Legislature(1995 - 1996)
03/07/1996 01:34 PM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE March 7, 1996 1:34 p.m. MEMBERS PRESENT Representative Ivan Ivan, Co-Chair Representative Alan Austerman, Co-Chair Representative Jerry Mackie Representative Kim Elton Representative Al Vezey Representative Pete Kott MEMBERS ABSENT Representative Irene Nicholia COMMITTEE CALENDAR * HOUSE BILL NO. 474 "An Act relating to violations of municipal ordinances and regulations; and amending the definition of the jurisdiction of the superior court and the Department of Health and Social Services over delinquent minors to add a further exclusion from that jurisdiction for a minor's violation of a municipal ordinance or regulation that is punishable as an infraction or violation, and making a related technical amendment to that jurisdictional definition." - PASSED OUT OF COMMITTEE * HOUSE BILL NO. 488 "An Act relating to matching funds requirements for municipal school construction grants." - HEARD AND HELD CS FOR SENATE BILL NO. 54(RLS) am "An Act relating to exclusive service areas for utilities certificated to provide electric utility service and to the definition of `general public' for utilities furnishing electric service; and relating to employees and terms of members of the Alaska Public Utilities Commission." - HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HB 474 SHORT TITLE: VIOLATIONS OF MUNICIPAL ORDINANCES & REGS SPONSOR(S): REPRESENTATIVE(S) TOOHEY, Kelly JRN-DATE JRN-DATE ACTION 02/07/96 2648 (H) READ THE FIRST TIME - REFERRAL(S) 02/07/96 2649 (H) CRA, HES, JUDICIARY 02/28/96 2944 (H) COSPONSOR(S): KELLY 02/29/96 (H) CRA AT 1:00 PM CAPITOL 124 02/29/96 (H) MINUTE(CRA)(cancelled meeting) 03/07/96 (H) CRA AT 1:30 PM CAPITOL 124 BILL: HB 488 SHORT TITLE: SCHOOL DISTRICT MATCHING FUND REQUIREMENT SPONSOR(S): REPRESENTATIVE(S) LONG, Foster JRN-DATE JRN-DATE ACTION 02/09/96 2693 (H) READ THE FIRST TIME - REFERRAL(S) 02/09/96 2693 (H) CRA, HES, FINANCE 02/19/96 2813 (H) COSPONSOR(S): FOSTER 02/29/96 (H) CRA AT 1:00 PM CAPITOL 124 02/29/96 (H) MINUTE(CRA)(cancelled meeting) 03/07/96 (H) CRA AT 1:30 PM CAPITOL 124 BILL: SB 54 SHORT TITLE: ELECTRIC UTIL SERVICE/ APUC SPONSOR(S): LABOR & COMMERCE BY REQUEST JRN-DATE JRN-DATE ACTION 01/26/95 95 (S) READ THE FIRST TIME - REFERRAL(S) 01/26/95 95 (S) STA, L&C, FIN 02/14/95 (S) STA AT 3:30 PM BELTZ ROOM 211 02/14/95 (S) MINUTE(STA) 02/21/95 (S) MINUTE(STA) 03/09/95 (S) STA AT 3:30 PM BELTZ ROOM 211 03/09/95 (S) MINUTE(STA) 03/10/95 576 (S) STA RPT CS 2DP 2NR SAME TITLE 03/10/95 576 (S) FISCAL NOTE W/FY97 IMPACT (DCED) 03/21/95 (S) L&C AT 1:30 PM FAHRENKAMP RM 203 03/21/95 (S) MINUTE(L&C) 03/22/95 743 (S) L&C RPT CS 2DP 3NR NEW TITLE 03/22/95 744 (S) PREVIOUS FN FY97 IMPACT (DCED) 04/06/95 (S) FIN AT 9:00 AM SENATE FINANCE 532 04/11/95 (S) FIN AT 9:00 AM SENATE FINANCE 532 04/11/95 (S) FIN AT 2:30 PM SENATE FINANCE 532 04/12/95 (S) FIN AT 9:00 AM SENATE FINANCE 532 04/12/95 (S) FIN AT 2:30 PM SENATE FINANCE 532 04/13/95 (S) FIN AT 9:00 AM SENATE FINANCE 532 04/13/95 (S) FIN AT 2:30 PM SENATE FINANCE 532 04/13/95 (S) MINUTE(FIN) 04/18/95 1056 (S) FIN RPT CS 2DP 1DNP 3NR NEW TITLE 04/18/95 1057 (S) PREVIOUS FN W/FY97 IMPACT (DCED) 04/19/95 (S) RLS AT 0:00 AM FAHRENKAMP ROOM 203 04/20/95 (S) RLS AT 7:30 PM FAHRENKAMP ROOM 203 04/30/95 (S) RLS AT 5:40 PM FAHRENKAMP RM 203 04/30/95 (S) MINUTE(RLS) 01/22/96 (S) RLS AT 11:25 AM FAHRENKAMP RM 203 01/22/96 (S) MINUTE(RLS) 01/30/96 2251 (S) RLS RPT CS 4DP AND CAL 1NR NEW TITLE 01/30/96 2251 (S) ZERO FISCAL NOTE TO CS (DCED) 01/30/96 2251 (S) RULES TO CALENDAR 1/30/96 01/30/96 2252 (S) READ THE SECOND TIME 01/30/96 2252 (S) RLS CS ADOPTED Y15 N3 E1 A1 01/30/96 2253 (S) ADVANCED TO THIRD READING UNAN CONSENT 01/30/96 2253 (S) READ THE THIRD TIME CSSB 54(RLS) 01/30/96 2253 (S) PASSED Y14 N4 E1 A1 01/30/96 2253 (S) Taylor NOTICE OF RECONSIDERATION 01/31/96 2265 (S) RECON TAKEN UP - IN THIRD READING 01/31/96 2265 (S) RETURN TO SECOND FOR AM 1 UNAN CONSENT 01/31/96 2265 (S) AM NO 1 MOVED BY HALFORD 01/31/96 2266 (S) AM NO 1 ADOPTED Y13 N7 01/31/96 2266 (S) AUTOMATICALLY IN THIRD READING 01/31/96 2266 (S) PASSED ON RECONSIDERATION Y14 N6 01/31/96 2268 (S) TRANSMITTED TO (H) 02/02/96 2595 (H) READ THE FIRST TIME - REFERRAL(S) 02/02/96 2595 (H) C&RA, L&C, STATE AFFAIRS 03/05/96 (H) CRA AT 1:00 PM CAPITOL 124 03/05/96 (H) MINUTE(CRA)(cancelled meeting) 03/07/96 (H) CRA AT 1:30 PM CAPITOL 124 WITNESS REGISTER CYNTHIA TOOHEY, Representative Alaska State Legislature State Capitol Building, Room 104 Juneau, Alaska 99801 Telephone: (907) 465-4919 POSITION STATEMENT: Presented sponsor statement for HB 474. BOB BAILEY, Member, Board of Directors Anchorage Chamber of Commerce; and Co-Chair, Chamber Crime Prevention Committee P.O. Box 91598 Anchorage, Alaska 99509 Telephone: (907) 279-3511 POSITION STATEMENT: Supported HB 474. ANNE CARPENETI, Assistant Attorney General Central Office Criminal Division Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 Telephone: (907) 465-3428 POSITION STATEMENT: Provided department's position and answered questions regarding HB 474. JACK CHENOWETH, Legislative Counsel Legal Services Division Alaska State Legislature Goldstein Building, Room 406 Juneau, Alaska 99801 Telephone: (907) 465-2450 POSITION STATEMENT: As bill drafter for HB 474, answered questions. DUANE UDLAND, Deputy Chief Anchorage Police Department 4501 South Bragaw Anchorage, Alaska 99507 Telephone: (907) 786-8500 POSITION STATEMENT: Testified on HB 474. L. DIANE WORLEY, Director Division of Family and Youth Services Department of Health and Social Services P.O. Box 110630 Juneau, Alaska 99811-0630 Telephone: (907) 465-3191 POSITION STATEMENT: Provided department's position and answered questions regarding HB 474. DON LONG, Representative Alaska State Legislature State Capitol Building, Room 405 Juneau, Alaska 99801 Telephone: (907) 465-4833 POSITION STATEMENT: Provided sponsor statement for HB 488. MICHAEL MOORE, Total Quality Manager Northwest Arctic Borough P.O. Box 1110 Kotzebue, Alaska 99752 Telephone: (907) 442-2500 POSITION STATEMENT: Testified on HB 488. JOHN ROGERS, Special Assistant to the Superintendent Northwest Arctic Borough School District P.O. Box 51 Kotzebue, Alaska 99752 Telephone: (907) 442-3472 POSITION STATEMENT: Supported HB 488. MICHAEL MORGAN, Special Projects Manager School Finance Department of Education 801 West Tenth Street, Suite 200 Juneau, Alaska 99801-1894 Telephone: (907) 465-8665 POSITION STATEMENT: Answered questions regarding department's fiscal note for HB 488. BRUCE D. SCOTT, Director Member and Public Relations Matanuska Electric Association, Incorporated P.O. Box 2929 Palmer, Alaska 99645 Telephone: (907) 745-9215 POSITION STATEMENT: Supported SB 54. SAM COTTEN, Commissioner Alaska Public Utilities Commission 1016 West Sixth, Suite 400 Anchorage, Alaska 99501 Telephone: (907) 276-6222 POSITION STATEMENT: Opposed SB 54. ALYCE HANLEY, Commissioner Alaska Public Utilities Commission 1016 West Sixth, Suite 400 Anchorage, Alaska 99501 Telephone: (907) 276-6222 POSITION STATEMENT: Opposed SB 54. PAUL MORRISON, Chief Engineering Section Alaska Public Utilities Commission 1016 West Sixth, Suite 400 Anchorage, Alaska 99501 Telephone: (907) 276-6222 POSITION STATEMENT: Answered questions on SB 54. DAVID HUTCHENS, Executive Director Alaska Rural Electric Cooperative Association 703 West Tudor, Suite 200 Anchorage, Alaska 99503 Telephone: (907) 561-6103; (907) 463-3636 POSITION STATEMENT: Testified on SB 54. ROBERT MARTIN, JR., General Manager Tlingit-Haida Rural Electric Association P.O. Box 210149 Auke Bay, Alaska 99821 Telephone: (907) 789-3196, Extension 35 POSITION STATEMENT: Supported SB 54. BOB CRAIG P.O. Box 20422 Juneau, Alaska 99802 Telephone: (907) 586-9091 POSITION STATEMENT: Opposed SB 54. ACTION NARRATIVE TAPE 96-17, SIDE A Number 0001 CO-CHAIR IVAN IVAN called the House Community and Regional Affairs Committee meeting to order at 1:34 p.m. Members present at the call to order were Representatives Ivan, Austerman, Mackie, Elton and Vezey; Representative Kott arrived at 1:35 p.m. Absent was Representative Nicholia. HB 474 - VIOLATIONS OF MUNICIPAL ORDINANCES & REGS Number 0073 CO-CHAIR IVAN noted that committee packets for HB 474 included the bill; a sectional analysis; zero fiscal notes from the Department of Community and Regional Affairs, Department of Health and Social Services and the Department of Public Safety; the sponsor statement; and letters of support. He invited Representative Toohey to introduce the bill. Number 0116 REPRESENTATIVE CYNTHIA TOOHEY, sponsor of HB 474, presented the bill: "We all know that the juvenile justice system has some problems. Too often, young offenders are finding there is no meaningful consequence for their delinquent behavior. This is particularly true for those who commit minor offenses, since the justice system is already overwhelmed with serious offenders. Knowing this, juvenile offenders have become increasingly dangerous and blatant regarding their offenses, since they know the overloaded system can do little to them. House Bill 474 would allow municipalities