Legislature(2007 - 2008)HOUSE FINANCE 519
03/19/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB418 | |
| HB396 | |
| HB419 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 396 | TELECONFERENCED | |
| *+ | HB 419 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 418 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
March 19, 2008
1:45 P.M.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 1:45:00 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Harry Crawford
Representative Les Gara
Representative Mike Hawker
Representative Reggie Joule
Representative Mike Kelly
Representative Bill Thomas Jr.
MEMBERS ABSENT
Representative John Harris
Representative Mary Nelson
ALSO PRESENT
Deven Mitchell, Executive Director, Alaska Municipal Bond
Bank Authority, Department of Revenue; Charlie Swanton,
Director, Division of Sport Fish, Department of Fish and
Game; Ellie Fitzjarrald, Director, Division of Public
Assistance, Department of Health and Social Services; Tom
Wright, Staff, Representative Mike Chenault; Jennifer Klein,
Facilities Manager, Department of Health and Social
Services; Vern Jones, Chief Procurement Officer, Department
of Administration; Kaci Schroeder, Staff, Representative
Bill Thomas
PRESENT VIA TELECONFERENCE
Tim Joyce, Mayor, Cordova
SUMMARY
HB 396 An Act relating to and increasing the amount of
the 2008 permanent fund dividend; and providing
for an effective date.
HB 396 was HEARD & HELD in Committee for further
consideration.
HB 418 An Act providing notice of and authorization for
the Department of Administration to enter into a
lease-purchase agreement for the construction, the
purchase of equipment, and the financing of a fish
hatchery in Anchorage to be operated by the
Department of Fish and Game; relating to the
issuance of certificates of participation for the
fish hatchery; authorizing payments for the lease-
purchase agreement from sport fishing facility
license surcharge fees; relating to capital lease
financing of sport fishing facilities; and
providing for an effective date.
HB 418 was HEARD & HELD in Committee for further
consideration.
HB 419 An Act prohibiting certain state leases and lease-
purchase agreements for equipment and other
personal property; and providing for an effective
date.
HB 419 was HEARD & HELD in Committee for further
consideration.
1:47:05 PM
HOUSE BILL NO. 418
An Act providing notice of and authorization for the
Department of Administration to enter into a lease-
purchase agreement for the construction, the purchase
of equipment, and the financing of a fish hatchery in
Anchorage to be operated by the Department of Fish and
Game; relating to the issuance of certificates of
participation for the fish hatchery; authorizing
payments for the lease-purchase agreement from sport
fishing facility license surcharge fees; relating to
capital lease financing of sport fishing facilities;
and providing for an effective date.
1:47:29 PM
DEVEN MITCHELL, DEBT MANAGER, ALASKA MUNICIPAL BOND BANK
AUTHORITY, DEPARTMENT OF REVENUE, inquired if the Committee
preferred to hear testimony on the project or the financing
first. Co-Chair Meyer requested the project be identified.
CHARLIE SWANTON, DIRECTOR, DIVISION OF SPORT FISH,
DEPARTMENT OF FISH AND GAME, explained that the project
proposes building a hatchery in Anchorage for the purposes
of producing resident species as well as anadromous fish.
The fish would be distributed throughout Southcentral Alaska
as well as provide brute stock for the Interior hatchery.
Mr. Swanton pointed out that in 2004, the Division managed
hatcheries largely located on military bases. In that year,
the military decided to decommission their power plants.
Those facilities are "vintage", built in the 1970's and now,
well beyond their construction life. The intent of the bill
is replace the Anchorage facility with a 146,000 square foot
facility, located on Elmendorf Air Force Base, which will
allow the State to produce fish for the programs for the
next 20-30 years. The original cost estimate was $45
million dollars and the estimate received in March 2008 was
$100 million dollars, including the construction, design and
site preparation work as well as the associated legal and
administrative fees.
1:50:16 PM
Vice-Chair Stoltze applauded the effort. He worried about
the policy passing through the House Special Committee on
Commercial Fisheries because of over-escapement issues. He
asked if there was too much salmon escapement in the
Southcentral streams. Mr. Swanton explained there are six
species of salmon; he asked for further refinement of the
questioned species. He agreed there has been production and
yield escapement and that over-escapement has been
identified with Kenai sockeye.
