Legislature(2003 - 2004)

04/28/2003 02:30 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 28, 2003                                                                                           
                         2:30 P.M.                                                                                              
                                                                                                                                
TAPE HFC 03 - 67, Side A                                                                                                        
TAPE HFC 03 - 67, Side B                                                                                                        
TAPE HFC 03 - 68, Side A                                                                                                        
TAPE HFC 03 - 68, Side B                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 2:30 P.M.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative  Vic  Kohring;  Senator  Gary  Stevens;  Larry                                                                   
Persily,  Deputy Commissioner,  Department  of Revenue;  Eddy                                                                   
Jeans,  Manger,   School  Finance  and  Facilities   Section,                                                                   
Department of Education and Early  Development; Robin Wilson,                                                                   
Tax Auditor,  Department of  Revenue; John MacKinnon,  Deputy                                                                   
Commissioner,  Highway  & Public  Facilities,  Office of  the                                                                   
Commissioner,   Department   of   Transportation   &   Public                                                                   
Facilities;  Bruce  Twomley, Chairman,  Commercial  Fisheries                                                                   
Limited Entry  Commission; Mark Barnhill,  Assistant Attorney                                                                   
General, Department  of Law;  Bob Robertson,  Superintendent,                                                                   
Lower   Yukon   School  District;   Larry   LaBolle,   Staff,                                                                   
Representative  Foster;   Landa  Baily,  Special   Assistant,                                                                   
Department   of  Revenue;   David   Tredway,  Child   Support                                                                   
Enforcement  Agency, Department  of  Revenue; Kevin  Jardell,                                                                   
Assistant  Commissioner, Department  of Administration;  Greg                                                                   
Winegar,  Director, Division  of  Investments, Department  of                                                                   
Community & Economic Development                                                                                                
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Kerry Jarrell,  Director, Business  Finance, Bering  Straight                                                                   
School  District,  Unalaskleet;  Diane  Wendlandt,  Assistant                                                                   
Attorney General, Department of  Law; Robert Boyle, Assistant                                                                   
Superintendent, Northwest Arctic School Borough, Kotzebue                                                                       
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 97     An Act authorizing a long-term lease of certain                                                                       
          Alaska Railroad Corporation  land at Anchorage; and                                                                   
          providing for an effective date.                                                                                      
                                                                                                                                
          HB   97  was   reported  out   of  Committee   with                                                                   
          "individual"  recommendations and with  zero fiscal                                                                   
          note  #1   by  the  Department  of   Community  and                                                                   
          Economic Development.                                                                                                 
                                                                                                                                
HB 105    An  Act  relating  to  loans to  satisfy  past  due                                                                   
          federal  tax  obligations of  commercial  fishermen                                                                   
          and to the commercial fishing loan program.                                                                           
                                                                                                                                
          CS HB 105 (FIN) was reported out of Committee with                                                                    
          a "do pass" recommendation  and with fiscal note #1                                                                   
          by Department of Community  & Economic Development.                                                                   
                                                                                                                                
HB 154    An Act relating to admission  to and advancement in                                                                   
          public  schools of children  under school  age; and                                                                   
          providing for an effective date.                                                                                      
                                                                                                                                
          CS HB 154 (FIN) was  reported out of Committee with                                                                   
          a "no  recommendation" and  with a new  fiscal note                                                                   
          by   the   Department    of   Education   &   Early                                                                   
          Development.                                                                                                          
                                                                                                                                
HB 156    An Act increasing the  motor fuel tax and repealing                                                                   
          the  special  tax  rates   on  blended  fuels;  and                                                                   
          providing for an effective date.                                                                                      
                                                                                                                                
          HB 156 was HEARD and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
HOUSE BILL NO. 154                                                                                                            
                                                                                                                                
     An Act relating to admission to and advancement in                                                                         
     public schools of children under school age; and                                                                           
     providing for an effective date.                                                                                           
                                                                                                                                
EDDY JEANS,  MANGER, SCHOOL  FINANCE AND FACILITIES  SECTION,                                                                   
DEPARTMENT OF EDUCATION AND EARLY  DEVELOPMENT, noted that HB                                                                   
154 had  been prepared at  the request  of the Governor.   He                                                                   
stated  it was  determined that  some  school districts  were                                                                   
claiming  four  year olds  in  the kindergarten  program  and                                                                   
counting them for  two years.  This came to  the Department's                                                                   
attention  when   they  started   doing  the  student   level                                                                   
electronic  data reporting  so the Department  then knew  how                                                                   
old the students  were that were being claimed  for the State                                                                   
foundation  funding.   The Department  of  Education &  Early                                                                   
Development attempted to address  this through the regulatory                                                                   
process.  These  concerns deal with AS 1403.080©  - the right                                                                   
to attend school.   Provision © states is that  a child under                                                                   
school age may be admitted to  the public school if the child                                                                   
meets the  minimum standards  described by  the Board  and as                                                                   
long as  that child  has the mental,  physical and  emotional                                                                   
capacity to  perform satisfactory at the  educational program                                                                   
being  offered.     He  interjected  that  it   is  the  term                                                                   
"educational program", which the  Department is attempting to                                                                   
define.                                                                                                                         
                                                                                                                                
Mr. Jeans continued that through  the regulatory process, the                                                                   
Department basically  adopted the statute with  the exception                                                                   
of  the  "education   program  being  offered"   and  instead                                                                   
inserted  "grade level  being offered".   The discussion  was                                                                   
centered  around whether  a school  district  can develop  an                                                                   
educational program  and start  serving whoever they  want or                                                                   
was the  intent to allow school  districts to enroll  a child                                                                   
that is ready to begin their school  career at an earlier age                                                                   
than five.   The Department believes  that it was  the latter                                                                   
and that it  would be an exceptional child  that starts their                                                                   
educational career early.                                                                                                       
                                                                                                                                
