Legislature(2003 - 2004)

03/27/2003 01:37 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       March 27, 2003                                                                                           
                          1:37 PM                                                                                               
                                                                                                                                
TAPE HFC 03 - 39, Side A                                                                                                        
TAPE HFC 03 - 39, Side B                                                                                                        
TAPE HFC 03 - 40, Side A                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 1:37 PM.                                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Mike Hawker                                                                                                      
Representative Bill Stoltze                                                                                                     
Representative Carl Moses                                                                                                       
Representative Jim Whitaker                                                                                                     
Representative Eric Croft                                                                                                       
Representative Richard Foster                                                                                                   
Representative Reggie Joule                                                                                                     
                                                                                                                                
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                          
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative   Norman  Rokeberg;   Mark  Davis,   Director,                                                                   
Division of  Banking and Securities, Department  of Community                                                                   
and Economic Development; Joanne  Gibbens, Division of Family                                                                   
and  Youth   Services,  Department   of  Health   and  Social                                                                   
Services;  Ernesta   Ballard,  Commissioner,   Department  of                                                                   
Environmental Conservation;  Tom Chapple, Director,  Division                                                                   
of  Air  and  Water  Quality,   Department  of  Environmental                                                                   
Conservation;   Marilyn   Crocket,   Alaska   Oil   and   Gas                                                                   
Association; Zach Warwick, Staff, Sen. Gene Therriault.                                                                         
                                                                                                                                
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Pad Awen,  Executive Director, Resource Development  Council;                                                                   
Steve Mulder, Assistant Attorney  General, Department of Law.                                                                   
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 11     "An Act relating to deposits to the Alaska                                                                            
          permanent fund from mineral lease rentals,                                                                            
          royalties,   royalty  sale  proceeds,   net  profit                                                                   
          shares  under  AS  38.05.180(f)  and  (g),  federal                                                                   
          mineral  revenue sharing  payments received  by the                                                                   
          state from mineral leases,  and bonuses received by                                                                   
          the  state   from  mineral  leases,   and  limiting                                                                   
          deposits  from  those  sources  to the  25  percent                                                                   
          required  under art. IX,  sec. 15, Constitution  of                                                                   
          the   State  of  Alaska;   and  providing   for  an                                                                   
          effective date."                                                                                                      
                                                                                                                                
          HB  11 was  REPORTED out  of Committee  with a  "do                                                                   
          pass"    recommendation   and   three    previously                                                                   
          published  fiscal  notes  from  the  Department  of                                                                   
          Revenue (#1, zero; #2 & #3, fiscal impact).                                                                           
                                                                                                                                
HB 159    "An Act relating to the frequency of examinations                                                                     
          of  certain  persons  licensed  to  engage  in  the                                                                   
          business of  making loans of money,  credit, goods,                                                                   
          or things in action;  repealing the requirement for                                                                   
          a state  examination and  evaluation of  the Alaska                                                                   
          Commercial   Fishing  and  Agriculture   Bank;  and                                                                   
          providing for an effective date."                                                                                     
                                                                                                                                
          HB  159 was REPORTED  out of  Committee with  a "do                                                                   
          pass" recommendation  and a new fiscal  impact note                                                                   
          from   Department   of   Community   and   Economic                                                                   
          Development.                                                                                                          
                                                                                                                                
HB 160    "An Act relating to the emission control permit                                                                       
          program; relating  to fees for that  program and to                                                                   
          the  accounting   of  receipts  deposited   in  the                                                                   
          emission  control  permit   receipts  account;  and                                                                   
          providing for an effective date."                                                                                     
                                                                                                                                
          Committee Substitute  HB 160 (FIN) was REPORTED out                                                                   
          of Committee with a  "do pass" recommendation and a                                                                   
          new   zero   fiscal   note   from   Department   of                                                                   
          Environmental Conservation.                                                                                           
                                                                                                                                
HB 166    "An Act relating to adoptions that include a                                                                          
          subsidy  payment by  the state; eliminating  annual                                                                   
          review  of  the subsidy  paid  by the  state  after                                                                   
          adoption  of a  hard-to-place  child has  occurred;                                                                   
          and providing for an effective date."                                                                                 
                                                                                                                                
          HB 166 was HEARD and HELD.                                                                                            
                                                                                                                                
CSSB 20(FIN)                                                                                                                    
          "An Act relating to  the Board of Marine Pilots and                                                                   
          to marine pilotage;  extending the termination date                                                                   
          of the  Board of Marine  Pilots; and  providing for                                                                   
          an effective date."                                                                                                   
                                                                                                                                
          CSSB 20 (FIN) was REPORTED out of Committee with a                                                                    
          "do pass" recommendation and one impact fiscal                                                                        
          note #1 DCED.                                                                                                         
                                                                                                                                
HOUSE BILL NO. 160                                                                                                            
                                                                                                                                
     "An  Act   relating  to  the  emission   control  permit                                                                   
     program; relating  to fees for  that program and  to the                                                                   
     accounting  of   receipts  deposited  in   the  emission                                                                   
     control  permit receipts account;  and providing  for an                                                                   
     effective date."                                                                                                           
                                                                                                                                
ERNESTA BALLARD, COMMISSIONER, DEPARTMENT OF ENVIRONMENTAL                                                                      
CONSERVATION testified in support of the legislation.  She                                                                      
read from prepared testimony as follows:                                                                                        
                                                                                                                                
     Mr.  Chairmen and  members of the  committee, thank  you                                                                   
     for the  opportunity to testify  today on behalf  of the                                                                   
     Governor's air permit reform legislation, HB 160.                                                                          
                                                                                                                                
     Governor  Murkowski is committed  to enhancing  Alaska's                                                                   
     economy  through resource  development.   He is  equally                                                                   
     committed  to protecting  Alaska's environment.   It  is                                                                   
     not  an either/or  proposition.   A strong economy  will                                                                   
     generate  the  revenue  base  to  continue  funding  our                                                                   
     important  regulatory   programs.    Without   a  strong                                                                   
    economy we cannot hope to have a strong government.                                                                         
                                                                                                                                
     Over the last  30 years, we have learned  much about the                                                                   
     environmental  and health  hazards  associated with  air                                                                   
     pollution.   We have  also learned  much about  emission                                                                   
     control  technologies,   air  modeling   and  protective                                                                   
     ambient  air  standards.   Through  national  and  state                                                                   
     legislation  we  have  recognized  our shared  value  of                                                                   
     environmental protection  along with the many other core                                                                   
     values   that   form  the   framework   for   government                                                                   
     regulatory  programs.  Environmental  protection  is not                                                                   
     incompatible with  resource development.   Rather, it is                                                                   
     as fundamental  a component  of resource development  as                                                                   
     are labor and worker safety laws.                                                                                          
                                                                                                                                
     Governor Murkowski and members  of his Cabinet recognize                                                                   
     that  Alaska's laws  taken together  form the  framework                                                                   
     for   a  successful   resource   development   strategy.                                                                   
     Environmental   laws  are  one   of  the  many   equally                                                                   
     important pieces of the public  policy mosaic.  They are                                                                   
     no more, and no less important.   This bill will improve                                                                   
     the process  and function of underlying  state policy to                                                                   
     protect  the  environment.    It  does  NOT  change  the                                                                   
     protective standards  already in place  and administered                                                                   
     by the Department through existing regulation.                                                                             
                                                                                                                                
     Through  DEC's  proposed  FY  04  budget  we  intend  to                                                                   
     sharpen our  focus on our core responsibilities.   House                                                                   
     Bill 160 is essential to  achieving the results promised                                                                   
     in our budget proposal.   HB 160 achieves permit reform.                                                                   
     As you  can see - reform  requires attention  to detail.                                                                   
     The bill  is long with  many reference changes.   Reform                                                                   
     means  re-engineering the  way  we do  business.   These                                                                   
     proposed  changes in law  will substantially  change the                                                                   
     mechanisms of permitting.   Moreover, the bill makes way                                                                   
     for  many more changes  that we  can accomplish  through                                                                   
     revised  regulations.   The  ultimate result  will be  a                                                                   
     timely, predictable and rational  program that will meet                                                                   
     business and  development needs without  sacrificing air                                                                   
     quality.                                                                                                                   
                                                                                                                                