1:52:58 PM
Co-Chair Chenault questioned the $100 million dollar
estimated Anchorage hatchery costs and asked the anticipated
costs associated with the Fairbanks hatchery. Mr. Swanton
replied $45.6 million dollars and that a surcharge will pay
the bond debt.
Co-Chair Chenault acknowledged how essential hatcheries are
throughout the State. He mentioned that a hatchery in Kenai
had to be shut down resulting from spawning fish in federal
waters. He indicated concern with the proposed amount for
the State in obligating for the proposed expenditures.
1:55:16 PM
Co-Chair Meyer inquired why expenses had so dramatically
increased and understood there is not adequate funding for
both proposals. He said that both Anchorage and Fairbanks
hatchery proposals are in a "mess together". He inquired if
the Department would recommend a Governor's veto for the
supplemental language.
1:56:21 PM
Mr. Swanton addressed the concerns. Originally, when the
hatchery issue first surfaced, there was not an available
site for the Fairbanks hatchery. A design is usually
developed on a selected site. The original numbers
submitted were confusing. The $25 million dollar number was
in fact for construction alone. The buildings are very
complex to build and if something goes wrong, an entire year
of production could be lost. He identified increases to
construction costs. The refinements on the estimates are
good.
Co-Chair Meyer was concerned that the Anchorage hatchery
would be dependant on a Certificate of Participation (COP)
approval, making the project based on selling fishing
licenses in Southeast Alaska to subsidize it. He wanted to
see that the supplemental split the request, encouraging
Fairbanks and Anchorage to work together for COP funding.
He maintained that was not fair.
1:58:36 PM
Mr. Mitchell proposed a potential solution to amend the
proposed legislation to include Fairbanks as a participant
in the transaction and allocate costs to accomplish both
projects. One concern regarding the Fairbanks proposal is
that they are further along in the design process and now
are ready to assume bids for construction.
2:00:46 PM
Co-Chair Meyer inquired the status for funding the Fairbanks
project. Mr. Swanton noted that the bids for construction
had already gone out for the reimbursable service agreements
(RSA) and will be opened in early April 2008. He noted the
Fairbanks facility is on schedule.
2:02:07 PM
Mr. Mitchell addressed financing aspects of the legislation.
He noted that the surcharge on sport fishing license sales
was implemented in 2006, creating a revenue stream bonds and
supported by that revenue.
In order to achieve the needed ratings, the State required a
restrictive bond test to secure the revenue stream. As a
result of and with the outstanding debt, there are
limitations on how much more capital can be raised from that
finite revenue stream. Mr. Mitchell was comfortable with
about $45 million dollars as an achievable figure without
General Fund support. That would involve backend loading
and the use of capital appreciation bonds and being more
creative and perhaps suffering on the rating side & interest
rate. As an alternative, the COP options were introduced.
The General Fund would become the backstop for the bonds and
use the surcharge to pay a portion of the debt service on
simple permanent bases to the outstanding bonds.
Mr. Mitchell pointed out that the fiscal note does not
indicate issuing capital appreciation bonds, but rather
shows the benefits of the current interest bonds, using some
General Fund support at least through 2026 to support the
obligations. If fishing license revenues from the surcharge
continue to grow, the amount would diminish over time. The
structure extends the surcharge by 15-17 years.
Contemplating the structure is a large commitment. He noted
the structure is marketable.
2:05:17 PM
Co-Chair Meyer thought that the length could be shortened by
adding more cash. Mr. Mitchell responded that the
legislature could come up with General Fund monies that
could be appropriated to the projects or direct the
Administration to administer the Capital Appreciation Bonds
(CAB) with a shorter life.
2:06:08 PM
Representative Crawford asked about specifics of the bonds.
Mr. Mitchell explained that CAB bonds are otherwise referred
to as zero coupon bonds, paying no interest expense until
the bonds mature. The earnings would correlate to an
annualized interest rate.
2:07:01 PM
Representative Thomas remembered when Senator Seakins
introduced a similar bill. He commented that he represents
a long district that has many hatcheries. He pointed out
that Southeast Alaska would be paying 25% of the sport
licenses and receiving nothing back and then paying for
hatcheries in Anchorage and Fairbanks. Mr. Swanton advised
that the total request of the Administration is $146 million
dollars. Representative Thomas argued that Southeast sells
25% of the permits and maintained that the requests are not
"fair or equitable" as the Governor proposes her
Administration to be. He said he would only support the
bill if Southeast hatcheries were included.
