Legislature(2017 - 2018)HOUSE FINANCE 519

04/19/2017 01:30 PM House FINANCE

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* first hearing in first committee of referral
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Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 90(FIN) Out of Committee
Moved HB 167 Out of Committee
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 19, 2017                                                                                            
                         1:38 p.m.                                                                                              
1:38:10 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Foster  called the House Finance  Committee meeting                                                                    
to order at 1:38 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Paul Seaton, Co-Chair                                                                                            
Representative Les Gara, Vice-Chair                                                                                             
Representative Jason Grenn                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Dan Ortiz                                                                                                        
Representative Lance Pruitt                                                                                                     
Representative Steve Thompson                                                                                                   
Representative Cathy Tilton                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Senator  Anna  MacKinnon,   Sponsor;  Laura  Cramer,  Staff,                                                                    
Senator Anna MacKinnon;  Deven Mitchell, Executive Director,                                                                    
Alaska   Municipal  Bond   Bank  Authority,   Department  of                                                                    
Revenue; Kendra  Kloster, Staff, Representative  Chris Tuck;                                                                    
Courtney  Enright, Staff,  Representative Gabrielle  LeDoux;                                                                    
Crystal  Koeneman, staff  to Representative  Sam Kito;  Sara                                                                    
Chambers,  Acting Director,  Alcohol  and Marijuana  Control                                                                    
Office,  Department  of  Commerce,  Community  and  Economic                                                                    
Development; Representative Sam Kito.                                                                                           
PRESENT VIA TELECONFERENCE                                                                                                    
Bob Doehl,  Deputy Commissioner, Department of  Military and                                                                    
Veterans  Affairs;   John  James,  Colonel,   Department  of                                                                    
Military  and  Veterans  Affairs; Mark  Richards,  Executive                                                                    
Director, Resident  Hunters or Alaska, Fairbanks;  Al Brett,                                                                    
Self,   Fairbanks;   Angela    Birt,   Chief   Investigator,                                                                    
Corporations,   Businesses   and   Professional   Licensing,                                                                    
Department of Commerce, Anchorage.                                                                                              
HB 90     OCC. LICENSING FEES; INVESTIGATION COSTS                                                                              
          CSHB 90 (FIN) was REPORTED OUT of Committee with                                                                      
          a "do pass" recommendation and with a previously                                                                      
         published fiscal impact note: FN1 (CED).                                                                               
HB 150    PAY, ALLOWANCES, BENEFITS FOR MILITIA MEM                                                                             
          HB 150 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
HB 167    STATE AGENCY PERFORMANCE AUDITS                                                                                       
          HB 167 was REPORTED OUT of Committee with an                                                                          
          "amend" recommendation and with one new zero                                                                          
          fiscal note by the Legislature.                                                                                       
SB 97     PENSION OBLIGATION BONDS                                                                                              
          SB 97 was HEARD and HELD in committee for further                                                                     
Co-Chair Foster reviewed the agenda for the day.                                                                                
SENATE BILL NO. 97                                                                                                            
     "An Act relating to pension obligation bonds."                                                                             
1:39:24 PM                                                                                                                    
SENATOR  ANNA MACKINNON,  SPONSOR, explained  that the  bill                                                                    
took  the  current  statutory  $5  billion  pension  bonding                                                                    
authority  and  reduced  the  amount  to  $2.5  billion.  In                                                                    
addition,  the legislation  required  the administration  to                                                                    
submit  a  proposal  to the  Legislative  Budget  and  Audit                                                                    
Committee  (LBA)  within  45 days  of  issuing  any  pension                                                                    
obligation bonds  (POBs). She noted  that the  procedure was                                                                    
the same as  any RPL (request per  legislature). She pointed                                                                    
out  that  the  process  included  the  legislature  in  the                                                                    
process and  allowed for time  to respond if  necessary. She                                                                    
believed the  administration supported the  legislation. She                                                                    
recounted  that in  the prior  year when  the administration                                                                    
proposed the  POB plan, her constituents  requested the bill                                                                    
and  questioned  whether  any amount  of  the  authorization                                                                    
should  be spent  on POBs  due  to the  inherent risks.  She                                                                    
thought  that   the  administration  had  proposed   a  very                                                                    
conservative  approach to  POB's. She  detailed that  unlike                                                                    
other cities  or states, the administration's  plan "did not                                                                    
take all  of the  benefits upfront."  Other states  that had                                                                    
defaults  with POB's  "took all  of the  benefits when  they                                                                    
were  most  at  risk."  The state's  approach  deferred  the                                                                    
smaller payments until the end  of the loan proposition. She                                                                    
reiterated   that   the    administration's   approach   was                                                                    
conservative. She  informed the committee that  if the state                                                                    
had  issued  POB's  in  2007 the  results  would  have  been                                                                    
positive. Had  the Walker  administration issued  POB's last                                                                    
year  positive gains  were also  anticipated. She  qualified                                                                    
that  the "positive  influences" needed  20 to  30 years  to                                                                    
come to fruition which prompted  her to introduce SB 97. She                                                                    
believed that the  legislation did not tie the  hands of the                                                                    
administration,  invited  engagement with  the  legislature,                                                                    
and  added  a layer  of  transparency  to the  process.  She                                                                    
offered to review the sectional analysis.                                                                                       
1:43:16 PM                                                                                                                    
LAURA  CRAMER,  STAFF,  SENATOR  ANNA  MACKINNON,  read  the                                                                    
sectional analysis:                                                                                                             
     *Section  1: Requires  a subsidiary  created under  the                                                                    
     Alaska   Housing  Finance   Corporation  to   submit  a                                                                    
     proposal  to the  Legislative Budget  and Audit  (LB&A)                                                                    
     Committee prior  to borrowing  money and  issuing bonds                                                                    
     for the purpose of  financing or facilitating financing                                                                    
     of a governmental employer's  share of unfunded accrued                                                                    
     actuarial liability of retirement systems                                                                                  
     *Section  2: Creates  a  new  subsection outlining  the                                                                    
     process  for   submitting  a   proposal  to   the  LB&A                                                                    
     *Section  3:  Requires  the  State  Bond  Committee  to                                                                    
     submit  a  proposal  to the  LB&A  Committee  prior  to                                                                    
     issuance  and  sales  of  bonds   for  the  purpose  of                                                                    
     financing or  facilitating financing of  a governmental                                                                    
     employer's   share   of  unfunded   accrued   actuarial                                                                    
     liability  of retirement  systems, including  the costs                                                                    
     of issuance and administration                                                                                             
     *Section  4: Creates  a  new  subsection outlining  the                                                                    
     process  for   submitting  a   proposal  to   the  LB&A                                                                    
     *Section 5:  Amends the  pension obligation  bond limit                                                                    
     from $5,000,000,000 to $2,500,000,000                                                                                      
     *Section  6:  Requires   the  Pension  Obligation  Bond                                                                    
     Corporation to submit a proposal  to the LB&A Committee                                                                    
     prior to  issuance and sales  of bonds for  the purpose                                                                    
     of   financing   or   facilitating   financing   of   a                                                                    
     governmental  employer's  share   of  unfunded  accrued                                                                    
     actuarial  liability of  retirement systems,  including                                                                    
     the costs of issuance and administration                                                                                   
     *Section  7: Creates  a  new  subsection outlining  the                                                                    
     process  for   submitting  a   proposal  to   the  LB&A                                                                    
     *Section  8: Requires  the Alaska  Municipal Bond  Bank                                                                    
     Authority to  submit a proposal  to the  LB&A Committee                                                                    
     prior to  issuance of  bonds, notes,  commercial paper,                                                                    
     or  other  obligations  for the  purpose  of  assisting                                                                    
     employers to prepay all or  a portion of their share of                                                                    
     unfunded  accrued actuarial  liabilities of  retirement                                                                    
     systems in an effort to reduce their costs                                                                                 
     *Section  9: Requires  a subsidiary  created under  the                                                                    
     Alaska  Municipal  Bond  Bank  Authority  to  submit  a                                                                    
     proposal  to  the  LB&A Committee  prior  to  borrowing                                                                    
     money and  issuing bonds for  the purpose  of financing                                                                    
     or facilitating financing  of a governmental employer's                                                                    
     share  of  unfunded   accrued  actuarial  liability  of                                                                    
     retirement systems                                                                                                         
     *Section  10: Creates  a new  subsection outlining  the                                                                    
     process  for   submitting  a   proposal  to   the  LB&A                                                                    
