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Senate | June 19, 2013 | Committee Room | Education

Full MP3 Audio File

Ladies and gentlemen, we call the meeting to order. I gave up drinking a few years ago. I've seriously considered going back. If we've got Members around let's get them in their seats. Pages today, Caitlin Devine, [??] Senator Tucker, Bradley Anderson, Lake Forest, Senator Sanderson, Caitlin Hanson, Youngsville, Senator Barefoot, Alison Berger, Raleigh, Senator Stein, Kelly Long, Elizabeth City, Senator Cook, Caroline Peebles, Raleigh, Senator Hunt. Now, I was told how to pronounce this name and have already forgotten. Somebody help me with this name. Davilla Genaya [??] from Cary, Senator Clodfelter, Carlton Rouse from Gastonia, Senator Harrington. We've got a lot good pages today. We thank you for that, and our Sergeant-at-Arms, who always do a great job and help us to keep things moving, Billy Fritscher, Steve Wilson, Ashley Meakins, Ed Kesler. Today we've got three Bills on the docket. One of them, the first one, we're going to have discussion on the Bill, and we're not going to vote the Bill today. If Senator Meredith would come up briefly and explain the Bill and then we'll take some comments and questions from the Members, and then we have some visitors to speak. Visitors you'll be allowed to speak for two minutes and we'll go ahead with Senator Meredith. Senator Meredith on his Bill, and we do have a joint resolution that we want to do before this to honour Jean Preston and Senator Apodaca was going to be here to do that, Senator Brown or Senator Davis. Do we have that resolution? Could you pass it out? Do you have a copy? There is a PCS to the resolution. Do I have a motion to adopt the PCS? Senator Davis, the PCS is adopted and I will call on Senators that are not here yet. We'll wait just a minute. I will take the privilege of the Chair to say that I am very honoured to be able to speak on Senator Preston's behalf. She was a great Member, a lifetime educator, I think she was even a cheerleader in High School was she not? I'm also very, very honoured to have her daughter Suzanne as my legislative assistant. She is quiet and professional, just like her mother. But Jean served the State in a wonderful way in the field of education and was such a valued Member here in the legislature, in the House and in the Senate for a number of years, and we're just so thankful for her service and I miss her greatly and I know that you all who knew her certainly miss her who had a chance to work with her. Senator Pate. [SPEAKER CHANGES] Mr Chairman, at the appropriate time I'd like to move for adoption of the resolution. [SPEAKER CHANGES] I've got a motion for adoption. But before that, thank you Senator Pate, Senator Parmon. [SPEAKER CHANGES] Thank you Mr Chairman. I will never forget my first year here as a Member of the House, and very much interested in education, and doing things I shouldn't have been doing. Senator Preston came up to me. She said "young lady, I appreciate you being so interested in education but I'm going to show you how to get done what you need to get done", and she proceeded to help me. In that first year we were able to get scholarships for African American males to go into teaching and she took me under her wings and worked with me the whole time as we worked together on education and I will always...

Appreciate her for that. [SPEAKER CHANGES] Thank you, Mr. Chair. I, too, have deep appreciation for Jean Preston. Of course, this is just my second term, but my very first term, one of the first friends I made was Jean Preston, and it didn't matter what parties we were from, we had similar concerns about education and about the welfare of people, and often times, as we discussed bills going in, she and I would sit back and we would chat about what it ought to be, and what ought to happen, and the good of the kids and our education system, so I have very fond memories of Jean Preston, and certainly, I'm very supportive of the resolution, and so glad it was brought forth. [SPEAKER CHANGES] My mike was not on. Thank you. Senator Davis. [SPEAKER CHANGES] Thank you, Mr. Chair, and to the members, I can say that I really got to know Jean very well. Senator Preston was truly first class in all that she did, and I can tell you in coming to the Senate the first time, and you remember, Mr. Chair, sir, when the education -- but I must admit to you, as much as we exchanged thoughts and ideas about education, and you know, I thought a lot about those dialogues, I think the greatest came from the conversations with Senator Preston. And one thing that we had in common was definitely a love for education, but, beyond that, was her Graham County roots. She was from Graham County, and when I came, we faithfully spoke every day, it seemed, that we were here in session, and she would always reach out to me and see how things were coming, how things were coming along and I would say what a remarkable person, Suzanne, not just a person I knew as Senator Preston, but infamously known in Graham County as Pookie. [SPEAKER CHANGES] [laughter] That's