Legislature(1993 - 1994)

04/16/1994 01:05 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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                     HOUSE FINANCE COMMITTEE                                   
                         April 16, 1994                                        
                            1:05 p.m.                                          
                                                                               
  TAPE HFC 94-127, Side 1, #000 - end.                                         
  TAPE HFC 94-127, Side 2, #000 - end.                                         
  TAPE HFC 94-128, Side 1, #000 - end.                                         
  TAPE HFC 94-128, Side 2, #000 - 511.                                         
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair Larson called the House  Finance Committee to order                 
  at 1:05 p.m.                                                                 
                                                                               
  PRESENT                                                                      
                                                                               
  Co-Chair Larson                                                              
  Co-Chair MacLean            Representative Martin                            
  Vice-Chair Hanley           Representative Navarre                           
  Representative Brown        Representative Parnell                           
  Representative Foster       Representative Therriault                        
                                                                               
  Representatives Grussendorf and Hoffman were not present for                 
  the meeting.                                                                 
                                                                               
  ALSO PRESENT                                                                 
                                                                               
  Senator  George  Jacko;  Crystal   Smith,  Director,  Member                 
  Services,    Alaska    Municipal   League;    Frank   Homan,                 
  Commissioner, Commercial Fisheries  Entry Commission;  Duane                 
  Guiley, Finance Director,  Department of Education;  Juanita                 
  Hensley, Chief Driver Services, Division of Motor  Vehicles,                 
  Department of  Public Safety; Ray Gillespie,  Lobbyist; Kent                 
  Dawson,  Lobbyist,  Silver  Lining  Seafood;  Greg  Winegar,                 
  Department of Commerce and Economic  Development; Josh Fink,                 
  Senator  Kelly;   Ron  King,  Department   of  Environmental                 
  Conservation; Jeannie Larson, Staff, Representative Martin.                  
                                                                               
  SUMMARY INFORMATION                                                          
                                                                               
  HB 328    "An Act relating to motor vehicle registration and                 
            registration fees;  to fees for  drivers' licenses                 
            and permits; and providing for an effective date."                 
                                                                               
            CSHB 328 (FIN) was reported  out of Committee with                 
            "no recommendation" and with a fiscal impact  note                 
            by the Department of Public Safety.                                
                                                                               
  SB 45     "An Act relating to persons under 21 years of age;                 
            providing for  designation  of  `safe  homes'  for                 
            runaway  minors; and  providing  for an  effective                 
            date."                                                             
                                                                               
                                1                                              
                                                                               
                                                                               
            HCS CSSB 45  (FIN) was  reported out of  Committee                 
            with  "no recommendation"  and  with three  fiscal                 
            impact notes  two by  the Department  of Health  &                 
            Social  Services  and  one  by  the  Alaska  Court                 
            System; and with  five zero fiscal notes  three by                 
            the Department of Health & Social Services, one by                 
            the Department of  Law, dated  2/17/94 and one  by                 
            the Department of Labor, dated 2/17/94.                            
                                                                               
  SB 141    "An Act extending  workers' compensation  coverage                 
            to certain  high school students  in uncompensated                 
            work-study programs."                                              
                                                                               
            HCS CSSB 141  (FIN) was reported out  of Committee                 
            with  "no  recommendation"  and  with  two  fiscal                 
            impact   notes   one   by   the   Department    of                 
            Administration  and  one   by  the  Department  of                 
            Education;  and  with a  zero  fiscal note  by the                 
            Department of Commerce and Economic Development.                   
                                                                               
  SB 251    "An  Act  relating   to  the  commercial   fishing                 
            revolving loan fund and the fisheries  enhancement                 
            revolving loan fund."                                              
                                                                               
            SB  251   was  HELD   in  Committee   for  further                 
            discussion.                                                        
  HOUSE BILL NO. 328                                                           
                                                                               
       "An  Act relating  to  motor  vehicle registration  and                 
       registration fees;  to fees for  drivers' licenses  and                 
       permits; and providing for an effective date."                          
                                                                               
  Representative  Martin  provided  members  with  a  proposed                 
  committee substitute,  work draft 8-LS1316\D,  4/15/94 (copy                 
  on  file).  He noted  that the proposed committee substitute                 
  incorporates the following changes:                                          
                                                                               
       *    Sets biennial vehicle  registration fees at  twice                 
            the current annual rate; and                                       
                                                                               