     *Section 11:  Conforming language  for the powers  of a                                                                    
     subsidiary   corporation  created   under  the   Alaska                                                                    
     Municipal Bond Bank Authority                                                                                              
     *Section 13:  Conforming language  for the  issuance of                                                                    
     bonds  and  notes by  the  Alaska  Municipal Bond  Bank                                                                    
1:45:06 PM                                                                                                                    
Vice-Chair Gara recalled  that in 2007 he  was supportive of                                                                    
investing  in POB's.  He noted  the unpredictable  nature of                                                                    
the  stock market.  He wondered  why the  current investment                                                                    
climate  with  rising interest  rates  was  a good  time  to                                                                    
invest in  POB's. Senator MacKinnon  explained that  in 2007                                                                    
the state  was facing a  $10 billion to $12  billion pension                                                                    
liability of  which, the  $5 billion  figure was  roughly 50                                                                    
percent of the liability but  did not factor in the unfunded                                                                    
liability for healthcare costs.  When the legislature issued                                                                    
a cap  of $5 billion it  was less than 50  percent yet still                                                                    
considered  a  significant  amount. Currently,  the  state's                                                                    
unfunded  liability  was  $6.1  billion.  The  $2.5  billion                                                                    
number was less  of a ratio but still  reduced the liability                                                                    
and  was  close  to  the amount  the  administration  deemed                                                                    
reasonable to sell  in the market at one  time. The unfunded                                                                    
liability was  only as  accurate as  the performance  of the                                                                    
assumptions of  the rate of  the return. She  clarified that                                                                    
the  $$6.1 billion  figure  was as  reliable  as the  credit                                                                    
rating agencies reports that contained  the numbers and were                                                                    
based on assumptions that  the state's actuaries calculated.                                                                    
She reminded the committee  that the legislature contributed                                                                    
$3 billion in FY 15 in order to reduce the debt load.                                                                           
Co-Chair Foster  noted Representative Pruitt had  joined the                                                                    
Vice-Chair Gara  commented that he  understood the  risk and                                                                    
ascertained that in  hind sight, he wished  the state issued                                                                    
the POB's  in 2007.  He asked why  POB"s were  authorized in                                                                    
the past but never  issued. Senator MacKinnon confirmed that                                                                    
POB's were  issued in 2007  but no proposal was  ever issued                                                                    
until  the current  governor believed  that  the market  was                                                                    
"timed right." She related that  the public opposed the bond                                                                    
issue because  of the  risk and the  proposal was  "met with                                                                    
1:50:22 PM                                                                                                                    
Representative Grenn  cited the  sponsor statement  and read                                                                    
the following:                                                                                                                  
     Credit rating agencies continue to monitor our                                                                             
     activities and the policy measures we pass to improve                                                                      
     our financial foundation.                                                                                                  
Representative Grenn  inquired whether lowering  the bonding                                                                    
authority  contributed  to   improving  the  state's  fiscal                                                                    
foundation or was  a "prudent" change to  protect our credit                                                                    
rating.  Senator   MacKinnon  believed  that   lowering  the                                                                    
authority would be  positively viewed by the  market and the                                                                    
Representative Ortiz asked about  any potential downsides of                                                                    
the  action. Senator  MacKinnon responded  that she  did not                                                                    
see any. She indicated that  she always attempted to balance                                                                    
both  sides   of  the  issue   with  any   legislation.  She                                                                    
acknowledged  that many  thought  POB's were  too risky  and                                                                    
should be  avoided. She  agreed that  the bonds  required 30                                                                    
years of  returns to  work and were  risky. She  thought the                                                                    
legislation was a  compromise and was a "nod"  to the credit                                                                    
rating agencies  that sent  the message  that the  state was                                                                    
not relying  on debt  to solve the  problem. She  added that                                                                    
utilizing  debt might  be  a component  but  not the  entire                                                                    
approach.  Representative  Ortiz  asked what  the  negatives                                                                    
were  of   taking  the  liability  down   to  zero.  Senator                                                                    
MacKinnon pondered whether the  legislature could "sustain a                                                                    
legislative  override"  for  a   governor's  veto.  She  had                                                                    
confidence   that  both   legislative   bodies  endorsed   a                                                                    
reasonable approach to alert credit  agencies that they took                                                                    
the  state's financial  situation seriously  by not  totally                                                                    
relying on debt  to solve the problem. She  mentioned the $3                                                                    
billion pension liability payment as proof.                                                                                     
1:54:15 PM                                                                                                                    
Co-Chair Seaton  mentioned the idea  of taking  the unfunded                                                                    
liability to zero.  He wondered at what point  the state was                                                                    
required  to  pay  post-retirement pension  adjustments  the                                                                    
state was required to pay  to the retired employees. Senator                                                                    
MacKinnon reported that  when the state hit  100 percent [no                                                                    
liability] the  retirees could ask for  additional benefits.                                                                    
When  the  $3  billion  payment   was  made  in  FY  15  the                                                                    
legislature's goal was to achieve  80 percent funding of the                                                                    
state's liability  and was  the point  debt could  be repaid                                                                    
with "positive investment returns."  She had voted with many                                                                    
of her colleagues  in favor of much of the  money paying for                                                                    
the  Teaching  Retirement  System (TRS)  instead  of  Public                                                                    
Employees'  Retirement System  (PERS).  She delineated  that                                                                    
the  TRS debt  was entirely  the state's  debt but  PERS was                                                                    
shared  with  the  municipalities  at a  60  percent  to  40                                                                    
percent split.  The House  and Senate  came together  to pay                                                                    
the state's  100 percent  debt and  attempted to  achieve an                                                                    
overall 80 percent ratio. She  cautioned against achieving a                                                                    
90 percent ratio because if  the state over-contributed than                                                                    
retirees  could   ask  for  more.  She   believed  in  being                                                                    
cognizant of  how much the  state could fund  the liability.                                                                    
She thought  that the  state's estimated  unfunded liability                                                                    
was understated due to the  current rate of return. Co-Chair                                                                    
Seaton recapped  that Senator  MacKinnon discussed  that the                                                                    
state owned  100 percent  of the TRS  liability and  only 60                                                                    
percent of the  PERS. He queried whether the  state would be                                                                    
better  off funding  its 100  percent  liability versus  the                                                                    
PERS system. He  indicated that if the state  funded PERS at                                                                    
100   percent   liability,   the   state   would   pay   the                                                                    
municipalities' retirement  reimbursement and end  up paying                                                                    
for  their debt.  He asked  whether  she objected  directing                                                                    
POB's to the TRS system.                                                                                                        
1:58:47 PM                                                                                                                    
Senator  MacKinnon  responded  that  the  bill  was  in  the                                                                    
committee's possession and she  would trust the judgement of                                                                    
the committee. She detailed that  when the state established                                                                    
the 22  and 12 percent  ceilings on  municipal contributions                                                                    
the numbers were a compromise.  The municipalities asked the                                                                    
state  of Alaska  to help  fund the  liabilities. The  state                                                                    
chose  to  help by  extending  the  years  on the  debt  and                                                                    
thereby lowering the  payments. She did not  think the state                                                                    
should  turn  away  from the  municipalities  struggle  with                                                                    
meeting  the payment  obligations  and  avoid burdening  the                                                                    
local  communities further  by  not providing  more than  60                                                                    
percent.  She   advocated  working  together  in   the  best                                                                    
financial  interest  of  all and  not  exclude  helping  the                                                                    
municipalities.  She  hoped  that the  administration  would                                                                    
talk with the legislature  regarding the municipalities when                                                                    
considering  POB's.  She  remembered  that  the  legislature                                                                    
directed  the  administration  to  deposit much  of  the  $3                                                                    
billion to TRS  but still wanted to make a  deposit into the                                                                    
PERS system  to help  local communities  and the  state. She                                                                    
remarked  that the  cap set  at  22 percent  meant that  the                                                                    
state was paying the portion above 22 percent.                                                                                  
Representative  Pruitt questioned  the  role of  LBA in  the                                                                    
bill.  He noted  that  ultimately  the administration  could                                                                    
make  its own  decisions regarding  RPL's. He  asked whether                                                                    
the  sponsor   considered  granting   LBA  the   ability  to                                                                    