right. Even that got out of Greene County, 'cause I heard that. If you knew her, you liked her, I don't think she had an enemy anywhere that I knew of, never heard anybody speaking ill of Senator Preston. A great lady, and got a great daughter here today with us, and we just say Amen to everything that's been said, and I see no other hands, I have a motion for adoption of the resolution... and we adopted the PCS earlier. We did have a motion earlier -- before adoption -- let's go back, make sure, all in favor of the adoption of the PCS, aye, any opposed, no. And we've got a motion for adoption of the PCS, and all in favor, aye, any opposed, it's adopted. Thank you. [SPEAKER CHANGES] Mr. Chair? [SPEAKER CHANGES] Senator Davis. [SPEAKER CHANGES] Thank you, Mr. Chair. I wanted to make sure we give honor to Jean, but the family has experienced many, at least a couple, of losses, and I just want to convey my deepest sympathy in regards to the entire family. They're highly regarded, well respected, and greatly appreciated in Graham County. [SPEAKER CHANGES] Thank you, well spoken, Senator Davis, thank you. At this time, we're gonna move quickly through the agenda, and the first bill is Senator Meredith's bill for discussion only, it's the Senate bill 474, the Net-Zero Energy Schools. Senator Meredith. We do have a PCS, do I have a motion for adoption? I do, Senator Parmon. Any discussion? All in favor, aye, any opposed, all right, PCS is before us. [SPEAKER CHANGES] I think, Mr. Chairman, members of the board, I'll be very brief, 'cause there's some people that would like to speak to this subject matter. Senate bill 474 is an innovative way to build public schools. I'd given you a chart that speaks to the Sandy Grove Middle School, it's a pie chart on your desk, it will show this school was actually been built in Hope County, it will show you what the traditional delivery would have cost the school in Hope County, and it also shows you what the current, based on Senate bill seven-forty-

474 bid to lower the costs of building this school. I think this pie chart speaks very strongly to what this Bill would do to help innovate schools throughout the State of North Carolina, but to be specific about it. [SPEAKER CHANGES]: Mr. Chairman? [SPEAKER CHANGES]: Yes, ??. [SPEAKER CHANGES]: Mr. Chairman, may I ask a question. [SPEAKER CHANGES]: Senator Pate, those of us on this side of the room did not receive any of the Pie. Could we have it distributed. [SPEAKER CHANGES]: We're supposed to get all the pie this week. I hope you get some pie over there. [SPEAKER CHANGES]: Someone in the front row was hanging onto the pie. Thank you. [SPEAKER CHANGES]: Thank you sir. I'll continue. That kind of speaks to what the cost would have been traditionally and what the costs were based on the formula that's covered in Senate Bill 474. I'd like to refer to staff, if I may, to kind of go over the Bill. Do you mind? Thank you. [SPEAKER CHANGES]: Section 1 of the Bill on Page 2 of the Bill specifically provides that local boards may enter into operating leases for design and construction of net-zero energy schools. Local boards can already do operating leases for school buildings and school facilities under current statutes. B2 would provide a new section, subsection, in that statute that before entering into any operating leases local boards would have to go through a resolution process as provided in the new language publishing notice of the intent to enter into an operating lease and the resolution would have to provide specific information that it is in the LEA's best interest with all the circumstances and the process the School Board went through to arrive at that conclusion to enter into the lease, and some information regarding the private developer that they would contract with for the operating lease. Section 2 of the Bill would make some changes in the utilities statutes that the net-zero energy school would produce trade-able instruments in the forms of renewable energy certificates, REC's, and there would be different credits that the Utilities Commission would assign depending on the county in which the school is located, the Tier 1, Tier 2, Tier 3, which I believe deals with the economic development of the counties, and the REC's that are generated by net-zero energy schools could be used to comply with requirements for utility providers depending on the underlying energy resource. [SPEAKER CHANGES]: You're up. Go ahead Senator. [SPEAKER CHANGES]: Thank you Mr. Chairman. I think we have some speakers that would like to speak, if they may. [SPEAKER CHANGES]: Very well, we do, and we will thank you Senator ??. We will call them in this order and you have two minutes and Sargent Long will let you know when time is almost up and then he'll let you know when time is up and first off is Robbie Ferris. Robbie, if you will give us your full name and who you are representing. [SPEAKER CHANGES]: My name is Robert Ward Ferris. I represent SFLA Architects. My company designs and develops school buildings and we, in fact, did the Sandy ?? School that Senator Meredith passed out the information