selling  something, internet  at                                                                    
various speeds.  She felt personally  that she  overpaid for                                                                    
her service,  but it was  an individual choice for  her. One                                                                    
of  her  family members  had  elected  to discontinue  cable                                                                    
service due to  the cost. It was up to  the school districts                                                                    
what they were willing to pay.                                                                                                  
Senator  MacKinnon furthered  that there  might not  be 1000                                                                    
megabits  available  at all  of  the  schools. She  believed                                                                    
there was up  to 25 megabits based on  microwave, fiber, and                                                                    
satellite  systems that  the state  could  raise the  lowest                                                                    
level  to  a  group  of  districts  and  provide  additional                                                                    
funding to pay for the  additional speed. She found that the                                                                    
costs would go down because the  fixed cost for a company to                                                                    
try to recover  the rate they were charging  was spread over                                                                    
more megabits.  The costs would  go down. She  reported that                                                                    
in 2014,  multi-million dollars were  fronted by  the state.                                                                    
Once  the fixed  costs were  covered over  time, the  actual                                                                    
speed  rate dropped,  and school  districts' bills  dropped.                                                                    
She deferred to her aide.                                                                                                       
2:23:33 PM                                                                                                                    
Ms. Hartmann  replied that  she had  information from  FY 15                                                                    
through FY  18 regarding BAG  statistics. In FY 15  the cost                                                                    
was $3.6 million, in  FY 16 the cost was $2.6,  in FY 17 the                                                                    
cost  was $2.3  million,  and in  FY 18  the  cost was  $2.2                                                                    
million. She reported  that there was a  decrease every year                                                                    
of the BAG program.                                                                                                             
Representative   Ortiz  applauded   Senator  MacKinnon   for                                                                    
bringing the  bill forward.  He spoke  to the  importance of                                                                    
broadband. He  was concerned about  where the  funding would                                                                    
come from.  He pointed to appropriation  language in Section                                                                    
3 of  the bill. He  asked about  the current balance  of the                                                                    
Higher  Education  Fund.   Senator  MacKinnon  replied  $336                                                                    
Representative  Ortiz   asked  if  it  had   initially  been                                                                    
capitalized at $400 million. He  queried if she had concerns                                                                    
about the solvency  of the fund and the  continuation of the                                                                    
Alaska Performance Scholarship Program.                                                                                         
Senator  MacKinnon answered,  not for  10 years.  She stated                                                                    
that Alaska  needed to  get its fiscal  house in  order. The                                                                    
bill  was a  way to  create equity  over time.  The interest                                                                    
currently  being earned  on the  Higher  Education Fund  out                                                                    
into  the  future  looked  like it  would  cover  the  cost,                                                                    
especially  if  the  legislature deployed  the  resource  to                                                                    
receive matching  funds and raised  the megabits from  10 to                                                                    
25.  Past  experience  showed   that  when  the  legislature                                                                    
invested  money  at  the  10  megabits,  the  state  paid  a                                                                    
significant  amount  up front.  Over  the  years it  started                                                                    
sliding down and the school  districts were getting the same                                                                    
speeds. She  believed the  state would  see a  similar drop.                                                                    
Senator MacKinnon noted that Senator  Olson carried the bill                                                                    
on the  Senate Floor but was  not able to address  the issue                                                                    
in House Finance  because of the timing of  the meeting. The                                                                    
Senate saw  the idea  as emeritus. She  copied his  bill and                                                                    
added the  15 megabit  speed up to  25 megabits  because she                                                                    
saw the  merit of the  bill passed  in 2014. She  hoped that                                                                    
the expenses would reduce over  time and that the fund would                                                                    
be whole. She emphasized that  the finance committee had not                                                                    
chosen  to   use  the  Higher   Education  Funds   on  other                                                                    
proposals. However, the other  BAG programs were funded from                                                                    
the Higher  Education Fund, which  was the reason  she chose                                                                    
it as the source for her proposal.                                                                                              
2:27:39 PM                                                                                                                    
Representative Wilson referred to  a handout that showed the                                                                    
annual call for  the internet, the E-rate,  the BAG portion,                                                                    
and the school  portion. She noted that it was  only for the                                                                    
197 schools. She  wondered if there was  any information for                                                                    
the  other districts  outside of  those that  serve the  197                                                                    
schools. Ms. Hartmann answered she  would follow up with the                                                                    
Representative Wilson wondered why the  bill did not use the                                                                    
Power Cost Equalization (PCE) Fund  as opposed to the Higher                                                                    
Education Fund. She  suggested that the nature  of the issue                                                                    