2:10:04 PM
Representative Thomas asked if it was intended to displace
Kings and Coho's in the Whittier area. Mr. Swanton did not
know the specifics. There have been modifications to where
fish are provided, yet did not know about displacement.
Representative Thomas pointed out past federal efforts to
shut down military bases and asked what would happen if
Elmendorf was closed. Mr. Swanton explained the current
plan to use the Elmendorf Air Force is isolated from the
base proper; however, it is on federal land. The former
facilities were not on a public access road which was
problematic; that has been addressed by rerouting it.
Representative Thomas referenced the DiPac Hatchery,
pointing out that most of the funding comes from cost
recovery of a chum release in Amalga Harbor. He wanted to
see some of the dollars used to pay off sport-fish hatchery
activity. He emphasized that Southeast should be supported.
He noted he had hoped to add an amendment to the bill but
that it was impossible the way it is written; consequently,
he would oppose it.
2:13:06 PM
Representative Hawker referenced the COP vehicle; he asked
why the Administration had not requested General Obligation
(GO) bond funding if it was determined that it was the will
of the people to support the projects. Mr. Mitchell
acknowledged that it could be funded through GO bonds,
however, there is a timing issue associated with the
project, lending urgency. He added that stand-alone
facilities lend themselves to COP type funding.
2:14:46 PM
Representative Hawker wondered if the request was
unrealistic. Mr. Swanton characterized the request as
moderate, pointing out that the costs associated with the
building are complex, structured with tanks, pumps, & back-
up systems. It will be a production facility. He advised
that the Fairbanks facility had been scaled back. The
purpose is to efficiently produce fish. There are
additional costs associated with the design work. He
defended the costs of the project.
Representative Hawker requested objective testimony
regarding the facts. Mr. Swanton did not have any
available, but offered to research it for the Committee.
2:17:35 PM
Vice-Chair Stoltze wanted to see more fish in the
Southcentral streams but was not sure that HB 418 was the
correct vehicle to achieve that. He worried about the costs
and commented on buy-back programs. Mr. Swanton explained
that the facility would produce about half the resident
species for stocking streams, lakes and impoundments and of
which, 140 are located in the Interior, 82 in Mat-Su and a
smattering up and down the Kenai Peninsula. The other
production component is the anadromous, which are primarily
King and Coho and what the facility production is intended
for. It should satisfy the location demands for particular
species. He added that the language of the bill is broader
regarding angler opportunity.
Vice-Chair Stoltze noted that he had received a lot of mail
regarding the deficiency of Alaska salmon availability. He
did not understand the motives for the bill and asked if he
misread the needs of Southcentral and public pressure.
2:22:51 PM
Mr. Swanton interjected that he had not indicated that lake
trout would be the primary species released. He stipulated
that he had referenced rainbow trout and Dali Varden as the
primary large volume fish. Vice-Chair Stoltze said he had
been generically referring to lake fish & apologized.
Mr. Swanton guaranteed that without the hatchery production,
there would be less sport fishing opportunities in and
around Cook Inlet and cannot be expanded without a
production facility. Vice-Chair Stoltze offered to ask the
Commissioner about the buy-backs. Mr. Swanton addressed the
concerns with a buy-back, pointing out that unless there is
a large volume, the fish preserved through not having
permits would not go elsewhere and that the permit being
fished, always catches more fish.
2:24:56 PM
Vice-Chair pointed out that with the economic value
currently being in Cook Inlet, $50 million would be a
substantial buy-back. Mr. Swanton agreed it would be
substantial. Mr. Mitchell interjected that a buy-back would
not be funded through COP; for that funding there must be a
project.
2:26:02 PM
Co-Chair Meyer understood that the State would have a 50-
year lease of the military land base. Mr. Swanton said yes.
Co-Chair Meyer inquired how Fairbanks currently addresses
the fish situation. Mr. Swanton said, currently, there is
an experimental pilot hatchery run on the banks of the Chena
River, producing between 30,000 to 40,000 rainbow trout from
the Anchorage facility. Co-Chair Meyer asked if that
process could continue rather than spending $50 million on a
new hatchery. Mr. Swanton commented that the current
situation will continue to diminish opportunities.
Co-Chair Meyer thought the State could save at least $50
million dollars by using the Anchorage hatchery and trucking
fish to Fairbanks. Mr. Swanton did not know the age of the
facilities but thought they were close to 40 years old and
that both have site demands. He mentioned the risks placed
in one facility. Having two facilities, it is spread out.