on. Senate Bill 474 is all about improving the existing leasing statute. It will save the taxpayers money in two ways. Number One, it encourages the development of schools that generate more electricity than they consume. That is schools that actually have net production back to the grid and it supports the privatization of leasing of schools and we'll go over in a minute how that saves money. The Bill is by no means perfect but it does get a lot of projects moving in this State. Currently, my firm alone, has about a billion dollars worth of work in our marketing pipeline. To put it in perspective there was only a few hundred million dollars worth of new schools constructed in North Carolina or put under contract in 2012. So this could have an enormous economic impact generating roughly 4,000 construction jobs by the end of this year. The Bill does include the assignment of SREC'S, Solar REC's as either swine or poultry or other REC's. We know that Senate Bill 3 is being revisited. We understand that but Senate Bill 3 does exist currently and

and there are not projects for the utilities to currently comply with the requirements of Senate Bill 3 so this does, there are some projects I think in the works but this does give a method for compliance and it would be great for school development. It will produce great learning environments, far superior to what you can normally do, it will create thousands of jobs almost immediately and ultimately it would save the taxpayers billions of dollars and I would call your attention to this pie chart. Senator Meredith said this school in Hope County would have traditionally cost about $53,500,000 to construct. Hope County Schools will spend a total of $16.3 million, that's a total of all these payments, including utilities. That's accomplished in a number of ways, number one, by eliminating utility costs, we've got about 4.2 million in federal tax credits that went into the project. We were able to completely eliminate the interest costs, in fact, earn money on interest, so again, the total of all costs is $16.3 million dollars. Thank you. [SPEAKER CHANGE] Thank you, Robbie. The next speaker is Patrick Ballentine. If you will give us your name and who you are representing. [SPEAKER CHANGE] Thank you, Mr. Chairman. Members of the committee if I may, Mr. Chairman, if I may, make a point of personal privilege, going back to the prior resolution. I served with Jean Preston and I can't think of anybody sweeter and kinder and she was an excellent public servant and a wonderful advocate for public education. I actually was her senator, she said she voted for me, I'm not sure about that but she was a great lady and I appreciate your time. Mr. Chairman, I represent, my name is Patrick Ballentine and I represent a group called Robison for Advancement. The builder of this school the architect just spoke about,is my client and it is Alumbe Construction Company that is looking to be part of the bidding process on other schools. This bill was introduced actually before I came on board but they showed it to me and I was very intrigued with the innovative approach to this. Hope County would not have built this school, but for this concept. They just couldn't afford a new school. They needed a new school, school was bursting at the seems but they couldn't afford one for $53 million. This actually saves them about $35 million. So I was intrigued because yes, this is green, it is clean but as you know from a conservative, pro business standpoint I wanted to see the numbers and I was just amazed. It is going to help the taxpayers, it is going to help the children, it is going to help the school boards, its going to help the county commission. We have letters from the North Carolina Association of School Administrators, Hope County Board of Education, county commissioners. It is just a really good idea. There were a lot of issues with the bills. Duke Energy, the electric membership coops, the treasurer's office, all had some concerns. We have worked diligently over the last few months to try and alleviate some of those concerns and we want to work with all parties to make sure that this works for everybody but I just wanted to speak in favor of it. I think it is just an incrediably innovative idea and it is thinking out side of the box but it helps so many people in North Carolina not to mention the construction industry, so thank you so much, senators. [SPEAKER CHANGE] Thank you, Senator Ballentine. We have one other speaker who has signed up and that is Lee Ann Winter. Lee Ann. [SPEAKER CHANGE] Good morning, I am Lee Ann Winter. I'm with the North Carolina School Boards Association and I have also been asked to speak on behalf of North Carolina Association of School Administrators this morning. Both organizations do support this bill. We believe it gives us another tool in the toolbox for us to have more choices as we are looking at school construction. This method has also been tried successfully also in Texas, Nebraska, Colorado and Kentucky, just to name a few other states. As you know, North Carolina for many, many years has had a backlog in school construction and we believe anything that can save taxpayer dollars, spread those dollars further so that we can get classrooms on the ground faster is beneficial to the state of North

