Legislature(1997 - 1998)
02/11/1998 01:45 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
February 11, 1998
1:45 P.M.
TAPE HFC 98 - 27, Side 1.
TAPE HFC 98 - 27, Side 2.
TAPE HFC 98 - 28, Side 1.
CALL TO ORDER
Co-Chair Therriault called the House Finance Committee
meeting to order at 1:45 P.M.
PRESENT
Co-Chair Hanley Representative Kelly
Co-Chair Therriault Representative Kohring
Representative J. Davies Representative Martin
Representative G. Davis Representative Moses
Representative Grussendorf
Representatives Foster and Mulder were not present for the
meeting.
ALSO PRESENT
Senator Drue Pearce; Representative Jeannette James; Ernie
Hall, Chairman of the Board, Anchorage Economic Development
Corporation (AEDC), Anchorage; Donna Tollman, (Testified
via Teleconference), Glennallen; Keith Laufer, (Testified
via Teleconference), Alaska Industrial Development Export
Authority (AIDEA), Anchorage; Patricia Marko, President,
Anchorage Economic Development Corporation (AEDC),
Anchorage; Deborah Behr, Assistant Attorney General,
Department of Law; Douglas Mertz, Attorney Representing
Prince William Sound Regional Citizen's Advisory Council
(RCAC), Juneau.
SUMMARY
HB 264 An Act providing for a negotiated regulation
making process; and providing for an effective
date.
HB 264 was HELD in Committee for further
discussion and placed into Subcommittee with
Representative Kelly as Chair and Representative
J. Davies and Representative Martin.
SB 159 An Act relating to the new business incentive
program.
HCS CS SB 159 (FIN) was reported out of Committee
with a "do pass" recommendation and with two zero
fiscal notes by the Department of Commerce and
Economic Development dated 1/23/98.
SENATE BILL NO. 159
"An Act relating to the new business incentive
program."
SENATOR DRUE PEARCE spoke to the point that SB 159 would
create a new business incentive and economic development
program targeted at companies locating or expanding into
manufacturing businesses in Alaska. The program is
designed to attract substantial business with high value
and year round jobs.
The grant program would be limited to reimbursement of
defined portions of relocation costs, site development
costs, special employee training not covered by other
programs, and special analysis of sites in Alaska. The
program is limited to $3 million dollars annually and all
unallocated funds would be returned to the General Fund.
Allocations would be made each year to fund the program and
would be administered by the Department of Commerce and
Economic Development (DCED).
Senator Pearce continued, the New Business Incentive
Program will target three essential functions:
1. A need to generate cargo and freight exports from
Alaska.
2. A need for more diversity in the corporate tax
base.
3. High value jobs for Alaskans.
Senator Pearce noted that the proposal had been initially
presented by the Anchorage Economic Development Corporation
(AEDC) and has been embraced by the other Alaska Regional
Development Corporation (ARDOR) in the State. She
interjected that it is not unusual for any state to provide
this type of incentive program.
Co-Chair Therriault referenced the business feasibility and
analysis study, pointing out that a business would not be
reimbursed for costs unless they actually went forward in
manufacturing. He inquired that if the business went
bankrupt, would the State continue to be secure. Senator
Pearce was not clear on how the Department of Commerce and
Economic Development would create the security aspect. She
advised that at least 75% of the United States currently,
use such incentive programs.
Representative J. Davies referenced Page 1, Line 14, and
Page 3, Line 1, language that indicates that the business
requires continued operation to receive funding. Senator
Pearce agreed that the costs would be reimbursable only
after the business was in operation. She stated that she
would not oppose some sort of alternative clarification to
Page 1, Line 14, as long as the new language could
guarantee to assure the grant work.
Representative Grussendorf inquired if new business
established in the proposed legislation would compete with
already existing State business. Senator Pearce replied
that the program targets mainly manufacturing done in the
State for export. At present time, there is very little
manufacturing occurring in Alaska. The program will act as
an enticement for manufacturing and fabricating plants.
