Legislature(2003 - 2004)
04/06/2004 02:08 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 06, 2004
2:08 P.M.
TAPE HFC 04 - 77, Side A
TAPE HFC 04 - 77, Side B
TAPE HFC 04 - 78, Side A
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 2:08 P.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-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
Representative Kevin Meyer, Vice-Chair
ALSO PRESENT
Representative Max Gruenberg; Pete Ecklund, Staff,
Representative Bill Williams; Vanessa Tondini, Staff,
Representative Lesil McGuire; Doug Wooliver, Administrative
Attorney, Alaska Court System; Cheryl Frasca, Director,
Division of Management & Budget, Office of the Governor;
Bruce Tangeman, Legislative Analyst, Legislative Finance
Division
PRESENT VIA TELECONFERENCE
none
SUMMARY
HB 227 An Act increasing the jurisdictional limit for
small claims and for magistrates from $7,500 to
$10,000; increasing the jurisdictional limit of
district courts in certain civil cases from
$50,000 to $75,000; and amending Rule 11(a)(4),
Alaska District Court Rules of Civil Procedure,
relating to service of process for small claims.
CS HB 227 (JUD) was reported out of Committee with
a "do pass" recommendation and with indeterminate
note #1 by the Alaska Court System.
HB 298 An Act relating to the distribution of
appropriations from the Alaska permanent fund
under art. IX, sec. 15(b), Constitution of the
State of Alaska, and making conforming amendments;
and providing for an effective date.
CS HB 298 (FIN) was reported out of Committee with
a "no recommendation" and with a new zero note by
the Department of Revenue and zero note #1 by the
Department of Revenue.
HJR 9 Proposing amendments to the Constitution of the
State of Alaska relating to an appropriation limit
and a spending limit.
CS HJR 9 (FIN) FAILED to MOVE out of Committee.
HJR 26 Proposing amendments to the Constitution of the
State of Alaska relating to and limiting
appropriations from and inflation proofing the
Alaska permanent fund by establishing a percent of
market value spending limit.
CS HJR 26 (FIN) was reported out of Committee with
"individual recommendations" and with a new zero
note by the Office of the Governor and zero note
#2 by the Department of Revenue.
SB 289 An Act extending the termination date of the
special education service agency; and providing
for an effective date.
SB 289 RESCINDED Committee action in adopting a
Letter of Intent. SB 289 was reported out of
Committee on April 5, 2004.
SENATE BILL NO. 289
An Act extending the termination date of the special
education service agency; and providing for an
effective date.
Representative Stoltze MOVED to RESCIND Committee action
taken in adopting a Letter of Intent for SB 289. There
being NO OBJECTION, action was RESCINDED.
Representative Stoltze MOVED to WITHDRAW the Letter of
Intent. There being NO OBJECTION, the letter was withdrawn.
Co-Chair Williams stated that the House Finance Committee
respectively requests that the Legislative Budget and Audit
Committee (LBA) authorize the Division of Legislative Audit
to conduct a performance audit of the Special Education
Service Agency. The audit should utilize the sunset
criteria established in AS 44.66.050© for evaluating the
agency's performance. Additionally, the audit should
measure the progress made by the agency to the
recommendations made in the most recent sunset review.
(Audit Control No. 05-20026-04). The audit should be
completed and available to the Legislature by January 2008.
The Committee RESCINDED action taken on SB 289 in adopting
the Letter of Intent. SB 289 was reported out of Committee
on April 5, 2004.
HOUSE JOINT RESOLUTION NO. 26
Proposing amendments to the Constitution of the State
of Alaska relating to and limiting appropriations from
and inflation proofing the Alaska permanent fund by
establishing a percent of market value spending limit.
Co-Chair Harris MOVED to WITHDRAW the previous MOTION to
MOVE adoption of Amendment #3, #23-LS1006\V, Cook, 3/22/04.
There being NO OBJECTION, the motion was withdrawn.
Co-Chair Harris MOVED to ADOPT work draft version #23-
LS1006\Z, Cook, 4/6/04, as the version of the bill before
the Committee.
Representative Croft commented that version "Z" would be a
"pure percent of market value (POMV) form" of the bill.
There being NO OBJECTION, it was adopted.