[Speaker changes.]...Carolina to school districts to taxpayers and to children. Thank you very much. [Speaker changes.] Thank you, Leann??????? At this time, we will go to the members to see if we have questions about the bill. Let me make one note for you. I believe the PCS means it is a crossover bill and, as you know, crossover has passed so this bill...that's why it's discussion only and I don't believe it will be eligible to be voted on but I do wanna hear your comments because there's a lot of new ideas and innovative ideas in here. I saw Senator Bryant stand first. [Speaker changes.] Thank you, Mister Chairman. I just wanted somebody to explain the finances to me. I don't really...I'm just new to this and I don't understand exactly how it works. How can you go from 53 million to 16 million and I really don't under...I'd like to...the pie chart is pretty but I don't understand it. [Speaker changes.] I (inaudible) ...exact figures so let's ask Mister Ferris????? to come back and see if he can answer that one. [Speaker changes.] Ok, to go over the pie chart in a little bit more detail...of course, this is the traditional delivery project on the left... the construction cost is about 21.5 million dollars for a traditional project. Utilities over 40 years would be about 16 million and interest on a project like this would roughly be 16 million dollars so it's three pieces of pie that are pretty close to equal. The building will generate 30% more electricity than it consumes. Ok so that will..obviously we're generating more than we consume so we've eliminated the electrical bill. It's an all electric school, ok...so we'll be selling some power back to the utility company. We were able to obtain about 4.2 million dollars in tax credits, mostly federal tax credits...some because this was a low-wealth district and some because of the solar panels and the geothermal system on the roof so that's cash into the transaction at closing. And that money's already been received. In this case, we were actually able to use some of the county's ?????????? allocation to eliminate the interest cost and, because of the way we structured that debt, we are earning a million dollars on that borrowing so there's no interest cost and there's actually a million dollars in earnings. So all of the pieces of the pie that are shaded out on the right under the lease delivery...those are costs that we've eliminated that normally would've existed in a school. So the cost goes from what would've been 53.5 million down to 16 million. And, to put it into perspective, the county...HOPE????? County has a school that we did for them about seven years ago. Their payment on that, including utilities, is about 1.5 million a year. The payment on this...the first year is $400,000. [Speaker changes.] Follow up, Mister Chair? [Speaker changes.] Follow up. [Speaker changes.] Who owns the school and what are the arrangements in that respect? Who owns it and who do they pay and what happens over forty years? How do they keep possession of it...or use of it over the forty years in this arrangement? I just don't understand it. [Speaker changes.] Okay, there's a long term lease so I own the building, my company owns the building and we lease it to the school system over...28 years, I believe is the term...and they have an option to purchase the building and it's expected that they probably will purchase the building. And we have...the way we're structuring these, moving forward, is they'll all have assumable notes so the school system would be able to purchase the building and assume the mortgage that exists because interest rates are very, very low right now so it's good...it's very good for them to be able to construct now versus having to wait. Construction costs have gone up a little but they're still relatively low. Interest rates are very low, so that's another part of the value proposition. And then, we haven't even talked about here..if they waited two years to build this building, they'd probably pay couple percent higher interest rates and construction costs would be higher. [Speaker changes.] One more follow up, Mister Chairman? [Speaker changes.] One more is it. [Speaker changes.] Is there...the amount at which they can buy it? Is that governed in the lease or is that managed by statute or is that market driven...how is that determined? [Speaker changes.] It's managed by...there's a series of accounting guidelines that govern that. There will be some small exchange of money but we have to follow what's called FAZBY???????? which is a set of accounting guidelines that governmental entities have to follow. [Speaker changes.] Thank you. One comment I'd make here...not showing in here, the cost of purchasing that building in the end...and you've got a relatively new, as far as school buildings go, at 28 years old...buildings of the last 50 or 60 years, and so you're gonna hafta purchase that...that doesn't show in these fig....