ultimately  veto an  issuance  of  POB's. Senator  MacKinnon                                                                    
responded that  last year  the administration  had responded                                                                    
to  concerns   raised  by  the  House   and  Senate  Finance                                                                    
Committees  regarding the  proposed POB  plan. She  revealed                                                                    
that  any  issues  raised against  POB's  could  cause  "the                                                                    
buyers  to increase  the cost  of debt  through risk."  "The                                                                    
minute the legislature starts talking  in a negative way the                                                                    
administration had to include  the documentation in the bond                                                                    
packets." She  concluded that LBA was  the appropriate place                                                                    
to  decide on  the  issuance because  if the  administration                                                                    
decided to proceed  regardless, all that was  needed to stop                                                                    
the process  was for the  legislature to write a  letter and                                                                    
the  credit  rating would  increase.  She  relayed that  the                                                                    
Senate Finance Committee had written  a letter without prior                                                                    
knowledge   of  the   consequences.   She   felt  that   the                                                                    
administration was  sensitive to the issue  and the reaction                                                                    
of the  legislature. In addition,  the state's  debt manager                                                                    
was required  to relay  any issues to  the purchaser  of the                                                                    
bonds.   Representative   Pruitt   acknowledged   that   the                                                                    
administration  had  consulted  with  the  legislature  over                                                                    
whether to proceed with the  POB's. He surmised that Senator                                                                    
MacKinnon  was  comfortable  with  LBA's  role  due  to  the                                                                    
increased costs  of bonding signaled by  any resistance from                                                                    
the   legislature.   Senator   MacKinnon  replied   in   the                                                                    
affirmative.  She  discerned  that  even  a  dialog  raising                                                                    
concerns  about POB's  in the  LBA  committee process  could                                                                    
trigger a rate increase  based on borrower's discomfort. She                                                                    
felt  comfortable  with the  language  but  deferred to  the                                                                    
2:07:20 PM                                                                                                                    
Representative  Guttenberg  reminded  members  to  refer  to                                                                    
Mayor  Navarre's  comments on  the  debt  liability and  its                                                                    
origins in  previous testimony.  [Mayor Mike  Navarre, Kenai                                                                    
Peninsula  Borough,   Presentation  to  the   House  Finance                                                                    
Committee  on March  28, 2017]  He surmised  that last  year                                                                    
when the  governor announced the  POB issuance  and received                                                                    
strong opposition  resulting in his decision  not to proceed                                                                    
indicated that the  "process did work." He  thought that the                                                                    
LBA  provision  in  the  bill   in  favor  or  against  held                                                                    
"significant" sway over  whether to proceed or  not. He felt                                                                    
that the state  already had a system that  appeared to work.                                                                    
He  wondered  why  the process  needed  to  change.  Senator                                                                    
MacKinnon relayed  that the debt to  bonding authority ratio                                                                    
was presently  a significantly  larger portion  of potential                                                                    
indebtedness  that carried  great risk.  The bill  offered a                                                                    
similar ratio as  the situation in 2007.  She qualified that                                                                    
the  state was  underestimating  the liability  but did  not                                                                    
think  the  ratio  should be  above  50  percent  especially                                                                    
without approval  of the legislature. She  revealed that the                                                                    
administration was  supportive of  the lower  authority. She                                                                    
maintained that  SB 97  was a positive  move for  the states                                                                    
bond rating and offered a  positive ratio. She believed that                                                                    
the LBA provisions  created a formal process  to include the                                                                    
legislature in  the decision. Representative  Guttenberg was                                                                    
wondering what  the state was  trying to fix.  He reiterated                                                                    
his belief  that the system  worked last fall.  He suggested                                                                    
that merely not using the  $5 billion authority was an asset                                                                    
and had  a value. He  felt that  the authority and  its best                                                                    
use was  "a tool  in the state's  coffer." He  believed that                                                                    
the  administration's   acceptance  of  the   lower  bonding                                                                    
authority  was its  "standard answer"  for "making  do" with                                                                    
2:13:58 PM                                                                                                                    
Representative   Thompson  was   sensitive  to   the  issues                                                                    
regarding   the  local   contribution.  He   spoke  to   his                                                                    
experience as  the previous mayor of  Fairbanks. He recapped                                                                    
that  when he  was mayor  the  city had  requested its  PERS                                                                    
balance from the state actuarial.  He reported that the city                                                                    
was told  it had an  excess of  $35 million and  three years                                                                    
later  the state  claimed  the city  owed  $130 million.  He                                                                    
noted that  the 22  percent cap was  imposed in  response to                                                                    
the situation.  Senator MacKinnon replied that  the bill did                                                                    
not alter  the contribution rate. She  countered that credit                                                                    
rating  agencies were  aware that  Alaska could  utilize its                                                                    
unissued debt  and further indebt  the state.  The situation                                                                    
jeopardized the state's bond rating.  She commented that the                                                                    
by reducing  the bonding authority  the legislation  put the                                                                    
state  in  the right  direction.  She  advocated taking  the                                                                    
state's pension  obligation "very  seriously." She  spoke to                                                                    
the  current  fiscal crisis  and  funding  the $2.8  billion                                                                    
budget  deficit  as  a  priority  and  considered  the  $6.1                                                                    
billion  pension obligation  and  future  indebtedness as  a                                                                    
"background issue" that needed to be addressed.                                                                                 
Representative  Pruitt referenced  the discussion  regarding                                                                    
the credit rating. He wondered  whether lowering the bonding                                                                    
authority  thereby lowered  "the  potential opportunity  for                                                                    
debt" and the ratio.                                                                                                            
DEVEN  MITCHELL, EXECUTIVE  DIRECTOR, ALASKA  MUNICIPAL BOND                                                                    
BANK  AUTHORITY,  DEPARTMENT  OF REVENUE,  replied  that  he                                                                    
agreed   with   Senator   MacKinnon  that   an   outstanding                                                                    
authorization  impacted  credit.  He  relayed  that  in  the                                                                    
current  situation, the  authority was  for a  liability the                                                                    
state  already   had  "and  was  a   little  different."  He                                                                    
recounted that  last fall the  $2.3 billion to  $3.3 billion                                                                    
POB's  issuance  proposal  received  ratings  in  line  with                                                                    
current ratings  except for Standard and  Poor's decrease of                                                                    
a "notch"  from AA+  to AA flat.  He likened  predicting the                                                                    
credit rating agencies was similar  "to reading tea leaves."                                                                    
He understood  the legislature's  point of view.  He offered                                                                    
that  as an  "issuer  of debt"  he  perceived that  "greater                                                                    
flexibility  resulted  in  better  execution"  of  debt  but                                                                    
recognized the  need for a  balanced approach.  He concluded                                                                    
that  "at the  end of  the  day he  could not  think of  any                                                                    
objection to reducing the current authorization."                                                                               
Representative   Guttenberg   clarified  that   bonds   were                                                                    
prohibited  from  any  other type  of  use  besides  pension                                                                    
obligations. Mr.  Mitchell responded in the  affirmative. He                                                                    
qualified   that   when   the  initial   authorization   was                                                                    
established   the  legislation   included   a  "couple"   of                                                                    
different  types of  authorization  based  on the  financial                                                                    
situation  at the  time that  would not  be utilized  in the                                                                    
"current construct of the retirement  system." He noted that                                                                    
one  provision granted  the municipalities  use of  the bond                                                                    
bank to cover  the unfunded liability. He  revealed that the                                                                    
option  was  not  viable  because  the  bonding  would  only                                                                    
benefit the state and not  the municipality. He informed the                                                                    
committee   that  the   current  PERS   actuarially  assumed                                                                    
contribution rate  was over  26 percent,  the municipalities                                                                    
paid 22 percent  and the state paid the  remainder. He added                                                                    
that funding the  debt service was based on  a commitment by                                                                    
the  legislature and  the administration;  no collateral  or                                                                    
taxing  pledge  was  committed  to  the  debt  service.  The                                                                    
state's  commitment  to  the  debt  service  was  a  "lesser                                                                    
pledge"  than   what  was  typical  in   "other  instances."                                                                    
Representative  Guttenberg  asked  whether  the  POB  credit                                                                    
rating "stood  alone or  was built  into the  state's credit                                                                    
rating  as a  whole."  Mr. Mitchell  answered  that the  POB                                                                    
credit rating  relied on the  state's credit rating  and was                                                                    
one  notch  under  the state's  overall  credit  rating.  He                                                                    