had to do  with a utility. The Power  Cost Equalization fund                                                                    
balance  equaled  $1 billion.  She  opined  that the  Higher                                                                    
Education Fund had  been robbed for several  things. She was                                                                    
concerned  the  state would  have  more  problems within  10                                                                    
Senator  MacKinnon  answered  that  the PCE  Fund  had  been                                                                    
modified  the  preceding  year to  prioritize  spending  and                                                                    
reduced  interest  earnings  on   it.  It  provided  heating                                                                    
assistance and  applied to  other items  to reduce  costs in                                                                    
rural Alaska.  In addition, the  fund was being  shared with                                                                    
all  communities  including Fairbanks,  Wrangel,  Anchorage,                                                                    
and  other  communities.   All  communities  qualifying  for                                                                    
community revenue sharing were  receiving funds from the PCE                                                                    
Fund.  A bill  had  been structured  through Senate  Finance                                                                    
with her support  in advancing it to provide  energy use and                                                                    
community assistance.                                                                                                           
Representative Wilson stated that  the Higher Education Fund                                                                    
had  not made  enough interest  to pay  for the  scholarship                                                                    
program  and  the  needs-based program.  She  was  concerned                                                                    
about taking  more out of  the fund. She relayed  a personal                                                                    
scenario about her internet service  at home. She also spoke                                                                    
about   her  son's   internet  service.   She  agreed   with                                                                    
Representative Guttenberg about the  speed of service. Speed                                                                    
was necessary. She  thought the amount could go  down, but a                                                                    
commitment  of more  than $10  million was  being discussed.                                                                    
She was  very concerned  about fairness. She  continued that                                                                    
districts  all over  Alaska were  paying for  whatever speed                                                                    
they had.  She spoke about  fairness. She was  concerned the                                                                    
bill  only  pertained  to  197  schools.  There  were  other                                                                    
schools trying  to do the right  thing. She did not  want to                                                                    
jeopardize   an   important   program.   She   thought   the                                                                    
scholarship  programs were  equally  important for  B and  C                                                                    
students. She did not want to negatively impact them.                                                                           
2:31:35 PM                                                                                                                    
Senator MacKinnon  spoke about a conversation  pertaining to                                                                    
equity  for  rural  states and  about  equity  in  education                                                                    
opportunities.  She reported  that 100  megabits per  second                                                                    
(mbps)  was the  national  recommendation. However,  because                                                                    
Alaska's  smaller communities  in more  rural locations  did                                                                    
not  have the  same advantage  of fiber  that could  provide                                                                    
lower  cost   service,  the  bill  was   only  providing  an                                                                    
opportunity of  25 percent  of the  national recommendation.                                                                    
She  agreed  there  was  consternation  around  the  funding                                                                    
source.  The  funds were  set  aside  for higher  education.                                                                    
Should the legislature solve  the state's fiscal challenges,                                                                    
there was an  opportunity to place more money  back into the                                                                    
fund  to  continue  to  provide  resources  for  the  Alaska                                                                    
Performance  Scholarship, the  needs-based Alaska  Education                                                                    
Grant, and the BAG program.  She understood there might be a                                                                    
negative draw on  the fund and that it might  eat the corpus                                                                    
of the money  placed in the account. However,  she felt that                                                                    
providing equity for those presently  in the system would be                                                                    
Representative  Pruitt spoke  about the  funding source.  He                                                                    
mentioned  a Legislative  Finance Division  analysis of  the                                                                    
impact  of  SB 102  on  the  fund.  By 2023,  the  estimated                                                                    
investment  earnings would  be just  over $15  million while                                                                    
the total  appropriations would be $35  million, $20 million                                                                    
being drawn down. He reported the  total value at the end of                                                                    
2023  would  be $245  million.  He  had concerns  about  the                                                                    
impact on the  ability to earn with less in  the account and                                                                    
the  residual  effects  of being  able  to  provide  various                                                                    
services.  He thought  Senator McKinnon  had  said that  the                                                                    
earnings  could be  covered by  what was  being asked  to be                                                                    
drawn down. He  thought it looked like in  the estimate that                                                                    
what was provided  in the bill could fit  within the amount.                                                                    
However, there were  other items still being  drawn from the                                                                    
fund including the Alaska  Performance Scholarship (APS). He                                                                    
asked how  he could say  it was fiscally responsible  if the                                                                    
goal  was to  be able  to provide  scholarships in  the long                                                                    
2:35:03 PM                                                                                                                    
Senator MacKinnon  answered that if students  were not ready                                                                    
to go to college, they had  to take remedial courses. In the                                                                    