One facility carries additional water demands. He was not
sure if the current system could adequately produce all the
fish.
2:29:14 PM
Co-Chair Chenault referenced the federal lease, questioning
the guarantee on a 50-year lease on federal property.
2:31:06 PM
Representative Thomas pointed out that in the 1970's, the
Fishery Rehabilitation and Enhancement Division (FRED) built
hatcheries in Southeast Alaska, which are now are operated
by regional aquacultures. He asked if Department of Fish
and Game would be managing the newly proposed hatcheries.
Mr. Swanton was not sure why the FRED Division had
surrendered management. The Department would operate the
new proposed facilities.
Representative Thomas mentioned his involvement with the
DiPac Hatchery and that they had to apply for federal
funding. Mr. Swanton reported that operating a facility
producing pink and chum salmon is different from other
species and that they need to be held longer. He added,
concerns related to disease.
2:33:34 PM
Representative Joule asked the difference between COP versus
GO bonds. Mr. Mitchell responded the differences are subtle
and perhaps more legal than not. With a General Obligation
bonds, there is a full faith commitment and tax pledge with
an entity. A Certificate of Participation is something that
the State or municipality can issue and that there is a
"lesser" pledge and is structured around a lease. An
investor is looking at the credit as being the General Fund
of the State of Alaska subject to appropriation pledged to
them.
Representative Joule asked if GO bonds had to be approved by
the voters. Mr. Mitchell affirmed. Representative Joule
asked if the COP's were simply an act of the Legislature.
Mr. Mitchell replied that revenue debt and lease typically
do not require a vote of the electorate.
2:36:44 PM
Co-Chair Meyer asked if the last COP issued by the State was
for the Virology Lab. Mr. Mitchell said yes and that the
one before that was the Department of Environmental
Conservation lab. A credit pledge is not an unusual
commitment.
Co-Chair Meyer asked where the fish from the Anchorage
hatchery go. Mr. Swanton explained that there are 13 sites
from Kachemak Bay to Ship Creek that receive King and Coho
salmon.
2:38:45 PM
PUBLIC TESTIMONY CLOSED
Co-Chair Meyer acknowledged the proposed dilemma, realizing
that the Legislature had authorized these two projects four
years ago.
Representative Crawford requested research information
regarding the results of the hatchery. Mr. Swanton did not
have an historical assessment of the costs available. Some
of the hatcheries are at least 20-years old. He offered to
research those projects.
Representative Crawford questioned the size of the
hatcheries in relationship to what already exists. Mr.
Swanton indicated that he had visited only three or four
sites around the State and did not have an adequate frame of
reference.
2:42:02 PM
Representative Thomas asked if the Department of Fish and
Game budget would be increasing each year to cover the
operational costs for the hatcheries. Mr. Swanton advised
that $2.3 million dollars had been included for current
facility operational costs. He did anticipate that
operation of a facility could be run with the current
operational allocation provided to the Department. It is
anticipated that the Anchorage hatchery could be run for
approximately $2.3 million dollars annually, essentially, a
no net gain. The Fairbanks facility will cost about $1.7
million dollars to operate. Presently, the State is going
through the Division's internal budget to capture the
operating costs.
2:44:04 PM
Co-Chair Meyer hoped that the COP could include both
hatcheries, realizing that if the bill is going to make it
through the Legislative bodies, it can not be a stand alone
Anchorage project.
Representative Kelly commented on the Fairbanks hatchery,
pointing out that construction costs have increased
dramatically statewide and that the needed amount is causing
consternation. He encouraged that the project be scaled
back. He wanted to see fixed costs put in place for the
overruns, pointing out that the project are not justified.
st
An escapement should be the 1 requirement. It has not been
completely balanced out. He hoped the problem could be
solved with the Governor's help, hence, HB 418.
Representative Kelly encouraged more focus on cost overruns,
which the Department has responded with scale-backs. He
pointed out that in the old bonding package, there is $21
million remaining dollars dedicated to Fairbanks. He
believed that some of the funds were available for switching
over. He stated that there is support from both communities
on the facility project & wanted to see the bill move
forward. He offered to work with Co-Chair Meyer.
2:51:46 PM
Co-Chair Meyer acknowledged the efforts put forward by the
departments. He observed that they had met last year and
that he had hoped a resolution could have come forth earlier
in the session.
