Legislature(2001 - 2002)

04/10/2002 02:16 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 10, 2002                                                                                           
                          2:16 PM                                                                                               
                                                                                                                                
TAPE HFC 02 - 79, Side A                                                                                                        
TAPE HFC 02 - 79, Side B                                                                                                        
TAPE HFC 02 - 80, Side A                                                                                                        
TAPE HFC 02 - 80, Side B                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Mulder  called the  House Finance Committee  meeting                                                                   
to order at 2:16 PM.                                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Eldon Mulder, Co-Chair                                                                                           
Representative Bill Williams, Co-Chair                                                                                          
Representative Con Bunde, Vice-Chair                                                                                            
Representative Eric Croft                                                                                                       
Representative John Davies                                                                                                      
Representative John Harris                                                                                                      
Representative Bill Hudson                                                                                                      
Representative Ken Lancaster                                                                                                    
Representative Carl Moses                                                                                                       
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Richard Foster                                                                                                   
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative  Lisa Murkowski;  Representative Drew  Scalzi;                                                                   
Representative  Carl  Morgan;   Steve  Allwine,  Alaska  Auto                                                                   
Dealer's  Association;  Clyde  (Ed) Sniffen,  Jr.,  Assistant                                                                   
Attorney  General, Department  of  Law;  Adjutant General  BG                                                                   
Phil  Oates,   Commissioner,   Department  of  Military   and                                                                   
Veterans  Affairs;  Tina  Lindgren,  Alaska  Travel  Industry                                                                   
Association,  Juneau;   Kurt  Parkan,  Deputy   Commissioner,                                                                   
Department of Transportation and Public Facilities                                                                              
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Ralph   Seekins,   Automobile    Dealer,   Fairbanks;   Libby                                                                   
Dannenburg,  Alliance Automobile  Dealers;  John Mecke,  Ford                                                                   
Motor  Company; Stan  Hurst Chrysler;  Mark Mueller,  General                                                                   
Motors;  Bob   Dutton,  Toyota;   Mary  Washburn,   Director,                                                                   
Division  of Motor  Vehicles,  Department of  Administration;                                                                   
Steve  Conn,  Executive  Director,   Alaska  Public  Interest                                                                   
Research Group,  Anchorage; Rick Morrison,  Alaska Automobile                                                                   
Dealers  Association,  Anchorage;  Sara  Fisher-Goad,  Alaska                                                                   
Industrial  Development and Export  Authority, Department  of                                                                   
Community and Economic Development.                                                                                             
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 182    "An Act  relating to motor vehicles;  and providing                                                                   
          for an effective date."                                                                                               
                                                                                                                                
          CSHB 182 (FIN) was REPORTED out of Committee with                                                                     
          a  "do pass"  recommendation  and a  new with  zero                                                                   
          fiscal  note by  the  Department of  Administration                                                                   
          and a previously published fiscal note: LAW (#1).                                                                     
                                                                                                                                
HB 287    "An  Act relating  to the  exemption of  commercial                                                                   
          fishing entry permits  from claims of creditors, to                                                                   
          loans to  satisfy past due federal  tax obligations                                                                   
          of commercial fishing  entry permit holders, and to                                                                   
          loan  origination  charges for  loans  made by  the                                                                   
          commercial  fishing  loan  program to  refinance  a                                                                   
          debt  obligation; and  providing  for an  effective                                                                   
          date."                                                                                                                
                                                                                                                                
SB 291    "An    Act    making   supplemental    and    other                                                                   
          appropriations;   amending    appropriations;   and                                                                   
          providing for an effective date."                                                                                     
                                                                                                                                
          HCS CSSB 291 (FIN) was REPORTED out of Committee                                                                      
          with "no recommendation."                                                                                             
HOUSE BILL NO. 182                                                                                                            
                                                                                                                                
     "An Act relating to motor vehicles; and providing for                                                                      
     an effective date."                                                                                                        
                                                                                                                                
REPRESENTATIVE LISA  MURKOWSKI, SPONSOR, spoke  in support of                                                                   
the legislation. The legislation  establishes a comprehensive                                                                   
motor vehicle  act. It is a  compilation of work  between the                                                                   
automobile  manufacturer's  alliance,  auto  dealers  in  the                                                                   
state of  Alaska and  consumer protection organizations.  She                                                                   
observed that the legislation  has had considerable work. She                                                                   
explained  that the  relationship  between  auto dealers  and                                                                   
manufacturers  was addressed along  with that of  prospective                                                                   
buyers.  Guidelines to  protect dealers  and consumers  and a                                                                   
framework  for dispute  resolution  in regards  to  franchise                                                                   
agreements  were   established.  The  legislation   addresses                                                                   
uniform  procedures  relating  to transfer,  termination  and                                                                   
conveyance  of  franchise  agreements,   and  guidelines  for                                                                   
succession  in  case  of  the  death  or  incapacity  of  the                                                                   
individual that  holds the dealer franchise.  The legislation                                                                   
also  includes  meaningful  provisions  for the  auto  buying                                                                   
public. Dealers  are required  to make reasonable  inquiry as                                                                   
to  the condition  of used  vehicles. Dealers  would also  be                                                                   
required to do  a reasonable inspection of the  vehicle under                                                                   
the   consumer  protection   provision  on   page  18,   sec.                                                                   
45.25.470.   Dealers  have   expressed   concern  with   sec.                                                                   
45.25.470,  which was  brought forward  by the Department  of                                                                   
Law.  The courts  already  construe this  provision  to be  a                                                                   
requirement.                                                                                                                    
                                                                                                                                
Vice-Chair  Bunde   referred  to   page  3,  section   5.  He                                                                   
questioned  how   the  amount  for  the  bond   was  derived.                                                                   
Representative  Murkowski  noted that  there  is currently  a                                                                   
bonding requirement under Title VIII.                                                                                           
                                                                                                                                
Vice-Chair  Bunde  asked  the   rationale  for  the  18-month                                                                   
requirement  on page  13,  line 3.  Representative  Murkowski                                                                   
noted that the 18-month requirement  was a compromise between                                                                   
fractions  that wanted  12-months and  those that wanted  24-                                                                   
months.                                                                                                                         
                                                                                                                                
Representative Davies  observed that test-driving  provisions                                                                   
were removed [from sec. 45.25.470].  Representative Murkowski                                                                   
reiterated  that  dealers had  expressed  concerns  regarding                                                                   
[sec. 45.25.470]. Section. 45.25.470 states:                                                                                    
                                                                                                                                
     If  the dealer  has information  that reasonably  should                                                                   
     lead the dealer to know of  the potential for a material                                                                   
     defect in  a used motor  vehicle, conduct  an inspection                                                                   
     of  the vehicle,  including, at a  minimum, placing  the                                                                   
     vehicle on a rack and inspecting under the hood.                                                                           
                                                                                                                                
Representative Davies  observed that test-driving  provisions                                                                   
had been included in this section.                                                                                              
                                                                                                                                
Vice-Chair  Bunde  MOVED  to ADOPT  work  draft  22-LS0239\R,                                                                   
4/9/02. There being NO OBJECTION, it was so ordered.                                                                            
                                                                                                                                
STEVE  ALLWINE, ALASKA  AUTO DEALER'S  ASSOCIATION,  provided                                                                   
information   on  the   legislation.   He   noted  that   the                                                                   
legislation would satisfy their  needs with the exception of:                                                                   
Sec. 45.25.470, which deals with  the sales of used vehicles.                                                                   
He  noted  that  dealers  support the  concept  of  used  car                                                                   
inspections,  but  have  not been  able  to  come up  with  a                                                                   
provision  that  they  think   is  fair  and  reasonable.  He                                                                   
explained that the section is  a "deal breaker" because it is                                                                   
too  vague.  He  felt that  the  provision  would  amount  to                                                                   
"almost  an  express  warranty."   He  maintained  that  most                                                                   
Alaskan dealers do  an inspection because it is  in their own                                                                   
best interest; dealers  live or die by their  reputations. He                                                                   
felt  that the  provision would  prove difficult  due to  its                                                                   
vagueness. He suggested that the  provision be withdrawn from                                                                   
the legislation.  He  stated that dealers  would welcome  the                                                                   
opportunity to continue work on  the provision outside of the                                                                   
legislation.                                                                                                                    
                                                                                                                                
Representative  Hudson questioned  what was  the impetus  for                                                                   
the legislation.  Mr. Allwine noted  that there are  not huge                                                                   
issues between  consumers and  dealers. The legislation  came                                                                   
about because  Alaska is  the only state  that does  not have                                                                   
regulations that give dealers  some protection and guarantees                                                                   
in their  relationship with  manufacturers. Dealer  franchise                                                                   
agreements  are arbitrary  agreements.  Dealers  do what  the                                                                   
manufacturer  says they  should  do or  they do  not have  an                                                                   
agreement  and the  franchise  can be  removed. Dealers  also                                                                   
felt that it would  be in the best interest  of the community                                                                   
to  clarify some  of  the  business advisories  dealing  with                                                                   
advertising and  marketing by putting them into  statute. The                                                                   
changes would  level the  playing field  and make people  who                                                                   
deviate from the advisories accountable.                                                                                        
                                                                                                                                
