Legislature(2007 - 2008)SENATE FINANCE 532

04/07/2008 09:00 AM Senate FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 231 LOW-INCOME HOUSING; HOMELESSNESS TELECONFERENCED
Moved CSSB 231(HES) Out of Committee
+ HB 419 STATE LEASE-PURCHASE AGREEMENTS TELECONFERENCED
Heard & Held
+ HB 319 DENTISTS & DENTAL ASSISTANTS TELECONFERENCED
Moved SCS CSHB 319(HES) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
CS FOR HOUSE BILL NO. 419(FIN)                                                                                                
                                                                                                                                
     "An Act relating to state lease-purchases of equipment                                                                     
     and other personal property; and providing for an                                                                          
     effective date."                                                                                                           
                                                                                                                                
Senator  Huggins MOVED  to ADOPT SCS  CSHB 419(FIN),  labeled                                                                   
25-LS1567\O, Cook, 4/3/08.                                                                                                      
                                                                                                                                
Senator Dyson OBJECTED.   He requested an explanation  of the                                                                   
changes in the new CS.                                                                                                          
                                                                                                                                
9:43:48 AM                                                                                                                    
                                                                                                                                
TOM WRIGHT,  STAFF, REPRESENTATIVE  MIKE CHENAULT,  explained                                                                   
that the  new CS is the  bill that was originally  introduced                                                                   
in House Finance.   It does not allow any agency  to do state                                                                   
lease purchases.                                                                                                                
                                                                                                                                
Senator  Dyson  WITHDREW  his  OBJECTION.    There  being  NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
Mr.  Wright explained  that  there  were concerns  about  the                                                                   
usage of the master  lease line of credit.  One  of the items                                                                   
used for lease purchase was Governor  Murkowski's jet.  There                                                                   
have been 29 separate lease purchases.   The legislature last                                                                   
year  authorized $16  million for  the master  lease line  of                                                                   
credit.   This  was  problematic because  there  was no  fund                                                                   
source for  it.  There  were a number  of items  that avoided                                                                   
the appropriation process.                                                                                                      
                                                                                                                                
Mr.  Wright related  that  the other  concern  was that  some                                                                   
payments were not  showing up in the detail book.   There was                                                                   
lack  of information  about  the source  of  funding and  who                                                                   
controlled the  dollar amounts.   The original intent  of the                                                                   
bill was to stop the master lease line of credit.                                                                               
                                                                                                                                
Co-Chair  Stedman  suggested  that Mr.  Wright  provide  more                                                                   
information.                                                                                                                    
                                                                                                                                
Mr. Wright reiterated  that the bill does apply  to all lease                                                                   
purchase  agreements.    One  of the  problems  was  that  AS                                                                   
36.30.085 was  too broad  and lacked a  definition of  what a                                                                   
lease purchase agreement  was or how the departments  were to                                                                   
use it.  There were only four  agencies that were entitled to                                                                   
use it.   A 1987 Attorney  General's opinion opened  the door                                                                   
to departmental abuse due to the broadness of the statute.                                                                      
                                                                                                                                
Mr. Wright reported  that one of the goals of  the bill is to                                                                   
have a  reporting mechanism regarding  lease purchases.   Any                                                                   
agency  that  enters  into a  lease  purchase  contract  over                                                                   
$100,000 must  provide written notice  within 10 days  to the                                                                   
House  and   Senate  presiding   officers  and  the   Finance                                                                   
Committee chairs.  It also requires  OMB to compile a list of                                                                   
every lease  purchase item  a department  enters into.   This                                                                   
information  would  be  used   when  drafting  the  operating                                                                   
budget.                                                                                                                         
                                                                                                                                
9:49:47 AM                                                                                                                    
                                                                                                                                
Senator  Dyson termed  the bill  draconian.   He asked  which                                                                   
organizations  would  be  included.    Mr.  Wright  said  the                                                                   
organizations  could still lease  equipment, but  they cannot                                                                   
enter into a  lease purchase agreement.  Senator  Dyson asked                                                                   
if the  problems occur when the  leases end up  as purchases.                                                                   
Mr. Wright said that was correct.   The biggest objection the                                                                   
House Finance Committee had was  the lack of limitations with                                                                   
the use of the master lease line of credit.                                                                                     
                                                                                                                                