Mr. Jeans explained that the Department  took the regulations                                                                   
to the  State Board  of Education  and they  were adopted  in                                                                   
September 2001.   He stressed that  this is not a  new issue.                                                                   
School  districts did  adopt the  standards  for enrolling  a                                                                   
student  and   some  of  the  districts  have   continued  to                                                                   
blanketly enroll all four year olds.                                                                                            
                                                                                                                                
Mr.  Jeans  stated   that  it  is  not  the   intent  of  the                                                                   
legislation to  block a child from getting  into kindergarten                                                                   
if they are ready; however, the  Department would expect them                                                                   
to advance  to the  next grade level  in the subsequent  year                                                                   
and not stay in kindergarten for two years.                                                                                     
                                                                                                                                
Mr.  Jeans spoke  to  the $3.9  million  dollar fiscal  note,                                                                   
which  lists the  school  districts  with the  dollar  amount                                                                   
associated  with them.    He pointed  out  that  there are  a                                                                   
number  of  school  districts  that  generate  a  substantial                                                                   
amount of money through the provision.   That dollar is large                                                                   
in terms of State funding.  He  pointed out that these school                                                                   
districts  also receive  federal impact  aid money for  early                                                                   
entering programs.                                                                                                              
                                                                                                                                
   ·    In the Bering Straight School district, 99% of the                                                                      
        students qualify for federal impact aid dollars,                                                                        
        which amounts to $5,000 dollars per child.                                                                              
   ·    In the Lower Yukon School district, 81% of their                                                                        
        students qualify for federal impact aid dollars.                                                                        
   ·    In the North Slope School District Borough, 67% of                                                                      
        the students qualify for the federal impact aid                                                                         
        dollars.                                                                                                                
   ·    In the Northwest Arctic Borough School District, 64%                                                                    
        of the students qualify.                                                                                                
                                                                                                                                
Mr. Jeans noted  that it the legislation passes,  the schools                                                                   
districts will continue to generate  these federal impact aid                                                                   
dollars in the amount of $5,000 dollars per child.                                                                              
                                                                                                                                
Representative  Croft asked if  the legislative  would change                                                                   
how the student was enrolled and  if they would still qualify                                                                   
for  the  federal  aid.    Mr.   Jeans  clarified  that  A.S.                                                                   
1403.080, which is the right to  attend public school free of                                                                   
tuition,  is what  qualifies  students  for State  foundation                                                                   
funding.    A  school  district   can  offer  an  educational                                                                   
program, in which they do not  claim those students for State                                                                   
funding.  If they do that, under  the federal impact aid law,                                                                   
they are then  offering a preschool program,  and even though                                                                   
they are not  receiving State money, they will  still receive                                                                   
federal impact aid dollars.                                                                                                     
                                                                                                                                
Representative Croft  asked if they would let  the student go                                                                   
free of charge  if an extra program was provided.   Mr. Jeans                                                                   
said yes.                                                                                                                       
                                                                                                                                
Mr. Jeans maintained  that this is an issue of  fairness.  If                                                                   
some school  districts are  allowed to  enroll all  four year                                                                   
olds, then all  school districts should be allowed  to do the                                                                   
same.   The  costs  to enroll  all four  year  olds would  be                                                                   
between $50  & $60 million dollars.   He reiterated  that the                                                                   
Department is not zeroing in on specific districts.                                                                             
                                                                                                                                
Co-Chair  Harris asked  why only some  school districts  have                                                                   
chosen to take  advantage of the federal impact  aid dollars.                                                                   
Mr.  Jeans  explained  that  the   provision  that  is  being                                                                   
utilized  under AS  1403.080© allows  the child  to be  early                                                                   
entered into school.   Line 9 indicates "For  the educational                                                                   
program being offered".  He pointed  out that this is a broad                                                                   
term  and is  what  some school  districts  have utilized  to                                                                   
define  the program.   The  Department  did go  to the  State                                                                   
Board  of Education  and adopted  regulations, which  changed                                                                   
that wording  to "For the grade  level being offered".   That                                                                   
language would  help to  clarify that the  intent of  the law                                                                   
would not be  just any program but rather students  that were                                                                   
ready to  start kindergarten.   Even  with that amendment  on                                                                   
the books, some school districts  continue to enroll all four                                                                   
year olds.   Consequently,  the Department  comes before  the                                                                   
Legislature for clarification.                                                                                                  
                                                                                                                                
Co-Chair Harris addressed school  district costs.  He thought                                                                   
that there  are a  few school  districts heavily impacted  by                                                                   
the legislation.                                                                                                                
Mr. Jeans commented that HB 154  would clarify that it is not                                                                   
the intent to fund all four year  olds through the foundation                                                                   
program.    Without  the  legislation,  there  will  be  more                                                                   
districts that expand their program  to include the four year                                                                   
olds because they have space available.   When there is space                                                                   
available in  a school, they  want to fill  it up.   Once the                                                                   
students  are funded  through  the foundation  program,  they                                                                   
must be counted for space for school construction.                                                                              
                                                                                                                                
Co-Chair Harris asked if the Department  would have a problem                                                                   
phasing the  program out over  a two-year period.   Mr. Jeans                                                                   
responded  that  the  Governor's   office  wants  to  see  it                                                                   
resolved  this  year and  that  the  districts have  been  on                                                                   
notice.    The  Department  has attempted  to  deal  with  it                                                                   
through the regulatory process.   The Department of Education                                                                   
& Early Development  regulations clarified that  the previous                                                                   
State Board adopted this piece  of statute in September 2001.                                                                   
The same school districts keep claiming the four year olds.                                                                     
                                                                                                                                