Mr.  Allwine  noted  that  the  bond  was  changed  from  $10                                                                   
thousand  dollars  to  $50  thousand   dollars.  The  dealers                                                                   
support  the  provision but  would  like  to see  the  amount                                                                   
raised  to  $100  thousand  dollars.  He  observed  that  $10                                                                   
thousand  dollars  does not  represent  much  in a  car;  $50                                                                   
thousand dollars  would represent  a couple of  cars. Dealers                                                                   
feel that there needs to be more  protection for the consumer                                                                   
and pointed out that the state  is a prime target for natural                                                                   
disasters such as floods.                                                                                                       
                                                                                                                                
In response  to a question  by Vice-Chair Bunde,  Mr. Allwine                                                                   
explained   that  differences   in  philosophy  between   the                                                                   
manufacturer and dealer  at a local level and  the deal could                                                                   
result in  the loss of a  business. Dealers are at  the mercy                                                                   
of  a person  that  may  not represent  everything  that  the                                                                   
manufacturer wants.                                                                                                             
                                                                                                                                
Mr. Allwine  explained that the  prohibition against  the use                                                                   
of "invoice"  came about because  of advertising  by dealers,                                                                   
which  use  the  term "invoice".  The  Attorney  General  has                                                                   
indicated that  the term "invoice"  is too ambiguous  and may                                                                   
not adequately represent the actual  net cost of the vehicle.                                                                   
The  intent  is  to  eliminate   this  from  the  advertising                                                                   
process,   which   is   supported   by   Mr.   Allwine.   The                                                                   
"manufacturer suggested retail  price" would be used since it                                                                   
is a document that is on every new vehicle.                                                                                     
                                                                                                                                
Representative   John  Davies   referred  to   page  18.   He                                                                   
questioned   if  Mr.  Allwine   would  recommend   substitute                                                                   
language  [for  section 45.25.470].  Mr.  Allwine  emphasized                                                                   
that the  provision needs considerable  work. He  stated that                                                                   
they would  consider, in  separate legislation, a  documented                                                                   
disclosure  by  the seller  that  could  be shared  with  the                                                                   
consumer.  He  emphasized that  a  consumer  may not  tell  a                                                                   
dealer everything  that is  wrong. The  dealer sells  the car                                                                   
and  "maybe  we've  inspected   it  and  maybe  we've  missed                                                                   
something, whose  to say that  six months down the  road this                                                                   
doesn't come up and the consumer  we sold it to comes back to                                                                   
us and said  this is here,  you should have known  about it."                                                                   
He maintained that  it would border on an  expressed warranty                                                                   
or at  least be  close to  an implied  warranty, "which  is a                                                                   
situation  that  no  vendor  should  be  in."  Even  new  car                                                                   
manufacturers  are not required  to put  a warranty  on their                                                                   
vehicles.                                                                                                                       
                                                                                                                                
Vice-Chair  Bunde pointed out  that if  someone is  trying to                                                                   
launder a  car in Alaska they  are not going to  disclose the                                                                   
information. He didn't think [a  documented disclosure] would                                                                   
have much use.                                                                                                                  
                                                                                                                                
In response  to a question  by Vice-Chair Bunde,  Mr. Allwine                                                                   
explained that federal law requires  a sticker on the back of                                                                   
every  used car.  The sticker  lists the  components that  [a                                                                   
consumer] must  concern themselves  with on their  automobile                                                                   
and how  they can  protect themselves.  The consumer  has the                                                                   
right to take  the automobile to a technician  or mechanic of                                                                   
their choice  to have  the vehicle  inspected. He  maintained                                                                   
that the sticker addresses the  "buyer beware" part of a used                                                                   
car. He stressed that section  [45.25.470] needs so much work                                                                   
that they  are not  comfortable with the  placement of  it in                                                                   
statute. He  maintained that the  provision is too  vague and                                                                   
it  is not  reasonable  for merchants  to  have  to face  the                                                                   
liability issues that come with the provision.                                                                                  
                                                                                                                                
Representative   John  Davies   acknowledged  Mr.   Allwine's                                                                   
concerns, but pointed out that  there has been extensive work                                                                   
on the  legislation. He expressed  support for  the inclusion                                                                   
of a compromise on the issue.                                                                                                   
                                                                                                                                
Mr. Allwine  noted that he  received the current  version the                                                                   
previous night. He  stressed that the dealers  have put their                                                                   
information forth and what has  been received [back] has been                                                                   
essentially  the  same every  time.  He maintained  that  the                                                                   
provision  should stand  alone. "It  is too  important to  be                                                                   
left in  this piece of legislation.  If we leave this  in the                                                                   
legislation, we  as a dealer  group do  not feel that  we can                                                                   
support the bill."                                                                                                              
                                                                                                                                
CLYDE  (ED) SNIFFEN,  JR,  ASSISTANT ATTORNEY  GENERAL,  FAIR                                                                   
BUSINESS PRACTICES,  DEPARTMENT  OF LAW provided  information                                                                   
on the  legislation. He observed  that the original  consumer                                                                   
protection  section was  10 pages  long  and contained  "real                                                                   
world things and  problems that we have seen  in our office".                                                                   
The provisions  were reduced  to 6 pages,  most of  which are                                                                   
agreeable to  the dealers and  have been changed  in response                                                                   
to  requests by  dealers.  He responded  to  comments by  Mr.                                                                   
Allwine  and noted that  the original  provision did  provide                                                                   
specific  information   about  the  inspection   process.  He                                                                   
observed that the initial proposal  stated: "This is what you                                                                   
do in  a circumstance; you need  to ask these  questions; you                                                                   
need to  write down  this information; you  need to  tell the                                                                   
consumer  what  you  find  out;  you  need  to  do  a  visual                                                                   
inspection, a test drive. We defined  what those things were.                                                                   
We also went  on to include information about  inspecting for                                                                   
dangerous or material  defects." The proposal  was reduced in                                                                   
response  to   concerns  by  dealers.  The   current  version                                                                   
requires  dealers  to  ask  if  the  seller  knows  what  has                                                                   
happened to the car, for the accident  and repair history and                                                                   
tell the  consumer what they know.  He noted that  there have                                                                   
been circumstances  where dealers have  taken a car  in trade                                                                   
and told  the owner not to  tell them anything about  the car                                                                   
because if they know about it  they will have to disclose the                                                                   
information.  Dealers would  be required  to inspect  the car                                                                   
for material defects only if the  dealer knows of a potential                                                                   
for  that kind  of  a defect  to exist  in  the vehicle.  The                                                                   
information  could  come  to  them  in  a  variety  of  ways.                                                                   
Material  defects are  defined to only  include defects  that                                                                   
could affect  the safe operation  of the car by  a reasonable                                                                   
person. He  acknowledged that there  is a point in  time when                                                                   
the  consumer  must  take  responsibility   for  the  vehicle                                                                   
purchase.  Consumers  are cautioned  to  hire  a mechanic  to                                                                   
inspect the  car. He  noted that  a car can  be sold  "as is"                                                                   
even  under  the proposed  legislation.  He  maintained  that                                                                   
implied warranties would not be  affected by the legislation.                                                                   
If there  is an  implied warranty,  it already  exists,  as a                                                                   
matter of  state law  and the legislation  would not  make it                                                                   
any  different.  If  a  dealer  inspects  a  car  and  misses                                                                   
something and  sells it to a  consumer, then the  consumer is                                                                   
always going to  have implied warranty claims,  regardless if                                                                   
there is  a duty to  inspect under  the statute.  He stressed                                                                   
that the department  has done a fairly good job  in trying to                                                                   
limit the responsibility of the  dealers under the section to                                                                   
fundamental and basic things.  He encouraged the inclusion of                                                                   
the provision.                                                                                                                  
                                                                                                                                
Co-Chair Mulder  expressed concern  with subsection  (2): "If                                                                   
the dealer  has information that  reasonably should  lead the                                                                   
dealer to know…" He asked for a definition of "reasonable".                                                                     
                                                                                                                                
Mr. Sniffen noted that the concept  of "reasonable" exists in                                                                   
almost every  law in  the state.  Concepts of negligence  are                                                                   
defined  by referring  to the reasonable  person standard.  A                                                                   
"reasonable person" is a person  that twelve people in a jury                                                                   
box think  should have  made a decision  one way  or another.                                                                   
Unfortunately,  there is  no way,  in  some circumstance,  to                                                                   
narrow the definition beyond what  a reasonable person should                                                                   
have known about a car.                                                                                                         
                                                                                                                                