PETE ECKLUND, STAFF, REPRESENENTATIVE BILL WILLIAMS,
explained the changes made to the work draft version. He
noted that it would be classified as a pure POMV bill and
would place all the Permanent Fund into one fund. There
would be no distinction between the Earnings Reserve Account
and the principle. The bill would appropriate 5% of that
amount annually for whatever purposes the Legislature
desires. Mr. Ecklund noted the one difference added to Page
2, Line 10, Paragraph (b), a transition section. The
language in that section clarifies that if the POMV
amendment is adopted in 2004, the POMV mechanism would not
come into effect until the FY 2006 budget.
Co-Chair Harris observed that the proposed version of the
bill would do nothing to protect the principle in the
Constitution nor would it constitutionally authorize a
dividend. It would only provide 5%, regardless. Mr.
Ecklund said that was correct and that there would be no
distinction between principle and earnings reserve.
Representative Foster MOVED to report CS HJR 26 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes.
Representative Hawker OBJECTED, noting a letter in the file
from the Permanent Fund Corporation. (Copy on File). The
letter notes withdrawing their request for additional
authority for the out reach concepts. He believed it would
zero out the fiscal note. Co-Chair Williams agreed.
Representative Hawker WITHDREW his OBJECTION.
Representative Fate voiced concern that the bill would erode
the ability of the Legislature to raise and allocate funds.
He recommended the bill receive full debate on the House
Floor.
Representative Foster noted that the MOTION to MOVE the bill
from Committee also included the two zero notes from the
Department of Revenue and the Office of the Lt. Governor.
There being NO further OBJECTION, it was so ordered.
CS HJR 26 (FIN) was reported out of Committee with
"individual recommendations" and with a new zero note by the
Office of the Governor and zero note #2 by the Department of
Revenue.
HOUSE BILL NO. 298
An Act relating to the distribution of appropriations
from the Alaska permanent fund under art. IX, sec.
15(b), Constitution of the State of Alaska, and making
conforming amendments; and providing for an effective
date.
Co-Chair Harris MOVED to ADOPT work draft #23-LS1075\C,
Cook, 4/6/04, as the version of the bill before the
Committee. There being NO OBJECTION, it was adopted.
PETE ECKLUND, STAFF, REPRESENTATIVE BILL WILLIAMS, explained
changes made to work draft version "V". Page 3, Section 3,
language provides a 5-year rolling average and insures that
the Legislature will not eat into the principle and will not
remove more from the Permanent Fund real rate of return. He
pointed out that Page 3, Line 6, had been amended adding the
language: "The first 10 of the 11 fiscal years". That
technical change was made to insure that the year-end data
would add an additional fiscal year. In that way, by using
the 11 years, the Legislature would be able to look back and
take the 10-years in order to have the complete data for
using as a comparison.
He pointed out that on Page 3, Line 19, the Committee had
previously adopted an amendment indicating that not more
than 50% be allocated for public education and that language
was left in the draft. Page 5, Line 18, Paragraph 2,
provides notification language. The permanent fund check
stub indicates that "X" amount of the check goes toward
inflation proofing by the Legislature. If the Percent of
Market Value is adopted, there will no longer be a principle
to inflation proof, only the fund. The language was changed
to read:
(2) Disclose the amount of each dividend
attributable to [Income earned by the
Permanent Fund from] deposits to that fund
required under art.IX, sec. 15. Constitution
of the State of Alaska."
Co-Chair Harris stated for the record that he maintains the
percentage should be 60% for dividends and 40% to be used
for education rather than the proposed 50/50 split. He said
that he was not offering that as an amendment but wanted the
record to indicate his intent.
Representative Hawker concurred with Co-Chair Harris,
stating that he looked forward to continuing the debate. He
added, consideration should be made to the possibility of
municipal revenue sharing.
Representative Foster MOVED to report CS HB 298 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CS HB 298 (FIN) was reported out of Committee with "no
recommendation" and with a new zero note by the Department
of Revenue and zero note #1 by the Department of Revenue.
HOUSE JOINT RESOLUTION NO. 9
Proposing amendments to the Constitution of the State
of Alaska relating to an appropriation limit and a
spending limit.
Co-Chair Harris MOVED to ADOPT work draft #23-LS0435\J,
Cook, 4/6/04, as the version of the legislation before the
Committee. There being NO OBJECTION, it was so ordered.
