28^th Legislative Session Ends

We have finally finished work in the 28th legislative session after ninety–five days. Our work continued beyond the statutory 90-day limit imposed by the voters in the 2006 election. I am grateful for all of the communication and support I have received from District 32 during my short time in this position. In addition to the Operating and Capital budgets we passed this year, there were several pieces of important legislation that were considered, passed, or left on the table. One piece of legislation that was of concern to many, House Bill 77, did not receive adequate support to make it back for a vote in the House, and has died a perhaps not unexpected death. The Governor’s Gasline bill House Bill 138 passed both the House and Senate, but without my vote. Further discussion on HB 138 is provided below. A big accomplishment of the session was the passage of House Bill 385 which provided deposits into the PERS/TRS retirement trusts, and established a mechanism to continue to pay down the unfunded liability. The session also began and ended with discussion and action around the Governor’s Omnibus Education bill House Bill 278.

Sam with fellow members of House Democratic Caucus as they discuss amendments
to HB 138 Gas Pipeline bill during an at ease.

EDUCATION

On Sunday night, April 20, the regularly scheduled end of session, the House and Senate were unable to come to an agreement on the Education bill (HB 278). One of the most involved discussions about the bill was in regard to the funding for school districts. There were some fundamental differences between the House version and the Senate version (see chart detailing differences). The House version included a Base Student Allocation (BSA) increase of $185, with an additional $30 million outside of the BSA in the first year. There were also smaller, subsequent increases of $58 in years two and three. These amounts were included in the House version, with the understanding that there was also an additional, one-time amount of $25 million included outside the BSA. Through the process, the additional $25 million outside the BSA was removed.

The Senate version of the bill included $100,000 million outside of the BSA for three consecutive years, as well as approximately $25 million in funding for new grant and program funding distributed in different ways to different school districts. The House version also included policy items that created concern for me including provisions for implementing an “A-F” school rating system, and an increase in the qualifying time period for teacher tenure from three years to five, and provisions that allowed tax credits for support of private nonprofit schools. The Senate version included funding for several new programs including grants for schools to increase their internet speed up to 10 mb/s, grants to provide technical equipment to students, and untested changes to correspondence programs that take attention away for the critical needs of our neighborhood schools.

Earlier this session, I and other Democrats offered a plan to increase the Base Student Allocation (BSA) by $404/$200/$200 over the course of three years. Our proposed increase would provide funding that would have prevented teacher layoffs in virtually all of Alaska’s school districts. Looking to the future, I would like to see education funding prioritized above large, mega projects that are not providing jobs this year, or even expecting construction several years into the future.

On the House Floor, we tried unsuccessfully, to remove tax credit language from the bill that allows businesses to avoid state taxes by claiming a credit for donations to private schools. These tax credits will take resources away from public schools and remove educational accountability for our public dollars. We also tried to remove a change to the teacher tenure system. The tenure provision increases the required time for teachers to achieve tenure from three years to five, except in first class cities of less than 5,500 where the tenure requirement remains at three years. As passed, the Senate bill also included language to complete a state salary and benefits study and implementation plan.

Ultimately, I voted against the bill because of the disturbing policy changes that allowed public funding for private schools, the salary study, and an inadequate BSA increase that would not prevent teacher layoffs. It is important for us to support the students in Alaska’s public schools.

The House did not end up agreeing to the changes the Senate made to the bill, and that resulted in appointment of a Conference Committee, where conferees from both the House and Senate get together to hash out differences between the two bills. I was appointed to the Conference Committee as a conferee for the House Democratic Minority. The Conference Committee process took three days, and resulted in a revised bill that proposes spending of $300 million over three years. Funding was split between a BSA increase, outside the BSA one time funding increment, and additional program funding. The additional program funding cannot be considered as BSA funding, so the “effective” BSA increase, or the funding that will end up being distributed to the districts for educational purposes, is around $226, with about a $7 increase in the second year and a $1 increase in the third year.

After participating in the Conference Committee process, I did end up supporting the bill even though it does not adequately fund education, and it included policy shifts that, in my belief, push education away from our neighborhood schools. In addition, the bill included items that have significant constitutional concerns regarding private nonprofit tax credits, allowing religious organizations to sell classroom materials to correspondence school students. The bill does provide program funding to increase broadband access for many schools, included a BSA increase (although at half of what I support), removes the High School Graduation Qualifying Exam (HSGQE), includes funding for students to take the SAT, ACT or Workkeys test, implements a STEM grant program and provides tax credits that can help public schools.

Sam stands with members of the House Democratic Caucus during a short break in the last days of session.