Vice-Chair Stoltze apologized for the comments he had made
to Representative Kelly.
Co-Chair Chenault referenced the fiscal note, questioning if
the debt service would come from the capital or operating
budget. Mr. Mitchell advised that the debt service was
scheduled to come out of a combination of the surcharge
collection remaining $500 thousand dollars operational
commitment for the next eight years. Presently, the total
is about $1.5 million dollars and the balance would then
come from General Fund dollars. Co-Chair Chenault clarified
that it would be included in the operating budget until
2026.
Co-Chair Meyer thought it could be off-set by a cash
infusion from the capital budget. Representative Kelly
pointed out that by adding the item in, it would not
increase the fishing license fee, but instead extends it.
Mr. Mitchell said yes, pointing out those fees are
established in statute. The amount is more punitive on out
of State sport fishers and that a one year out of state
license costs $100 dollars.
2:56:10 PM
HB 418 was HELD in Committee for further consideration.
2:56:18 PM
HOUSE BILL NO. 396
An Act relating to and increasing the amount of the
2008 permanent fund dividend; and providing for an
effective date.
REPRESENTATIVE BILL THOMAS, SPONSOR, introduced his staff,
Kaci Schroeder. He pointed out that high cost fuel is
affecting everyone statewide. Alaska contributes a
significant amount of resources to the Nation, yet residents
pay some of the highest prices for fuel. If the hardships
associated with fuel costs continue, it will force many
families to leave the State for a lower cost of living.
While the State devises a permanent plan to address the
problem, people are continuing to pay the costs. HB 396
attempts to temporarily address the problem by increasing
the amount of the 2008 Permanent Fund Dividend (PFD) check
by $500 dollars. Representative Thomas summarized that the
proceeds from Alaska's oil belongs to all of Alaska and
should be shared equally. He urged support for HB 396.
3:01:23 PM
Vice-Chair Stoltze asked if Representative Thomas would
oppose the money coming from a progressivity formula.
Representative Thomas commented that until the Legislature
as a body can create a plan that treats everyone equally, HB
396 provides a one-time shot. With the high energy costs,
it is important.
Vice-Chair Stoltze reiterated his question if the sponsor
was amenable to another source of funding for the bill.
Representative Thomas wanted it to one come out of the PFD
[a $310 million one-time cost]. Vice-Chair Stoltze worried
about removing funds out of the formula. He agreed that
getting money to Alaskans "is not a needs issue but a fair
distribution concern".
Representative Thomas thought the proposed legislation
provides a fair way to distribute the wealth accumulated by
the State. He agreed it could be classified as an energy
rebate. Vice-Chair Stoltze thought it would be more
appropriate as an energy dividend. He asked if issuance of
a separate check had been considered. Representative Thomas
thought that one distribution would be cheaper.
Co-Chair Meyer was concerned about getting the money back to
the people for fuel. He disagreed with using the PFD
earnings and proposed instead, use of the surplus resulting
from high fuel costs. He advised that the dollars will help
the economy regardless on how they are spent.
3:06:55 PM
Representative Gara agreed with finding a way to issue money
to help people defray their high energy costs but would not
support money coming out of Permanent Fund. He said he
would support the rebate coming out of the General Fund. He
noted it was a proposed one-year only item so a continual
funding source was not necessary.
Representative Gara expressed many people have a problem
giving the funds to the wealthy. He disagreed with comments
made by Co-Chair Meyer. It is the lower income people that
actually put the money into the economy. He thought the
funds could be given to people who make only a certain
amount. Every adult could apply and indicate how much they
earn, noting that it is a crime to lie on a State benefit
form.
3:09:27 PM
Representative Thomas agreed that using General Fund money
would also be a good funding source. He mentioned the
discrimination issue voiced by Representative Gara,
maintaining he wanted a program that does not discriminate
against an income bracket. Representative Gara stated he
would not support the legislation if it gives money to rich
people. Representative Thomas referenced a bill in the
Senate Finance Committee (SFC) providing certain dollars as
charitable donations. He noted, currently, everyone in the
State receives a PFD and that there is no discrimination
with that issuing.
Co-Chair Chenault supported all Alaskans receiving the
subsidy and thought that it could help spur statewide
economy. He understood that Earnings Reserve was relatively
low on funds; he did not know the effect paying the subsidy
from the PFD.