Anchorage  area  there  had been  a  newspaper  report  that                                                                    
showed  that  reading  and  math  were  below  the  national                                                                    
average. The  bill provided an opportunity  to help increase                                                                    
the  chances that  those that  were ready  to go  to college                                                                    
would be  prepared and  not have  to take  remedial classes.                                                                    
She believed the fund had been  used as a funding source for                                                                    
two years  for items  that were  not education  related. The                                                                    
items had dwindled  the fund and the fund had  been used for                                                                    
those items  in response  to Alaska  not solving  its fiscal                                                                    
challenges. She  reported that the state  had better numbers                                                                    
at the beginning  of the year. But the fund  had changed its                                                                    
earnings  estimation.  She  explained   that  when  she  had                                                                    
originally  started with  the  bill,  the interest  earnings                                                                    
were  meeting  everything  in  the  fund.  The  numbers  had                                                                    
dropped, and  she had  received them  the previous  day. She                                                                    
was looking  for equity  for all  Alaskans, mostly  those in                                                                    
small communities.  She relayed that all  of Alaska's school                                                                    
districts  could   qualify  for  the  E-rate.   It  was  the                                                                    
committee's  decision whether  it  was  the correct  funding                                                                    
source. The  Senate chose to  use the Higher  Education Fund                                                                    
as  the funding  source inside  of a  comprehensive look  at                                                                    
education with a suite of  bills. The other legislation that                                                                    
would affect  this fund  was not  before the  committee. She                                                                    
admitted  it  was  a  bit  out of  sequence  with  what  the                                                                    
Senate's ideas were around the issues.                                                                                          
2:37:18 PM                                                                                                                    
Representative Pruitt  mentioned remedial classes  needed by                                                                    
University of Alaska students. In  Anchorage a large portion                                                                    
of students likely came from  the Anchorage and Mat-Su areas                                                                    
with access  to broadband. He  thought it spoke to  a larger                                                                    
issue than whether  there was access to  broadband. He noted                                                                    
a   policy  call   about  whether   to  continue   with  the                                                                    
scholarship  fund. He  asked  if  Senator MacKinnon  thought                                                                    
going forward  with the bill  without another  component was                                                                    
appropriate. He reported having  objected to using the fund.                                                                    
He questioned  whether the committee should  go forward with                                                                    
only one piece of a larger package.                                                                                             
Senator MacKinnon commented that each  bill stood on its own                                                                    
merits. She deferred  to the deliberation of  the House. She                                                                    
thought she  had made  a fair  case for  smaller communities                                                                    
that  were  paying  high  costs  for  providing  educational                                                                    
services. They  received the same  BSA as  other communities                                                                    
that  had taxing  authority  to add  to  their schools.  She                                                                    
noted that all  schools in Alaska qualified  for E-rate. The                                                                    
cost for  internet speed in  larger communities was  less or                                                                    
might be less  than in rural Alaska. She  indicated that she                                                                    
was  trying  to benefit  all  students.  The goal  from  the                                                                    
Senate Finance Committee was to  try to do what was possible                                                                    
to support  education. She  would explain  to people  in her                                                                    
district  that equal  was equal  and being  able to  provide                                                                    
broadband access  without latency  and buffering  meant that                                                                    
the  state could  deploy a  state  of the  art teacher  into                                                                    
classrooms  that  might  or might  not  currently  have  the                                                                    
2:41:03 PM                                                                                                                    
Vice-Chair  Gara  appreciated  the  rural  equity  goal  the                                                                    
senator was trying to achieve.  He wondered if 25 mbps would                                                                    
be  enough  to allow  for  a  large classroom  setting.  Ms.                                                                    
Hartmann thought  the question would be  better addressed to                                                                    
the telecom  companies or  DEED. She had  been told  that it                                                                    
took 4  mbps to have  a face-to-face interactive  video. The                                                                    
bill would help increase the ability to livestream.                                                                             
Vice-Chair Gara reported having spent  a fair amount of time                                                                    
in  rural  Alaska  and  watched the  little  circle  on  his                                                                    
computer  go around  and  around.  He asked  if  all of  the                                                                    
school  districts listed  with  less than  25 mbps worth  of                                                                    
broadband  had   enough  infrastructure  from   the  telecom                                                                    
companies to  provide the 25  mbps. He wondered  if internet                                                                    
access would slow down. He  asked if the broadband available                                                                    
to others would  slow down or be eaten up.  He also wondered                                                                    
if  the telecom  infrastructure would  have to  be upgraded.                                                                    