...easier so that when you're looking at the whole ball of wax, we've got to consider what that cost is going to be and you said you didn't know, it would be some figure worked out or something. I think we would need to know that before we fully look at what it's going to really cost. [SPEAKER CHANGES] The county actually owns the land, so we lease the land from the county. We lease the school building to the school. So at the end of the lease, since the county owns the land, they could technically take ownership of the building at no cost. [SPEAKER CHANGES] That building is what you said and I think that's something we want to explore here, but I know some other members have got questions. Senator Curtis. [SPEAKER CHANGES] Is the $16.3 million, is that the lease payments? [SPEAKER CHANGES] That's the total of all lease payments, including utilities and there's some maintenance items in there also. [SPEAKER CHANGES] All right. Senator Cook? [SPEAKER CHANGES] I don't understand how, you said something about we would earn interest on this. Can you explain that a little bit more, please? [SPEAKER CHANGES] Yes. As the lease payments get made from the school system, that money gets deposited into what's called an account, a guaranteed investment contract, so that money earns about two and half percent, which is a very low amount, but over time that adds up to about $1 million. This is a bullet maturity so the bondholders get paid off at the end of the financing which is a 20-year financing. So again, the county makes lease payments, that money gets deposited into a guaranteed investment contract and it earns interest. This is a very unique financing. This would not happen on every project, but this is what we did there and that's one of the advantages of the private sector doing it is we find ways to put things together that aren't normally though of being put together. [SPEAKER CHANGES] That's definitely an interesting concept. Follow up, Senator Cook? [SPEAKER CHANGES] I've always heard that if it sounds too good to believe it probably is not believable. So I'm a little worried about this. It sounds great, but I just find it difficult to believe that we can save this much money. I think your point about how the cost of the building should be reflected in this and I wonder about some of these tax credits. If in the long run will they be still available. [SPEAKER CHANGES] One other comment. I have a question for you. Who purchased the land to begin with since it's owned by the county? [SPEAKER CHANGES] The school system purchased the land to build two schools on maybe 10 or 12 years ago and they deeded the land for this project over to the county so then the county could then lease it to us and that's what gives them the guarantee that they will not have some ridiculous purchase price at the end. They own the land, the building is on the land. When the land lease expires they get the building. [SPEAKER CHANGES] Yep, but you didn't tell us what the land cost the school system or the county. That's not factored in here and when you build a building, you've got to buy a piece of land somewhere. I don't see the cost of the land in the figures. [SPEAKER CHANGES] The cost of the land... [SPEAKER CHANGES] The cost of the land. [SPEAKER CHANGES] The cost of the land was $300,000. [SPEAKER CHANGES] All right, well, that's a factor. And one other question. This was federal tax credits because of a low income district, I believe that would apply some places, but not too many places. But I do think this bill's got a lot of interest out there. Senator Robinson? [SPEAKER CHANGES] Yes. Just one other question for the presenter, Mr. Chair and thank you. I think it does have some possible potential with a lot of questions to be answered in terms of how we construct schools in the future. Since a lot of counties can't afford it. But to the gentleman there, how does your company then, of course for business it's about the profit at the end, so how does your company make some money off of this arrangement? Where do you get the final profits from? How does it benefit your company? [SPEAKER CHANGES] We make a fee on the front end to develop the project. We don't make an ongoing profit from the project. So that the money that comes in for the lease payments goes into a trust account to be held to pay the debt. So our profits are made on fees up front. [SPEAKER CHANGES] And do you take care of the architect fees? [SPEAKER CHANGES] We do. We do everything from designing the building, we develop it, construct it, we put furniture in it, technology, everything. [SPEAKER CHANGES] All right. Sounds good. Senator Pate. [SPEAKER CHANGES] Who sells the excess renewable energy to the utility and who gets that money? [SPEAKER CHANGES] We do, while we own the building and then once the school...