Co-Chair Mulder questioned why  not include a proscribed list                                                                   
of things  and remove  the attorneys  from the equation.  Mr.                                                                   
Sniffen responded  that if  they could anticipate  everything                                                                   
the  list  would be  long,  and  was  not  sure if  it  would                                                                   
accomplish  the  intent  to  make  sure  the  consumer  knows                                                                   
everything that the dealer should  know about a car they took                                                                   
in trade. He  emphasized that they are not  asking dealers to                                                                   
go  out of  their way  to  find out  the  information. It  is                                                                   
information the  person providing  the car may  already have.                                                                   
The provision asks dealers to  ask the questions and disclose                                                                   
what they find out.                                                                                                             
                                                                                                                                
Co-Chair Mulder  observed that  there is  an element  of risk                                                                   
from  the person  that  gives the  car to  the  dealer to  be                                                                   
honest.  Mr. Sniffen  pointed out  if the  consumer fails  to                                                                   
disclose the  information that the  dealer has done  his job.                                                                   
He observed  that the provision  only requires the  dealer to                                                                   
ask  and make  a good  faith attempt  to find  out about  the                                                                   
problems. If the  consumer is dishonest, the  dealer has done                                                                   
his job.                                                                                                                        
                                                                                                                                
Co-Chair Mulder  clarified that  if the  dealer asks  and the                                                                   
seller is  not honest  that the dealer  would not  be liable.                                                                   
Mr. Sniffen  affirmed that the  dealer is not liable  for the                                                                   
lack  of  previous  owner  to  disclose  information  on  any                                                                   
defects.                                                                                                                        
                                                                                                                                
Representative  Croft  observed  that everyone  is  asked  to                                                                   
behave  responsibly. He  noted that  concerns were  expressed                                                                   
that  the original  proposal was  too detailed  but that  the                                                                   
current  standard  is too  general.  He summarized  that  the                                                                   
dealer  would  not be  liable  unless  they have  some  other                                                                   
reason to know.                                                                                                                 
                                                                                                                                
In response to a question by Representative  John Davies, Mr.                                                                   
Sniffen clarified that the original  proposal included a more                                                                   
detailed  inspection  procedure.   The  inspection  procedure                                                                   
required  an initial  inspection  that would  be extended  if                                                                   
certain things  were found. The  detailed list  raised issues                                                                   
among dealers.                                                                                                                  
                                                                                                                                
Representative  Whitaker asked if  there is an  outpouring of                                                                   
public concern  regarding the  issue. Mr. Sniffen  noted that                                                                   
the number  one complaint received  by their office  pertains                                                                   
to used automobile purchases.  "A lot of those complaints are                                                                   
essentially: I bought  this car. They told me it  was a great                                                                   
car. I drove it for a week and  it fell apart on me. What can                                                                   
I do, and we  find out later on that perhaps  the dealer knew                                                                   
things  about the  car  that they  did  not  disclose to  the                                                                   
consumer,   that  might   have  affected   the  decision   to                                                                   
purchase."   Alaska is  one of  the only  states that  do not                                                                   
have  an automobile  dealer franchise  law.  There are  other                                                                   
states with  laws that deal  with consumer protection  issues                                                                   
and  the  purchase  of  used  vehicles.  The  legislation  is                                                                   
consistent with some states' laws.                                                                                              
                                                                                                                                
Representative  Whitaker questioned  the number one  consumer                                                                   
complaint  in  other  states,   which  have  these  types  of                                                                   
consumer protection  laws. Representative Whitaker  concluded                                                                   
that there was no information  regarding their effectiveness.                                                                   
                                                                                                                                
Representative  Hudson clarified that  the "lemon  law" would                                                                   
not be  affected. Mr.  Sniffen observed  that lemon  laws are                                                                   
only applicable to new cars.                                                                                                    
                                                                                                                                
RALPH   SEEKINS,   ALASKA  AUTOMOBILE   DEALER   ASSOCIATION,                                                                   
FAIRBANKS, testified via teleconference  in opposition to the                                                                   
inspection provisions  in AS 45.25.470. He  expressed concern                                                                   
that  buyers would  lie  about the  condition  of their  used                                                                   
cars. He  noted that there is  an old saying in  the industry                                                                   
that  "buyers are  liars".  Vehicle histories  are  currently                                                                   
kept for 18 to  24 months. The histories are  "dumped out" if                                                                   
there is not  an update. The requirement would  cause dealers                                                                   
to maintain records  on previous repairs in  order to fulfill                                                                   
future reporting  requirements. He referred to  provisions of                                                                   
implied warranty  and noted that the Uniform  Commercial Code                                                                   
(UCC), which was  adopted by Alaska, would allow  the display                                                                   
of  some of  the  implied warranties.  He  stressed that  the                                                                   
legislation  would not  disallow  the disclaimer  of  implied                                                                   
warranty under the UCC. He did  not disagree with the intent.                                                                   
Every car  he takes in trade  is reviewed to determine  if it                                                                   
will  be  certified  under  the   manufacture's  program.  He                                                                   
maintained  that  a  lot  of  things  happen  in  a  new  car                                                                   
dealership that  might not happen  in a used  car dealership,                                                                   
which  does not  have $5  - $6  million  dollars invested  in                                                                   
their facilities and equipment.  He felt that the issue could                                                                   
be beneficial  to the  buyer and  most dealers and  expressed                                                                   
the desire  to work with  the administration and  legislature                                                                   
to  "be  able  to  place  something   in  here  in  terms  of                                                                   
inspection,  from the  beginning." He  observed that  dealers                                                                   
asked for  licensing provisions  and changes  in bonding  and                                                                   
advertising.  He acknowledged  that  there is  a tendency  in                                                                   
certain areas for abuses to exist  and stated that they would                                                                   
like  to  address  them  up  front.  Dealers  also  requested                                                                   
warranty   coverage    issues   to   protect    buyers   from                                                                   
manufacture's  policies. Those  provisions have been  removed                                                                   
to make  the legislation  easier  for people  to look at.  He                                                                   
suggested   that  the   provision  be   placed  in   separate                                                                   
legislation  to allow the  parties to  come to consensus.  He                                                                   
noted that anyone  that sells less than five  vehicles a year                                                                   
is  private seller  and would  not be  subject to  inspection                                                                   
requirements as  automobile dealers.  He noted that  they had                                                                   
just received model legislation  from the National Automobile                                                                   
Association. He  emphasized the intent  to work on  the issue                                                                   
and make it right.                                                                                                              
                                                                                                                                
Representative John  Davies acknowledged Mr.  Seekins' desire                                                                   
to  "make  it   right,"  but  observed  that   the  committee                                                                   
substitute was version  R and was in its second  time through                                                                   
the  alphabet.  He  asked  if  Mr.  Seekins  could  recommend                                                                   
language  to   modify  the  legislation,  which   they  would                                                                   
support.  Mr.  Seekins  noted that  the  National  Automobile                                                                   
Dealer Association was sending  additional language that they                                                                   
could take a look  at. He emphasized that they  do not have a                                                                   
problem  with trying  to make  it better,  but stressed  that                                                                   
they would like  the opportunity to really make  it right. He                                                                   
referred  to  provision  (a)  (2),  which  requires  that  an                                                                   
automobile be placed on a rack  and inspected under the hood.                                                                   
He noted that the legislation  doesn't require the vehicle to                                                                   
be  lifted  up;  it only  has  to  be  put on  the  rack.  He                                                                   
maintained that  this is too big  a loophole to  be addressed                                                                   
in  the  remaining  time.  He   emphasized  that  he  already                                                                   
inspects  vehicles on  their  appraisals  because he  doesn't                                                                   
want to  get stuck with a  vehicle that has been  rebuilt. He                                                                   
is willing to make appraisal slips  available and to disclose                                                                   
repairs  made after  his purchase,  but "some  of the  little                                                                   
things in here, just catch us".                                                                                                 
                                                                                                                                
LIBBY DANNENBURG, ALLIANCE AUTOMOBILE  DEALERS, testified via                                                                   
teleconference in support of the  legislation. She noted that                                                                   
the  Alliance  has some  remaining  concerns,  but would  not                                                                   
object to the current version.                                                                                                  
                                                                                                                                
TAPE HFC 02 - 79, Side B                                                                                                      
                                                                                                                                
JOHN MECKY, FORD MOTOR COMPANY,  testified via teleconference                                                                   
in  support  of  the  legislation.   He  noted  that  he  was                                                                   
available for questions.                                                                                                        
                                                                                                                                
STAN HURST CHRYSLER  testified via teleconference  in support                                                                   
of  the  legislation.   He  observed  that   the  legislation                                                                   
provides   protections   to   both   the   dealer   and   the                                                                   
manufacturer.                                                                                                                   
                                                                                                                                
MARK  MUELLER,   GENERAL  MOTORS,   DETROIT,  testified   via                                                                   
teleconference in  support of the legislation  and noted that                                                                   
he was available for questions.                                                                                                 
                                                                                                                                
BOB DUTTON, TOYOTA, testified  via teleconference in support.                                                                   
                                                                                                                                
