Legislature(2003 - 2004)
03/04/2004 01:43 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 04, 2004
1:43 P.M.
TAPE HFC 04 - 44, Side A
TAPE HFC 04 - 44, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 1:43 P.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Eric Croft
Representative Hugh Fate
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Carl Moses
Representative Bill Stoltze
MEMBERS ABSENT
None
ALSO PRESENT
Representative Jim Holm; Barbara Cotting, Staff To
Representative Holm; Laura Baker, Budget Chief, Division of
Administrative Services, Department of Health & Social
Services; Pat Davidson, Legislative Auditor, Legislative
Audit Division, Legislative Affairs Agency; Patrick Sidmore,
Commission on Aging Grants, Senior and Disability Services,
Department of Health & Social Services; Pete Ecklund, Staff
to Representative Bill Williams; Bob Loescher, Alaska Native
Brotherhood, Juneau; Steve Porter, Deputy Commissioner,
Department of Revenue; Kim Garnero, Director, Finance
Division, Department of Administration;
PRESENT VIA TELECONFERENCE
Larry Meyers, Deputy Director, Division of Finance,
Department of Revenue, Anchorage; Steven Borcherding Sr.,
General Manager, Gold Cash Bingo, Anchorage; John Focht,
Vice President of Prepaid Card Products, US Bank, Milwaukee,
Wisconsin; Peter Brown, Key Bank Alaska, Anchorage;
SUMMARY
HB 296 An Act making an appropriation for the operation
of the Alaska Natural Gas Development Authority;
and providing for an effective date.
HB 296 was heard and HELD in Committee for further
consideration.
HB 394 An Act extending the Alaska Commission on Aging.
CS HB 394(HES) was REPORTED out of Committee with
a "do pass" recommendation and with a new fiscal
note.
HB 494 An Act relating to the disbursement of money by
the state, including employment compensation,
unemployment payments, and permanent fund
dividends, and to bank investments and deposits by
the state; and providing for an effective date.
HB 494 was heard and HELD in Committee for further
consideration.
HB 509 An Act relating to establishing the Alaska Gaming
Commission.
CS HB 509(FIN) was REPORTED out of Committee with
individual recommendations and a previously
published fiscal impact note.
HOUSE BILL NO. 394
An Act extending the Alaska Commission on Aging.
BARBARA COTTING, STAFF TO REPRESENTATIVE JIM HOLM, explained
that Section 1 extends the sunset for the Alaska Commission
on Aging. Sections 2 and 3 reflect Executive Order 108 in
2003 which moved the commission from the Department of
Administration to the Department of Health & Social
Services. Ms. Cotting referred to page 13 of the audit
report (copy on file) recommending extension of the
commission. The fiscal note indicates that the Department
of Health & Social Services will receive $13 million in
federal funds because the commission meets the federal
requirements.
Co-Chair Harris asked for clarification of the federal funds
on the fiscal note.
PATRICK SIDMORE, COMMISSION ON AGING GRANTS, SENIOR AND
DISABILITY SERVICES, DEPARTMENT OF HEALTH & SOCIAL SERVICES,
explained that the Commission on Aging is responsible for
planning for Title 3 federal money of the Older Americans
Act that provides for nutrition, transportation and support
services (NTS) for seniors. Title 3 funds Meals on Wheels,
congregate meals, rides for seniors, and the National Family
Caregiver program. The commission is tasked with allocating
the money to meet the targets of federal law.
Co-Chair Harris reiterated his question of whether federal
money is involved. Mr. Sidmore explained that interagency
receipts are administration money from the federal
government based on senior population. He said that Alaska
receives the minimum amount. Referring to Fiscal Note 1
dated 02/12/04, Mr. Sidmore stated that a portion of $202.4
in "Other (1007 Interagency Receipts)" is the federal
administration money.
REPRESENTATIVE HOLM referred to the second page of the
fiscal note, "analysis continuation," that explains the
department would lose $13 million in federal dollars for
senior services if the commission expires.