       *    Allows the  Department of Public Safety to suspend                 
            or revoke the  registration if the owner  fails to                 
            obtain an emission inspection certificate.                         
                                                                               
  Co-Chair Larson noted that the  ability to collect municipal                 
  personal property tax  on automobiles upon  registration has                 
  aided municipalities.                                                        
                                                                               
  Representative Martin  noted  that the  provision for  state                 
  collection will be optional.  He stressed that the municipal                 
                                                                               
                                2                                              
                                                                               
                                                                               
  tax could be collected in conjunction with the property tax.                 
                                                                               
                                                                               
  Co-Chair  Larson  noted  that  the  owner of  an  automobile                 
  purchased  on January  2 would  not pay their  municipal tax                 
  until the following year.                                                    
                                                                               
  JUANITA  HENSLEY,  DIRECTOR,  DIVISION  OF  MOTOR  VEHICLES,                 
  DEPARTMENT OF PUBLIC SAFETY explained that section 17 of the                 
  proposed  committee  substitute contains  the  municipal tax                 
  schedule.  Section 17 also provides for an agreement between                 
  the  Commissioner  of the  Department  of Public  Safety and                 
  municipalities   to   collect   the   municipal   tax   upon                 
  registration.     She  clarified  that   municipalities  are                 
  currently  given  the  option  of  state  collection.    The                 
  proposed committee substitute  would add  an option for  the                 
  state to collect the tax.  She noted that the state collects                 
  municipal tax for ten municipalities.                                        
                                                                               
  Ms. Hensley  noted that  the  proposed committee  substitute                 
  removes authorizing language from title 28.10.431.  Language                 
  allowing the tax to be collected by the Department of Public                 
  Safety would be placed under title  29.  The Commissioner of                 
  the  Department  of   Public  Safety  would  be   given  the                 
  discretion to collect or not collect the municipal tax.                      
                                                                               
  Representative   Hanley   expressed    concern   that    the                 
  Commissioner could chose not to collect the tax on behalf of                 
  municipalities.   He emphasized  that the  state receives  8                 
  percent of the money collected for administrative costs.                     
                                                                               
  Representative  Martin   noted  that  the   state  has   the                 
  administrative burden and expense of  collection.  The state                 
  receives 8 percent  of the  money collected as  compensation                 
  for the administrative costs.                                                
                                                                               
  Ms.  Hensley  noted  that  the  Division of  Motor  Vehicles                 
  collected $29.0 million  dollars in FY  94.  She added  that                 
  $5.9 million was  returned to municipalities.   She observed                 
  that  8  percent of  the collected  tax  is returned  to the                 
  General Fund.   Eight  percent  equals approximately  $440.0                 
  thousand  dollars.    She  emphasized  that  the  8  percent                 
  marginally  covers  all  of the  costs  associated  with the                 
  collection.                                                                  
                                                                               
  Representative Hanley discussed funding for the Division  of                 
  Motor  Vehicles.    He  reiterated   his  concern  with  the                 
  provision to  allow the  Commissioner of  the Department  of                 
  Public  Safety   to  not  collect  the  tax   on  behalf  of                 
  municipalities.                                                              
                                                                               
  Members discussed amending the proposed committee substitute                 
                                                                               
                                3                                              
                                                                               
                                                                               
  to delete the  provision allowing  discretion.  Ms.  Hensley                 
  suggested that section 17 be deleted.                                        
                                                                               
  Representative Martin  clarified that the  tax collection is                 
  based on annual  registration.   Ms. Hensley explained  that                 
  the tax is still based on the annual registration fee.                       
                                                                               
  Representative  Hanley  express concern  that municipalities                 
  would receive the same amount of revenue for each year.  Ms.                 
  Hensley clarified that  the fee would be collected every two                 
  years  with a  reflection of  one year  collected tax  base.                 
  Municipal revenues would be  cut in half if the tax  base is                 
  not  doubled  for a  biannual  collection.   Title 28.15.431                 
  would have to be amended to double the tax base structure.                   
                                                                               
  Ms. Hensley noted  that the legislation also  allows payment                 
  by credit card.                                                              
                                                                               
  JEANNIE LARSON, STAFF,  REPRESENTATIVE MARTIN observed  that                 
  the tax structure  could be  taken out of  statute to  allow                 
  municipalities to  set  fees.   Ms. Hensley  noted that  the                 
  Department of Public  Safety would oppose the  suggestion to                 
  allow municipalities to set  fees.  She emphasized that  the                 
  Department wishes a standard fee structure.                                  
                                                                               
