Legislature(2005 - 2006)CAPITOL 106
01/26/2006 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB349 | |
| HB273 | |
| Confirmation Hearing(s): || Commissioner, Department of Administration | |
| Lieutenant Governor Designee | |
| Alaska Public Offices Commission (apoc) | |
| HB278 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 349 | TELECONFERENCED | |
| += | HB 273 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 278 | ||
HB 278-RETIREMENT SYSTEM BONDS 9:46:46 AM CHAIR SEATON announced that the last order of business was HOUSE BILL NO. 278, "An Act relating to the Alaska Municipal Bond Bank Authority; permitting the Alaska Municipal Bond Bank Authority or a subsidiary of the authority to assist state and municipal governmental employers by issuing bonds and other commercial paper to enable the governmental employers to prepay all or a portion of the governmental employers' shares of the unfunded accrued actuarial liabilities of retirement systems and authorizing governmental employers to contract with and to issue bonds, notes, or commercial paper to the authority or its subsidiary corporation for that purpose; and providing for an effective date." CHAIR SEATON noted that included in the committee packet is a memorandum from Tamara Cook, Director, Legal Services, dated 1/6/06, and he asked the sponsor of the bill to address it. 9:46:58 AM REPRESENTATIVE MIKE HAWKER, Alaska State Legislature, as sponsor of HB 278, stated that the memorandum is a response to a question from Representative Weyhrauch regarding whether state law prevents municipalities from issuing pension bonds. Representative Hawker interpreted Ms. Cook's response to mean that there are prohibitions in the constitution; however, other structures exist that may very well meet constitutional muster. He said he suspects Ms. Cook's answer was generic because she did not have any specific proposal before her to evaluate. Furthermore, the bill does not contemplate any specific structure. 9:49:33 AM REPRESENTATIVE HAWKER said that based on the concerns of the House State Affairs Standing Committee and a request made by Chair Seaton, he did some research and developed an amendment to ensure that smaller municipalities could band together and not be excluded. He said he learned from Legislative Legal and Research Services that AS 29.35.010(13) authorizes municipalities to enter into cooperative agreements. Section 13 read as follows: (13) to enter into an agreement, including an agreement for cooperative or joint administration of any function or power with a municipality, the state, or the United States; REPRESENTATIVE HAWKER encouraged the committee to reach the conclusion that he has reached: an amendment is not necessary, as the power exists in current statute [to allow municipalities to enter into cooperative agreements for pension obligation bonds (POBs)]. 9:51:29 AM REPRESENTATIVE GRUENBERG, referring back to the previously mentioned legal memorandum, said by "reading between the lines" he believes Ms. Cook is saying that municipalities cannot issue general obligation bonds, but could issue moral obligation bonds. He asked Representative Hawker if that is his interpretation. 9:52:13 AM REPRESENTATIVE HAWKER responded as follows: If you were [implying] a specific limitation to moral obligation debt, I don't believe that's a correct statement. I believe there would be a variety of debt vehicles to which she would be inferring in this .... REPRESENTATIVE HAWKER said he is hesitant to provide testimony regarding the intent of someone else's work product. His interpretation, he said, is that there are constitutional prohibitions against specific forms of debt, but there are other forms of debt available that would be constitutional and have been proven already with precedent established in the Alaska Court System. 9:53:03 AM REPRESENTATIVE GRUENBERG offered his understanding that general obligation (GO) bonds are specifically prohibited. 9:53:15 AM REPRESENTATIVE HAWKER concurred that "general obligation bonding by the State of Alaska would be inappropriate and unacceptable." 9:53:40 AM REPRESENTATIVE GRUENBERG added, "Or a political subdivision." 9:53:50 AM REPRESENTATIVE HAWKER answered yes. 9:53:55 AM CHAIR SEATON cited a sentence in the memorandum at the end of paragraph 3, which read: Other exceptions to the restraint on borrowing are found in Art. IX, sec. 11, but it is not obvious to me how these exceptions might be used to fund pension plans. CHAIR SEATON advised the committee that that remark by Ms. Cook raises some flags, and he said he thinks it might be necessary to get further [legal] clarification as the bill moves along through the process. CHAIR SEATON directed attention to page 7, line 24, of the bill, which [with the preceding lines 21-23] read: (a) Subject to AS 44.85.100(b), the bond bank authority may issue its bonds or notes in principal amounts that it considers necessary to provide funds for any purposes under this chapter, including (1) the purchase of municipal bonds CHAIR SEATON said he thought the Alaska Municipal Bond Bank Authority ("Bond Bank") issued bonds. He asked for clarification. 