Co-Chair Harris questioned that the fiscal note analysis
indicating the extension of the commission has no fiscal
impact because it is funded in the Governor's office, while
the second fiscal note shows an increase over the original
fiscal note to reflect changes in the amended Governor's
budget.
Representative Holm was unable to respond.
LAURA BAKER, BUDGET CHIEF, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF HEALTH & SOCIAL SERVICES (DHSS),
explained that when DHSS updated the fiscal note for the
Senate version [Senate Bill 263], the department realized it
had submitted a budget amendment for interagency receipts
for the commission that reflected what would have been in
the budget if the department had not proposed a
consolidation of several boards in the original proposal.
The $417.9 totals the cost of the four current full-time
positions in the commission. With the plan to consolidate,
the FY 05 budget had revised these to two part-time and two
full-time positions.
Co-Chair Harris asked if the department is proposing four
new permanent full-time members. Ms. Baker clarified that
the $417.9 reflects the Governor's amended budget, and while
there is a slight increase over FY 04 in interagency
receipts and retirement costs, it shows the cost of the
aging commission if it is extended. She said it is already
built into the budget.
Representative Hawker asked if these changes came through a
late amendment incorporated in the budget process rather
than in the Governor's budget. Ms. Baker affirmed, and
explained that the new fiscal note is a technical adjustment
showing the increase in interagency receipts in the budget
amendment. Representative Hawker advised that the budget
amendment resulted from a negotiated settlement over a
potential lawsuit regarding changes proposed to the boards
and commissions.
In response to a question by Co-Chair Harris, Representative
Hawker explained that the $417 thousand is already in his
subcommittee recommendations for the Department of Health &
Social Services.
Representative Fate brought up the Legislative Budget and
Audit report in FY 02 giving directives regarding the mixing
of funds for sub-recipients, and asked if those corrective
actions are on-going. Mr. Sidmore explained that corrective
actions have been taken. There was concern over the sub-
recipients not reporting their older workers in the federal
Mature Alaskans Seeking Skills Training (MASST) Program.
Each of the larger sub-recipient agencies is visited at
least once a year for an audit. The department also
corrected the reporting of federal monies. The department
is under a new system of managing grants, and the FY 02
audit is outdated.
Representative Foster MOVED to report CSHB 394(HES) out of
Committee with the accompanying fiscal note and individual
recommendations.
HOUSE BILL NO. 509
An Act relating to establishing the Alaska Gaming
Commission.
Co-Chair Harris MOVED to ADOPT Work Draft 23-LS1768, Version
U. There being NO OBJECTION, it was so ordered.
Representative Croft asked for explanation of the changes.
SUE STANCLIFF, STAFF TO REPRESENTATIVE KOTT explained that
the new changes in Version U have resulted from working with
the gaming industry. On page 2, "Creation of commission,"
the commission would still consist of five voting members,
but would now include two non-voting members from the
industry. Addressing a question that arose during a previous
hearing, she stated that one voting member must have five
years' experience in law enforcement. One of the industry
members must hold a permit or license under AS 05.15, and
the other ex-officio nonvoting member must hold a license or
permit under AS 04.11. The voting members elect the chair.
Ms. Stancliff noted that in Subsection (b), page 2, the
voting members serve staggered terms of three years and it
is already defined in AS 39.05.55. The nonvoting members
serve a non-staggered three-year term. The change on page 3,
(f) sets out that an ex officio member may not serve if the
person has been convicted of a crime
In response to a question by Representative Croft, Ms.
Stancliff advised that ex officio members can hold permits
for charitable gaming, must submit to a criminal background
check, and cannot serve on the commission if they have a
criminal record. She stated that there would be five voting
members and two non-voting members.
Ms. Stancliff referred to page 4, explaining that the
provision that the commission may participate with other
states in multi-gaming activities was moved from "Duties and
powers of the commission" in Version S to "Gaming
activities" in Version U.
Ms. Stancliff pointed out a change on page 5, "Duties of
director." The director now would be exempt but not the
director's employees. This change resulted from a concern
that the seven current non-exempt employees in the
Department of Revenue would gain exempt status by moving to
the commission.
