Legislature(1993 - 1994)
01/20/1993 01:30 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
January 20, 1993
1:30 P.M.
TAPE HFC 93 - 4, Side 2, #000 - end.
TAPE HFC 93 - 5, Side 1, #000 - end.
TAPE HFC 93 - 5, Side 2, #000 - end.
TAPE HFC 93 - 6, Side 1, #000 - #272.
CALL TO ORDER
Co-Chair Ron Larson called the meeting of the House Finance
Committee to order at 1:30 p.m.
PRESENT
Co-Chair Larson Representative Brown
Co-Chair MacLean Representative Foster
Vice-Chair Hanley Representative
Grussendorf
Representative Hoffman Representative Martin
Representative Navarre Representative Parnell
Representative Therriault
ALSO PRESENT
Representative Curt Menard; Representative Cliff Davidson;
Representative Jerry Mackie; Senator Drue Pierce; Senator
Steve Rieger; Senator Bert Sharp; Paul Fuhs, Commissioner,
Department of Commerce and Economic Development; Guy Bell,
Director, Division of Administrative Services, Department of
Commerce and Economic Development; Darrel Rexwinkel,
Commissioner, Department of Revenue; Tracy McGill, Director,
Division of Administrative Services, Department of Revenue;
Barry Hulin, CEO/Executive Director, Alaska Housing Finance
Corporation, Department of Revenue.
SUMMARY INFORMATION
Agency Budget Overviews: Commerce & Economic Development
Department of Revenue
AHFC - Merger Implementation
HAD Loan Purchase
General Discussion
HB 55 FY 94 OPERATING BUDGET & LOAN PROGRAMS
DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT BUDGET
OVERVIEW
1
PAUL FUHS, COMMISSIONER, DEPARTMENT OF COMMERCE AND ECONOMIC
DEVELOPMENT (DCED), provided the Committee with Attachment
objectives include building a strong economic base from
which to design a fiscal policy. The DCEC program is
divided into two pieces; regulating occupational licensing
and to develop economic development resources, tourism and
transportation.
Attachment #1 provides a brief overview of the statutory
functions of each organization within the Department as well
as a departmental funding history and summary of the
proposed changes for FY 94.
The agencies within the Department are:
1. The Division of Measurement Standards
2. The Division of Insurance
3. The Division of Banking, Securities and
Corporations
4. The Division of Occupational Licensing
5. The Alaska Public Utilities Commission
6. The Alaska Energy Authority
7. The Division of Administrative Services
8. The Commissioner's Office
9. The Office of International Trade
10. The Division of Investment
11. The Division of Tourism
12. The Alaska Tourism Marketing Council
13. The Alaska Industrial Development and Export
Authority
14. The Alaska Seafood Marketing Institute
15. The Alaska Aerospace Development Corporation
16. The Alaska Railroad Corporation
Commissioner Fuhs listed the major accomplishments within
the Department during the past year including the completion
of the Community Development Quota Program (CDQ) placing $25
million dollars into western Alaskan communities; the
signing of a Memorandum of Agreement with a shipping company
for the Northern Sea Route; the legal formation of the
Northern Forum as an international organization; salmon
research work; negotiated new air routes to Alaska to make
up for the passenger air routes lost and completion of
various studies from last year.
Commissioner Fuhs provided the Committee with Attachment #2,
SUSTAINING ALASKA'S ECONOMY. The handout itemizes specific
projects for which the Department will be accountable. He
added that the Department is more often using "user fees"
rather than general fund money.
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He noted the budget's increase offset by additional private
industry contributions to both ASMI and the Tourism
Marketing Council. The proposed budget includes a $120
thousand dollar increase over the FY 92 budget include and
the formation of an Oil and Gas Division.
Representative Brown questioned if the increase to the
Division of Insurance's budget last year increased
uncollected taxes. Commissioner Fuhs stated that increase
resulted in $5 - $10 million dollars additional revenue
dollars.
Representative Brown asked for further discussion on the
merit of the Oil and Gas Division. Commissioner Fuhs
explained that currently there is not a strong advocacy for
the oil and gas industry in the State of Alaska. The oil
and gas leasing section also collects the taxes.
