HFIN-260505-1330

Okay, I'll call this meeting of the House Finance Committee to order and let the record reflect that the time is currently 1:48 PM on Tuesday, May 5th, 2026. And present today we have Representative Stepp, Representative Moore, Representative Bynum, Co-Chair Schrag, Co-Chair Josephson, Representative Jimmy, Representative Galvin, Representative Tomaszewski, Representative Hannon, myself, Co-Chair Foster. And just a reminder, folks can mute their cell phones. And, um, we have 3 items on the agenda today. Um, the first is House Bill 261, that's the education funding bill, and we do have amendments for that bill we'll be taking up.

And then we do have House Bill 388, the bulk fuel loan. Bill, and we'll be taking public testimony on that bill and then also going back to questions, member questions. We also have with us Representative Allard. And the third bill that we have before us today is an introduction to Senate Bill 24. That is the tobacco and e-cigarette bill.

If we run long, we are striving to stay within the confines of our time schedules. And so we hope to be up by 3:30. If it's possible that we may not get to Senate Bill 24, and if that's the case, the tobacco and e-cigarette bill, then we'll just have to push that, figure out another time to squeeze that in somewhere. So, but hopefully we'll be able to take up all 3. And so jumping right into the first item of business, Regarding House Bill 261 education funding, we have had 5 meetings.

We've taken invited and public testimony, reviewed the fiscal notes. We have 4 amendments. And so with that, I'd like to invite up Representative Stepp as well as Representative Story. We'll get this right. Thank you, co-chair.

I'm here and available. Here and— all right, Representative Stepp, shout out. And Representative Story's staff is Ms. Tammy Smith. And if you could both yourselves on the record. And I guess maybe just, do you have any comments before we jump into amendments?

Thank you, Co-chair Foster and committee members. For the record, my name is Andy Storey, proudly serving District 3, which is here in the Mendenhall Valley, Fritz Cove, Oak Bay, Out the Road, Haines, Skagway, Klukwan, and Gustavus. And Tammy Smith, staff for Representative Story. Thank you. Yes, we are here working on House Bill 261, which is an education funding reform bill.

Basically reforms our timeline, our education funding timeline, by using a 3-average student count processing— count method, I would say. So, and there are a few ways to do that. You can take the 3-year average or you can take the previous year. And then there are the intensive needs student count, which you can take the previous year, the current year, or it has another opportunity in February if you received an intensive student in your district. And then it also has an element for alternative schools.

And one important thing it also does is where we have the funding cliffs at 100 and 425 students, and that is part of the statute, schools, facilities constituting a school, it smooths that process out at that 100 and 425. Student population. Great, thank you very much. And we've got our first amendment is by Representative Hannon. If you'd like to move your amendments, I move Amendment 1.

Okay, and I'll object for purposes of discussion. Representative Hannon. Okay, this is an amendment that was suggested to the sponsor from the Department of Education and Early Development that we clarify in the bill. So the meat of it is in that first bold section on the top of the first page that we are using a school's average daily membership versus the district's average daily membership. So most districts have multiple schools and current statute is you use schools, you are going to have a district total, but that for the calculations and changes we should be using the the school's ADM, not the district's ADM.

So there, that's the bulk of the meat of this amendment on that first page. And then I would say all of the subsequent ones, there's a couple other places where we're clarifying school and then we are renumbering and aligning because there's subsequent changes through it, but there are no other substantive changes in Amendment 1. OK, Representative Stapp. Yeah, I think, Chair Foster, through the chair, I'm going to ask the teacher to educate me. I think, I think I probably understand this.

This is because of the nature of the multipliers, right? By the like school size and stuff like that. I would imagine you got to take those individually through the chair. Is that correct? That is my understanding.

Go. Further questions on Amendment Number 1? Seeing none, I'm going to remove my objection to Amendment Number 1. Is there any further objections? Seeing none, Amendment Number 1 to House Bill 261 has been adopted.

That takes us to Amendment Number 2. Representative Bynum. I move Amendment Number 2. Okay, and I'll object. Representative Bynum.

Thank you, uh, Co-Chair Foster. Amendment Number 2— what Amendment Number 2 does is it basically simplifies the formula within the bill that basically says that we use a 3-year average. As it stands, uh, the amendment Changes the bill to make the ADM calculation based only on the 3— prior 3-year average with the— and it leaves in a relief provision to use the higher number if the current year actual count exceeds the average of 5% or more. So basically it is putting in a provision for that true-up opportunity. In the current bill, there's lots of different levers and mechanisms that give the school district lots of different options.

And it basically says you can use the ADM from the previous year, you can use the current year if it's higher, you have a 5-year or 5% safety, or you can use the 3%. And when we look at, when we look at what the other states were doing, they're using this averaging method without all of the different additions, and even the prior reports that were suggested didn't suggest to use all the different additions. Additionally, the school districts have a mechanism to help them make sure that they have smoothing in their funding, and that's through their, through their balances that they are able to retain for just this purpose. So that's what Amendment 2 does, and it does it for— clarify that it does it for all of their their student counts. This includes not just their regular ADM students, but it also includes the intensive needs students as part of that 3-year averaging.

Okay. Representative Story, any comments? Thank you, Co-Chair Foster. I am going to speak against the amendment. When I look at the averaging, the 3-year average for the intensive intensive student count.

We took that out. We had that in the original bill and we took that bill out. That was the bill that caused the $47 million increase in the last bill. But when you take an average of the intensive student count, you might be missing intensive student. And we have to remember this is intensive students.

And so by law, we have to fulfill our responsibilities in that current year to the intensive students. So if you only took a 3-year average, you might have more intensive students that year. And since you could not take— well, you could take the current year average, but if you took an average of the intensive years, you might have more intensive students than you would have And we decided that that was not the best way to fund the bill.

And did we have a question? Maybe Representative Bynum, do you— do we have a question over here? No. Representative Hannan? I guess I'll phrase it as a question, Mr. Chairman.

If that was the intent by the sponsor, Representative Bynum, to include the intensive needs in a mandatory retroactive 3-year averaging. Representative Bynum. Thank you, Co-Chair Foster. Through the chair to Representative Hannan, yes. And to Representative Story, yes.

My intent was to say if we want to provide certainty to the school districts on what funding they are going to have available, that we would look at the student, normal student ADM. We would give a 3-year average. We would give that to them as their ADM count for the year. And we would also look at their intensive. And we would include that as a 3-year average and we provide that to them. And then if for some reason they have an event where they have a high, you know, just this emergency event where they have more than 5%, then we would do a true-up on that.

School districts have fund balances that they can maintain and hold, and in the same year that you're saying that there might be a need because we have, because they might have a few more students, this also works in the reverse. In the years that they have lower students they're getting more money. So the school districts have, in my opinion, a responsibility to maintain their budgets. They have a responsibility to have a good clear picture about what their student counts and cohorts are doing as they're going through the process. And this works both ways.

So in years that they have lower counts, they're getting more money. And in years they have higher counts, they might be getting just a little bit less. But ultimately they still have fund balance that they're able to absorb those. Hence the 3-year averaging. So, Mr. Chairman— Representative Hammond.

So I'm going to speak in opposition to this because an average student we can average, but a special needs intensive is a whole different kind of kid, an obligation to serve, and they may be a kid who has to have an interpreter, an aide, a physical therapist, and of course because of the nature of a 7.5-hour day, you don't just have one aide. This is a child that you might have to have two people because you're gonna need to be providing them feeding and through a feeding tube, so with special medical adaptations and toileting needs. And these are kids we have legal obligation to serve, to serve them when they show up, the day they show up, and for the length they're there. And if we are trying to add— some of those kids may cost a district $80,000 to $100,000 a year. And when we are averaging them, we are either underfunding if they weren't there previously or overfunding if they have gone somewhere else.

And so lumping those intensive special needs in and mandating that everybody use the 3-year average which doesn't serve, I think, either the district for predictability from— you know, you can predict that your group of kindergartners are going to matriculate to first graders, and you know that in 4 more years they're going to be fifth graders. But our intensive needs kids don't move through the system in that linear of a fashion. And for that reason, I'm going to object to the motion— or I'm going to object to the amendment too. Representative Story and then Allard. Representative Story.

Ah, yes, thank you. And I did talk with the school business officials about this possible amendment, and they said that averaging the intensive needs students might disrupt the federal maintenance of effort requirement, which both local districts and the state must abide— must abide by in order to receive the Title I IDEA funds, which are the Individuals with Disabilities Education Act. We would, because you have to serve that student. If you're taking an average of an intensive student, you might not have the funding for the intensive, and we do know that our special education students are increasing, our intensive students are increasing, and in order to get your maintenance of effort, you have to show that if they're increasing, that you are increasing your funding for them, or we don't get federal monies for them. So if we went to just an averaging of intensives, and the year they were increasing, we might run in danger of losing our maintenance of effort funds.

Representative Ballard, Galvin, Bynum, I think— do you want to make a quick— Representative Ballard? Yeah, I was just gonna— if it's okay, Representative Foster, yes, but what we're talking about here is the state funding component and how much money we're putting toward those students happens at the school level. And so this doesn't take away the school's ability to support that student. Right now, when we fund our schools, not every dollar is part of that SPED multiplier is going to that student. It's going to the school, and then the school makes a decision about how to care for those students.