Ms. Stancliff referred to page 5, line 8, "Duties of
director," and explained that the contractual questions with
agents have been removed in the current version because no
gaming is allowed under AS 05.18. On page 6, "Gaming
activities," language has been removed that stated, "the
commission may not authorize a charitable gaming activity
unless that activity is authorized under AS 05.15." The
language was unnecessary because this section speaks only to
AS 05.18.
Ms. Stancliff pointed out a change on page 6, "Prohibited
acts," which removed price fixing from the previous version
because it would be inappropriate for the state to set
prices on raffle tickets. She added that it was confusing
language that doesn't apply to AS 05.15.
PETE ECKLUND, STAFF TO REPRESENTATIVE BILL WILLIAMS,
clarified that AS 05.15 is the charitable gaming statute.
Most of this bill would create a new section of law, AS
O5.18, for future new gaming. He noted existing confusion
over how AS 05.15 and AS 05.18 interplay, and he pointed out
that these are totally separate sections of law.
Ms. Stancliff noted that page 6, "Prohibited acts," (b) does
not reflect a change but speaks only to AS 05.18 under which
no gaming is allowed. The Governor and his staff can still
buy a raffle ticket under AS 05.15.
Ms. Stancliff explained one requested change that was not
made to Version U. The Department of Law asked for added
language on page 8,(C), stating "expressly authorized under
AS 05.15 or 05.18." The legal drafter thought it would apply
to specific activities like Blackjack and that it was
unnecessary.
Representative Hawker MOVED to ADOPT Amendment 1. Co-Chair
Williams OBJECTED for purposes of discussion.
Amendment 1 reads:
Page 3, following line 25:
Insert a new subsection to read:
"(c) The voting members of the commission may
exclude the ex officio members from executive sessions
otherwise permitted by law."
Ms. Stancliff explained that Am#1 would give only the voting
non-industry members the authority to go into executive
session.
Co-Chair Williams WITHDREW his OBJECTION.
Representative Hawker MOVED to ADOPT Amendment 2. Co-Chair
Williams OBJECTED for purposes of discussion.
Amendment 2 reads:
Page 6, line 5, following "if":
Insert "that participation and those activities are"
Ms. Stancliff explained that Am#2 was recommended by the
gaming industry and the sponsor does not object to the
change.
Representative Stoltze asked for examples of these types of
activities. Ms. Stancliff replied that Am#2 falls under AS
05.18, which currently has no gaming activities, so the
expansion of new gaming could not take place without the
authority of the legislature.
Co-Chair Williams WITHDREW his OBJECTION.
LARRY MEYERS, DEPUTY DIRECTOR, DIVISION OF FINANCE,
DEPARTMENT OF REVENUE, VIA TELECONFERENCE, ANCHORAGE,
provided background on staffing of the charitable gaming
unit. He explained that it is a regulatory unit that
oversees 1200 permittees who, in FY 03, paid about $2.6
million in taxes and fees to the state. While gambling is
illegal and falls outside the gaming unit's regulatory
authority, charitable gaming is the exception.
STEVEN BORCHERDING SR., GENERAL MANAGER, GOLD CASH BINGO,
VIA TELECONFERENCE, ANCHORAGE, expressed that he's been in
the industry for fourteen years, and that this bill is
nothing more than a springboard for full scale gambling in
the future. He stated that charitable gaming is currently
working very well, with enforcement and regulatory statutes
in place. The majority of the gaming industry is truly
charitable and non-profit.
BOB LOESCHER, ALASKA NATIVE BROTHERHOOD (ANB), JUNEAU,
explained that he has worked with a number of charitable
permittees, including the ANB and the Tlingit-Haida
Community Council. The ANB has worked with the legislature
for two years on charitable gaming legislation. He expressed
the ANB's support of HB 509; in particular, the
restructuring that would move the Department of Revenue
commission to a new commission, and separation of charitable
gaming and any new gaming in the future. He stated that he
has received assurances that any changes to statute and
regulation would come before the legislature. He expressed
support that the industry is included in an advisory role as
part of the commission. He expressed that the issue of
taxes and fees is an important condition of his support for
HB 509 because the ANB believes the legislature should
establish taxes and fees.