ROBERT  BOYLE,  (TESTIFIED  VIA   TELECONFERENCE),  ASSISTANT                                                                   
SUPERINTENDENT,  NORTHWEST ARCTIC  SCHOOL BOROUGH,  KOTZEBUE,                                                                   
quoted   various    studies   regarding   childhood    school                                                                   
involvement  in   early  childhood  success.     All  of  the                                                                   
different  studies  speak of  the  value of  early  education                                                                   
programs   particularly   for    children   in   social   and                                                                   
economically  distressed  areas.    The  districts  that  are                                                                   
currently  involved  are  districts   that  have  severe  and                                                                   
chronic social  and economic status differentiation  from the                                                                   
city   schools   or   schools   that   have   more   economic                                                                   
opportunities  on  a  daily  basis.     The  early  childhood                                                                   
opportunities  for families and  children within  these areas                                                                   
are non-existent.   He stressed  that these children  live in                                                                   
disadvantaged areas.                                                                                                            
                                                                                                                                
At  this time,  the  process is  directly  reflective of  the                                                                   
socio-economic  status  of  these   children  and  not  their                                                                   
cognitive  abilities.   The  school  districts  do what  they                                                                   
believe  is   appropriate  in   attempting  to  serve   their                                                                   
children.  Mr.  Boyle emphasized that it is not  a process of                                                                   
attempting  to generate  funds or  to fill  empty seats.   He                                                                   
stressed that this is an "educationally  correct, sound thing                                                                   
to do".                                                                                                                         
                                                                                                                                
The  studies previously  sited go  into great  detail of  how                                                                   
this  early intervention  process is  successful in  reducing                                                                   
the costs  of education programs  later, down the road.   The                                                                   
reduction of costs  for retention of students, who  end up in                                                                   
social service programs  is compensated over the  cost of the                                                                   
four-year-old programs.                                                                                                         
                                                                                                                                
Mr. Boyle reiterated  that the question of "fairness"  is not                                                                   
the issue.   The studies are  about "quality".   The fairness                                                                   
issue  comes   down  to  what  services,   opportunities  and                                                                   
educational  stimulation is  available to  students in  these                                                                   
regions.                                                                                                                        
                                                                                                                                
Mr.  Boyle reiterated  that the  school  districts oppose  HB                                                                   
154.  Currently,  the funds are being used  appropriately and                                                                   
that use greatly  enhances the State's  long-term investment.                                                                   
He added that as written, HB 154  is contradictory in regards                                                                   
to the "achievement"  of each child.  He claimed  that it was                                                                   
"social promotion".                                                                                                             
                                                                                                                                
Co-Chair  Williams asked  if Mr.  Boyle's  same argument  had                                                                   
been presented  to the State Board  of Education.   Mr. Boyle                                                                   
responded that he was new to the  position and was not around                                                                   
in 2000.                                                                                                                        
                                                                                                                                
KERRY  JARRELL,  (TESTIFIED  VIA  TELECONFERENCE),  DIRECTOR,                                                                   
BUSINESS  AND  FINANCE,  BERING   STRAIGHT  SCHOOL  DISTRICT,                                                                   
UNALASKLEET, spoke  in opposition to HB 154.   He stated that                                                                   
the proposed  legislation would  not provide the  anticipated                                                                   
savings.   Services  terminated by  this action  will have  a                                                                   
severe impact  on the most  needy and vulnerable  children in                                                                   
the State.                                                                                                                      
                                                                                                                                
Mr.  Jarrell   pointed   out  that  in   many  rural   Alaska                                                                   
communities,  there  are  very few  opportunities  for  young                                                                   
children   to  participate  in   early  childhood   education                                                                   
programs.    Outside   of  the  schools,  very   few  of  the                                                                   
communities  have any  kind of  public  or private  preschool                                                                   
programs.   The  districts  recognize  the dilemma  in  these                                                                   
places.   The  districts have  struggled to  insure that  all                                                                   
children  in  the  region  have  access  to  early  childhood                                                                   
programs  of some  type.   In  an area  in which  80% of  the                                                                   
children  fall  below  poverty  level, access  to  a  quality                                                                   
educational experience  to remedy the poverty  and isolation,                                                                   
is of paramount  importance.  He reiterated that  this is not                                                                   
a new program.  The Bering Straight  School district has been                                                                   
offering the  service for 13 years  and as a result  has been                                                                   
able to insure  that all three year old children  have access                                                                   
to  a limited  program of  education where  before there  was                                                                   
nothing.                                                                                                                        
                                                                                                                                
The reduction  of the funds sought  in HB 154  will eliminate                                                                   
that program.   He  pointed out  that some  believe that  the                                                                   
current  language would  allow  other districts  to begin  to                                                                   
offer  programs  for  four-year-old children.    Mr.  Jarrell                                                                   
suggested that was  not the case.  Establishing  a program is                                                                   
costly  and  time  consuming.   It  took  the  Bering  Strait                                                                   
district several years to work  through those initial issues.                                                                   
A school district  would not set up a program  like that in a                                                                   
short amount  of time.   The result of  HB 154 will  be short                                                                   
time saving but  those savings will be "overshadowed"  by the                                                                   
increased  costs in special  need services  and the  likihood                                                                   
that more children will fail to succeed in school.                                                                              
                                                                                                                                
Mr.  Jarrell reiterated  that  these  children  are the  most                                                                   
needy and vulnerable  children in the charge  of these school                                                                   
districts.  They have the fewest  advocates and need the most                                                                   
nurturing.  He encouraged a no vote on the legislation.                                                                         
                                                                                                                                
Representative Joule asked Mr.  Jarrell's position on phasing                                                                   
out  the program  and he  asked  how that  would affect  each                                                                   
district.  Mr.  Jarrell replied that phasing  out the program                                                                   
could  at  the  very least  provide  time  for  requests  and                                                                   
application   for   grant   funding  to   work   with   other                                                                   
organizations  to transition  a  program  of some  meaningful                                                                   
educational  value for the  children.   He stressed  that the                                                                   
program is so  important that they request that  the bill not                                                                   
be passed  from Committee.   Mr. Boyle echoed  the statements                                                                   
made by Mr. Jarrell.                                                                                                            
                                                                                                                                