So what we're doing in federal issues versus what we're doing in the state funding formula toward our schools are two related things, but they're separate. Representative Allard, thank you. Thank you, Representative Allard. Thank you, Co-Chair, and through the Co-Chair. I, I am going to support this amendment.

I'm very happy that Representative, um, Bynum brought this forward. I, I understand about some of the concerns about the SPED students. They don't rotate out of the school system as quickly as people say, or when they come in. So you have a, a level of SPED children that don't just keep moving in and out. That's not what happens.

And if there's one child that comes in or out slowly, the parents understand skill set at which that child needs to be supported at. And to take an overall average of 3 years is more fiscally responsible, but it's also still serving the children and the schools so that they do have an accurate headcount and being able to fiscally move forward. Thank you. Okay. And Representative Galvin.

Thank you, Co-Chair Foster. Through the Chair, this is a question, I guess, to the Mr. Maker, the amendment, and then perhaps we need to hear comment from either the sponsor of the bill or maybe from EDE, but what I'm trying to understand is, was your intention to have a floor that is higher that would be inclusive of special needs if we flatten that out over 3 years with the understanding that if there was an influx of intensive needs, that that would be added in addition to that. Was that your intent? And my secondary question is, did you run that by DEED to make sure that we were dotting the i's and crossing the t's in terms of our responsibility to meet the IDEA standards that have been set for intensive needs students? Representative Bynum.

Thank you, Co-Chair Foster. Through the Chair to Representative Galvin, staff worked on this. I know they had discussions with the department. I can't specifically answer directly to your question on response from DEED. But what I can say is the intention of this was to say that we are providing 3-year average as a whole, and this is for both non-intensive and intensive students.

So if there was an extraordinary need that occurred, meaning an event where we had an average of an increase more than 5%, then the school would get the additional funding for that. But, you know, when we look at the percentage of special needs students in our school compared to the full bulk of funding going to the school, this was to provide a reliable mechanism that they know exactly how much money they're getting, and we also know what our liability to the school districts are as far as our foundation formula. So this was— this goes both ways. Some years, if you have a little bit of a higher count, you might have to draw a little bit from reserves if you want to maintain the same level— correction— from fund balance, if you want to maintain the same pupil-to-student counts, all the identical services. And then other years, you're going to have overfunding, and in those years, the school district should be setting some of that aside.

Money aside into their fund balance. And if I may—. Representative Gelsen. So if we are smoothing out and in some years we have over and some a little under, I guess that is where I do draw the line because we have legal responsibilities that absolutely cannot be underfunded when it comes to our intensive needs students. So that is where I am— I can't be supportive of this, but I understand the intent of where you are headed and I do appreciate it.

Thank you. Any further questions before we go to wrap up? Representative Stout. Yeah, thank you, Co-Chair Foster. I'm going to support this amendment.

I took the time through the conversation to go to IDEA, Individuals with Disabilities Act, Section 302.03 regarding maintenance of effort, and I don't see how we would fail to meet the maintenance of effort if we were to use what the maker of the amendment is asking, an average of the intensives. The exceptions are enrollment-based, right? So even if you were to use a 3-year— if enrollment goes down, in theory the money would go down. That's an exception to maintenance of effort in Section 203. And if the enrollment went up, the money would go up.

So I can't imagine it's not. I would certainly love to hear from the department in the event that they had a different interpretation of that. But, you know, I just think it puts the puts the averaging more in line with the rest of the bill, right? And kind of what's good for the goose is good for the gander. So that's why I support it.

Thanks. Lori Weed, could you put yourself on the record? And if you have any comments on this, they'd be welcome. Otherwise, we'll go to Representative Story. Ms. Weed.

Okay, thank you. Good afternoon, House Finance. Chair Foster, this is Lori Reid, school finance manager with the Department of Education and Early Development. I'm trying to wrap in a couple of conversations that have happened in here. I will start with the funding that is provided through the foundation formula is considered general operating funding for use to the district to meet its obligations.

So, to that end, there are the district-level special education maintenance of effort that districts do have to maintain. It is a little bit of a complicated calculation because there are a number of exceptions that can allow a district to reduce or increase allow for fluctuations from year to year if there is a reduction in student count or a teacher leaves. Those kinds of exceptions can occur, but for the most part, a district does have to maintain its special education funding from year to year. Likewise, the state also has a maintenance of fiscal support requirement. We— because we do not have specific funding allocated to special education as the feds kind of identify it with our factors.

They don't consider that directed funding. So we base our test on the CFA allocation and a percentage of our funding. So as long as our— and then a divisor of the number of SPED students in the state. So that can also fluctuate, but we have been meeting that for most years. To the amendment, what I see —and so Representative Bynum may speak differently—I see that this language replaces the prior year—use of the prior year calculation and replaces it with a 3-year average and that—and maintains that for both the special intensive funding and the regular ADM count.

So that there is still the alternative for if there are new students in current count year, those would be counted in lieu of the 3-year average if it was greater.

Representative Ballard. Thank you, Ms. Weed. I have a question to ask you in regards to SPED. When you say that funds go towards the SPED students, and I don't know if Donna's on the phone, but I'm fully aware, and I don't know if most people in this or most members of this committee are aware too, but not all SPED funds go towards the child. They use it for other things at the school, so they kind of take off the top, give what the kid needs, and then if there's $100,000 is supposed to be going to the child, they don't necessarily put it towards the child.

Can you speak on that? Ms. Weed.

Through the chair, Representative Allred, Lori Weed. I cannot speak to that. Okay. Is there somebody that can speak to it in regards to— with deed? Or— because I feel like you are giving an opinion, you are throwing SPED in there, and then when I ask for actual numbers, you can't say anything about it.

There is nobody else online. Figures. All right. Thank you. Representative Stout.

Yeah, thank you, Co-Chair Foster. Just through the chair to Ms. Weed to follow up. I didn't hear you say whether or not you think using this 3-year average would compromise district-level maintenance effort or not. And I was just hoping you could either give me a yes, no, or a maybe on that through the chair. Ms. Weed.

Sorry, through the chair, rep— Lori Weed. Um, again, it can be a little bit of a complicated calculation. If the general funding level is maintained relative to the students, I think it, it would be neutral. I do, um, we are trying to get our special education manager online for additional questions. I think I'll just go to the vote, co-chair.

It's fine. Okay, before we go to wrap up, Representative Stray, did you have something? Ah, yes, thank you. I really do urge a no vote on this amendment. We know it will cost $47 million, so that's one reason to vote no in addition.

But I also think that intensive students really come with a lot of needs, as this committee knows, and it really makes a difference no matter what size school district you are. But when you are a smaller school district, you really need to have that revenue for that student in the current year. And so an averaging is just not going to meet some children's needs and will really impact the district. So I urge a no vote. Okay.

Representative Stapp. Yeah, just a quick follow-up, Mr. Kuchar. I'm sorry, through the chair to Representative Story. Did I hear you say this would cost $47 million? In addition.

Well, if that were the case, you would be spending more per intensive. So how would you not meet maintenance of effort if you were spending more? And where did you get the number? Through the chair? Sure.

Representative Stahl or Story. Yeah, thank you. We went over that number with Representative Tomaszewski's number because the bill prior to this, I did have 3-year averaging in there for an incentive. Students. And because when you average intensive students, it was just a higher number than the intensive students we have.

Indeed figured that it would be $47 million more, and Heather Heineken testified to that on the record at our last committee hearing.

Rep. Froegge, did you have a question?

Isn't the Thank you, Commissioner Foster. Isn't the 3-year averaging an option in the bill currently? Through the chair? Not for intensive students. Not for intensive students.

Thank you. Thank you. Representative Galvin.

I just wanted to have a little bit more clarity around the choice of not having the intensive needs added to this piece. Were you concerned that that dollar figure would not— that it would be unappetizing because it would just be too high? It's not— I assume that it's not because you don't think schools don't need the funding, but that you were trying to be fiscally prudent. Is that the reasoning, or was there something else in there that was on your mind? Representative Story.

Thank you, through the chair. Rep. Galvin, yeah, that was certainly part of it. And when we talked about meeting our special intensive needs, you could take your prior year because a lot of times special intensive kids stay with the district. You could take your current year. There are 3 choices.

You can take your current year because if an intensive kid shows up, that's very important. And then we will do a true-up in February. So there are 3 ways to meet our intensive students' needs, but we took out the averaging. And Tammy is reminding me that I need to remember to say previous year student count. And then so there is the previous, the current, and then the February true-up.

One final— Ms. McGilvin. Thank you. And was any consideration also because of concerns related to IDEA and that follow-through, or was it a separate issue that you weren't concerned about? Representative Story. Thank you.

Through the chair to Rep. Galvin, by being able to take the previous year or the current year, you are going to be making maintenance of efforts, so that is not a worry in this situation. Thank you. Wrap up, Representative Bynum. Thank you, Co-Chair Foster. Obviously I don't want to do anything that's going to disrupt the sponsor's bill too much, and it sounds like the bill sponsor is not in favor of creating this 3-year averaging due to potential additional money being put in.

So with that, I'll be offering Conceptual Amendment 1 to Amendment 2. Okay, and I'll object for purpose of discussion. Representative Bynum. Thank you, Co-Chair Foster. Conceptual Amendment 2 retains the 3-year average requirement for all ADM calculations except for the intensive needs students.