     Our  legislative  proposal  is based  on  two  important                                                                   
     developments  of the  last  several years.    One was  a                                                                   
     benchmarking  study  conducted by  the  department.   We                                                                   
     reviewed  the funding  and workforce  allocation in  the                                                                   
     air programs  of states that  we consider  comparable in                                                                   
     workload  and  complexity  to  Alaska.   Alaska  has  an                                                                   
     unusual  air   program.    Although  we   have  a  small                                                                   
     population,  we have a  high number  of air permits:  as                                                                   
     many operating permits as  the State of Colorado, and as                                                                   
     many major new  permits as the state of New  Jersey.  We                                                                   
     discovered  in our  benchmarking  study  that we  simply                                                                   
     have  not  funded,  staffed  or  organized  our  program                                                                   
     adequately to do the job  applicants expect.  House Bill                                                                   
     160 and the program increase  proposed in the Governor's                                                                   
     budget will  allow us to  remodel our permit  program in                                                                   
     line with successful programs in other states.                                                                             
                                                                                                                                
     The second development that  guided our proposal was the                                                                   
     Air  Permit Work  Group - a  stakeholder group  convened                                                                   
     last  year.    The Work  Group  carefully  reviewed  our                                                                   
     program against  the federal Clean  Air Act and  the EPA                                                                   
     rules that have been amended  several times establishing                                                                   
     new   programs  and   control  concepts.     Our   state                                                                   
     permitting program  has not kept pace with  the national                                                                   
     regime   or  the  needs   of  Alaskan  communities   and                                                                   
     industry.  The Work Group  report is in your packets and                                                                   
     the work group recommendations  are incorporated into HB                                                                   
     160.                                                                                                                       
                                                                                                                                
     Specifically, this bill:                                                                                                   
                                                                                                                                
   · Creates a predictable, timely and rational permitting                                                                      
     program.                                                                                                                   
   · Changes how we regulate minor sources using more                                                                           
     standardized permit conditions  based on best management                                                                   
     practices.   Our present "permit by rule"  program works                                                                   
     for  the oil  drilling  rigs.   We  want  to expand  the                                                                   
     concept  and  apply it  to  more  situations.   For  our                                                                   
     population size, we have many more mobile and portable                                                                     
     plants and machinery than most states.  We need the                                                                        
     tools to work with this unusual but essential fleet.                                                                       
   · Exempts  sources from permitting  to the extent  allowed                                                                   
     under federal law.                                                                                                         
   · Streamlines permitting  for the major sources  in Alaska                                                                   
     by matching our procedures to those in federal rules.                                                                      
   · Achieves  efficiency through  adopting federal  rules by                                                                   
     reference  - this  will make  it much  easier for  us to                                                                   
     permit rural power  plants - we will be able  to use the                                                                   
     so-called "clean unit test"  to avoid a detailed site by                                                                   
     site technology analysis.                                                                                                  
                                                                                                                                
   I want to take some time to explain  our zero fiscal note.                                                                   
   The bill itself  does not  warrant a significant  increase                                                                   
   in staffing.  However, reform and streamlining  alone will                                                                   
   not obtain the  desired result.   On-time permitting  in a                                                                   
   fast changing  resource development  climate  can only  be                                                                   
   achieved through  a combination  of reforming the  process                                                                   
   and  increased  staff.    Without  additional  staff,  the                                                                   
   important changes achieved through the  legislation cannot                                                                   
   be delivered.                                                                                                                
                                                                                                                              
   We are asking for an  increment in the Governor's  FY 2004                                                                   
   Operating Budget to  increase staffing for  permitting and                                                                   
   field functions and to  hire contractors to  handle fluxes                                                                   
   in  permitting  demands  -  both  critical  components  to                                                                   
   achieving overall success.                                                                                                   
                                                                                                                                
   The direction  in which  I  am leading  the department  is                                                                   
   based on my  commitment to  develop sound,  understandable                                                                   
   standards, spend  time in  the field and  enforce the  law                                                                   
   when it is necessary to achieve compliance.                                                                                  
                                                                                                                                
   I have  proposed additional  staffing in  this program  to                                                                   
   fulfill my commitment.   A well run air permit  program is                                                                   
   essential to  the economic  and social  well being  of our                                                                   
   state.   I  also  want  you  to know  that  while  we  are                                                                   
   increasing this  very important  program,  we have  looked                                                                   
   closely at our  mission and have  reduced our  services so                                                                   
   that we are  only providing  those that  are essential  to                                                                   
   our  mission   of  protecting   public   health  and   the                                                                   
   environment.   With  this  increment  as well  as  several                                                                   
   other small  increases  in  core permitting  programs  the                                                                   
   department  still has  an  overall  net  reduction  of  13                                                                   
   positions and $153,000.                                                                                                      
                                                                                                                                
Co-Chair Harris MOVED to adopt the Committee Substitute for                                                                     
HB 160 (FIN), Work Draft (23-GH1059\D).  There being NO                                                                         
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
Co-Chair Harris referred to the fiscal note (#1, DEC,                                                                           
3/3/03) and asked if the numbers were correct.                                                                                  
                                                                                                                                
Commissioner  Ballard  clarified  that  the new  fiscal  note                                                                   
(3/26/03)  was actually a  zero fiscal  note.  She  explained                                                                   
that in  preparing the  initial fiscal  note, the  department                                                                   
followed  instructions   to  reflect  that  the   amount  was                                                                   
included in the  FY 04 budget and would therefore  be "zeroed                                                                   
out".   She  noted that  a subsequent  meeting with  Co-Chair                                                                   
Williams'  staff clarified  that  the appropriate  course  of                                                                   
action was actually to prepare a zero fiscal note.                                                                              
                                                                                                                                
Co-Chair Harris asked   if  positions  would  be   added  and                                                                   
pointed  out  that  seven  new  positions  reflected  in  the                                                                   
previous fiscal  note did  not now appear  on the  new fiscal                                                                   
note.                                                                                                                           
                                                                                                                                
Commissioner  Ballard  responded   that  new  positions  were                                                                   
intended to implement  the new program.  She  maintained that                                                                   
the  legislation could  not be  properly implemented  without                                                                   
additional staff  and that staff  needed the new  legislation                                                                   
to improve the permitting program.                                                                                              
                                                                                                                                
Co-Chair  Harris referred  to  the previous  fiscal note  and                                                                   
asked  about  funds  to  be  received   from  the  Clean  Air                                                                   
Protection Fund.                                                                                                                
                                                                                                                                
Commissioner  Ballard clarified  that the  Federal Clean  Air                                                                   
Protection  Act  established   a  permit  program,  paid  for                                                                   
through permit  fees.  She  stated that collected  fees would                                                                   
offset the entire cost of the  budget request increment.  She                                                                   
did not feel  it was appropriate for the Department  to raise                                                                   
fees in order to upgrade the program.                                                                                           
                                                                                                                                
Co-Chair Harris contended  that  the previous  note was  more                                                                   
appropriate.   He noted, however, that although  the spending                                                                   
was  increased,  the  program  did not  seem  to  impact  the                                                                   
overall governmental budget.                                                                                                    
                                                                                                                                
In response  to a question  by Co-Chair Harris,  Commissioner                                                                   
Ballard  responded that  the seven new  positions would  work                                                                   
with existing positions in an entirely new program.                                                                             
                                                                                                                                
Co-Chair Harris asked  for a definition  of a major  versus a                                                                   
minor source.   Commissioner Ballard  responded that  a major                                                                   
source might be  a power plant, whereas a minor  source might                                                                   
be an asphalt plant.                                                                                                            
                                                                                                                                
Representative Joule asked about  the differences between the                                                                   
Committee  Substitute and  the original  bill.   Commissioner                                                                   
Ballard deferred to Mr. Chapple.   She noted the Department's                                                                   
review and support of the Committee Substitute.                                                                                 
                                                                                                                                