                                                                                                                                
(TAPE MALFUNCTION)                                                                                                            
                                                                                                                                
                                                                                                                                
BOB ROBERTSON,  SUPERINTENDENT, LOWER YUKON  SCHOOL DISTRICT,                                                                   
spoke in  opposition to the  proposed legislation.   He urged                                                                   
that the  Committee phase  in the  legislation to allow  time                                                                   
for the small communities to establish a program.                                                                               
                                                                                                                                
Vice-Chair  Meyer inquired  if 99%  of the  funding could  be                                                                   
offset  through federal  government aid.   Mr. Robertson  did                                                                   
not know about the impact the  bill would have on the federal                                                                   
funding.                                                                                                                        
                                                                                                                                
Representative  Foster  MOVED  to adopt  Amendment  #1,  #23-                                                                   
GH1123\D.1, Ford, 4/9/03.  Co-Chair Williams OBJECTED.                                                                          
                                                                                                                                
LARRY   LABOLLE,   STAFF,  REPRESENTATIVE   RICHARD   FOSTER,                                                                   
explained that  the amendment would  allow the program  to be                                                                   
prolonged for  two more years.   The amount of impact  aid is                                                                   
$5,000 per child  and that money would continue  to be there.                                                                   
The intent  of the amendment  provides the districts  time to                                                                   
look at  other sources for grant  money in order  to continue                                                                   
these  programs.    Mr.  LaBolle  noted  that  Representative                                                                   
Foster was  not opposed to  the bill  as current law  is open                                                                   
ended and that phasing it out  over 2 years would provide the                                                                   
time needed to respond.                                                                                                         
                                                                                                                                
Co-Chair  Williams   questioned  why   the  State   Board  of                                                                   
Education  had vetoed  the concern.    Mr. LaBolle  responded                                                                   
that the Board  had made regulations, which  could accomplish                                                                   
the same  end.   He did not  know why  the program  was being                                                                   
discontinued.                                                                                                                   
                                                                                                                                
Representative  Hawker  asked  the effect  of  the  amendment                                                                   
would have on  the exiting fiscal note.  Mr.  LaBolle replied                                                                   
that the  amendment would  freeze the  program and  would not                                                                   
allow any  new districts to make  a program.  There  would be                                                                   
no decrease to the cost for the  up-coming fiscal year and in                                                                   
the second year it would be reduced by 50%.                                                                                     
                                                                                                                                
                                                                                                                                
(TAPE CORRECTED)                                                                                                              
                                                                                                                                
                                                                                                                                
Representative Hawker  commented that FY04 would  have a zero                                                                   
fiscal note effect;  in FY05 with only 50%  eligibility would                                                                   
provide a  reduction of nearly  $2 million dollars;  in FY06,                                                                   
there would  be a second reduction  of $2 million  dollars as                                                                   
the program is phased out.                                                                                                      
                                                                                                                                
Representative  Hawker  clarified  that  the funding  in  the                                                                   
amendment would guarantee that  the school districts would be                                                                   
able to receive  their basic need plus the  percentage of the                                                                   
difference  of the basic  need between  the base fiscal  year                                                                   
and the second  fiscal year.  He thought that  the definition                                                                   
of  basic need  was a  little vague  and acted  like a  "hold                                                                   
harmless" clause  for basic need.   Mr. LaBolle did  know how                                                                   
it would  apply to the entire  program but requested  that it                                                                   
be considered.                                                                                                                  
                                                                                                                                
Vice-Chair  Meyer  suggested  that the  amendment  should  be                                                                   
addressed  conceptually.    He  advised  that  the  Education                                                                   
Subcommittee  had left full  funding in  the budget  for this                                                                   
concern.  If it  were left at 100%, it would  be satisfactory                                                                   
and  then  gradually  reduced.    He  acknowledged  that  the                                                                   
Governor was counting on the savings  this year.  He inquired                                                                   
what action Senate Finance Committee  had taken on the issue.                                                                   
Mr. LaBolle believed that they had not yet moved the bill.                                                                      
                                                                                                                                
Representative Foster MOVED to  make Amendment #1 conceptual.                                                                   
                                                                                                                                
Representative  Whitaker   asked  about  the   research  done                                                                   
regarding the need for this program.   Mr. LaBolle reiterated                                                                   
that  the Assistant  Superintendent of  the Northwest  Arctic                                                                   
Borough School  District had  cited three important  studies.                                                                   
There have been many articles  over the years regarding early                                                                   
intervention  in   areas  where  there  is   severe  economic                                                                   
depravation,  which does  exist in  many village  areas.   He                                                                   
assured Representative  Whitaker that  there is a  large body                                                                   
of research regarding this concern.                                                                                             
                                                                                                                                
Mr. Jeans advised  that Representative Hawker  was correct in                                                                   
his  observation that  the amendment  would  provide a  "hold                                                                   
harmless" provision.   A  conceptual amendment would  clarify                                                                   
that.   He added that  this is not a  new issue and  that the                                                                   
districts have been  aware of the Department's  position.  It                                                                   
has been  around for  a few administrations.   He  added that                                                                   
the Senate had taken the proposed cut in their budget.                                                                          
                                                                                                                                
Co-Chair Williams asked the argument  used by the State Board                                                                   
of Education.  Mr. Jeans responded  that the statute is broad                                                                   
and  that the  Department believes  that the  purpose of  the                                                                   
foundation  program  is  to  fund K-12  education.    If  the                                                                   
Legislature wants to direct funding  for pre-K, that would be                                                                   
another discussion.   The Department  is attempting  to bring                                                                   
clarity to  the statutes  regarding the  manner in  which the                                                                   
Department applies them.                                                                                                        
                                                                                                                                