This amendment to the amendment would leave the intensive needs students count to the manner currently set in law with no changes. Okay, any discussion? Oh, Representative Bynum. For the record, I do have a copy of the amendment to the amendment if the Finance Committee staff would like to have it. Okay, if we could go ahead and have that distributed.

Mr. Chair, let's take one at a time here. Representative Josephson. Well, he called it Amendment 2 and he meant to say Amendment 1 to Amendment 2. Yeah, Amendment 1 to Amendment 2.

I thought I heard Maybe he said two different versions, but at least I heard the correct version. For the record, it's Amendment 1 to— Conceptual Amendment 1 to Amendment 2. Correct. Representative Stout. Just— thank you, Chair.

I'm curious if there's a— probably not. Is there a more efficient way maybe to just divide the question, if that's possible? If not, probably— looking at the amendment, it doesn't appear that it's possible by the language. Certainly, member prerogative to make any motion that you wish. I don't want to make the motion if it makes it worse, Co-Chair.

Maybe Representative Bynum thoughts? Thank you, Co-Chair Foster. What the amendment to the amendment does is that it removes that intensive needs component. I think if we tried to divide the question, it's a pretty complex amendment to begin with through legal, and so I I think we might create a real problem for our staff in the back and our legal department if we tried to do that. But I'm not opposed to it.

Okay. Okay. I think we're going to move forward as is. And from what I am seeing— Representative Tomaszewski. Yes.

So are we just going to get a—. Thank you, Co-Chair Foster, through the chair. Are we just going to get a copy copy of it so we can— before we start—. We just take a brief— go through it. Yeah.

Oh, I thought it was distributed, but is it being copied? Okay, we'll take a brief— it is.

Okay, I'll call House Finance back on record at 2:21 PM on Tuesday, May 5th. And with that, Representative Bynum, we have before us conceptual amendment number 1 to amendment number 2. And did you need to discuss further? I can—. Co-chair Foster, thank you.

I can just very clearly outline what amendment 1 to amendment 2, conceptual amendment 1 to amendment 2, does. And that is that it retains the 3-year averaging requirement for all ADM calculations except for intensive needs student. This amendment to the amendment would leave intensive needs student counts to the manner currently set in law with no changes. So effectively it is simplifying the whole process. The current bill uses multiple measures or levers that can be pulled.

This basically simplifies the bill down into the fact that the ADM will be established by a 3-year average. Okay. Representative Storey and then Sharagi. Representative Storey. Yes.

Thank you. Thank you, Co-Chair Foster, and thank you, Rep. Bynum, for your thoughts on bringing up another possibility. I am, however, going to speak against it because what it deletes is allowing the district to take the previous student count. So right now it is— you can have an average of the prior 3 years, or you can take your previous year student count. The previous student count would have been your most recent student count.

So like it would have been the count just happening in October of '25. And if you're a smaller district and you're getting maybe a 2% growth or a 3% growth under that 5% growth that this bill triggers if you go above 5%, that is a significant student growth that really buys you something in a smaller district to meet those needs of those students that are, are coming up. And so that is something in really talking with the districts they wanted to see in there. Some districts— why we put the 5% in there again was talking with other districts, because if we get the Coast Guard, if we get some big industry coming in, we want to be able to meet those needs. But also if their district was showing an upturn, they didn't want to have to wait to have that accounted.

They wanted to be able to make sure that our formula adjusted for what they saw as a bright spot and wanted to make those students and families have those resources. Okay, and just so folks know, we do have online Donald Enoch, special education Education Administrator at the Department of Education. Next question is to Sharagi. Representative Sharagi. Thank you, Co-Chair Foster.

This is really just a process question. Normally when I see an amendment to an amendment, it is altering the underlying amendment, but I think the way this is formatted, this is just a substitute amendment. Is that right? Essentially delete all material in place? OK, thank you.

OK, further questions on Amendment Conceptual 1 to Amendment 2? For the record, the answer is yes. Okay. And Representative Bynum's yes was to Representative Sharagi's question. Representative Hammond.

Thank you.

I— Amendment— Conceptual Amendment 1 to Amendment 2 is a better version.

I still have a concern, which is by using— mandating that a district use a 3-year average, a district and I used to represent one that was a growing district. So if you were a growing district, you would be harmed by having to use your 3-year average because it— you may not have had growth in all 3 of those years, and you may not be able to keep up with the growth. I think by far more districts in the state will use a 3-year average because most districts aren't growing, but community of Skagway has had a growing— and they are a very small district. I no longer represent them, but they are an exemplar in my mind of the kinds of districts that using a 3-year average wouldn't keep up with what their growth is. And for them, you know, a family moving in with 4 or 5 kids is a big expansion percentage-wise of their school.

So I'm going to vote against the amendment. Further questions, comments on conceptual amendment? We'll go to wrap-up. Representative Bynum. Thank you, Co-Chair Foster.

I think that what's really missing in the conversation and was not demonstrated through the bill presentation process is that this is not just a very linear item that we're talking about. This isn't one number being plugged into the formula. Our formula is actually quite complex and school size factors play a role. So when we have a growing population in our school district, it is not just a one-for-one additional cost. There are fixed costs that don't change.

They stay the same unless you're adding additional buses and buildings. The, that bus still runs down the road if it has 1 kid on it or 20 kids on it. So, and the same is true for the facility itself. And so what this is really, when we talk about having this average and saying there's no other levers to then pick an option, be A, B, C, D, which then just all they do is add more money, harms the school, I disagree. And that's why many other states are using this method without those other levers.

And this is also why our school districts carry fund balances and have choices that they can make on all different levels, plus additional other funding, including local funding. So I believe that this is ultimately more money for our schools when you look at the fiscal note applied, and it does provide simplicity and it also provides a forecast that not only the schools can understand but that the legislature will understand as well. So I urge you guys to support the amendment to the amendment. Okay. I'll maintain my objection.

Madam Clerk will be calling the roll for conceptual amendment number 1 to amendment number 2. Madam Clerk. Representative Stapp. Yes. Representative Tomaszewski.

Yes. Representative Hannan. No. Representative Jimmy. No.

Representative Moore. Yes. Representative Allard. Yes. Representative Galvin.

No. Representative Bynum. Yes. Representative Josephson. No.

Representative Schraggy. No. Representative Foster. No. 5 Yay, 6 nay.

Okay, on a vote of 5 yeas, 6 nays, conceptual amendment number 1 to amendment number 2 has not been adopted. That takes us back to the main amendment, which is amendment number 2. Any further questions on amendment number 2? Seeing none. Representative Bynum, do you have any further comments on amendment number 2?

Uh, thank you, Co-Chair Foster. Again, I think that this creates an opportunity to smooth funding to our school district districts. And as the bill sponsor indicated, this isn't a detriment to our special needs or intensive needs programs. This is actually an increment and does provide some level of certainty not only to our school districts but to the legislature. I urge support for the amendment.

Thank you. Okay. And I am going to maintain my objection. So Madam Clerk will be calling the roll on Amendment 2. Madam Clerk.

Representative Bynum? Yes. Representative Hannon? No. Representative Stapp?

Yes. Representative Allard? Yes. Representative Moore? Yes.

Representative Tomaszewski? Yes. Representative Jimmy? No. Representative Galvin?

Representative Schraggy? No. Representative Josephson? No. Representative Foster?

No. 5 Yea, 6 nay. So on a vote of 5 yea to 6 nay, Amendment Number 2 has not been adopted. That makes— takes us next to the third of fourth amendment— of four amendments, and the third and fourth are both by Representative Moore. Representative Moore.

Thank you, Co-Chair Foster. I move Amendment Number 3. Objection. Amendment Number 3 establishes a maximum pupil-teacher ratio in Alaska's public schools. It is set at a cap of 18 students to 1 teacher for grades K through 6 and 24 students to 1 teacher for grades 7 through 12.

Uh, the intent is simple: if we are going to invest more in education, we should be clear about what that means for students, um, sitting in classrooms across our state. Class size matters. It affects teachers' ability to manage a classroom, provide individual attention, and teach the needs for each student. Uh, this amendment creates a clear statewide standard so that families know what to expect when it comes to funding decisions and how it translates into real, real improvements in each of the classrooms.

This is— it does not interfere with local control beyond setting a reasonable size limit. Oh, briefities. Briefities.

Okay, House Finance back on record at 2:33 PM on Tuesday, May 5th. 2026. And, uh, let's see here, we are going to in a moment, uh, I believe withdraw one amendment and offer another, but we'll wait for the, uh, remainder of our folks here. And, uh, let's see, I think we've got two more. Um, I always find that's the quickest and easiest way to get folks back is just to gavel in.

Yeah.

And so with that, uh, we'll just do a little bit of cleanup. Representative Moore? Yeah, I'm going to, um, not move Amendment Number 3 at this time and move Amendment 4, if the committee would indulge me, please. Sure. And I'll go ahead and object.

Representative Moore? Um, thank you. Okay, so I was already explaining, um, Amendment Number 4. My, sorry about that, I was got confused on my amendments in here. And so with, with going over this, the class cap sizes, I also understand the fiscal situation that we are in and what the impact of a policy like this would make balanced with the reality of education funding today.

I just think this is a really good conversation that we should continue to have as we move forward, and I'll be withdrawing number 3— amendment number 3. 4 Or 3? Number 4. 4. Okay, withdrawing amendment number 4.