to respond to less serious juvenile behavior by expanding its jurisdiction to include the abilities to subject juvenile offenders to civil infractions and/or mediation. This will allow the juvenile justice system to focus on the more serious criminal activities while assuring that juvenile offenders of less serious offenses receive more immediate consequences for their actions." Number 0314 BOB BAILEY, Member, Board of Directors, Anchorage Chamber of Commerce, and Co-Chair, Chamber Crime Prevention Committee, testified via teleconference. He indicated the Municipality of Anchorage had brought before the Crime Prevention Committee a package of proposed crime-related legislation. Due to lack of jurisdiction, Anchorage had been "nearly helpless" in addressing problems relating to juveniles. "We've heard such horror stories as juveniles shoplifting in Dimond Center because they knew they'd get a ride back downtown by the police but the state couldn't prosecute," he said. While HB 474 would not solve juvenile problems, Mr. Bailey believed it would allow local municipalities to use their resources as a first line of defense against offenders. "It's been shown over and over again that many juveniles commit crimes simply because they know they won't be prosecuted due to the overcrowding of the state system," Mr. Bailey said. "And they get away with it once and they offend again." While fines did not necessarily deter serious criminals, his committee believed that fines might keep first-time juvenile offenders from becoming repeat offenders. On December15, the Anchorage Chamber of Commerce Board of Directors passed a resolution supporting the entire package of crime-related legislation. Today, they were asking for passage of HB474, which they saw as an important first step in fighting juvenile crime. Number 0474 REPRESENTATIVE AL VEZEY asked if there was a relationship between HB 474 and shoplifting. MR. BAILEY replied he was not sure there was a direct relationship. "It's my understanding that minor shoplifting offenses could be addressed under this bill as a citation," he said. REPRESENTATIVE VEZEY asked for clarification about "citation." MR. BAILEY clarified it was a violation. He explained his understanding that a ticket would be issued for shoplifting. REPRESENTATIVE VEZEY again asked for clarification, saying he thought shoplifting was a misdemeanor under Alaska statute. MR. BAILEY asserted his understanding that the municipality could pass a local ordinance to address shoplifting, as well. Number 0591 ANNE CARPENETI, Assistant Attorney General, Central Office, Criminal Division, Department of Law, said, "concealment of merchandise in our Alaska statutes varies according to the value of the merchandise that's concealed." She indicated it went from a B misdemeanor to a C felony. REPRESENTATIVE VEZEY asked what that had to do with HB 474, which appeared to address violations and infractions. Number 0653 JACK CHENOWETH, Legislative Counsel, Legal Services Division, Alaska State Legislature, offered that he was the bill drafting attorney. He explained: "In the current law, municipalities are permitted to identify conduct and criminal laws through ordinances. When they enact ordinances that carry a criminal penalty, [indisc.] under the law as it currently reads, unless there is an exception in state law, the way that the penalty is enforced is through DFYS. The minor is handled through the delinquency process. What Anchorage has asked is that the exceptions to treatment through the delinquency process be expanded, so that if a municipality chooses to write ordinances and treat more activities - more conduct by minors - in a criminal sense, that these kids could be prosecuted in the district court. And that's what Section 3 of this bill does. "At the current time, the only exception for municipal ordinances that takes them out from under delinquency treatment and allows a direct prosecution, is the exception for traffic ordinances or regulations. That's page 2, lines 26 and 27 of the bill. The provisions of this subsection apply when a minor is accused of violating a traffic ordinance or regulation by a municipality. What Anchorage has asked for is an expansion of that authority. And what we've given them is paragraph 6, so that the exception is broadened, so that any ordinance or regulation of a municipality that's punishable as an infraction or violation can be taken to the district court and tried and prosecuted and sentence can be entered there." Number 0772 MR. CHENOWETH continued: "The wrinkle on this is that the kinds of conduct that this is being expanded to cover includes things that can only be punished as infractions or violations, only minor offenses, only minor conduct, as it's called in the court rules, so that there is no threat of a minor having to put in any kind of jail sentence. There is no threat of incarceration, there is no threat of any penalty whatsoever, except for payment of a fine, and under the general authority, of payment of restitution if there's property damage done. Limiting it to a minor offense means that provisions of law that would require trial before a jury or appointment of public counsel would not be applicable. In other words, if the only penalty - the only potential penalty - is the payment of a fine, treatment of this as a violation would mean that there would be no requirement that a municipality choosing to enforce its ordinances this way would be required to go before a jury to prosecute this minor or no requirement that there be a court-appointed counsel. So, essentially, what Anchorage is asking is that the opportunity be expanded beyond traffic offenses and other sorts of conduct that minors might engage in be criminalized and enforced in this manner." Number 0869 MR. CHENOWETH continued: "Now, having said that, let me also say that Anchorage has a wrinkle on this that differs from, as I understood it, from most, if not all, of the municipalities. About a year and a half ago, Anchorage expanded its civil enforcement ordinance, so that rather than prosecute before the district court, or rather than take these cases, if they gain the benefit of this change in law, what they proposed to do would be to expand the use of their civil enforcement mechanism that's in place and handle it that way. But for most municipalities - Fairbanks, where you're from, Juneau, and other places where the norm would be to adopt ordinances that speak to criminal conduct - what we're asking, or what the bill is asking, what the sponsor is asking, is that the opportunities be given to municipalities to enforce their ordinances directly in the district court, rather than requiring that these be handled as delinquency proceedings initiated by DFYS." Number 0926 REPRESENTATIVE VEZEY said he had thought the bill was trying to give municipalities more authority to deal with violations. "But then, the example was given of shoplifting," he said, "and you elaborated that we have statutes that criminalize shoplifting, like the misdemeanor, and we would be giving municipalities the right to supersede that statute and make it a violation, prosecute people for a violation of what under state law would be a misdemeanor or perhaps a felony. Nobody in the municipality of Anchorage would voluntarily be prosecuted for a felony when they could choose to be prosecuted for a violation." Number 0970 MR. CHENOWETH replied it was not a question of choice. It was a question of how a municipality chose to enforce or penalize criminal conduct. He referred to shoplifting as an example and indicated that nothing said a municipality could not come along and make substantially similar conduct a violation with a fine for a penalty. "And the choice then, really, would be up to law enforcement officials and the prosecutors of the city or borough, whichever it would happen to be, as to how to prosecute. If they chose not to prosecute at the municipal level, it could go before the district attorney's office and be prosecuted by the state, I assume, or vice versa. The district attorney might turn it down and the municipality might decide that it would choose to prosecute. But nothing prevents the municipalities from enacting an ordinance now that says that shoplifting is conduct that is punishable as a violation." Number 1039 REPRESENTATIVE VEZEY indicated he could envision a double-jeopardy possibility. MR. CHENOWETH said that would be true only if they were prosecuted by both the state and the municipality. REPRESENTATIVE VEZEY replied, "But if the state chose to prosecute as a felony violation and the person's saying, `no, no, I committed this in the municipality where it's only a violation, not a felony, I would prefer to be prosecuted for a violation.'" MR. CHENOWETH emphasized it was not the alleged offender's decision but the prosecutor's decision. Number 1076 REPRESENTATIVE JERRY MACKIE said that Representative Vezey was on point with some concerns he also had. He noted that many larger communities prosecuted DWI violations, for example, under municipal ordinances, using city attorneys to prosecute the cases. "But