Legislature(2001 - 2002)

04/27/2001 09:09 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 234                                                                                                            
                                                                                                                                
     An Act relating to the financing of construction and                                                                       
     renovation of certain public facilities; and providing                                                                     
     for an effective date.                                                                                                     
                                                                                                                                
Vice-Chair  Bunde MOVED to  ADOPT the  new Amendment  #1, 22-                                                                   
LS0863\O.2, 4/26/01.  [Copy on  File].  Representative Davies                                                                   
OBJECTED for discussion.                                                                                                        
                                                                                                                                
Vice-Chair Bunde  explained that  the amendment  would secure                                                                   
the final  20% of  the Tobacco  Settlement money for  funding                                                                   
smoking  education   and  cessation  and  would   remove  any                                                                   
reference to the University.                                                                                                    
                                                                                                                                
Representative  Davies  asked for  more  detail.   Vice-Chair                                                                   
Bunde explained  that "taxable versus non-taxable"  was still                                                                   
being debated.   The amendment  would provide the  detail and                                                                   
vehicle to address the consequences.                                                                                            
                                                                                                                                
Representative  Davies  questioned how  the  payout could  be                                                                   
addressed through the legislation.                                                                                              
                                                                                                                                
Representative Croft  interjected that it is  imperative that                                                                   
the final  20% of  the money  be used  for tobacco  cessation                                                                   
programs.                                                                                                                       
                                                                                                                                
Vice-Chair Bunde  explained that there is a  moral connection                                                                   
with the use of that money.                                                                                                     
                                                                                                                                
MARK HICKEY,  AMERICAN CANCER SOCIETY, COALITION  OF ALASKANS                                                                   
FOR TOBACCO FREE  KIDS, JUNEAU, discussed that  the amendment                                                                   
would  take the  remaining  20%  from the  Master  Settlement                                                                   
Agreement (MSA)  and would  trade it in  the same  fashion as                                                                   
the 40% was treated  last year.  The other 40%  would be sold                                                                   
to the  Alaska Housing Finance  Corporation (AHFC) or  to its                                                                   
subsidiary, the Northern Tobacco  Seuritization Program, with                                                                   
the intent to issue  debt bonds.  The corpus  that comes from                                                                   
that would have to be appropriated  to the account created in                                                                   
the bill.  That account is located  on Page 2, Section 3, the                                                                   
Smoking  Education   Account.    That  is  where   the  money                                                                   
generated from the  bond sale would be deposited  and subject                                                                   
for legislative  appropriation.  The  intent is to  have that                                                                   
money  used for  prevention education  cessation  activities.                                                                   
The Legislature  would  have to appropriate  annually  out of                                                                   
that  account  for  the  program.    He  concluded  that  the                                                                   
amendment attempts to address that detail.                                                                                      
                                                                                                                                
Representative Davies asked an  estimate of annual funds that                                                                   
would  be  available.    Mr. Hickey  replied  that  AHFC  has                                                                   
indicated that the range would  be between $40 to $63 million                                                                   
dollars.    Mr.  Hickey  stated the  need  was  $8.1  million                                                                   
dollars per  year, in a  perfect scenario.   It could  not be                                                                   
done  at  the  proposed  level.   The  recommendation  is  to                                                                   
provide   that  amount   as  close   as   possible,  in   the                                                                   
neighborhood  of   $5-$6  million  dollars  per   year.    He                                                                   
emphasized that number was conservative.                                                                                        
                                                                                                                                
JOHN  BITNEY,  LEGISLATIVE LIAISON,  ALASKA  HOUSING  FINANCE                                                                   
CORPORATION, DEPARTMENT  OF REVENUE, responded  that based on                                                                   
the current market condition,  the amount would need to be in                                                                   
taxable bonds  with a 25-year  term.  He believed  that could                                                                   
generate about $40 million dollars in proceeds.                                                                                 
                                                                                                                                
Co-Chair  Mulder  commented that  the  intent  was  to put  a                                                                   
"fence"  around  the  payout.    The  payout  averages  $6.82                                                                   
million  dollars.   He commented  that in  order to  maximize                                                                   
with a  minimal amount  of confusion,  the language  needs to                                                                   
clarify the intent.                                                                                                             
                                                                                                                                
Representative Croft argued that  there would be a benefit to                                                                   
using the money for cessation  programs.  He pointed out that                                                                   
the  proposed  language  moves  the Legislature  out  of  the                                                                   
program.    He  reminded  members   that  the  money  is  not                                                                   
guaranteed.                                                                                                                     
                                                                                                                                
Vice-Chair  Bunde agreed that  it is  important to  do things                                                                   
the simplest way possible, however,  there is a risk that the                                                                   
tobacco industry will fall on  hard times and that the income                                                                   
stream would  need to  be securitized for  other takers.   He                                                                   
commented that  the legislation  would build a  "moral fence"                                                                   
around  the money.    Vice-Chair  Bunde wanted  to  guarantee                                                                   
various groups  offering programs  that there would  continue                                                                   
to be an income stream.                                                                                                         
                                                                                                                                
Representative  Hudson asked  how  much money  would the  20%                                                                   
generate.  Mr.  Hickey replied that the annual  average would                                                                   
be  a little  under $5  million dollars,  unsecuritized.   In                                                                   
2008,  there would  be an  additional  $2.5 million  dollars.                                                                   
Mr. Hickey pointed out that the formula is complicated.                                                                         
                                                                                                                                
Representative  J.  Davies  WITHDREW his  OBJECTION.    There                                                                   
being NO further OBJECTION, the amendment was adopted.                                                                          
                                                                                                                                
Representative Foster MOVED to  report CS HB 234 (FIN) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal  note.  There being NO  OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CS HB  234 (FIN)  was reported  out of  Committee with  a "do                                                                   
pass" recommendation and with  a fiscal note by Department of                                                                   
Revenue.                                                                                                                        
                                                                                                                                

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