Representative Foster MOVED to report CSHB 509, Version U
out of committee with the accompanying fiscal note and
individual recommendations.
Representative Stoltze OBJECTED.
A roll call vote was taken on the motion to move the bill
from committee.
IN FAVOR: Moses, Chenault, Croft, Fate, Foster, Hawker,
Joule, Harris, Williams
OPPOSED: Stoltze
Vice-Chair Meyer was not present for the vote.
The MOTION PASSED (9-1).
Representative Foster commented that he does not object to
the concept of the bill, but he expressed concerns over
creating another commission that would come to the
legislature with additional funding requests.
CSHB 509(FIN) was REPORTED out of Committee with individual
recommendations and one fiscal note.
HOUSE BILL NO. 296
An Act making an appropriation for the operation of the
Alaska Natural Gas Development Authority; and providing
for an effective date.
REPRESENTATIVE ERIC CROFT explained that HB 296 is identical
to Senator Therriault's bill [SB 241]. It would appropriate
$2.15 million to the Alaska Natural Gas Development
Authority (ANGDA) so that the authority can proceed with its
work. He expressed frustration that neither the legislature
nor the administration has shown support for the authority
and has taken six months to appoint the board and fund the
authority. The authority received some funding in November
2003, a year after it was established, but it is still
awaiting significant funding to implement the will of the
Alaska voters.
Co-Chair Williams stated his intention to hear and hold the
bill today.
STEVE PORTER, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
acknowledged that the issue concerns the plans of the
Department of Revenue and ANGDA for the funding requested in
this legislation. He noted that Harold Heinze, the Chief
Executive Officer of ANGDA, has provided substantial
information to the committee on ANGDA's budget needs and
concerns.
Mr. Porter pointed out that the Department of Revenue has
compiled a 3-page list of items requiring funding over the
next eighteen months to meet the requirements of the
Stranded Gas Act, and to allow ANGDA to proceed (copy on
file.) The department is currently responding to three
stranded gas applications, and supporting ANGDA as well as
energy legislation. He explained that the department is
cooperating with the Canadian government on pipeline issues.
He gave a breakdown, explaining that the broad projection in
FY 04 and FY 05 with the producers is about $2.6 million,
with MidAmerican at about $450 thousand, the Port Authority,
if the application is approved, at about $700 thousand, and
ANGDA at about $450 thousand. Mr. Porter said that the
energy bill in FY 04- FY 05 could take as much as $1
million. The total request is $3.48 million.
Mr. Porter stated that some these projected costs may not
actually have to be spent because of potential negotiated
agreements, but he said that the department needs nearly all
of the $3 million that it has recommended.
Mr. Porter informed the committee that although ANGDA is
earmarked for only $450 thousand, some of the benefit ANGDA
will receive is through contracts the department is
negotiating on the Stranded Gas Development Act. There is
about $200 thousand spread through different groups, with
ANGDA receiving substantially more benefit than $450
thousand. He said the $450 thousand is attributable to ANGDA
and it cannot benefit the Stranded Gas Development Act
negotiations.
TAPE HFC 04 - 44, Side B
Representative Croft questioned the infrastructure support
for ANGDA in the department's proposal. Mr. Porter replied
that it is in operating budget for the Department of
Revenue, which includes a line item for ANDGDA allocated to
the CEO and staff. The money in HB 296 would go to
contractors and additional support. Representative Croft
asked the amount. Mr. Porter replied that the details are
being worked out, but he thought it would be between $150
and $274 thousand.
Vice-Chair Meyer stated that he is co-sponsoring HB 296 in
order to keep all avenues open for development of a gas
pipeline. He asked if MidAmerica will meet their contract
deadline by March 12 and expressed concern about getting
ANGDA funded sooner if MidAmerica does not meet the
deadline.
