001Good afternoon. We'll call the April 6th ASD School Board work session to order. It is >> [sighs] >> 4:03 in the board room. Present are members Jacobs, Donley, Holliman, Lessons, and Wilson. Online is member Bellamy. And we'll note should member Higgins join us. We have We called ourselves to order and engaged in a roll call. Our first item of discussion, if we have the presenter ready, is a presentation on HB 78 by Representative Kopp and his office. Representative Kopp or the staff of Representative Kopp, are you present and ready to present on this topic? Yes, sir. Can you hear me okay? We can. Welcome and thank you for making >> Okay. for your service to Alaska. Yes, thank you. I I apologize if there's background noise. I am at an airport boarding gate. But uh
002did not want to miss the opportunity. Uh would you like me just to walk through the legislation? Yes, sir. Whatever information you would like to share with the board would be appreciated. Yes, okay. So, House Bill 78 is a um it's a transformative new approach to a pension that is nothing like the state has ever seen before. And I think that's important to to note right out of the box in that the legacy pension system that we had for public employees was entirely at the risk of only the employer, which was the state. And for a couple reasons, which I'll note briefly, that pension suffered liability increases, which caused the legislature back in 2005 to become concerned about how how stable the system was and whether or not it was going to be smart to
003continue in that plan. Ultimately, they decided to adopt a defined contribution plan where in now we're um basically employees have a 401k. And leave the the guaranteed lifetime income that a pension uh provides. So, this new approach is a shared risk between the employers, the employees, and the retirees. And the the employee ers, which are are most interested of course to the school board, um have no increased cost in this plan. The cost is exactly the same what you're paying now. The cost is still capped at 12.56% of payroll, just like it is now. Now, the the 10-year outlook for for when this legacy system is paid off, that cost is projected on just this plan to be 9.5%. So, I'll say that again. The actuary, this is the state actuary, you know, not a
004not a contract actuary or an or an advocacy adversary, but the state of Alaska actuary says that the the new teachers system, TRS plan, will be 9.5% of payroll versus the 12.56% that you're capped now. And remember that above that cap, all the way to 26 or 27%, the state is paying. So, that's how expensive that legacy system was, not the fault of school boards or local government. That fault goes squarely with the state and the actuary who got us in trouble back in the early 2000s. And unfortunately, we've all been shouldering that. But the good news is due to good Alaska Retirement Management Board policy in paying down that legacy debt, we are well on track to having retired all of that debt by 2039. So, at that point, we can expect the um
005the payroll contributions that school boards are making will drop considerably, even below the 12.56% that you're capped at right now. The bill has a floor contribution required of 12%. And you you might say, "Well, why is it capped at 12 when the actuary says it's only to be 9.5?" The reason is is we still have that legacy pension debt, and we want to stay on track with paying that off. Once that is paid off, the legislature can revise that payroll contribution, and this plan will will prove itself that um you know, down to the 9.5 or whatever they find the true floor is. And so, basically, the bill will be structured so that the floor is 12% or whatever the actuarially determined contribution is. So, if it's 9 and 1/2, it can drop down to
0069 and 1/2, whichever is less. So, you're still guaranteed to not not have to pay more than what you're paying, but um but a an opportunity now for real payroll relief for school districts. And it's the same significant relief for local government on on the TRS side of things. Their their plan is going to drop to 10 just over 10% of payroll, about 10.05, down from the 22% cap that they're at now. So, one of the reasons why it is so much cheaper is because employees have skin in the game as well. Their their contribution starts at eight, which it is now, same as it is now, but it can go all the way up to 12 percent of payroll. But the actuaries say that every 0.1% increase brings in tens of millions of dollars.