PETE ECKLUND, STAFF, REPRESENTATIVE BILL WILLIAMS, explained
the changes made from the "E" version, to the "J" version of
the bill. Page 1, Line 6, changes the first section of the
bill to reflect the numbers used to calculate either growth
in the spending limit or negative numbers in the percentage
change to the cost of living or population. The spending
cap could increase or decrease. The language provides
clarification regarding the spending limit and if it depends
on those factors.
Representative Croft questioned using the language
"increased or decreased by the lesser of". He asked if it
were a negative number, would the number still be used. Mr.
Ecklund responded that "lesser of" refers to either
calculations under (1) or (2). Representative Croft
clarified that if the calculation under #1 produced a
decrease by 1% and #2 decreased by 2%, the lesser 2% would
be applied. Mr. Ecklund agreed.
Mr. Ecklund noted that language on Page 2, Line 17,
incorporates a change taken at the Committee table,
providing an appropriation for permanent fund for State
residents. Page 2, Line 21, Subparagraph 4, adds new
language: "An appropriation to a separate fund or account in
the general fund from which expenditures may not be made
without an additional appropriation from that separate fund
or account". The language would take care of duplicated
funds such as the Marine Highway funds and it would not
count the appropriations coming out of the fund. It would
not double count an appropriation.
Representative Croft asked why they were not being counted
as they are spent on the actual votes. Mr. Ecklund
corrected his previous statement, noting that they would be
counted going into the fund not coming out of the fund. The
intent is that the expenditures are only counted once.
Mr. Ecklund continued, Page 2, Line 31, (9), language which
clarifies that a State agency can RSA funds between either
agencies or within the same agency and that they are not
counted twice. Page 3, Line 13, added (14): "An
appropriation of dedicated funds". There are six or seven
dedicated funds that have been in existence since before the
State Constitution was adopted. They would be excluded from
the spending limit. He listed those funds:
· Fish and Game Fund
· School Fund
· Cigarette tax
· Second Injury Fund Reserve Account
· Fishermen's Fund
· Public School Fund
· Fishermen's Fund Income
Co-Chair Harris questioned how much had been deposited into
those accounts. Mr. Ecklund advised that the balance in
those accounts was $72 million dollars.
Representative Stoltze inquired if Legislative Legal had
approved that language. Mr. Ecklund responded that he had
not specifically asked about that language but that they had
reviewed it and did not "raise a red flag" on the issue.
CHERYL FRASCA, DIRECTOR, DIVISION OF MANAGEMENT & BUDGET,
OFFICE OF THE GOVERNOR, understood that the dedicated funds
have existed since the time the Constitution was drafted and
had been "grandfathered" in.
Mr. Ecklund referenced the change made to Page 3, Lines 23 &
24.
BRUCE TANGEMAN, LEGISLATIVE ANALYST, LEGISLATIVE FINANCE
DIVISION, explained the change. He pointed out that since
we are in the midst of the FY04 budget and building the FY05
budget, in order to know more precisely what FY06 is going
to be, 3.3% was incorporated into the base of FY04 and 3.4,
the base for FY05. The numbers are sufficiently high to
allow for whatever may happen. The theory is to allow
"enough headroom" for FY06.
Representative Stoltze commented that the numbers were
"conservatively liberal". He asked Ms. Frasca what other
funds beside the general funds had been included in the
larger number. Ms. Frasca responded that the total run was
$2.9 billion dollars and would include all the other funds,
providing a number of where the State is presently. Mr.
Tangeman added that those are general funds and other non-
duplicated funds such as the Alaska Marine Highway.
Mr. Ecklund concluded his testimony and pointed out the
handouts provided by Legislative Finance Division, which
describe how the spending limit and spending base works.
(Copy on File). Mr. Tangeman noted that the handout
highlights how FY06 was calculated and shows what has been
incorporated into the FY06 budget.
Representative Croft inquired the difference between the
three-year average growth and the three-year growth. Mr.
Tangeman explained that the average growth would be 4% a
year. Unfortunately, that would be applied to a base year
average three years ago, providing a 4% increase over the
amount appropriated three years ago. That would work out to
be 1.3% a year, carry forward. If there is accumulative
growth, it would be 4% + 4% + 4% = 12%, and would be applied
to the base year of three years ago. That should allow a
more realistic growth rate.