elucidated that the legislation  required a credit rating of                                                                    
at least AA minus.  Representative Guttenberg clarified that                                                                    
the $3  billion payment was a  cash infusion and not  a bond                                                                    
issue. Mr. Mitchell responded that he was correct.                                                                              
2:25:52 PM                                                                                                                    
Vice-Chair  Gara   mentioned  the  provision  that   a  bond                                                                    
issuance was  predicated on consent  by LBA within  45 days.                                                                    
He wondered whether the time  lag would have "a potential or                                                                    
material imperial"  on the  issuance. Mr.  Mitchell answered                                                                    
in  the  negative.  He  related that  last  year  the  state                                                                    
engaged  in  79  meetings with  institutional  investors  in                                                                    
order to sell  the bonds and the day before  the pricing and                                                                    
commitment the state  reneged on the sale.  He revealed that                                                                    
as  a  result  the  banking community  would  only  purchase                                                                    
future  POB's  from  the  state with  some  type  of  formal                                                                    
approval  from the  legislature. He  indicated that  the LBA                                                                    
provisions  formalized  the  current "ad  hoc  process."  He                                                                    
determined  that there  was "a  lack of  clarity" on  how to                                                                    
obtain the  appropriate approval  from the  legislature that                                                                    
the bill provided.                                                                                                              
Co-Chair   Seaton  asked   Mr.  Mitchell   to  explain   the                                                                    
difference between  soft and  hard obligations  for unfunded                                                                    
liability payments.  Mr. Mitchell  explained that  the state                                                                    
could choose  not to fund the  annual actuarially determined                                                                    
funding requirements  without "negative  ramification." When                                                                    
debt  was  issued  making  it   a  hard  liability,  missing                                                                    
payments resulted in consequences  such as rating downgrades                                                                    
and lost access to the  capital markets. He ascertained that                                                                    
recently "an  evolution of  pension liability  was underway"                                                                    
and was elevated in the  considerations of the credit rating                                                                    
agencies. He  detailed that a  failure to pay  POB liability                                                                    
resulted in  a similar  rating downgrade  as a  debt service                                                                    
payment. Co-Chair  Seaton had  expressed concerns  about the                                                                    
pension  adjustments  when the  liability  was  paid at  105                                                                    
percent. He  wondered whether the  state was  statutorily or                                                                    
contractually obligated  to pay the  post-retirement pension                                                                    
obligations  in addition  to  cost-of-living increases.  Mr.                                                                    
Mitchell   deferred  the   question  to   the  Division   of                                                                    
Retirement and  Benefits. He thought that  the payments only                                                                    
applied to Tier 1 retirees.                                                                                                     
2:31:09 PM                                                                                                                    
Co-Chair  Seaton referenced  the  state's split  obligations                                                                    
between PRS and  TRS. He questioned whether  the state could                                                                    
issue  POB's  to  the  percentage  of  liability  where  the                                                                    
municipality would  not need to  pay its contribution  at 22                                                                    
percent.  He  wondered  whether the  18  percent  obligation                                                                    
would  apply  or could  POB's  be  structured  in a  way  to                                                                    
maintain the  22 percent split.  Mr. Mitchell  answered that                                                                    
the  22 percent  was  statutorily set  in  SB 125  (Pers/Trs                                                                    
Contribut'ns;Unfunded  Liability)  [CHAPTER   13  SLA  08  -                                                                    
04/08/2008]  and did  not fluctuate.  He  learned last  fall                                                                    
that  the way  the  actuarial math  worked, any  significant                                                                    
cash  payment into  PERS over  $500  million diminished  the                                                                    
percentage  of payroll  requirement  in the  short term.  He                                                                    
discovered  that   the  22  percent  was   a  "hard  payment                                                                    
requirement" set  in statute. Last  year's $3.3  billion POB                                                                    
transaction  proposal would  have funded  TRS at  90 percent                                                                    
and  the  portion  that  the  state  paid  would  have  been                                                                    
refinanced if  the bonds were issued.  Co-Chair Seaton asked                                                                    
whether  there  was any  downside  to  limiting the  pension                                                                    
liability to 85  percent through use of POB's.  He wanted to                                                                    
avoid  any situation  where the  state  was overfunded.  Mr.                                                                    
Mitchell responded  that the  administration was  looking at                                                                    
funding the  liability at 90  percent. He observed  that "if                                                                    
the  state  was  borrowing  at  one  rate  and  expected  to                                                                    
reinvest  at a  higher rate  than the  larger the  issue the                                                                    
greater the potential benefit." He  deduced that for TRS the                                                                    
85  percent  limit  "could  restrict  the  potential  of  an                                                                    
issuance" but seemed satisfactory for PERS.                                                                                     
2:36:21 PM                                                                                                                    
Representative  Guttenberg asked  if the  state reached  105                                                                    
percent  what the  state's  liability  to increase  benefits                                                                    
was. Mr. Mitchell  deferred the question to  the Division of                                                                    
Retirement    and   Benefits.    Representative   Guttenberg                                                                    
referenced other  state's lower  credit rating  and reported                                                                    
that  the  states  were  still  able  to  borrow  money.  He                                                                    
wondered whether  a credit rating  could be  disregarded and                                                                    
money could be  borrowed at a reasonable  rate. Mr. Mitchell                                                                    
answered  that California  had  experienced  a volatile  and                                                                    
tumultuous period with its credit  rating. He commented that                                                                    
borrowing  depended  on  the   type  of  credit  and  market                                                                    
conditions that  determined how expensive the  credit rating                                                                    
differential  was.  He observed  that  there  was a  lot  of                                                                    
anxiety  with  the  market  and  rating  agencies  regarding                                                                    
Alaska due to the budget situation.                                                                                             
Co-Chair Foster OPEND Public Testimony.                                                                                         
2:40:18 PM                                                                                                                    
Co-Chair Foster CLOSED Public Testimony.                                                                                        
SB  97  was   HEARD  and  HELD  in   committee  for  further                                                                    
HOUSE BILL NO. 150                                                                                                            
     "An Act relating to pay, allowances, and benefits for                                                                      
     members of the organized militia."                                                                                         
2:41:06 PM                                                                                                                    
KENDRA   KLOSTER,   STAFF,    REPRESENTATIVE   CHRIS   TUCK,                                                                    
introduced the  legislation. She  explained that HB  150 was                                                                    
an ongoing  effort to modernize the  state's Alaska Military                                                                    
Code from 1955. She reminded  the committee that the process                                                                    
began last  year with the  Alaska Code of  Military Justice.                                                                    
She delineated  that HB  150 would  authorize the  same pay,                                                                    
allowance  and benefits  for the  organized militia  whether                                                                    
they are  called into state  active duty by the  Governor or                                                                    
Adjutant  General or  called to  service  by the  President.                                                                    
Presently, the  Alaska State Defense Force  soldiers serving                                                                    
during  emergencies   or  disasters   were  paid   as  state                                                                    
employees  according  to   tasks  performed  under  assigned                                                                    
duties.  She  furthered  that the  type  of  accounting  was                                                                    
cumbersome and  labor intensive. Soldiers were  uncertain of                                                                    
the amount of pay they  would receive. The bill aligned with                                                                    
the current  armed forces pay  schedule which paid  by grade                                                                    
and rank  of the  soldier instead  of duties  performed. She                                                                    
indicated that the change was cost neutral.                                                                                     
Representative  Kawasaki asked  about  whether the  soldiers                                                                    
were entitled to retirement benefits.   Ms. Kloster answered                                                                    
that  the  Alaska  State  Defense   Force  was  a  volunteer                                                                    
organization  and  would only  receive  pay  when in  active                                                                    
state  duty. She  elaborated that  the  force was  different                                                                    
than  the National  Guard members  and she  deferred further                                                                    
answers to  the Department of Military  and Veterans Affairs                                                                    
(DMVA).  Representative  Kawasaki   clarified  that  he  was                                                                    
asking  whether there  was an  impact  on Public  Employees'                                                                    
Retirement System (PERS) from  the bill. Ms. Kloster replied                                                                    
in  the  negative. She  reiterated  that  as volunteers  the                                                                    
force members only received pay  when activated and were not                                                                    
entitled to PERS.                                                                                                               
Representative   Grenn   asked   for  examples   of   recent                                                                    
emergencies. Ms. Kloster referred  to pay tables in member's                                                                    
packets  [prepared   by  the  Department  of   Military  and                                                                    