MARY  WASHBURN,   DIRECTOR,  DIVISION   OF  MOTOR   VEHICLES,                                                                   
DEPARTMENT  OF ADMINISTRATION,  provided  information on  the                                                                   
legislation. She noted that the  previous dealer bond was $10                                                                   
thousand dollars,  which was  insufficient. They  recommended                                                                   
the  bond be  raised to  $50 thousand  dollars,  which is  an                                                                   
entry level.  She noted that  $100 thousand dollars  would be                                                                   
applicable but that they did not  want to exclude anyone from                                                                   
becoming an automobile dealer because of bonding.                                                                               
                                                                                                                                
STEVE  CONN,  EXECUTIVE  DIRECTOR,   ALASKA  PUBLIC  INTEREST                                                                   
RESEARCH GROUP,  ANCHORAGE, testified via  teleconference. He                                                                   
noted that the original language  contained a requirement for                                                                   
dealers  to conduct a  reasonable inspection  of the  vehicle                                                                   
including  a test drive  and visual  inspection for  material                                                                   
defects. He suggested  that the provision be  returned to the                                                                   
bill  with  the  deletion  of  "material  defects."  After  a                                                                   
reasonable inspection  of the vehicle including  a test drive                                                                   
and visual inspection  that whatever information  is gathered                                                                   
would be provided in writing to  the prospective buyer of the                                                                   
vehicle before  the sale. This  is the salient  component. He                                                                   
emphasized that most consumers  believe that the dealer, when                                                                   
he takes  on a  vehicle, does  make a reasonable  inspection.                                                                   
Whatever the  dealer knows from  the seller and  a reasonable                                                                   
inspection  would be provided  to the  buyer. He stated  that                                                                   
after more than a year of working  on the legislation that to                                                                   
"leave the  consumer standing  at the curb"  and to  make the                                                                   
legislation only a "deal between  the franchisers and the car                                                                   
dealers"  would do  a major disservice  and  be an insult  to                                                                   
consumers who  are looking for  enough information to  make a                                                                   
good choice.                                                                                                                    
                                                                                                                                
RICK   MORRISON,  ALASKA   AUTOMOBILE  DEALERS   ASSOCIATION,                                                                   
ANCHORAGE,  testified via  teleconference in  support of  the                                                                   
legislation. He noted  that the project has  been seven years                                                                   
in the  making. Alaska  is the  last state  in the  nation to                                                                   
have  any franchise  law protections  for automobile  dealers                                                                   
and  manufacturers.  The  legislation   provides  clarity  to                                                                   
protect  both  the dealer  and  the  consumer. In  1973,  the                                                                   
Federal   Trade  Commission   (FTC)   attempted  to   address                                                                   
disclosures and  inspections on vehicles. The  FTC found that                                                                   
the cost to consumers  would be too great and  the implied or                                                                   
express warranties  made the issue so complex  that they were                                                                   
unable to  come to a  solution. The FTC  worked on  the issue                                                                   
for 11 years and ended with the window sticker now applied.                                                                     
                                                                                                                                
Mr. Morrison observed  that the dealer association  prefers a                                                                   
$100 thousand dollar  bond. He noted that the  market area is                                                                   
[a radius of] 14 miles [around  an existing new motor vehicle                                                                   
dealer] and  maintained that  it should be  extended to  50 -                                                                   
100 miles. He referred to page  17, line 24 and observed that                                                                   
no vehicle  should be required  to be sold with  accessories.                                                                   
He explained  that accessories must  be placed on the  car in                                                                   
order  to display  them for  sale.  Some can  be removed  and                                                                   
others cannot.  He agreed  that a  car should  be able  to be                                                                   
bought with just  the factor options, but emphasized  that it                                                                   
would be  tough to  make a particular  car available  without                                                                   
accessories. They  compromised on many areas,  but still have                                                                   
concern  with  portions of  the  bill.  He pointed  out  that                                                                   
customers could be asked to disclose  information relating to                                                                   
a  car,  but  that  under  privacy  laws  they  cannot  share                                                                   
information  relating  to  the  seller  with  the  buyer.  He                                                                   
observed  that, under  the  Fair Trade  Practices  law, if  a                                                                   
dealer knows  something is wrong with  the car and it  is not                                                                   
passed on  to the consumer  that they  would be at  fault. He                                                                   
maintained  that  the  provision would  result  in  frivolous                                                                   
lawsuits. He referred  to Section. 45.25.470:  "If the dealer                                                                   
has information  that  reasonably should  lead the dealer  to                                                                   
know…" He  maintained that  the provision  is vague  and open                                                                   
ended.   He observed that  if a car  was serviced  five years                                                                   
previously  and recommendations  were made  for repairs,  but                                                                   
the customer  did not  return, then  they records would  have                                                                   
been downloaded  and deleted in  24 months. The  dealer could                                                                   
be  at fault  if the  car is  subsequently  sold through  the                                                                   
dealer [and  the problem was  not identified].  He maintained                                                                   
that  dealers  would  have  to  charge  the  consumer  for  a                                                                   
warranty  or express  warranty.  He observed  that he  allows                                                                   
consumers to  return cars in 3  days or exchange the  car for                                                                   
any car  of equal value within  30 days. He does  not support                                                                   
page 18,  lines 16 -  28. He maintained  that the  section is                                                                   
onerous and  would cause more  difficulties for  the consumer                                                                   
than it would solve.                                                                                                            
                                                                                                                                
In  response to  a  question  by Representative  Davies,  Mr.                                                                   
Morrison suggested the use of  a substitute process. He noted                                                                   
that  there could  be a  safety inspection  of all  vehicles.                                                                   
There could  be a standard for  all vehicles that are  on the                                                                   
street. If  there were an  inspection than the  customer that                                                                   
is trading  the vehicle  could sign a  form developed  by the                                                                   
state, which would  be transferred to the buyer.  He stressed                                                                   
that  both  ideas would  need  additional  consideration  and                                                                   
pointed out that the devil is in the details.                                                                                   
                                                                                                                                
Representative John  Davies asked if repair  records would be                                                                   
given to a  consumer who has a vehicle  identification number                                                                   
on  a  car  that  they  are  considering  for  purchase.  Mr.                                                                   
Morrison stated  that he would supply repair  information but                                                                   
not the  names of the owner.  He observed that he  could only                                                                   
store two  years of information.  He does not charge  for the                                                                   
service.                                                                                                                        
                                                                                                                                
In   response   to   a   question    by   Vice-Chair   Bunde,                                                                   
Representative  Murkowski  acknowledged  that  the  provision                                                                   
under  AS  45.25.470  has  been a  concern  of  dealers.  She                                                                   
observed   that  it   addresses  the   number  one   consumer                                                                   
complaint. She maintained that  the provision fits within the                                                                   
bill and  emphasized that the  intent was to make  the impact                                                                   
as minimal as  possible while still protecting  the consumer.                                                                   
She acknowledged  that a separate vehicle could  be used, but                                                                   
spoke in support of retaining  the provision. She stated that                                                                   
removal of the  consumer protection provision would  not be a                                                                   
"deal breaker" but emphasized their importance.                                                                                 
                                                                                                                                
Representative Lancaster MOVED  to Delete Sec. 45.25.470 page                                                                   
18.  Representative John  Davies OBJECTED.  He stressed  that                                                                   
the  section  retains  a  significant  balance  in  terms  of                                                                   
consumer  protection. He  observed  that the  issue has  been                                                                   
discussed for up to seven years.  He expressed disappointment                                                                   
that  those  in  opposition  have not  been  willing  to  put                                                                   
"their" version  on the  table. He  thought that the  current                                                                   
language, which  has been worked  and compromised  on, should                                                                   
go forward, if  those in opposition to the  provision are not                                                                   
willing to put alternative language  on the table. He thought                                                                   
that it would follow the reasonable persons standards.                                                                          
                                                                                                                                
Representative  Croft  pointed out  that  the legislation  is                                                                   
balanced  in   terms  of  the  significant   protections  for                                                                   
manufacturers   and  dealers,  but   that  adoption   of  the                                                                   
amendment  would  withdraw  protection  for  the  public.  He                                                                   
acknowledged  that   there  could  be  arguments   about  the                                                                   
specifics of the  obligation to inspect, but  felt that there                                                                   
should be a  reasonable requirement to inspect  the car being                                                                   
sold. The only requirement would be the FTC sticker.                                                                            
                                                                                                                                
Representative  John Davies spoke  against the amendment.  He                                                                   
noted that the  section is the only piece in  the legislation                                                                   
that addresses what is the number  one consumer complaint. He                                                                   
pointed  out  that  no  compromise  is  possible;  nobody  is                                                                   
willing  to "roll up  their sleeves  and put  it down  on the                                                                   
table." He  felt that the  process was somewhat  disingenuous                                                                   
and spoke  in support or  retaining some consumer  protection                                                                   
in the legislation.                                                                                                             
                                                                                                                                