Senate Edu: 619: Speaker 1: xx they will purchase the building between five and seven years, they will get their access money then I would caution you thinking there’s a lot of excess money better charged by the utility company and so there is not a lot of excess money and it pretty much breaks even. It’s the goal. And thereby utility, but there is not a whole lot of excess money because of the demand charges and fees. Speaker changes: One xx Speaker changes: Under senate bill 305, if I remember correctly I have seen Miss Hawkins here I believe that the utilities I have to purchase something like 12 % of renewable energies are 12 ½ percent okay, Thank you. Speaker changes: Are we approaching that by any stretch of imagination, I guess that question I will leave for Miss Hawkins if she might answer, Mr. Chair. Speaker changes: Kathy Hawkins give us your name and who you represent. Speaker changes: Kathy Hawkins with DK Energy and thank you Mr. Chairman . Under the current senate bill three your requirement is 12 ½ percent by 2021, and it comes in phases and how utility is meeting the compliance of everything but this one in poultry xx requirement at this time. And earlier there was a comment that there aren’t a lot of projects for us to meet that compliance and I would like to state that is incorrect. We have a vast majority of solar projects coming up in our new system. Thank you. Speaker changes: Thank you, Kathy. I don’t see any other….thought/ Speaker changes: Thank you Mr. Chair, a quick question is this, as I understand the standard for renewal credit is 1 or if you want if we had multipliers may be as much as 300% will get xx Speaker changes: What’s the rational thought behind giving a 3000% multiplier since or does that impact things like what Duke’s working on? Are we going to lose interest or not?? Speaker changes: Who you asking that to? Senator Apadoca can answer anything; he may not be right[ laughter]Let’s see if Robbie or xx any of the experts can answer that. Speaker Changes: The logic behind the multiplier is that these xx have a very short life, about five years, in fact that’s been written into the substitute I think that you will see it today, so while a normal project would have a lot of life of may be forty or fifty years, this project , the racks?? At least in this project may have a life of only five years. So it’s a way to recoup some of those expenses within that life, short life. Speaker changes: Senator Apadoca this is a final question from the man from the mountain. Speaker Changes : Thank you Mr. Chairman. It’s a two part question if I may ask. Speaker changes: Yes sir. Speaker changes: Thank you Mr. Chairman. The first question, who is responsible for maintenance on the school facility? Speaker changes: I think I know but I would ask Robin. Speaker changes: Okay we give the school system the option to fully maintain it or they can maintain it with their workforces, in the case of Sandy Governor of a school her county has decided they want us to maintain the mechanical system, solar panels and the generator. We have a very very large generator at this school. So we are maintaining those things and they chose to maintain everything else, Speaker changes: Second question, What happens if the lease holder I guess in this case it is your company were to go under same circumstances. What would be the responsibility of the school at that point? Speaker changes: The owner of the building is actually a single purpose entity so this building is the only asset that entity has and so if something were to happen to that entity the school system could take that into the xx over or if something happened to our company the school system would take that into the , would purchase that entity they have the rights to purchase the building and to purchase that single purpose entity. So this entity is not entangled, doesn’t have any interest in any of our other business. Speaker changes: And that’s a really good question but I could show you Speaker changes: Well okay to follow up on my question, if the entity only has this one asset then the school system is just left holding the whole bag, is that not correct? Speaker changes: This is a bag that they would love to have if something happened. This is , there was a team of probably 20 lawyers that worked on that question for a very long time and [ laughter] Speaker changes: That. .. that’s the problem, that’s why I say see where you are going. xx thank you.[laughs] That really end the discussion. ..

...did today, but we have had some good discussion on a very innovative idea that we'll continue to give some thought to. We have one other bill for discussion on it, but I'm going to take House Bill 249 next. This is one we can dispose of quickly. If bill sponsor, Holloway, I see him over there and various others he's brought with him for armaments if he needs them. Representative Holloway? [SPEAKER CHANGES] Thank you, Mr. Chair and members of the committee. I brought my whole clan with me this morning, Mr. Chair. But the bill does simply what the title says. Substitute, or teachers when they require a sub and use a personal day, have to pay, I think it's $50. A lot of times in the school system they... [SPEAKER CHANGES] Representative? [SPEAKER CHANGES] Yes, sir. Are you ready to vote? [SPEAKER CHANGES] You're ahead right now. You've got a motion from Senator Cook for a favorable report. [SPEAKER CHANGES] I'll hush. I'll hush. [SPEAKER CHANGES] All right. Got a motion for favorable report. Any discussion? All in favor say aye, any opposed? Passed. Who do you want to handle that on