Mr. Ecklund pointed out that the blue line on the chart
reflects that number. The language is very tightly written.
There is an amendment that will change the manner in which
growth is calculated. The language addresses the ceiling so
that future legislatures do not have to appropriate up to
the ceiling. Given the three-year rolling base could affect
it, if less than the ceiling was appropriated.
Co-Chair Williams interjected that there are amendments that
will change the bill. He added that he had been working
with the sponsor of the bill. Co-Chair Williams requested
that Mr. Ecklund continue with the overview.
Mr. Ecklund referenced Page 1, Line 4, Section 1, which
clarifies that if the spending limit were passed, it would
repeal the current spending limit on the books. Page 1,
Line 6, the appropriation limit, should not exceed the
earliest three of the four fiscal years preceding that
fiscal year and increased or decreased by the lesser of. He
stated that the average of the fiscal years would be used as
the base. Page 1, Line 10, 50% of the sum of the annual
rate of change and the cost of living for three calendar
years would adjust the base. For FY 06, the calendar years
2001, 2002, & 2003, would average out the rate of change and
cost of living and then take 1/2 of that average. That
number would be added to the percentage equal to the percent
rate of change. In a calendar year, one would take the
average, by 1/2 and then adjust the base by that amount.
Page 2, Line 1, (2), explains that the average rate of
change in personal income of State residents for three
calendar years preceding the calendar year during which the
immediate preceding fiscal year began. The calculated
adjustment of cost of living and State population cannot
exceed the rate of change in personal income. If personal
incomes are declining or flat, the base cannot be adjusted
up even if the cost of living is rising. The ceiling would
be the State income for residents.
Page 2, Line 5, Section ©, is the accidence section. If for
some reason the Legislature needed to exceed the determined
spending limit, they could do that by 2% if they got a 2/3
vote in both bodies. If they needed to exceed that amount
by 4%, they would need a 3/4 vote in each body. The
Legislature could address that through a separate piece of
legislation. Mr. Ecklund advised that accidence of the
limit must be an exception, not the rule. It would not be
built into the base for following years.
Page 2, Line 15, lists items outside the spending limit.
Paragraph 1, the appropriation to the Alaska Permanent Fund,
cannot fall under the spending limit. Mr. Ecklund listed
all the calculations made under (a) and (c) of that section.
#(1) through #(15), Page 2, Lines 15-31 and Page 3, Lines 1-
14.
Mr. Ecklund continued, Page 3, Line 15, Section 2, adding a
new Section #30, providing the transition language. He read
the language on Page 3, Lines 17-22. The legislation
inserts (1) fiscal year 2004 equals $3,300,000,000; and (2)
fiscal year 2005 equals $3,400,000,000. Section (b), Line
25 clarifies that if the voters pass the amendment, it would
reappear on the ballot in 2010.
Co-Chair Harris referenced Page 2, Line 5, ©, and asked if
it could exceed the amount that would be calculated with the
increase by no more than 2% if there was a 2/3 majority vote
of both bodies and 3/4 vote for a 4% increase. He inquired
if there was any provision that would allow the Legislature
to exceed the 4% in case of some event other than a natural
disaster. Mr. Ecklund emphasized that it is a hard cap, 4%,
and cannot exceed what the spending limit is.
Co-Chair Harris commented that there should be an option for
a super majority to have ability to spend above and beyond
the constitutional limit. He asked what would happen if
more money had to be spent because some event occurring,
requiring the State to spend above that amount. Mr. Ecklund
replied that as currently written, 4% is the maximum that
can exceed, absent a natural disaster.
Co-Chair Harris did not think that was good public policy.
He admitted that it should be difficult to access but noted
that sometimes there are "tough" choices that must be made
by the elected officials. He recommended that there be some
sort of "escape" valve.
Representative Stoltze admitted that the legislation
attempted to address all concerns without creating too many
loopholes.
Co-Chair Harris asked if it would make sense to indicate a
compromise of a 3% increase with 2/3 vote and if a 3/4 vote
occurs, then the legislation could address very important
needs. Representative Stoltze pointed out that there could
be a special election for voter approval if that should
happen.
