Legislature(2015 - 2016)BUTROVICH 205

03/12/2015 03:30 PM EDUCATION

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HCR 2 JAN 24 - 30, 2016: AK SCHOOL CHOICE WEEK TELECONFERENCED
Moved CSHCR 2(EDC) Out of Committee
+= SJR 2 CONST. AM: G.O. BONDS FOR STUDENT LOANS TELECONFERENCED
Moved SJR 2 Out of Committee
+= SCR 1 CIVICS EDUCATION TASK FORCE TELECONFERENCED
Moved CSSCR 1(EDC) Out of Committee
*+ SB 64 SCHOOL BOND DEBT REIMBURSEMENT TELECONFERENCED
Heard & Held
              SB 64-SCHOOL BOND DEBT REIMBURSEMENT                                                                          
                                                                                                                                
4:03:16 PM                                                                                                                    
CHAIR DUNLEAVY  announced the consideration  of SB 64. He  said it                                                              
is the first hearing of the bill.                                                                                               
                                                                                                                                
SENATOR ANNA  MACKINNON, Alaska  State Legislature, sponsor  of SB                                                              
64, read  the sponsor statement.  Alaska is facing a  $3.5 billion                                                              
revenue  shortfall this  year and  projected into  next year.  One                                                              
thing we  can do to  take care of  Alaska is  to take care  of our                                                              
fiscal house as  quickly as possible. The current  bill before you                                                              
proposes to sunset  current state aid regarding  reimbursement for                                                              
major  maintenance  and school  construction.  This  is a  measure                                                              
that is  outside of our control  in anticipating our  future debt-                                                              
to-credit ratio  needs. I  understand that it  is a  valuable tool                                                              
for communities  that can provide bond indebtedness.  This doesn't                                                              
prevent   schools   from   going  forward   and   providing   that                                                              
indebtedness.                                                                                                                   
                                                                                                                                
She said  she originally  wanted an effective  date of  January 1,                                                              
2015. That  date was  rejected and is  a policy consideration  for                                                              
the  committee. It  takes  into  account that  people  go to  bond                                                              
market in  April and  October and sell  bonds. A municipality  may                                                              
be  getting  ready  to  market to  sell  bonds.  She  opined  that                                                              
January 1,  2015, is  the correct  date and  the people  of Alaska                                                              
will  understand that  the  state is  not in  the  position to  go                                                              
forward  with reimbursing  at a  higher level.  The bill does  not                                                              
eliminate the program, but sunsets it for five years.                                                                           
                                                                                                                                
4:06:04 PM                                                                                                                    
SENATOR GARDNER asked if January 1, 2015, is the correct date.                                                                  
                                                                                                                                
SENATOR MACKINNON  said yes; it  is retroactive. She  related that                                                              
Legislative Legal  expressed concern  about retroactivity  and the                                                              
possibility  that Anchorage  might  have a  bond proposition  that                                                              
voters expect to be reimbursed for.                                                                                             
                                                                                                                                
CHAIR DUNLEAVY requested a sectional analysis.                                                                                  
                                                                                                                                
LAURIE  PIERRE,  Staff,  Senator   Anna  MacKinnon,  Alaska  State                                                              
Legislature,  presented  a  sectional   analysis  of  SB  64.  She                                                              
clarified  that the  year  bonds  are issued  is  listed in  state                                                              
statute. The most  recent one was issued from October  1, 2006, to                                                              
May 1, 2015.  Legislative Legal suggested  a May 1 sunset  date so                                                              
as not to affect that bond.                                                                                                     
                                                                                                                                
4:08:17 PM                                                                                                                    
MS.  PIERRE  related   that  Section  1  sunsets   the  bond  debt                                                              
reimbursement  provisions   for  school  construction   and  major                                                              
maintenance for five years, May 1, 2015 to July 1, 2020.                                                                        
                                                                                                                                
Section  2  begins   on  page  6,  line  21,   and  restricts  the                                                              
reimbursement  of bonds  authorized after  May 1,  2015. Also,  on                                                              
page  7, lines  1  through 11,  it  deletes language  relating  to                                                              
bonds authorized after May 1, 2015.                                                                                             
                                                                                                                                
