Legislature(2003 - 2004)
05/08/2003 08:52 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
May 08, 2003
8:52 AM
TAPE HFC 03 - 82, Side A
TAPE HFC 03 - 82, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 8:52 AM.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Richard Foster
Representative Mike Hawker
Representative Carl Moses
Representative Bill Stoltze
Representative Jim Whitaker
MEMBERS ABSENT
Representative Eric Croft
Representative Reggie Joule
ALSO PRESENT
Representative Beth Kerttula; Representative Ethan
Berkowitz; Representative Lesil McGuire; Tom Lawson,
Director, Administrative Services, Department of Community
and Economic Development.
PRESENT VIA TELECONFERENCE
Tracy Townsend, Anchorage; Brian Brubaker, Anchorage; Edgar
Blatchford, Commissioner, Department of Community and
Economic Development; Hans Roeterink, Executive Director,
Alaska Science and Technology Foundation.
SUMMARY
HB 205 An Act relating to service in the peace corps as
an allowable absence from the state for purposes
of eligibility for permanent fund dividends and to
the period for filing an application for a
permanent fund dividend; authorizing the
Department of Revenue to issue administrative
orders imposing sanctions for certain
misrepresentations or other actions concerning
eligibility for a permanent fund dividend and
providing for administrative appeal of those
orders; and providing for an effective date.
HB 205 was REPORTED out of Committee with a "do
pass" recommendation and one new zero fiscal note
from the Department of Revenue.
SB 173(efd fld) "An Act repealing statutes pertaining to
the Alaska Science and Technology Foundation and
transferring money in the foundation's endowment;
repealing statutes relating to the BIDCO
assistance program; repealing statutes pertaining
to the international trade and business endowment
and transferring money in the international trade
and business endowment; transferring oversight
administration of outstanding Alaska Science and
Technology Foundation loans and grants to the
Alaska Industrial Development and Export
Authority; establishing an Alaska BIDCO assistance
program to be administered by the Department of
Community and Economic Development; and making
conforming amendments."
SB 173 (efd fld) was REPORTED out of Committee
with a "do pass" recommendation and two fiscal
notes: #1, zero note, from Department of
Community and Economic Development (Alaska Science
and Technology Foundation), and #2 from Department
of Community and Economic Development (Alaska
Industrial Development and Export Authority),
(AIDEA).
HOUSE BILL NO. 205
An Act relating to service in the peace corps as an
allowable absence from the state for purposes of
eligibility for permanent fund dividends and to the
period for filing an application for a permanent fund
dividend; authorizing the Department of Revenue to
issue administrative orders imposing sanctions for
certain misrepresentations or other actions concerning
eligibility for a permanent fund dividend and providing
for administrative appeal of those orders; and
providing for an effective date.
REPRESENTATIVE LESIL MCGUIRE, Sponsor, provided information
on the bill. She noted that similar legislation had been
passed out of the House in the last session, but it was not
acted upon in the Senate. She explained that in 1982 a list
of exemptions were put in place for the Permanent Fund
Dividend to recognize that there were true Alaskans that
live in and contribute to the State but were forced to be
out of the State for limited time periods. She noted that
the exemptions were very narrow. She pointed out that for
sixteen years Peace Corps volunteers had been given
exemptions, added along with the military, since they were
in a competitive national program to serve the country. She
recalled that the bill had received a wide array of public
testimony during its hearing in the House Finance Committee
in the last legislature. She emphasized that Peace Corps
volunteers received only a small living stipend, and
maintained that the dividend made a significant impact on
their livelihood. She noted that volunteers could not have
any debts, other than student loans. She maintained that
the bill recalled the initial intent of 1982. She stated
that in 1998, Peace Corps volunteers were removed from the
list of exemptions. She maintained that this was a
politically motivated action based on biases. She contended
that volunteers come from a wide variety of backgrounds and
did not represent any one political viewpoint.
Representative McGuire proposed that this time in history
called for more volunteerism in third world countries. She
discussed the skills and services provided by Peace Corps
volunteers, which she maintained were equal to the
importance of service provided by military personnel. She
also pointed out services, such as teaching, provided to the
state of Alaska by Peace Corps volunteers when they returned
to the state at a rate of roughly 82 percent. She
emphasized that these volunteers had been a part of the
original list of exemptions. She pointed out that there
were on average 32 volunteers per year, which would impact
dividend payments by about 3 cents.