TOM CHAPPLE,  DIRECTOR,  DIVISION OF AIR  AND WATER  QUALITY,                                                                   
DEPARTMENT    OF    ENVIRONMENTAL    CONSERVATION    provided                                                                   
information   regarding   key   changes  in   the   Committee                                                                   
Substitute.                                                                                                                     
                                                                                                                                
Mr.  Chapple  referred  to  Section  12, on  page  5  of  the                                                                   
Committee   Substitute,   sub-section  (f),   pertaining   to                                                                   
facilities  exempt from  permitting.   He noted the  language                                                                   
change of "exempt  or defer", since some federal  rules speak                                                                   
of deferring  a source if a  permit were required at  a later                                                                   
point.  He also  referred to Section 13, line  12 of the same                                                                   
page,  pertaining to  construction  permits.   He noted  that                                                                   
current  statute  indicates numbers  regarding  quantity  per                                                                   
year of emission,  but left some criteria to  regulation.  He                                                                   
explained  that  the  changes specified  the  federal  cutoff                                                                   
values, linking it to the federal regulation.                                                                                   
                                                                                                                                
Mr. Chapple also referred to page  7, Section 15 of the bill,                                                                   
line 21, where  a new sub-section (2) is added,  dealing with                                                                   
monitoring, record  keeping and  reporting requirements.   He                                                                   
noted  that the  new  provisions  linked with  federal  rules                                                                   
about monitoring permits.                                                                                                       
                                                                                                                                
Mr. Chapple  then referred to  Section 25, on page  12, under                                                                   
"General minor  permits". He  briefly defined these  permits,                                                                   
and  stated that  the  section  allowed general  permits  for                                                                   
minor sources.   He noted previous confusion  over the permit                                                                   
holder.    He maintained  that  the  language  clarified  the                                                                   
permit user.                                                                                                                    
                                                                                                                                
Mr.  Chapple also  referred  to  Section 26  under  Temporary                                                                   
operations. He referred to line  27, changing the number from                                                                   
thirty to  ten days.   He  noted that  federal rules  had not                                                                   
been drafted at  the time of the original bill,  and that the                                                                   
federal rules  now specifies  ten days,  a time period  which                                                                   
also corresponds to industry needs.                                                                                             
                                                                                                                                
Mr. Chapple  referred to Section  54, page 23,  which defines                                                                   
the  term "modification".   He  noted that  the citation  was                                                                   
more  specific  in  federal regulations,  and  that  the  new                                                                   
language corresponds to federal regulation.                                                                                     
                                                                                                                                
Mr. Chapple  referred to Section  59, on page 25,  which adds                                                                   
definitions  of "major  modification"  and "major  stationary                                                                   
source".   He also  referred to  Section 62,  page 25,  which                                                                   
adds a new  sentence placing a requirement on  the department                                                                   
to adopt  regulations recently  adopted by the  Environmental                                                                   
Protection Agency (EPA).  He emphasized  that the regulations                                                                   
were important to the state of Alaska.                                                                                          
                                                                                                                                
Co-Chair  Harris   asked  if  the  Department   had  received                                                                   
statewide   feedback  from  various   groups  regarding   the                                                                   
legislation.                                                                                                                    
                                                                                                                                
Mr. Chapple responded that they  had heard predominantly from                                                                   
the  Stakeholder  Group, representing  the  oil  and gas  and                                                                   
mining  industries,   as  well  as  members   of  the  Prince                                                                   
Williams' Sound and  Cook Inlet advisory councils.   He noted                                                                   
that those  parties engaged  in substantive discussion  about                                                                   
the bill throughout the late summer and early fall.                                                                             
                                                                                                                                
Co-Chair  Harris  asked  about the  differences  between  the                                                                   
modified  Alaskan  statute  and   federal  law  in  terms  of                                                                   
emission standards.                                                                                                             
                                                                                                                                
Mr.  Chapple stated  that the  bill  did not  change "out  of                                                                   
stack"  limits, which  still exist  along  with ground  level                                                                   
limits, also  known as ambient  public health standards.   He                                                                   
stated  that the  bill  merely  streamlined the  process  for                                                                   
timely  permitting   and  attained  efficiencies   by  better                                                                   
imitating  federal   standards.     He  explained   that  one                                                                   
efficiency  moved  "minor  sources"  from  the  major  source                                                                   
permitting program and created a new, streamlined program.                                                                      
                                                                                                                                
Mr.  Chapple  also  stated  that   the  Committee  Substitute                                                                   
reflected   conversations  between   the   Sponsor  and   the                                                                   
Department, and that provisions  had been thoroughly examined                                                                   
by DEC staff and the Department of Law.                                                                                         
                                                                                                                                
MARILYN  CROCKET,   DEPUTY  DIRECTOR,  ALASKA   OIL  AND  GAS                                                                   
ASSOCIATION  (AOGA) testified  in support of  the bill.   She                                                                   
explained that  her organization  was a trade  association of                                                                   
seventeen oil and  gas companies in the state  of Alaska. She                                                                   
observed  that  the  oil  and  gas  industry  had  long  been                                                                   
involved  in  the  air  permitting   process  and  an  active                                                                   
participant in  the aforementioned discussions  to revise the                                                                   
state's  regulatory  program.   She  noted that  the  revised                                                                   
process allowed timelier permitting  and more clearly defined                                                                   
fees.   She also observed that  the new program  more clearly                                                                   
resembles the federal program.                                                                                                  
                                                                                                                                
Ms. Crocket noted two changes  in the Committee Substitute to                                                                   
which AOGA  took exception.   She noted  a citation  error in                                                                   
referring  to  federal  rules:    page 25,  lines  2  and  5,                                                                   
referring  to 40  CFR.165 and  .166, should  read 51.165  and                                                                   
51.166.                                                                                                                         
                                                                                                                                
Representative Foster  MOVED to accept the  technical changes                                                                   
[CFR  51.165 and  CFR 51.166]  to  the Committee  Substitute.                                                               
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
Ms. Crocket also referred to page  7, lines 21-25, pertaining                                                                   
to monitoring and reporting requirements.   She noted the new                                                                   
language  "but  which  may  be   supplemented  by  additional                                                                   
requirements that".  She suggested  that the language was not                                                                   
consistent with the  recommendations of the Work  Group.  She                                                                   
noted  the  great  challenge   of  monitoring  and  reporting                                                                   
requirements.    She  observed   that  Alaska's  terrain  and                                                                   
climate  might  sometimes  result   in  additional  or  other                                                                   
monitoring  requirements.   She summarized  that the  oil and                                                                   
gas  industry  did not  anticipate  that  the  recommendation                                                                   
would  add  additional monitoring  requirements,  but  rather                                                                   
enhance flexibility to take into  account Alaska's situation.                                                                   
                                                                                                                                
Mr. Chapple noted  that the words that were  developed in the                                                                   
Work   Group  were   "take  into   account  Alaska's   unique                                                                   
conditions".  He suggested that  a change had occurred in the                                                                   
drafting process.  He suggested  that the words "supplemented                                                                   
by additional requirements that" be omitted.                                                                                    
                                                                                                                                
Representative  Croft  suggested   "additional  or  different                                                                   
requirements" as a possible solution.                                                                                           
                                                                                                                                
After further  discussion by  Committee members,  Ms. Crocket                                                                   
suggested  that the  sentence might  read "but  which may  be                                                                   
modified   to  take   into   account  this   state's   unique                                                                   
conditions".                                                                                                                    
                                                                                                                                
STEVE MULDER, ASSISTANT ATTORNEY  GENERAL, DEPARTMENT OF LAW,                                                                   
testified  via   teleconference.    He  stated   that  either                                                                   
solution would  be acceptable, but recommended  the option of                                                                   
"additional or different".                                                                                                      
                                                                                                                                
Co-Chair Harris  recommended the  solution of "but  which may                                                                   
be  modified  to take  into  account",  as suggested  by  Ms.                                                                   
Crocket.                                                                                                                        
                                                                                                                                
Representative  Whitaker  asked  whether  the intent  was  to                                                                   
establish a limitation as to compliance  with record keeping,                                                                   
reporting and  monitoring requirements.   He speculated  that                                                                   
the goals were for specificity and clarity.                                                                                     
                                                                                                                                