TAPE HFC 04 - 77, Side B
Representative Hawker commented that it is important to not
constrain future legislatures but to keep the legislation
effective. There is no language to accommodate
extraordinary circumstances. He recommended an additional
provision as an identification of extraordinary
circumstances.
Representative Fate commented that might cause problems for
an electorate passage. Co-Chair Williams pointed out that
legislation provides a new spending cap. The current cap is
not working.
Representative Chenault referenced items #5 & #6, asking if
a project could be bonded. If the State intended to be a
part of the gas line project, could the State then use
Railroad bonds or general obligation (GO) bonds. He thought
that would work without addition of the new language. Co-
Chair Williams agreed.
Representative Croft noted that the capital had not been
excluded. Mr. Ecklund acknowledged that was correct.
Representative Croft referenced the chart, asking if the
blue average growth line, represents the State at this time.
Mr. Ecklund acknowledged that line was the current
representation.
Representative Croft pointed out that the manner in, which
the language was previously written would have limited it to
a 2/3% growth. It could stabilize there when inflation is
increasing 3% every year. Mr. Ecklund reiterated that the
current version is tightly written.
Representative Croft asked what kind of public policy sense
does that make. Mr. Ecklund advised that there is an
amendment, addressing that concern. Representative Croft
stressed that capping it at 2% or 3% does not work as costs
continue to grow. He thought that each scenario would
guarantees that every year, the State will be getting behind
a point or two.
Co-Chair Harris MOVED to ADOPT amended Amendment #8, #23-
LS0435\J.1, Cook, 4/6/04. (Copy on File).
Mr. Ecklund explained that the amendment would average $110
million dollars per year potential growth to the spending
cap.
Representative Hawker questioned if the numbers listed were
annual numbers or the average of the previous three years.
Mr. Tangeman responded that they were based on the numbers
from the preceding three years. Representative Hawker
emphasized that the chart only represents "modeling" and
that it would only be 3% per year inflation. He commented
that the average of 3% per year would be nine, the same as
population growth. The formula is interpreted as averaging
the two changes together. He believed that the amendment
would move the State in the right direction.
There being NO OBJECTION, Amendment #8 was adopted.
Representative Croft reiterated that with the proposed
scenario, each year the State will be moving 1% further
behind on public service spending. The charts always make
the future look even and smooth and the past appears jagged.
He asked if the changes to personal income would be used in
calculating the spreadsheets. Mr. Tangeman explained that
personal income had not been included in the graph and that
it is higher than the percentages currently being analyzed.
He added that assumes 3% with 1% growth and if the numbers
decrease, the limit could decrease. Representative Croft
pointed out that information provided would be the maximum
of what could be allowed at the 3%, 1% scenario. He
inquired if the numbers were available from 15 years moving
backward on inflation, population and personal income
changes. Mr. Tangeman said they are. Representative Croft
questioned why 15 years was not being used.
Representative Croft MOVED to ADOPT Amendment #4. (Copy on
File). Representative Stoltze OBJECTED.
Representative Croft explained that the amendment would
remove the spending cap concept and replaces it with a tax
cap. It would be a tax prohibition. An income or sales tax
could not be added without a vote of the people. He
questioned why government should be restricted in such
things as building new schools, stressing that government
should be restricted in its ability to tax. He observed
that if he had capped his personal expenses right out of
college that would have "tied his hands" when his employment
improved. There should be a balance between revenues and
expenditures.
Representative Stoltze spoke against the amendment, stating
that it provides a wide deviation from the growth of
possible taxes.
Representative Hawker acknowledged that the amendment makes
sense. The power to appropriate should be limited to the
revenue available. He stated that he would support the
amendment if it were revised deleting reference to personal
income or sales tax and instead was to prohibit "a tax"
without a vote of the people. He questioned if the
amendment could accomplish Representative Croft's goal.
Representative Joule pointed out that there is no long-range
fiscal plan. He spoke against the implementation of a
personal income or sales tax, however, mentioned that if one
were needed, it is the obligation of the Legislature to make
that decision.
Representative Croft stated that he would support an
amendment to prohibit a tax on individual Alaskans. He felt
that a spending cap was poor public policy. He recounted
that members have indicated support that it could be
necessary to ensure the use of the Permanent Fund. He
argued against tying the hands of future legislatures.