Representative McGuire also pointed out the real problem of
dividend fraud. She stated that although it resulted in a
loss of thousands of dollars each year, fraud was not
prosecuted since it required a costly jury trial. She noted
that Section 4 of the bill established an administrative
penalty for dividend fraud. She explained that in the House
State Affairs Committee discussion had occurred, which
resulted in the implementation of a $3,000 penalty level.
Rules of case law require a jury trial once administrative
penalties reach a certain threshold. In addition to the
penalty, those found guilty of fraud will be denied a
permanent fund dividend for five years. She suggested that
to impose penalties for fraud would provide a needed
deterrent. She concluded that the bill provided a dividend
for true Alaskans who participate in a national program, and
a penalty for fraudulent applicants.
TRACY TOWNSEND, ANCHORAGE, testified via teleconference in
support of the bill. As a former peace corps volunteer, he
indicated that the bill would encourage peace corps
volunteers to return to Alaska.
BRIAN BRUBAKER, ANCHORAGE, testified via teleconference in
support of the bill. He referred to friends who were
volunteers.
Representative Foster MOVED to report HB 205 out of
Committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTIONS, it was
so ordered.
HB 205 was REPORTED out of Committee with a "do pass"
recommendation and one new zero fiscal note from the
Department of Revenue.
SENATE BILL NO. 173(efd fld)
"An Act repealing statutes pertaining to the Alaska
Science and Technology Foundation and transferring
money in the foundation's endowment; repealing statutes
relating to the BIDCO assistance program; repealing
statutes pertaining to the international trade and
business endowment and transferring money in the
international trade and business endowment;
transferring oversight administration of outstanding
Alaska Science and Technology Foundation loans and
grants to the Alaska Industrial Development and Export
Authority; establishing an Alaska BIDCO assistance
program to be administered by the Department of
Community and Economic Development; and making
conforming amendments."
EDGAR BLATCHFORD, COMMISSIONER, DEPARTMENT OF COMMUNITY AND
ECONOMIC DEVELOPMENT testified via teleconference. He noted
that the bill repealed the existing statute creating the
Alaska Science and Technology Foundation (ASTF) and its
programs, including foundations grants and the Business and
Industrial Development (BIDCO) assistance program. He also
noted that the bill also repeals the statute creating the
International Trade and Business Endowment in the Science
and Technology Foundation. Subject to appropriation, the
bill provides for the transfer to the General Fund of funds
remaining in the ASTF Endowment fund and the International
Trade and Business Endowment. Oversight for administration
of existing ASTF grants and other financial assistance will
be transferred to the Alaska Industrial and Export
Authority. He pointed out that a new BIDCO assistance
program was established and administered by the Department
of Community and Economic Development.
Mr. Blatchford stated that ASTF had been established in 1988
with an endowment of more than $100 million to support
grants for technology projects, small business innovation
research and direct grants to teachers. He noted that ASTF
has generated $126 million in income for distribution. He
maintained that between 1988 and 2002, one half of the
endowment income ($63 million) has been appropriated for non
Alaska Science and Technology Foundation programs, such as
for the University of Alaska operations, Alaska Aerospace
operations, and trade and development operations. He noted
that $17 million had been appropriated to the state's
General Fund, and $11 million in federal match funding. He
stated that the remaining $63 million was distributed in
technology and knowledge project grants, schools and science
museums, science teacher grants, and ASTF operations. In
mid march the Governor approved a supplemental appropriation
to reduce funding to the amount spent and obligated to date,
and provided intent to wind down operations in May 15 of
2003. He noted that ASTF is not included in the FY 04
budget.
Co-Chair Harris observed that the BIDCO systems program
would continue and asked how it would be staffed and funded.
TOM LAWSON, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT OF
COMMUNITY AND ECONOMIC DEVELOPMENT noted that a new program
would be set up in the Department of Community and Economic
Development. He noted that no funding would be appropriated
at this point, which resulted in a zero fiscal note. The
program would be maintained if at some point the legislature
chose to fund it.
Representative Berkowitz referred to a letter provided by
the Governor's office to Alaska Science and Technology
Foundation. He raised concern over the accusations contained
in the letter, and suggested that someone should take
responsibility for speaking to the accusations.
HANS ROETERINK, EXECUTIVE DIRECTOR, ALASKA SCIENCE AND
TECHNOLOGY FOUNDATION provided information via
teleconference. He disagreed with the listed viewpoints of
the letter, which questioned the effectiveness and
appropriateness of ASTF grants.