you'll find serious felonies and murder and other types of things are always charged under state statute," he said, "because then it's the responsibility of the district attorney and the state to pay for those. Representative Mackie cited examples of offenses that might be bailable for fines that could be mailed in, including traffic regulations, possession of tobacco, fish and game statutes, and parks and recreation violations. He referred to the new language on page 3, lines 3-7, where it said "an ordinance or regulation that is punishable as an infraction or violation." "My question is," he said, "other than the ones that are already stated, what is there out there that is punishable by a violation that could be adopted by ordinance without getting into the area that Representative Vezey talked about where all of a sudden, municipalities are adopting ordinances that are normally criminal offenses, misdemeanor charges under state statutes, and opting to go to infraction-type ordinances?" He clarified, "What are some of the things they're asking to be able to serve violation citations on?" Number 1189 MR. CHENOWETH replied he did not have a list of what Anchorage, for example, might be concerned about. Typical low-level criminal conduct, he suggested, might be things like littering, dog control, or curfew violations. REPRESENTATIVE MACKIE responded that they could do all those things under ordinance now. MR. CHENOWETH said, "Yes, but when they come to enforce those ... there is no exception that says they are to be prosecuted in the district court. Consequently, they get put through the delinquency system. That is to say, they are presented to or by DFYS and handled through DFYS. What Anchorage folks are asking is that the use of the availability of the district court as a means, just as we do now, for - just as municipalities do now - to enforce their traffic ordinances, that that be expanded, so that other kinds of ordinances, other subject matter, could be prosecuted - minors could be prosecuted - in the district court in the same way. And I say that and then I have to hasten to add that Anchorage at this point does not use that. They are thinking in terms of expanding the use of a parallel civil enforcement remedy that they adopted about a year and a half ago. But that doesn't mean that other municipalities might not also want to have the opportunity to enforce their own regulations, or their own ordinances [indisc.] through a district court criminal prosecution." Number 1294 REPRESENTATIVE TOOHEY noted that Duane Udland was available and asked Mr. Udland if he could answer that question. DUANE UDLAND, Deputy Chief, Anchorage Police Department, testified via teleconference that he was also representing the City of Anchorage. "Our whole request for this bill lies in the fact and the belief that minor offenses often go unpunished when you're dealing with juveniles," he said, expressing the need for early consequences when a juvenile was first caught by the police. He suggested that juvenile intake did not have the time or resources to deal with petty offenses. This legislation would allow Anchorage to either cite a juvenile in district court or take it through the civil road, as they were currently doing with curfew violations. He cited types of violations that the state courts never saw. "We think we have a problem with juveniles that we would like to start charging them with some of these ordinances," he said. "But right now, unfortunately, we can charge, but the system at the state level just is not going to deal with it." He emphasized that Anchorage was asking for enabling legislation. Number 1428 REPRESENTATIVE MACKIE asked if the focus of the bill related to jurisdiction more than the ability to put new laws on the books. "Because I can't imagine any of the infractions that you can't put on the books right now, already, under current law, by ordinance," he said. MR. UDLAND replied, "You're exactly right. We've got a whole host of them that we could charge the kids with right now. It's just that the state has the jurisdiction to prosecute. We're asking for that jurisdiction to prosecute them, either civilly or taking them directly into district court." Number 1450 REPRESENTATIVE MACKIE asked if there was a fiscal note from the courts. He wanted to know what kind of impact it would have on state courts, prosecution, court time and the judges. He further wondered if the fines eventually went to the municipality of Anchorage, what was in it for the state for the utilization of the state courts. MR. UDLAND said he did not know how many kids they were talking about. He indicated the assembly was interested in the civil process, where Anchorage would have its own Anchorage hearing officer. He thought the impact on district court would be minimal. Number 1542 REPRESENTATIVE VEZEY referred to page 2, lines 14 through 16, and said it appeared to be double jeopardy. "You're talking about prosecuting for a violation for somebody that's been convicted of a crime, which implies that there was a misdemeanor or a felony involved, they were convicted, then it talks about prosecuting for violations," he said. "I'm confused by what we're trying to do there." Number 1578 MR. CHENOWETH said, "Section 2 is intended to address the question of a concern on the part of Anchorage that if you allow us to prosecute, don't put on us the burden of requiring that these things go before a jury or requiring that we have to pay for court- appointed counsel. You don't have to take a case to a jury and you don't have to provide a lawyer at public expense if you are prosecuting what the court has identified as a minor offense - that's their term. And we looked at what the court meant by minor offense." He explained the term arose out of a judicial decision. "And we were looking for something that would indicate what the court was thinking of in terms of qualifying as a minor offense. If we met that, we would be able to exempt the municipalities from having to carry the burden of trying a minor before a jury or appointing an attorney. We found the clue to that in something called District Court Criminal Rule 8. And essentially, paragraphs 2 and 3, lines 7-16 of that page, pick up the characteristics out of the district court rule and set them down in state law in a way that, hopefully, keeps the municipality from having to carry the burden of putting their cases before a jury or of having to appoint an attorney at public expense." Number 1658 MR. CHENOWETH continued: "One of the other characteristics of a minor offense is that the penalty could not give rise to any disability or legal disadvantage based on conviction of a crime. Your voting rights couldn't be taken away. You couldn't lose a license to practice, practice law, practice medicine, operate a business. No other disability or legal disadvantage attaches to the conviction apart from payment of a fine. Period. If the ordinance were drafted in any way that said that for violation of this ordinance, some other penalty attaches beyond payment of a fine, then paragraph 3 would say that the enacting municipality could not take advantage of the minor offense exception, and therefore, it would be treated as a normal criminal offense and various other things would come into play, including right to trial by jury and right to court-appointed counsel if you couldn't afford it. So, what we're trying to do is meet the court's definition of minor offense in all of the facets in the district court rule." Number 1723 REPRESENTATIVE VEZEY said his interpretation in reading it was that there was a conviction involved. He understood Mr. Chenoweth to be saying there was no disability or legal disadvantage that would accrue from a conviction. MR. CHENOWETH replied that an ordinance that the municipality chose to enforce this way could not include a provision that penalized the defendant, upon conviction, beyond payment of a fine. Number 1764 REPRESENTATIVE VEZEY explained that he understood what Mr. Chenoweth was saying but questioned whether the bill language said that. He asked if Mr. Chenoweth was comfortable that the language said that. MR. CHENOWETH indicated he had cribbed the language from the district court rule. Number 1777 REPRESENTATIVE MACKIE reiterated that he wanted to know if there was a fiscal note from the court. Furthermore, he wished to know the position of the Administration or the Department of Law on this particular bill. Number 1799 MS. CARPENETI testified on behalf of the Department of Law, saying the department opposed HB 474. She explained that the Administration opposed automatic waivers of juveniles to adult court, especially for minor offenses. Shoplifting was the type of offense that the Administration thought should be dealt with in the juvenile system. Number 1838 MS. CARPENETI explained that the district court in Alaska had no probation supervision, so that a person would go to court and be fined without having any follow-up. Nor did the bill provide for restitution. "And we're not sure exactly what offenses may be dealt with under this system," she said. "If