01/20/2004 08:00 AM House STA

HB 373-STATE TREASURY WARRANTS                                                                                                
                                                                                                                                
[Contains brief mention of HB 109.]                                                                                             
                                                                                                                                
Number 0730                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH announced  that the  last order  of business  was                                                              
HOUSE  BILL NO.  373,  "An Act  requiring  warrants  drawn by  the                                                              
Department  of Administration  against  the state  treasury to  be                                                              
negotiable instruments."                                                                                                        
                                                                                                                                
Number 0765                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  mentioned that HB 109 passed  last year.                                                              
It was  a bill  that dealt  with stale-dated  warrants and  "swept                                                              
these  into the  unclaimed property  Act  after six  months."   He                                                              
expressed his  past and  ongoing interest in  the question  of why                                                              
the State  of Alaska uses the  system of treasury  warrants rather                                                              
than checks.  He  noted that in the late 1980s,  there was a long-                                                              
standing dispute  between banks and  the State of  Alaska, because                                                              
the  latter took  the  position that  treasury  warrants were  not                                                              
checks and  could be  immediately dishonored  without any  notice.                                                              
"Somebody" would  have a  warrant and would  cash it,  and someone                                                              
in government would  assume that they should dishonor  it, and the                                                              
banks were  "left holding hundreds  of thousands of dollars."   He                                                              
remarked that "we"  tried to get that inequitable  situation dealt                                                              
with.  He  said, "The bill passed  out of this committee  and, for                                                              
various  reasons  - mainly  my  own  limitations -  didn't  follow                                                              
through on  that."  As  a result, he  said, "They had  to litigate                                                              
this up to the Alaska Supreme Court.                                                                                            
                                                                                                                                
REPRESENTATIVE GRUENBERG  cited the case, which was  NATIONAL BANK                                                            
OF   ALASKA,   National  Banking   Association,   Appellants,   v.                                                            
UNIVENTURES   1231   and   STATE    OF   ALASKA,   DEPARTMENT   OF                                                            
ADMINISTRATION,  Appellees.  The  court held that  [warrants] were                                                            
negotiable instruments.   He noted  that this case  followed cases                                                              
from Louisiana  and  Nebraska, for  example.   In the majority  of                                                              
cases it  was held that warrants  are negotiable  instruments and,                                                              
therefore,    are    under   the    Uniform    Commercial    Code.                                                              
Representative  Gruenberg described  the bank as  a holder  in due                                                              
course.   He said  that, unless  that [holder  in due  course] had                                                              
actual knowledge  that the warrant had been dishonored,  the state                                                              
had to pay.  He added that that was only a just and fair result.                                                                
                                                                                                                                
                                                                                                                                
REPRESENTATIVE GRUENBERG  stated that HB 373 simply  codifies that                                                              
case  by stating  that a  treasury  warrant must  be a  negotiable                                                              
instrument, and  that that negotiable instrument  is defined under                                                              
the Uniform  Commercial Code.   He  stated that  he thinks  HB 373                                                              
should  not be  a controversial  bill,  and noted  that the  House                                                              
State  Affairs  Standing  Committee   is  the  only  committee  of                                                              
referral.                                                                                                                       
                                                                                                                                
Number 1034                                                                                                                     
                                                                                                                                
KIM  GARNERO,   Director,  Division  of  Finance,   Department  of                                                              
Administration,  thanked the  committee  for passing  HB 109  last                                                              
year.  She said  it changed the way [the division]  does business;                                                              
the  stale-dated warrants  are  now being  routinely  paid by  the                                                              
unclaimed  property  program.    She added,  "You  won't  see  any                                                              
stale-dated warrants in your supplemental language this year."                                                                  
                                                                                                                                
MS. GARNERO  stated that  HB 373  does nothing  to change  the way                                                              
[the division] does  business.  It has treated  its state warrants                                                              
as if  they were  negotiable instruments  since the supreme  court                                                              
decision in 1992.   She explained that that's why  there is a zero                                                              
fiscal note.   She  said HB  373 simply  clarifies in statute  the                                                              
supreme  court decision.    In response  to  a  question by  Chair                                                              
Weyhrauch,  she  said the  Department  of Administration  sees  no                                                              
trouble with [HB 373].                                                                                                          
                                                                                                                                
Number 1150                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  moved to report HB 373  out of committee                                                              
with  individual  recommendations   and  the  accompanying  fiscal                                                              
note.   [There being no  objection HB 373  moved out of  the House                                                              
State Affairs Standing Committee.]