Veterans  Affairs  (copy  on file).]  She  noted  the  table                                                                    
listed  the example  of  the  Sockeye fire  on  page 2.  She                                                                    
elaborated that  the table listed the  pay scale comparisons                                                                    
under the old system and the  new system. The new system was                                                                    
cost  neutral  due to  the  efficiencies  in the  accounting                                                                    
required.  Representative Grenn  asked  whether the  Sockeye                                                                    
fire was the most recent example.                                                                                               
2:46:37 PM                                                                                                                    
Ms.  Kloster replied  in the  affirmative. She  deferred the                                                                    
question to the Department  of Military and Veterans Affairs                                                                    
(DMVA) for further detail.                                                                                                      
Representative  Pruitt referred  to  the  2015 Sockeye  fire                                                                    
example  on  the  pay  table  document.  He  was  trying  to                                                                    
determine why some  members of the force were  paid more and                                                                    
others  were  paid  less when  compared  to  their  previous                                                                    
service.  Ms. Kloster  deferred  the question  to DMVA.  She                                                                    
added  that  a force  member  would  be  paid based  on  the                                                                    
person's  current position  in  grade and  rank rather  than                                                                    
BOB DOEHL,  DEPUTY COMMISSIONER, DEPARTMENT OF  MILITARY AND                                                                    
VETERANS  AFFAIRS (via  teleconference),  answered that  the                                                                    
tables  were looking  at  two different  pay  scales of  two                                                                    
different systems.  He elucidated  that the  military system                                                                    
used  a  straight  system of  rank.  Currently,  a  National                                                                    
Guardsman  and a  defense force  volunteer working  together                                                                    
would  be   paid  differently  from  different   pay  scales                                                                    
depending  on rank  and  duty. The  challenge  was when  the                                                                    
Alaska  State Defense  Force  was  activated the  department                                                                    
evaluated the duties on a  given day or hour consistent with                                                                    
the official position description  system, hourly rates, and                                                                    
the  pay  range. The  difference  was  how the  two  systems                                                                    
calculated doing the same job.  Every disaster had different                                                                    
requirements in terms of the  type of individuals activated.                                                                    
He concluded that he could  not find a consistent pattern to                                                                    
identify the system that paid higher.                                                                                           
2:51:03 PM                                                                                                                    
Representative Pruitt  asked whether the force  members were                                                                    
in favor of the new pay system.                                                                                                 
JOHN  JAMES, COLONEL,  DEPARTMENT OF  MILITARY AND  VETERANS                                                                    
AFFAIRS (via teleconference), replied in the affirmative.                                                                       
Co-Chair Foster OPENED and CLOSED public testimony.                                                                             
Co-Chair Foster CLOSED public testimony.                                                                                        
HB  150  was  HEARD  and   HELD  in  committee  for  further                                                                    
HOUSE BILL NO. 167                                                                                                            
     "An Act  relating to  performance reviews,  audits, and                                                                    
     termination   of  executive   and  legislative   branch                                                                    
     agencies,  the University  of  Alaska,  and the  Alaska                                                                    
     Court System."                                                                                                             
2:53:15 PM                                                                                                                    
Representative  Wilson noted  that 31  House members  and 14                                                                    
Senators  had  cosponsored  the  original  legislation.  She                                                                    
requested further  discussion before  the bill  reported out                                                                    
of committee  and thought the  performance reviews  had some                                                                    
merit.  She  wanted  clarification that  the  Department  of                                                                    
Health  and  Social   Services  (DHSS)  performance  reviews                                                                    
identified $2 million savings.                                                                                                  
COURTNEY  ENRIGHT, STAFF,  REPRESENTATIVE GABRIELLE  LEDOUX,                                                                    
deferred  to   Kris  Curtis,  Legislative   Auditor,  Alaska                                                                    
Division  of Legislative  Audit to  respond to  the question                                                                    
and   noted  that   she  was   not  available   to  testify.                                                                    
Representative  Wilson requested  a subcommittee  to examine                                                                    
the  issue  further.  She  suggested  that  Ms.  Curtis  had                                                                    
suggested ways to fix the  problem, decrease the cost of the                                                                    
reviews,  and  still  result in  the  desired  outcome.  She                                                                    
reminded the committee that  the original legislation passed                                                                    
with bipartisan support.                                                                                                        
Co-Chair  Foster asked  for more  input  from other  members                                                                    
whether to report  the bill out of committee or  place it in                                                                    
a subcommittee for further discussions.                                                                                         
2:56:59 PM                                                                                                                    
Co-Chair  Seaton  noted that  the  sponsor  of the  original                                                                    
legislation,  HB   30  (State  Agency   Performance  Audits)                                                                    
[CHAPTER  19  SLA  13   -  05/28/2013]  Representative  Mike                                                                    
Chenault was  on a  subcommittee that  recommended repealing                                                                    
the legislation.  At present, he  felt that  proceeding with                                                                    
the program that was unfunded  for the previous two sessions                                                                    
and that the  legislature had already decided  was not worth                                                                    
continuing was  the correct course  of action.  He recounted                                                                    
that  the previous  legislature  left  the program  unfunded                                                                    
predicated on  the results  that were not  worth the  half a                                                                    
million dollar cost  each year. He preferred to  vote on the                                                                    
bill.   He  suggested   addressing  a   particular  agency's                                                                    
performance in question via specific legislation.                                                                               
2:59:28 PM                                                                                                                    
Representative   Tilton   remembered    that   Kris   Curtis                                                                    
identified one  challenge with the  legislature implementing                                                                    
the recommendations from the reviews.  She recalled that Ms.                                                                    
Curtis  reported  on  one  recommendation  that  would  save                                                                    
approximately  $1 million  in the  DHSS budget.  She relayed                                                                    
her  previous  experience  as   a  House  Finance  Committee                                                                    
staffer  handling  the DHSS  budget  when  she undertook  an                                                                    
internal review. She emphasized  how helpful the performance                                                                    
audit  review would  had been  if available  at the  time in                                                                    
enhanced  understanding  resulting  in better  outcomes  and                                                                    
better  decisions. She  mentioned  the overwhelming  support                                                                    
for  the   original  bill.   She  suggested   examining  the                                                                    
completed  reviews  further  over the  interim  to  discover                                                                    
further savings.                                                                                                                
Representative  Kawasaki reported  having been  a co-sponsor                                                                    
of the original  legislation. He commented that  the way the                                                                    
bill was  presented and "envisioned" was  different than the                                                                    
actual outcome of the reviews  that were completed. He noted                                                                    
the necessity for  the 3 full-time positions  and $1 million                                                                    
dollar  cost  to move  forward  with  program. He  supported                                                                    
moving HB 167 out of committee.                                                                                                 
Vice-Chair Gara  reported that a  provision in  the original                                                                    
bill tasked  the audit  with finding 10  percent or  more of                                                                    
efficiencies  in an  agencies  budget. Next  year, the  bill                                                                    
listed  the  University Of  Alaska  as  the recipient  of  a                                                                    
performance audit.  He communicated that the  University had                                                                    
$50 million to  $72 million in proposed cuts  in the current                                                                    
fiscal year  alone. The legislature had  already cut roughly                                                                    
$600 million  from agencies. He  acknowledged that  the DHSS                                                                    
audit identified  a $1  million cut to  the DHSS  budget but                                                                    
was not  scheduled to receive  another review for  ten years                                                                    
and the  DHSS budget was  cut $200 million since  passage of                                                                    
the  bill.  The goal  of  the  original  bill was  to  begin                                                                    
finding cuts.  The legislature  had already  identified cuts                                                                    
that totaled  $3.4 billion  in all  departments. He  did not                                                                    
see the  logic in  continuing the reviews  on the  drawn out                                                                    
schedule by  each individual agency  to identify  10 percent                                                                    
in cuts. He  concluded that the legislature  was cutting all                                                                    
department's budgets and the bill was unnecessary.                                                                              
3:04:39 PM                                                                                                                    
Representative  Pruitt voiced  that Representative  Wilson's                                                                    
request was appropriate. He had  found some very interesting                                                                    
information in some  of the audits from the  past. He agreed                                                                    
that in the current year  it was appropriate to abstain from                                                                    