it's concealment of merchandise, it might be a violation in Anchorage, then it's a B misdemeanor or an A misdemeanor or a C felony outside of Anchorage." Ms. Carpeneti acknowledged there was frustration with the juvenile system. "And we would recommend that you wait while the Governor's Commission on Youth and Justice addresses the problem," she said. "I think the system is creaking under too many people and too many demands made of it. But we would oppose this approach to alleviating whatever problems that are seen with the juvenile system." Number 1893 REPRESENTATIVE MACKIE said he could appreciate the position of automatic waivers of juveniles into court. "What we're talking about is not jail time," he said. "We're talking about minor offenses, which is under a bailable schedule. With certain parameters on there, ... wouldn't the Administration look to this as, perhaps, a mechanism for relief from a juvenile justice system that is obviously very broke?" He suggested that Anchorage would not be asking for relief unless it was a serious problem. Number 1930 MS. CARPENETI thought it would be useful to hear from the Division of Family and Youth Services (DFYS) and added, "I think that may be a misconception that these cases are just not dealt with. And it's the Administration's position that if you don't deal with them at the beginning, then you might end up with a juvenile who has not been addressed in terms of how to help that person steer away from committing offense after offense. And you end up with a juvenile who's in more trouble, and who's in serious trouble, and you've lost the chance to help that individual, to steer him or her away from bad behavior." Number 1956 REPRESENTATIVE ELTON asked who would determine what a minor infraction was. He wondered whether the municipality, by ordinance, would say what were waivable offenses, rather than having determinations made by DFYS or the state. Number 1999 MS. CARPENETI believed that the way the bill was drafted, if the municipality adopted an ordinance with only a fine attached to it, they could, by that very act, define what is a waivable offense. For example, if they prohibited concealment of merchandise and made the only consequence a fine, that would, by definition, make it waivable under this bill. She added that she believed minor consuming was already waived to district court. Number 2034 MR. UDLAND emphasized Anchorage's willingness to take on the problem. He said, "I'd be testifying in the opposite if we were talking about waiving the kids into district court where they would be sentenced to jail, as opposed to being handled by juvenile intake. But that's not the case." He added, "I think that if there's concerns about the extent that the municipality would pursue this, for instance, would be going to serious misdemeanors and then sort of declassifying them to violations, perhaps you could put some language into the bill that would somehow ensure that that wouldn't occur, but I don't know how to do that. But it would seem to me that this bill really does relieve the state of Alaska from some burden that I've always heard in the past that you'd like to get rid of." Number 2130 L. DIANE WORLEY, Director, Division of Family and Youth Services (DFYS), Department of Health and Social Services (DHSS), testified that the department opposed HB 474. "While it has been noted that there are times we would probably relieve ourselves of some of these obligations, the reality is we do not feel it is in the best interest of the youth," she said. Number 2163 MS. WORLEY pointed out that in the bill, as designed, each municipality would have the ability to adopt the ordinance of their choice. The department was concerned that throughout the state, youth would be treated differently for the same violations. A second concern was that when a youth went into court, DFYS had no mechanism for receiving that information. Someone who had been to district court previously could come into the DFYS system as a first-time offender. Similarly, there was no notification to district court when a youth was on probation in the juvenile system. Number 2229 MS. WORLEY emphasized that DHSS felt the juvenile justice system was the best mechanism for handling youth. She discussed misperceptions and statistics relating to the system. On misdemeanor referrals for 1995, she said, DHSS adjusted with a letter 18 percent of the time and with a referral 29 percent of the time, resulting in payment of restitution, going to youth court or mediation, or performing community service. The department adjusted with a conference almost 21 percent of the time, in which parents were involved and worked out a plan of action with the youth and probation officer, including ongoing follow-up. In 13 percent of the cases, juveniles were petitioned to court. About 5 percent received ongoing probation for a period of time. Ms. Worley emphasized that the system was trying to find methods of rehabilitation. She acknowledged they were not always successful. However, they felt that if parents were involved and the youth were engaged in community service, probation, monitoring or other methods, there was a better opportunity for keeping an eye on the youth. Number 2313 MS. WORLEY expressed concern that youths would fail to pay the fines. "As you all well know," she said, "our youth facilities are more than full and we have grave concern about how many of these kids decide not to pay a fine, get a contempt of court charge, and then we have to take them in for a period of time for an offense that could be as small as skateboarding in the wrong place of town because there was a municipal ordinance against skateboarding on that part of the street." Number 2345 MS. WORLEY emphasized that they supported municipalities taking a more active role. "Anchorage is a wonderful example," she said. "We would really like the opportunity to work with municipalities and have them help us develop alternatives for placement and referrals for these youth." Number 2369 REPRESENTATIVE TOOHEY expressed amazement that DHSS opposed allowing the municipality to take on this problem. She asked if the problem was going to be addressed in the Governor's new youth bill. MS. WORLEY replied that was certainly part of it. "And I serve on the prevention working group of the Governor's Conference," she said. "There's the prevention, there's the youth-at-risk and then there's dealing with the juvenile code. So we are dealing with all aspects of that." Number 2401 REPRESENTATIVE TOOHEY asked, "But will he address this issue that is a major problem in Anchorage? If he doesn't, then that's what I'm saying. This bill is a specific problem in our Anchorage area with the youth. They're running rampant in Anchorage. We need some way to stop them in the very beginning. Now, whether the state wants to get involved in a five-dollar shoplifting or in spray-painting an office building, maybe that's something they want to do. And if that is, then the fiscal note should be totally different. As it is now, it is something that Anchorage feels they can handle." Number 2430 REPRESENTATIVE MACKIE referred to earlier testimony about attitudes by juvenile offenders who did not worry about prosecution. He asked if there were minor offense charges currently under the state's juvenile justice system being dismissed because of lack of resources. TAPE 96-17, SIDE B Number 0001 REPRESENTATIVE MACKIE asked if DFYS could be notified when there was a violation. "If it's being adjudicated by a district court judge anyway, there would be a record of it," he said, "and certainly, something like that could be passed on." He asked why Ms. Worley did not see the bill as an asset to the system. Number 0025 MS. WORLEY responded, "You bring up a number of good points, as does Representative Toohey. And I think it's important to understand that it's not that we don't feel the municipality can handle it." However, DFYS was concerned that payment of a fine, while often immediate, was not a real deterrent nor would it keep juveniles on the right track down the road. "There could even be said that it provides a benefit to those who have higher economic status," she said. "It's easy to pay a fine if you have a wealth of money. If you don't, it becomes a greater burden. I guess my concern continues to be that I believe, through the juvenile justice system, we can have a stronger, continuing relationship, a monitoring process, to keep in touch with these youth and to see where they're going. Certainly a fine for some kids is going to be a deterrent." She reiterated the fear that many would not pay the fines and would end up in contempt of court, resulting in their placement in the youth facilities. Number 0085 MS. WORLEY agreed the department could probably set up a system to receive notification from the courts. REPRESENTATIVE MACKIE asked if it were a policy of DFYS to not issue fines because of a belief that fines did not serve as a deterrent. He noted that paying money had been a deterrent to him as a youth. Representative Mackie then referred back to his earlier question about youth not