Representative   Hawker  questioned   the  school   districts                                                                   
intention  during   the  phase  out  period.     Mr.  LaBolle                                                                   
responded  that the  districts  would be  working with  other                                                                   
agencies in their  regions to come up with  alternate sources                                                                   
of  funding for  the program.   School  districts do  receive                                                                   
money from  other resources.   He referenced the old  Title 1                                                                   
program,  which  provides  assistance to  students  that  are                                                                   
economically deprived.  He noted  the Indian Education funds,                                                                   
some of  which go to  the actual village  rather than  to the                                                                   
school  districts.   He indicated  that  the amendment  would                                                                   
provide an  opportunity for  them to  go back and  creatively                                                                   
look at other sources  of funding to be able  to continue the                                                                   
program.   The districts  bring forward approximately  $5,000                                                                   
on their own to help with these programs.                                                                                       
                                                                                                                                
                                                                                                                                
TAPE HFC 03 - 67, Side B                                                                                                      
                                                                                                                                
                                                                                                                                
Mr.  LaBolle explained  that  if the  student  was not  being                                                                   
claimed for  foundation purposes,  then the Department  would                                                                   
hold  them  harmless  from the  right  to  recapture  federal                                                                   
funds.   Representative Hawker  acknowledged that he  did not                                                                   
understand    the    mechanics    of    education    funding.                                                                   
Representative  Hawker  asked if  it  would  be necessary  to                                                                   
defer the  step down to FY05  rather than FY04.   Mr. LaBolle                                                                   
responded  that  it  would  be  close  to  a  "wash"  if  the                                                                   
Department  placed it  at 50%  and allowed  the districts  to                                                                   
keep the impact aid funds.                                                                                                      
                                                                                                                                
Representative Croft pointed out  that the State does not let                                                                   
the  districts  keep  the  federal impact  aid  money.    Mr.                                                                   
LaBolle replied that was correct.   He added that it would be                                                                   
"cleanest"  to maintain  the 100%  funding for  one year  and                                                                   
allow  the  Department  to recapture  the  impact  aid  money                                                                   
involved.  The total cost to the State would be more.                                                                           
                                                                                                                                
In response  to Representative  Croft,  Mr. Jeans noted  that                                                                   
currently,  if a school  district were  claiming a  four year                                                                   
old  in  the  foundation  program   for  State  funding,  the                                                                   
Department  would   deduct  that   impact  aid  the   student                                                                   
receives.   He noted that it is  important to go back  to the                                                                   
starting  point.    These  school  districts  generate  about                                                                   
$11,000  dollars  per  student  and  that  amount  is  shared                                                                   
between  the State  and federal  impact aid.   Right now  the                                                                   
State  deducts   a  little  over  $4,000  per   child,  which                                                                   
generates  impact aid being  claimed under  the program.   If                                                                   
the State does not provide State  aid, none of the impact aid                                                                   
is deducted  and the  district would retain  100%.   It would                                                                   
change  the funding  from  $11,000 per  child  to $5,000  per                                                                   
child.                                                                                                                          
                                                                                                                                
Representative  Croft  asked  if  the $5,000  dollars  was  a                                                                   
separate  line.   Mr.  Jeans  replied that  it  is  not on  a                                                                   
separate line  and that the  school district claims  students                                                                   
that  are  eligible  for  impact   aid;  the  State  receives                                                                   
vouchers,  which   highlights  the  percentage   that  school                                                                   
population is eligible for in  federal impact aid.  The State                                                                   
relies  on  the  school  district  to  claim  for  foundation                                                                   
funding and then makes the necessary adjustments.                                                                               
                                                                                                                                
Representative  Croft  clarified  that  the  State  does  not                                                                   
deduct  from their  foundation  formula  those students  that                                                                   
they are not claiming in the formula.   Mr. Jeans stated that                                                                   
they do not  deduct the impact aid from students  not claimed                                                                   
for State aid.                                                                                                                  
                                                                                                                                
Representative  Croft commented that  at present  time, those                                                                   
students  are  receiving both  payments.    He asked  if  the                                                                   
Department's fiscal  note reflects  the savings in  State aid                                                                   
by not  having those kids  in school and  the loss of  90% of                                                                   
the $5,000 dollars  federal aid.  Mr. Jeans  advised that the                                                                   
Department  reflected  the  State  aid savings  and  not  the                                                                   
impact aid that would offset that number.                                                                                       
                                                                                                                                
Representative  Croft reiterated  that the  fiscal note  does                                                                   
not reflect the  amount that would be lost.  He  asked if the                                                                   
Department  had  an  estimate  of that  amount.    Mr.  Jeans                                                                   
responded that  they would reflect the current  year numbers.                                                                   
Representative Croft  thought that it would amount  to 40% of                                                                   
the savings.   Mr. Jeans did not  know the offset.   He added                                                                   
that  their analysis  took  all four-year-old  children  that                                                                   
were counted in  the current year and backed them  out of the                                                                   
equation to determine how much State aid they represent.                                                                        
                                                                                                                                
Representative  Croft asked about  how many  pre-kindergarten                                                                   
students  would the  bill identify.   Mr.  Jeans replied  650                                                                   
students statewide.                                                                                                             
                                                                                                                                
Vice-Chair Meyer spoke to the  amendment extension.  Co-Chair                                                                   
Williams called an at-ease.                                                                                                     
                                                                                                                                
                                                                                                                                
At Ease:       3:32 P.M.                                                                                                      
Reconvene:     3:40 P.M.                                                                                                    
                                                                                                                                
                                                                                                                                
Representative Foster WITHDREW  Amendment #1.  There being NO                                                                   
OBJECTION, Amendment #1 was withdrawn.                                                                                          
                                                                                                                                
Representative Foster  MOVED to change the effective  date on                                                                   
Page 1, Line 12, to "July 1, 2004".                                                                                             
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Co-Chair Harris pointed  out that the fiscal  note would need                                                                   
to be changed in the FY2004 line section.                                                                                       
                                                                                                                                