Section  3 page  12, line  17, through  page 13,  line 2,  inserts                                                              
language relating  to bonds authorized  on or after July  1, 2020,                                                              
and reduces  reimbursement from  70 percent for standard  projects                                                              
to 50  percent, and from 60  percent for non-standard  projects to                                                              
40 percent.                                                                                                                     
                                                                                                                                
4:10:04 PM                                                                                                                    
Section   4  restricts   the   commissioner   from  approving   an                                                              
application for bond  debt reimbursement between May  1, 2015, and                                                              
July 1, 2020.                                                                                                                   
                                                                                                                                
Section   5  restricts   the   commissioner   from  approving   an                                                              
application for bond  debt reimbursement between May  1, 2015, and                                                              
July 1, 2020.                                                                                                                   
                                                                                                                                
Section 6  repeals sections  1, 4, and  5 of this  Act on  July 1,                                                              
2020.                                                                                                                           
                                                                                                                                
Section 7 is  the retroactivity clause and applies  to Sections 1,                                                              
4, and 5.                                                                                                                       
                                                                                                                                
Section 8 states that Section 3 takes effect on July 1, 2020.                                                                   
                                                                                                                                
Section 9 is the immediate effective date.                                                                                      
                                                                                                                                
4:11:22 PM                                                                                                                    
SENATOR  STEVENS   requested  clarification   of  a   hypothetical                                                              
situation; if the  voters of Anchorage approved a  bond package on                                                              
April 7,  2015, it  would be funded  at a  70/30 ratio,  but other                                                              
districts  that  vote  at  a  later   date  would  not  have  that                                                              
opportunity.                                                                                                                    
                                                                                                                                
MS. PIERRE said that is correct.                                                                                                
                                                                                                                                
4:12:28 PM                                                                                                                    
MIKE ABBOTT,  Chief Operating  Officer, Anchorage School  District                                                              
(ASD),  testified about  concerns  regarding SB  64.  He said  ASD                                                              
relies on  general obligation  debt for  all capital projects,  at                                                              
about  90 percent,  with  smaller contributions  from  legislative                                                              
grants, federal sources,  and the operating budget.  ASD has taken                                                              
advantage  of multi-year  bonding  programs  for capital  projects                                                              
and voters  appreciate that approach.  ASD hopes to  continue that                                                              
funding method.                                                                                                                 
                                                                                                                                
He  explained  that ASD's  six-year  capital  improvement  program                                                              
anticipates  going forward  with  debt reduction.  New bonds  have                                                              
been sold  at lower rates  and old debts  have been  refinanced at                                                              
lower  rates. He  said  ASD is  not involved  in  the state  grant                                                              
process  and  would   not  score  well  compared   to  other  area                                                              
projects.  He concluded  that ASD  is uncertain  if it could  meet                                                              
its capital requirements going forward with this bill.                                                                          
                                                                                                                                
4:17:28 PM                                                                                                                    
SENATOR  HUGGINS  said  Wasilla  has had  many  new  students  and                                                              
construction demands. He asked what the trend is in Anchorage.                                                                  
                                                                                                                                
MR.  ABBOTT  replied  that  ASD anticipates  a  slight  growth  in                                                              
enrollment  over   the  next  six  years;  a   slight  decline  is                                                              
anticipated next year.                                                                                                          
                                                                                                                                
SENATOR HUGGINS asked for retrospective data.                                                                                   
                                                                                                                                
MR.  ABBOTT  said  over  the last  five  years  the  district  has                                                              
declined in enrollment by about three percent.                                                                                  
                                                                                                                                
4:19:18 PM                                                                                                                    
SENATOR STEVENS said  the bill has unusual wording.  He asked what                                                              
is on the  Anchorage ballot for  April 7, and how the  70/30 split                                                              
would work.                                                                                                                     
                                                                                                                                
MR.  ABBOTT  replied  that  there   is  a  single  bond  proposal,                                                              
Proposition 1,  for a little over  $59 million.  About  2/3 of the                                                              
bond is  to be  reimbursed at 60  percent and  1/3 at  70 percent,                                                              
for a blended  rate of about 64  percent. Of the $59  million, $56                                                              
million  is  for  four  elementary  renewal  projects.  Individual                                                              
costs range  between $12  million and $19  million. No  new school                                                              
construction is planned within the six-year CIP.                                                                                
                                                                                                                                