Mr. Porter replied that there is always the possibility of
reaching agreement by March 12 if the details can be
negotiated. For ANGDA to be strong and viable, the funding
is needed quickly in order to execute contracts.
In response to a question by Representative Croft, Mr.
Porter clarified that he never told the ANGDA board that it
wouldn't get any funding if it didn't support the $3 million
request. He admitted making statements to the board that
the best way to get funding for ANGDA and the Stranded Gas
Act is the vehicle the Department of Revenue put before
them.
Representative Croft argued that a number of board members
have told him that they heard from Mr. Porter that this was
only way they would get significant funding. Mr. Porter
replied he would clarify it with the ANGDA board in open
session during their March 15 meeting.
Representative Hawker asked the sponsor if the $2.15 million
is consistent with the lapse date of 2009. Representative
Croft replied no, that most of the money would need to be
spent soon, and he chose 2009 as the expected date that
construction would begin. He offered to shorten it if
Representative Hawker would like.
Representative Hawker asked Co-Chair Williams to arrange
public testimony from the ANGDA board because he is hearing
conflicting perceptions. Co-Chair Williams affirmed that it
could be arranged.
In response to a question by Representative Croft, Co-Chair
Williams clarified that more committee work would be done on
the bill to keep the numbers but change the language.
Representative Joule asked Mr. Porter if ANGDA participated
in the budget. Mr. Porter responded that Mr. Heinze had not
seen this report. He said that because Mr. Heinze's budget
does not include research costs for the Stranded Gas Act
negotiations, the numbers would not necessarily match.
Representative Croft expressed continuing concern that only
a small portion of the $3 million would reach ANGDA. He
stated that only $450 thousand is not good administrative
efficiency, and not what he intended in sponsoring the bill.
His intention was that ANGDA receive the entire $2.15
appropriation. He expressed support for the separate
structure of the board to make decisions independent of
political administrations or the legislature.
Co-Chair Williams commented that Representative Croft has
not had direct discussion with the ANGDA board on a day-to-
day basis.
HB 296 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 494
An Act relating to the disbursement of money by the
state, including employment compensation, unemployment
payments, and permanent fund dividends, and to bank
investments and deposits by the state; and providing
for an effective date.
SUE STANCLIFF, STAFF TO REPRESENTATIVE KOTT, explained that
HB 494 relates to the disbursement of money by the state
including unemployment payments and Permanent Fund
dividends, and bank investments and deposits by the state.
The bill would change how the state disburses funds and it
has the potential of saving the state considerable money in
the reduction of check fraud, reissuing lost or stolen
checks, postage, check printing costs, bank fees and reduced
labor costs.
Ms. Stancliff commented that the sponsor would work with the
administration to refine the legislation. Statistics
provided by the administration indicate that as of 2003,
electronic deposits executed 89% of the state payroll. She
noted that the issue of vendors poses a difficulty. The
department has almost 50,000 vendors and currently only 500,
or 1.3%, are using electronic payment. Ms. Stancliff
expressed that the sponsor would like to see vendor payments
increased, and believes it is achievable even though labor-
intensive.
Ms. Stancliff explained that the payroll and first check
issuance must be by a warrant. The committee substitute
will address that issue and build in flexibility.
KIM GARNERO, DIRECTOR, DIVISION OF FINANCE, DEPARTMENT OF
ADMINISTRATION, expressed concern regarding the mandatory
language in Section 19 of the current version. She stated
that the department would work with the sponsor on the bill,
which benefits the way the state does business. She shared
the history of electronic payments, noting that wire
transfers have been used for decades and are both expensive
and labor intensive. She said that all of the big state
revenues including royalties and large tax payments, and
most of the $1.7 billion received from the federal
government last year come in electronically. She explained
that currently 67% of public assistance payments and 90% of
pension payments to retirees are made electronically.
Electronic payments to vendors began in 1999 and it has
about doubled each year.