  RON  KING, PROJECT  MANAGER,  MOBIL  SOURCES, DEPARTMENT  OF                 
  ENVIRONMENTAL  CONSERVATION  referred  to  the  department's                 
  fiscal  note.   He noted  that the  department  has provided                 
  three  fiscal  notes  based  on   different  options.    The                 
  department supports option  one.   Option one would  provide                 
  that if an individual fails to renew the emmissions  permit,                 
  the Department  of Environmental  Conservation would  inform                 
  the Department of Public Safety.                                             
                                                                               
  Mr. King explained that  failure to renew could result  in a                 
  violation of $100  hundred dollars  issued by the  municipal                 
  police department or a civil action through the small claims                 
  court.                                                                       
                                                                               
  Mr.   King   discussed  the   Department   of  Environmental                 
  Conservation's  fiscal  notes.   He noted  that  a $2  to $3                 
  dollar per vehicle  fee would be  collected.  He noted  that                 
  section  21  amends  AS   28.10.431  which  addresses   only                 
  Anchorage and Fairbanks.  Ms. Hensley noted that  section 14                 
  of the  proposed committee substitute addresses  the program                 
  fees  collected by the Division  of Motor Vehicles.  Program                 
  authority would be under section 19.                                         
                                                                               
  Representative Martin noted  that sections  10 and 15  allow                 
  registration to be paid by credit card.  He noted that there                 
  are   difficulties   with    implementation   of    biannual                 
  registration.                                                                
                                                                               
                                4                                              
                                                                               
                                                                               
  Ms. Larson recommended that sections 2, 7, 10, 14, 15 and 19                 
  be  retained  to  allow   the  Department  of  Environmental                 
  Conservation greater enforcement authority.                                  
                                                                               
  CRYSTAL SMITH, ALASKA  MUNICIPAL LEAGUE stressed  that state                 
  collection of the  municipal motor vehicle registration  tax                 
  is  the  most efficient.    She  felt fee  values  should be                 
  increased.   She spoke in support of a  change to a two year                 
  collection  of the tax.   She discussed the municipal fiscal                 
  note.  She  noted that enforcement  would be a local  police                 
  function.  She stressed that monitoring of the program would                 
  cost  the municipality of Anchorage $181.6 thousand dollars.                 
                                                                               
                                                                               
  Co-Chair Larson noted that the word "biannual" would need to                 
  be  deleted if the Committee does  not change the collection                 
  period  from an annual  fee.  Mr. King  stressed that if the                 
  registration is kept  on an annual  basis the Department  of                 
  Environmental  Conservation would  not have to  exercise any                 
  fee  requirements  under  section  19.   He  added  that the                 
  Department would  have improved  enforcement abilities.   He                 
  suggested  that  section 19  would  allow the  Department of                 
  Environmental Conservation to  establish a  fee to fund  the                 
  Mobil Source Program by program receipts.   He estimated the                 
  proposed change  would result in  a general fund  savings of                 
  $287.0 thousand dollars.  He noted that municipalities could                 
  increase revenues through the issuance of citations.                         
                                                                               
  Representative Martin  spoke  against increased  fees.    He                 
  spoke in  favor of deleting all sections  except sections 10                 
  and  15.     Representative  Therriault   agreed  that  only                 
  retention of sections 10 and 15 should be retained.                          
                                                                               
  Representative   Brown  suggested   that   fees  should   be                 
  considered  in light of the state's declining revenues.  She                 
  suggested that the enforcement authority  be retained if the                 
  fee sections are deleted.  Mr. King reiterated that sections                 
  2, 7, 10, 14, 15 and 19  would result in a zero fiscal  note                 
  and that  no fees  would be  executed by  the Department  of                 
  Environmental Conservation unless regulations are exercised.                 
                                                                               
  (Tape Change, HFC 94-127, Side 2)                                            
                                                                               
  Representative Martin  MOVED to  delete all  material except                 
  sections  10  and 15;  and amend  the  title to  reflect the                 
  change.                                                                      
                                                                               
                                                                               
  Representative Brown MOVED  to AMEND  the motion to  include                 
  the retention of  sections 2 and 19.   Representative Martin                 
  OBJECTED.  Representative Brown argued that the amendment to                 
                                                                               