Vice-Chair Bunde  suggested that  retention of the  provision                                                                   
might encourage further work.                                                                                                   
                                                                                                                                
Representative   Lancaster   spoke    in   support   of   the                                                                   
legislation.  He observed  that  the industry  has  requested                                                                   
time to look at revisions.                                                                                                      
                                                                                                                                
Representative  Whitaker spoke in  support of the  amendment.                                                                   
He stressed  the difficulty  of regulating  truth telling  in                                                                   
relationship to the selling and buying of cars.                                                                                 
                                                                                                                                
Representative John Davies suggested  that the use of another                                                                   
piece  of legislation  could  be a  dodge.  He stressed  that                                                                   
retention  of  the  provision  would  provide  incentive  for                                                                   
additional  legislation.  He emphasized  that  the  provision                                                                   
would send a message regarding  the standard of care, justice                                                                   
and truth.  He stressed  that  there should  be at least  one                                                                   
standard  for  public  protection.  He  maintained  that  the                                                                   
legislation  would  be  unbalanced with  the  [withdrawal  of                                                                   
section 45.25.470].                                                                                                             
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Lancaster,   Moses,  Whitaker,  Hudson,   Williams,                                                                   
          Mulder                                                                                                                
OPPOSED: Bunde, Croft, Davies, Moses                                                                                            
                                                                                                                                
Representative Foster was absent from the vote.                                                                                 
                                                                                                                                
The MOTION PASSED (6-4).                                                                                                        
                                                                                                                                
Co-Chair  Williams MOVED  to  report CSHB  182  (FIN) out  of                                                                   
Committee with  the accompanying fiscal note.  Representative                                                                   
Croft OBJECTED. He stressed that  the time should be taken to                                                                   
craft a provision on a reasonable inspection.                                                                                   
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Bunde, Harris, Hudson,  Lancaster, Moses, Whitaker,                                                                   
          Williams, Mulder                                                                                                      
OPPOSED: Croft, Davies                                                                                                          
                                                                                                                                
Representative Foster was absent from the vote.                                                                                 
                                                                                                                                
The MOTION PASSED (8-2).                                                                                                        
                                                                                                                                
CSHB  182 (FIN)  was REPORTED  out  of Committee  with a  "do                                                                   
pass" recommendation  and a new with zero fiscal  note by the                                                                   
Department  of  Administration  and  a  previously  published                                                                   
fiscal note: LAW (#1).                                                                                                          
SENATE BILL NO. 291                                                                                                           
                                                                                                                                
     "An Act making supplemental and other appropriations;                                                                      
     amending appropriations; and providing for an effective                                                                    
     date."                                                                                                                     
                                                                                                                                
Co-Chair Mulder  provided members  with a proposed  committee                                                                   
substitute,    work   draft    22-GS2102\B,   4/10/02,    and                                                                   
accompanying spreadsheet (copy on file.)                                                                                        
                                                                                                                                
Representative  Whitaker  MOVED   to  ADOPT  work  draft  22-                                                                   
GS2102\B,  4/10/02.  There  being  NO OBJECTION,  it  was  so                                                                   
ordered.                                                                                                                        
                                                                                                                                
DENNY DEWITT,  STAFF, REPRESENTATIVE  ELDON MULDER,  reviewed                                                                   
the  legislation.  He  provided members  with  a  spreadsheet                                                                   
detailing the  changes contained in the  committee substitute                                                                   
(copy on file).                                                                                                                 
                                                                                                                                
Section 1                                                                                                                     
     Court System, Judicial Conduct, Legal                                                                                      
                                                                                                                                
Mr. Dewitt observed  that section 1 authorizes  legal fees in                                                                   
excess of the FY2001 supplemental  in the amount is $6829.77.                                                                   
                                                                                                                                
Section 2                                                                                                                     
     Department of Community and Economic Development,                                                                          
     Alaska Science & Technology Foundation, Idaho National                                                                     
     Engineering and Environmental Laboratory Grant                                                                             
                                                                                                                                
Mr. Dewitt  noted that section  2 funds statutory  designated                                                                   
program  receipts   for  a   contract  for  Alaska   Business                                                                   
Research. Funds are available March 1, 2002.                                                                                    
                                                                                                                                
Section 3                                                                                                                     
     Corrections, Palmer Correctional Center                                                                                    
                                                                                                                                
Mr. Dewitt noted that there is  a problem with the water pump                                                                   
and well house, which the section  would address. The request                                                                   
authorizes $172  thousand dollar general  fund appropriation.                                                                   
The request was for other funds  but the other body felt that                                                                   
general funds would be more secure.                                                                                             
                                                                                                                                
Section 4                                                                                                                     
     Department of Health and Social Services, Medicaid                                                                         
     Services, Medicaid Services                                                                                                
                                                                                                                                
Mr. Dewitt observed  that the funds are need  to complete the                                                                   
year. They are projected to run out April 16.                                                                                   
                                                                                                                                
Co-Chair Mulder noted that a lack  of funding would result in                                                                   
a restriction of payments, which would result in a backlog.                                                                     
                                                                                                                                
Section 5(a)                                                                                                                  
     Department of Transportation and Public Facilities,                                                                        
     Marine Highway Stabilization Fund, Marine Highway                                                                          
     Stabilization Fund                                                                                                         
                                                                                                                                
Mr. Dewitt  noted that  the appropriation  would address  the                                                                   
FY02  deficit  due  to  M/V  Columbia   fire  and  fuel  cost                                                                   
increases.                                                                                                                      
                                                                                                                                
Section 6                                                                                                                     
     Military and Veterans Affairs, Disaster Planning &                                                                         
     Control                                                                                                                    
                                                                                                                                
Mr. Dewitt  noted that section  6 appropriates  $125 thousand                                                                   
dollars  to  cover  costs  to   maintain  the  24-hour  State                                                                   
Emergency  Coordination   Center  (SECC),  the   agency  that                                                                   
coordinates  all  federal,  state  and  local  jurisdictional                                                                   
responses associated with any disaster or event.                                                                                
                                                                                                                                
Section 7                                                                                                                     
     Department of Natural Resources, CIP                                                                                       
                                                                                                                                
Mr.  Dewitt  observed  that the  section  changes  a  capital                                                                   
improvement program in Kenai to reduce risks from wildfire.                                                                     
                                                                                                                                
Section 8                                                                                                                     
     Office of the Governor, Elections                                                                                          
                                                                                                                                
Mr.  Dewitt  noted  that  section 8  would  cover  costs  for                                                                   
printing  and  mailing  a Primary  Election  Voter  Education                                                                   
Guide in time to  explain the new law (shifted  from the FY03                                                                   
budget,  which was amended).  The $125  thousand dollars  was                                                                   
taken out  of the House budget  when it was passed,  with the                                                                   
expectations that it would be in the supplemental.                                                                              
                                                                                                                                
Section 9                                                                                                                     
     Department of Community and Economic Development, Power                                                                    
     Cost Equalization & Rural Electrification Fund                                                                             
                                                                                                                                
Mr.  Dewitt  explained  that  the  amount  was  inadvertently                                                                   
omitted  from  the FY02  appropriation  from  the Power  Cost                                                                   
Equalization  Endowment fund to  the Power Cost  Equalization                                                                   
and  Rural  Electrification Fund.  The  section  appropriates                                                                   
3.5% of market value.                                                                                                           
                                                                                                                                
Section 10                                                                                                                    
     Department of Public Safety, State Troopers                                                                                
                                                                                                                                
Mr.  Dewitt noted  that  the section  is  for one-time  costs                                                                   
associated with response to the September 11, 2001 events.                                                                      
                                                                                                                                
Section 11                                                                                                                    
     Legislature, Redistricting Board                                                                                           
                                                                                                                                
Mr.  Dewitt  observed  that section  11  provides  additional                                                                   
funds for personal services and  board meeting. The Board has                                                                   
an additional  $30 thousand dollars,  which should  cover the                                                                   
balance of the cost to redo their maps.                                                                                         
                                                                                                                                
Section 12                                                                                                                    
     Department of Community and Economic Development,                                                                          
     Qualified Trade Assoc. Contract                                                                                            
                                                                                                                                
Mr.  Dewitt noted  that section  12  appropriates $2  million                                                                   
dollars for additional tourism  marketing efforts to mitigate                                                                   
the economic  effects to Alaska  from the September  11, 2001                                                                   
terrorist  attacks.  The  House  sent  a  $6  million  dollar                                                                   
appropriation to the Senate for the same purpose.                                                                               
                                                                                                                                
Section 13(a)(1) - (4)                                                                                                        
     Department of Transportation and Public Facilities                                                                         
                                                                                                                                
Mr.  Dewitt  noted  that  there  were  a  number  of  highway                                                                   
maintenance stations  in disrepair.  The funds would  provide                                                                   
temporary rental and other costs  of vacating the maintenance                                                                   
station due to imminent failure.                                                                                                
                                                                                                                                