007And the only reason it would be increased by the ARM Board, by the Alaska Retirement Management Board, is if the funding level drops below 90%. In other words, your projected liabilities and all the assets you have on hand, if you drop below a 90% value of covering all your projected liabilities of of pension retirement benefit plans, then the employer and the employee contribution can go up proportionally. So, if it's a point one increase, it's a point one to both. Well, what happens to the retirees? The retirees um can lose their inflation proofing if we need to go above uh if the plan drops below I think if the plan drops below 90% funding. So, you you might say, "Well, that's harsh on the retirees." But the the actuaries say it actually is one of the
008levers that makes the plan profoundly affordable is when all three entities have skin in the game. So, um that now you say, "Well, what's the probability of that happening?" So, the state of Alaska uh the Division of Retirement Benefits had our actuary model a scenario where this plan would drop below 90% funding. And they had to do something that has never occurred before in the history of 70-some years of Alaska having a pension. They had to produce a 0% rate of return on the pension trust funds for 3 years in a row. Three years in a row it would finally drop below 90% funding. That is how actuarially sound the plan is. And when, you know, asked in Senate Finance Committee, you know, if if that was a realistic thing that could happen, and of
009course the actuary said, "No, it's a you know, it's a meteor strike event. It's just like it's never happened before you know in our in our history of of of of helping the state." Now, we the state of Alaska terminated and sued its actuary in the early 2000s. That was Mercer, and you can look up the case. And in that case, um Mercer basically uh I'll I'll just say it what it was. They they lied to the state. They discovered their error in telling the state to under contribute the payroll requirement. And of course that was shared with all of the school boards and local governments saying, "Hey, your your payments this year are dramatically lower or in many cases you don't have to make a payroll contribution." Well, we would roll our eyes at
010that now and say, "Come on, you you can't have a retirement system unless you're you're contributing. You have some kind of discipline in your contribution." But Mercer under calculated what was going on with health care, and they also did not use correct valuation of lifespan of of participants. And it ended up being a $2.8 billion under contribution that this that hit the state. Well, for those of you with a finance background or just, you know, a basic understanding of the time value of money, $2.8 billion over time easily puts us well beyond the liability level that we have now combined with PERS and TRS, which is just over $6 billion. But But I will say that's down from it used to be 14 billion here about 10 years ago. So, we are making progress, but
011it's certainly not as fast as what we would like, but we're on an appropriate glide slope that is getting us there. So, again, it it was a you know, it's it's it's an event that is is um so improbable to occur that we would have a 0% return for 3 years in a row. We know this plan is actually really sound, and that's one of the reasons why we expect uh this bill to be passed out of Senate Finance Committee um uh either this week or or next week. It's actually up for a hearing uh this week for amendments, and we expect it to be voted on in the Senate in the next week or two. Um and I uh really excited about being able to have our school districts advertise at job fairs again
012that Alaska is competitive, that we offer teachers a pension. I mean, you all know we don't offer Social Security. Now, admittedly some school districts do, and that's great. But most of them are not in Social Security, and and none of them have a pension, and that really puts us at a real disadvantage. So, again, we believe this is a um a transformatively new look at what a pension could be with shared risk across the employer, the employee, and the retirees. Uh we have guaranteed actuarial discipline in the contributions, and the plan reacts to the market. And so, that's another reason why it's nearly impossible to be under funded. Um so, we're yeah, it's excited. I've been I've been um trying to get us competitive again as a state in the employer market. Um educators and
013public safety in particular are really in crisis, the high public trust positions where we're seeing so much turnover right now. TRS has a 28% turnover statewide. And we are the highest in the nation by far. And when we were under a pension, we had single digit turnover statewide. So, excited to get back to those numbers, um hold on to our superintendents, our principals, and our teachers. And um yeah, would welcome any questions in particular about the the plan or or any aspect of it. Representative Kopp for the presentation. Um I'm going to open the the floor up to board members who may have questions on this legislation. Um To help frame our consideration tonight, um could you speak to, Representative Kopp, the current status of the bill um and and your your assessments as to
014whether or not it will receive support from the governor? And then if as to if any information about if a letter of support or a resolution in support of this bill would be of assistance to you and your office. Representative Kopp, would you like me to repeat that question for you, sir? Yeah, can you hear me okay? Uh we can hear you now, yes, sir. Okay, yeah, I I apologize. I It's might be my earpiece battery, but yeah, so I am feeling positive um about the governor's office. The meetings I've had with him, I'm actually meeting with him again this week. They realize that this is a a completely different retirement vehicle than anything the state has had before, and that it is nothing like the legacy system. They've seen what their own actuary has
015produced. Again, not a not an advocate's actuary or anybody being paid for by anybody other than than the state of Alaska to evaluate this. And um the the state's actuary um has said this is absolutely the plan he would go to if he was advising the state on how to turn around our current recruitment and retention uh problem. So, again, I'm feeling positive about the governor's office. Obviously, I haven't got any commitment, but um um the conversations are going very well, and I'll leave that at that. Uh secondly, um letters of support are critical. It's one of the things that the one of the co-chairs of Finance have asked for uh a few weeks ago. He says, "Well, where how come there's no letters of support from employers?" And he no sooner had asked that