Mr. Chapple  clarified that the  intent was to  be consistent                                                                   
with  federal  regulations,  while  allowing  flexibility  to                                                                   
respond to Alaska's unique conditions.                                                                                          
                                                                                                                                
In response  to a  question by  Representative Whitaker,  Mr.                                                                   
Chapple confirmed  that this would provide more  certainty to                                                                   
applicants as to requirements.                                                                                                  
                                                                                                                                
Representative Croft emphasized  that the bill did not change                                                                   
the overall  standards.  He referred  to Page 9,  which lists                                                                   
the  substantive  standards,  and  differentiated  this  from                                                                   
reporting  requirements, which  required more flexibility  in                                                                   
Alaska.                                                                                                                         
                                                                                                                                
Co-Chair Harris  pointed out that  "modify" did  not preclude                                                                   
additional requirements.                                                                                                        
                                                                                                                                
There  being  NO  OBJECTION,  the  Committee  Substitute  was                                                                   
amended  to read  "but which  may  be modified  to take  into                                                                   
account  this state's  unique conditions"  (page 7, lines  24                                                                   
and 25).                                                                                                                        
                                                                                                                                
TADD OWEN,  EXECUTIVE DIRECTOR, RESOURCE  DEVELOPMENT COUNCIL                                                                   
(RDC)  testified via  teleconference in  support the  amended                                                                   
version  of  the  Committee  Substitute.    He  read  from  a                                                                   
prepared statement as follows:                                                                                                  
                                                                                                                                
    Thank  you, Mr. Chairman. For the record  my name is Tadd                                                                   
    Owens,  I  am  the  executive director  of  the  Resource                                                                   
    Development   Council.  RDC  is  a  private,  non-profit,                                                                   
    business   association   representing   individuals   and                                                                   
    companies  from  Alaska's oil  and  gas, mining,  timber,                                                                   
    tourism  and fisheries  industries.  Our membership  also                                                                   
    includes   electric  utilities,  local   communities  and                                                                   
    Native  regional and village corporations.  RDC's mission                                                                   
    is   to   help   grow  Alaska's   economy   through   the                                                                   
    responsible    development   of   the   state's   natural                                                                   
    resources.                                                                                                                  
                                                                                                                                
    RDC  supports the amended  version of House Bill  160 and                                                                   
    we   ask  the  House   Finance  Committee  to   move  the                                                                   
    legislation  forward. I would  like to thank DEC  for not                                                                   
    only   establishing  a   Work  Group   to  evaluate   the                                                                   
    department's   air  permitting  program,   but  also  for                                                                   
    taking  action  on  that group's  recommendations.  While                                                                   
    RDC  did  not formally  participate  in  the Air  Program                                                                   
    Work  Group, several  of our members  did and  we endorse                                                                   
    their recommendations.                                                                                                      
                                                                                                                                
    Working  in  cooperation  with the  regulated  community,                                                                   
    DEC   has  successfully   addressed   many  of  the   air                                                                   
    program's  major  weaknesses and  inefficiencies. HB1  60                                                                   
    provides    DEC    with   additional    flexibility    in                                                                   
    administering  the  air  program  and it  simplifies  the                                                                   
    permitting   process   for   those   in   the   regulated                                                                   
    community.                                                                                                                  
                                                                                                                                
    Specifically, this bill accomplishes the following:                                                                         
                                                                                                                                
     • It allows DEC's program to remain consistent with the                                                                    
       federal program on a long-term basis                                                                                     
     • It differentiates between major and minor source                                                                         
       permits and standardizes the requirements for minor                                                                      
       permits                                                                                                                  
     • It restructures the program's fee schedule making the                                                                    
       costs more transparent and predictable for applicants                                                                    
                                                                                                                                
    In  or  view,   this  legislation  will  result  in  more                                                                   
    efficient  review of permits  allowing agency  staff more                                                                   
    time  and  resources  for  the field  work  necessary  to                                                                   
    protect  Alaska's  air quality.  HB1  60  also creates  a                                                                   
    much more user-friendly process for those in the                                                                            
    regulated community. The legislation has RDC's strong                                                                       
    support.                                                                                                                    
                                                                                                                                
HENRIK WESSEL, ENVIRONMENTAL OFFICER,  GOLDEN VALLEY ELECTRIC                                                                   
ASSOCIATION testified in support  of the Committee Substitute                                                                   
and thanked the Working Group  for their recommendations.  He                                                                   
noted that his group was a non-profit  cooperative serving 90                                                                   
thousand  residents.    He  commended   the  legislation  for                                                                   
streamlining the  permitting process, while  still protecting                                                                   
the environment.                                                                                                                
                                                                                                                                
Representative Foster  MOVED to report CSHB 160  (FIN) out of                                                                   
Committee with the accompanying  fiscal note.  There being NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
Committee  Substitute  HB  160  (FIN)  was  REPORTED  out  of                                                                   
Committee  with a  "do pass"  recommendation and  a new  zero                                                                   
fiscal note from Department of Environmental Conservation.                                                                      
                                                                                                                                
TAPE HFC 03 - 39, Side B                                                                                                      
HOUSE BILL NO. 11                                                                                                             
                                                                                                                                
     "An  Act relating  to deposits to  the Alaska  permanent                                                                   
     fund  from  mineral lease  rentals,  royalties,  royalty                                                                   
     sale proceeds,  net profit shares under  AS 38.05.180(f)                                                                   
     and  (g),  federal  mineral   revenue  sharing  payments                                                                   
     received by  the state from mineral leases,  and bonuses                                                                   
     received by the state from  mineral leases, and limiting                                                                   
     deposits from  those sources to the 25  percent required                                                                   
     under  art. IX, sec.  15, Constitution  of the  State of                                                                   
     Alaska; and providing for an effective date."                                                                              
                                                                                                                                
REPRESENTATIVE   NORMAN  ROKEBERG,   SPONSOR,  testified   in                                                                   
support  of the  bill.   He  explained  that the  legislation                                                                   
returns  the percentage  of all mineral  lease royalties  and                                                                   
bonuses   deposited   into   the  Permanent   Fund   to   the                                                                   
constitutionally mandated 25 per cent.                                                                                          
                                                                                                                                
Representative  Rokeberg  maintained   that  the  bill  would                                                                   
provide Alaska  with a source  of general fund  revenue while                                                                   
staying true  to the purposes  of the Permanent Fund  and the                                                                   
intent  of  the Constitution.    He  referred to  Article  9,                                                                   
Section  15 of the  Alaska State  Constitution, which  states                                                                   
"At least twenty-five per cent  of all mineral lease rentals,                                                                   
royalties,  royalty sale  proceeds,  federal mineral  revenue                                                                   
sharing payments  and bonuses received by the  State shall be                                                                   
placed in a permanent fund".                                                                                                    
                                                                                                                                
Representative   Rokeberg   observed   that   in   1980   the                                                                   
legislature recognized that the  state had "excess revenues".                                                                   
He pointed out that the general  fund expenditure during that                                                                   
legislative session  was $4.07  billion.  He speculated  that                                                                   
the current budget was roughly one third of that amount.                                                                        
                                                                                                                                
Representative  Rokeberg pointed  out the  fiscal gap  facing                                                                   
the current  Legislature.   He proposed  that the bill  would                                                                   
generate  approximately $42  million per  year over  the next                                                                   
seven years.                                                                                                                    
                                                                                                                                
Representative  Rokeberg  speculated  that  contributions  of                                                                   
smaller  fields such  as  Alpine and  North  Star offset  the                                                                   
decline in  the production  at major  fields such as  Prudhoe                                                                   
Bay.    However   he  maintained  that  the   replacement  of                                                                   
resources was  not entirely equitable.   He pointed  out that                                                                   
Prudhoe  Bay was  contributing  75 percent  into the  General                                                                   
Fund and 25 percent into the Permanent Fund.                                                                                    
                                                                                                                                