9:55:37 AM REPRESENTATIVE HAWKER explained that that language, which is in Section 5 of the bill, is not new statute and amends the language on page 8, lines 5-7, which read as follows: (5) assisting governmental employers to prepay all or a portion of their share of the unfunded accrued actuarial liabilities of retirement systems, with security as the bond bank authority considers reasonable. 9:56:09 AM CHAIR SEATON directed attention to page 8, subsection (c), the original language of which shows a bonding authority of $500,000,000. He interpreted the new language in the subsection to mean "there's no limit at all." The new language read as follows: This subsection does not apply to (1) bonds or notes issued to fund or refund bonds or notes; (2) bonds, notes, commercial paper, and other obligations issued under AS 44.85.086 or 44.85.180(a)(5). 9:56:33 AM REPRESENTATIVE HAWKER indicated that there are no limits in regard to refunding or obligations issued under the statutes previously noted in subsection (c). In regard to aggregating pension liabilities, he said, "The best execution would be if municipalities chose to come together and place larger securities on the market and get a much more efficient execution with a ... greater ultimate savings to the issuer." 9:57:20 AM CHAIR SEATON recalled that the Department of Revenue testified to the committee that the moral bonding authority was "somewhat south of $6 billion." He said, "So, maybe as this goes into [the House Finance Committee] you can see whether we want this unlimited amount, which could be more than the moral bonding authority of the state." 9:57:49 AM REPRESENTATIVE HAWKER stated for the record that he is committed to getting a thorough review and analysis by the Department of Law, the Department of Revenue, the Bond Bank, and outside bond counsel and authorities to ensure that the financial management aspect of the bill will be strongly addressed. 9:58:51 AM CHAIR SEATON referred to a sentence in Ms. Cook's memorandum, which read: Art. IX, sec. 9 states in full: "No debt shall be contracted by any political subdivision of the State, unless authorized for capital improvements by its governing body and ratified by a majority vote of those qualified to vote and voting on the question." CHAIR SEATON indicated that he does not see that issue addressed anywhere in the bill "one way or the other." He stated the need to find out if that requirement is in place or exempted. 9:59:43 AM REPRESENTATIVE GRUENBERG said he doesn't see any legal requirement "that this be approved by a vote of the people." He mentioned an amendment could be offered "to do that" and asked Representative Hawker if he would object. 10:00:13 AM REPRESENTATIVE HAWKER reiterated his sincere belief that the existing statutory regulatory structure, as it applies to municipalities and the authorities the state vests in those municipalities, is adequate and provides appropriate public protections. He continued: Certainly we've discussed the possibility of a broader authority being extended, specifically for this type of transaction, through a constitutional amendment process to a general obligation bond. ... I believe the subject and the question you're broaching would be best discussed in that context rather than in this context, which is where we are definitely not making any changes in our current constitutional authorities. 10:01:27 AM REPRESENTATIVE GRUENBERG said he is looking into the drafting of a constitutional amendment. He said he was concentrating on amending the article dealing with state contraction of debt and he had not looked as much at the constitutional provisions regarding the local contracting of debt. He mentioned the concept of putting both those issues together in the same amendment. 10:02:12 AM CHAIR SEATON suggested that, in the interest of time, the issue be brought up at another time. He stated his concern regarding hard debt versus soft debt in relation to pension bonds. He said the committee was been told that the hard debt is a debt obligation. He said, "I don't want this to end up in court later as to whether it should be a vote or not." He stated his desire to get a full legal opinion as to whether pension bonds would be exempt from the requirement of a vote of the people. 10:03:36 AM REPRESENTATIVE GRUENBERG moved to report HB 278 out of committee with individual recommendations and the attached fiscal note. 10:03:56 AM REPRESENTATIVE HAWKER noted that he had not received a copy of the fiscal note. 10:04:26 AM CHAIR SEATON asked if there was any objection. There being none, HB 278 moved out of the House State Affairs Standing Committee.
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