Consequently, they can not talk to the oil and gas
industries because of the legalities involved. He
emphasized the importance of understanding and appreciating
the economic growth of Alaska through the oil and gas
industries. He felt that Alaska needs to advocate for the
oil and gas industries for both federal and state
regulations, pushing for oil and gas leasing procedures. He
felt the State should advocate for regulations which will
allow them to prosper similar to the fisheries, timber and
mineral industries and the fisheries.
Representative Martin noted his concerns with the increased
DCED budget.
GUY BELL, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, addressed
the licensing concerns of Representative Martin.
Representative Martin asked for a further evaluation of the
revolving loan funds. Mr. Bell stated that all areas of
receipts needing adjustment have been evaluated.
Co-Chair Larson asked if collection had been received from
the Alaska Public Utilities Commission (APUC). Commissioner
Fuhs stated that was fully implemented. Two years ago, Co-
Chair Larson noted that a one million dollar appropriation
was made to capitalize the Alaska Aerospace Development
Corporation into a revolving fund. He asked the need for a
further appropriation. Mr. Bell stated the request was a
technical error and the funding source would be transferred.
Representative Brown asked for further information regarding
tourism promotion and marketing. Mr. Bell replied that the
private support increment has increased from fifteen to
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twenty percent which would be a reduction in general fund
money. Commissioner Fuhs stated that this percentage would
continue into the future.
Representative Hoffman asked which programs were available
to assist rural Alaska in obtaining employment.
Commissioner Fuhs stated that the best available program is
the CDQ Program. There is a Fisheries Enhancement Program
in the Yukon-Kuskokwim area and western Alaska. He
emphasized that the fishing industry is one of the few
resources available in those areas. Representative Hoffman
pointed out that the current Administration has deleted
fisheries from the budget. Commissioner Fuhs commented
there is $600 thousand dollars in the capital budget this
year for the Yukon area. He added it is difficult to find
economic opportunities in village areas.
Co-Chair Larson clarified that the DCED subcommittee would
consist of Representative MacLean as Chair and members
Representative Hudson, Representative Sanders,
Representative Menard and Representative Nordlund.
(Tape Change, HFC 93-5, Side 1).
DEPARTMENT OF REVENUE
DARREL REXWINKEL, COMMISSIONER, DEPARTMENT OF REVENUE,
provided the Committee with Attachment #3, BUDGET OVERVIEW,
FY 94, AGENCY REQUEST. The Department of Revenue (DOR) has
two primary responsibilities: The administration and
enforcement of Alaska's tax laws, and the investment of
state funds. The other key responsibilities include the
Permanent Fund Dividend Program, debt management and child
support enforcement.
The Department also provides support and financial advice to
the following boards and authorities:
1. Alaska Permanent Fund Corporation
2. Alaska Housing Finance Corporation
3. Alaska Science and Technology Foundation
4. Alcoholic Beverage Control Board
5. Alaska Industrial Development and Export Authority
6. State Bond Committee
7. Alaska Municipal Bond Bank Authority
8. State Assessment Review Board
9. Royalty Oil and Gas Advisory Board
10. Alaska Medical Facility Authority
11. Alaska Gas Pipeline Financing Authority
12. Public School Fund Advisory Board
13. Alaska State Pension Investment Board
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Representative Grussendorf referenced the chart on Page 10,
Attachment #3. He questioned the reductions in auditor and
accountant positions. He believes these positions to be
extremely important to the State in order to collect
revenues. Commissioner Rexwinkel agreed the positions are
important, although the Department of Law ends up with the
final settlement.
Co-Chair Larson pointed out that four full time positions
were deleted from the agency budget whereas five new
positions were added. Commissioner Rexwinkel replied that
it was the goal of the Department to become efficient.
Representative Brown agreed with Representative Grussendorf
and Co-Chair Larson. She pointed out that it would be
difficult to have an equitable tax policy if categories of
taxes are not being collected.
Representative Brown asked about the determination agreement
between the Department of Natural Resources and DOR for the
Amarada Hess settlement. She asked if the proposed changes
would require regulatory or statutory authorization.