Representative Joule  commented that accepting  the amendment                                                                   
would provide  time for the communities to  form partnerships                                                                   
to help with the effects from  the cuts in State funding.  He                                                                   
emphasized that  the action was  extremely important  for the                                                                   
future of education in Alaska.                                                                                                  
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Hawker, Joule, Meyer, Moses, Whitaker,                                                                           
              Chenault, Croft, Foster, Harris                                                                                   
OPPOSED:       Stoltze, Williams                                                                                                
                                                                                                                                
The MOTION PASSED (9-2).                                                                                                        
                                                                                                                                
Representative  Croft suggested  that the  effective date  be                                                                   
placed  into  the title  of  the  bill.    He MOVED  a  Title                                                                   
Amendment  on  Page  1,  Line   2,  inserting  language:  "An                                                                   
effective  date for the  Act of  July 1,  2004".  The  change                                                                   
provides the date to conform to Amendment #1.                                                                                   
                                                                                                                                
There being NO OBJECTION, it was adopted.                                                                                       
                                                                                                                                
Representative  Foster  MOVED  to  report  CS  HB  154  (FIN)                                                                   
including the  Title Change out of Committee  with individual                                                                   
recommendations  and with the  accompanying new  fiscal note.                                                                   
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
CS HB  154 (FIN)  was reported  out of  Committee with  a "no                                                                   
recommendation" and with a new  fiscal note by the Department                                                                   
of Education & Early Development.                                                                                               
                                                                                                                                
Representative   Foster  voiced   his  appreciation   to  the                                                                   
Committee for passage  of the bill and stressed  how much the                                                                   
bill would help the Bush area.                                                                                                  
                                                                                                                                
HOUSE BILL NO. 97                                                                                                             
                                                                                                                                
     An Act authorizing a long-term lease of certain Alaska                                                                     
     Railroad Corporation land at Anchorage; and providing                                                                      
     for an effective date.                                                                                                     
                                                                                                                                
REPRESENTATIVE  VIC  KOHRING  commented  that  in  2002,  the                                                                   
Legislature  passed House  Bill 298 to  increase the  maximum                                                                   
lease  term without  termination rights  the Alaska  Railroad                                                                   
can grant without  Legislative approval to 55  years from the                                                                   
35-year maximum set  in 1984.  The increase  was to encourage                                                                   
economic development  in communities  along the Rail  belt by                                                                   
making  it  easier  for  large   commercial  and  residential                                                                   
developers  to  obtain  financing through  grants  and  other                                                                   
sources,  which require  a longer  lease.   For example,  the                                                                   
Housing  and  Urban  Development  (HUD)  202  Senior  Housing                                                                   
Grants required a  minimum 40-year lease.  The  55-year lease                                                                   
maximum set forth in HB 298 went into effect May 30, 2002.                                                                      
                                                                                                                                
Representative  Kohring noted  that after  the minimum  lease                                                                   
requirement for HUD 202 grants  increased from 40 years to 75                                                                   
years, in effect putting developers  back at square one.  The                                                                   
Alaska Railroad  can approve a  lease in excess of  55 years;                                                                   
however, they must  reserve the right to terminate  the lease                                                                   
in the event the land is needed for railroad purposes.                                                                          
                                                                                                                                
A multi-family  senior housing  project has been  planned for                                                                   
Government Hill  in Anchorage  and the Alaska  Railroad Board                                                                   
granted the developer  a 55-year lease for the  project site.                                                                   
When  HUD   changed  the  terms   of  the  202   program,  it                                                                   
disqualified  the  project  for  consideration  for  HUD  202                                                                   
grants.                                                                                                                         
                                                                                                                                
Representative Kohring  commented that HB 97  would allow the                                                                   
Alaska  Railroad to  extend the  developer's current  55-year                                                                   
lease,  without  the  termination clause,  allowing  them  to                                                                   
apply for HUD 202 funding.                                                                                                      
                                                                                                                                
Representative Foster MOVED to  report HB 97 out of Committee                                                                   
with  the   accompanying  fiscal   note.    There   being  NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
HB  97  was  reported  out  of  Committee  with  "individual"                                                                   
recommendations  and   with  zero  fiscal  note   #1  by  the                                                                   
Department of Community and Economic Development.                                                                               
                                                                                                                                
                                                                                                                                
AT EASE:       3:50 P.M.                                                                                                      
RECONVENED:    4:00 P.M.                                                                                                      
                                                                                                                              
                                                                                                                              
(TAPE MALFUNCTION)                                                                                                          
                                                                                                                                
HOUSE BILL NO. 105                                                                                                            
                                                                                                                                
     An Act relating to loans to satisfy past due federal                                                                       
     tax obligations of commercial fishermen and to the                                                                         
     commercial fishing loan program.                                                                                           
                                                                                                                                
SENATOR  GARY  STEVENS  provided  information  on  the  bill,                                                                   
noting that  it was intended to  help an industry  in crisis.                                                                   
He explained that  the last appropriation into  the revolving                                                                   
loan fund was in 1985.  The bill  reinstates a system used in                                                                   
the past  to mitigate a federal  tax obligation.   He pointed                                                                   
out that  the Salmon  Task Force  considered  the bill  as an                                                                   
important part  of their package  of legislation to  help the                                                                   
industry.   Many permits  in Alaska are  at risk.   These are                                                                   
secured loans.                                                                                                                  
                                                                                                                                
Senator  Stevens explained  that permit  holders who  want to                                                                   
take advantage of  the loan program must be  a State resident                                                                   
for  a   continuous  two  years   before  applying   for  the                                                                   
application.    They must  be  current  on their  income  tax                                                                   
filing  with a payment  agreement with  the Internal  Revenue                                                                   
Service  (IRS).    HB  105  would  eliminate  the  ½  percent                                                                   
refinancing fee  in the program.   He added that there  was a                                                                   
provision,  eliminating the  word  "promptly", allowing  more                                                                   
flexibility for the Division of  Investments.  He stated that                                                                   
the bill is a "small step" for an industry in crisis.                                                                           
                                                                                                                                