Ms.  Hartmann  responded  that  she  had  recently  uploaded                                                                    
letters from  the telecom companies that  currently provided                                                                    
services to the 197 schools that  they were capable to go up                                                                    
to  25 mbps  with  current infrastructure.  She  also had  a                                                                    
letter from  the Alaska  Telecom Association  confirming the                                                                    
same thing. Regarding Vice-Chair  Gara's other question, she                                                                    
would have to research or  defer the question to the telecom                                                                    
companies. Vice-Chair Gara  did not know the  answer and did                                                                    
not expect her to either.                                                                                                       
2:44:24 PM                                                                                                                    
Representative Guttenberg asserted  that providing broadband                                                                    
across Alaska was likely the  most important thing the state                                                                    
could  do for  its students.  He reported  paying more  than                                                                    
$110  for 4  megabytes. He  indicated that  the GCI  map was                                                                    
inaccurate.  He  mentioned  that  3  years  prior,  the  FCC                                                                    
adopted the  industry written Alaska  plan. Over  the course                                                                    
of  10 years  GCI  would receive  $1.350  billion. He  spoke                                                                    
about the  telecom companies building  infrastructure, which                                                                    
was supposed  to increase coverage  in remote  locations. He                                                                    
noted living  5 miles from  the university and  reported not                                                                    
having access  to service. He  was interested in  seeing the                                                                    
cost associated with the schools.                                                                                               
Representative  Guttenberg  wondered   if  the  Senator  had                                                                    
queried the  telecom companies about where  they intended to                                                                    
build  out in  communities. The  Alaska plan  was looked  at                                                                    
critically by  some. He  indicated there  would be  a 5-year                                                                    
look back  in about  2 years. He  thought $1.350  billion in                                                                    
subsidies with a minimal amount  of build out was way beyond                                                                    
what  was being  considered  in the  bill  ($15 million  per                                                                    
year).  He  asked  if  the senator  had  asked  the  telecom                                                                    
companies  about   where  the   build  outs   would  enhance                                                                    
communities without additional costs.                                                                                           
Senator   MacKinnon   thought   the  providers   that   were                                                                    
participating in  the Alaska plan  should be  consulted. The                                                                    
telecom companies participating in  the Alaska Plan received                                                                    
a  benefit  from the  federal  government,  which came  with                                                                    
strings attached. She noted that  for people concerned about                                                                    
the price of internet service going  up, the FCC who ran the                                                                    
federal E-rate program,  showed all of its  data online. The                                                                    
prices reflected the cost continuing to go down.                                                                                
Senator MacKinnon  reported that the  FCC had a  rule called                                                                    
the "Lowest  Corresponding Price  Rule (LCP).  She explained                                                                    
that the LCP was defined as  the lowest price that a service                                                                    
provider  charged  to  non-residential  customers  who  were                                                                    
similarly  situated  to   a  particular  applicant,  school,                                                                    
library, or  consortium for similar services.  The rule also                                                                    
stated that service providers could  not charge applicants a                                                                    
price  above  the  LCP  for  E-rate  program  services.  She                                                                    
indicated that the state could  not force people to build in                                                                    
all  rural  communities  in the  state.  There  were  active                                                                    
choices  occurring  with  how many  individuals  were  in  a                                                                    
location  to receive  service.  The  federal government  was                                                                    
trying to  extend the  stretch and  trying to  regulate that                                                                    
the  lowest  cost  structure was  still  provided  to  those                                                                    
receiving  the services.  She offered  to reach  out to  the                                                                    
providers  on behalf  of the  House  Finance Committee.  She                                                                    
thought their  plan had  investment in  infrastructure costs                                                                    
every  year.  However,  the  state   did  not  direct  where                                                                    
providers built out.                                                                                                            
2:48:16 PM                                                                                                                    
Representative  Guttenberg   relayed  that  the   state  was                                                                    
providing $1.3 billion  in subsidies which did  not cover E-                                                                    
rate, rural  clinics, or FirstNet.  He thought there  was an                                                                    
intangible public  purpose for  the legislature to  see that                                                                    
an  infrastructure  build-out  happened. He  frequently  had                                                                    
discussions  with  industry people  in  which  he posed  the                                                                    
question  about  when  infrastructure  would  be  built.  He                                                                    
reported  that  there was  no  square  answer from  industry                                                                    
folks. He reiterated the  need for additional infrastructure                                                                    
with the amount of money  going into Alaska in subsidies. He                                                                    