016than we already have, I think, um more than 10 school districts have written letters of support or resolutions. Um superintendents, principals, and also letters of support from local government units. So, they're now coming in. And um and we've had you know, many of these types of conversations walking them through it assuring them that there is no contribution requirement that is any higher than what they're paying now, but um you know, a a guaranteed uh lower contribution in the future uh because all the cost projections of this plan are it's just way more competitive in cost than than what we are paying now. Um I will briefly comment on the health care piece. The health care piece uh for for teachers uh would be a 3% of the average payroll of the entire TRS class. So,
017it's not just 3% of your own payroll. The reason why we didn't do it that way is because health care costs the same for everybody. It doesn't matter if you're $300,000 a year um I don't think we have anybody that high actually in TRS, but let's just say you're a you're a $200,000 a year high-paid executive um all the way down to an entry-level teacher making 40, 50,000, your health care health care is the same. So, we base that off 3% of the average payroll of the whole class per year goes into a health savings account. And when you hit your 10-year mark, you're completely vested in your health savings account. And when you turn 65, you would be able to also get your supplemental health care plan along with your your Medicare. So, you
018would have your backup Alaska health care plan with Medicare. If you work your full uh for teachers it would be 25 years, uh you would be able to immediately use your health savings account to buy a plan to bridge you to Medicare. And if you work 30 years, of course, you have your you you earn your full pension trust and your health care. We lowered the eligibility for full health care uh to from 30 to 25 intentionally because health care frankly is is is the health care trust is so over funded. It's I think the TRS trust is 125% and and No, I'm sorry. It's about 150%. So, we we the ARM board's actuary has actually recommended that we lowered the retirement eligibility age just with respect for health care so employees could get all
019the value of their health care plans sooner. And so for TRS it's it's 30 years and you just slowly build up your your um your accumulation of your base salary towards that. It's a 2% per year of your base salary for 10 years and that's 2 and 1/4% per year for the next 10 years and that's 2 and 1/2% per year for the next 10 years so you're all the way up to I forget. I think it's 67%. Um and and you can teach longer than that too but at at that point um you've earned your money to immediately retire and have your pension. So, if you start teaching at 22, you retire at 52, have your pension and your health care but you'd have your health care actually 5 years earlier. So, even if
020you even if you quit at 25 years, took another job, you would immediately have your full state of Alaska health care plan for the rest of your life and then you'd pick up your of course your your Medicare when you turn 65. So, um This is a little bit on the health care piece. All right. Thank you Representative Kopp. Um just for your general awareness, we have an agenda item tonight on our action calendar to uh consider um potentially uh supporting um myself and the superintendent drafting a letter of support um on behalf of our board and so uh the outcome of that will be known soon. Um I appreciate the presentation and the information. I want to open up the floor uh to the board for any other questions regarding HB 78. This is
021a unique opportunity we have uh for the sponsoring legislator of this particular bill um who has made time for us today. Also, before we turned it over to questions, wanted to note that member Higgins joined us at 4:11 p.m. Is there another board member who wishes to ask a question of Representative Kopp while he's still with us today? Um I see member Bellamy. Yes, thank you. Uh thank you so much uh for all the work you've put into this. Uh you answered one of my questions which was the health care piece. The other piece and I think you covered it early in the beginning. Um What What do you see as the short and long-term uh fiscal impact on districts? Um and and will there be anything about this in this bill that is uh
022what for lack of a better word un- unfunded or unfunded mandated? >> [laughter] >> Yeah, no. Great question. So, the the economist um Dr. Teresa Ghilarducci who is a world-renowned pension economist evaluated this plan. She presented in both House Finance Committee and Senate Finance Committee and her evaluation is this plan will be a net revenue positive of over $130 million a year to the state. Per year. And the reason why she comes to that conclusion is because of reducing the hiring churn, keeping people for a career, not and not having to um retrain and losing those taxpayer dollars out the door. So, you're keeping your mid-level teachers who are mentoring your newer teachers and you're keeping your principals and your superintendents. So, I'm just speaking about it from the TRS end. But just just um
023bending the the curve on the the hiring churn and those lost training dollars was a projected savings of $62 million. The state of Alaska right now is paying over $200 million a year in premium pays. Premium pay is overtime and call outs and covering vacancies and and and and staffing at a minimum level. And it is so across the board and that cost curve to show you how fast it's going up. Just 5 years ago we were at 80 million. So, in 5 years we've gone from 80 million to over $200 million per year. And but just bending that curve down, will this eliminate all of it? No, of course not. But just just partially relieving that, the savings are are just significantly more than the cost of this plan. This plan, if you look
024at it as an investment, is going to be about $80 million a year. But what we're spending now in just overtime losses over $200 million a year and we're and we're losing about $70 million a year in training dollars alone. And there's there's other things that are have to do with the power of a pension versus an individual 401k that are really powerful that to the employees and employers adds up to about another $14 million a year in total savings to the state. Um due to the power of a pension pooled asset and professional risk management versus being added alone. Right now we know that we're having a 5-year cash out where $500 million a year is being cashed out of state retirement plans under our defined contribution right now. And people are leaving the
025system. They're leaving TRS, they're leaving PERS, they're leaving Alaska. And because that's what we've incentivized as portability. 5 years you get all your employees and all your employers' contributions. So, again the actuary says they can't even a model a scenario where we drop below 90% um funded. In other words, what they're saying is this plan will not produce unfunded liability. The unfunded liability that we have is from the legacy system. We got that unfunded liability because we had an actuary who lied to us 3 years in a row. Alaska sued. We only recovered 400 and some million but it cost us 2.2.8 billion dollars and we've been floundering ever since. But I'll give you an example of what a good actuary will do is you look at the Alaska Railroad. The Alaska Railroad has state