Section 13(b)                                                                                                                 
     Department of Transportation and Public Facilities,                                                                        
     Central Region CIP                                                                                                         
                                                                                                                                
Mr. Dewitt  noted that  section 13 (b)  is for the  Anchorage                                                                   
Bowl  -  Long Range  Transportation  Plan  Update  for  2025.                                                                   
Federal  funds   would  be   moved  forward,  for   immediate                                                                   
implementation.                                                                                                                 
                                                                                                                                
Section 13(c)                                                                                                                 
     Department of Transportation and Public Facilities,                                                                        
     Southeast Region CIP                                                                                                       
                                                                                                                                
Mr. Dewitt  clarified that section  13 (c) changes  the title                                                                   
from  West Douglas  Highway  Extension  to Gastineau  Channel                                                                   
Second Crossing to match the federal  project name. This is a                                                                   
change from the Senate version.                                                                                                 
                                                                                                                                
Section 13(d)(1)                                                                                                              
     Department of Transportation and Public Facilities,                                                                        
     Central Region Highways and Aviation, Security and                                                                         
     Emergency Access Routes in Anchorage                                                                                       
                                                                                                                                
Mr.  Dewitt explained  that section  13  (d) revises  traffic                                                                   
patterns for enhanced  security and emergency  routing at the                                                                   
Port  of Anchorage  Access and  access/egress from  Elmendorf                                                                   
AFB and Ft. Richardson onto the Glenn Highway.                                                                                  
                                                                                                                                
Section 13(d)(2) (4)                                                                                                          
     Department of Transportation and Public Facilities                                                                         
                                                                                                                                
Mr.  Dewitt  explained  that these  sections  fund  liability                                                                   
premium  increases  as  result  of  the  September  11,  2001                                                                   
terrorist attack.                                                                                                               
                                                                                                                                
Section 13(e)(1)- (8)                                                                                                         
     Department of Transportation and Public Facilities                                                                         
                                                                                                                                
Mr. Dewitt  noted that these  sections increase  the presence                                                                   
and visibility  of law enforcement  officers required  by the                                                                   
federal government and authorizes  the expenditure of federal                                                                   
funds.                                                                                                                          
                                                                                                                                
Section 13(f)(1) - (7)                                                                                                        
     Department of Transportation and Public Facilities                                                                         
                                                                                                                                
Mr.  Dewitt  explained  that these  sections  are  activities                                                                   
relative to  the Anchorage and Fairbanks  airports. Liability                                                                   
premium increases  are authorized as result  of the September                                                                   
11,  2001 terrorist  attack,  along with  security  measures,                                                                   
which are  funded through  the International Airport  Revenue                                                                   
Fund.                                                                                                                           
                                                                                                                                
Section 13(g)                                                                                                                 
     Department of Transportation and Public Facilities,                                                                        
     Alaska Marine Highway System                                                                                               
                                                                                                                                
Mr. Dewitt  noted that  section 13 (g)  allows funds  to come                                                                   
out  of the  Alaska Marine  Highway  System Fund  to pay  for                                                                   
liability premium  increases as  result of the  September 11,                                                                   
2001 terrorist attack (See 5(b)).                                                                                               
                                                                                                                                
Section 13(h)(1) - (4)                                                                                                        
     Department of Transportation and Public Facilities                                                                         
                                                                                                                                
Mr. Dewitt  explained that  these sections  are a mixture  of                                                                   
federal  funds and  International  Airport  Revenue funds  at                                                                   
Anchorage and Fairbanks airports.                                                                                               
                                                                                                                                
Section 14(a)                                                                                                                 
     University, System wide Small Planning, Design and                                                                         
     Construction                                                                                                               
                                                                                                                                
Mr.  Dewitt noted  that section  14(a)  allows $800  thousand                                                                   
dollars in university  receipts to be used at  the Lena Point                                                                   
fisheries and ocean sciences laboratory.                                                                                        
                                                                                                                                
Section 14(b)                                                                                                                 
     University, CIP                                                                                                            
                                                                                                                                
Mr.  Dewitt explained  that  section 14  (b)  allows a  scope                                                                   
change for  Sec 3, Ch  61, SLA 2001  to include  UAA Heating,                                                                   
Ventilation, and  Air Conditioning Piping  Replacement Phases                                                                   
1-4.                                                                                                                            
                                                                                                                                
Vice-Chair Bunde  asked for more  information on  section 12.                                                                   
Mr.  Dewitt observed  that the  funding  would help  increase                                                                   
marketing. He observed that the  funding might not be in time                                                                   
to help  with the current season.  The funds are  in addition                                                                   
to  the  $4.5  million  dollars   currently  going  into  the                                                                   
tourism-marketing budget.                                                                                                       
                                                                                                                                
TAPE HFC 02 - 80, Side A                                                                                                      
                                                                                                                                
In response  to a question  by Representative  Lancaster, Mr.                                                                   
Dewitt observed  that the funding  was added in  the proposed                                                                   
committee  substitute.  Discussion ensued  regarding  funding                                                                   
for tourism.  The House  legislation appropriated  $6 million                                                                   
dollars.  The  legislation has  not  passed the  Senate.  The                                                                   
Senate did not provide additional funding for tourism.                                                                          
                                                                                                                                
Representative   Harris   asked   for   further   information                                                                   
regarding Power Cost Equalization.  Mr. Dewitt noted that the                                                                   
statute would  have 7  percent of  the fund appropriated.  He                                                                   
indicated that  additional funding would be  provided through                                                                   
another vehicle.                                                                                                                
                                                                                                                                
Representative  Lancaster  referred to  section  5 (a),  fuel                                                                   
costs.  Mr. Dewitt  explained that  the section  appropriates                                                                   
funds related to fuel costs and the M/V Columbia fire.                                                                          
                                                                                                                                
Representative  Davies  asked  for  more  information  the  7                                                                   
percent funding for Power Cost Equalization.                                                                                    
                                                                                                                                
SARA FISHER-GOAD,  ALASKA INDUSTRIAL  DEVELOPMENT AND  EXPORT                                                                   
AUTHORITY, DEPARTMENT  OF COMMUNITY AND ECONOMIC  DEVELOPMENT                                                                   
testified via teleconference.  She explained that the request                                                                   
was  7 percent  from the  Power  Cost Equalization  Endowment                                                                   
Fund.  The legislation  would  appropriate  3.5 percent.  The                                                                   
Fund is out of money; an additional  amount is needed to meet                                                                   
the  FY02 obligations.  The additional  $3.5 million  dollars                                                                   
would provide funding through  April. There is a $1.5 million                                                                   
dollar  backlog  for PCE  payments.  The  full 7  percent  is                                                                   
needed to meet FY02 obligations.                                                                                                
                                                                                                                                
Representative  Lancaster noted  that a  pro rata amount  was                                                                   
begun on June 1. Ms. Goad explained  that the pro rata amount                                                                   
was to the appropriation of $15.7  million dollars. The issue                                                                   
before  the Committee  was the  capitalization  of the  Fund.                                                                   
There  was an error  in the  7 percent  appropriation to  the                                                                   
Endowment Fund, which did not  happen. They prorated to $15.7                                                                   
million dollars,  but there was not $15.7 million  dollars in                                                                   
the  Fund.  The  Fund  is  $7   million  dollars  short.  She                                                                   
explained that  the $1.1 million  dollars was  a supplemental                                                                   
request to  fully fund  the program  for March through  June,                                                                   
which would  allow payments of  100 percent. The  current pro                                                                   
rata is at 80  percent of the PCE level. The  amount is based                                                                   
on PCE levels set by the Regulatory Commission of Alaska.                                                                       
                                                                                                                                
Representative  Lancaster  interjected  that  the  amount  is                                                                   
subject to  interpretation on  what is full funding:  whether                                                                   
it is $15.7  million dollars total with or  without fuel cost                                                                   
increases or new  people on the program. The  amount needs to                                                                   
be finalized.                                                                                                                   
                                                                                                                                