                                5                                              
                                                                               
                                                                               
  the    amendment    would   strengthen    the   enforcement.                 
  Representative Martin spoke  in opposition to the  motion to                 
  amend.   A roll call vote was taken  on the amendment to the                 
  amendment.                                                                   
                                                                               
  IN FAVOR: Brown, Larson                                                      
  OPPOSED:  Hanley, Foster, Martin, Parnell, Therriault                        
                                                                               
  Representatives Grussendorf, Hoffman,  Navarre, and  MacLean                 
  were not present for the vote.                                               
                                                                               
  The MOTION FAILED (2-5).                                                     
                                                                               
  Ms.  Hensley  noted  that  the  Division  needs  legislative                 
  authority  to  pay the  credit  card  collection fee.    She                 
  estimated that  the Division  would need  a $225.0  thousand                 
  dollar fiscal  note to  reflect the  credit card  collection                 
  cost.                                                                        
                                                                               
  Representative  Martin reiterated  the motion to  delete all                 
  material except sections 10  and 15; and amend the  title to                 
  reflect the change.                                                          
                                                                               
  In  response  to  a question  by  Representative  Brown, Ms.                 
  Hensley clarified that the department needs authorization to                 
  seek appropriation to pay credit card costs.   She estimated                 
  that credit  card  fees  would  equal  approximately  $225.0                 
  thousand  dollars  a  year.    Ms. Hensley  discussed  costs                 
  associated with credit card collection and defaulted checks.                 
                                                                               
                                                                               
  Co-Chair Larson  suggested that credit  card collection will                 
  result in increased efficiency.                                              
                                                                               
  There being NO  OBJECTION, all  material except sections  10                 
  and 15 was  deleted; and  the title amended  to reflect  the                 
  change.                                                                      
                                                                               
  Representative  Brown expressed  concern  with the  cost  of                 
  credit card collection.                                                      
                                                                               
  Co-Chair  Larson  MOVED to  report  CSHB  328 (FIN)  out  of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying amended  fiscal  note from  the  Department  of                 
  Public Safety for  $225.0 thousand dollars.  There  being NO                 
  OBJECTION, it was so ordered.                                                
                                                                               
  CSHB  328  (FIN)  was  reported out  of  Committee  with "no                 
  recommendation"  and  with  a  fiscal  impact  note  by  the                 
  Department of Public Safety.                                                 
  SENATE BILL NO. 45                                                           
                                                                               
                                6                                              
                                                                               
                                                                               
       "An  Act relating  to persons  under 21  years of  age;                 
       providing for  designation of `safe homes'  for runaway                 
       minors; and providing for an effective date."                           
                                                                               
  Representative  Brown  noted that  Amendment  2A, which  was                 
  adopted  by  previous  action  of   the  Committee,  deleted                 
  "immediately" on  page  4,  line  31.   She  suggested  that                 
  "immediately" be added back.                                                 
                                                                               
  Co-Chair Larson MOVED  to RESCIND the Committee's  action in                 
  adopting AMENDMENT 2A.  There being  NO OBJECTION, it was so                 
  ordered.                                                                     
                                                                               
  Representative Brown MOVED to ADOPT  AMENDMENT 2A as amended                 
  to add "immediately" after "make  reasonable attempts to" on                 
  page  4, line  31.   There  being NO  OBJECTION,  it was  so                 
  ordered.                                                                     
                                                                               
  Representative Foster MOVED to report  HCS CSSB 45 (FIN) out                 
  of Committee with  individual recommendations  and with  the                 
  accompanying fiscal notes.  There being NO OBJECTION, it was                 
  so ordered.                                                                  
                                                                               
  CSHB  328  (FIN)  was reported  out  of  Committee with  "no                 
   recommendation"  and  with  a  fiscal  impact  note  by  the                
  Department of Public Safety.                                                 
  SENATE BILL NO. 141                                                          
                                                                               
       "An  Act  extending workers'  compensation  coverage to                 
       certain   high   school   students   in   uncompensated                 
       work-study programs."                                                   
                                                                               
  Co-Chair  Larson provided  members  with proposed  committee                 
  substitute, work  draft 8-LS0355\Q,  dated 3/23/94 (copy  on                 
  file).                                                                       
                                                                               