Commissioner Rexwinkel stated that this was yet to be
determined and needed further review. Co-Chair Larson
reiterated the need to retain an aggressive collection
policy.
Representative Martin recommended reducing the number of
boards and commissions. He questioned the addition of the
Fishermen Trust Fund receipts. Commissioner Rexwinkel
replied that fund is part of the Department of Labor and is
used to fund injured fishermen. The funds reside in the
Department of Revenue for portfolio management.
Commissioner Rexwinkel addressed the child support
enforcement component of the budget summary. The purpose of
the Child Support Enforcement Division is to enforce child
support orders and to establish child support obligations.
This reduces the public financing burden for welfare-related
programs by protecting the custodial parents and children
from the need to seek public assistance and by recovering
for the State and federal governments a portion of each
government's expenditures.
Representative Navarre questioned the proposal to move
charitable gaming back to DOR. Commissioner Rexwinkel felt
it would be a good administrative move.
Co-Chair Larson noted the DOR subcommittee would be chaired
by Representative Martin and with members Representative
Vezey, Representative Kott, Representative Grussendorf, and
Representative Brown.
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(Tape Change, 93-5, Side 2).
ALASKA HOUSING FINANCE CORPORATION (AHFC)
BARRY HULIN, CEO/EXECUTIVE DIRECTOR, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE, spoke to the merger of
the Alaska State Housing Authority and Housing Assistance
Division (HAD). The effective date of the merger was
7/01/92 at which time 229 employees were transferred from
the Alaska State Housing Authority (ASHA) Corporation. AHFC
at that time had 126 employees creating a total of 390
employees. The ASHA positions were not subject to the
Executive Budget Act and were not part of the State payroll.
He added that the core of AHFC has declined since the merger
and the rapid growth of employees has created a management
challenge.
Co-Chair Larson noted that press releases have indicated
that the University of Alaska may ask AHFC to sell $164
million dollars of bonds for deferred maintenance. Mr.
Hulin replied that as part of the merger, the building
powers previously housed within ASHA came to AHFC. The
referenced proposal addresses those powers previously
associated with ASHA. The specifics of the University
request have not yet been negotiated.
Representative Martin stated that he does not support the
merger. He provided the Committee with Attachment #4 which
addressed questions and concerns regarding the merger. Mr.
Hulin responded that AHFC will not act on the University
issues without instruction from the Legislature. AHFC does
not have the power to issue bonds and build buildings. The
only powers which came with the merger are the old ASHA
powers and there are no new powers available to AHFC.
Mr. Hulin added that additional dialogue is needed with HUD.
They are not happy with the concept of public housing being
part of the Executive Budget Act. The State does not want
to jeopardize funds coming into the State.
The issue of privatizing AHFC would be virtually impossible.
A state's power to issue tax exempt status can not be given
away. The power could not be transferred to a private
sector business. There is currently $3.2 billion dollars of
debt secured by mortgages and cash. Many bond issues can
not be called for certain periods of time.
Representative Martin noted his concern with housing
control. Mr. Hulin explained that AHFC inherited the
Section VIII Programs and the ownership of sixteen units of
low rent housing. Currently, there are long waiting lists
of people in the Section VIII Programs. Landlords are not
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being forced to rent to these people.
Representative Hoffman stated that he did not support the
merger. He asked if the Legislature had been provided
information on the excess assets of AHFC. Mr. Hulin replied
a letter was mailed 12/28/92 to the Senate President and the
Speaker of the House regarding those concerns.
Representative Hoffman questioned what portion of the excess
assets would be tied up because of the refinancing program.
Mr. Hulin replied the bottom line is that AHFC does not feel
that they have excess assets. To date, $220 million dollars
in cash has been given to the State for FY 93.
Representative Hoffman asked if funds to the AHFC Program
were at the same interest rate as offered to new buyers.