3:13:26 PM
Vice-Chair Stoltze appreciated the debate. He remembered
that initially, the proposal was floating as an energy
program. He did not want to see an increase to the PFD.
Representative Crawford indicated his concern with the
legislation. He commented that energy costs are going to be
high next year as well. He encouraged the State be
investing ways to get off fuel such as making renewal energy
the goal. He suggested that a $300 million dollar
investment into considerations for renewable energy costs
would be a huge boost. He wanted to see a plan that could
create dividends for years to come.
Representative Thomas pointed out that HB 152 was sitting in
Senate Finance Committee in support of renewable energy
ideas. He agreed with the need to support alternative power
sources.
3:20:03 PM
Representative Joule supported finding alternative energy
sources as recommended. He noted that he supports the
legislation submitted by Representative Thomas to addresses
short term concerns as he believes that the core premise is
to help people with energy costs and was less concerned with
who gets it. He agreed that the long term concerns must be
discussed. The survivability of rural Alaska is directly
related to high energy costs, which a huge concern and those
decisions must be made soon.
3:23:39 PM
Representative Gara mentioned fiscal discipline and the need
to prioritize these concerns. He voiced support the first
$150 million dollars going to the poorest, sincerely needing
the funds. He stated that second half [$150 million
dollars] could fund a strong university financial aid
program to get people into college. He revisited his
concerns for financing low income college students.
Representative Gara advised he is a co-sponsor for the
renewable resource funding bill, adding that it is important
to prioritize and rank projects with relationship to how to
transform society.
Co-Chair Meyer supported HB 396, indicating that the same
argument could be used for the PFD's. He maintained that
everyone should be treated fairly and equally.
3:27:13 PM
Co-Chair Chenault agreed with comments made by Co-Chair
Meyer that all Alaskans should be given the entitlement and
that he would not support creating two classes of people, an
upper and lower income group. He did not want to see the
State divided, yet wanted to address statewide needs in a
fair and equitable manner.
Co-Chair Meyer relayed that the Governor has the oil prices;
he maintained that should be shared with all Alaskans.
Representative Thomas advised that over 53% of Alaskans are
in favor of the bill. He hoped that the money could help
put food on the table.
3:29:43 PM
TIM JOYCE, MAYOR, CORDOVA (Testified via teleconference),
voiced support for HB 396. He stated that the cost of
energy has drastically increased in the past few years and
much more quickly than inflation. The economy can not
adjust fast enough to compensate for the costs of energy and
as a result, spending by individuals needs time to adjust.
He listed resource costs in Cordova. There is a hydro plant
in Cordova. The recommended allowance proposed by
Representative Thomas could pay for approximately one month
of heating in the Cordova area. He urged consideration for
relief for citizens of Alaska, providing time to adjust to
the new energy factors. He reminded members that last year,
the price of oil increased to $110 dollars per barrel.
3:34:33 PM
ELLIE FITZJARRALD, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, offered to answer
questions of the Committee on the fiscal notes.
3:35:34 PM
PUBLIC TESTIMONY CLOSED
3:35:43 PM
Co-Chair Meyer wanted to hold the bill in Committee in order
to determine an appropriate funding source.
Representative Gara reiterated that he would not support the
bill if the funds came out of the Permanent Fund. He
maintained the need for funding a university financial aid
program. Co-Chair Meyer believed that should be a later
philosophical debate. He maintained that the distribution
should be the same as the PFD. The list of eligible persons
are known so the costs associated with administering the
program would be substantially less.
3:37:42 PM
Representative Crawford pointed out there is a statutory
definition of the poverty rate. He maintained that if the
government is making an investment in people's lives, it
needs to be a long-term investment and should get away from
high fuel costs. He urged consideration of alternative
energy options. He asked to work with Representative Thomas
on a long-term fix.
Co-Chair Meyer pointed out that the Longevity Bonus had been
available to everyone as well as the PFD program. There
have been programs in place that are not income based. He
maintained, it is the most fair way.
Representative Thomas advised that included in the
supplemental funding for the energy assistance was $350
million dollars and that $100 million of that was for grants
for home improvements, based on income.
Representative Gara reiterated that this is a poverty level
issue, especially for the kids at poverty level. He
maintained that the logic used was inconsistent and that
discrimination against wealthy people is not discrimination.
He emphasized that he does not share the Co-Chair's view of
discrimination.