GAS PIPELINE

The governor’s gasline bill, SB 138, passed on the last night of the regular session. For several reasons, I was one of four House members who voted against the measure. I appreciate the hard work put in by the administration in working this bill through the legislative process. The bill enables the Governor’s representatives to negotiate with various parties to begin the process of development of an instate gasline for the primary purpose of exporting Liquefied Natural Gas. The bill provides for a 25% state ownership in the gas liquefaction plan in Nikiski, on the Kenai Peninsula. We also will be taking our revenue share (Royalty) in-kind, or as gas product. The state’s revenue, would therefore, be coming from our ability to sell the gas on the open market. As an owner of the Liquefaction plant, and gas product, there is an opportunity for greater revenue to the state than in well-head royalties, but with greater revenues, comes greater risk. The Democratic Caucus members on the House Resources and Finance Committees worked very hard to improve the bill, and were able to support provisions that help ensure fair revenues for the state.

When it came down to the vote, there were several items that still gave me concern. One item is the concern that we have only seen this concept this session. This proposal is the latest in a long line of proposed gasline projects, and without adequate review, we may very well get the state into a situation where we take a significant amount of risk for the possibility of limited reward. We have been down this path before with Yukon-Pacific starting the 1970’s, and we currently have a LNG trucking project, and two other competing gasline proposals, one of which will be transitioning into this new gasline project. We have spent and propose to continue to spend hundreds of millions of dollars on a project that may not even bring gas to Alaskan’s at a reasonable price. In my comments, I encouraged the Administration to work hard to work with the Alaska Native community to train and prepare for construction and operation jobs on the pipeline project.

PERS/TRS BILL

For several years now, democratic legislators have proposed transferring several billion dollars from our savings into the funds that pay our public employee retirement system (PERS) and our teacher retirement system (TRS) pensions. This year Governor Parnell proposed to do the same thing when he rolled out his budget for Fiscal Year 2015. These funds are short funded due to some questionable decisions made in the past, and the recent solution has been to deposit an extra few hundred million dollars into the fund every year. These annual payments are scheduled to increase dramatically over the next several years. The idea of putting in a lump sum is that the new funds will generate income, reducing the size of the annual payment and speeding up the time it takes to pay down the deficit. It makes sense to me to do this is now while we still have enough savings to be flexible.

Earlier in the session we were successful in removing a controversial pay-as-you-go plan to fund the TRS that was included in House finance to the education bill and the rumors of the majority implementing a similar plan for PERS died down. In response to legislators calling for an actual Governor’s bill to propose the buy down of liability two weeks ago, a bill, House Bill 385, was introduced that put some terms and conditions around the governor’s proposal. Basically, it changes the existing law that provides for open-ended contributions and replaces it with a “level dollar” figure designed to pay down the debt over the next 25 years.

HB 385 authorizes the large one-time contribution. The funding will be appropriated through the Capital Budget (Senate Bill 119). The capital budget will transfer $1 billion to the Public Employee Retirement System and $2 billion to the Teachers Retirement System from our Constitutional Budget Reserve (CBR).

I fully support the idea of limiting our future retirement fund liability even though this will require a draw from one of our savings accounts, the Constitutional Budget Reserve (CBR). The CBR requires ¾ vote in both bodies. In recent years, we have been fortunate enough to have been able to put extra funding into the CBR.

Sam pictured with his fellow members of the Community & Regional Affairs Committee in the House Chambers

OPERATING BUDGET

One of the primary responsibilities of the Legislature is consideration of the Operating Budget that funds state services to the public. This year, the bill number for the Operating Budget bill is HB 266. The total Operating Budget that passed the Legislature this year was $9.1 billion, with $5.8 billion in state general funds. The non-general fund portion of the budget included $2 billion in federal funds, and $1.3 billion in other funds such as program receipts, which are funds received for state services provided to consumers. The education funding would normally have been included in the Operating Budget, but because the Operating Budget has already passed, the Capital Budget has become the bill for that funding.

The Operating Budget Conference Committee added some funding back into the final budget, some of the highlights are provided below:

• Behavioral grants – the House had cut $1,043,000 from residential drug treatment centers along with an additional $1 million in behavioral health grants. The conference committee restored $510,000 to the residential treatment centers and $720,000 of the behavioral health funding along with some authorization to receive additional federal funds should they become available.

• Front Line Social Workers – The senate included, from the recommendation of the 2012 Office of Children’s Services Workload Study, almost $1.5 million for ten new full-time front line social workers.

• SHARP II – The House cut $1.2 million from this program, which provides loan forgiveness for nurses and other health professionals in DHSS-designated healthcare service shortage areas. The Senate cut it by only $214,500, which was what was accepted by the conference committee.