Co-Chair Williams noted the list of questionable projects,
including a specific reference to a $1.3 million payment to
UCLA to patent a commercialized radioactive waste treatment
project that contained the actual patent number. He
maintained that the Governor's letter was adequately
substantiated.
Representative Berkowitz stated that he had questions on the
follow-up on some of the examples, such as radioactive waste
disposal programs, and wildlife programs, $233 to convince
Alaskans to stop smoking, transferring technology to Alaska,
etc. He suggested that these projects had potential
implications for our state and stated that he would like to
have more information on these grants. He maintained that
the list did not appear to be objective, and suggested that
the legislature should investigate more fully and review
more solid information.
Co-Chair Williams emphasized the poor performance compared
to the return on the amount invested through ASTF grants,
and stressed that under the State's current financial
situation it could not afford to provide venture capital
that did not provide a return. He reiterated that the state
of Alaska had taken $11 million from the Alaska Science and
Technology Foundation for various projects. He maintained,
however, that of the $63 million, returns had not been
received, although the Foundation had been spending down the
corpus of the fund. He pointed out that on February 12,
2003, the Alaska Science and Technology Foundation Board
passed a resolution authorizing a conversion credit program
that would forgive two thirds of repayment of the debt owed
by its recipients.
Mr. Roeterink explained that BIDCO grants were actually
loans, and stated that the logic was to allow successful
companies to repay part of their loans through other means
than simply money, for example through jobs or other
service. He noted that the program was to last over a ten-
year period. In response to a question by Co-Chair
Williams, Mr. Roeternink stated that ASTF could not afford
to lose companies due to cash flow issues.
Co-Chair Williams asked why the program had subsequently
been placed on hold. Mr. Roeternink stated that this was due
to lack of support for the program by the legislature.
Representative Berkowitz asked why the legislature could not
keep the program in place while stripping its assets. Co-
Chair Williams maintained that the Administration wished to
do so since the Foundation had not been successful, and
suggested that Alaska Industrial Development and Export
Authority, (AIDEA) might be more successful.
Representative Berkowitz asked if AIDEA would be required to
continue all functions. Mr. Lawson noted that the only
function it would continue was monitoring the maintenance of
grants. He noted other programs were currently offered by
AIDEA. He clarified that the other functions would not be
continued.
Co-Chair Harris observed that the Administration did not
intend to fund the program, and wished to have it off the
books, unless a future program was initiated by statute. He
asked if the Alaska Science and Technology Foundation had
outstanding obligations, either moral or legal, to continue
operations for other organizations, such as fish hatcheries,
and whether there was a mechanism to continue these
obligations.
Mr. Lawson responded that the funding would end at the end
of FY 03, and the Alaska Science and Technology Foundation
Board would meet with current grantees. Grantees had been
notified by mail, and had to submit information to the
Board. He summarized that programs that had expected
funding in FY 04, would not receive that funding since it
would not be available. He noted that final decisions on
any grantee payments would be made on May 15 and then
operations would cease.
Co-Chair Harris asked whether any organizations had been
promised multi year payments, upon which they had already
acted. He asked if there was any moral obligation
outstanding, and how it would be handled.
TAPE HFC 03 - 82, Side B
Mr. Lawson stated that grantees that were expecting funding
in FY 04 totaled approximately $1.4 million. He deferred to
Mr. Roeternink to address moral obligations to grantees. He
did observe that some grantees expecting funding in FY 04
had contacted legislators to seek specific appropriations
for their projects.
Mr. Roeternink stated that there were 14 grantees
outstanding, with one project extending to FY 2006. He
noted that many grantees had invested heavily anticipating
continuing funding. He gave the example of Americulture
that was halfway into a six-year research plan, and would
now how to shut down since funding was discontinued. He
maintained that many grantees would now either be forced to
close or limit their work. He noted that there was no legal
obligation to continue funding, but maintained that we were
morally obligated to continue funding the grants.
Co-Chair Williams asked how long the 14 grantees had been in
existence. Mr. Roeternink noted that there was a range of
project lengths, from two to three years. Co-Chair Williams
asked if the projects had been in business long enough to
borrow money from other sources, including AIDEA. Mr.
Roeternink pointed out that the programs were attempting to
address scientific problems in Alaska, but noted that they
may not be able to be successful in forming equity
partnerships. He maintained that AIDEA might not be able to
take on these projects under the current circumstances of
the grant.