She stressed the amount of interest and support for the
bill.
Representative G. Davis asked when the "five years of
operation" specification would begin - at the time of the
contract or at the time of production. Senator Pearce
acknowledged the concern. She suggested that issue could
lend itself to a House Finance Committee Letter of Intent
directing the Department of Commerce and Economic
Development (DECD) when writing the regulations to specify
that production would have had to occur.
ERNIE HALL, CHAIRMAN OF THE BOARD, ANCHORAGE ECONOMIC
DEVELOPMENT CORPORATION (AEDC), ANCHORAGE, noted that he
was the owner of a small furniture manufacturing company in
Anchorage. AEDC has the responsibility for growing an
economic base in the State. Alaska generates about $140
million dollars a year in corporate taxes. Of that, eleven
corporations, pay $110 million dollars, six of which are
oil corporations. He stressed the need to broaden the
economy base in the State given the declining oil revenues.
The State must diversify. The question that any
manufacturing corporation will ask is what are the
incentives Alaska has to offer. He stressed that passage
of the proposed legislation would be an asset to the entire
State.
DONNA TOLLMAN, (TESTIFIED VIA TELECONFERENCE), GLENNALLEN,
spoke in support of passage of SB 159. She suggested that
it would be instrumental in providing a "level playing
field" for Alaska when competing with other states inticing
new manufactures.
KEITH LAUFER, (TESTIFIED VIA TELECONFERENCE), ALASKA
INDUSTRIAL DEVELOPMENT EXPORT AUTHORITY (AIDEA), ANCHORAGE,
expressed AIDEA's support for SB 159. AIDEA believes that
the legislation could be an important tool for attracting
new business to Alaska. The bill provides a role for AIDEA
to review applications on the objective standards.
Representative J. Davies asked if the Committee would be
writing a Letter of Intent. Co-Chair Therriault suggested
that the "grant provisions" could be clarified by changing
language on Page 3, Line 1, inserting after "must" the
language "be operating and". Senator Pearce supported the
addition of that language.
Co-Chair Therriault MOVED that conceptual language as
Amendment #1. There being NO OBJECTION, it was adopted.
Representative J. Davies asked why the bill required that a
business be engaged in exporting outside the State rather
than just "manufacturing". Senator Pearce replied that
language would alleviate the concern that business' would
not compete with small business' already established. She
added, the intent of the legislation is to create a
business in Alaska of materials that are for export,
providing for greater cargo and freight needs. Anchorage
is an economic crossroad and the International Airport is a
primary economic driver. Cargo and freight seriously
impact that consideration and the original intent is to
help build on that aspect.
Co-Chair Therriault pointed out that there has been concern
expressed that Alaska ships out a lot of our raw and
organic resources to be processed outside of the State to
supply the rest of the world with product. He suggested
that business in Alaska should be encouraged to process the
natural resources.
Representative J. Davies concurred, questioning why the
legislation does not encourage creation of new business
engaged in manufacturing inside the State. Senator Pearce
explained that her intent was to limit the amount of
dollars spent on the program. As the focus is expanded, so
is the cost. She felt that SB 159 would not be the proper
vehicle to provide that incentive.
Representative J. Davies stated that he was not speaking
about services, but instead about manufacturing. There
have been a number of businesses' which have proposed to
open up small scale manufacturing forest products. He
pointed out that those businesses would not be eligible for
funding from the proposed program.
PATTY DEMARCO, PRESIDENT, ANCHORAGE ECONOMIC DEVLEOPMENT
CORPORATION (AEDC), ANCHORAGE, acknowledged Representative
Davies concern, although pointed out that the focus of the
proposed legislation is to find ways to bring revenue into
the State through manufacturing. AEDC is looking for ways
to incentify small companies to expand their operation for
exporting. She felt that the program has provoked people
to consider how value could be added so that Alaska can
reach a world market. The market would create higher value
jobs and production with a broad base of primary functions
in the State.