indicated that the  chairman of the FCC  criticized the lack                                                                    
of  infrastructure build-out  in Alaska.  He thought  it was                                                                    
untenable that, at the end  of a 10-year period, there would                                                                    
be no  substantial infrastructure  in place. He  felt policy                                                                    
makers would  be faced with  continued escalating  costs. He                                                                    
agreed  with  the  bill  sponsor   that  Alaska's  kids  and                                                                    
businesses  were owed  an infrastructure  to  allow them  to                                                                    
function  at  their highest  level.  He  reiterated that  he                                                                    
lived  in sight  of  the University  and  the mappings  were                                                                    
inaccurate.   He   continued   to  criticize   the   telecom                                                                    
companies. He appreciated the senator's efforts.                                                                                
Senator  MacKinnon   clarified  she  was   not  representing                                                                    
telecom companies. The bill  represented students and school                                                                    
districts in  Alaska. She believed that  the legislature had                                                                    
reached  out to  telecom  companies to  understand how  they                                                                    
were providing service  and some of their  challenges. In no                                                                    
way was  she trying  to direct a  single dollar  towards any                                                                    
individual  private sector  person. However,  private sector                                                                    
companies were  providing the services. She  emphasized that                                                                    
she  was not  in communication  with telecom  providers with                                                                    
the exception of asking questions.                                                                                              
Representative  Guttenberg clarified  that he  had not  been                                                                    
inferring anything.                                                                                                             
Representative   Wilson  wanted   to   understand  how   the                                                                    
calculation had been  made for the figure  of $13.4 million.                                                                    
She suggested that $2.5 million  applied to the 197 schools.                                                                    
She  had hoped  to  have a  discussion  about other  options                                                                    
after  seeing  how  the  calculation  was  applied.  Senator                                                                    
MacKinnon  answered  that  the department  was  prepared  to                                                                    
address the fiscal note.                                                                                                        
2:52:43 PM                                                                                                                    
Co-Chair Foster OPENED public testimony.                                                                                        
DAMON  HARGRAVES,  KODIAK  ISLAND BOROUGH  SCHOOL  DISTRICT,                                                                    
KODIAK  (via teleconference),  testified in  support of  the                                                                    
bill. He  relayed that in  Kodiak bandwidth  offered options                                                                    
for  its students.  Many of  the district's  sights had  one                                                                    
high  school teacher  available locally.  Bandwidth provided                                                                    
access  to high  quality teachers  and provided  students in                                                                    
the smaller  schools with access  to as  many as a  dozen or                                                                    
more  teachers. He  continued  that  live video  connections                                                                    
between students  and teachers  for each distance  class was                                                                    
crucial. The  Kodiak School  District was  currently limited                                                                    
to  2  simultaneous  video connections  at  most  sites.  An                                                                    
increase to 25 mbps would help  the district to deliver 4 or                                                                    
more  simultaneous connections  to  each of  its sites.  The                                                                    
district, with  increased bandwidth,  would also be  able to                                                                    
offer more classes including welding.  The course was taught                                                                    
and facilitated by  a teacher in Kodiak at  the high school.                                                                    
He continued he was able  to offer a better experience. [The                                                                    
testifier's call dropped off].                                                                                                  
2:54:45 PM                                                                                                                    
LUKE MEINERT, YUKON-KOYUKUK  SCHOOL DISTRICT, FAIRBANKS (via                                                                    
teleconference),  spoke in  favor  of the  bill. He  thanked                                                                    
members  for supporting  the bandwidth  assistance grant  in                                                                    
the  past.  The grant  provided  a  positive impact  on  the                                                                    
educational   opportunities   the  district   provided   its                                                                    
students. Because  of this impact, he  encouraged members to                                                                    
support  SB 102.  The Yukon-Koyukuk  School District  had 10                                                                    
rural schools in  the interior of Alaska. 98  percent of the                                                                    
students in  the villages  were Athabaskan and  8 of  the 10                                                                    
villages  were  only reachable  via  air  service, with  all                                                                    
school internet being delivered  by satellite or a microwave                                                                    
connection.  Very  few  homes   in  the  area  had  internet                                                                    
connections  and there  was no  cell service.  Each school's                                                                    
internet  costs for  a 10-megabit  circuit  was $16,000  per                                                                    
location or $160,000  for each of the  district's 10 schools                                                                    
prior to  E-rate and the  BAG contribution. The  internet at                                                                    
the school  was a  lifeline for their  communities. Securing                                                                    
more bandwidth for the district's  students was not possible                                                                    
without assistance, given  the district's challenging budget                                                                    