being prosecuted or receiving follow-through in the system and asked if that was the case. Number 0113 MS. WORLEY stated that according to the statistics for FY 1995, 6percent of misdemeanors were dismissed for various reasons. Lack of resources precluded them from dealing with every single case as thoroughly as they wanted to. "But we certainly try to evaluate each case and make a good determination as to what steps can be taken and we try to have some type of consequence in every case," she said. Althought DFYS did not normally impose fines, they required a lot of restitution, particularly in cases where there was property damage or stolen merchandise. Number 0209 REPRESENTATIVE MACKIE said, "So, there's not an inordinate number of offenders that are falling through the cracks, then, in your opinion?" MS. WORLEY replied, "It's hard to answer that. I think there are kids who are falling through the cracks, definitely. I don't know if there is an inordinate number. I think a lot of it is on perception of what is a consequence. In some people's minds, a fine is a concrete consequence, whereas community service is not a concrete consequence." Number 0237 REPRESENTATIVE TOOHEY said, "If municipalities would get together and absorb 10 or 15 percent of these minor cases, it certainly would leave your hands free, and the money free, to prosecute the more serious offenses." She asked Mr. Udland about the numbers of cases being dismissed. Number 0254 MR. UDLAND replied, "I can't give you numbers. I think `dismissed' is actually the wrong terminology." He said he had heard people from Juneau intake say they were so busy that if they could write a letter, that might be all they would do because of lack of time. "And I don't think that would count as a dismissal," he said. "It would probably be a disposition, and therefore, I don't think the dismissals would show up as a true, accurate picture." He noted that street officers were frustrated because the only consequence was a letter in the mail. "I've always defended juvenile intake and the work that they do," he said. "I think they do a wonderful job. But the problem is, is there aren't enough of them. And they're getting overwhelmed. I wish I could get every kid into juvenile intake for every minor event. I think they have the ability and the desire. They just don't have the resources. I guess there's a question, can the municipality enter into this one limited area and help out? I think we can." Number 0333 CO-CHAIR AUSTERMAN pointed out that with 18 percent letters and 6 percent dismissals, that was 24 percent, almost a quarter of the cases, which did not have fines or actions against them. With another 21 percent going to conference with parents, nearly 45 to 50 percent of the caseload was not being petitioned to court, going to referrals or in the ongoing probation period. "So, using those numbers, it sounds to me like there is a problem," he said. "And maybe this would be one way of helping your department solve some of the problems that you've got out there." He indicated he supported the bill and wanted to move it from committee. Number 0369 CO-CHAIR IVAN commented that he was not totally convinced by DFYS. He saw the bill as a tool and thought it would give the municipalities the authority to deal at the local level, getting the authority closer to parents and enforcement in the communities. Number 0422 REPRESENTATIVE ELTON thought they were taking a philosophy adopted by the state over a long period of time and "turning it on its head." He said, "I really do believe that part of the problem with juvenile misbehavior is that we've got to get them into a system where they can get some help." He was not sure that taking juveniles straight into the court system would do that. He suggested the proposed legislation was, at most, a partial solution that could possibly be adopted as part of a package. "I don't see anything in here that guarantees that there's going to be retribution," he said. "I don't see anything in here that speeds up the docket in district court. I don't see anything in here that tells me how much this is going to cost the court system. I don't think we've even asked the court system how much it's going to cost." He advised that until there were answers to those kinds of questions, the bill should not move on. Number 0539 REPRESENTATIVE TOOHEY responded, "This is for a municipality to adopt. Juneau obviously doesn't have that problem. It is obviously a problem for Anchorage. It may be for Fairbanks; I'm not sure. But the court system said that it would be so minor that it might incur a $2,000 court problem, $2,000 a year, if that." She emphasized her belief that it was a solution to 14- and 15- year-olds starting into a life of crime. "Some of them it's going to stop," she said. "If we can save 20 percent by scaring them or by imposing this fine on them, then I think that we're saving somebody." She pointed out that the municipalities were not mandated to do this but were willing to take on this problem. Number 0582 REPRESENTATIVE MACKIE said he did not necessarily disagree with Representative Elton's comments. "And I certainly think that DFYS and other agencies try to do the best they can with the rehabilitation and looking out for the best interest of the kid." However, he recalled getting a ticket at age 14 for driving without a license and the effect that going with his mother before a judge had on him. He suggested that going before a judge could be a wake-up call. Representative Mackie referred to the numbers pointed out by Co-Chair Austerman and said that also concerned him. "There is not a lot of deterrent out there," he added. Number 0658 REPRESENTATIVE ELTON clarified that although he thought there was a problem, he was not yet ready to buy into the solution. He indicated that as a youth, he would have been more frightened by his parents receiving a letter than by going before the district court judge. He recalled an incident where he was one of 150 kids who jaywalked in front of the high school one afternoon. "We thought that was the biggest, most fun thing we had that whole week," he said. "We got the afternoon off and we all went to court and he told us not to do it again." He thought there should not be too much concern about 21 percent getting a letter because if it worked right, a lot of those kids would not be back in the system. "Frankly, I think the best solution is, give DFYS the ability, the resources they need, to do a good job," he said. Number 0766 CO-CHAIR AUSTERMAN moved that HB 474 move from committee with accompanying fiscal notes and individual recommendations. There being no objection, it was so ordered. CO-CHAIR IVAN recessed the committee at 2:40 p.m. for a short break. HB 488 - SCHOOL DISTRICT MATCHING FUND REQUIREMENT Number 0796 CO-CHAIR IVAN called the meeting back to order at 2:45 p.m. There was no longer a quorum. Co-Chair Ivan noted that committee packets for HB 488 contained the bill; the affected statutes; a zero fiscal note from the Department of Community and Regional Affairs; a fiscal note from the Department of Education; a sponsor statement; data from the Department of Labor; and letters of support. Number 0828 REPRESENTATIVE DON LONG, sponsor of HB 488, presented the bill. He said certain school district areas had been neglected because of inability to come up with the matching fund requirement. He read from the sponsor statement: "This legislation is intended to allow municipalities with an unemployment rate of 10 percent a waiver towards their participating share. At the present time, municipalities with an unemployment rate of 10 percent of greater have a much harder time of paying their local share for school construction. This high unemployment rate results from a lack of economic development or jobs in a municipality, which translates into low revenue for the local municipalities. "Since the adoption of the school district participation grant program in 1973, many schools in Alaska have been neglected due to these municipalities' inability to come up with their participating share of the grant. I believe this bill would be a step in the right direction in helping economically depressed municipalities in their efforts to receive school construction grants." Number 0910 REPRESENTATIVE LONG explained that although some schools had applied for waivers, none had been granted since 1993. Many of the schools had been on a list for many years, yet had never been funded. He felt the only municipalities that could afford matching fund programs would have their schools fixed or constructed. There was no effective means of helping these municipalities come up with matching funds. CO-CHAIR IVAN noted that there was again a quorum present, with Representatives Austerman, Vezey and Elton present in addition to himself. Number 0980 REPRESENTATIVE ELTON asked how Representative Long had arrived at the 10 percent figure. He said Mat-Su, for example, was "on the cusp of maybe being eligible," which he did not think was necessarily intended. Number 1019 REPRESENTATIVE LONG responded that in discussions with people