Representative J. Davies reiterated why eliminate the
privilege of manufacturing with the intent to keep it in
the Alaska market. Representative Moses pointed out that
the State has a great need for value added processing. He
urged consideration of that concern. Senator Pearce
pointed out that the bill would allow for incentives for
business' doing that in Alaska and then expanding into the
export market. The intent of the program is not to start
new businesses in Alaska just for Alaskans. The point is
to bring in more revenues by bringing in business from
outside and providing export privileges.
Co-Chair Therriault noted that the legislation was
permissive. It would allow money to be set aside into a
fund. The appropriation would have to be a yearly
appropriation and the unexpended funds would lapse at the
end of each fiscal year. The proposed fiscal note is zero;
a specific appropriation would be requested yearly. Co-
Chair Hanley commented that the way the appropriation had
been established would limit the way the program was set
up. Senator Pearce replied that there are many senators
sensitive about adding fiscal notes to legislation,
consequently, SB 159 has been submitted with zero fiscal
notes. She anticipated that the Legislature could
appropriate required funding and provide for carry forward.
Representative Kohring asked why the bill provided grant
funding rather than low interest rate money. Senator
Pearce explained that it is essential that Alaska be
competitive with other States. Elsewhere, states and local
governments are making huge tax concessions and they are
willing to build the infrastructure to bring high value
jobs to their communities. It is important that Alaska is
involved with a similar effort.
Co-Chair Hanley MOVED to report HCS CS SB 159 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it
was so ordered.
HCS CS SB 159 (FIN) was reported out of Committee with a
"do pass" recommendation and with two zero fiscal notes by
the Department of Commerce and Economic Development dated
1/23/98.
(Tape Change HFC 98-27, Side 2).
HOUSE BILL NO. 264
"An Act providing for a negotiated regulation making
process; and providing for an effective date."
REPRESENTATIVE JEANNETTE JAMES stated that HB 264 would
enable and encourage negotiated regulation (neg/reg) rule
making. Currently, neg/reg is in use by the Federal
government, Montana and Nebraska. She believed that the
citizens of Alaska are clamoring for the Legislature to do
something about the regulation process. The proposed
negotiated regulation would address the issue.
She continued, neg/reg is a voluntary process for drafting
regulations that would bring together those parties
significantly impacted by a regulation including the
government, and would be expected to reach consensus before
the rule is formally published as a proposal. An impartial
mediator is used to facilitate intensive discussions among
the participants who operate as a committee and would be
open to the public. Representative James commented that
regulations drafted using this process tend to be more
technically accurate, clear, specific and less likely to be
challenged in litigation than rules drafted by the agency
alone.
She pointed out that the neg/reg process would cost more
money at the front end than a traditional approach.
However, Representative James thought that the advantages
would outweigh the consideration. Because representation
from all interested parties draft the regulations, the
formal process of public notice and comment becomes smooth
with few comments raised. Lengthy regulation litigation is
generally eliminated and compliance tends to be higher.
Agency costs for litigation of the rules and enforcing of
the standards are reduced.
DEBORAH BEHR, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, commented that she had been assisting with work on the
proposed legislation since last year. She believed that
the legislation could be workable and less costly in
creating the neg/reg process.
She pointed out that the process would be volunteer,
although, there will be costs associated with the program.
Participants will decide if they want to use it or not. Ms.
Behr explained in detail the process used in negotiation
and supporting the Open Meetings Act. The commissioner
will have the authority to add members at any time. The
Administration will have one person on the board. The
legislation requires that a commissioner not establish a
board, unless, from the beginning, there is good faith to
use the results of the regulation process.
Ms. Behr added, in regard to the administrative procedure
process, nothing would be changed. It would allow anyone
from the public to testify during the public comment
period. The commissioner remains the confirmed cabinet
officer who makes the final decision on regulations. The
goal is to encourage people to talk up-front to create a
practical reality and exchange valuable information for the
regulations. The current Administrative Procedure Act does
not preclude this. The legislation would establish a
framework. She predicted that if the rules were followed,
there would not be a follow-up court case.