3:43:16 PM
HB 396 was HELD in Committee for further consideration.
3:43:22 PM
HOUSE BILL NO. 419
An Act prohibiting certain state leases and lease-
purchase agreements for equipment and other personal
property; and providing for an effective date.
TOM WRIGHT, STAFF, REPRESENTATIVE MIKE CHENAULT, said that
HB 419 was introduced to eliminate the use of the master
lease line of credit that some departments are utilizing as
a means to purchase equipment or other non-real property
items.
The State's master lease line of credit was established in
2001 in response to inefficient leasing of equipment by the
agencies. The State Bond Committee selected Key Municipal
Financial as the provider of a $25 million master lease line
of credit in June 2001. Lease obligations can be increased
above the $50 million dollar threshold through the use of
the master lease program or through independent lease
purchase agreements, including vendor lease purchase
agreements or a third party lease purchase.
He noted that many questions could be addressed through
passage of HB 419. Generally, the limitations on
departments' ability to enter operating lease purchases for
non-real property purchases are broad. AS 36.30.085
provides the ability for departments to enter into lease
purchase agreements to perform duties and statutory
functions of the departments. The statute limits the term
of the lease to 40-years, requiring that the lease be
subject to annual appropriation and otherwise non-limiting.
He pointed out AS 36.30.085 pertains to real property and is
silent on the use of equipment and other non real property
issues. He noted that there are definitions of real and non
real property found in AS 01.10.060.
Mr. Wright directed comments to the policy questions that
arise from the master lease line of credit program:
· Is it a circumvention of the legislative
appropriation process.
· Where do the payments for the participating agencies
show up in the agencies budgets.
· Why do we pay interest at a time when General Fund
dollars are available to purchase equipment.
· Who controls the dollar amounts available within the
master lease program.
He recommended that departmental purchasing of big items
such as equipment or other items may be better sought
through the Capital budget process.
Mr. Wright referenced the Master Lease Summary attachment,
indicating the twenty-nine transactions, some of which have
been paid. (Copy on File). He pointed out that there are
about $40 million dollars of projects that have gone through
the Master Lease line of credit with approximately $26
million dollars owed on those transactions.
3:49:50 PM
JENNIFER KLEIN, FACILITIES MANAGER, DEPARTMENT OF HEALTH AND
SOCIAL SERVICES, offered to answer questions of the
Committee.
DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK AUTHORITY, DEPARTMENT OF REVENUE, commented that the
Administration is indifferent on the bill. He stated that
HB 419 would severely restrict the flexibility of the State
to respond to interim needs. The master lease of credit is
a program, which he manages. It was formulated in the early
2000's when there had been a series of private placements
made with banks for structuring, stand-alone transactions.
He realized that some agencies were using vender financing,
some of whom are creative people and have financing
associates. The financing can end up being a cost center
with high interest. The formulation of the program was not
an attempt to do something new but rather, it was an attempt
to do something better. It was a matter of accessing a tax
exempt rate of interest, recognizing that it was the State
of Alaska. Alaska should obtain a rate and have terms and
conditions for that type issue. The program has received
some notoriety with the purchase of the jet.
3:53:01 PM
Co-Chair Chenault pointed out that when the master lease
line of credit was put into effect, the State did not have
the amount available that it currently has. The line did
provide the Administration flexibility. He worried about
the Legislature giving away their appropriation authority
and if some of the issues were "sliding" around. He
believed that if any of the issues were really needed or if
it was a timing issue, then the master lease would be the
way to go. He wanted to be assured that concerns are
"tightened" up & not abused.
3:55:09 PM
VERN JONES, CHIEF PROCUREMENT OFFICER, DEPARTMENT OF
ADMINISTRATION, acknowledged the concerns voiced by Co-Chair
Chenault creating an attempt to zero in on the master lease
line of credit. The bill as written, would eliminate all
leases and will create departmental difficulty. There are
some things that by law, the State can not own and must
lease; there are other times where smaller dollar leases do
make sense. He reiterated concerns with the way the bill
was written.
3:56:22 PM
Co-Chair Chenault advised that HB 419 was not intended to
eliminate all leases but rather to bring the Administration
to the Legislature for discussions on certain issues.
Representative Thomas asked what was the spending limit.
Mr. Jones was not aware of a limit.
PUBLIC TESTIMONY CLOSED.
HB 419 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting was adjourned at 3:57 P.M.
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