Sorry, I'm just support. Amendment number 4 has been withdrawn. And Representative Bynum, would you like to move amendment number 3? That'll be— oh, that'll be me. I will move amendment number 3.

Okay, and I'll object for for purpose of discussion. Representative Moore. Thank you so much, uh, Co-Chair Foster. Okay, this Amendment, uh, Number 4 adds, um, I'm sorry, Number 3 adds a simple guardrail on administrative spending. It says, um, school districts may not budget or spend more than 15% of its operating expenditures on administrative expenses.

Uh, this, this amendment does not cut classroom instruction. It does not tell districts how to teach. It simply says that there be a reasonable ceiling on how much of a district's operating budget can be consumed by administration. At this time when we are asking families and taxpayers to support additional education funding, I think this is a fair way for accountability to come into play. I would urge support for the amendment.

Okay. Representative Story. Yes, thank you.

To the co-chair Foster and to the committee, I appreciate the sponsor's amendment to to try and make sure administrative expenses are kept at 15%. I am going to speak against the mo— the motion because it really impacts local control and I think it really is harmful for small rural districts who oftentimes their fixed costs don't make it capable of them to keep funding below. If you remember, we used to have the 70/30 rule. 70% Must be on instruction, 30% must be on other— on administrative, other expenses. And we ended up getting rid of that because so many districts who were smaller population, they had to apply for a waiver each year and spend a couple weeks showing all of their hard receipts about why they could not do— meet the 70% instruction.

And so I'm speaking against that. And again, I have to remind ourselves that a lot of things are legally required of administrative costs. We've been requiring more and more administrative— because again, we want accountability, and accountability has cost behind it. And so I really feel like I would need more time to talk to the school business officials and people who— what is mandated and is this a realistic number. But the goal is something that does have some justification to look into it more, but I would need more time to look into it.

Further discussion? Representative Galvin. Thank you. I appreciate the intent of this particular Amendment because I do know that certainly the conversation around education is let's keep it into the classroom. Let's do everything we can.

And so I did a lot of research around this because I was worried that maybe we were spending too much money in administration. In Anchorage, for example, it's 6%-ish, but in some districts it's much, much higher. To what we just heard from Representative Story is exactly why. There are so many fixed costs, and now we know— we just listened to a bill about how to get more loans for fuel because that is skyrocketing, and those costs alone make it impossible to stay within the range that is typical for a larger district. There may be some large districts I don't know about every district, but I can tell you in my own We certainly are below that percentage of 15%, but I do appreciate that with other districts, and I remember being around when it was district after district applying for that waiver, and most of them were getting that because they were all explaining the various fixed costs that they were experiencing.

Health care was another one, and high costs of insurance. Was another one. That one was going up and down. So I just appreciate that it is complex and for that reason I also will not support this amendment. Okay.

Representative Skow. Yeah. Thank you, Co-Chair. So I'm going to support the amendment. I think we should maybe read it.

It's actually materially different from the 70/30 as before. It basically defines administrative expense is strictly narrow to administrative employee salaries, administrative employee benefits, professional and technical services, supplies, communication, travels, dues and fees, and school board stipends. So I don't see any fixed costs that are supposed to be under this, like heat, energy, that type of stuff. I just see an amendment that basically says a district may not budget or spend more than 15% of their operating budget on administrative expenses and narrowly defines them. I would actually be kind of surprised based on that narrow definition if a district actually was spending 15% of their total budget on that narrow scope.

But, you know, I think I'm going to support the amendment. I've been around long enough to know regarding the local control thing, you know, some, some days we like that, some days we don't. So I'm going to support the amendment. Okay. Representative Bynum.

Yes, thank you, Co-Chair Foster. I think that when we mention the word local control, we do like to have locally controlled curation of our educational programs. However, we do have parameters on what we do with our money. Seems that the majority of funding for education in our state is coming from the state, so setting an ideal standard for how we want those expenditures to happen is no different than what we do with many of our grant programs and many of our other community assistance and every program that we spend money on in the state. So— but I do have a question for the maker of the amendment, and that is to just clarify that this would not include non-certified personnel, aides, paraprofessional type people, because I know that one of the questions that comes up when we look at this topic is a lot of times people talk about teachers in the classroom, but when they do that, they don't classify paraprofessionals and other aides in those counts.

And so sometimes it skews the, the counts in the classroom. So I just want to clarify that this is only, as the definition would describe, the administrative component and not the— that technical services or professional and technical services would not fall under the non-certified aides, paraprofessionals, and that type of thing. Representative Moore. Yes, through the co-chair, to Representative Bynum, it is only the rep— the administrative component. Thank you.

Okay, Representative Tomaszewski and then Hannon. Thank you, co-chair. So I'm going to support this amendment. I believe that anytime that we can direct more funding towards the classroom, and I think that's what this amendment is overall intended to do, the intent and purpose is to get— keep more of the money available for teachers in classrooms. I totally support that.

Thank you for bringing this amendment. Representative Dapannan. Thank you, Co-Chair Foster. I guess I pulled out the chapter law just to see, and specifically I was looking for definitions. There are none.

And so I am to the maker of the motion, Representative Moore, whether Ledge Legal gave you a memo on guiding that and whether they had some definitions. Because in particular, in general, like administrative costs, technology in my school's budget, my school district's budget, technology came under administrative costs. So trying to figure out if, if your intent is to narrowly follow administrators whose title is administrator, principal, assistant principal, and their travel expenses, or is it travel expenses for school sports is incorporated into that? And since I don't see anything in statute with definitions, I am wondering if legal gave you guidance on that or whether you gave them specific definitions to use. Representative Moore.

I do believe this was guidance from Ms. Marks, and I don't know if she's available or not, and we can maybe ask— okay, no, all right. Ms. Marks not online. Yeah, I do believe it was guidance from Ledge Legal on the definitions in the amendment. Representative Hannon. Thank you, good job.

And that's where I'm not seeing a definition. In reading it, it says administrative expenses, But I don't know, because if my district's budget right now reads under an allocation for administrative expensive, all of our technology costs, our technology director, which I would say many people wouldn't think of them as an administrator, but in my school district's budget, the director of technology probably is an administrator, and his entire budget came under that. So I'm just trying to figure out, you know, 15% for principals, vice principals, and their travel. But if it's all travel, that's a very different budget line item and concern. And I— from Representative Stapp's comments and what I thought I heard you say, you're intending it to be a very narrow piece of just principal and vice principal.

But I'm not sure if those are legal definitions or if— how they are constructed.

Representative Bynum. Thank you, uh, Co-Chair Foster. I forgot to mention before that I will be supporting the amendment. And then to the comment when we said that we used to have a law in place that said 70/30 and that school districts had to take time to say why they weren't meeting that requirement, I think that that's actually time well spent communicating to the department that there's an issue there and how we can then communicate that back to the legislature. Because right now, without that there, we have very limited information coming from our school districts.

So I, even if this were to trigger through regulation a requirement for them to ask for waiver, or to report why they are having problems, that is good. And as far as the definition thing, when I am hearing that, I know a lot of times we create law and what happens is the department then has to develop regulations, and in regulations they would define those things. So I don't have any particular problems here. Could we ask Deed if they are still online? We do have Deed online.

We have Ms. Laurie Weed as well as Donald Enoch. So I will ask Ms. Weed. Okay.

When— if there is a definition or if you see the amendment, what your perception is of who that covers, what budget allocations that would cover for a school district of what they would be allowed to spend money on of up to 15%. And secondly, whether you have any knowledge of using that definition, how many districts currently exceed 15% for administrative costs. Ms. Weed.

Thank you. Lori Weed, through the chair, to Representative Hannan. The department does have the budget and accounting standards for the chart of accounts that school districts have to use. Within that, there are sections that address specific to the amendment. School admin, school admin support, district admin, district admin support.

So if those areas were the intent, then yes, districts budget to those accounting code sections, functions, and we could report to that. I don't have the number of districts that would match to those— the 15%. I would have to get back to the committee. Representative Hannan. Thank you, uh, Co-Chair Foster.

So, Ms. Weed, do you— and I know that this is torturous for engineers, accountants, and lawyers to speculate, but, um, using those accounting budget codes that you have just articulated, whether 15% is within the average range of what districts are spending on that, or is that really low or a meetable goal for most districts?

Ms. Weaver.

I would not want to speculate. I have not looked at the data to be able to draw a good speculation or conclusion.

I don't see any further questions, so we'll go to wrap-up. Representative Moore.

Thank you, Co-Chair Foster. I, I do believe that there are 3 districts outside that 15%. I— we haven't looked, I mean, super far into it, but there are a few that are, are spending more than that 15% on administrative costs. And like we said, it's very narrow defined. This is not principals, not sports.

This is superintendent travel, things like that. And so again, I think it just puts guardrails. If we're asking for more education funding, I think Alaskans are expecting that money to be as close to the classroom as possible. And I think this is a really important amendment, something that shows that we're all trying to figure out how to put more money in schools and in education, so, and not inflate where it doesn't need to be. So thank you.

Senator Moore, we may have a question, so we'll give you wrap-up again if this is a question. That is Representative Ballard. Yeah, I apologize, I didn't realize she was going to be wrapping up right away. I'm beside myself. I can't understand why this body wouldn't support this amendment.