Representative Croft maintained that the power to tax should
be taken before the power to appropriate.
Representative Stoltze stated that his motivation is not
tied to the to Percent of Market Value or other issues.
Representative Hawker stressed that there is no quid pro
quo. He maintained that the issue is the basis of
credibility in the eyes of the public. He felt that
legislators make the best decision that they can based on
the facts before them. He observed that the Legislature
lacks a certain amount of credibility before the public and
that the legislation would be a referendum by the public.
He thought that the public perception is that the
Legislature wants to go "on a wild spending spree" and
viewed the legislation as a cooling off bill. The bill
provides State voters "comfort" while legislators are making
spending decisions. The sunset provision is critical to the
bill. He did not think that the bill should be
characterized as binding future legislatures.
A roll call vote was taken on the motion.
IN FAVOR: Croft, Chenault, Moses
OPPOSED: Stoltze, Fate, Foster, Hawker, Williams,
Harris
Representatives Meyer and Joule were absent from the vote.
The MOTION FAILED (3-8).
Representative Croft advised that Amendments #5, #6 and #7
had been incorporated into the committee substitute
presently before the Committee.
Representative Stoltze MOVED to report CS HJR 9 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. Representative Croft OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Chenault, Hawker, Stoltze, Harris, Williams
OPPOSED: Croft, Fate, Foster, Moses
Representative Joule and Vice Chair Meyer were not present
for the vote.
The MOTION FAILED (5-4).
HJR 9 was HELD in Committee.
HOUSE BILL NO. 227
An Act increasing the jurisdictional limit for small
claims and for magistrates from $7,500 to $10,000;
increasing the jurisdictional limit of district courts
in certain civil cases from $50,000 to $75,000; and
amending Rule 11(a)(4), Alaska District Court Rules of
Civil Procedure, relating to service of process for
small claims.
VANESSA TONDINI, STAFF, REPRESENTATIVE LESIL MCGUIRE,
advised that the jurisdictional limit for district courts
was last raised in 1990 when the Legislature raised the
limit from $35,000 to $50,000 dollars. By raising the
jurisdictional limit from $50,000 to $100,000, HB 227 will
allow for increases in inflation and provide increased
flexibility for litigants regarding whether to file in
district court or superior court.
Ms. Tondini added that the jurisdictional limit on small
claims court and magistrate court was last raised in 1997
when the Legislature raised the limit from $5,000 to $7,500
dollars. Small claims court offers many advantages over
district court to private litigants, including less formal
discovery requirements, reduced filing fees, and relaxed
evidentiary rules. The bill would increase the limit to
$10,000 dollars. She added that the bill would also remove
prohibitions against the district court hearing claims for
false imprisonment, libel, slander, and malicious
prosecution. The restrictions were adopted shortly after
statehood. District court judges are well qualified and
there is no reason to prohibit them from hearing these types
of cases.
Ms. Tondini concluded that the bill would expand small
claims jurisdiction over out-of-state defendants. Under
current law, small claims actions against out-of-state
defendants may only be brought under the landlord-tenant act
or under AS 09.05.020, which authorizes service of process
against owners or operators of motor vehicles involved in an
accident in the State. The bill would authorize small
claims jurisdiction over out-of-state defendants under
traditional long-arm principles. The expanded long-arm
jurisdiction is limited to district court judges.
Magistrates would continue to be limited by the standards
set forth in current law.
REPRESENTATIVE MAX GRUENBERG offered to answer questions of
the Committee.
Co-Chair Harris asked what the benefits of the legislation
would be. Representative Gruenberg replied that it would
become more simple and faster than district court.
· Section 1 increases the jurisdictional limit of
district courts from $50,000 to $100,000 dollars.
· Sections 2 increases the jurisdictional limits of
the small claims court from $7,500 to $10,000
dollars.
· Section 3 extends the jurisdiction of the district
court to include claims for false imprisonment,
libel, slander and malicious prosecution.
· Section 4 increases the jurisdictional amount for
claims heard by magistrates from $7,500 to $10,000
dollars.