026employees. They're They have a traditional legacy pension where all their risk is on the employer and they're funded at 96% and their health care trust is way over funded. It's it's like the our they're like 150, 160%. So, it's a traditional defined benefit plan. It's very strong, very healthy and and and good actuarial guidance. They're paying the you know, the recommended contribution every year and they're in great shape. Alaska will never experience that again because we no longer rely on one actuary. We learned our lesson. Now we have three that all double check each other. The the administration has an actuary. The Alaska Retirement Management Board has an actuary and there's a third actuary that trues up those two every 4 years. So, we'll never be in a position of being led astray by one
027firm that miscalculates or underestimates, you know, what you know, what we need to be contributing. So, um I I hope I answered that question. You did. Thank you so much and thanks again for your work on this. Thank you. It is it is a privilege. I So, one of my highest hopes is to have Alaska be a competitive employer again. Thank you. Are there any other questions from the board regarding this piece of legislation? I do just want to thank you also for your work on it. Um I know excellent teachers that teach in other states now because of this. I know people that are sitting and watching. We've gotten a little bit closer year after year. It's been a It's been a very long slog. Um but I really appreciate you taking it up
028and [clears throat] working hard to bring something that is a very reasonable proposal. I I hope we get it in place and thank you. Thank you. I really appreciate the board's consideration of it and um I am I am very hopeful it will it will produce uh stability in our education system that we haven't seen in a long time and ultimately we know that that kind of stability also drives up test scores. Schools do better. Uh you know, the the whole system it is stable. It even gets into the funding battles. You know, people say, "Well, the schools improve then we'll fund them." But you know, we got we got to keep these good teachers in the classroom and we got to we got to we got to be competitive for them and show them
029that we really value their commitment to our our young people and um and I I think this is a tool that's going to get us there. So, thank you guys. I really appreciate your service and what you're doing. Thank you, Representative Kopp. I think that completes um our time with you today. Um you're welcome to stay in our work session but we understand you're very busy and likely won't be able to do so. Um again, the board will take action and then we'll follow up with your office directly with the outcome. Um you know, on behalf of a board that governs a district that spends over $30,000 uh to recruit a new educator uh for each vacancy that we have, um this bill uh promises to be a tool in the toolbox that will be
030um invaluable and so thank you. Um again, take care and best of luck. Um Okay. Thank you. Thank you. Yeah. Thank you. Take care. With that said uh to the board, um we're going to have it before we move to our next topic of a legislative update with our Before we go to the next topic, remember Donley. Yeah, thank you. Was anybody else invited to to offer testimony or to brief the board on possibly other concerns that might be raised? This was a presentation that was offered up by the sponsor of this bill. No one else was connected with or writing this presentation besides our next invited testifier who is Christie Setz, who is the president of the Anchorage Education Association. Miss Setz, if you have a minute to come forward, I'm curious as to
031the Anchorage Education Association position on this piece of legislation. I think that information could be useful as the board considers whether or not to vote in support of a a letter of a letter of support for this particular bill. So, could you please state your name for the record, your position, and then any information that you know as to AEA's position on HB 78? Christie Setz, AEA president. So, we were in Juneau at the beginning of the week last week and we spoke with legislators on both sides of this bill and AEA is definitely in support of this legislation. Is that an official position that what what was a vote taken? What does it support look like? How did you come to support the what was the process? The Board of Directors for NEA Alaska
032met and we did take a vote to support this legislation. Are there any questions for Miss Setz? Okay. Seeing none, thank you so much for being with us today. Appreciate your time. Okay, again board members for your general awareness, there will be an agenda item on our meeting this evening and a motion would be in order to draft a letter of support on behalf of the board. What I would propose is coming from myself and Dr. Brian indicating that the vote of the of that agenda item would be reflected in that letter indicating support for the legislation or not potentially depending upon the outcome of that vote. Are there any questions on that before we move on to our second agenda item? Remember Donley. Yeah, I was just wondering I I'm trying to remember the
033vote in the house on HB 78. I think there were quite a few no votes. It would have might have been I think it would have been helpful today to hear what their concerns were from somebody who had you know went through the committee process and and voted against it. It's good to hear all point of view, I think. Understood. Appreciate that, member Donley. Okay, seeing no other feedback or questions or concerns regarding this item, we'll move on to our second item, which is a legislative update from our lobbyists, Miss Briggs. Can you hear us, Miss Briggs? I can, Mr. President. Can you hear me? We can. Welcome, the floor is yours. Great, thank you. Good evening and happy to be here with you today. I have just a quick update from Juneau mostly focused
034on where we are on the budget. And so, America is going to help me with my my slides here and I'm going to um go off camera. And can everyone see see the slides? Yes. Okay, great. Thank you. I just wanted to give a quick a refresh on where the spring revenue forecast is. You'll remember we started session with about a $500 deficit for the current year and based on the fall revenue forecast close to balance budget for FY27 assuming a $1,000 permanent fund dividend. March 13th, the budget I'm sorry, the Department of Revenue updated that forecast and you can see for FY26 we have um essentially what looks like probably kind of wiped out that deficit for FY26 although we're you know have a ways to go here before June 30th to to realize
035those revenues. FY27 forecast was updated from $62 a barrel to $75 a barrel which leads to additional $510 than was previously anticipated for FY27 and that's the budget that you'll remember you'll know we are working on currently today to fund. And next slide. Miss Briggs, before we move on that slide, could we could you discuss and just really lay out for us what is forecasted for the price of barrel for oil? What does that what does that mean? And what happens if the forecast is off and $75 a barrel, which I would assume that that figure is is being impacted by the war in Iran? And if that $75 doesn't hold, what happens then? Yes, thank you, Mr. President. So, the Department of Revenue does a revenue forecast based on all of the revenue that