We are complaining that we have no teachers available, which we do. 56 Of them in the ASD already got laid off. This just reins in what we need to happen and to rein in. This is what our public is complaining about. They are complaining that we are giving too much money to administrative side instead of doing what is right, and that is protecting our teachers and our children as far as keeping classroom sizes down, as far as making sure they get the sports and athletics.

I get that Representative Moore said it's not really about that. I understand it in her amendment, but if we can rein in based on this amendment the expenditures for the administration, there's no reason this bill— this amendment shouldn't pass. So I fully support it, and the public should know this is an absolutely great amendment that should move forward. Representative Moore, did you have anything to add for REPUB? Sarah too.

Representative Hannon. Thank you. I, I'm, uh, I was thrown off by one of the things that Representative Moore said in her wrap-up where you said principals, that you didn't include principals. So that makes me think you are trying to target district-level administration, but every school I have ever worked on, when you say administrator, very few people default in their brain to the superintendent. They go to their building administrator.

Principal and vice principal. Those are always part of your administration. So were you intending to capture all administration in your 15% or just district-level administration versus building administration? Through the co-chair, um, to Representative Hannon, correct. This is specifically district-defined As it is defined in the bill.

District-wide administrators.

Administration. District level. That is what it says in the bill here. In the amendment, I am sorry. Excuse me.

Can you draw—. Excuse me, Chair Foster. I am not seeing that in the amendment. It says district. If you could draw our attention to where it says district-level administration.

Rep. Moore. Oh, Maximize Monitor. We're at a district may not budget for— spend more than 15% of the district's operating expenditures on administrative expenses. And so I guess we aren't— it doesn't say district level. I mean, district level in here, but I mean, that's the intent of the amendment is that this is administrative level.

Within each district, which we can fix really quick if we need to. Okay, Representative Stepp. Yeah, I mean, I'd be happy to make an amendment conceptually to add, um, I would suppose on line 8 after, uh, excuse me, line 9, district's operating expenses, just insert the words at the district level if that would make everyone happy. And I'll move that, I guess, as Conceptual Amendment 1, which would be to insert, um, on line 9 after the word expenditures, at district level. Okay, and that is Conceptual Amendment Number 1 to Amendment Number 3.

I am not going to object. Is there any other objection? Okay, seeing none, Amendment Number 1 to Amendment Number 3 has been adopted. And with that, back to Amendment Number 3. Any further discussion?

Seeing none, wrap up. Representative Moore. Um, again, yeah, I think that this is a— this is an amendment that says we are doing our best to make sure that all the dollars are getting as close to the classroom as possible. I think this shows Alaskans that we are doing what we can to not inflate education in other areas but bring it back to the kid. So I think that's really important, and I hope that there's support for it.

Okay, thank you. And I'm going to maintain my objection. And so with that, we have Amendment 3, which has been adopted before us, and we'll ask for the—. No, conceptual amendment was adopted, not the whole amendment. Correct.

That's correct. Yes. So Amendment Number 3 has been adopted, is before us, and it is amended by Amendment Conceptual Number 1. And so with that, Madam Clerk, if you could please call the roll. Representative Hannon.

No. Representative Allard. Yes. Representative Stapp. Representative Jimmy.

No. Representative Moore. Yes. Representative Galvin. Representative Tomaszewski.

Yes. Representative Bynum. Yes. Representative Josephson. No.

Representative Schraggy. No. Representative Foster. No. 5 Yea, 6 nay.

And so on a vote of 5 yea to 6 nay, Amendment Number 3 has not been adopted. And that takes us through the entirety of our amendments. I don't believe we have any further amendments. So with that, we— as I mentioned, we've kind of checked off all the boxes. And if it is the will of the committee, I would entertain a motion.

Representative Froegge. Thank you, Co-Chair Foster. I move House Bill 261, Work Order 34-LS1293/G, out of committee with individual— as amended with individual recommendations and attached fiscal note. Objection. And we have an objection.

Representative Steff. Yeah, thank you, Co-Chair Foster. Again, I actually want to say I appreciate the member from kind of bringing this bill forward. I would love to support it. I think long term, I just think without modeling of the different kind of variables, it makes it really challenging to kind of have a scope for the fiscal note.

But I just want to put the objection on record. Don't really feel the need to call a roll call vote. So I'll withdraw the objection. Objection. OK, we have an objection.

Never mind. Representative Ballard. Yeah, I just don't think we can afford this and there's just not enough analysis or information on it. And I will do a roll call. OK, any further discussion on the adoption of the bill?

I have a brief-a-deez. Brief-a-deez.

Okay, House Finance is back on record at 2:50— House Finance is back on record at 2:57 PM. I think to finish off with Representative Allard, then we'll come back to Representative Bynum. Representative Allard. Yeah, thank you. I'm, I'm gonna just state on the record I don't support this particular bill.

We're looking at over $100 and I think $40, $130 million every year, and quite frankly, it doesn't fix anything. So I'm going to go ahead and remove my objection. I don't want anybody thinking I'm anti-education, so I'm just going to remove the objection, and I will fill it out on the little form that goes around to all of us. So my objection is removed. Okay, thank you.

Representative Bynum, do you object? Yes, I object. Representative Bynum. Thank you, Co-Chair Foster. Just briefly, I didn't get a chance to say it, is I do applaud the effort that we have here.

And just like my— the member from Fairbanks had said, is I really would have liked to have had some modeling and some data associated with what we're actually trying to do here. That was requested as part of this committee process for this bill. I do believe that that's something that the department should have— should have been able to provide, or Finance should have been able to provide as part of their fiscal note. It's a very complex in the sense that there's a lot of different levers that can be pulled, but it is very substantial in the cost. And so having a very clear picture of that is important.

So I will just put on the record, I don't believe that we've done the necessary work that we need to do. For this complex bill, but I will be— I won't be getting in the way for us to continue moving the ball forward on it. I think it's an important conversation that we keep having and appreciate all the work that you put into it, Representative Story. Thank you. And I will withdraw my objection.

Okay. The objection is withdrawn. Any further objection? Seeing none. Okay.

So House Bill 261, which is version 34-LS, 1293/G moves out of committee, House Finance Committee, as amended with individual recommendations and attached fiscal note. And so if we could make sure that everyone signs the committee reports. And Representative Story, do you have anything you'd like to say before we say goodbye? Thank you. And thank you for your questions and thorough vetting of the bill.

I appreciate it. Great. And thank you for presenting it. And normally I might take a little bit of a break, but we do have some public testimony, not a lot of public testimony, but I think maybe 4, 4 folks on the next bill. So we're going to jump right into the next item, and that is House Bill 388.

And if I could have my staff, Mr. Paul LeBoul, if you could please come up. And I know we just heard that— this— heard the bill this morning, so I think the recap will be pretty short and simple. But if you could just give us the brief recap, just to let folks who might be watching, the public know what we're talking about, and then we'll go to public testimony. Thank you, Mr. Chairman, members of the committee. Paul LeBowl, staff to Representative Foster.

House Bill 388 doubles the cap on the bulk fuel loan program to— from what, to $1.5 million? Okay, thank you. And so with that, we're going to jump into— I'll open public testimony for House Bill 388. And if folks who are watching would like to submit written testimony, they can do so by emailing us at [email protected]. And I'll repeat that at the end of this public testimony period.

And so with that, the first person that we have up is— let's see, I think Albie Dallmally. Dallmally. There you go. I knew that before.

And thank you for coming here to testify on this bill. Thank you, Mr. Co-chair. Good afternoon, co-chairs, members of the committee. [SPEAKING NATIVE LANGUAGE] I'm Albie Dallmally.

For the record, I serve as the vice president of economic development and sustainability for NANA Regional Corporation. But I am also here representing the Northwest Arctic Leadership Team in support of House Bill 388. I chose to testify in person because of the urgency of the fuel crisis that is currently unfolding in our region. In Northwest Alaska, fuel is essential to daily life. It heats and powers our homes and businesses through long winters, keeps schools and clinics running, and supports critical infrastructure like water and sanitation services.

Our communities rely on a short summer barge season to bring in a full year's fuel supply. There is very little margin for error, and our region is already energy insecure. Right now, two issues are emerging. First is availability of fuel. This is immediate problem.

Suppliers are telling communities to secure fuel now due to global supply uncertainty. Without sufficient capital, communities risk missing this narrow purchasing window. Second is cost. Even before recent global price increases, our communities already paid some of the highest energy costs in the nation. In 2022, NANA conducted a home regional household heating survey and found that 46% of households could not afford to heat their homes or pay their electric bill.

Fuel is the single largest expense for households and essential services. These loans must be repaid through user fees, and communities have extremely limited ability to absorb higher costs. As a result, residents will be paying higher costs for everything: heating their homes, electricity, transportation, water and sewer, etc. And the list goes on. House Bill 388 does not solve the cost problem.

It buys time. It allows communities to access the capital they need to purchase fuel now during this critical window and reduces the risk of emergency resupply later. Without that flexibility, the risk shifts to winter when fuel delivery is far more expensive, more complex, and more disruptive. We appreciate the legislature taking action. This bill is a necessary step an important signal that the state understands the urgency of this crisis communities are facing.

But it is only a first step. Addressing long-term energy affordability and reliability in Northwest Alaska and the rest of rural Alaska will require broader, sustained solutions. Thank you for the consideration. Thank you for this opportunity, and I'm happy to answer any questions. Kōchii.