constraints.  He relayed  the estimated  costs of  expanding                                                                    
the bandwidth without assistance.  The district was more and                                                                    
more reliant on internet service  for education. He spoke to                                                                    
the  equitability   of  educating  rural   students  through                                                                    
distance  learning  with  additional  bandwidth  being  made                                                                    
accessible.  He  indicated  that   to  continue  to  improve                                                                    
student  outcomes  additional  bandwidth was  necessary.  He                                                                    
asked that  members consider supporting  an increase  to the                                                                    
bandwidth from  10 megabits to  25 megabits. He  thanked the                                                                    
Representative Guttenberg asked  who provided the district's                                                                    
bandwidth. Mr.  Meinert answered,  "DRS Technologies  is our                                                                    
2:57:47 PM                                                                                                                    
DAVID NEESE, SELF,  ANCHORAGE (via teleconference), believed                                                                    
increasing  bandwidth was  a  good  idea. However,  internet                                                                    
service was provided by 2  companies in Alaska, GCI and DRS.                                                                    
He relayed that DRS had the  ability to increase it but cost                                                                    
much   more.   None  of   the   letters   included  in   the                                                                    
documentation showed what the amount  would be to go from 10                                                                    
to 25 megabits. He reported  that 4 megabits per device were                                                                    
necessary  to  have  video.  If   a  school  had  5  devices                                                                    
streaming could occur on 4  of them. Other activities on the                                                                    
internet  such  as  accounting would  likely  drop  off.  He                                                                    
referred to  the last  section of the  bill that  noted "any                                                                    
amount" from  the fund.  He believed  those words  should be                                                                    
removed  or a  cap should  be included.  He argued  that the                                                                    
legislature  would be  funding  internet at  the school  for                                                                    
elementary kids  and taking  it away  from college  kids. He                                                                    
reported that  at Dot  Lake School, the  cost per  child was                                                                    
$30,000 for  internet at  10 megabits.  He argued  that "any                                                                    
cost"  would  be  difficult. He  encouraged  legislators  to                                                                    
consider  that   the  state  was  helping   to  subsidize  a                                                                    
monopoly, GCI in most of  the villages, instead of promoting                                                                    
competition. He  relayed that ACS  had sent a letter  to the                                                                    
FCC complaining  that GCI  had a  monopoly in  rural Alaska.                                                                    
The  bill did  nothing  to  break the  monopoly  up. He  was                                                                    
worried about the  fund source to solve the  problem. He did                                                                    
not support  the bill  in its  current from  and recommended                                                                    
looking at another funding source.                                                                                              
3:01:05 PM                                                                                                                    
AT EASE                                                                                                                         
3:01:44 PM                                                                                                                    
Mr.  Hargraves continued  his earlier  testimony. He  shared                                                                    
that  the  Kodiak  Island Borough  School  District  offered                                                                    
Career Technical  Education (CTE) courses  including classes                                                                    
in welding  through distance, which were  heavily reliant on                                                                    
connectivity. The school was the  best location for reliable                                                                    
internet. He shared  that many home school  students came in                                                                    
to use  the internet.  He noted a  decline in  enrollment in                                                                    
rural schools. He attributed it  partial to limited options.                                                                    
Increased     bandwidth    would     increase    educational                                                                    
opportunities for students.  He also mentioned opportunities                                                                    
for professional  development was impacted  by connectivity.                                                                    
Kodiak had  cut down on travel  for professional development                                                                    
and  was now  focused  on  videoconferencing capability  for                                                                    
training. He  relayed that the  bill would impact  8 schools                                                                    
within his  district. He anticipated that  the Kodiak Island                                                                    
School District would see a  benefit of about $400,000. Upon                                                                    
the passage of the bill,  the school district would be ready                                                                    
to  implement   immediately;  it  had  the   personnel,  the                                                                    
expertise,  and  the  local  hardware  in  place.  He  asked                                                                    
members to support the bill.                                                                                                    
Representative  Guttenberg  asked   what  the  district  was                                                                    
paying  for 10  megabits  currently. Mr.  Hargraves did  not                                                                    
have the numbers on hand.                                                                                                       
3:04:59 PM                                                                                                                    
BILL BURR,  DELTA/GREELY SCHOOL DISTRICT AND  ALASKA SOCIETY                                                                    
OF   TECHNOLOGY   IN    EDUCATION,   DELTA   JUNCTION   (via                                                                    
teleconference), testified in support  of the bill. He spoke                                                                    
to the  technical side of  delivering broadband,  going from                                                                    
10 to  25 mmbps. The  cost of increasing bandwidth  in rural                                                                    
areas  was high.  Flat  funding did  not  afford the  school                                                                    