from his district, they had arrived at an average figure of 10 percent. He noted that in his own district, those figures had gone up to 14 or 16 percent in some areas. REPRESENTATIVE ELTON asked why the previous year was being used. He suggested an average of prior years would ensure that it was more than a one-year phenomenon and asked if there had been discussion about that. Number 1055 REPRESENTATIVE LONG replied, "The discussion was based on that the department would have the ability to prove that they ... meet that requirement of the 10 percent." He indicated they had not considered an average over several years. CO-CHAIR IVAN noted that he did not plan to move the legislation out today. "We need more input and questions answered before we proceed," he said. Number 1131 REPRESENTATIVE AL VEZEY said, "Representative Long, I'm not aware that the unemployment rates in different regions of the state have been extremely cyclical in the last, say, eight years." He noted that with 10 years, there might be cyclical action. "We have certain regions of the state which have historically high unemployment rates," he said. "When we passed the statutes providing for the matching funding for the bonding propositions and whatnot, those unemployment conditions were known then. And I would, on the surface, think that all that was taken into account." He thought going back in now might distort the whole idea of local sharing on these cost programs. Number 1232 REPRESENTATIVE LONG responded that it had become apparent that it was hard for a school district to obtain a waiver. He envisioned this legislation as an additional waiver mechanism for school districts that would not otherwise qualify. He said a municipality might have funds but be mandated by another department, for example, the Department of Environmental Conservation, to spend the money elsewhere, such as in fixing their landfill. Number 1338 CO-CHAIR AUSTERMAN indicated he had questions for the Department of Education. MICHAEL MOORE, Total Quality Manager, Northwest Arctic Borough, testified via teleconference from Kotzebue that the borough was having a great deal of difficulty raising the required match for schools. "What we estimate we need to do for the next 20 years is set aside $750,000 a year at a minimum to meet the match requirement," he said. He indicated they faced deficits otherwise totalling $15 million in the next five years. "So, we don't believe we're going to be able to do it. Our unemployment rate over the past three years has averaged approximately 18 percent." Number 1430 REPRESENTATIVE VEZEY asked Mr. Moore what the relationship was in the borough between borough revenues, school district revenues and unemployment. MR. MOORE responded there was no direct relationship. "The unemployment figure is an indicator of the state of the economy," he said. "Another indicator would be that we have a number of communities with 30 percent of the people at or below poverty level. There's many indicators that could have been used. I don't have any reason to believe that the unemployment indicator is an incorrect one, but it might need additional factors and that might be something to consider in the bill." Number 1494 JOHN ROGERS, Special Assistant to the Superintendent, Northwest Arctic Borough School District, testified via teleconference from Kotzebue. He said he had been asked by Superintendent Swenson to testify in support of HB 488. He explained they were in the final design stages of a school facility in Selawik, the first project for which they had received funding that required a local match. "In this particular case," he said, "that requirement was $1,436,669. After the money was appropriated by the legislature, we worked with the Department of Education to identify approximately $245,000 of prior year expenses which qualified for local match purposes. This left the district with a $1.2 million obligation to complete this requirement for Selawik schools." Number 1569 MR. ROGERS continued, "Over the last two years, the district has had to utilize all of its cash reserves to meet this obligation. Just recently, the school board appropriated the final $850,000 which was necessary for us to go ahead and apply with the local match requirement. At the same time they were appropriating the $850,000 for construction, they also had to go in and cut approximately $435,000 out of the operating fund budget. The action of the board in this final appropriation for the construction project in Selawik has utilized all of the district's available cash reserves. If additional construction funds were to be appropriated by the legislature for our school district, we cannot meet any more local match requirements." Number 1643 MR. ROGERS indicated that HB 488 provided a method for a waiver of the local match requirement in areas of the state having high unemployment, such as his borough. He reiterated the school district's support of the bill. Number 1649 REPRESENTATIVE VEZEY asked Mr. Rogers what the match formula had been. MR. ROGERS replied he believed the borough's match was 10 percent, providing a 90/10 split. Number 1699 MICHAEL MORGAN, Special Projects Manager, School Finance, Department of Education, testified that the department acknowledged that districts faced challenges in meeting the local match requirement. "And this bill certainly speaks to that," he said. He indicated he was there to answer questions regarding the fiscal note. CO-CHAIR AUSTERMAN stated his understanding that for the fiscal note, the Department of Education had used the total number of sites, 29. MR. MORGAN clarified that was municipalities. "This excludes REAAs," he said. CO-CHAIR AUSTERMAN stated, "And you've said 11 of them go over the 10 percent." MR. MORGAN replied, "That's correct. That was using 1995 unemployment figures." Number 1773 CO-CHAIR AUSTERMAN referred to the fiscal note for $873,000 and asked if it was based upon full funding. MR. MORGAN clarified it was full funding of the department- recommended projects for FY 1997. "This is based on the six-year plan that we put forth within the last couple weeks," he said. CO-CHAIR AUSTERMAN asked if it was full funding for the 11 sites. Number 1805 MR. MORGAN replied, "No, that's based on full funding for all projects within that fiscal year." He added, "For the first two fiscal years in the six-year plan, the department targeted, in its six-year plan, a target figure of $100 million a year. And part of the projects which were recommended for funding under that $100- million-dollar goal were recommended for funding, for example, perhaps, for planning a design only in FY 97, with full funding for construction to follow in FY 98. So, the $873,000 speaks to the full funding as recommended by the department, but that doesn't necessarily cover the full scope of all the projects in that one year." CO-CHAIR AUSTERMAN asked if it covered the 11 sites. MR. MORGAN replied yes. CO-CHAIR AUSTERMAN asked if it covered more than the 11 sites. MR. MORGAN replied, "The $873,000 is just the impact of the 11 municipalities that had over the 10 percent. If you go to Attachment Number 1, we kind of speak to this by saying -- the first group of figures is total scope and the $873,000 is just the impact if those 11 sites didn't have to pay their participating share for that year." Number 1890 CO-CHAIR AUSTERMAN suggested that over the number of years that they had been funding school construction, not everybody on the list had been funded at once. MR. MORGAN said, "That's correct." CO-CHAIR AUSTERMAN pointed out that the department had used a full- list figure for the fiscal note. MR. MORGAN replied, "We've used the full-list spread over a six- year period." He added, "Right now, this six-year period includes more than the full list. This includes the full list as we published it this year, plus other projects which have been currently identified by districts in their six-year plans, which really takes us out into that -- the end of the six-year horizon." Number 1950 CO-CHAIR AUSTERMAN replied, "I guess what I need from you guys is to go back and do an average on what percentage of funding you're getting actually for school construction over the last number of years, what you project to get FY 97, and come back with a figure that shows what you would need, then, for an additional funding for it." MR. MORGAN said, "If everything on the list was funded this year ... and the 11 districts got waivers, the cost would be $12 million. That's if all $650 million gets funded in one year, but ... if you total up everything on the current list for municipalities, excluding REAAs, it comes to $273,983,000. If the 11 districts ... which had over 10 percent unemployment didn't pay their participating share, it would cost an additional $12,300,000." CO-CHAIR AUSTERMAN asked for clarification. Number 2044 MR. MORGAN referred to Attachment 1, the third page of the fiscal note, and said, "The very top figure is the $273,983,644. That's total requested by districts right now, on the current list, that aren't REAAs. Right below it is, out of that 273 [million], 118 [million] of it belongs to those 11 districts that had over 10 percent unemployment. If you drop down to the second group of figures, the 57.5 [million], that's how much the participating share is out of the 273 [million] for all those municipalities. The figure right under it is how much the participating share would be for those with over 10 percent unemployment. In other words, out of the 118 [million], it would be $12,300,000." CO-CHAIR AUSTERMAN said, "And then, you're saying that the $873,000 is based upon what possibly could be funded." MR. MORGAN responded, "That was just on our recommended funding. I mean, if we come back to the Governor's plan of $7,100,000, we'd have to go back and look at those individual projects and see how they'd apply. But that was saying, if we recommended funding of $39,800,000 for districts that were municipalities in FY 97, out of that $39,800,000, the impact of this bill would be the $873,000 in [FY] 97." Number 2179 CO-CHAIR AUSTERMAN asked if a list was available of the 11 sites or the 33 percent being discussed and then noted it was part of the committee packet. Number 2200 REPRESENTATIVE ELTON expressed concern about the language in the bill that said the exemption will be granted if unemployment averaged at least 10 percent in the fiscal year immediately before the fiscal year for which the appropriation bill funding the municipality is passed by the legislature. He asked, "How many municipalities have those figures that are that recent, or does the Department of Community and Regional Affairs have those figures? Or do they keep them that up-to-date, so that you can just call somebody and say, `what was the unemployment rate?'" Number 2259 MR. MORGAN replied, "I'm not sure. I know that in preparing this fiscal note, we had to go back to '95 figures." REPRESENTATIVE ELTON asked if that was FY 95. MR. MORGAN specified it was calendar year 1995, as he understood it. REPRESENTATIVE ELTON said, "Because this requires that unemployment rates be figured in terms of fiscal years, not calendar years." MR. MORGAN replied, "Right. And I don't know the answer to that." He noted there were some practical questions that needed to be worked out. Number 2290 REPRESENTATIVE ELTON pointed out that unemployment rates were not based on fiscal years. They were based on calendar years. MR. MORGAN suggested it would probably lap into two calendar years. Number 2345 CO-CHAIR IVAN said he would hold HB 488 in committee for further information. "As far as unemployment figures are concerned, I believe the Department of Labor can provide that," he added. SB 54 - ELECTRIC UTIL SERVICE/ APUC Number 2381 CO-CHAIR IVAN noted that committee packets for SB 54 included fiscal notes and sponsor statements, as well as letters of support. TAPE 96-18, SIDE A Number 0026 BRUCE D. SCOTT, Director, Members and Public Relations, Matanuska Electric Association, Incorporated (MEA), testified via teleconference. He read the first portion of a four-page document dated March 7, 1996, included in the committee packets. He explained that MEA, incorporated since 1941, was now a member-owned nonprofit cooperative serving 29,000 members in Southcentral Alaska, with a service are of 3,360 square miles. He discussed the pricing structure of MEA and explained that of the four types of costs to customers, only the wholesale cost of energy went down when MEA lost a customer. Remaining costs were then spread to fewer customers. A few large, commercial customers were important to the cooperative; MEA's largest customer represented almost 3 percent of total sales, whereas the six largest customers represented 10 percent. Therefore, MEA was concerned about "cherry picking," where a competitor might pick up these high-consumption customers, resulting in higher costs to the other consumers. Therefore, MEA urged passage of SB 54, which he said would allow utilities to preserve their retail loads and avoid counterproductive and unfair cherry picking. They suggested the real opportunity for savings was in coordinated planning and operation of generation facilities. Number 0462 SAM COTTEN, Commissioner, Alaska Public Utilities Commission (APUC), testified via teleconference, indicating the committee had a copy of APUC's position paper on SB 54. He noted that fellow commissioner Alyce Hanley and Paul Morrison, chief of APUC's Engineering Section, were also present on teleconference. Mr. Cotten said the commission unanimously opposed SB 54, basically because it eliminated the opportunity for the commission to analyze potential benefits of competition. It also eliminated the potential choice of service options by consumers. He acknowledged concerns about "cherry picking" and said, "we're not aware of any case where the commission has allowed direct competition. While we must consider the effect on the current providers, the results could be better rates, better service, more choices." He added, "the commission feels that protection is already in place and feel that this bill would go against what is a national trend, that I think would apply to Alaska as well, and that's the potential for benefit from competition." ALYCE HANLEY, Commissioner, Alaska Public Utilities Commission, voiced via teleconference that she agreed with Commissioner Cotten's testimony but had no further comments. Number 0653 CO-CHAIR AUSTERMAN said, "There's been reference to APUC being able to control competition to some degree. And is that a correct statement, that if somebody wants to move into an area, that it does have to come through APUC and some competition, then, is controlled by APUC?" Number 0695 PAUL MORRISON, Chief, Engineering Section, Alaska Public Utilities Commission, answered via teleconference, saying, "Our current statutes require a waiver of objection be (indisc.) by a utility trying to get into another utility service area." MR. COTTEN added, "Basically, the answer is yes. In order, for example, for somebody to come into Kodiak and compete with Kodiak Electric for providing electric service, they'd have to come to the commission to get permission to do that." MS. HANLEY said, "And I think at the present time - there perhaps was one exception - there are no overlapping certificate areas. I think we basically have just one certificate in each area. I think, through some mistake some years ago, there got to be a portion of an area that overlapped, but for the most part, we have no overlapping. They're all pretty much monopoly services." Number 0765 DAVID HUTCHENS, Executive Director, Alaska Rural Electric Cooperative Association, indicated he had been asked to go through the bill section by section. He explained: "Section 1 is an intent provision that was put in, in one of the committees in the other body last spring, to make it clear that this legislation applies only to service areas for electric utilities, not any other kind of utility service. "Section 2 was a provision added in the Finance Committee in the other body that had been something that the APUC had requested so that if the budget ever provides for funding for special assistants to the commissioners, separate from the professional staff of the commission itself, as a whole, that they could be selected outside of the regular state employment system. "Section 3 is also something that the commission had recommended. This would eliminate the lame-duck appointment problem that you faced a year ago. And Section 6 goes with that - it's the transition provision - so that current commissioners would hold over until early the next year after their term would otherwise have expired in October. "Sections 4 and 5 are the heart of the bill, from our perspective, at least, and we would agree with the commission that the present practice has been that the service areas be separate for electric utilities. And, frankly, the reason for the legislation is to make sure that it stays that way. This was the determination made by the state legislature in 1970, that up until that time, you did have overlapping service areas and utilities competing with each other at retail and it was a mess. And the legislature made the affirmative decision in 1970 to separate these service areas and gave the commission detailed instructions in the statute as to how to separate the service areas. And we had taken it for granted all these years that that was the natural order that the service areas would remain separate. But as one spokesman from the commission just now said, there is a good deal of national discussion about some kind of retail competition and that usually goes under the title of retail wheeling. And this, you know, we have people from the commission in recent years that have been going out to meetings with their counterparts from across the country and they hear a lot of discussion about retail wheeling and they come back, `oh, gee, wouldn't it be nice if we tried retail competition?' Well, we tried it in this state and it doesn't work very well in the Alaska setting." Number 0950 MR. HUTCHENS referred to a statement that he had submitted to the committee and said he would not discuss that in the interests