Ms. Behr acknowledged that this is a newly proposed process
with a new view. A check and balance would be with the
Administrative Procedure Act providing essential public
participation. The bill before the Committee contains all
the requested changes of the Administration. She
summarized, the fiscal note would be indeterminate as all
costs are voluntary and some departments will not use it.
The legislation is a way to encourage more up-front public
involvement.
Co-Chair Therriault questioned how utilizing the proposed
process could prevent a court test. The legislation would
not take the place of the regulatory process, but instead
would shift the contention to the beginning. He
anticipated that it would build a framework to invite more
Court challenges.
Ms. Behr acknowledged that any regulation passed would be
subject to Court challenge. Although, the proposed bill
would bring everyone to the table so that concerns could be
addressed in advance.
Co-Chair Therriault pointed out that currently, the
departments do take the time to gather information. He
recommended the balance be shifted through the legislation.
Ms. Behr responded that she could not guarantee that there
would not be a court case, although, only one case has
resulted on negotiated rule making statutes throughout the
United States. That case did not defeat the rule. She
proposed the key is that the notice is printed on the
regulation; anyone can come to testify, after which time,
the Commissioner would make the decision.
Representative J. Davies referenced Page 1, Line 12. He
asked if that point would modify the possibility of
lawsuits. Ms. Behr noted that there is a provision in the
bill addressing the judicial review, Page 5, Line 30 - 31,
Page 6, Lines 1 - 5. That language stipulates how the
commissioner sets up the committee. The committee would
not be subject to judicial review, although, the regulation
itself is given no higher difference.
Representative J. Davies questioned whether the rule could
be properly balanced at the out-set. Ms. Behr stressed
that any regulation released is subject to judicial review.
The process is totally open. The regulation review
committee could hold meetings on it. Any regulation
released under HB 130 is subject to the Lt. Governor's
regulation review. The commissioner's budgets are very
tight and they would not want to implement a process that
would cause more work in the long run. The regulation is
subject to court test and scrutiny. She added, the bill
has a five-year sunset provision; if concerns happen, they
will be addressed. There is no statute requiring
negotiated rule making. To date, none of the committees
have been stacked, because checks and balance exist.
Representative Grussendorf inquired why Representative
Berkowitz, as a sponsor of the bill, voted to amend in the
previous committee of referral. Ms. Behr advised that
Representative Berkowitz had trouble with language used on
Page 7, Lines 17 - 18 and had requested to amend the board
immunity provision. Most model acts do not have immunity.
Representative James pointed out that concern had been
addressed. She added, an additional concern, which was not
amended, was that more public notice be posted in the
beginning of the process.
Co-Chair Hanley referenced Page 2, Line 8. He asked if a
written finding would be required. Ms, Behr reiterated
that the process would be totally voluntary. All the model
acts generally lay it out, which the commissioner would use
when deciding whether or not to use negotiated rule making.
Co-Chair Hanley reiterated to insert "shall" on Page 2,
Line 8. Ms. Behr noted that she would be more comfortable
using "may", as it is a totally voluntary process.
Co-Chair Therriault asked if the determination would be an
appeal vote. Ms. Behr reiterated that the commissioner
would make that decision. In order to establish an appeal,
the act must contain those procedures.
DOUGLAS MERTZ, ATTORNEY REPRESENTING PRINCE WILLIAM SOUND
REGIONAL CITIZENS' ADVISORY COUNCIL (RCAC), JUNEAU, noted
that RCAC is an independent non-profit corporation whose
mission it is to promote environmentally safe operations of
the Valdez Marine Terminal and associated tankers.
Membership is compromised of organizations within the
communities and regions affected by the 1989 Exxon Valdez
oil spill, as well as commercial fishing, aquaculture,
native recreation, tourism and environmental groups.