an  audit due  to costs  and with  the exercise  of removing                                                                    
programs  "from the  books" if  warranted. He  believed that                                                                    
the  performance  review  program  should  be  reformed.  He                                                                    
advocated  for  further  consideration  of  the  performance                                                                    
audit program  over the  interim and  felt that  the program                                                                    
was a useful  tool that could bring value in  the future. He                                                                    
promoted modernizing the program instead of eliminating it.                                                                     
3:08:12 PM                                                                                                                    
Representative Thompson  believed that  "it was  always good                                                                    
to  review   performance."  However,  the   legislature  had                                                                    
reduced  budgets and  identified  efficiencies. He  wondered                                                                    
about  the  workload  and burden  the  program  created  for                                                                    
legislative  audit  and  the departments  under  review.  He                                                                    
favored the  concept of a  performance review but  had mixed                                                                    
feelings  about  whether or  not  to  support the  bill.  He                                                                    
suggested  reviewing   the  program  over  the   interim  to                                                                    
determine how to proceed.                                                                                                       
Representative Guttenberg  liked the performance audit  as a                                                                    
tool  but  surmised that  the  reviews  worked only  if  the                                                                    
department was "static." He did  not see the value currently                                                                    
because  there   had  already  been  cuts   resulting  in  a                                                                    
significant amount of transition  and reorganization in each                                                                    
agency.  He  mentioned that  missions  and  measures was  an                                                                    
established tool that offered  agency analysis. He suggested                                                                    
that additional  audits could be  funded in the  future. Due                                                                    
to  the  state's  current fiscal  condition,  he  wanted  to                                                                    
cancel the  program. He mentioned  that keeping  the program                                                                    
in  statute  but  not  funding  it  caused  instability  and                                                                    
uncertainty for  legislative audit. He supported  moving the                                                                    
bill out of committee.                                                                                                          
3:12:27 PM                                                                                                                    
Representative  Wilson wanted  to understand  the difference                                                                    
in rescinding  the program today  versus waiting  until next                                                                    
year. She  noted that Ms.  Curtis provided a review  with 12                                                                    
suggestions. She  thought that  requiring board  audits held                                                                    
boards  at  higher  standards than  the  agencies.  She  was                                                                    
asking whether it  was worth "taking the program  off of the                                                                    
books at present  or waiting until next  January and further                                                                    
examine  the  issue.  She thought  the  audits  provided  an                                                                    
opportunity for  agencies to  determine whether  its mission                                                                    
was  met. She  reiterated her  request to  reexamine whether                                                                    
the program, in total or in part, was beneficial.                                                                               
Co-Chair  Seaton  reminded  the committee  that  Ms.  Curtis                                                                    
testified her  need to  hire 3  manager positions  to manage                                                                    
contracts to  continue with the reviews.  The disruptions to                                                                    
the   department  the   audits  caused   were  "significant"                                                                    
especially due  to budget cutting measures.  He deduced that                                                                    
altering  the program  required  additional legislation.  He                                                                    
remarked that the legislature could  require an agency audit                                                                    
if  a  problem was  identified  and  noted that  audits  and                                                                    
performance  reviews  were  different. He  stressed  that  a                                                                    
better way to proceed was  to address a targeted problem and                                                                    
not reform an unproductive  system. He reiterated his desire                                                                    
to report the bill out of committee.                                                                                            
Co-Chair Foster indicated that  members had "good arguments"                                                                    
on both sides of the issue.  He believed that a vote was the                                                                    
best course of action.                                                                                                          
Vice-Chair Gara reported  on the fiscal note  FN 1(LEG) with                                                                    
zero fiscal impact.                                                                                                             
3:17:53 PM                                                                                                                    
Co-Chair  Seaton MOVED  to report  HB 167  out of  Committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
Representative Wilson OBJECTED.                                                                                                 
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Gara, Grenn, Guttenberg,  Kawasaki, Ortiz, Foster,                                                                    
OPPOSED: Thompson, Tilton, Wilson, Pruitt                                                                                       
The MOTION PASSED (7/4).                                                                                                        
HB  167  was  REPORTED  OUT of  Committee  with  an  "amend"                                                                    
recommendation  and with  one new  zero fiscal  note by  the                                                                    
HOUSE BILL NO. 90                                                                                                             
     "An Act relating to occupational licensing fees;                                                                           
     relating to an occupational investigation surcharge;                                                                       
     and providing for an effective date."                                                                                      
3:19:27 PM                                                                                                                    
CRYSTAL   KOENEMAN,  STAFF   TO  REPRESENTATIVE   SAM  KITO,                                                                    
recapped that the bill intended  to spread the investigative                                                                    
charges to  all licensees and  work similar to  a surcharge,                                                                    
reducing  the   high  fee   fluctuations  that   some  board                                                                    
experienced  due to  investigative costs  and low  number of                                                                    
Representative Wilson  asked whether there  were individuals                                                                    
who  were  members of  more  than  one board.  Ms.  Koeneman                                                                    
answered  in the  affirmative.  Representative Wilson  asked                                                                    
whether  an individual  on two  boards paid  each individual                                                                    
licensing  fee. Ms.  Koeneman answered  in the  affirmative.                                                                    
Representative Wilson wanted to  ensure that the legislation                                                                    
did  not  impact  business   licensing  fees.  Ms.  Koeneman                                                                    
responded in  the affirmative and  added that the  bill only                                                                    
impacted professional licensing fees.                                                                                           
3:22:36 PM                                                                                                                    
Co-Chair Foster OPENED Public Testimony.                                                                                        
3:22:46 PM                                                                                                                    
MARK  RICHARDS,  EXECUTIVE  DIRECTOR,  RESIDENT  HUNTERS  OR                                                                    
ALASKA, FAIRBANKS (via  teleconference), spoke in opposition                                                                    
of  HB 90.  He spoke  to  the Big  Game Commercial  Services                                                                    
Board  regarding  how   guiding  affected  resident  hunting                                                                    
opportunities  and the  wildlife resources.  He pointed  out                                                                    
that the board  was in debt due to  investigative costs that                                                                    
were  the second  or third  highest  out of  all boards.  He                                                                    
reported  that   the  Board  of  Nursing   had  the  highest                                                                    
investigative costs.  He pointed  to the discrepancy  in the                                                                    
costs  of investigations  per member  due to  differences in                                                                    
the number of licensees. Nurses  had 20 thousand members and                                                                    
its  portion  of  fees related  to  investigations  was  $47                                                                    
versus  two thousand  guide licensees  each  paying $316  of                                                                    
their fee towards investigations. He  stated that due to the                                                                    
nature of  the guiding  service that  involved "taking  of a                                                                    
public resource"  the activity  required a certain  level of                                                                    
enforcement  presence. Ninety  five  percent  of all  guides                                                                    
operated  within the  law, however  the bad  actors lead  to                                                                    
high investigatory costs. He elucidated  that under the bill                                                                    
the  nurses  would  pay  $300  thousand  more  in  increased                                                                    
licensing fees to help cover  the investigative costs of the                                                                    
Big  Game Commercial  Services Board.  The guide  board fees                                                                    
would  significantly decrease.  He  relayed  that the  guide                                                                    
board's concern that  the high cost of  guide licensing fees                                                                    
deterred illegal  behavior. He  emphasized that  by removing                                                                    
the  burden of  the high  fee some  guide's standards  would                                                                    
relax and lead to "bad behavior."   He urged members to vote                                                                    
in  opposition of  the bill  or  exempt the  board from  the                                                                    
provisions in the bill.                                                                                                         
3:26:26 PM                                                                                                                    
AL  BRETT, SELF,  FAIRBANKS (via  teleconference), spoke  in                                                                    
opposition  of  HB  90.  He  communicated  his  unease  with                                                                    
allowing  the division  to  adjust  fees through  regulation                                                                    
versus statute. He  shared that he was a  registered Class A                                                                    
guide  and reported  that the  previous two  times the  fees                                                                    
were  raised   was  during  the   hunting  season   and  was                                                                    
inconvenient.  He  believed there  was  a  problem with  the                                                                    
government   controlling   businesses  and   resources.   He                                                                    