district  to put  money towards  increased internet  service                                                                    
when other  costs were higher.  He pointed out the  ratio of                                                                    
5:8:1  federal dollars  through  the  E-rate program.  Every                                                                    
dollar set  aside to increase  the bandwidth came  with more                                                                    
money from the federal government.  He believed the bill was                                                                    
an  opportunity that  should  not be  passed  up. He  talked                                                                    
about  the incredible  opportunities  that  would come  with                                                                    
additional bandwidth. He needed  bandwidth in order to reach                                                                    
out and  participate in  the modern  world. He  stressed the                                                                    
importance of  the funding. He shared  that the Delta/Greely                                                                    
School  District was  not one  of the  BAG communities.  The                                                                    
district was in  full support of rural  communities that did                                                                    
not have schools at 25 megabits.                                                                                                
Vice-Chair  Gara  indicated  that   his  interest  was  that                                                                    
students would be  able to participate live  in a classroom.                                                                    
He thought  Mr. Burr had  stated that his district  had this                                                                    
level  of internet.  He  asked  if it  worked  well for  the                                                                    
district to  provide live classroom participation.  Mr. Burr                                                                    
replied that the  school district had 250  megabits of data.                                                                    
It had the ability to do  desktop video inside the school as                                                                    
well  as  with  other   communities  and  other  states  and                                                                    
countries. The district's level  was higher than 25 megabits                                                                    
and  was  very functional.  Vice-Chair  Gara  would wait  to                                                                    
speak with a  district that had 25 megabits.  He thanked the                                                                    
3:09:40 PM                                                                                                                    
DR.  LISA  PARADY,  EXECUTIVE DIRECTOR,  ALASKA  COUNCIL  OF                                                                    
SCHOOL ADMINISTRATORS,  spoke in strong support  of the bill                                                                    
to increase  the floor of megabit  speed from 10 to  25. She                                                                    
shared that  she had  previously worked for  6 years  on the                                                                    
North  Slope  bringing  the  original  Broadband  Assistance                                                                    
Grant forward. At the time,  there were villages with only 1                                                                    
to 3 megabits  which made it unrealistic  to deliver certain                                                                    
content. It  was decided that  10 megabits would  become the                                                                    
new floor for  rural Alaska. She thought  it was appropriate                                                                    
to  continue to  incrementally  lift the  floor. She  agreed                                                                    
with Senator  MacKinnon that it  was an equity  issue. There                                                                    
had been  discussions about the shortage  and recruitment of                                                                    
teachers  and educators.  She thought  that in  rural Alaska                                                                    
broadband  played a  role.  She argued  that  Alaska had  to                                                                    
continue  to deliver  quality education  to all  of Alaska's                                                                    
students. Teaching  and learning through  distance learning,                                                                    
using  video  conferencing  over  broadband,  was  a  viable                                                                    
option  to provide  equity  to students.  She  spoke to  the                                                                    
enhancement  of  many  of the  education  applications  that                                                                    
needed  broadband.  She  noted   a  number  of  applications                                                                    
available to students that would  be enhanced by lifting the                                                                    
megabit floor.  She emphasized  that the  state's investment                                                                    
in  its broadband  infrastructure with  a federal  match was                                                                    
8:1.  The bill  would  expand access  for  students to  take                                                                    
University classes. She urged  members to consider the bill.                                                                    
She  shared that  members had  expressed  concern about  the                                                                    
funding mechanism.                                                                                                              
3:14:31 PM                                                                                                                    
Representative Guttenberg  stated there  were other  ways to                                                                    
get less expensive  internet. He invited her to  come to his                                                                    
office  to  review  those options.  He  continued  that  the                                                                    
charges   for  internet   service  in   rural  Alaska   were                                                                    
exorbitant. Dr.  Parady replied that she  would never engage                                                                    
in a  conversation about telecom  companies or prices  as it                                                                    
was  not her  area  of expertise.  She  relayed that  having                                                                    
tried  to provide  quality  professional development  across                                                                    
89,000 square miles, she might  be the only person in Alaska                                                                    
who  had  a  call  from   a  provider  saying  that  because                                                                    
satellites were colliding  she would not be  able to provide                                                                    
a  district-wide  professional  development class.  She  had                                                                    
lived the  issue. She had  talked to teachers  that reported                                                                    
they could not  upload or download due  to latency problems.                                                                    
She would not consider speaking  to the costs, but she could                                                                    
definitely speak to  the needs. It was a  desperate time for                                                                    
the  districts  to  figure  out  how  to  best  serve  their                                                                    