Great. Thank you, Representative Stapp. Thank you, Co-Chair Foster. Through the chair, thank you so much for coming all this way and being here to testify on this bill. If you could, maybe— so I've heard a lot of things about kind of an impending big problem in rural Alaska with really on the refining side.

I guess most of the folks I know in industry tell me that basically the Asian market is soaking up most of the production refining capacity because of these issues with the Strait of Hormuz. So is that— I mean, how critical is that? And I don't know, you probably have more information than I do on that to your guys' region and long-term fuel ability to do refining and processing. [Speaker:KATHRYN_SULLIVAN] Right. So unfortunately, our region has a— faces a number of unique challenges related to procuring transporting fuel.

And the current global issues and the scarcity of that fuel is compounded for our, for our region specifically because our region is the last region to receive its fuel supplies to the fuel vendors. So the, the fuel vendors, the distributors now are procuring fuel supplies for the contracts that they're able to receive from, you know, Southeast, Southwest, Bethel, Dillingham regions, and Kotzebue region as the very last to procure those contracts. In fact, at last inventory, only one of our communities had purchased or secured their fuel for the year. The fuel distributors which presented at our Regional Energy Steering Committee earlier this month stated, you know, because of that scarcity and availability of fuel, they cannot guarantee being able to procure the fuel that we need for our communities. So all the more important that our communities are able to secure through those purchasing contracts the fuel needed for our communities.

A quick follow-up, Mr. Coach. Yeah, thank you, Coach Vostar, through the chair. I know I really appreciate your expertise and your answer. Only question I guess would be, what, from our perspective, what is the best way that I think that we could help you, especially those groups in your region that haven't kind of executed on those contracts? Is there any way we can expedite that so they could utilize this increase in the bulk fuel?

I don't know when your drop dead date basically for contracts is, I guess. Through the Chair. Thank you for that question, Representative Slap. Through the Chair, passing this legislation now would effectively allow the communities to procure their fuel through those contracts through the distributors. Already we have competitive fuel distributing— distributions and In our region, there are only 2 field vendors that can pick here and deliver the field to our communities.

And already again, they are faced with availability issues. I think you heard from one of them earlier today in your morning meeting, Mr. Mike Poston with Vitus. Okay. And just a quick comment. Thank you, Co-Chair Foster.

So I don't— I guess I appreciate the invite to testify. I'm just saying that the bill's effective date is immediate. I don't have any amendments to the bill, although I would say you might entertain maybe making it retroactive if that's possible through the loan fund. That would be my only suggestion. So you could maybe set it March 1st or something.

So— Okay. And I've got questions from Representative Tomaszewski, Allard, and Hannan. Thank you, Co-chair Foster. Thanks for being here. At the retail level, when you are in the villages, is there any price gouging in your mind that you have seen throughout the years?

I mean, not even with what is going on today in the world today, but do you think that price gouging exists out in the villages when it comes to fuel sales? Or milk sales, I guess. Please tell them, Molly. Thank you for the question. Through the chair, the short answer is no.

However, our villages do have a significant operating cost to, to not only procure the fuel but also to maintain the bulk fuel infrastructure that they're responsible for maintaining in their community to be able to sell the fuel to, to residents and communities. So they do apply a certain percentage on top of the fuel costs or the procurement of that price per gallon, and that is relayed to the consumer. Price gouging, I would, I would say no. Already, you know, we all understand that our residents pay a significantly higher cost per gallon for diesel. That's $17 in the village of Notak, or $18 in the village of Gambler.

And so price gouging, in short, no, I don't think so. However, we do have high operating costs because of the logistical challenges it takes to, to provide that fuel in the communities. Thank you. Representative Allard. Thank you.

Uh, thank you. Through the co-chair, do we only do the delivery to the rural communities or to the villages once a year? Thank you for the question. I'll leave it to the chair. Typically [Speaker:KATHRYN] It varies by village.

It varies by their need. It varies even by capacity, their ability to hold the amount of fuel that their community needs. So, again, each village has their own unique set of challenges related to fuel. And some villages require 2 deliveries a year, one in the spring and then again a fall delivery. And then there are some villages that have enough holding capacity to purchased through one, one barge delivery for their entire community for the year.

May I? I was just wondering, because sometimes if you get it twice, that it could be less expensive. It's almost like a subscription. If I get my dog food— yes. And I was just wondering, is there any way that you guys representing the villages would consider Maybe some of the communities that only do once a year do twice a year.

Yes. If the math fits. If the math fits. Sometimes it's a little difficult to anticipate how much you're going to need for that second delivery. Yes.

And however, there are some villages that do try to maximize and leverage that buying power into two field deliveries into one contract if they're able to afford it. That's another complexity. It's totally— Cotsbutte is the one that's— I was looking at my notes— very expensive because there aren't they the last? They used it as an example. Isn't it one of the last to be delivered to?

Our Cotsbutte region? Yeah, Cotsbutte and the outlying villages. Absolutely, it is one of the last regions that fuel is delivered to. All right, well, I appreciate the education. Thank you.

Thanks. Sure. Representative Hannan and Bynum. Representative Hannan. Thank you, Co-Chair Foster.

Ms. Dolly Mollie, I just want— is that the correct pronunciation? Dolly Mollie? Yes, ma'am. It's a fabulous name. Thank you.

One of the things— my question, I think that you're going to find a lot of support for this bill. We want to make sure that we are structuring it in a way to solve a problem, move it forward. Right. We're just upping the cap, but making sure that we are capitalizing the fund. Adequately.

When the Department of Commerce and Economic Development, who administers the loan, was before us with their fiscal note, they currently have 78 loans in the previous fiscal year, and they couldn't predict how many new players there would be, how many more requests. Do you have any sense in your region of communities or buyers who would be eligible for this who have not previously use this loan program that might suddenly be saying, "We think we're going to need a loan," because we want to make sure that we are capitalizing it. And right now, the fiscal note capitalization scenarios that they presented are just using the current 78 loans and saying 100% increase and giving us 2 scenarios with those. And my concern is, but what if we go to having 120 communities that need loans? Instead of 78, right?

That, that's actually a really great question. For my region, through the chair, there are 4 communities that do not utilize the bulk fuel revolving fund. Either they're ineligible and/or they don't need to. There is one community— the one community that has placed their fuel order, and the only one that has placed their order this year— has had adequate funding and a reserve account to be able to pay for their community's fuel. So they've— so they're, they're successful in that regard.

However, a number of other communities that utilize the Bulk Fuel Fund, they do— again, at last inventory, they do plan on accessing their— those funds if the enough capital is there. And then the question is, if the capital isn't there for, for them to be able to purchase that fuel beyond what the loan allows, where are they going to get additional funding to purchase the fuel. So that's another question that we are having within our community, within our region. And so short answer the question, there are 4 communities that don't utilize the funds. The others intend to continue utilizing the, the bulk fuel loan program to access their fuel.

Representative Hannan. Okay, so if I can— thank you, Co-Chair Foster. Summarizing my brain, we could say The folks who are using it are going to continue to use it. The 4 who don't, either because they aren't eligible, don't want to take the risk, or have other capitalization, will probably still stay in that. Do you believe that the doubling of going from $750,000 to $1.5 million will be enough capitalization for the top need for many of your communities?

Ms. Dollar-Mollie. Through the chair, that Unfortunately, I cannot answer that question at this point because, again, the high cost of fuel that we are anticipating is going to be— it's going to be challenging to determine whether the $1.5 million is going to be adequate. I can say that it will absolutely help the communities by doubling the loan amount available to them for this— what we're anticipating an incredibly challenging year. Year related to bulk fuel. Thank you.

Representative Bynum. Thank you, Co-chair Foster. Thank you very much for being here. Appreciate your testimony. Just had a quick question, and I probably could get the answer elsewhere, but I know you probably know.

Do the communities around the state that are in need of these programs, when they procure bulk fuel, are they then providing parts of that bulk fuel to the school district? To the chair, in our region, they are not. The school district goes out and they competitively— they receive competitive quotes for their fuel supplies in our region. So the bulk fuel through the communities, whether it's a tribe or the city fuel vendors, are not partnering with the school district. The school district act as its own entity and procuring their bulk fuel for their communities or for these communities.

Perfect. I appreciate that. And maybe it's a conversation for another time that there might be an opportunity to create some systems of economy of scale, right, to help as well. So thank you very much. If I may, Mr.

Chair, Ms. Delamalle, thank you for that. That is the type of innovative thinking and solutions that we should be talking about and should be considering to really help our communities, whether it's the village fuel vendors, the school districts, and others like AVAC. And other, you know, we have two smaller-scale locally owned electric companies. I can tell you that one of them has, you know, is looking to procure their fuel, and their cost is up by 112%. So that is a significant increase, and obviously it's going result in consumer increases during their electric bill, you know, in their electric bill.

And so the economy of scale that you're referencing absolutely is something— as a conversation worth having, and to determine whether or not we're able to assist, you know, really driving that economy of scale. Thank you. Okay. And Representative Moore. Thank you, Coach Foster.

Um, thanks for being here. And your— one of your statements Representative Hannan, you had said that in your region you had a couple of ineligible communities. What makes a community ineligible? There, there is one community that I'm told they are ineligible because their fuel is flown in 100% of the time. And so if that truly is the case, and I'll admit I haven't looked into that particular requirement, but she's been in the fuel business for 20 years, so she knows that fuel program better than than I do at this point.