Representative Rokeberg  refuted criticism that  the bill was                                                                   
"a raid on the  permanent fund". He maintained  that the bill                                                                   
merely redirects monies being  deposited while taking nothing                                                                   
out of the Permanent Fund.  He  also maintained that the bill                                                                   
would have little effect on the  dividend program, projecting                                                                   
zero impact in the first two years,  potentially growing to a                                                                   
$20 per dividend impact within ten years.                                                                                       
                                                                                                                                
Representative  Rokeberg  summarized   that  the  bill  would                                                                   
diminish the draw on the Constitutional  Budget Reserve (CBR)                                                                   
and minimized the need for more general taxation programs.                                                                      
                                                                                                                                
Co-Chair Williams  asked for  clarification on the  criticism                                                                   
of the  bill.   Representative Rokeberg  reiterated  that the                                                                   
bill would  withdraw no monies  from the Permanent Fund.   He                                                                   
conceded  that to  put less  into  the Fund  might result  in                                                                   
lesser  output.   He maintained  that  market conditions  had                                                                   
much greater impact  on the Fund's performance.   He drew the                                                                   
analogy that increasing savings  while in a deficit might not                                                                   
be prudent management.  He suggested  that this bill might be                                                                   
a step toward correcting the state's fiscal situation.                                                                          
                                                                                                                                
Representative Rokeberg  suggested that many  potential plans                                                                   
for  correcting  the  state's   finances,  such  as  possible                                                                   
taxation,  had  the effect  of  withdrawing income  from  the                                                                   
economy, thereby  curtailing economic growth.   He maintained                                                                   
that   since  the   bill   merely  redirects   funding   from                                                                   
investment,  it  would not  have  a  negative effect  on  the                                                                   
state's economy.                                                                                                                
                                                                                                                                
Representative  Croft asked  for  a distinction  to be  drawn                                                                   
between  not depositing  money and  depleting the  fund.   He                                                                   
maintained that failing  to place money into  the account had                                                                   
the same effect as taking money out.                                                                                            
                                                                                                                                
Representative Rokeberg cited  his experience in business and                                                                   
contended  that  not  depositing  funds  was  different  than                                                                   
withdrawing  funds.   He maintained  that if  funds were  not                                                                   
available, they should not be deposited.                                                                                        
                                                                                                                                
Representative  Hawker referred to  the debate regarding  the                                                                   
difference   between    long-term   fiscal    solutions   and                                                                   
incremental steps  toward a solution.   He asked  whether the                                                                   
sponsor  viewed   the  legislation   as  a  solution   or  an                                                                   
increment,  and if  an increment,  whether consideration  was                                                                   
given  to a  long-term solution  which did  not include  this                                                                   
bill.                                                                                                                           
                                                                                                                                
Representative  Rokeberg noted  that the  legislature in  the                                                                   
past  had considered  this concept  as part  of a  long-range                                                                   
plan.  He characterized it as  a "common sense" first step in                                                                   
narrowing  a fiscal gap.   He  observed that  it only  had an                                                                   
impact of $43 million on the general  fund, which he conceded                                                                   
might be  an optimistic projection.   He suggested  that this                                                                   
step  presented  the  least  detriment,   since  it  did  not                                                                   
implement  a  "tax"  but  rather  only  affected  prospective                                                                   
future income.                                                                                                                  
                                                                                                                                
Representative  Whitaker observed  that the  change from  the                                                                   
constitutional requirement from  25 to 50 percent occurred in                                                                   
1980, when  the general  fund budget was  $4.07 billion.   He                                                                   
maintained  that the  legislature implemented  the change  at                                                                   
that  time  since the  funding  was  not  needed.   He  asked                                                                   
whether the  money was needed  at this time, with  the budget                                                                   
at roughly one third of that in 1980.                                                                                           
                                                                                                                                
Representative Rokeberg maintained  that the money is needed,                                                                   
especially  considering the  fluctuating  price of  oil.   He                                                                   
speculated  that  if the  bill  had  been  in place  for  the                                                                   
current  fiscal  year,  some  $57  million  would  have  been                                                                   
available  to spend  in FY03.   He maintained  that the  bill                                                                   
freed funding for use, without  the negative impacts of taxes                                                                   
and user fees.                                                                                                                  
                                                                                                                                
Representative Croft asked how  this could extend the life of                                                                   
the  CBR.   Representative  Rokeberg  replied  that the  bill                                                                   
minimized the  amount of the draw  on the CBR by  making more                                                                   
general funds available.                                                                                                        
                                                                                                                                
Representative  Croft  commented  that  in effect  the  funds                                                                   
would  be  moved   from  the  Permanent  Fund   to  the  CBR.                                                                   
Representative  Rokeberg   conceded  that  this   theory  was                                                                   
somewhat valid, but pointed out  that the money was therefore                                                                   
available  in  the General  Fund.    He speculated  that  the                                                                   
legislature might  choose to spend  the general  funds rather                                                                   
than reserving them in the CBR.                                                                                                 
                                                                                                                                
Representative Croft  asked if it was the intention  to spend                                                                   
the funds or to  extend the life of the CBR.   Representative                                                                   
Rokeberg responded  by pointing  out that the  current budget                                                                   
contained some  recommendations with which he  did not agree.                                                                   
He  observed   that  the   Governor  maintains  a   budgetary                                                                   
principal  whereby,  if  the  legislature  disagrees  with  a                                                                   
recommendation,  they  may  suggest an  alternative  that  is                                                                   
still in keeping with the Administration's  budget goals.  He                                                                   
suggested  that  the  bill  fit this  type  of  process,  and                                                                   
recommended  that the  legislature would  be wise to  embrace                                                                   
such a concept for budget making.                                                                                               
                                                                                                                                
Representative Joule  asked if Representative  Rokeberg would                                                                   
support  the revenue  being  directed  to a  dedicated  fund,                                                                   
which   would  require   a   change  in   the   Constitution.                                                                   
Representative  Rokeberg  acknowledged  that  some  dedicated                                                                   
funds currently  function, but  noted his  own belief  in the                                                                   
constitutional  principle of  avoiding dedicated  funds.   He                                                                   
clarified  that, while  the legislature  had  the ability  to                                                                   
choose whether or not to spend  the funds, he himself did not                                                                   
advocate spending but rather increased flexibility.                                                                             
                                                                                                                                
ED MARTIN,  SR., SOLDOTNA,  testified via teleconference,  in                                                                   
opposition  to  the  proposed  legislation.    He  read  from                                                                   
prepared testimony (copy on file),  maintaining that the bill                                                                   
erodes  the dividend  program,  encourages overspending,  and                                                                   
undermines voter's confidence in the legislature.                                                                               
                                                                                                                                
FRED  STURMAN,  SOLDOTNA,  testified  via  teleconference  in                                                                   
opposition to the  bill.  He noted that he  had not perceived                                                                   
any "cutting  of the  budget" support  from the  Legislature.                                                                   
He countered that taking the Permanent  Fund was not a viable                                                                   
option.   He observed,  "everyone  seems to  want more".   He                                                                   
encouraged budget cuts rather than spending.                                                                                    
                                                                                                                                
JAMES  PRICE,   NIKISKI,  testified  via   teleconference  in                                                                   
opposition  of  HB 11.    He  commented  that the  only  work                                                                   
currently being done  by the Legislature was  the proposal of                                                                   
"user  fees".   He  stressed  that HB  11  was not  a  viable                                                                   
solution  and speculated  that  the root  of  the problem  is                                                                   
bringing spending to a workable level.                                                                                          
                                                                                                                                
Representative Croft MOVED to ADOPT Amendment #1:                                                                               
                                                                                                                                
     Page 1, line 6, after Alaska insert:                                                                                       
     "and relating to the disposition of permanent fund                                                                         
     income"                                                                                                                    
                                                                                                                                
     Page 2, after  line 19, a new subsection is  added to AS                                                                   
     37.13.145:   "(e) AS 37.13.140 and AS 37.13.145  (b) may                                                                   
     not  be  amended  unless  the amendment  is  approved  a                                                                   
     majority of the voters voting on the question."                                                                            
                                                                                                                                