• Alaska Youth First – The Governor’s budget included $2,391,700 for the Alaska Youth First Program. The House cut the entire budget and the Senate funded the program at $1.4 million. The conference committee took the Senate number. In our district, this funding goes to Yaakoosge Daakahidi alternative high school and the Southeast Regional Resource Center (SERRC).

• Alaska Learning Network Grants –While both the House and Senate removed the funding from the base budget, the Senate funded the program at $1.1 million which was accepted by the conference committee.

• Municipal Revenue Sharing – currently municipalities receive $60 million per year in municipal revenue sharing funding, based on a formula that spends 1/3 of a fund set aside for this purpose. The FY15 isn’t fully replenishing this fund, instead putting just $52 million back. This will likely lead to a slow ramping down of this essential program and growing hardship for communities around the state, in particular those with a limited opportunity to collect funds from their tax base.

The state of Alaska is currently operating under a deficit and will again be required to dip into savings again in fiscal year 2015. Although the final numbers won’t be published for a while, it looks like FY14 will end up about $2 billion in deficit, FY15 at between $1 and $1.5 billion, plus the $3 billion pulled out of savings for the PERS / TRS contribution. That’s over $6 billion taken out of savings for just the current and next years, a drawdown of over 1/3 of what we had set aside.

Sam, along with Rep. Chris Tuck and Sen. Dennis Egan, were presented with a Peacock for Peace crafted by a Thunder Mountain High School art class and U.S. State Department Youth Exchange and Study Program students containing over 2000 pieces of origami.

CAPITAL BUDGET

The Capital budget this year included fewer capital budget projects than the last few due to the downturn in revenue for the state and totaled approximately $5.4 billion (this includes $3 billion for PERS/TRS and $108 million for education funding). Not all of the worthy projects that were proposed by communities made it into the final budget. This is always a difficult process as the co-chairs of both bodies strive to find a regional balance to the budget. Detailed reports of the capital budget by House district and by agency can be found on the Legislative Finance page.

Following is a listing of projects in the district that the legislature included in the bill:

• Gustavus – Good River Culvert Replacement Project $107,500

• Gustavus – Upgrade the GVFD/EMS 911 Radio System $64,958

• Juneau – State Library Archives and Museum $37.5 million

• Juneau – Joint City, State, Federal Parking Facility in Willoughby District $1.5 million

• Juneau - Last Chance Basin Well Field Upgrades $1.35 million

• Juneau - Salmon Creek Water Treatment Facility $650,000

• Juneau –School District Curricular Materials $200,000

• Juneau International Airport Approach Lighting $93,750

• Juneau – Fire Department Mobile Data Terminals $66,000

• Juneau – Seismic Retrofit and Exterior Restoration of the Capitol $9 million

• Petersburg – Renovation of Police Station $1,007,500 million

• Petersburg – Cemetery Columbarium $85,000

• Juneau – UAS Deferred Maintenance $4.27 million

• Juneau – Boy Scouts Safety Features on Gun Range $15,000

• Juneau – Territorial Sportsman Public Use Cabins $37,500

• Juneau – Eagle Beach Winter Trail Grooming Implement $6,200

• Juneau – Gruening Cabin Major Maintenance and Residency Program Startup $30,000

• Juneau – UAS Mining Workforce Development $120,000

• Juneau – SEARCH Pediatric Dental Clinic Expansion $193,000

• Skagway – Replace Captain William Henry Moore Bridge $13.4 million

• Skagway – Float Extension $1.8 million

• Juneau – Gavel to Gavel Video Server Replacement $190,000

• Juneau – Catholic Community Services Commercial Dishwasher Replacement $10,000

• Juneau – Dimond Park Field House Parking Lot Paving Project $72,000

• Juneau – REACH Energy Efficiency Upgrade to Failing Heating System $98,000

• Juneau – Communities in Schools $100,000

• Juneau – SAIL Accessible Vehicle $23,000

• Juneau – SERRC Kitchen Renovations $35,700

• Juneau – Front Street Clinic Equipment Acquisition $43,000

Sam speaking in support of HB 216 making 20 Alaska Native languages
official languages of the state of Alaska

This year, we are dipping into our savings for the first time in 10 years. Balancing our Operating and Capital budgets in future years, will very likely require dipping in to our savings accounts each year, and we will need to watch very closely so we do not deplete our savings at an unsustainable rate.

On another note, we are in close contact with the Department of Transportation and Public Facilities regarding salvage and repair of the Skagway Ferry Terminal. We will assist in whatever way we are able to help DOT and the City get the dock repaired or replaced as quickly as possible.

My office door is always open, if you are in Juneau, please come by and talk to me or my staff about any issues, concerns or comments you may have.

Sincerely,

Sam Kito III