Co-Chair Harris  spoke to the  fiscal note, asking  where the                                                                   
funds would  come from.   Senator G.  Stevens noted  that the                                                                   
dollars would  come from the  people that participate  in it.                                                                   
They  have been  used in  the  past from  the revolving  loan                                                                   
fund.                                                                                                                           
                                                                                                                                
Representative  Croft observed  that the  funds indicated  in                                                                   
the  fiscal note  were  general funds.    Senator G.  Stevens                                                                   
acknowledged  that this  would be  a loss of  income for  the                                                                   
general fund.                                                                                                                   
                                                                                                                                
GREG WINEGAR,  DIRECTOR, DIVISION OF INVESTMENTS,  DEPARTMENT                                                                   
OF  COMMUNITY  &  ECONOMIC  DEVELOPMENT,   corrected  Senator                                                                   
Stevens noting that it would be  a loss to the Revolving Loan                                                                   
Fund.   In response  to a question  by Representative  Croft,                                                                   
Mr. Winegar expected  a relatively low activity  around 10-15                                                                   
loans  per year.    He  stated that  the  fund would  not  be                                                                   
impacted.                                                                                                                       
                                                                                                                                
Representative  Croft  asked if  the  loans  had a  different                                                                   
default rate.  Mr. Winegar replied  that the loans have had a                                                                   
higher delinquency rate.                                                                                                        
                                                                                                                                
Representative  Croft asked how  the loans would  be secured.                                                                   
Mr.  Winegar replied  that  they would  be  secured with  the                                                                   
permit as collateral.                                                                                                           
                                                                                                                                
Co-Chair Harris  inquired the  balance in the  Revolving Loan                                                                   
Fund.   Mr. Winegar  commented that  the current balance  was                                                                   
approximately  $90 million  dollars.   The projected  balance                                                                   
for this fiscal year is approximately $15 million dollars.                                                                      
                                                                                                                                
Co-Chair Harris  asked if  there was any  money taken  out of                                                                   
the fund from the recent past.   Mr. Winegar stated that last                                                                   
year, $2 million  dollars had been taken out of  that fund to                                                                   
balance the Power Cost Equalization (PCE) fund.                                                                                 
                                                                                                                                
                                                                                                                                
(TAPE CORRECTION)                                                                                                             
                                                                                                                                
                                                                                                                                
TAPE HFC 03 - 68, Side A                                                                                                      
                                                                                                                                
                                                                                                                                
Representative  Hawker  MOVED  to adopt  Amendment  #1,  #23-                                                                   
LS0534\D.1,  Utermohle,  4/28/03,  which would  add  language                                                                   
"and  child  support  liens  of   which  the  department  has                                                                   
notice".   Representative Chenault  OBJECTED and asked  if it                                                                   
would be a normal procedure.                                                                                                    
                                                                                                                                
Mr. Winegar replied  that it was normal and had  been used in                                                                   
the past.                                                                                                                       
                                                                                                                                
BRUCE TWOMLEY,  CHAIRMAN, COMMERCIAL FISHERIES  LIMITED ENTRY                                                                   
COMMISSION  added  that  the amendment  was  consistent  with                                                                   
current  law.  Child  Support Enforcement  Agency (CSEA)  has                                                                   
the power  to step in at  that point and legally  cannot take                                                                   
any proceeds over and above those  that need to be satisfied.                                                                   
                                                                                                                                
Representative Chenault asked  about the notification process                                                                   
to  CSEA.    Mr.  Twomley  deferred   that  question  to  the                                                                   
Department of Revenue.                                                                                                          
                                                                                                                                
DAVID TREDWAY,  CHILD SUPPORT ENFORCEMENT  AGENCY, DEPARTMENT                                                                   
OF REVENUE,  offered to  answer questions  of the  Committee.                                                                   
He  noted that  all cases  through  the State  of Alaska  are                                                                   
informed of any arrears that they  have in the State and that                                                                   
CSEA  is  assigned  to  collect   that  data  through  normal                                                                   
channels.  If  this language was in statute,  it would become                                                                   
a statutory process liable for collection.                                                                                      
                                                                                                                                
Representative  Chenault  commented  that  child  support  is                                                                   
important in the  State.  He encouraged that the  lag time be                                                                   
shortened regarding what is owed verses paid.                                                                                   
                                                                                                                                
Representative  Chenault   WITHDREW  his  OBJECTION   to  the                                                                   
amendment.   There being NO  further OBJECTION,  Amendment #1                                                                   
was adopted.                                                                                                                    
                                                                                                                                
Representative Foster MOVED to  report CS HB 105 (FIN) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal note.                                                                                                       
                                                                                                                                
CS HB  105 (FIN)  was reported  out of  Committee with  a "do                                                                   
pass" recommendation  and with  fiscal note #1  by Department                                                                   
of Community & Economic Development.                                                                                            
                                                                                                                                
                                                                                                                                
At Ease:       4:15 P.M.                                                                                                      
Reconvene:     4:40 P.M.                                                                                                      
                                                                                                                                
HOUSE BILL NO. 156                                                                                                            
                                                                                                                                
     An Act increasing the motor fuel tax and repealing the                                                                     
     special tax rates on blended fuels; and providing for                                                                      
     an effective date.                                                                                                         
                                                                                                                                
Vice-Chair  Meyer MOVED  to  adopt work  draft  #23-GH1118\Q,                                                                   
Kurtz,  4/25/03,  as  the  version of  the  bill  before  the                                                                   
Committee.                                                                                                                      
                                                                                                                                
Representative  Croft OBJECTED.   He asked about  the missing                                                                   
exemptions.   Co-Chair Williams  replied that the  difference                                                                   
represented the tax credits for  the timber industry and fish                                                                   
waste.  Representative  Croft noted that it would  get rid of                                                                   
the  contingent effect  on the  constitutional amendment  for                                                                   
the permanent fund.   Co-Chair Williams advised  that was the                                                                   
Governor's original bill.                                                                                                       
                                                                                                                                