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Representative Croft  summarized that the  Amendment recalled                                                                   
efforts in 1999  to present the concept [fiscal  plan] to the                                                                   
Alaskan  people.     He   suggested  that,  considering   the                                                                   
initiative and  referendum power in  the state of  Alaska, no                                                                   
fiscal  plan  would  succeed without  the  agreement  of  the                                                                   
people.                                                                                                                         
                                                                                                                                
Co-Chair Williams  disagreed.   He expressed his  belief that                                                                   
it was  wrong in 1998  and 1999 to  send this message  to the                                                                   
people.    He  recalled  that   when  the  initial  bill  was                                                                   
presented  to the  Senate  and the  Governor,  the House  had                                                                   
agreed that  there would  not be  a vote by  the people.   He                                                                   
further  recalled that  at that  time, the  Governor and  the                                                                   
Senate recommended  that the bill receive a public  vote.  He                                                                   
maintained  that HB  11 did  not  represent a  "raid" on  the                                                                   
Permanent Fund.                                                                                                                 
                                                                                                                                
Representative  Rokeberg  echoed  comments made  by  Co-Chair                                                                   
Williams.   He    proposed   that   the    amendment   claims                                                                   
unconstitutional  delegations of authority.   He  pointed out                                                                   
that the amendment  would require a constitutional  amendment                                                                   
for implementation.                                                                                                             
                                                                                                                                
Representative   Stoltze   observed    that   the   amendment                                                                   
practically  represented  a  non-binding  advisory  vote  and                                                                   
suggested  that it  be presented  in that way  to voters  for                                                                   
full disclosure of its true function.                                                                                           
                                                                                                                                
Co-chair  Harris objected  to  the amendment.   He  commented                                                                   
that the Legislature  could conceivably ask the  public every                                                                   
year about  budgetary  spending.  He  strongly expressed  his                                                                   
belief that this did not present good public policy.                                                                            
                                                                                                                                
Representative  Croft   maintained  that  the   dividend  was                                                                   
established  to generate  public  support  for the  Permanent                                                                   
Fund by giving  people "a stake in" the fund.   He noted that                                                                   
this resulted  in a public sense  of ownership.   He proposed                                                                   
that this sense  of ownership must be recognized.   He agreed                                                                   
that the legislature  could change statue, which  made it not                                                                   
"legally binding",  however he maintained that  the amendment                                                                   
helped establish an important principal.                                                                                        
                                                                                                                                
Co-Chair Harris asserted  that the people of  Alaska voted on                                                                   
the  constitutionally  mandated  25 percent  [permanent  fund                                                                   
deposit].  He  pointed out that when the  legislature changed                                                                   
the amount  to 50 percent in  adopting the statute,  they did                                                                   
not ask  for another  public vote.   He  maintained that  the                                                                   
circumstances  at that time  were different  than today.   He                                                                   
proposed that  the current Legislature must now  determine if                                                                   
the  additional, statutorily  mandated  25  percent might  be                                                                   
shifted into the general fund.                                                                                                  
                                                                                                                                
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Moses, Stoltze, Croft, Joule                                                                                          
OPPOSED: Myer, Whitaker, Foster, Hawker, Williams, Harris                                                                       
                                                                                                                                
Representative Chenault was not present for the vote.                                                                           
                                                                                                                                
The MOTION FAILED (4-6).                                                                                                        
                                                                                                                                
Representative Foster MOVED to  report HB 11 out of Committee                                                                   
with  individual recommendations  and  with the  accompanying                                                                   
fiscal note.                                                                                                                    
                                                                                                                                
Representative Croft OBJECTED.                                                                                                  
                                                                                                                                
Representative  Croft observed that  the effect of  the bill,                                                                   
assuming that  it did not  increase current spending  levels,                                                                   
was to  transfer $43  million per year  that would  have gone                                                                   
into the  Permanent Fund  into the  CBR.    He asserted  that                                                                   
this proposition did not make sense.                                                                                            
                                                                                                                                
Representative   Croft   noted   that  the   Permanent   Fund                                                                   
historically  earned 9.5  percent,  with projected  long-term                                                                   
earnings of 8 percent.   He contrasted that the  CBR earned 6                                                                   
percent  annually, since  up to  half of that  fund could  be                                                                   
withdrawn at any time.  He summarized  that the net effect of                                                                   
the bill would either be to spend  the funds on government or                                                                   
to transfer  it to another account  with lower earnings.   He                                                                   
maintained that this was not good public policy.                                                                                
                                                                                                                                
Co-Chair Williams  contended that one must consider  the best                                                                   
use of funds for  the state of Alaska.  He  stated his belief                                                                   
that the  bill would allow  additional tools to  advocate the                                                                   
best  fiscal interest  of the  people.   He  pointed out  the                                                                   
history leading  to the current budget reductions,  and noted                                                                   
the lack  of change  in management  of the state's  financial                                                                   
resources.   He maintained  that the  rejection of  the House                                                                   
plan  in 1998  by the  Senate and  a subsequent  vote of  the                                                                   
people contributed to the current financial difficulties.                                                                       
                                                                                                                                
Co-Chair Harris noted that the  bill might be one in a series                                                                   
of  steps  aimed  at  balancing  the  budget  based  on  true                                                                   
revenues.   He pointed  out the  distinction between  the CBR                                                                   
and general  fund monies:  use  of the CBR requires  a three-                                                                   
quarter  vote  of   both  sides  of  the  legislature.     He                                                                   
speculated  that  use of  the  CBR  might  result in  a  more                                                                   
partisan budget  process.  He  stressed that the  money would                                                                   
go to the general fund and not the CBR.                                                                                         
                                                                                                                                
TAPE HFC 03 - 40, Side A                                                                                                      
                                                                                                                                
Co-Chair  Harris  went  on to  observe  that  expenditure  of                                                                   
general fund monies  required only a simple  majority of both                                                                   
bodies.  He noted his opinion  that Alaska was the only state                                                                   
that required a three quarter  vote to spend certain types of                                                                   
funding.    He  maintained  that  the  bill  facilitated  the                                                                   
addition  of  $40 to  $50  million  of General  fund  revenue                                                                   
without requiring  a three quarter  vote.  He  suggested that                                                                   
the bill would enable a balanced  budget without such a vote.                                                                   
                                                                                                                                
Co-Chair Harris  also stated his desire to  create mechanisms                                                                   
that did not  require a state income tax. He  maintained that                                                                   
a tax  would not improve economic  growth.  He  proposed that                                                                   
the  bill  encouraged economic  growth  without  a  tax.   He                                                                   
contended  that the bill  did not  severely impact  Alaskans,                                                                   
resulting  in  only an  eventual  $20 reduction  to  dividend                                                                   
payments.                                                                                                                       
                                                                                                                                
Co-Chair Harris  stressed that  the bill intended  to balance                                                                   
the  budget,  and  not  to  increase  spending  as  had  been                                                                   
implied.                                                                                                                        
                                                                                                                                
Representative  Stoltze thanked  Representative Rokeberg  for                                                                   
his work in  introducing the bill.  He expressed  his caution                                                                   
about the bill but his willingness to discuss the issues.                                                                       
                                                                                                                                
Representative Whitaker  suggested that the  primary debating                                                                   
points related to the actions  of the 1980 Legislature, which                                                                   
was  operating  with a  more  than  $4  billion budget.    He                                                                   
maintained that current spending  was significantly lower and                                                                   
that funds were needed to meet the now $2 billion budget.                                                                       
                                                                                                                                
Representative  Joule  noted  his continued  support  of  the                                                                   
legislation.    He suggested,  however,  that  at some  point                                                                   
discussion must occur regarding  generating broad based state                                                                   
revenue and  the fate  of the Permanent  Fund.  He  expressed                                                                   
disappointment  that these  discussions  were not  occurring.                                                                   
He speculated  that the bill  could be  part of a  package of                                                                   
legislation aimed  at addressing  these issues.   He exhorted                                                                   
the   Majority  to   show  leadership   in  beginning   these                                                                   
discussions.                                                                                                                    
                                                                                                                                