  JOSH FINK, STAFF, SENATOR KELLY  testified in support of  SB                 
  141.  He noted that current law allows students enrolled for                 
  credit at a  public high school  in a course which  combines                 
  academic instruction with work experience outside the school                 
  for a public or private nonprofit employer to be an employee                 
  of  the state for workers' compensation  purposes.  The bill                 
  would broaden  coverage so  that all  students participating                 
  for  no  financial compensation  in  on-the-job-training, as                 
  part of an  academic program would  be covered.  This  would                 
  provide  workers'  compensation  coverage  to  students  who                 
  participate in automotive  maintenance, welding,  carpentry,                 
  and various other work study programs.                                       
                                                                               
  Mr.  Fink  noted   that  the  bill   was  amended  so   that                 
                                                                               
                                7                                              
                                                                               
                                                                               
  uncompensated students injured  at the worksite, in  a work-                 
  study  program,  are  considered  state  employees  for  the                 
  purpose   of   medical    benefits   only   under   workers'                 
  compensation.  Uncompensated students who are injured  would                 
  not receive  compensation for lost wages as they received no                 
  compensation for the work study.                                             
                                                                               
  Mr. Fink noted that the  proposed committee substitute would                 
  provide the exclusive liability provision  to the work site,                 
  school district and  to the state.   He noted that  no claim                 
  has ever been filed under current statutes.                                  
                                                                               
  Representative Brown referred to page 1, lines 11 - 14.  Mr.                 
  Fink explained  that school  districts want  to  be able  to                 
  offer  activities  such  as  automotive  body shop,  but  be                 
  protected from liability.                                                    
                                                                               
  DUANE  GUILEY,  FINANCE  DIRECTOR, DEPARTMENT  OF  EDUCATION                 
  further explained that the purpose of exclusive liability in                 
  the state of Alaska is to provide, without proving fault, to                 
  the injured party medical payments  and if they were  making                 
  wages, lost wages.  The legislation clarifies that the state                 
  of  Alaska  bares  the  financial  responsibility   for  the                 
  situation.  The  Department of  Education would prefer  that                 
  the student be  employees of the school  district sponsoring                 
  the  activity  or   of  the  employer  providing   the  work                 
  experience.  He noted that under the legislation there would                 
  be no limitation  of state liability.  He noted  that if the                 
  legislation is passed the Department  of Education will seek                 
  a way to bill  the expense to the district  participating in                 
  the program.                                                                 
                                                                               
  Mr. Guiley discussed student work experience at the Kotzebue                 
  Technical Center and AVETEC.  He clarified that students not                 
  working  for a  salary  are covered  by school  districts as                 
  voluntary   employees   under   a  $200.0   hundred   dollar                 
  endorsement to their workers' compensation policy.  He noted                 
  that self insured districts cannot buy volunteer endorsement                 
  policies.    Salaried  students  must   be  covered  by  the                 
  employer's policy.                                                           
                                                                               
  Representative  Parnell  observed  that  employers  are  not                 
  willing to shoulder  the cost  of increased  premiums.   Mr.                 
  Fink  agreed  that  employers  do  not  have  protection  of                 
  workers' compensation statutes.                                              
                                                                               
  Mr. Fink reiterated that the legislation would allow medical                 
  costs without compensation.  He asserted that  there has not                 
  been a previous claim filed by a student.                                    
                                                                               
  In response to a question by Representative Martin, Mr. Fink                 
  noted  that  the  Department of  Education  has  submitted a                 
                                                                               
                                8                                              
                                                                               
                                                                               
  fiscal note for $24.0  thousand dollars.  He noted  that the                 
  fiscal note is  an estimate of  actual costs.  He  suggested                 
  that the fiscal estimation is high.                                          
                                                                               
  Co-Chair  Larson MOVED  to  ADOPT  work draft,  #8-LS0355\Q,                 
  dated 3/23/94 (copy on file).   There being no OBJECTION, it                 
  was so ordered.                                                              
                                                                               
  Representative  Foster MOVED to report CSHB 141 (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal notes.  There being no OBJECTION, it was                 
  so ordered.                                                                  
                                                                               
  HCS CSSB 141  (FIN) was reported  out of Committee with  "no                 
  recommendation" and with two fiscal  impact notes one by the                 
  Department of Administration  and one  by the Department  of                 
  Education; and with a zero fiscal  note by the Department of                 
  Commerce and Economic Development.                                           
  SENATE BILL NO. 251                                                          
                                                                               
       "An Act  relating to  the commercial fishing  revolving                 
       loan fund and the fisheries enhancement  revolving loan                 
       fund."                                                                  
                                                                               