· Section 5 precludes magistrates from hearing cases
brought under the expanded small claims
jurisdiction over out-of-state defendants provided
for in Section 6 of the bill. Magistrates would
continue to be able to hear claims against out-of-
state defendants only under the landlord-tenant
act or in accordance with the AS 09.05.20 relating
to service of process on nonresident owner or
operator of motor vehicle.
· Section 6 amends District Court Rule 11(a) to
allow suits in small claims court against out-of-
state defendants under traditional long-arm
jurisdictional authority.
· Section 7 provides that Sections 5 and 6 of the
bill only take effect if the court rule changes in
Section 6 of the bill receive the two-thirds
majority vote of each house required by art. IV,
sec. 15 of the Alaska Constitution.
Representative Hawker asked if to date, there had been a
compelling argument against the legislation.
TAPE HFC 04 - 78, Side A
DOUG WOOLIVER, ADMINISTRATIVE ATTORNEY, ALASKA COURT SYSTEM,
stated that the Court is neutral on the bill. There are
potential down sides in making the proposed changes. The
bill is consistent with the Courts overall philosophy.
Section 1 raises the juristical limit of district court to
$100,000 dollars, which the court does not object to.
Sections 2 & 4 raise from $7,500 dollars to $10,000 dollars,
the jurisdictional limit for small claims courts. Judges
are split if that is a good idea or not. The concerns are
if that change is necessary, it is a lot of money to have at
stake and that most people cannot avail themselves of that
amount.
Mr. Wooliver continued, another category of complaint of a
more serious nature is claims up to $10,000 dollars are
consistent with the purpose of small claims court. The
purpose in general is to move many small claims more quickly
through. He pointed out that the higher the claim amount,
the more tenaciously the cases are fought, which could be a
potential downside. Also, related to that, the same things
that make it easier to sooth somebody in the small claims
court, can make it easier to loose in that arena. It would
be a trade off between speed, efficiency and due process.
Several judges are concerned that with the higher
jurisdictional limit, the more likely it is that the
unsophisticated defendants are going to loose. It is true
that they have the option for more formal district court
action. Many people do not understand the distinctions or
the benefits between the two types of courts.
Regarding the limit of $10,000 dollars, he advised that most
judges and magistrates are comfortable moving to that level,
however, it needs to be understood that defendants can loose
out in the process. The other significant change deals with
more out-of-state defendants in the small claims court.
That does not create new problems but it would be moving
into a more informal process. Out-of-state defendants are
frequently more time consuming.
Mr. Wooliver reiterated that the Alaska Court System is
neutral on the bill. He pointed out that more and more
people are coming to court without attorneys.
Co-Chair Harris referenced the interminent fiscal note from
the Alaska Court System. Mr. Wooliver clarified that the
Alaska Court System does not know the impact. Small claims
courts are easier, faster and cheaper for litigants but not
necessarily for the Court System. There could be more court
effort involved. Co-Chair Harris did not think the fiscal
impact would be much.
Representative Stoltze thought that increasing the amount to
$10,000 dollars would increase caseloads and that there
would be more court action. Mr. Wooliver pointed out that
the last two times that the jurisdiction rate was raised for
small claims, the courts did not see a spike in those files.
Representative Fate commented on damage recovery and
problems associated with that in the lower jurisdiction
courts. Mr. Wooliver was not aware of the connection
between those two factors. He acknowledged it would be
interesting to see if there was a correlation between the
amount in small court and recovery percentages.
Representative Fate believed that recovery could become
problematic and thought it could be predicated on the amount
at stake.
In response to Representative Fate, Representative Gruenberg
advised that all the bill does is to clarify that the
decision can be brought to either small claims court,
district and/or superior court. The judgment will remain
the same.
Representative Croft pointed out that small claims court are
generally handled without lawyers and the situation is more
relaxed. Lawyer fees can get high quickly. If the amount
discussed was under $7,500 dollars, the person previously,
could stay in the small claim court venue. Small claims
court is the simplified place for people to go without
having to hire an attorney.
Representative Foster MOVED to report CS HB 227 (JUD) out of
Committee with individual recommendations and with the
accompanying fiscal note.
CS HB 227 (JUD) was reported out of Committee with a "do
pass" recommendation and with indeterminate note #1 by the
Alaska Court System.
ADJOURNMENT
The meeting was adjourned at 4:02 P.M.
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