Representative   Rokeberg  thanked   public  testifiers   and                                                                   
concurred with  Co-Chair Harris  in not wishing  to institute                                                                   
taxation.   He  suggested that  the bill  presented a  viable                                                                   
alternative.                                                                                                                    
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Whitaker,  Foster,  Hawker, Joule,  Meyer,  Harris,                                                                   
Williams                                                                                                                        
                                                                                                                                
OPPOSED: Moses, Stoltze, Croft                                                                                                  
                                                                                                                                
Representative Chenault was not present for the vote.                                                                           
                                                                                                                                
The motion PASSED (7-3).                                                                                                        
                                                                                                                                
HB  11  was  REPORTED  out of  Committee  with  a  "do  pass"                                                                   
recommendation  and  three  fiscal   impact  notes  from  the                                                                   
Department of Revenue(#1, zero; #2 & #3, fiscal impact).                                                                        
                                                                                                                                
CS FOR SENATE BILL NO. 20(FIN)                                                                                                
                                                                                                                                
     "An Act  relating to the  Board of Marine Pilots  and to                                                                   
     marine pilotage;  extending the termination  date of the                                                                   
     Board of  Marine Pilots; and providing for  an effective                                                                   
     date."                                                                                                                     
                                                                                                                                
Co-Chair  Williams  noted  that  public  testimony  had  been                                                                   
previously concluded.                                                                                                           
                                                                                                                                
Co-Chair  Harris  MOVED  to  report  CSSB  20  (FIN)  out  of                                                                   
Committee   with    individual   recommendations    and   the                                                                   
accompanying fiscal note.                                                                                                       
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
CSSB 20 (FIN) was REPORTED out  of Committee with a "do pass"                                                                   
recommendation and one fiscal note #1 DCED.                                                                                     
                                                                                                                                
HOUSE BILL NO. 159                                                                                                            
                                                                                                                                
     "An  Act relating  to the frequency  of examinations  of                                                                   
     certain persons  licensed to  engage in the  business of                                                                   
     making  loans  of money,  credit,  goods,  or things  in                                                                   
     action;   repealing   the   requirement  for   a   state                                                                   
     examination  and  evaluation  of the  Alaska  Commercial                                                                   
     Fishing  and  Agriculture  Bank; and  providing  for  an                                                                   
     effective date."                                                                                                           
                                                                                                                                
MARK  DAVIS, DIRECTOR,  DIVISION OF  BANKING AND  SECURITIES,                                                                   
DEPARTMENT OF REVENUE, testified  in support of the bill.  He                                                                   
spoke to  the two  statutory changes  contained in  the bill.                                                                   
The first  change alters  the Banking Code,  Title Six.   The                                                                   
second change pertains to the State Code, Title 44.                                                                             
                                                                                                                                
Mr.  Davis  explained  that  the  change  to  the  Bank  Code                                                                   
lengthens the exam time for small  loan companies from twelve                                                                   
to  eighteen  months.    He noted  that  this  was  the  only                                                                   
provision  of  the  Banking  Code  that  required  an  annual                                                                   
examination.  He  emphasized that, even with  the change, the                                                                   
Division would perform more frequent  examinations if needed.                                                                   
                                                                                                                                
Mr. Davis  explained the change  to Title 44  eliminating the                                                                   
provision  for  a  qualitative  examination  for  the  Alaska                                                                   
Commercial Fishing  and Agricultural  Bank (CFAB).   He noted                                                                   
that since CFAB  is a cooperative, it is required  by statute                                                                   
to  prepare  an   annual  audit  that  is  provided   to  the                                                                   
legislature.  He also stated that  when Title 44 was enacted,                                                                   
CFAB operated  using state  funds, which  it was required  to                                                                   
repay.  He pointed  out that CFAB currently  operates with no                                                                   
state funds.  He also noted that  the deleted provision would                                                                   
still make CFAB subject to a full  legislative audit, as well                                                                   
as the annual audit by outside auditors.                                                                                        
                                                                                                                                
Mr. Davis further noted that the  fees charged by the banking                                                                   
section  of  the Division  do  not  cover  the costs  of  the                                                                   
examination.   Mr. Davis  pointed out that  the fees  leave a                                                                   
deficit  of  $350 thousand.  He  noted  that by  statute  the                                                                   
banking  fees  could  not  discriminate   between  state  and                                                                   
federal  institutions,  and  must  be charged  equally.    He                                                                   
maintained  that  a shortfall  would  exist  as long  as  the                                                                   
legislature required fee equanimity.                                                                                            
                                                                                                                                
Mr.  Davis  clarified  the  difference  between  the  audited                                                                   
report and the banking exam. He  noted that the outside audit                                                                   
report would inform the legislature  on the loan portfolio by                                                                   
major  category,  specifying  loan  performance  and  payment                                                                   
history.                                                                                                                        
                                                                                                                                
Mr.  Davis summarized  that the  Division  was requesting  an                                                                   
exemption  from examination under  Title 44.    He  expressed                                                                   
his belief that with the statutory  audits required, adequate                                                                   
fiscal provisions were already in place.                                                                                        
                                                                                                                                
Mr. Davis  also noted  that the  Division had no  enforcement                                                                   
powers with regard to the examination,  since it was included                                                                   
under Title 44.  He explained  that if a problem arose in the                                                                   
examination, the Division could not address it.                                                                                 
                                                                                                                                
Representative Croft  asked how much  of the fiscal  note was                                                                   
attributed to each section of  the bill.  Mr. Davis responded                                                                   
that  the  CFAB  examination  required  ten  days,  and  that                                                                   
savings  were  realized by  freeing  up  the bank  for  other                                                                   
business during that time.                                                                                                      
                                                                                                                                
Representative  Croft   questioned  whether  the   change  to                                                                   
eighteen months  represented the greatest cost  savings.  Mr.                                                                   
Davis   noted  that   the  savings   came  essentially   from                                                                   
eliminating  one  position.    He  speculated  that  the  new                                                                   
schedule enabled an efficiency of service.                                                                                      
                                                                                                                                
In response to a question by Representative  Croft, Mr. Davis                                                                   
stated that  examination fees  were charged  to CFAB  of $2.6                                                                   
thousand.  He also noted that  the additional ten days in the                                                                   
current cycle created  a loss of $6 thousand, as  well as the                                                                   
loss of  potential  paid service  to a state  bank or  credit                                                                   
union.   He  stressed that  as  a cooperative,  CFAB did  not                                                                   
receive  money   from  the  public,  and  focused   on  other                                                                   
cooperatives.                                                                                                                   
                                                                                                                                
Representative   Hawker   asked    for   a   distinction   in                                                                   
organization  between  CFAB and  commercial  banks or  credit                                                                   
unions,  and   whether  that  difference  was   part  of  the                                                                   
justification for the requested exemption.                                                                                      
                                                                                                                                
Mr. Davis  noted that  CFAB was  created by the  legislature,                                                                   
set up  as a  cooperative in  AS 44.81.014,  and required  to                                                                   
follow  a set  structure.   He referred  to 44.81.200,  which                                                                   
requires the bank  to provide an audited  financial statement                                                                   
to the  legislature each year,  including discussion  of bank                                                                   
circumstances,  operating, and   "any other information  that                                                                   
the Board  believes to  be of interest  to the Governor,  the                                                                   
legislature and to the public".   He summarized that the bank                                                                   
was required to self regulate.                                                                                                  
                                                                                                                                
Mr.  Davis noted  that in  1985, problems  occurred with  the                                                                   
bank  and examiners  were asked  to  complete a  report.   He                                                                   
suggested  that the  statute set  forth for  this purpose  in                                                                   
1987 should have  contained a sunset provision.   He proposed                                                                   
that the structure of the bank,  along with special reporting                                                                   
requirements, made the bill appropriate.                                                                                        
                                                                                                                                
Representative Croft MOVED to Adopt Amendment #1:                                                                               
                                                                                                                                
     Page 1, Line 13, DELETE:                                                                                                   
                                                                                                                                
     "*Sec.2. AS 44.81.270(d) is repealed."                                                                                     
                                                                                                                                