Representative Moses MOVED Amendment #1 as follows:
Page 1, line 1:
Delete "repealing statutes pertaining"
Insert "relating"
Page 2, line 2:
Delete "eliminate the Alaska Science and
Technology Foundation"
Insert "not use the Alaska Science and Technology
Foundation at this time"
Page 9, line 13:
Delete "former"
Page 9, lines 17 - 18:
Delete "AS 37.17.010, 37.17.020, 37.17.030,
37.17.040, 37.17.050, 37.17.060, 37.17.070, 37.17.080,
37.17.090, 37.17.100, 37.17.110, 37.17.200"
Insert "AS 37.17.200"
Page 9, lines 20 - 21:
Delete "37.17.400, 37.17.410, 37.17.420,
37.17.430, 37.17.440; AS 39.25.110(25); and
AS 44.99.030(a)(11)"
Insert "and 37.17.440"
Page 9, line 23, following "appropriation,":
Insert "and notwithstanding AS 37.17.010 -
37.17.110 and 37.17.400 - 37.17.430,"
Page 9, line 24:
Delete "former"
Page 10, lines 7 - 8:
Delete ", as those statutes appeared on the day
before the effective date of this Act,"
Page 10, line 8:
Delete "former"
Page 10, line 9:
Delete "former"
Page 10, line 11:
Delete "former"
Page 10, line 13:
Delete "former"
Page 10, line 16:
Delete "AS 37.17.090(g), 37.17.230 - 37.17.330"
Insert "AS 37.17.230 - 37.17.330"
Page 10, line 17, following "Act,":
Insert "and AS 37.17.090(g)"
Page 10, line 19:
Delete "those former statutes"
Insert "AS 37.17.090(g) and former 37.17.230 -
37.17.330, 37.17.350, and 37.17.390"
Page 10, line 21:
Delete "former AS 37.17.090(g)"
Insert "AS 37.17.090(g)"
Page 10, following line 25:
Insert a new subsection to read:
"(e) Notwithstanding AS 37.17.010 - 37.17.110 and
37.17.400 - 37.17.430, the Alaska Science and
Technology Foundation is not authorized to have members
on its board, to have meetings, to have an executive
director or other staff, to receive money unless by
appropriation, or to perform any other functions,
except as otherwise expressly allowed under this Act."
Co-Chair Williams OBJECTED.
Representative Kerttula explained that the amendment would
ensure that the statute would remain on the books to provide
a structure for the Foundation if at a future time funding
was available.
Co-Chair Williams maintained that it was a legislative
policy to eliminate statutes that were not productive. He
suggested that if funding became available in the future,
statutes could be enacted.
Representative Hawker suggested that the existing statute
impeded the success of Alaska Science and Technology
Foundation. He proposed that a future structure ought to be
reconfigured, since the organization's financial burden was
too great to bear. He proposed that the Foundation be
allowed to sunset.
Representative Berkowitz observed that the mission of the
Alaska Science and Technology Foundation was worthy,
although it may have not risen to the satisfaction of the
Administration. He suggested that the legislature ought to
work on reforms, converting the Alaska Science and
Technology Foundation to a manner that satisfied
expectations, rather than simply to destroy its
infrastructure. He contended that the legislature would one
day regret this decision.
Co-Chair Harris noted that the amendment did away with the
reason for the bill. He suggested that the bill should not
pass if the amendment was supported. Co-Chair Williams also
noted the risk involved in venture capital, and suggested
that the State was not in the position to take on such risk.
He pointed out that the poor in our State were undergoing
cuts to social services.
Representative Berkowitz pointed out the risk involved in
drilling for oil and gas, upon which our state economy was
based. He stated that to avoid risk was in opposition to
the economic history of the State. Co-Chair Williams
maintained that the money used to take these risks belonged
to the oil companies and not to the state of Alaska.
A roll call vote was taken on the motion.
IN FAVOR: Moses
OPPOSED: Chenault; Foster; Hawker; Meyer; Stoltze;
Whitaker; Harris; Williams.
The Amendment FAILED on a vote of 1 to 8.
Representative Foster MOVED to report SB 173 out of
Committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
SB 173 (efd fld) was REPORTED out of Committee with a "do
pass" recommendation and two fiscal notes: #1, zero note,
from Department of Community and Economic Development
(Alaska Science and Technology Foundation), and #2 from
Department of Community and Economic Development (Alaska
Industrial Development and Export Authority), (AIDEA).
ADJOURNMENT
The meeting was adjourned at 9:58 AM
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