Mr. Mertz continued, while RCAC favors the early
involvement of stakeholders in any rule-making process,
they believe that HB 264 contains serious flaws that could
permit an administrative agency to abuse the authority
granted under the bill by biasing the process in favor of
selected special interests. The problems could be remedied
by a few simple changes without alternating the intent of
the bill.
The bill provides for notice of committee meetings but does
not provide notice that a committee is being formed. An
interested party could find that a committee was formed
without knowledge of the process. He suggested that there
should be a notice provision added to the bill in order
that interested parties could request to be a part of the
committee.
Mr. Mertz added, nothing in the bill requires that a
committee's makeup be fair and representative of the broad
spectrum of interests. The choice of members could be
totally arbitrary and biased. RCAC recommends a simple
requirement in that the committee makeup is fair and
representative of all interested viewpoints.
Nothing in the bill gives members of the public any right
to participate in meetings or to make their views known.
The bill makes a committee meeting subject to the Open
Meetings Act, but it does not create a right to
participate. The bill should guarantee that non-members
might speak at and participate in any meetings and submit
materials to the committee.
Mr. Mertz pointed out that the bill states that committee
members serve at the pleasure of the agency. That means
any committee members who voice opposition to the viewpoint
of the agency may be booted off the committee, with no
reason given. RCAC recommends limiting the causes for
terminating a member to non-attendance.
Mr. Mertz noted that there is a technical question whether
the provision at Sec. 44.62.750(f), making the Open
Meetings Act applicable to the committee, is effective,
since the terms of the Open Meetings Act do not apply to
committee meetings of a non-decisional body within an
agency.
(Tape Change HFC 98- 28, Side 1).
Co-Chair Therriault echoed concern that there is material
in the proposed legislation which could be challenged and
open to court review. Mr. Mertz agreed. He pointed out
another concern of immunity from judicial review, an issue
that should be addressed when applying a standard at the
front-end. The proposed bill has no standards.
Co-Chair Hanley interjected that if there were a biased
commissioner, the same result would occur using the current
system or the proposed legislation. He voiced concern that
the legislation could create an additional process, which
could then bog down the system even more. Representative
J. Davies commented that in the proposed legislation, the
process could not be reviewed. Co-Chair Therriault
understood that the current process litgitimized the
stakeholders process.
Representative J. Davies asked if adding language to
balance would help in a judicial review. Mr. Mertz replied
that would provide one more moral constraint on the
commissioner.
Representative J. Davies voiced concern with the members
paying their own expenses, Page 5, Line 10. He pointed out
that often times, people representing citizen's viewpoints
have limited means; the people who represent the corporate
viewpoint have the corporation paying their expenses. To
ask a person to certify that they do not have the means is
not appropriate or to require the person to participate by
telephone would put them at a disadvantage. He believed
that in a negotiated process, some of the meetings need to
have all members present.
Representative James explained the intent of the language
was that people pay their own way if they could. She
anticipated that there would be people from the rural areas
who would not be able to participate without financial
support. A decision would be made in determining whether
or not the person would be able to participate and pay for
their way. The purpose is to provide legislation without a
fiscal note associated. Agencies will need to redirect
funds or reevaluate the department's financial position in
order to make the program work.
Co-Chair Therriault commented on how the State would budget
for the payment process. Co-Chair Hanley asked in a normal
regulatory process, would a department cover any expense of
a person wanting to testify. Ms. Behr replied that when
the Department of Environmental Conservation (DEC)
establishes a negotiation in a rural committee, they
specify up front and in advance that the Department is not
budgeted to provide funds for any representatives to the
meeting. The current process does not provide funding.
There is concern that people of little means will have a
difficult time participating in the regulation decisions.
The goal is to help those that truly can not pay.
Co-Chair Hanley voiced concern in establishing a public
process and then determining a public need that the State
pays the participant's portion. He concluded that gifts
and grants create complications.
Co-Chair Therriault placed HB 264 in Subcomittee with
Representative Kelly as Chair and with members
Representative J. Davies and Representative Martin. HB 264
was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 3:30 P.M.
H.F.C. 12 2/11/98
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