  SENATOR GEORGE JACKO maintained that the fishing industry is                 
  undergoing an  economic  crisis due  to  weak markets.    He                 
  observed  that  fishermen  have  experienced  difficulty  in                 
  meeting their  loan and tax  obligations.  He  asserted that                 
  the legislation would make the Commercial  Fishing Revolving                 
  Loan  Fund more flexible in  order to meet  the needs of the                 
  fishing industry.                                                            
                                                                               
  Senator Jacko explained that the legislation would allow IRS                 
  debts that threaten ownership to be paid from the Commercial                 
  Fishing Revolving Loan Fund.   Loans would be one  time only                 
  and capped  at $30,000.   The  legislation contains a  three                 
  year sunset.  He emphasized that there are 12,000 permits in                 
  arrears to the IRS.                                                          
                                                                               
  Senator Jacko noted  that the  legislation would also  allow                 
  the department to  refinance loans  up to $300,000  thousand                 
  dollars  incurred  by  borrowers  for   the  purchase  of  a                 
  commercial fishing vessel or for gear.  He discussed factors                 
  which have lead fishermen into fiscal difficulties.                          
                                                                               
  (Tape Change, HFC 94-128, Side 1)                                            
                                                                               
  Senator Jacko observed that the  legislation also amends the                 
  Fisheries Enhancement  program to  provide authority to  the                 
  Department  of  Commerce  and  Economic  Development to  use                 
  excess  funds in  the fisheries  Enhancement Revolving  Loan                 
                                                                               
                                9                                              
                                                                               
                                                                               
  Fund for the  purposes of  the Commercial Fishing  Revolving                 
  Loan  Fund.    He  maintained that  loan  priority  will  be                 
  established  through  regulation.    Expenditures  would  be                 
  prioritized in the following manner:                                         
                                                                               
       1.   Limited Entry Permits                                              
       2.   Vessels                                                            
       3.   Gear                                                               
       4.   Refinance loans                                                    
       5.   Hatcheries                                                         
                                                                               
  Senator Jacko observed  that loans  would be categorized  as                 
  (a) or (b)  loans.  The (a)  loans would be made  to finance                 
  the purchase of limited entry permits.   The (b) loans would                 
  be made for  repair, restoration,  or upgrading of  existing                 
  vessels and gear or purchase or  limited entry permits, gear                 
  or  vessels.   Loans  are distinguished  on  page 1,  line 7                 
  through page 3, line  23.  He discussed requirements  of the                 
  loan.  He observed  that fishermen would need to  be current                 
  in their IRS  filings in order to  apply for the loans.   He                 
  noted that there is a two year Alaska residency requirement.                 
  A lack of employment opportunity in the area of residence or                 
  economic dependency on the fisheries  must be demonstrated.                  
  The applicant  must have  been active  in the  fisheries for                 
  three  of the last  five years.   The applicant must  have a                 
  commercial  fishing   license  for   the  year   immediately                 
  proceeding the loan application.                                             
                                                                               
  In response to a question by Representative Navarre, Senator                 
  Jacko clarified that payments would be made  directly to the                 
  IRS.  He reiterated the loans would be one time eligibility.                 
  He observed that the $30,000 thousand dollars loan cap would                 
  address 80 percent of the IRS obligations.                                   
                                                                               
  Senator Jacko explained that limited entry permits cannot be                 
  used as collateral for loans.                                                
                                                                               
  Representative  Hanley argued  that  the federal  government                 
  would  not take permits  if holders  attempt to  contact and                 
  negotiate for repayment of obligations.   He did not see the                 
  need for the state to assume the risk of repayment.  Senator                 
  Jacko maintained that the program  would act as assurance to                 
  the  IRS for  a means  of repayment  in order to  achieve an                 
  executed agreement.                                                          
                                                                               
  Representative Navarre  noted that payment  can be suspended                 
  for one year upon a showing of good cause.  He observed that                 
  the   tax  liability   could  have  been   incurred  through                 
  activities other than commercial fishing.  He questioned the                 
  constitutionality of the program.                                            
                                                                               
  Senator  Jacko  emphasized the  goal  of the  program  is to                 
                                                                               
                               10                                              
                                                                               
                                                                               
  prevent loss of limited entry permits to the IRS.                            
                                                                               
  Representative Parnell echoed  concerns that tax obligations                 
  could be  the result  of other  activities.   Representative                 
  Therriault  hypothesized that  the tax  liability would  not                 
  have to be associated with commercial fishing.                               
                                                                               