students going  forward. She  believed the  technology piece                                                                    
in the bill had to be part of the answer.                                                                                       
Representative  Guttenberg noted  that  if someone  compared                                                                    
the charges with  anything else anywhere in  the world, they                                                                    
would be dumbfounded.                                                                                                           
Representative  Ortiz noted  that Ms.  Parady had  mentioned                                                                    
her  concern about  the funding  source  at the  end of  her                                                                    
testimony.  He  agreed  that the  state  needed  to  upgrade                                                                    
broadband,  especially  in  his   district,  as  there  were                                                                    
several rural  areas that would  be positively  impacted. He                                                                    
asked that  if the question  boiled down to having  to leave                                                                    
the  funding source  as is  in order  for the  bill to  move                                                                    
forward,  or not  having the  program, did  she support  the                                                                    
funding source  remaining. Dr. Parady answered  that she saw                                                                    
the megabit increase as a very high priority to education.                                                                      
Representative Pruitt  spoke about  fiscal costs  for items.                                                                    
He  asked  if  Ms.  Parady's  members  would  be  okay  with                                                                    
removing  other things  that were  drawing  from the  Higher                                                                    
Education Fund in order to  keep the fund stable. Ms. Parady                                                                    
responded  that  she  could not  answer  his  question.  She                                                                    
thought  that   there  were  many  worthwhile   supports  to                                                                    
education.  They  had  varying   degrees  of  impact  across                                                                    
different  school districts.  She  was  unclear whether  the                                                                    
answer  to  his  question  would  be  uniform  and  was  not                                                                    
prepared  to answer  it. From  a  fiscal perspective,  using                                                                    
federal  dollars appeared  to be  a wise  investment. School                                                                    
districts were  being called upon  to come up  with creative                                                                    
and  innovative ways  to  serve  students. Connectivity  was                                                                    
necessary to  do so. She did  not see the bill  as a luxury,                                                                    
but rather a necessity.                                                                                                         
Representative   Pruitt  added   that  often   times  people                                                                    
requested  certain   things  that   had  fiscal   costs.  He                                                                    
disagreed that  it was up  to the legislature to  decide how                                                                    
the  state  paid for  things.  He  inherently disagreed  and                                                                    
argued   that  people   had  to   recognize  and   determine                                                                    
priorities.   He  agreed   that   better  connectivity   was                                                                    
necessary  in order  to provide  better  education in  Rural                                                                    
communities. He thought  it was good to  discuss other areas                                                                    
of  savings.  Dr. Parady  thought  it  would cost  about  $2                                                                    
billion  to  wire  the  school   districts.  From  a  fiscal                                                                    
perspective,  incrementally raising  the  megabit floor  and                                                                    
leveraging federal dollars seemed to be a wise investment.                                                                      
3:22:31 PM                                                                                                                    
Representative  Guttenberg clarified  that the  estimate for                                                                    
wiring the entire state was  between $1.2 billion and higher                                                                    
based  on  the  2008 Broadband  Taskforce  calculations.  He                                                                    
compared it  to buying  a house: A  total cash  layout would                                                                    
not  be required.  The  investment would  be  paid off  over                                                                    
time. The  cost for not  doing things for  Alaska's children                                                                    
was higher than making the investment.                                                                                          
Co-Chair  Foster   CLOSED  public   testimony.  He   set  an                                                                    
amendment deadline  for 5:00 PM  Friday, April 20,  2018. He                                                                    
appreciated the sponsor's work on the bill.                                                                                     
SB  102  was  HEARD  and   HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
SB 102 - Higher Education Investment Fund excerpt from Treasury report 1-23-18.pdf HFIN 4/18/2018 9:00:00 AM
SB 102
SB 102 - Higher Education Fund Projection - 6.21% return woSB102.pdf HFIN 4/18/2018 9:00:00 AM
SB 102
SB 102 - Higher Ed Fund SB 102 - 6.21% return wSB102.pdf HFIN 4/18/2018 9:00:00 AM
SB 102
SB 102 Sectional Analysis ver A 04.16.2018.pdf HFIN 4/18/2018 9:00:00 AM
SB 102
SB 102 Sponsor Statement 4.16.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 102
SB 104 Letter of Support ACSA 4.14.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 104
CSSB 104 IEP Explanation SFIN Request 4.14.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 104
CSSB 104 Sectional Analysis 4.16.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 104
SB 104 Letter of Support Kenai Peninsula Borough School District 4.14.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 104
SB 104 Letter of Support MSBSD 4.14.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 104
SB 104 Sponsor Statement.pdf HFIN 4/18/2018 9:00:00 AM
SB 104
SB 216 School Consolidation Presentation-House Finance.pdf HFIN 4/18/2018 9:00:00 AM
SB 216
SB216 CS FIN Summary of Changes All Versions.pdf HFIN 4/18/2018 9:00:00 AM
SB 216
SB 216 Sectional Analysis Ver. T 04.13.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 216
SB 216 Sponsor Statement 03.21.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 216
SB 216 Basic Middle School Consolidation Example 041818.pdf HFIN 4/18/2018 9:00:00 AM
SB 216
SB 216 Basic Elementary School Consolidation Example 041818.pdf HFIN 4/18/2018 9:00:00 AM
SB 216
SB 102 TelAK letter 4.16.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 102
SB 102 DRS Techonologies Letter 4.16.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 102
SB 102 Adak Letter 4.16.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 102
SB 102 Cordova Telephone Cooperative Letter 4.16.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 102
SB 102 Alaska Communications Letter 4.16.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 102
DEED HFSC Budget Overview LAM 1.31.18.pdf HFIN 4/18/2018 9:00:00 AM
SB 102