Mr. Hulin stated that they are not. There are a number of
Alaskans who either have credit problems or do not have
equity in their property. The rural loan portfolio has
never been able to be refinanced. AHFC felt that given that
interest rates had fallen, it would make sense to
investigate a refinancing program for people who had Alaska
finance loans in order to be able to refinance on a simple
basis. Currently, there are four sets of rates available.
Representative Hoffman distributed Attachment #5 to
Committee, ALASKA HOUSING FINANCE CORPORATION MORTGAGE
REFINANCING letter from Senator Adams. Representative
Hoffman asked how many rural loans have been made since the
merger. Mr. Hulin offered to provide that information.
Representative Hoffman emphasized that the merger will
benefit the urban areas 15:1.
Representative Hoffman asked for information regarding the
"grants programs". Mr. Hulin asked if Representative
Hoffman was addressing the homeless program. Last year,
four grants were made in the winter of 1992 for a total of
$250 thousand dollars which was approved by the Board of
Directors. The areas represented are Anchorage, Seward,
Kenai and Fairbanks. Representative Hoffman interjected
that the power of appropriation is the responsibility of the
Legislature.
Representative Hoffman asked how much was contributed to the
Economic Summit. Mr. Hulin replied that $10 thousand
dollars had been contributed to that cause. Representative
Hoffman pointed out that the Legislature should ask the
Governor to make those contributions from the Governor's
contingency fund.
Co-Chair Larson asked if the rural housing loans were issued
at a lower interest rate than the Alaska housing loans. Mr.
Hulin replied that the rural housing portfolio total is $180
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million dollars, whereas, the total portfolio is $3.2
billion dollars. Refinancing will be a function of how many
loans exist. Mr. Hulin stated in FY 94, all grants will be
included in the proposed budget.
(Tape Change, 93-6, Side 1).
Mr. Hulin added that there were a number of programs which
came with the merger as part of a $8 million dollar fiscal
note.
Senator Rieger asked if the grants which did not appear in
last year's budget amounted to $250 thousand dollars. Mr.
Hulin stated they did.
Representative Brown commented that AHFC staff specifically
Mr. Hulin, have done a great job given the difficult
situation. She asked that AHFC be sensitive to neighborhood
concerns for the low income.
Representative Hoffman questioned the fairness of efforts
made for the homeless in rural Alaska. Mr. Hulin stated
that homeless grants are not offered to communities; it is
their responsibility to initiate the process of receiving
those grants. Representative Hoffman emphasized that
communities in rural Alaska often do not have the resources
to receive the grants. Therefore, they do not have equal
access to grants. Mr. Hulin replied that AHFC would try to
do a better job in the future.
Co-Chair MacLean pointed out that with the merger of AHFC
and the HAD loans, there are certain requirements which have
to be met - the building inspections and the energy
efficiencies standards. She asked how these standards would
be addressed in the rural areas. Mr. Hulin agreed that AHFC
is aware of these problems. The inspection requirements are
expensive and AHFC is currently working with the lenders in
hopes of expanding the inspector base or possibly finding a
place for those costs to be covered. AHFC is currently
working with the National Bank of Alaska (NBA).
Co-Chair MacLean asked who paid for the travel expenses of
the inspectors. Mr. Hulin replied that they pay for their
own travel which is then paid out of the fee charged the
homeowner. Co-Chair MacLean asked who paid for the energy
raters fee. Mr. Hulin replied that cost was paid by the
homeowner and is $75 dollars. Co-Chair MacLean asked if
they also would have to travel from the urban areas to the
rural areas to rate the homes. Mr. Hulin stated they would.
Co-Chair MacLean questioned AHFC's dedication to the rural
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housing program. Mr. Hulin commented on legislation to move
the cash flow of the rural loan portfolio which would be
rededicated to rural lending. An analysis of that portfolio
showed that 35% of the loans in the rural portfolio had been
made in Kodiak. He hoped to improve that program for rural
Alaska. AHFC is currently looking at programs to
accommodate the needs of non-traditional housing in rural
Alaska.
Co-Chair MacLean asked if the non-conforming loans were
being processed differently since the merger. Mr. Hulin
replied they continued to be processed in the same manner.
ADJOURNMENT
The meeting adjourned at 3:45 P.M.
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