036the state is anticipated to realize through corporate income tax, through production tax of oil and gas, tobacco tax, alcohol taxes, all of the above and our our sort of largest piece of that is oil and gas revenue. And the oil and gas revenue forecast is based on both price of oil and production of of oil, the volume of oil that we produce. The Department of Revenue takes into consideration a number of factors in putting that together. And this is the forecast that comes out is it really what is used by both the legislature and the governor to pass a balanced budget. It is a forecast and it's never right. And so, that's a a big kind of consideration as the legislature is putting together next year's budget is we don't actually know what the price
037of oil is going to be. They base their forecast on a number of factors. They're typically conservative in those in those forecasts. They take before they release it in this case in in March, mid-March, they take 5 days prior to the release into consideration and as everyone is aware we were in conflict in the Middle East at that point. Prices were very high. I think on March 13th the price was $107 per barrel. The the both leadership in both bodies of the of the legislature are urging caution for as is our senior US Senator Lisa Murkowski on basing a budget on that high of oil. There is no guarantee that we will have that that level of of price. And so, while these numbers look very positive and reassuring, there there is no guarantee and
038in fact that's why how we found ourselves in a budget deficit this current year partially. We had some unexpected um disaster and fire seasons. However, that's partially how we found ourselves in that deficit for the current fiscal year. So, there's caution urged by you know all parties in taking this this forecast and running with it. And the Senate has has put out direction to their budget their legislators who are who are considering the budgets for the operating on department on the departmental [clears throat] level that they don't want them to use a $75 per barrel price. They want to be more conservative and use a $73 per barrel. And the rule of thumb in Juneau is that a every $1 average price over a year is about 35 to 37 million dollars. And so, you
039can look at that direction from the co-chairs of the Senate Finance Committee saying we want to use a lower number at $73. That's approximately I think budget analysts are using about 70 million dollars lower than what the the spring forecast shows here. And then >> And oh, go ahead. Question, um the budget that passed out of House Finance recently, did that utilize $73 of barrel worth of income or $75 a barrel worth of income? $75. Okay. And did the House Finance Committee indicate where they would choose to cut $70 million from if they needed to? Um they did not in Mr. President, they will um the stages of of the budget process were in the very um kind of first official stage, if you will. That budget passed out of the House Finance Committee. It
040will be on the House floor this next week is the plan. Um they will pass a budget over to the Senate after days of deliberation and amendments. Um that could either grow or reduce this budget. Um and once it gets to the Senate, the Senate passes their own version and eventually we end up in what's called a conference committee that they will have to balance both the operating and capital budget expenditures within a certain dollar amount. And so, whether they at that point choose the the Senate's direction of $73 per barrel um is yet to be seen. And that that process starts to occur um probably the the first week of May. Thank you. Thank you for hearing those questions. Yes, absolutely. Um next slide. Uh this is just a a recap. Um I wanted
041to mention the capital budget typically um is it is transmitted to the house. The Senate will start on the capital budget. We're going to see their first version of that on Thursday. Um they have been focused heavily on deferred maintenance, school construction, and major maintenance funding. And uh that looks like the direction that the Senate is likely to invest um a a significant amount of uh dollars into. Um and so, we will see as this plays out a um a house bill that contains $159 million one-time outside the BSA formula uh funding for education for K-12. And the Senate um is likely to show a greater number on their capital budget side. And so, those are the things that will have to be negotiated during this conference committee process. Um so, we'll see again Senate
042Finance. That's where the capital budget is now. They will see that first version on Thursday morning. Um and it there may be a second version, there may not. They may pass that to um out of committee and to the floor for a vote to um go over to the Senate. I'm sorry, to the house. Thank you, Ms. Brick. Um if if you This isn't covered later, if it is, please just uh let me know, we can wait. Um Do you know how much funding um is new funding for public education is included in the House Finance budget that was passed to the floor? Yes. Um on slide four, um I've listed uh the number of um a number of the the additions that the House Finance Committee has made to um education. Um so, there
043you can see they have a um a pilot project um for K-12. Um they have a additional of that 1. Oh, sorry. $159 million um which is equivalent to about a 630 BSA increase. Um they have fully funded school bond debt reimbursement and the REA um construction uh fund um at 4.41 .6 million and 19.6 million, respectively. Uh fully funded um uh the federal the state match to federal funding at 3.8 million for Head Start. Um pre-K grants are funded at 6.2 million. Parents as Teachers is an increase of 356,000. Um they made a cut to um the data [clears throat] dashboard. And um and then they have uh increased spending for the Department of uh Education Early Development for um a building maintenance management specialist um positions there. Uh going back really quick just
044to uh slide three, I wanted to just highlight uh one more feature that um amendment that occurred in the House Finance Committee. And that is the addition of a uh full statutory permanent fund dividend at approximately $3,900 per eligible resident. That um amendment envisions drawing uh 1.5 billion dollars from the constitutional budget reserve fund, which has approximately 3 billion dollars in it currently and is used for cash flow purposes. Uh for um uh for its state expenditures, as as you're aware, um not all revenue come in comes in on July 1st. It comes in throughout the year as taxpayers submit their um returns to the state. So, uh that but that constitutional budget reserve is really our last remaining uh um savings account. And it requires a three-quarter vote in each body to access it.