floor? [SPEAKER CHANGES] You can handle it for me, if you'd like. [SPEAKER CHANGES] You want to pass? Give it here. [laughter] [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] I got one more bill for discussion only and this is House Bill 269, children with disabilities scholarship grants. And I believe we have Jordan, Brandon, Jones, Stam, who have we got here? We got Burt Jones here? Marcus Brandon? All right. OK. Representative Jones, I think you and Representative Brown have it. Go to it. [SPEAKER CHANGES] Thank you, Mr. Chair and members of the committee. The two attorneys that are sponsors on this bill are not here today, so and I understand it's for only discussion only. We can pretty much give you the short version or the long version. I'm going to start with the short version and we'll go as you see fit. Children with disabilities scholarships is already the law. If you look at the bill summary, it's already the law that they're entitled to education tax credits up to $3,000 per semester for tuition and special education. And of course, we're talking about families with children with disabilities. That's already the law. The change that House Bill 269 would make would be to extend this and make it basically a refundable tax credit. So what we're saying is that it extends this opportunity to those that really need it the most. Those that may not necessarily be having enough income, if they're paying taxes or enough taxes to qualify for this full grant, but it just extends the opportunity. Some of the questions that we addressed in the House Committee when we discussed this really had more to do with the current law that was already passed then what this bill does. And I don't really want to delve into that unless that's what you want to do. I would just say that the program as it is, it does help taxpayers because it saves the State money. It does help schools, because in a sense with the money following the child, if you will, the cost of educating these particular children and their needs in the public school system is higher than what the average cost would be. But most importantly, it helps the children and it helps the parents because it gives them the opportunity to make the choices that are best for their children. If they have children with special needs with disabilities to be able to put them in the place where they're going to get the best services for their needs. [SPEAKER CHANGES] Representative Jones, let's pause for a moment. I think Senator Parmon's got a question that can't wait. [SPEAKER CHANGES] I can wait if he wasn't what...but my question is I know its current law but under this bill, how many families or students would actually benefit from these scholarships or the tax credits? Possibly? [SPEAKER CHANGES] Brandon? [SPEAKER CHANGES] Thank you, Mr. Chair. Senator Parmon, it's a little unclear of how many because the bill still currently allows for those who are currently on the program to also be grandfathered into this program, and so the number of children that it's going to be effected will depend on really and how much we continue to allocate, and the extra people that come on after the point of the people who are grandfathered in. But this does extend it out to those families that would, because of the way we passed a bill last year, which I'll let folks know that the Senate passed it unanimously. The way we do it now is that those who didn't...

If they have to pay income taxes, they are now eligible. That just gives a lot more far reach, especially to those poor and minority families who were not able to take advantage of this now. I mean, its the first year, don't ??. [SPEAKER CHANGE] Now, before we go on, if Chris Nordstrom, I would like for a . . . To tell us, we're actually doubling from the federal 3,000, we're putting an additional 3,000 I believe in this bill. What's the price tag on that? [SPEAKER CHANGE] Sir, the fiscal implications on this bill . . . Sorry, let me pull up the note here. In 13'-14', its more the result of a timing issue. The appropriation has to be made in 13'-14' in order for the money to available to be distributed for scholarships. The tax credit is then repealed for 14'-15', so there's a $3.7 Million cost in the first year, $2.8 Million in the second year. The ramps down a little bit throughout the five year time frame of the estimate. It's down to $2.1 Million, by 2017-18'. [SPEAKER CHANGE] I was told at one point there would be a net savings, since we were putting a little less money there than the state is spending on those children. I guess I was wrong about that. [SPEAKER CHANGE] Sir, the original program of House Bill 344 that was passed in 2011, I believe there were savings associated with that bill. There is a cost, mostly due to this timing issue of replacing the tax credit with a scholarship program. [SPEAKER CHANGE] Okay. Very well. Lets see if we have some questions, folks. I think the idea is one that is certainly worth discussing. Senator Bryant. [SPEAKER CHANGE] I was just wanting an update on how many people are currently using the tax credit and the cost is of that, if we know. How many years has it been going on, is it one year or two year? [SPEAKER CHANGE] Mr. Chairman can get staff over, we have Julia here who might know . . . You don't know that information. Lets just get staff to answer that for me. [SPEAKER CHANGE] Anybody have . . . Chris, I believe may have . . . [SPEAKER CHANGE] Chris Archer, from fiscal again. In the 2011 taxable year, we have 619 returns that claimed the tax credit. Preliminary data through March 12, 2013 indicated that 485 returns