  Representative Navarre  suggested that  the state  negotiate                 
  with  the  federal  government to  allow  state  purchase of                 
  seized permits.                                                              
                                                                               
  FRANK HOMAN, COMMISSIONER, LIMITED ENTRY COMMISSION provided                 
  members with  a chart  summarizing  tax delinquencies  among                 
  permit holders (Attachment 1).   He gave a brief  history of                 
  the  Commissioner's   interactions  with   the  IRS.     The                 
  Commissioner was unable to  reach an agreement with  the IRS                 
  in regard to seized  permits.  He emphasized that  the state                 
  will  not lose money  as a result  of the  program.  Permits                 
  would be held as collateral.  He reviewed areas of the state                 
  having  difficulty  with tax  delinquencies  as detailed  in                 
  attachment 1.                                                                
                                                                               
  In response to a question  by Representative Therriault, Mr.                 
  Homan  explained  that  the IRS  did  not  want restrictions                 
  placed as to how they could discharge the permits.  He noted                 
  that  all  transfers  must come  through  the  Limited Entry                 
  Commission.  He  observed that if  the state is given  first                 
  right at permit purchase the bidding may not be as active.                   
                                                                               
  Representative  Navarre queried the  status of permits under                 
  dispute by both  the federal and  state governments for  the                 
  default of  payments.  Representative  Hanley observed  that                 
  the  federal  government  generally  wins  in  state/federal                 
  disputes.                                                                    
                                                                               
  Representative   Hanley   expressed    concern   that    the                 
  difficulties experienced  by  the fishing  industry are  not                 
  temporary.                                                                   
                                                                               
  In response to a question  by Representative Therriault, Mr.                 
  Homan further  discussed the  permit as  collateral for  the                 
  loan.  Representative  Therriault noted  that the permit  is                 
  generally used as collateral for its  purchase.  He asked if                 
  provisions are  included to allow  loans not  to exceed  the                 
  equity of the permit.  Mr. Homan stressed that it would be a                 
  criteria of the Division of Investment.                                      
                                                                               
  RAY GILLESPIE,  testified  on  behalf  of  four  aquaculture                 
  associations.    He  noted   that  aquaculture  associations                 
  support the  legislation.  He referred to provisions on page                 
  6, which allow  the Commissioner  of Department of  Commerce                 
  and  Economic  Development  to move  excess  money  from the                 
                                                                               
                               11                                              
                                                                               
                                                                               
  Commercial Fisheries  Revolving Loan  Fund to the  Fisheries                 
  Enhancement Revolving Loan Fund in order to refinance loans.                 
  He  noted  that  loans  were  made  at higher  than  current                 
  interest rates.  The ability to reduce loans for aquaculture                 
  associations would  indirectly benefit fishermen.   He noted                 
  that  aquaculture  association   loans  are  secured   by  a                 
  volunteer enhancement tax.  The  enhancement taxes cannot be                 
  repealed until loans are paid.                                               
                                                                               
  Representative Hanley summarized that  reduction of interest                 
  rates would reduce payments to the  Funds.  He discussed the                 
  operation of  the  Funds.   He  expressed concern  that  the                 
  legislature retain its ability to  control the amount loaned                 
  through the fund programs.                                                   
                                                                               
  Co-Chair MacLean  noted  that the  department has  projected                 
  that  $14  million  dollars  will   be  available  for  loan                 
  activity,  $9 million dollars will be used to satisfy normal                 
  loan demand, and $5 million will  be used for the applicants                 
  of  the bill.  Fifty percent of any remaining funds could be                 
  transferred  to  the  Fisheries Enhancement  Revolving  Loan                 
  Fund.                                                                        
                                                                               
  (Tape Change, HFC 94-128, Side 2)                                            
                                                                               
  Representative Hanley  stressed  that  priorities  for  loan                 
  payments should be set in statute.                                           
                                                                               
  Mr.  Gillespie   replied  that   the  Commercial   Fisheries                 
  Revolving Loan Fund demands will be the top priority, before                 
  any  funds are  transferred.  He  maintained that  any funds                 
  transferred  must  be  determined to  be  an  excess  of the                 
  demands of the  Commercial Fisheries Revolving Loan  Fund as                 
  determined by the Commissioner.                                              
                                                                               
  Co-Chair MacLean observed that the Department has determined                 
  that there will be no excess  funds available in the current                 
  fiscal year.                                                                 
                                                                               