045The um uh there was a an attempt during uh the supplemental uh process, supplemental budget process, to access that for current year. It failed. Um we have since seen that spring forecast showing larger revenue coming in um forecasted. Again, it's not a um it's not a for sure um thing. And so, they believe again that that is is likely to erase the current year deficit. Um But there are no guarantees again. We have a while to go here yet. Um and and so, this amendment that went in on the permanent fund dividend um is going to require that same three-quarter vote in both the House and Senate. And it's very unlikely at this point that that will be achieved. Um and so, we will fall if that occurs, if that that budget um that vote
046does not materialize, then um it would revert back to a $1,500 dividend, um which is still higher than the $1,000 dividend that uh we've been seeing over the last few years. And that still will show us out of deficit spending for FY27. Um and that is without a capital budget included in in that dollar amount. So, whatever we see here coming out of the house is likely to be compressed to make room for a capital budget that um we talked about earlier that will focus on a lot of uh state deferred maintenance, University of Alaska, as well as um schools across the state. Ms. Brick, can I just attempt to summarize? Am I understanding correctly that >> um even without a a CBR draw or utilizing the state savings account to pay a a statutory
047dividend, the operating budget for FY27 is still underwater without a capital budget? Yes. Which will certainly not be the case. There will be some sort of capital budget given the emphasis on school construction of nothing else. Is that your assessment as well? Yes, you're correct. So, all that to say that this version of the budget that passed out of House Finance is going to change and things will probably be cut versus added. That's correct. Thank you. Um I think I just There are a couple pieces of legislation. If anybody I should stop and and see if anybody else has any other questions kind of on that um on the for my Ms. Brick, but we do have member Donley who just raised his hand. Thank you, Mr. President. Um Have you been Were you successful
048in getting any leg- member of the legislature to offer an amendment in the committee budget process to fund a new district cost differential study, which is of course one of the board's priorities? Senator, um the the There is a provision in the Senate education um bill that has been introduced that would fund uh that cost differential study. Um however, it has not been inserted in uh this version at this point of the of the budget. Have you had any luck in finding a sponsor for a floor amendment to uh have the cost in the budget for a new district cost differential? Um not to this point, no. Are you attempting to find a sponsor for such a floor amendment? I've had discussions with legislators, yes. Thank you. I'm not seeing any other questions, Ms. Brick.
049So, we can move forward. Okay. Um >> [clears throat] >> I I inserted a couple uh a slide here uh for the education the two pieces of legislation that address a um more permanent uh update to the uh BSA. Um one is the House Education Committee's version. Um it is still in the House Education Committee. It was It was uh introduced um both of these bills were introduced um in in March. So, um not unusual that it hasn't moved out of of its first committee. Uh and then a Senate Education Committee Senate Bill um has also a a smaller uh BSA increase. It uh In addition, um includes people transportation grants, um reading proficiency incentive grants, charter school administrative costs, a number of different um provisions there that uh that committee is continuing to work
050on. Um and I don't know if um that will that will either of these will um move over to to the other body. Um they may uh just focus on the one-time outside the uh BSA formula foundation formula increases. And I on slide seven, I just wanted to um remind everyone that the governor did introduce a fiscal plan at the beginning of session that really included four main components. So, there's the revenue component um that I've provided a little more detail in in following slides on what those uh provisions are. Um it But, in this package, um he also wants a constitutional spending cap, which would be a resolution passed by the legislature requiring 2/3 vote in each body. That spending cap would um would essentially limit the annual state appropriations. Um a constitutional amendment
051to put the permanent fund dividend into the constitution at a 50% of the 5% POMV annual draw from the permanent fund. And I'll just explain that a little bit cuz it's very uh confusing sometimes for uh members of the public. Um current under current law, the state draws 5% of the market value from the permanent fund earnings. Of that 5%, um this year it's $3.9 billion. Of that amount, um it is split between state services, which includes education funding, transportation, um all of the above on on state uh services. And it includes It is also used for the annual permanent fund dividend check to eligible Alaskans. Over uh that that has been in place since 2018. Um and over uh the last number of years, the legislature has been able to fund a permanent fund
052dividend at 25% of that POMV draw, not a 50%. And um and so that has it come out to um 1,000, 1,200, 1,100. It's varied over over the years, but around that amount. And um when we've had a surplus uh at times since 2018, the legislature has uh allocated a larger amount of that to um residents. Um this constitutional amendment again would take 2/3 vote to pass and get before voters in the general election. Um and that would put a 50/50 split between state services and uh permanent fund dividend checks. Um that third provision or I'm sorry, fourth um and sorry I have a uh misspelling misspelled word here, but uh it would implement a um a review of all departments and agencies on a rolling basis um to to look at the programs that