Senator Dyson  summarized that the  intent of the bill  is to                                                                   
prevent  departments from  purchasing  equipment through  the                                                                   
subterfuge of  a lease purchase  and bypassing  the budgeting                                                                   
process.  Mr. Wright said that was correct.                                                                                     
                                                                                                                                
Co-Chair  Stedman  noted  that  there  was  language  in  the                                                                   
capital budget  to deal with this  issue.  It was  decided to                                                                   
follow the House's lead on this matter.                                                                                         
                                                                                                                                
9:52:56 AM                                                                                                                    
                                                                                                                                
Senator Thomas  asked for  clarification of the  departments'                                                                   
responsibility regarding leases.   Mr. Wright said that under                                                                   
the CS  there would  be no  lease purchase  agreements.   Mr.                                                                   
Wright clarified  that one  could not enter  into a  lease of                                                                   
personal property.  It does not apply to real property.                                                                         
                                                                                                                                
Co-Chair  Stedman  asked  who   controls  the  dollar  amount                                                                   
available.   Mr. Wright  reiterated that  there is  no dollar                                                                   
amount listed  under the  master lease line  of credit.   Co-                                                                   
Chair  Stedman  inquired how  the  payments  show up  in  the                                                                   
budgets that are presented.  Mr.  Wright said that was one of                                                                   
the questions  that the  House Finance  Committee had.   Some                                                                   
agencies do report in the detail books and some don't.  Co-                                                                     
Chair Stedman thought that would  create concern.  Mr. Wright                                                                   
agreed.                                                                                                                         
                                                                                                                                
9:55:04 AM                                                                                                                    
                                                                                                                                
Senator  Dyson requested  an example about  how the  building                                                                   
improvements were  abused.  Mr.  Wright did not know  if that                                                                   
had  happened.    He  gave  an  example  of  a  purchase  for                                                                   
carpeting for the State Office Building.                                                                                        
                                                                                                                                
Senator  Dyson  noted that  the  agencies  may be  using  the                                                                   
process to subvert the capital  projects process.  He gave an                                                                   
example.    He  agreed  with the  intent  of  the  bill,  but                                                                   
emphasized  that  the  legislature  must  be  responsible  in                                                                   
providing needed equipment.                                                                                                     
                                                                                                                                
9:57:57 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  said  when  looking back  at  this  year's                                                                   
capital  budget,  the  Administration   reduced  departmental                                                                   
requests  by $1  billion before  the  Committee received  it.                                                                   
The  Senate   Finance  Committee  reduced   the  legislators'                                                                   
requests by about $1.1 billion.                                                                                                 
                                                                                                                                
9:58:14 AM                                                                                                                    
                                                                                                                                
JIM LYNCH,  ASSOCIATE VICE  PRESIDENT OF FINANCE,  UNIVERSITY                                                                   
OF ALASKA,  voiced  concern about  the lack  of a floor  when                                                                   
reporting to the  Office of Management and Budget.   He spoke                                                                   
in  favor  of  the accountability  aspect  of  the  bill  and                                                                   
against removing the ability to lease purchase.                                                                                 
                                                                                                                                
10:01:53 AM                                                                                                                   
                                                                                                                                
REMOND  HENDERSON,  DEPUTY  DIRECTOR,   DIVISION  OF  GENERAL                                                                   
SERVICES,  DEPARTMENT OF  ADMINISTRATION,  commented that  if                                                                   
the CS prohibits  the leasing of equipment or  other personal                                                                   
property  when necessary,  the  Department of  Administration                                                                   
objects to the  bill.  He spoke in favor of  the bill version                                                                   
which  was  amended  in  the  House  and  contains  reporting                                                                   
requirements.                                                                                                                   
                                                                                                                                
Co-Chair Stedman noted two zero fiscal notes.                                                                                   
                                                                                                                                
HB  419  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                

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