     "This amendment  keeps the  requirement for  the [Alaska                                                                   
     Commercial Fishing and Agricultural  Bank]     CFAB   to                                                                   
     submit to  annual bank examinations.   The  argument for                                                                   
     not  holding CFAB  to this  standard  is the  perception                                                                   
     that the  requirement is overly redundant,  that CFAB is                                                                   
     subject  to  independent  audit  or  legislative  audit,                                                                   
     should one be requested.                                                                                                   
                                                                                                                                
     CFAB  puts  forth that  the  requirement  is not  overly                                                                   
     redundant;  that  the independent  audit  only looks  at                                                                   
     their financial  situation, and the bank  examiners make                                                                   
     sure CFAB is adhering to  statute.  CFAB argues the bank                                                                   
     examinations  help  them  with their  accountability  to                                                                   
     their board  (two members of which are  appointed by the                                                                   
     Governor)  and  their  members  and CFAB  pays  for  the                                                                   
     examination.                                                                                                               
                                                                                                                                
     Although  the  Legislature   could  request  Legislative                                                                   
     Budget on  a regular basis.   This last one  occurred in                                                                   
     1995."                                                                                                                     
                                                                                                                                
Representative Croft observed  that Section 1 of the bill was                                                                   
an appropriate  cost savings.   He maintained that  Section 2                                                                   
pertained to the  CFAB examination, and referred  to a letter                                                                   
from CFAB,  which expressed  a desire for  this service.   He                                                                   
suggested  that  the  entity should  continue  to  receive  a                                                                   
service that they  valued.  He pointed out  that by retaining                                                                   
Section 1, the majority of the savings was still available.                                                                     
                                                                                                                                
Co-Chair  Williams  asked  if  CFAB could  pay  for  its  own                                                                   
outside  examiner.    Mr.  Davis  reiterated  that  CFAB  was                                                                   
required  by  statute  to  have   an  outside  auditor.    He                                                                   
suggested that  CFAB could expand  the scope of the  audit to                                                                   
include their  loan portfolios.   He  suggested that  such an                                                                   
audit could help evaluate the  potential of these portfolios.                                                                   
He noted  that bank examiners  did not traditionally  perform                                                                   
such an  evaluation.  He stated  that he did not  support the                                                                   
Amendment.                                                                                                                      
                                                                                                                                
Representative  Stoltze  asked   if  a  sunset  might  be  an                                                                   
alternative  to  deleting  the  requirement.    He  suggested                                                                   
giving two  years for the requirement  to lapse if  a problem                                                                   
arose that necessitated an examination.                                                                                         
                                                                                                                                
Mr. Davis  emphasized  the legislative  audit as a  mechanism                                                                   
for effectively addressing any potential problems.                                                                              
                                                                                                                                
In  response  to  questions by  Co-Chair  Harris,  Mr.  Davis                                                                   
clarified  that  the CFAB  examination  period  would not  be                                                                   
extended  to eighteen  months, but that  the cycle  pertained                                                                   
only to  small loan companies.   He stated that for  CFAB the                                                                   
bill addressed  their annual  examination requirement,  which                                                                   
is separate from the annual legislative audit.                                                                                  
                                                                                                                                
Representative  Hawker recalled a  circumstance in  the early                                                                   
1980's during  the time when CFAB  was subject to  an outside                                                                   
audit  only,  and  asked  if  the  outside  audit  identified                                                                   
circumstances  that  resulted  in  the  addition  of  a  bank                                                                   
examination by the legislature.                                                                                                 
                                                                                                                                
Mr. Davis  stated that  the Division was  invited in  1985 to                                                                   
report on  the viability of the  bank.  He observed  that the                                                                   
outside auditors identified problems.   He explained that the                                                                   
Division  turned  to  bank  examiners  to  help  address  the                                                                   
potential crisis for the State and for the other investors.                                                                     
                                                                                                                                
Representative  Hawker  recalled   that  the  examiners  were                                                                   
viewed as  an effective  tool of the  state, even  though the                                                                   
examiners  did  not traditionally  involve  themselves  in  a                                                                   
cooperative with  a limited loan  portfolio such as  CFAB. He                                                                   
observed that the examination  was voluntary and limited.  He                                                                   
echoed  previous   concern  that  the  legislation   was  not                                                                   
sunsetted,  and  expressed  confusion  as  to  why  the  bank                                                                   
desired additional regulation.                                                                                                  
                                                                                                                                
Representative Croft  contended that CFAB was  requesting the                                                                   
oversight.  He  suggested that it was unwise to  wait until a                                                                   
serious  problem arose  to engage  an outside  examiner.   He                                                                   
pointed out that CFAB desired  the service and was willing to                                                                   
pay for a portion of it.                                                                                                        
                                                                                                                                
Co-Chair Williams  concurred with the Sponsor  that Section 2                                                                   
was a viable cost savings.                                                                                                      
                                                                                                                                
A roll call vote  was taken on the motion to  ADOPT Amendment                                                                   
#1.                                                                                                                             
                                                                                                                                
IN FAVOR: Joule, Croft, Harris                                                                                                  
OPPOSED:  Meyer, Stoltze, Whitaker,  Foster, Hawker, Williams                                                                   
                                                                                                                                
The MOTION FAILED (3-6).                                                                                                        
                                                                                                                                
Representative Foster MOVED to  report HB159 out of Committee                                                                   
with individual  recommendations and the  accompanying fiscal                                                                   
note.                                                                                                                           
                                                                                                                                
HB  159  was REPORTED  out  of  Committee  with a  "do  pass"                                                                   
recommendation  and  a  new  fiscal   impact  note  from  the                                                                   
Department of Community and Economic Development.                                                                               
                                                                                                                                
HOUSE BILL NO. 166                                                                                                            
                                                                                                                                
     "An Act relating to adoptions that include a subsidy                                                                       
     payment by the state; eliminating annual review of the                                                                     
     subsidy paid by the state after adoption of a hard-to-                                                                     
     place child has occurred; and providing for an                                                                             
     effective date."                                                                                                           
                                                                                                                                
JOANNE  GIBBENS,  DIVISION  OF  FAMILY  AND  YOUTH  SERVICES,                                                                   
DEPARTMENT OF  HEALTH AND  SOCIAL SERVICES (DHSS),  testified                                                                   
in support  of the bill.   She explained that the  bill would                                                                   
repeal a current statute requiring  DHSS to conduct an annual                                                                   
review of  subsidy amounts being  paid to subsidize  adoption                                                                   
and  guardianship.   She noted  that the  payments were  both                                                                   
federally  and statutorily  required and  designed to  assist                                                                   
parents who adopt or become legal  guardians of children with                                                                   
special needs.                                                                                                                  
                                                                                                                                
Ms. Gibbens  noted that  the original  intent of the  statute                                                                   
was to provide  cost containment.  She noted  that the annual                                                                   
review  did not  generally result  in  cost containment,  but                                                                   
rather in  increases in the  amount of subsidies  awarded, as                                                                   
well  as  department  staff  time.   She  proposed  that  the                                                                   
elimination of  the annual review process created  savings by                                                                   
providing cost  containment to existing subsidy  amounts, and                                                                   
by  eliminating  staff time  to  process annual  reviews  and                                                                   
unnecessary  follow ups  for subsidy  inquiry requests.   She                                                                   
noted that the projected annual  savings was $185 thousand of                                                                   
general funds.   She emphasized  that the elimination  of the                                                                   
annual  review  process  did   not  eliminate  the  right  of                                                                   
adoptive parents  or guardians to  request a review  of their                                                                   
subsidy.                                                                                                                        
                                                                                                                                
Representative Stoltze  asked if the savings  occurred in the                                                                   
cost of reviews  or of the actual  payments.  He asked  for a                                                                   
differentiation of these savings at the next hearing.                                                                           
                                                                                                                                
Co-Chair Harris asked if these adoptive parents would be                                                                        
notified that it would now be their responsibility to                                                                           
request a review of their payments.                                                                                             
                                                                                                                                
Ms. Gibbens responded that families currently communicated                                                                      
regularly with the division about their financial needs.                                                                        
                                                                                                                                
HB 166 was HEARD AND HELD.                                                                                                      
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 4:00 PM                                                                                            
                                                                                                                                
                                                                                                                                

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