4:22:12 PM                                                                                                                    
CHAIR  DUNLEAVY noted  SB 64  is  an attempt  to get  a handle  on                                                              
revenue  and  would  provide  breathing  space for  the  state  to                                                              
replenish  its  coffers. He  stated  he  would  hold the  bill  in                                                              
committee today.  He thanked the  sponsor and noted the  bill goes                                                              
to Senate Finance next.                                                                                                         
                                                                                                                                
SENATOR  MACKINNON  said there  are  four  major cost  drivers  in                                                              
Alaska's  budget;  K-12,  Health  and  Human  Service  -  Medicaid                                                              
growth,  PERS/TRS,  and  school   debt  reimbursement,  which  has                                                              
totaled  $3 billion  since FY  1972.  The legislature  has had  no                                                              
control  except  to  step  up and  pay  just  under  $120  million                                                              
annually.  She  stated   support  for  what  ASD   is  doing,  but                                                              
maintained that  it is time to  reduce expenses. She  stressed the                                                              
need to  retroactively  date the  bill to prevent  large bonds  in                                                              
the  fall.  She concluded  that  SB  64  is totally  about  fiscal                                                              
restraint.                                                                                                                      
                                                                                                                                
CHAIR   DUNLEAVY   asked  Mr.   Abbott   about  the   60   percent                                                              
reimbursement and if ASD followed DEED guidelines.                                                                              
                                                                                                                                
MR.  ABBOTT  explained   that  three  of  the   elementary  school                                                              
projects  are eligible  for 60  percent  reimbursement under  DEED                                                              
regulations  because  ASD  is  adding a  small  amount  of  square                                                              
footage to  try and improve the  security of the  front entrances.                                                              
It  is  less expensive  to  add  a  few square  feet  rather  than                                                              
remodel an old structure.  It would be eligible for  70 percent if                                                              
that were not done, but would be more expensive.                                                                                
                                                                                                                                
4:28:02 PM                                                                                                                    
SENATOR  HUGGINS  assumed  there   would  be  a  retroactive  date                                                              
proposed. He asked what that would do to ASD's bond proposition.                                                                
                                                                                                                                
CHAIR DUNLEAVY asked  Mr. Abbott to consider a  proposed amendment                                                              
to that effect.                                                                                                                 
                                                                                                                                
MR. ABBOTT  explained that the  ballot language authorized  by the                                                              
Anchorage Assembly  describes school  debt reimbursement as  it is                                                              
currently  defined  in statute  -  it  is  not guaranteed  and  is                                                              
subject  to appropriation.  The  voters are  on the  hook for  the                                                              
entire  amount  of  the indebtedness  and  the  entire  amount  of                                                              
annual debt service.                                                                                                            
                                                                                                                                
CHAIR  DUNLEAVY commented  on  the trend  of  a declining  student                                                              
population in Alaska.  He summarized that the bill  is a result of                                                              
the financial situation in the state.                                                                                           
                                                                                                                                
SENATOR  MACKINNON  noted SB  64  is  a Senate  Finance  Committee                                                              
bill.                                                                                                                           
                                                                                                                                
CHAIR DUNLEAVY held SB 64 in committee.                                                                                         

Document Name Date/Time Subjects
HCR 2 - Resolution.pdf SEDC 3/12/2015 3:30:00 PM
HCR 2 - Sponsor Statement.pdf SEDC 3/12/2015 3:30:00 PM
HCR 2 - Fiscal Note.pdf SEDC 3/12/2015 3:30:00 PM
SCR 1 Committee Substitute.pdf SEDC 3/12/2015 3:30:00 PM
SCR 1 Amendments in CS.pdf SEDC 3/12/2015 3:30:00 PM
CS for SCR 1 Testimony.pdf SEDC 3/12/2015 3:30:00 PM
CS for SCR 1 Fiscal Note.pdf SEDC 3/12/2015 3:30:00 PM
SJR 2 Diane Barrans Response to Question.pdf SEDC 3/12/2015 3:30:00 PM
SB 64 - Legislation.pdf SEDC 3/12/2015 3:30:00 PM
SB 64
SB 64 - Sponsor Statement.pdf SEDC 3/12/2015 3:30:00 PM
SB 64
SB 64 - Sectional Analysis.pdf SEDC 3/12/2015 3:30:00 PM
SB 64
SB 64 - Fiscal Note.pdf SEDC 3/12/2015 3:30:00 PM
SB 64