Ms. Garnero provided examples of agencies that use
electronic deposit for payment. The Department of Revenue,
Treasury Division, is developing an Automated Clearinghouse
(ACH) origination software to either send or receive
payments that will likely be a payment system for Medicaid.
In response to a question by Vice-Chair Meyer, Ms. Garnero
clarified that the state is paying by electronic deposit
almost $1 billion per year to vendors and contractors.
Vice-Chair Meyer asked if it could be made a requirement for
vendors. Ms. Garnero replied that the state has tried to
expand to vendors without success. In rural areas of the
state, the post office or grocery store often serves as a
bank. Workers Compensation electronic payments would not in
state's best interest. Ms. Garnero stated it would be
difficult to make electronic deposit mandatory.
Vice-Chair Meyer wondered if the state could include a
preference for Electronic Data Interchange (EDI) when it
puts work out to bid. Ms. Garnero affirmed that the
department could add the preference to procurements because
of a continuing relationship with the contractors.
Representative Hawker expressed strong support for the bill.
He noted that "the heart" of the bill is Section 19. He
questioned an account established by a state agency and an
electronic payment card. Ms. Garnero was unable to respond.
JOHN FOCHT, VICE PRESIDENT OF PREPAID CARD PRODUCTS, US
BANK, VIA TELECONFERENCE, MILWAUKEE, explained that the bank
delivers electronic products in five states, to more than
100,000 recipients. He explained the methodology, which is a
debit card for VISA or Mastercard. Instead of setting up a
checking or savings account, the bank establishes a funding
account. The state then creates a direct deposit file (ACH),
and that amount is deposited to the card. The cardholder
can go to an ATM anywhere in the world and access the money.
Representative Hawker asked if those states using the
product for their state programs are pleased with it. Mr.
Focht replied yes, and added that Iowa, one of the five
states, made it mandatory that benefits to child support
recipients are by electronic deposit. The other three states
have made the program voluntary, and 25% have opted for the
card. Mr. Focht said the model is working in Colorado,
Washington, Minnesota, Iowa and Oregon.
Representative Hawker asked if Mr. Focht has any experience
in controlling misappropriation or fraud. Mr. Focht admitted
that he does not have expense reduction information from the
five states regarding fraud, returned checks, or stop
payments. As the financial institution, US Bank has taken on
responsibilities that include managing and minimizing fraud.
Representative Hawker asked the cost to the state for the
product. Mr. Focht replied that there is tremendous cost
savings through reduced check production and mailing,
reduced handling of lost checks, and reduced fraudulent
activity. The state is not billed for any of the services,
but it has higher costs due to increased electronic
deposits, which he feels is a minor offset to cost
reduction. US Bank benefits from the deposits until the
actual money is spent, because payroll is not withdrawn
entirely or spent immediately. His bank also makes money by
the merchants' discount on VISA and Mastercard, with
merchants paying a small fee to the bank whenever the card
is used. Fees are assigned to the cardholder, but for the
most part, the card can be used without charge.
Representative Fate asked if there could be a judgment
against the card in case of indebtedness. Mr. Focht
clarified that because the bank authorizes transactions, it
wouldn't authorize above the amount on the card. The bank
would deal directly with overdrafts by the client, which
could happen.
PETER E. BROWN, KEY BANK ALASKA AND VICTORY CAPITAL
MANAGEMENT, VIA TELECONFERENCE, ANCHORAGE, expressed that
the administration would achieve economies through this
legislation. He felt that latitude is needed to make
disbursements in the old manner, but that electronic
payments should be used whenever possible and practical.
Instead of a difficulty imposed on rural bush residents,
it could be a boon if the recipient is able to transact with
a merchant over the telephone or the Internet with a card.
He said that the technology not too distant.
Representative Hawker requested that Mr. Brown work with the
sponsor to craft language addressing the exception problems
from the industry perspective. Mr. Brown replied that he
and his staff would assist. Representative Hawker commented
on the need for community input on changes that would not
compromise cost efficiency to the state.
HB 494 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 3:14 P.M.
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