And she— that village, again, because their village is— their fuel is funded 100% of the time, they were told that they're ineligible to apply for the loan. Okay. Follow-up? Follow-up? Would this program— do you know personally?

Obviously, maybe we need to look into it. Would this be something that they could utilize, is this program? Absolutely. Okay. Thank you.

Short answer, yes. Okay. Thank you very much.

I just want to extend my gratitude for you to come and testify and help to encourage us to push it along. We say—. Okay, thank you.

Thank you for your testimony. And we have 2 more people online to testify. And that is June Okada calling in from the Matsu. If you'd like to put yourself on the record.

Thank you, House Finance Co-chairs and members of the committee. My name is June Okada and I'm speaking on behalf of the Alaska Public Interest Research Group, or ACPRG. ACPRG is a 501(c)(3) nonprofit advocating for transparent and accountable government and works to bridge the gap between communities and policymaking. We support HB 388 and greatly appreciate the sponsor's work on responding to the urgent needs of our communities. ACBerg has been convening a statewide working group on energy and heating affordability, efficiency, and equity with stakeholders since last year.

Last week, we sent a collaborative letter to legislators from the group that outlines the severity of the current spikes in fuel costs. Fuel shortages and drinking water emergencies in several regions. With the significant fuel costs communities are facing, seasonal fuel purchases can easily exceed the current cap, the current cap, and in some cases potentially even the proposed cap, especially for communities of 3 or more pooling together. Due to the unusual— unusually extended cold weather, some communities are experiencing both fuel shortages and water system failures. Uh, in the Aleutian Pribilof Islands region, for example, emergency drinking water had to be flown in, costing more than $50,000 for just one response.

In the Bering Strait region, as of last week, at least 6 communities are on boil water notice, 8 communities have critically low drinking water levels, and several are completely out of heating fuel. Communities are turning to electricity when fuel runs out, which shifts costs into unaffordable utility bills and increases the likelihood of additional state intervention. HB 388 is a critical step towards supporting communities in need, but additional flexibility would strengthen the program. We've encouraged consideration of a 0% interest rate option during emergency and high-cost fuel years, extended and flexible repayment terms to help smooth costs and reduce rate impacts, a mechanism to adjust the cap over time based on fuel prices. These changes would help ensure the program keeps pace with real conditions and reduces the need for costly emergency responses.

Additionally, pairing these changes with sufficient funding for the Alaska Heating Assistance Program to support the increasing number of households needing heating assistance and weatherization on their homes would significantly help Alaskans keep— help keep Alaskans safe. Thank you for the opportunity to comment. Great, thank you very much, Ms. Okada. Do we have any questions? Seeing none, appreciate your testimony.

Thanks for calling in. And our last testifier is Mary David calling in from Nome. Mary, if you could put yourself on the record. Can you hear me? Uh, yes, we can.

Good. Hello, can you hear me? Uh, yes, we can. Thank you, Co-chair Foster, and good afternoon, House Finance Committee members. My name is Mary David and I'm the Vice President of Strategy and Policy at Quiric.

I'm calling in on behalf of Quiric and the Alaska Regional Coalition. The Alaska Regional Coalition represents 165 communities and approximately 99,000 Alaskans and is comprised of the Tanana Chief Conference in the interior, Meniulik in the northwest, Chugachmut in South Central, Central Council, Tlingit and Haida in Southeast, Inupiat Community of the Arctic Slope and the North Slope, Association of Village Council Presidents in Western Alaska, and of course, Quiruk. So I am calling in in support of HB 388. This cap no longer is sufficient due to rising prices.

Around the end of April, two of our communities ran out of heating fuel, Prévikmission and Teller. Like the previous speaker mentioned, residents had to resort to using electricity, which also then makes their power bills unaffordable. And like I mentioned, Teller was in the same situation, running out of heating fuel. So in Western Alaska, our communities can't wait for the prices to stabilize. As we, like previous speakers have said, have a tight timeframe to receive gas and fuel deliveries.

It's uncertain as to when we're able to secure fuel shipments and at what cost. We have communities in our region who have already depleted their local heating and oil and are now paying over $10 a gallon for heating fuel and that they're transferring from other local resources or even flying in fuel in barrels. We know when our population increases our use increases. When the temperatures go down and are really cold our use increases. And we have a lot of inefficient homes in our region, so obviously usage also increases there.

Combined with the multitude of other water shortage emergencies, frozen water and sewer infrastructure, our communities are racing for the remainder of the cold season, but luckily spring is just around the corner. Fuel barges will be able to arrive soon. So raising the cap on the bulk fuel loan will help communities with the funds they need to purchase fuel for the coming year and the coming winter. And I hope that they can do so immediately before supply runs out. But thank you all for the opportunity to provide public comments, and I appreciate all of your work and effort in this area.

Thank you. Thank you. Do we have any questions of the committee? It was good to see you here in Juneau just recently, and thanks for your testimony. And so next up we have the fiscal note, and I know that that had generated a fair amount of discussion earlier, and we're going to go back to— we should have Miss Director Sandra Muller online.

Director Moller, if you could put yourself on the record and walk us through the fiscal notes, and also maybe if you could read off the control codes just to make sure that we have the correct ones as you walk through them.

Yes, thank you, Chair Foster. This is Sandra Moller, and I hope you can hear me a little better. I switched out my headset. We can hear you great now. Thank you.

Great. And for the record, I am the Director of the Division of Community and Regional Affairs. And if you're looking at our fiscal note, it is a zero for the division so that there's no impact to our operations of this program. If you go to the second page, it is a recap of the two loans that we have for bulk fuel purchases, which this legislation is addressing. And it is to increase the loan amount from $750,000 cap maximum to $1.5 million cap.

It also adjusts the— what electric cooperatives purchasing on behalf of multiple communities and it removes the 1,800 requirement. So in this example, if we had 3 communities being purchased for— by one co-op, it would be 3 times the cap, so 3 times $1.5 million, so that would be $4.5 million for that example.

It would— this legislation would require capitalization. As we talked this morning, we would likely need— if we increase the cap, we would need to increase the capitalization amount. The scenarios described include the maximum The current number of borrowers, 78, if they were to all require a maximum amount, if they all requested $1.5 million, that's Scenario A, we would need an additional potential capitalization of $90 million. And that's under Scenario A. And similarly, Scenario B, It is the current number of borrowers and they increased their average number.

So again, their average for all those 78 communities is about $350,000 for a loan. And so if we increase those by 100%, the capitalization would be around $25 million for a total fund balance of $47 million. I know there was discussion. On— I know there is discussion, it is a concern we also have on having increased number of borrowers, not only our 78 that we identified. However, we believe that we have captured under Scenario B an amount that would be adequate to service not only our existing customers, but also any added.

And again, we ran several scenarios and we can run more, but these are the two we thought were most applicable for discussion. And as was discussed earlier, the loan amount to $1.5 million, we looked at three different scenarios of what we should raise that maximum to, and this $1.5 million represents a 100% increase from the current level of $750,000. Obviously, as you change that maximum loan amount, it will increase the required capitalization of the fund. Also this morning, we had heard from a fuel provider basically saying that the 100% is a very very realistic amount to be estimating for, for this loan amount. So that is our fiscal note, and happy to try to answer any questions.

Okay, thank you very much. And we're opening it up, questions to both the fiscal note, the sponsor, and to yourself, just regarding the program as a whole. And so we're going to first go to Representative Jimmy, which is where we left off at the last meeting. And then we'll come back over to Representative Bynum. Representative Jimmy.

[FOREIGN LANGUAGE] For being online and taking questions. It's kind of a hard question to ask, but I know we are trying to increase the cap for fuel, bulk fuel loans, and we still don't know the— to predict the future of the costs in the future.

Even with the rising cap from this to 1.5%. What happens if entities are unable to pay back the bulk fuel loan? Ms. Moller. Through the chair to Representative Jimmy, thank you for that question. We have a couple of levers we've used in the past.

Right now our maximum term amount The loan duration is max is 12 months. We typically do a 9-month— at the start when they get a loan they make payments based on a 9-month payback. In some cases we extend that 9 months to a 10, 11, or 12 month. So that's one way if a community is having difficulties that we work with them. Other communities we've had over the years, not Recently we've actually had a company go out of business and not pay and we've had to basically use the interest from the other loans to fulfill that amount of funding that should have been paid by that vendor and was not.

So we would— we had that ability to do that with the interest rates we charged. If as we go forward and we have defaults in the loan, it would— depending on the rate of default, it would deplete the fund. And secondarily, it would provide that entity that defaulted, they would not be able to apply for a loan for the next year. I hope that answers your question. Thank you.

Okay. Sure, Representative Jimmy. In the future, we, um, with the rising costs, this is also not going to affect how much is going to have to be paid by the consumer and be paid back as well. It'll fall on to the entities, but this will also increase, no doubt, the cost of groceries out there, the cost of living. Um, that's just— I'll just end it there.

That's my concern.

Okay. And next up we've got Representative Bynum. Thank you, Co-Chair Foster. Through the chair, just really quick, um, under Scenario B, we're saying that we would need additional capitalization of $25 million. Now let's assume that we go through the program here and we actually run short and the fund balance goes to zero.

What would happen in that scenario? Ms. Muller.