of time. He then referred to a printout from the Kodiak Electric Association that had yellow and pink highlighted lines on it. "What I'd like to point out with this," he said, "is why it doesn't work very well in the Alaska setting. You have to have a flexible marketplace for competition to work. And we don't have that in the Alaska setting, nor are we likely to." Line 14 of the printout, highlighted in pink, showed that if Kodiak Electric were to lose the fish processors from their system, the rates for everybody else would rise by nearly 15 percent. He referred to line 6, highlighted in yellow, and said that showed the amount of investment devoted to each kilowatt hour of sale in the year. "You see, what would happen," he said, "is that from '95 to '96, with just losing the fish processors from the system, the amount of investment per kilowatt hour sold would increase from 50 cents to 68 cents. And that would mean a 36 percent stranded investment, investment that would not be utilized in 1996 that was utilized in 1995, just from the sheer fact of losing that volume of sales. The same thing would happen all over the state. The smaller the system, the greater the impact." Number 1129 REPRESENTATIVE ELTON said, "Using your sheet here, let's assume that somebody wanted to do that. What would they have to do now to provide service in Kodiak under existing law?" MR. HUTCHENS replied, "What they would have to do now to provide service, not self-generation, but provide service to somebody else, they would have to make an application to the APUC for authority to serve. And up to this point, up until very recently, the commission had always regarded the service areas as exclusive, based on the 1970 statute. And the last year or two, there have been some sounds coming out of the commission that, `well, we don't really mean those to be exclusive,' that we could provide overlapping service areas if we chose to do so. And the authority they cite for that was a 1968 case involving Chugach Electric, but that was before the 1970 act of the legislature that changed all the rules. But any rate, to answer your question, they'd have to apply to the commission; the commission would have to have a finding that it was in the public interest to permit this; and then they could take a certificate area away from [an] existing utility and assign it to the new one." Number 1211 REPRESENTATIVE ELTON asked if there would be public hearings throughout that process. MR. HUTCHENS replied, "That is correct. That's the way we would understand it. We think it would be unlikely that in a real thorough test that any of these items could be found in the public interest. But we've heard some statements from people at the commission that indicate an intention to proceed in that direction and it's to forestall court tests on this very point is the reason for the legislation." Number 1246 REPRESENTATIVE ELTON thought the use of the fishing industry as an example was interesting, from his perspective, because of the trouble that industry was facing. "What would happen if a couple of the fish processing people got together in Kodiak and said, `hey, we've got to cut costs; our production costs are too high, we can't compete with farmed salmon, for example, that's being produced at x number of cents a pound'? Under the proposed legislation, would they be prohibited from going together to generate their own power?" Number 1278 MR. HUTCHENS replied, "Under the proposed legislation, they would have the absolute right to provide their own self-generation. But in terms of some entity being created that would sell to the fish processors, they would be prohibited from doing that." REPRESENTATIVE ELTON asked if they could form a co-op to provide power to themselves. MR. HUTCHENS said, "My understanding of it would be that if it were some kind of a separate entity created, this entity would have to sell power to the fish processors and that would be prohibited." Number 1322 ROBERT MARTIN, JR., General Manager, Tlingit-Haida Rural Electric Association (THREA), noted that he had submitted copies of his testimony, a four-page document. He discussed the national trend toward competition in the generation and transmission part of the utility business. He noted that the entire continent was joined in an interconnected grid of transmission and distribution lines except for Alaska, where only Hyder was connected to the continental grid. MR. MARTIN mentioned large loads being targeted by neighboring utilities or independent producers. In many rural communities, there were only one or two large loads, the school and perhaps the village store. Because of fixed costs for the utility serving residential consumers, rates would necessarily rise to the remaining customers if those large loads were lost to a competitor. The remaining customers would lower consumption, leading to what was known in the industry as a death spiral. Number 1480 MR. MARTIN said, "We support passage of this because it would protect the rural utilities from unfair competition." He mentioned steps taken in his region to keep costs down. "It is important to remember," he said, "that the experience with deregulation in other industries has led to great benefits for the urban areas but has led to decreased service and higher costs in the rural areas." Number 1566 BOB CRAIG testified that he was strongly opposed to SB 54. "At least in the urban environment, I think there is a need for competition," he said. He thought the fiscal note might be incorrect. "Competition almost always reduces prices," he said. "We've seen it time and again. When Mapco came to Juneau, the price of gasoline dropped 30 cents overnight. With the millions of dollars that the state spends on their power cost equalization program, the state has a great vested interest in seeing more competition come in and the price being reduced." He added, "I think the bill should be studied more and at least it should be amended by this committee to exclude large future customers. Any of the aspects brought up by utilities are for their existing customers. They have made an investment and perhaps they should keep those as exclusive. But future customers, I believe, should be for whoever can produce power at the lowest possible cost, such as the large mines that are coming in around the Juneau area and other communities." He thought he could produce power competitively. "But if I sell it to AEL&P and they resell it, it'll never happen," he added. Number 1669 CO-CHAIR AUSTERMAN said, "I've made no bones about my opposition to this bill. I think that it creates monopolies and I'm against the fact that we would try to run free enterprise out by creating these exclusive areas." He noted that he was distributing to committee members a letter from Chugach Electric Association to Representative Mark Hanley that showed that Chugach Electric was also opposed to the bill. Number 1701 CO-CHAIR IVAN indicated he thought more work needed to be done on the bill. He assigned SB 54 to a subcommittee chaired by Representative Vezey. REPRESENTATIVE KOTT asked who else would be on the subcommittee and asked Co-Chair Austerman if there were any way to alleviate his concerns. CO-CHAIR AUSTERMAN replied, "I've looked at this really hard and I don't see any. I'm concerned with -- in my area, I've got an 18 cent kilowatt hour that it costs me to live there and I'm on a hydro project. So I think if I got a hydro project that also, now, all of a sudden, becomes exclusive at 18 cents a kilowatt hour, I'm very concerned that it's going to be 24 or 30 cents a kilowatt hour before we're done there. And if there's no competition, I think that's where it might direct." Number 1770 REPRESENTATIVE ELTON expressed that he was somewhat in between. "I think we're trying to deal with different problems in different parts of the state with one approach," he said. "And I'm not sure that necessarily works, because I think the problems in a rural area where you have very high up-front costs for establishing infrastructure, and then if you allow cherry picking to occur, I can see where that could be very, very destructive to the residential consumers, especially. I'm not so sure that is something that necessarily occurs in the urban areas." He cited the example of cable TV in Juneau. "I happen to think that if there were competition, I wouldn't have to spend $50 a month for cable TV," he said. "I'm just not sure that we've got an approach that works for both areas." He suggested that structuring a system in which APUC could use public input to protect the different types of areas was the best way. "I'm not sure that this bill does it," he emphasized. Number 1865 CO-CHAIR IVAN noted that he represented a small, rural community. He referred to APUC, which controlled rates depending on population and the amount of revenue, and said "I've enjoyed their protection." He asked Representatives Kott and Elton to sit on the subcommittee for SB 54. ADJOURNMENT There being no further business to conduct, CO-CHAIR IVAN adjourned the House Community and Regional Affairs Committee meeting at 3:49 p.m.