053they are charged with administering, um their costs for doing so. Are they still providing the public service services at the the expected um levels. And so, I want to I wanted to remind um folks that when the governor introduced his fiscal plan, it wasn't just a package of brand new revenues or increased revenues, I should say. Um it included all four of these um these provisions. And um and so I have listed on pages eight and nine um the um various revenue measures that have been introduced. Um page eight um highlights uh the um the main ones that we are that have been um heard in committees. Um the first HB 284, the governor's first um uh his his bill that he introduced uh proposed uh about $920 million uh annual revenue increase um with
054a a mix of state and uh sales and use tax, um a corporate income tax, uh apportionment for corporate income tax to uh that's um businesses who do business in the state, but also amongst other states. It's updating our um our corporate income tax to uh see a a share of that um tax revenue. Um and uh infrastructure on um on oil and gas, and um it not just infrastructure, but an increase in oil and tax. The House Revenue House Finance Committee held uh hearings on that bill um uh the first 2 weeks that it was introduced. Um if you look to the bottom of this slide, you can see this the governor's um the same version was introduced in the Senate. Um the Senate Resources Committee made um a number of changes to that.
055Um they added more uh oil and gas tax um revenue. They removed the sales tax, um and they increa- uh included um a a head tax, education head tax. So, those um those two bills are in different form currently. They're both in the respective finance committees. Um and there are a number of other um tax uh or revenue measures you can see here. Um and then on page or sorry, slide nine, um Ms. Brick, I'm going to go and just ask you to ask the board for a consensus to continue on. We're at the end of our work session. However, we don't have executive session today. Um I'm proposing that we take another 10 minutes and finish the rest of this presentation. Great. Uh Ms. Brick, we got about 10 minutes left, and so uh
056please proceed. Okay, perfect. Thank you. Um I On the last slide here, I included a a link to the um school construction major maintenance list. Um it um If the negotiations lead to a point where there is no uh there there sorry, let me rephrase that. If negotiations lead to the same amount of funding that we've seen in the House Finance version of the operating budget at $159 million, um that would take us down through uh about number 28 on the project list. Um so I just included this for um folks if they want to to take a look at that um that list. So just kind of in wrap-up, I guess uh Mr. President and members, I think um it's important to remember that we're still in the early stages of um the budget
057process here in Juneau. There is a desire uh to increase uh give school districts some relief. Um uh I don't think it's likely we'll get a um a BSA statutory BSA increase at this point. I hear more uh legislators talking about a one-time um funding relief for for school districts um recognizing that there are a number of districts across the state that are really in a crisis situations. Um However, there's also very strong um indicators that the legislature is going to put uh some significant funding into the the school construction and major maintenance. And while the legislature is those decisions are being made um in the next uh month month and a half here in in the legislature, those negotiations are occurring. There's also there are also conversations uh ongoing with leadership and the governor.
058Um what level of funding will the governor um agree to? And um what does he have uh you know, more um interest in on in terms of operating versus uh capital budget spending for K-12? And those conversations are ongoing. Um it's too early to tell uh what that is going to look like in the end. Um and as we get closer, that will change significantly um in the last week of session hour by hour. So um I just it you know, we have the leadership in both bodies urging um extreme caution by these um high numbers in the spring forecast. Uh we have a lot of a negotiation to get through between now and and May 20th. Um And we don't know if the high oil prices are going to remain at the levels they
059are. And for FY27, that level of of price has to remain for 12 months uh to um to make that budget work. So um all you know, all sides are are urging caution. Um and in the end, despite what the legislature may negotiate and get to um final agreement on, um the end is going to depend on where the governor um is comfortable in terms of that spending amount. Um it's an election year, as everybody is well aware. Um and so legislators do not uh want to spend their summer in Juneau uh fighting over a budget. Um and and so I think um there's [clears throat] you know, those are also just factors to keep in mind as you're considering um decisions um that it is an election year. A lot of uh um complexities
060are added to uh to everything that's happening down here. So um I just sort of throwing that out there for your consideration and and as you're moving forward. Thank you. Thank you. Yeah. Yeah, we'll um open up to the board for questions while we're uh addressing questions regarding your presentation. Uh member Dunleavy asked for um perspective from Juneau regarding HB78 and maybe some of the bill's respectful detractors. Um what can you tell us about those who may not support HB78 that the board should know uh before considering whether or not that we want to write a letter of support um in this bill. Uh I think that's right, uh Mr. President. The House uh passed the bill 2119 along um caucus lines. Um I think both bodies, I guess I'll back up just a minute.