suggested that  investigations were a "civil  process" where                                                                    
grievances  were best  addressed in  civil court.  He opined                                                                    
that it  was unfair  for the state  to "intervene"  in civil                                                                    
issues "on boards related to occupations."                                                                                      
3:28:55 PM                                                                                                                    
Co-Chair Foster CLOSED Public Testimony.                                                                                        
Representative Ortiz  asked how  Ms. Koeneman  would respond                                                                    
to  the  first  testifier.  Ms.  Koeneman  deferred  to  the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED) to answer the question.                                                                                                 
SARA  CHAMBERS,  ACTING   DIRECTOR,  ALCOHOL  AND  MARIJUANA                                                                    
CONTROL  OFFICE,  DEPARTMENT   OF  COMMERCE,  COMMUNITY  AND                                                                    
ECONOMIC  DEVELOPMENT,   responded  that  the   fee  setting                                                                    
process was codified  in statute and the bill  did not alter                                                                    
the  fundamental principle  that the  division set  fees "in                                                                    
concert  with the  boards  and the  programs  pay for  their                                                                    
expenses."  The investigative  process was  transparent with                                                                    
the  exception  of  items  that  were  necessary  to  remain                                                                    
confidential.  She  expounded that  the  bill  served as  an                                                                    
insurance  policy for  investigative  costs.  The state  had                                                                    
historically  struggled with  setting  licensing  fees in  a                                                                    
timely  manner  so  licensees  could   budget  to  cover  an                                                                    
increased  license   fee  expense.   She  deemed   that  the                                                                    
volatility     came     from    investigator's     statutory                                                                    
responsibility,   in  concert   with  a   board  to   pursue                                                                    
violations. The  division lacked  the resources  to actively                                                                    
seek out violations but had  a responsibility to investigate                                                                    
complaints.  She  related  that  the  amount  and  level  of                                                                    
investigations were  impossible to  anticipate. Some  of the                                                                    
state's licensing  programs had  investigative fees  of over                                                                    
$100  thousand   for  a  single  investigation   either  for                                                                    
violations or from challenges to a denied license.                                                                              
3:33:08 PM                                                                                                                    
Representative Ortiz understood the  concept of an insurance                                                                    
pool  and  understood  the  volatility   in  costs.  He  was                                                                    
specifically  concerned with  the testifier's  scenario that                                                                    
his board  would be charged  less and nurses more  under the                                                                    
bill. Ms. Chambers  relayed that the division  had done some                                                                    
modeling  and  determined  that   nurses  would  pay  $9  in                                                                    
additional  fees each  licensing period.  She detailed  that                                                                    
very few  boards would have  increased license fees  of over                                                                    
$50 every two years and  boards with extremely high fees and                                                                    
deficits such as  the midwifery and guide  boards would save                                                                    
several  hundred  dollars.  The  state  was  looking  "at  a                                                                    
greater  savings"  with  nominal  fee  increases  to  larger                                                                    
licensing programs that had investigative  costs but had the                                                                    
"economy  of   scale  to  spread  the   expense  across  its                                                                    
Representative Kawasaki  appreciated the bill. He  asked how                                                                    
the  different boards  would change  their future  fees with                                                                    
the addition  of the surcharge. Ms.  Chambers indicated that                                                                    
the division  analyzed board's expenses and  revenue and set                                                                    
their  fees accordingly.  The investigative  costs would  be                                                                    
deducted  from  the  equation   and  allocated  through  the                                                                    
surcharge. The remainder  of the fees would be  set based on                                                                    
the  current  fee  analysis model.  The  investigative  fees                                                                    
would be allocated separately.                                                                                                  
Representative  Thompson  reported receiving  feedback  from                                                                    
licensees that the investigators  were not familiar with the                                                                    
profession they  were investigating.  He commented  that the                                                                    
situation made  the investigations  longer. He  wondered how                                                                    
many investigators  were on staff  and if they  were trained                                                                    
in regards  to what  they investigated. Ms.  Chambers stated                                                                    
that  the  investigative  process  included  board  members,                                                                    
which  assured  appropriate  expertise. She  indicated  that                                                                    
many licensing programs lacked  boards. When investigating a                                                                    
licensure  program  with a  board,  the  division relied  on                                                                    
board  member  review by  an  advising  board member  before                                                                    
proceeding  with an  investigation. Rarely,  an area  was so                                                                    
specialized  an investigation  required expert  witnesses to                                                                    
speak to  the specialty. The division  requested the board's                                                                    
consent   before    an   expert   witness    was   retained.                                                                    
Representative Thompson was satisfied with her answer.                                                                          
Representative  Wilson was  concerned  with  the person  who                                                                    
engaged in  an activity  without a  license yet  the board's                                                                    
licensees had  to pay for  the investigation. She  asked why                                                                    
the state  did not  pass the investigatory  costs on  to the                                                                    
offender instead  of the board. Ms.  Koeneman responded that                                                                    
she had  a good point.  She explained that when  the guiding                                                                    
statutes were  established the  licensees wanted  to protect                                                                    
their  industry through  regulation  of unlicensed  activity                                                                    
under   their   purview.   She  asserted   that   addressing                                                                    
unlicensed  activity  was a  larger  policy  call and  board                                                                    
members should  engage in the discussion  over relinquishing                                                                    
their duty.                                                                                                                     
3:40:39 PM                                                                                                                    
Representative  Wilson  clarified  that  she  did  not  want                                                                    
boards to  relinquish anything. She  was suggesting  that an                                                                    
unlicensed  individual  caught   engaging  in  the  licensed                                                                    
activity should  be held  responsible for  the investigatory                                                                    
costs and not the board.                                                                                                        
REPRESENTATIVE SAM  KITO, thought that the  issue was "broad                                                                    
and complicated."  In attempting  to address  the unlicensed                                                                    
practice issue he  discovered that even if  the activity was                                                                    
covered  under  criminal  statutes, the  Department  of  Law                                                                    
(DOL) investigations would  still need to rely  on the DCCED                                                                    
investigators   for   their   expertise.  He   voiced   that                                                                    
Representative Wilson's inquiry was  a broader question that                                                                    
he contemplated would need to  be addressed as a second step                                                                    
after the  changes in HB  90 were implemented.  He commented                                                                    
that if  costs were  recovered from unlicensed  violators he                                                                    
wanted the revenue deposited into  the general fund (GF). He                                                                    
worried that an "adverse  motivation" might arise within the                                                                    
division  to pursue  unlicensed practice  if the  department                                                                    
knew the money was dedicated to its licensing fund.                                                                             
Representative Wilson referred to  a chart in members packet                                                                    
titled, "FY  2016 Professional Licensing Statistics"  by the                                                                    
Division   of   Corporations,  Business   and   Professional                                                                    
Licensing [copy on file]. She  asked how much the bill would                                                                    
save  or  increase  the  guide  board  licensing  fees.  Ms.                                                                    
Koeneman responded  that the big game  guides currently paid                                                                    
$316  per licensing  period  and would  save  $261 in  their                                                                    
licensing  costs  under   the  bill.  Representative  Wilson                                                                    
stated that  when boards were  formed the costs to  run them                                                                    
were accessed and  paid by the board. She  declared that the                                                                    
bill  was a  "big policy  change." She  understood what  the                                                                    
sponsor  intended  to  accomplish  but  she  felt  that  the                                                                    
approach was penalizing the licensees  who were not breaking                                                                    
the law.  Ms. Koeneman  added that she  had reviewed  the FY                                                                    
2016 investigative  actions and  discovered that  22 percent                                                                    
was  due  to  unlicensed  activity and  88  percent  of  the                                                                    
investigations  were  from  licensees doing  their  job  and                                                                    
having  some missteps.  Representative  Wilson replied  that                                                                    
the licensees should pay as well.                                                                                               
3:45:48 PM                                                                                                                    
Representative  Kito added  that  spreading out  all of  the                                                                    
investigatory  costs  including   for  unlicensed  activity,                                                                    
benefitted  all boards  and the  public service.  He offered                                                                    
that the  lower costs decreased  the "barrier to  entry" for                                                                    