reported an associated tax credit value of $1.2 Million for the 2012 taxable year. Of course, 2012 taxable year they're still getting returns, so there's not final number there for the 2012 taxable year. [SPEAKER CHANGE] One more question. [SPEAKER CHANGE] One follow up. [SPEAKER CHANGE] One of the things I do hear from my community, and I'm not sure its addressing the summary and I get some of these different bills confused. Is there any accountability requirements, in terms of what is provided to these children with special needs, by wherever the person goes? Since the credit goes to the family, I mean, is there any criteria in terms of how its used and what has to be provided, or is it solely driven by the choice of the family? [SPEAKER CHANGE] Senator Bryant, I understand that, you know, the public school system is the one that issues the IEP, I think thats what it's called. The answer is, yes. They do have to actually obtain the services. They can't just say, I'm going to pull my child out of the public schools and I'm going to get this scholarship. They actually have to show that they are obtaining the services that they need. [SPEAKER CHANGE] A follow up. [SPEAKER CHANGE] Last follow up. [SPEAKER CHANGE] Who monitors whether or not, when we pay whatever we pay, either the child has IEP, we pay whatever we pay at the state supposedly for this child to get services elsewhere. Who monitors whether or not that ever happens or not. Is there anyone? [SPEAKER CHANGE] Senator Bryant, I appreciate your question. From what I remember and this is the PPI is in charge of making sure that happens. If you look at the bill summary, in the section of the reporting it talks about PPi and the requirements they need to do to make sure they accommodate the program. But, I'll be glad if staff wants to clarify that further. [SPEAKER CHANGE] Last question from Senator Robinson. Then we'll have to clear the room. [SPEAKER CHANGE] Thank you, Mr. Chair. I think I have two questions, several concerns, one is a credit to the parent is one thing, but the assurances of the service to the child with the developmental disability is at issue. If the IEP is issued by the

The school system, Ben how does the school system make sure some other school that they have no authority over and hears to the requirements of the IEP and that gets back to the accountability issue. Is there anything in this bill that says wherever the child goes they are responsible to make sure that those criteria being made for the child's need. [SPEAKER CHANGES]: Those questions all revolve around who is here ?? of the private schools that are going to be doing the program, and we have got representative Stam here who is ??. May be he can answer that one. [SPEAKER CHANGES]: The parents of the ?? of that, and they have also suggested in the house that was defeated that public schools should keep the hands on that, but the problem is this, this is like specially ?? what the kid needs to do for a physical disability is swim everyday. So, they find a private school that's perfect, that doesn't have a swimming pool. So, they use their money, under this bill, to go swim everyday. That doesn't have to be done at the school. Same thing a speech pathologist ?? the school doesn't have to provide the daily services, but for the reimbursement to happen the parents have to prove to the SEAA to get reimbursement that they received daily services. [SPEAKER CHANGES]: Yes I follow this. [SPEAKER CHANGES]: ?? follow-up center. [SPEAKER CHANGES]: When follow-up based on the answer I just got is there any liability then to the school system if the child actually did not since the parents determine what the child needs, and the Federal Law has some determination in terms of what those services for their child since the parents determines. Is there any liability issues for the school system then. [SPEAKER CHANGES]: ?? the representative Stam for that. [SPEAKER CHANGES}: I was advised by a staff previous thing, the answer for that is no. [SPEAKER CHANGES]: Final question, we have got ?? for another committee ??. [SPEAKER CHANGES]: I am not clear, ?? could help me better understand how it is that this program appears to cost us ?? when we are saving money in the schools by, we are spending more on the child in the public school then this credit is worth. [SPEAKER CHANGES]: ?? time ?? I don't think that this school not shows the savings to the counties. Is that correct Mr.??. So the tax payers are also county tax payers as well by ?? before Mr. ??. [SPEAKER CHANGES]: The bill that's currently being discussed is replacing an existing program. There is a cast related to replacing that existing program that has representative ?? mostly due to timing issue. From the county's perspective the expectation is there would be no change in the number of students coming or going, so this bill that is currently being discussed doesn't impact the county's role which is why there is no look at the county impact. The impact of the original bill, there would be some savings there involved but the current bill, there are no savings. [SPEAKER CHANGES]: We will take up a couple of those other financial questions that I have sent to Cook when do we have to get a ?? since we are putting in less. The public ?? don't want to paying less for these kids than the cost. So, I think, somehow we have got to find out where that trigger is. I know the start up and the transition is going to cost that we develop those later, we have got to in the meeting ?? set up for another committee. But very good discussion, thank you. [SPEAKER CHANGES]: Thank you.