ADJUTANT GENERAL  BG PHIL OATES, COMMISSIONER,  DEPARTMENT OF                                                                   
MILITARY  AND   VETERANS  AFFAIRS  provided   information  on                                                                   
requests  by the  department.  He  observed that  there  were                                                                   
several  problems  within  the fast  track  supplemental.  He                                                                   
noted that the department had  many expenditures based on the                                                                   
attacks of September 11. The expenditures  as they related to                                                                   
the Trans Alaska  Pipeline, Valdez Airport and  the Fox weigh                                                                   
station  were  communicated  through  teleconference  to  the                                                                   
House and Senate  leadership. The decision was  made that the                                                                   
threat was  not worth the cost  and that risk would  be taken                                                                   
in these  areas. He  pointed out  that although  many of  the                                                                   
areas  where   money  has  already   been  spent   have  been                                                                   
addressed,  there are some  areas that  have not be  covered.                                                                   
Three areas  of concern remain.  The first is  the checkpoint                                                                   
for  the Trans  Alaska  Pipeline.  The Department  of  Public                                                                   
Safety and the Military and Veterans  Affairs established the                                                                   
checkpoint for a  total cost of $433.2 thousand  dollars. The                                                                   
total  includes the  cost to  call the  Alaska State  Defense                                                                   
Force  up  to  state  active   duty  and  to  administer  the                                                                   
checkpoint. The cost  to the Department of Public  Safety was                                                                   
$288.2  thousand  dollars.  The  cost to  the  Department  of                                                                   
Military and Veterans  Affairs was $145 thousand  dollars. He                                                                   
noted that hours  were expanded at the Fox  weight station to                                                                   
24/7 in  order to  fully inspect all  the vehicles  and cargo                                                                   
transiting  the Trans  Alaska Pipeline.  He pointed out  that                                                                   
there has  been an  attack on  the pipeline. The  checkpoints                                                                   
were established  in response to calls from  the White House.                                                                   
The  United  States  Attorney  General and  the  director  of                                                                   
Homeland  Security called  the Governor  and said that  there                                                                   
was a  threat against  all infrastructure  across the  United                                                                   
States. They  stressed that security  needed to  be improved.                                                                   
The  leadership  was notified  and  checkpoints  established.                                                                   
Expanded  use  of  the  weigh  station  cost  $42.2  thousand                                                                   
general fund dollars.                                                                                                           
                                                                                                                                
Commissioner    Oates    discussed   the    Valdez    airport                                                                   
expenditures.  The Valdez  airport  was  not qualified  under                                                                   
federal  funding. State  funds  were spent  because the  FBI,                                                                   
FAA, and  Alaska Coast  Guard commander  were concerned  with                                                                   
the  level  of  security.  Total   expenditures  were  $542.3                                                                   
thousand dollars.                                                                                                               
                                                                                                                                
Commissioner  Oates  noted  that   legislation  for  homeland                                                                   
security has  not moved. The  funding [requested  in homeland                                                                   
security  legislation]  has  come  out  of  the  departments'                                                                   
existing budgets.  He stressed  that his department  would be                                                                   
in a crisis to  get to the end of the year.  Recovery will be                                                                   
harder  the  longer they  wait  for  funding. The  money  has                                                                   
already been spent and is coming out of existing budgets.                                                                       
                                                                                                                                
Representative  Lancaster questioned  if  the department  has                                                                   
worked  with   ALESKA  since   9/11/01.  Commissioner   Oates                                                                   
affirmed that he  has worked with ALESKA. He  emphasized that                                                                   
the  pipeline has  national and  worldwide significances.  He                                                                   
emphasized  that there  have  been expenditures  to  increase                                                                   
security. The  pipeline could  be lost if  the line  was done                                                                   
for more than 10 days.                                                                                                          
                                                                                                                                
In response to  a question by Vice-Chair  Bunde, Commissioner                                                                   
Oates clarified  that the checkpoint  is at the  Yukon River.                                                                   
It  is a  critical  point  of  vulnerability. The  Fox  weigh                                                                   
station is further  south. The checkpoint was  established to                                                                   
get situational awareness of who  was up there. Every vehicle                                                                   
was stopped, identification  was required, and  cargo and the                                                                   
purpose  of   travel  were  logged.   He  noted   that  8,849                                                                   
commercial vehicles and 774 public vehicles were checked.                                                                       
                                                                                                                                
Vice-Chair Bunde noted that there  is a lot of road access to                                                                   
the pipeline and  pointed out the difficulty  of securing the                                                                   
entire   pipeline.   Commissioner  Oates   acknowledged   the                                                                   
difficulty  of  securing  the  700 plus  mile  pipeline,  but                                                                   
pointed out that  the most critical points in  regards to the                                                                   
ability  to repair  is along the  Yukon River  bridge to  the                                                                   
north.  The key factor  is how  quick the  pipeline could  be                                                                   
repaired.  The idea  is to  take risk  in some  areas but  to                                                                   
decrease risk in areas difficult  to repair within the 10-day                                                                   
window in  which pressure  could be  lost. The protection  of                                                                   
the Transatlantic Pipeline is  the best in the United States,                                                                   
but  is  still  inadequate.  He emphasized  the  need  for  a                                                                   
presence to know who is there.                                                                                                  
                                                                                                                                
Representative  Harris  questioned the  affect  of the  added                                                                   
expenditure on the rest of the department's operations.                                                                         
                                                                                                                                
Commissioner Oates  explained that the Military  and Veterans                                                                   
Affairs   is   requesting   $145    thousand   dollars.   All                                                                   
discretionary  maintenance  would  be  withheld  without  the                                                                   
appropriation, which  would increase future  costs. Contracts                                                                   
to keep  on water and heat  or to do emergency  repairs would                                                                   
remain.  He  observed  that  funding   was  provided  in  the                                                                   
supplemental for the State Emergency  Coordination Center, an                                                                   
emergency transportation of blood  to the lower 48 states and                                                                   
provide  required  state  security  at  airports  during  the                                                                   
attacks.                                                                                                                        
                                                                                                                                
Co-Chair Mulder MOVED to ADOPT  Amendment 1. Vice-Chair Bunde                                                                   
OBJECTED. Co-Chair  Mulder observed that the  amendment would                                                                   
require a 30  percent match from the Alaska  Tourism Industry                                                                   
Association (ATIA) by June 30,  2002. The lapse date would be                                                                   
extended to June 30, 2003.                                                                                                      
                                                                                                                                
Vice-Chair Bunde  spoke against the amendment.  He maintained                                                                   
that [additional  funding to support the tourism  industry in                                                                   
the aftermath  of 9/11/02]  would send  the wrong message  in                                                                   
terms of  the fiscal  gap. He stressed  that the  match level                                                                   
should be higher.                                                                                                               
                                                                                                                                
Representative  Hudson   questioned  if  the   Alaska  Travel                                                                   
Industry Association  would be  able to  meet the 30  percent                                                                   
match.                                                                                                                          
                                                                                                                                
TINA    LINDGREN,   PRESIDENT,    ALASKA   TRAVEL    INDUSTRY                                                                   
ASSOCIATION, JUNEAU,  stated that the  ATIA would be  able to                                                                   
meet the match. The match would  be about $1 million dollars.                                                                   
                                                                                                                                
Co-Chair Mulder noted that there  was $4.5 million dollars in                                                                   
the  FY02 budget  for  tourism  marketing. The  total  budget                                                                   
would be approximately $6 million dollars.                                                                                      
                                                                                                                                
Representative Croft  questioned if the match  date should be                                                                   
changed to the end of this fiscal year.                                                                                         
                                                                                                                                
Representative  John Davies  clarified  that  the 30  percent                                                                   
match would  be to the $2  million dollar supplemental  grant                                                                   
by  the end  of FY02.  Ms. Lindren  noted that  the ATIA  has                                                                   
already met the required match for the FY02 appropriation.                                                                      
                                                                                                                                
Representative  Croft questioned  why the appropriation  goes                                                                   
to FY03, while the match is due by June 30, 2002.                                                                               
                                                                                                                                
Co-Chair Mulder responded  that the intent is  to provide for                                                                   
a match.  The ATIA indicated that  they could make  the match                                                                   
in the time allocated.                                                                                                          
                                                                                                                                
Vice-Chair Bunde MOVED to ADOPT  Amendment 1B: Delete funding                                                                   
for the Alaska  Travel Industry Association.  He stressed the                                                                   
need to reduce the budget. Representative  Lancaster spoke in                                                                   
support of the legislation.                                                                                                     
                                                                                                                                
Co-Chair Williams  spoke in opposition  to the  amendment. He                                                                   
stated  that the  appropriation  sends the  message that  the                                                                   
legislature is  attempting to help  an industry in need.   He                                                                   
observed  that state  support  for the  tourism industry  has                                                                   
been reduced.  He acknowledged that the cruise  ship industry                                                                   
has improved, but  emphasized that the amount  of money being                                                                   
spent off ships has been reduced.                                                                                               
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Moses, Bunde, Croft, Lancaster                                                                                        
OPPOSED:  Whitaker, Davies, Harris,  Hudson, Mulder, Williams                                                                   
                                                                                                                                
Representative Foster was absent from the vote.                                                                                 
                                                                                                                                
The MOTION FAILED (4-6).                                                                                                        
                                                                                                                                
Representative  Harris   MOVED  to  ADOPT  Amendment   2.  He                                                                   
explained that the amendment would  appropriate $145 thousand                                                                   
dollars for the Department of  Military and Veterans Affairs,                                                                   
for costs  to maintain  a temporary  checkpoint at  the Yukon                                                                   
River Bridge.                                                                                                                   
                                                                                                                                
Representative   John  Davies   spoke  in   support  of   the                                                                   
amendment. He  noted that there  was a great deal  of concern                                                                   
following September  11, 2001  regarding the security  of the                                                                   
pipeline.                                                                                                                       
                                                                                                                                