  Mr. Gillespie explained that the  impact of reductions would                 
  be  experienced  in  future   years.    At  that  time   the                 
  Commissioner  could exercise  discretion to  transfer excess                 
  funds.                                                                       
                                                                               
  Representative  Hanley  questioned   the  amount  needed  to                 
  refinance the  loans.   Senator Jacko  pointed out that  the                 
  demand for  hatchery loan refinancing  will be more  than is                 
  available.                                                                   
                                                                               
  KENT DAWSON,  NORTHWEST  SEAFOODS,  SILVER  LINING  SEAFOODS                 
  spoke in  support of  the provision  to allow  hatcheries to                 
  lower their debt burden.   He maintained that the  health of                 
                                                                               
                               12                                              
                                                                               
                                                                               
  the  hatcheries is  directly related  to the  health  of the                 
  fishing industry.                                                            
  He  noted  that  hatcheries   operated  by  the  aquaculture                 
  associations cannot secure bank refinancing since the  state                 
  holds their collateral.                                                      
                                                                               
  GREG  WINEGAR,  LOAN  MANAGER,  DEPARTMENT OF  COMMERCE  AND                 
  ECONOMIC  DEVELOPMENT  stated  that  refinancing  hatcheries                 
  loans  would be separate from the legislation.  He clarified                 
  that loans can be refinanced  under the Commercial Fisheries                 
  Revolving Loan Fund.  If  money was available the department                 
  could  refinance under  the Fisheries  Enhancement Revolving                 
  Loan  Fund.     Discussion  pursued  regarding   refinancing                 
  interest rates.  He anticipated that there will not be funds                 
  available for transfer in FY 95.                                             
                                                                               
  Representative Navarre discussed loan financing requirements                 
  and mechanisms.  Mr. Winegar  explained that the legislation                 
  would allow  the department  to refinance  other than  state                 
  held loans.                                                                  
                                                                               
  Representative Navarre questioned if loans could be provided                 
  based  on the  value  of  collateral.    He  suggested  that                 
  sections referring to  loans for tax obligations  be deleted                 
  in  order  to  assure that  constitutional  problems  do not                 
  occur.                                                                       
                                                                               
  Representative  Brown  discussed  delinquent revolving  loan                 
  fund  loans.    Mr. Winegar  clarified  that  permanent fund                 
  dividends can be garnished.                                                  
                                                                               
  Co-Chair MacLean provided members with  AMENDMENT 1 (copy on                 
  file).    Amendment  1  would delete  "one-half  of".    She                 
  explained that the amendment would  allow the entire surplus                 
  balance from the Commercial Fisheries Revolving Loan Fund to                 
  be transferred to the  Fisheries Enhancement Revolving  Loan                 
  Fund.  She  maintained that future surplus funding should be                 
  available for hatchery loans.                                                
                                                                               
  Senator Jacko  explained that  the provision  to allow  only                 
  half of the surplus  funds to be transferred was  adopted to                 
  assure that Commercial Fisheries Revolving  Loan Fund retain                 
  sufficient funds.                                                            
                                                                               
  In response  to a  question by  Representative Navarre,  Mr.                 
  Winegar   noted  that   $44   million  dollars   have   been                 
  reappropriated from the Commercial Fisheries Revolving  Loan                 
  Fund to the General Fund  after loan demand.  There  has not                 
  been  excess  funds in  the Fisheries  Enhancement Revolving                 
  Loan Fund.                                                                   
                                                                               
  Representative Navarre noted that the amendment could reduce                 
                                                                               
                               13                                              
                                                                               
                                                                               
  money  appropriated  back to  the  General Fund  for general                 
  appropriations.  Discussion pursued in regards to the effect                 
  of section five on legislative appropriations.                               
                                                                               
  Co-Chair MacLean MOVED to ADOPT AMENDMENT 1.  Representative                 
  Navarre OBJECTED.  A roll call vote was taken on the MOTION.                 
                                                                               
  IN FAVOR: Therriault, Foster, Larson, MacLean                                
  OPPOSED:  Brown, Hanley, Martin, Navarre, Parnell                            
                                                                               
  Representatives Hoffman and Grussendorf were not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (4-5).                                                     
                                                                               
  Representative Foster MOVED to report HCS CSSB 251 (FIN) out                 
  of Committee  with individual  recommendations and  with the                 
  accompanying fiscal notes.   The motion was held  pending in                 
  order to allow members to allay constitutional concerns.                     
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 3:45 p.m.                                           
                                                                               
                                                                               
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