061Um both bodies organized in uh January or prior to January, but after the election in '24 um last year uh with three main um three or four sort of main priorities. This was one of them. Uh uh defined benefit restoring defined benefit for public employees was one of both bodies' uh major priorities. Um and when I say bodies, I'm talking about the majorities that uh that organized um the House and the Senate. Um the the Senate uh is now currently holding HB78 in. It has been heard uh multiple times in in Senate Finance. Um there is some expectation that that bill will come out. And as uh Representative Kopp uh mentioned, um in the next week or two, um and there is some thought that the legislature the Senate will pass the bill. Um and
062they will transmit it to the governor prior to adjournment. So when we're in session, if the governor vetoes a piece of legislation, he has 15 days excluding Sundays to take action. Um that's either sign, veto, or let it become law without signature. Um and so if they were to um stay on or pursue that track, um then the governor would would get that um bill and make a decision. Um And if he were to veto it, um the it would go back to the legislature and they would need 40 votes to override a veto. And some think that having that done while we're while they're still here in session is an advantage. Um they don't have to come back during a uh special session, which um if it were up to the legislature, is a
063high threshold to meet in this environment right now. They need 2/3 to call themselves back in uh for a special session and I see the House having um those votes to do that. So um I think uh there are Senator Stedman is um is staunchly opposed to this uh this legislation. [clears throat] There are others as well. Um I mention him because he was the sort of author of um the defined contribution plan when the state moved in that direction in the early 2000s. Um and so he's got a couple of other pieces of legislation in that uh he's been pushing that would um that have some alternative solutions to a full restoration of defined benefit. Okay. Ms. Brooks, could you to the best of your ability, if it's not something you can speak to,
064I totally understand, speak to maybe reservations by uh members like Senator Stedman to HB78. What are the the common critiques that you've heard of the bill? Yeah, I think the the largest concern is a future um unfunded liability. We've had, as Representative Kopp um spoke to, this unfunded liability that the state has been state and uh uh all public employees employers have been paying to try to reduce that unfunded liability. Um I believe I want to say it's 5 billion um uh today. Um and despite in 2014 the uh legislature and governor uh putting in $3 billion to the unfunded liability, [clears throat] at the time it was um it really hasn't reduced significantly. Um and so there is a lot of concern about uh future growth of that uh unfunded liability. And that to
065that is what um I think most uh who who oppose the legislation or have concerns, I think is the bigger is probably the better description um is that the state's unfunded liability will continue to grow under a a new defined benefit plan. Uh understood. Just a quick follow-up on that. Your representative Cobb seemed to articulate that the bill is structured much differently than our Alaska's original pension system, which would mitigate much of that risk. Is that the consensus from those who support the bill? And how do those same detractors account for what representative Cobb presented that this bill is different and therefore has much less financial risk? Yeah, I think that is the consensus. I think as you mentioned, he spoke to that in really putting those sideboards on this version of returning to a
066defined benefit for public employees and teachers. Um And that is the the goal to do that giving the arm board the ability to raise the the contributions. And so I think there's still a just a a real fear that persists that we have we have gotten ourselves into this situation and we just haven't been able to climb out of it. Yeah, and it's putting a lot of strain on both not just at the state level but school districts and municipalities. And so I think that that concern is just it persists. I think the last question I have on HB 78 Representative Cobb stated that he had 10 known letters from school districts in support of the bill. Do you know of any school district who's written in opposition of HB 78? And I won't hold
067you to the answer, just asking to the best of your knowledge. I do not know, Mr. President, but I can I can find out if if there are any that have been submitted. That would be helpful. And if you can get myself or Dr. Brandon information, we'll get that information to members. Thank you. Are there any other questions for Ms. Briggs? Member Higgins. Yeah, just one quick one. Is there anything else that the school district can do cuz we got a list of items that we'd like to see the legislature do, but is there anything we can do on the on the school board right now that might be persuasive at all or beneficial in trying to achieve our goals? I I think just continuing to communicate with legislators. They're very aware of where the
068district stands um and the need that the district has. It's not it's it's not unique to Anchorage. So there is a very broad recognition of that in Juno. And I think you know, until until they are able to kind of get through this [clears throat] negotiation on the budget there's not a lot that I think we need to do additionally. Thank you. Seeing no other questions, Ms. Briggs, this was very insightful. Thank you very much for being our eyes and ears down there in Juno. And appreciate your service to the districts. Board members, we have no executive session, so I'm going to adjourn our work session and we'll adjourn our regular session at 6:00 p.m. We will adjourn our work session here at 5:00 12:00 p.m. Thank you. Thank you. Record