Vice-Chair Bunde  OBJECTED. He  noted that other  departments                                                                   
had made expenditures, which they  have been asked to absorb.                                                                   
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Croft,  Davies, Harris,  Hudson, Lancaster,  Moses,                                                                   
          Whitaker, Williams                                                                                                    
OPPOSED: Bunde, Mulder                                                                                                          
                                                                                                                                
Representative Foster was absent from the vote.                                                                                 
                                                                                                                                
The MOTION PASSED (8-2).                                                                                                        
                                                                                                                                
Co-Chair Williams  MOVED to ADOPT  Amendment 3.  He explained                                                                   
that  the amendment  would raise  the  appropriation for  the                                                                   
Alaska  Marine  Highway  System  to  $2,038.500  dollars.  He                                                                   
observed that  increased fuel costs  and the fire on  the M/V                                                                   
Columbia were  not under the  department's control.  He noted                                                                   
that $2.8 million dollars were requested.                                                                                       
                                                                                                                                
Vice-Chair Bunde spoke against the amendment.                                                                                   
                                                                                                                                
Representative  Whitaker  spoke in  support.  He pointed  out                                                                   
that the cost of fuel increased  and that the money is needed                                                                   
for operations.                                                                                                                 
                                                                                                                                
Representative  Harris  questioned  if  the  amendment  would                                                                   
address the issue of reduced service.                                                                                           
                                                                                                                                
Representative Hudson  affirmed that the  appropriation would                                                                   
affect service; without the funds  ships would be laid up and                                                                   
paid passengers turned away.                                                                                                    
                                                                                                                                
Co-Chair  Mulder observed  that  the total  amount needed  is                                                                   
approximately  $2.8  million   dollars.  He  stated  that  he                                                                   
anticipated   additional  funding  could   be  in   the  next                                                                   
supplemental  legislation.  The  amendment would  allow  some                                                                   
security.                                                                                                                       
                                                                                                                                
Representative Croft  questioned if service to  Cordova would                                                                   
be affected.                                                                                                                    
                                                                                                                                
Representative  Lancaster stated  that he  would support  the                                                                   
legislation  but  noted  that  he  did  not  think  that  the                                                                   
department did a good job in estimating fuel costs.                                                                             
                                                                                                                                
Co-Chair  Mulder  noted  that  he would  not  object  to  the                                                                   
amendment and pointed  out that the M/V Columbia  fire was in                                                                   
the nature of an emergency.                                                                                                     
                                                                                                                                
KURT    PARKAN,    DEPUTY   COMMISSIONER,    DEPARTMENT    OF                                                                   
TRANSPORTATION   AND  PUBLIC   FACILITIES  stated   that  the                                                                   
department  would have to  see how  the $600 thousand  dollar                                                                   
restoration would  affect the  overall impact. He  noted that                                                                   
the department provided the Committee  with impacts of a $1.4                                                                   
million dollar  reduction. The  restoration of $600  thousand                                                                   
dollars would  help considerably  but he  could not  speak to                                                                   
which vessel  would be brought  back on. Impacts  were stated                                                                   
for the M/V Bartlett in Prince  William Sound, the M/V Aurora                                                                   
and the M/V  Malaspina in Southeast, as well  as holding open                                                                   
vacant positions for shore side  employees. He added that the                                                                   
additional amount would minimize impacts to service.                                                                            
                                                                                                                                
Representative  Harris noted that  the concern in  Cordova is                                                                   
that the  fishing season  is about to  begin. He  referred to                                                                   
the proposed  schedule and expressed concern  that reductions                                                                   
in service could adversely impact the fisheries.                                                                                
                                                                                                                                
Vice-Chair Bunde stressed that  if government is reduced that                                                                   
new and creative ways would be found at less cost.                                                                              
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Croft,  Davies, Moses,  Harris, Hudson,  Lancaster,                                                                   
Whitaker, Williams                                                                                                              
OPPOSED: Bunde, Mulder                                                                                                          
                                                                                                                                
Representative  John  Davies  MOVED  to  ADOPT  Amendment  4:                                                                   
delete "$135  thousand dollars"  and insert "$423.2  thousand                                                                   
dollars" for the  Department of Public Safety  to cover their                                                                   
costs for the Yukon River checkpoint.                                                                                           
                                                                                                                                
Commissioner  Oates maintained that  the expenditure  came as                                                                   
the result of a call from the  White House and is "absolutely                                                                   
justified." The  funds have been expended and  the checkpoint                                                                   
is now closed.                                                                                                                  
                                                                                                                                
Co-Chair Mulder OBJECTED.                                                                                                       
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Harris, Moses, Croft, Davies                                                                                          
OPPOSED: Hudson, Lancaster, Whitaker, Bunde, Mulder                                                                             
                                                                                                                                
Representatives  Williams  and Foster  were  absent from  the                                                                   
vote.                                                                                                                           
                                                                                                                                
The MOTION FAILED (4-5).                                                                                                        
                                                                                                                              
TAPE HFC 02 - 80, Side B                                                                                                      
                                                                                                                                
Representative   Croft  MOVED  to   ADOPT  Amendment   5.  He                                                                   
explained  that the  amendment  would add  the  sum of  $26.4                                                                   
million dollars  for the University  of Alaska.  He expressed                                                                   
concern  that progress  at the  University  would be  reduced                                                                   
without additional  funding and pointed out  that there would                                                                   
be limited  opportunities to add  money to their  budget. The                                                                   
amendment  would be a  general fund  appropriation and  would                                                                   
add an increase  of $16.9 million dollars, which  would allow                                                                   
them  to overcome  $9.4 million  dollars in  fixed costs,  of                                                                   
which the majority is for contract increases.                                                                                   
                                                                                                                                
Representative  Whitaker  MOVED  to  AMEND  Amendment  5,  by                                                                   
deleting "26.4"  and inserting  "$16.9" million dollars.  Co-                                                                   
Chair  Mulder  OBJECTED.  Representative  Whitaker  spoke  in                                                                   
support  of the  amendment. He  noted  that the  University's                                                                   
request of  $16.9 million dollars  was reasonable.  There has                                                                   
been significant  momentum associated with the  University of                                                                   
Alaska. Co-Chair Mulder WITHDREW his OBJECTION.                                                                                 
                                                                                                                                
Representative  Harris   observed  that  the   $16.9  million                                                                   
dollars would be in addition to the current appropriation.                                                                      
                                                                                                                                
Co-Chair Mulder  explained that  $4.4 million dollars  in one                                                                   
time  funding  sources  were   utilized  in  FY02.  The  FY03                                                                   
appropriation  substituted general  funds.  The total  amount                                                                   
for  the  university  would  be  $219  million  dollars.  The                                                                   
University  requested an  increase of  $16.9 million  dollars                                                                   
plus  an  additional  general   fund  appropriation  of  $4.4                                                                   
million dollars to replace the  one-time funds. The amendment                                                                   
mirrors the request by the University of Alaska.                                                                                
                                                                                                                                
There being NO OBJECTION, the  amendment to the amendment was                                                                   
adopted.                                                                                                                        
                                                                                                                                
Co-Chair  Mulder maintained  his  objection. He  acknowledged                                                                   
the intent  but maintained that  the supplemental is  not the                                                                   
right place or  time for the appropriation to  go forward. He                                                                   
felt  that there  would be  other opportunities  to help  the                                                                   
University  and  pointed  out that  the  appropriation  would                                                                   
"blow  the lid"  off  of  the attempt  to  hold  the line  on                                                                   
spending.                                                                                                                       
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Croft, Davies, Whitaker                                                                                               
OPPOSED:  Bunde, Harris, Hudson,  Lancaster, Moses, Williams,                                                                   
          Mulder                                                                                                                
                                                                                                                                
Representative Foster was absent from the vote.                                                                                 
                                                                                                                                
The MOTION FAILED (3-7).                                                                                                        
                                                                                                                                
Representative  John  Davies  MOVED  to  ADOPT  Amendment  6:                                                                   
increase the appropriation for  Power Cost Equalization (PCE)                                                                   
from 3.5  percent to 7 percent  ($7.622 million  dollars). He                                                                   
spoke in support of the amendment.                                                                                              
                                                                                                                                
Representative  Harris clarified that  the Senate  funded PCE                                                                   
at $3.5  million dollars. The  legislature committed  to fund                                                                   
PCE at  7 percent.  Co-Chair Mulder  agreed and  acknowledged                                                                   
that it was an oversight.                                                                                                       
                                                                                                                                
Co-Chair Mulder WITHDREW his OBJECTION.                                                                                         
                                                                                                                                
Representative Hudson  MOVED to report CSHB 291  (FIN) out of                                                                   
Committee.                                                                                                                      
                                                                                                                                
HCS CSSB  291 (FIN)  was REPORTED out  of Committee  with "no                                                                   
recommendation."                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 4:55 PM                                                                                            

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