Yeah, through the chair to Representative Bynum, um, that is a concern. We've had that concern. If, um, that scenario played out and we either had larger price differentials— in other words, more communities, more entities borrowing at the max— then it would deplete our ability to encumber those funds to a loan to purchase fuel. And if we had an increased number of borrowers, that would also impact the fund. If they are in default, that again would deplete the funds.

Follow-up? Follow-up? So through the chair, would we basically just shut the loan program off then? So if a community was coming in or a borrower was coming in wanting to utilize the program, would we just say that the program is not available?

Director Mueller? Yes, through the Chair to Representative Bynum, yes, that would be correct. We would have to evaluate. Right now it's a first-come, first-served, if you will. We work with communities to get them to say— to get to a yes, here's a loan that we can provide to you.

If we were to run short of funds, we would have to turn away customers, assuming that the request to legislature couldn't be made in time to provide for those loans. So depending on that cycle, if we ran out of funds, we would be basically adjusting the way we do the program by likely turning away customers. Representative Bynum. Thank you, good chair Foster. Through the chair, aren't there mechanisms or levers that we could put into law that would allow the department to effectively borrow funds from other sources to cover those gaps until the fund is either recapitalized or borrowers pay back?

Director Moller.

[FOREIGN LANGUAGE] I am not familiar with those tools. I'm sure there are some, and we would definitely explore, you know, how to help the communities should we face that situation. And I think by discussing it, that will be on my to-do list to get, you know, more details of what happens if we've not able to supply a loan to a borrower. Thankfully, the last 8 years that hasn't happened. We have very good borrowers and very— again, it is a very successful program, and I do hope that we don't run into that type of scenario.

Representative Bynum. Thank you, Co-Chair Foster. Through the Chair, if it's possible, if you could get back to the committee that potential scenario and what levers could potentially be used short of recapitalizing or additional capitalization of the fund, that would be extremely helpful to us. You know, we want to make sure that we're providing— this is one of the things I think that is good for us to be doing, and we want to make sure that we have these programs available. But we also, you know, have a lot of constraints.

So I want to make sure that we keep the program viable and that we have options options available to us other than just fully re— or putting additional capitalization into the fund. So anything you can do to help the committee would be appreciated. Okay, next question is Representative Tomaszewski. Thank you, Co-Chair Foster. Through the chair, Miss Muller, you're talking about a fiscal note.

I didn't catch you mention the control code on that fiscal note. Can you verify I'm looking at the same Notice you.

Through the chair, if I know where to look at, I can do that.

It's at the bottom right-hand on the first page. I'm sorry, yes. The control code is capital B-R-B-X-T. Okay, thank you. And follow-up.

Follow-up. On the second page in the analysis on the fifth excuse me, 4th paragraph, you state the highest number of loans seen from the fund is 78 in 2025. And the next sentence says the current average loan amount is $358,000. Am I to correlate those two, or do you have 78 loans that are an average of $358,000, or can you tell me the number of, current number of loans you have to date. Thank you.

Through the chair to Representative Tomaszewski, this, uh, currently we, our largest number in the history of this loan that we've been tracking has been 78, and that number varies throughout the year because communities will pay off loans, so it'll dip down or we'll get a new one. So it's somewhat tricky to think about what we have because it's not static. Currently, we have about 45 loans right now, and we have 15 or so that we're working with. Some are existing, and at least one is a brand new person. So of those 78 loans that were mentioned in 2025, the average of all those loans was that number, $358.4 thousand.

Okay, thank you. Any further questions of the committee? Oh, Representative Sharkey and then Bynum. Representative Sharkey. Yeah, thank you, Coach O'Rourke.

I'm like Representative Bynum, honed in on this capitalization amount. Looking at the fiscal note, page 2, so we have 70— all-time high of 78 loans. With an average loan amount of $358,400. If I multiply those numbers, that gets me to the same number that I find on slide 14 for the total amount of loans that are out there right now, approximately $27.5 million. When I times those two numbers on page 2 of the fiscal note, I actually get $27,955,000, but they are approximately the same number.

We heard during the testimony that the fuel prices being experienced are approximately 100% more. So that would be a doubling of the amount. If all of the participants are experiencing double the cost, we would expect, I presume, that $27.5 million or $27.955 million to double. Is that a— reasonable assumption from your perspective? Director Moulding.

Yes, through the chair to Representative Sharkey. Yes, I think that is a fair assumption. And again, we have done some basic modeling and with our assumptions. So we wanted to share what numbers we had with, with the data we had. So, yes, that is correct.

[Speaker] Okay, and so just following that through, if we would expect a desired amount of loans of $55,910,000, which is, you know, just taking that number and doubling it, I get to the $55,910,000. The underlying fund right now has $50 million as its capitalization, is my understanding. So we would be approximately $6 million short if we were really trying to utilize every dollar in that fund and not put a dollar more in there. Is that accurate?

Through the Chair to Representative Schrag, I believe with those numbers that is correct. Okay. So I guess I'm trying to figure out, you know, obviously we don't want to capitalize the fund with just enough where we run into that scenario. Scenario that Representative Bynum has articulated where maybe usage is a little bit higher than double and we run out of money in that fund. We don't want that to happen.

But, you know, how do we get to a place of needing a potential capitalization of $25 million? Because by my count, the bare minimum needed would be $6 million, you know, maybe put some comfort on there of another $10 million. You know, you are at $16 million there. How do I get to $25 million as the desired capitalization under Scenario B? Director Mohler.

Through the Chair, through Representative Schrag, I think that is a great question and something we were looking at to try to see what would be the best number. I think part of the answer to that is when we get a loan, say we get a loan for $400,000 with the old numbers. We would then encumber those, and then it is not available for future loans. So at any given time, we are adjusting. So it's a comparison of obligation and encumberment, but also of cash flow, because we're paying— right now we have $22 million available.

Which means we have obligated or encumbered other monies from that loan. And that's the number that we put in the fiscal note with the $22 million that's available. And probably it might have been more clear if I put the, the $27 or the actual fund balance as if it weren't obligated.

[FOREIGN LANGUAGE] Yeah, I guess I'm just trying to figure out how to hone in on how much excess is necessary to deal with that cash flow issue. I want the program to be successful. I want communities to have access to the fuel that they need. I don't want to tie up more state funds than is necessary. Maybe there's someone smarter than I that can help hone in on this number, but I'm having a hard time understanding how we get to the $25 million exactly.

Let's see, I've got Representative Bynum, then Hannan, but Representative Hannan, do you on this point? Yes, I'm— Representative Schraggi's— where did you get $50 million as capitalization? That is the original—. Yeah, thank you, Co-Chair Foster. That is the original capitalization of the fund.

That is how much there is. In this fund. Rep. Sam Hannon. But their fiscal note is showing that they only have $22 million in capitalization. Through Co-Chair Foster.

Rep. Sam Schraggi. That's because they currently have a number of loans out. So people are utilizing that fund to purchase fuel.

But if the loan is out, we can't loan it to someone else, is my— I mean— So if we are trying to capitalize them for now and the payer isn't due to pay it back until October, it doesn't— you know, in my mind, it doesn't matter that we are going to get it paid back. We need to have that money there now. So I guess I was starting with $22 million is all they have got right now in the fund and that is how we need to get up there. Okay. Representative Sharkey.

Just to kind of finalize my thought on that, my understanding and correct me if I'm wrong, is that that's because communities already have loans out and if they have loans out, I don't think they're eligible then to take out a new loan on top of that. So maybe I'm wrong, but that's kind of the logical conclusion that I arrived at. Okay. Representative Bynum. Thank you, Co-Chair Schrag.

I look forward to seeing— correction, I don't know how I did that. Foster. Apologies.

To what the co-chair Schrag was talking about is trying to come up with a mechanism to protect against undercapitalization of the funds. So I look forward to a creative solution to that so we are not basically tying up other dollars available for other things. But through the chair, I did have a question about the amounts in loans that we have out. I was hoping that the department would be able to give us a trailing— provide to the committee prior 60 months of information with regard to the number of loans that are out in that month, the dollar amount outstanding, and the amount of money left in the fund. And then if they could also, if it is not too much trouble, to include the JET-A index along with that month.

That would be extremely helpful information to get a better idea of kind of what is going on over a 5-year period for this fund.

Okay, Director Moller, do you have any comments on that?

Thank you, Chair Foster and Representative Bynum. Yes, we have taken notes and we will get that information back to the Thank you, Andy. Okay, any further questions? Seeing none, um, that takes us to the end of our Q&A on the Bulk Fuel Loan Bill, which is HB 388. I think all of our questions have been asked, so I think maybe I'm looking at my staff in terms of thinking about amendment deadline and That's maybe something we can get out to members via email and then reiterate that tomorrow.

We are past our end of day adjournment time, which was 3:30, and so our last bill was scheduled to be Senate Bill 24. That's the tobacco and e-cigarette bill, and we'll set that bill— or we'll have to reschedule that bill and But when we do come back to that bill, we will get a recap of that bill and then we have a number of people who are online to testify. So we will have to come back to that. If there is nothing else to— let's see, our next meeting is scheduled for tomorrow at 9:00 a.m. and at that meeting we will hear House Bill 260, that is the construction project wages and liability bill as well as Senate Bill 40, the Fire Station Grant Program Bill. So if there's nothing else to come before the committee, we'll be adjourned at 3:47 PM.

Thank you.