certain professions that had a small number of licensees.                                                                       
Representative  Thompson  remembered   that  previously  the                                                                    
legislature  passed laws  requiring fees  recovered from  an                                                                    
offender would  cover the cost  of the licensees'  fees. Ms.                                                                    
Chambers answered that if the  legislation was passed it did                                                                    
not pertain to Title 8, which contained licensing statutes.                                                                     
Vice-Chair  Gara was  aware  that a  number  of people  with                                                                    
business licenses  were not  tied to a  board. He  asked for                                                                    
confirmation  that   the  costs  would  not   be  spread  to                                                                    
individuals  that  were  not   regulated  by  a  board.  Ms.                                                                    
Chambers indicated  the state had 43  licensing programs but                                                                    
only  22 operated  under boards.  However, all  professional                                                                    
licensees  were required  to pay  into the  proposed system.                                                                    
She   exemplified   that    construction   contractors   had                                                                    
professional licensure  but did  not have  a board  and were                                                                    
required to pay  into the new system.  Vice-Chair Gara asked                                                                    
whether  there was  an error  in  the bill.  He referred  to                                                                    
section 7  of the bill  [page 4,  line 8] that  addressed an                                                                    
investigation surcharge added to  AS 08.01.065 and cited (a)                                                                    
(2). He did not see (a)  (2) in existing statute but deduced                                                                    
that it  was a reference to  the new provision in  the bill.                                                                    
Ms. Koeneman responded in the affirmative.                                                                                      
3:49:38 PM                                                                                                                    
Representative Kito clarified that  the bill included all of                                                                    
the professions regulated under  Title 8 that included those                                                                    
with a board  or exclusively a license. He  used the example                                                                    
of acupuncturists in the scenario  of a professional license                                                                    
without a board.                                                                                                                
Representative  Ortiz  had  some  of the  same  concerns  as                                                                    
Representative   Wilson.   He  clarified   that   unlicensed                                                                    
activity  comprised of  22  percent  of investigations.  Ms.                                                                    
Koeneman responded in  the affirmative. Representative Ortiz                                                                    
asked  if the  position was  that  the passage  of the  bill                                                                    
brought greater good  for the law abiding  licensees but did                                                                    
not impact  whether the "bad  actors had a greater  stake or                                                                    
lesser stake  in the  issue." Ms.  Koeneman agreed  with his                                                                    
Representative Wilson was concerned  that under existing law                                                                    
a  mechanism did  not exist  to  collect investigatory  fees                                                                    
unless  a  case  was  a criminal  one.  She  reiterated  her                                                                    
previous  concerns   and  still  had  a   problem  with  the                                                                    
legislation. She added  that if no one was  found guilty the                                                                    
board  still  had  to  pay   the  investigative  costs.  Ms.                                                                    
Koeneman relayed that  currently there was a  $5000 fine for                                                                    
licensed activity  in AS 08.01.102. However,  the fine would                                                                    
not  cover  the entire  costs  and  was deposited  into  the                                                                    
general fund.                                                                                                                   
Ms. Chambers  interjected that even  though a board  and the                                                                    
division  was  able  to  charge  fines  for  unlicensed  and                                                                    
licensed  violations, the  finds did  not cover  any of  the                                                                    
investigatory expenses  because the  fees went into  GF. She                                                                    
addressed    Representative    Kito's   remarks    regarding                                                                    
incentivizing the  division to enforce  unlicensed activity.                                                                    
She  did  not  think  that  increased  fees  for  unlicensed                                                                    
activity deterred negative behavior.  She shared that all of                                                                    
the boards were in favor of the legislation.                                                                                    
3:54:53 PM                                                                                                                    
Representative Guttenberg  suggested that  if the  issue was                                                                    
an easy one to fix it  would have been dealt with years ago.                                                                    
He  wondered whether  DOL  assumed the  cost  of a  criminal                                                                    
licensing investigation. Ms.  Koeneman deferred the question                                                                    
to the division.                                                                                                                
ANGELA BIRT,  CHIEF INVESTIGATOR -  CORPORATIONS, BUSINESSES                                                                    
AND   PROFESSIONAL   LICENSING,  DEPARTMENT   OF   COMMERCE,                                                                    
ANCHORAGE  (via  teleconference),   answered  that  a  small                                                                    
portion   of  the   caseloads  became   criminal  and   were                                                                    
prosecuted through  the Office  of Special  Prosecutions and                                                                    
Appeals without charges to the  division. She furthered that                                                                    
civil  prosecutions  through   DOL  and  any  Administrative                                                                    
Hearings  costs  were  part  of  the  board's  investigative                                                                    
costs. Representative  Guttenberg clarified his  question by                                                                    
restating it.  Ms. Birt responded that  typically a criminal                                                                    
case began  with DOL and the  board was not charged  for the                                                                    
criminal component. She explained  that at the conclusion of                                                                    
the  criminal case  statute allowed  board punishments.  She                                                                    
exemplified  that the  Big  Game  Commercial Services  Board                                                                    
could  fine up  to two  times the  criminal conviction.  She                                                                    
stated   that   she  was   less   familiar   of  the   route                                                                    
Representative Guttenberg had described.                                                                                        
3:58:26 PM                                                                                                                    
Co-Chair Foster MOVED to ADOPT Amendment 1:                                                                                     
     Page 1, line 11, following "chapter"                                                                                       
     Insert  ";  the  regulations    may   provide    for  a                                                                    
     reduction   in   the amount   of the  surcharge imposed                                                                    
     under this paragraph for a  licensee who is required by                                                                    
     law  to  hold and  maintain  one  license in  order  to                                                                    
     qualify for and maintain another license"                                                                                  
Representative Wilson OBJECTED for discussion.                                                                                  
Ms.  Koeneman  explained  the  amendment.  She  stated  that                                                                    
Amendment  1   allowed  for  the  department   to  reduce  a                                                                    
surcharge imposed under the bill  if a licensee was required                                                                    
to hold  and maintain  another license  in order  to qualify                                                                    
for a license. She exemplified that  in order for a nurse to                                                                    
hold an  Advanced Practice Registered  Nurse License  it was                                                                    
necessary  to  maintain  a  Registered  Nurse  license.  She                                                                    
reported that  the situation affected  960 licensees  out of                                                                    
11 thousand registered nurses.                                                                                                  
Representative Wilson WITHDREW her OBJECTION.                                                                                   
There being NO OBJECTION, it was so ordered.                                                                                    
4:00:21 PM                                                                                                                    
Vice-Chair  Gara relayed  that there  was one  fiscal impact                                                                    
note in  the amount of $3.4  thousand from DCCED FN  1 (CED)                                                                    
for   the  implementation   of  regulations,   postage,  and                                                                    
Co-Chair  Seaton  MOVED  to  report CSHB  90  (FIN)  out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
Representative Wilson OBJECTED.                                                                                                 
A roll call vote was taken on the motion.                                                                                       
IN  FAVOR:  Gara,  Guttenberg,  Kawasaki,  Ortiz,  Thompson,                                                                    
Seaton, Foster                                                                                                                  
OPPOSED: Tilton, Wilson, Grenn, Pruitt                                                                                          
The MOTION PASSED (7/4).                                                                                                        
CSHB  90 (FIN)  was REPORTED  OUT  of Committee  with a  "do                                                                    
pass" recommendation and with  a previously published fiscal                                                                    
impact note: FN1 (CED).                                                                                                         
4:04:36 PM                                                                                                                    
AT EASE                                                                                                                         
4:06:47 PM                                                                                                                    
Co-Chair Foster  reviewed the agenda for  the following day.                                                                    
He recessed  the meeting to a  call of the chair  [Note: the                                                                    
meeting never reconvened].                                                                                                      
4:07:27 PM                                                                                                                    
The meeting was adjourned at 4:07 p.m.                                                                                          

Document Name Date/Time Subjects
REAL ID Act - Transmittal Letter - Rep. Edgmon.pdf HFIN 4/19/2017 1:30:00 PM
HB 74
CS HB 74 (STA) Sectional Analysis.pdf HFIN 4/19/2017 1:30:00 PM
HB 74
SB97 Sponsor Statement 04.08.2017.pdf HFIN 4/19/2017 1:30:00 PM
SB 97
SB97 Sectional Analysis ver D 04.08.2017.pdf HFIN 4/19/2017 1:30:00 PM
SB 97
HB150 Additional Document - 2017 Military Pay Chart 3.14.17.pdf HFIN 4/19/2017 1:30:00 PM
HB 150
HB150 Additional Document-Sockeye Fire Spreadsheet from DMVA 3.14.17.pdf HFIN 4/19/2017 1:30:00 PM
HB 150
HB150 Sponsor Statement 3.14.17.pdf HFIN 4/19/2017 1:30:00 PM
HB 150
HB150 Supporting Document-Letter DMVA 3.14.17.pdf HFIN 4/19/2017 1:30:00 PM
HB 150
HB 74 HFIN DPS Regarding REAL ID -signed.pdf HFIN 4/19/2017 1:30:00 PM
HB 74
CSHB 74 House Finance REAL ID Presentation 4.19 FINAL v2.pdf HFIN 4/19/2017 1:30:00 PM
HB 74
HB 90 - Amendment #1.pdf HFIN 4/19/2017 1:30:00 PM
HB 90
HB 90 Testimony Letter.pdf HFIN 4/19/2017 1:30:00 PM
HB 90