Representative Croft WITHDREW  his OBJECTION.  There being NO                                                                   
further OBJECTION, it was adopted.                                                                                              
                                                                                                                                
ROBYNN WILSON, (TESTIFIED VIA  TELECONFERENCE), DEPARTMENT OF                                                                   
REVENUE,  ANCHORAGE,  offered  to  answer  questions  of  the                                                                   
Committee.                                                                                                                      
                                                                                                                                
                                                                                                                                
LANDA   BAILY,  SPECIAL   ASSISTANT   TO  THE   COMMISSIONER,                                                                   
DEPARTMENT  OF  REVENUE,  noted  that she  had  reviewed  the                                                                   
committee substitute  with Commissioner  Corbus and  that the                                                                   
Department does  support the proposed  bill.  The  bill would                                                                   
levy a twenty-cent  per gallon tax on motor fuel.   She added                                                                   
that  this  bill is  a  significant  part of  the  Governor's                                                                   
package to address the current fiscal gap.                                                                                      
                                                                                                                                
Representative Croft  MOVED to ADOPT Amendment  #1.  Co-Chair                                                                   
Williams OBJECTED.                                                                                                              
                                                                                                                                
Representative Croft  explained that the amendment  would ask                                                                   
that  the State  appropriate the  statutory  amount for  road                                                                   
maintenance   assistance   to   the  municipalities.      The                                                                   
municipalities   have  over  40%   of  the  roads   in  their                                                                   
maintenance  jurisdiction.   Currently,  the  State has  been                                                                   
under-funding the statutory amount  dedicated to roads at 10%                                                                   
funding.  He acknowledged that  Amendment #1 is a complicated                                                                   
amendment.   The  concept  of the  amendment  gives less  for                                                                   
municipal  assistance for  roads than  the statute  requires,                                                                   
reducing the amount of tax collected by that percentage.                                                                        
                                                                                                                                
Representative  Croft  pointed   out  that  this  concern  is                                                                   
usually  addressed  in  the  dedicated  funds  section.    He                                                                   
reiterated  that   the  concept   is  simple,  if   money  is                                                                   
appropriated  in  the  prior   fiscal  year,  the  amount  in                                                                   
statute,  the  full  amount  for  revenue  sharing  and  road                                                                   
maintenance, and  then collected for  full tax.  If  less has                                                                   
been received,  then that would  be the percentage  collected                                                                   
for that tax.                                                                                                                   
                                                                                                                                
Representative Stoltze asked if  these funds would only go to                                                                   
organized governments  or would rural  areas also be  able to                                                                   
collect.   Representative  Croft  responded that  there is  a                                                                   
formula  regarding the  square miles  of roads maintained  by                                                                   
the municipality  in the districts and that  determination is                                                                   
made per road mile.                                                                                                             
                                                                                                                                
JOHN   MACKINNON,   DEPUTY   COMMISSIONER,    DEPARTMENT   OF                                                                   
TRANSPORTATION &  PUBLIC FACILITIES, understood  that formula                                                                   
was  handled  by  the  Department   of  Commerce  &  Economic                                                                   
Development.   He  noted that  he had  listened to  testimony                                                                   
given by  Kevin Ritchie, Alaska  Municipal League (AML).   He                                                                   
had  given  a  good explanation  for  funds  added  for  road                                                                   
maintenance.      In   the   original    Intermodal   Surface                                                                   
Transportation Efficiency Act  (ISTEA) crafted in Congress in                                                                   
1991,  Senator  Ted  Stevens   placed  a  provision,  1-18-E,                                                                   
allowing only Alaska  and Puerto Rico to use  federal highway                                                                   
funds for  community roads.   In 1991,  there was  no federal                                                                   
highway  trust fund  dollars and  that changed  to the  State                                                                   
being awarded  $72 million  dollars.   There is a  tremendous                                                                   
amount of highway dollars floating in the municipalities.                                                                       
                                                                                                                                
Mr. MacKinnon reminded members  that the proposed legislation                                                                   
was a measure  to reduce the fiscal  gap.  He added  that the                                                                   
Department of  Transportation &  Public Facilities  sees this                                                                   
as a user fee.                                                                                                                  
                                                                                                                                
Representative Stoltze  noted that the amendment  contained a                                                                   
pro rata  distribution for the  more densely populated  urban                                                                   
areas.  He  questioned the equity of the  issue distribution.                                                                   
Representative  Croft  explained  that  it  would  limit  the                                                                   
amount and if  enough had not been received,  then they would                                                                   
not collect  the full amount  of the  tax.  Nothing  would be                                                                   
changed   regarding   the   distribution   by   road   miles.                                                                   
Representative Stoltze voiced  his concern that the amendment                                                                   
would only benefit downtown Anchorage.                                                                                          
                                                                                                                                
Ms. Bailey  pointed out the  fluctuating amount  indicated in                                                                   
the amendment.   She stated that  the original intent  of the                                                                   
Governor was to address the fiscal  gap and that the proposed                                                                   
legislation was an important piece of that package.                                                                             
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Joule, Moses, Croft                                                                                              
OPPOSED:       Meyer, Stolze, Chenault, Foster, Williams                                                                        
                                                                                                                                
Representative Whitaker,  Representative Hawker  and Co-Chair                                                                   
Harris were not present for the vote.                                                                                           
                                                                                                                                
The MOTION FAILED (3-5).                                                                                                        
                                                                                                                                
Representative  Croft  MOVED  to  adopt  Amendment  #2,  #23-                                                                   
GH1118\Q.2, Kurtz, 4/28/03.  (Copy on File).                                                                                    
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Representative  Croft  explained   that  Amendment  #2  would                                                                   
attempt  an   alternative  approach.     The  amendment   was                                                                   
recommended by the  AML.  It attempts to put  together a fund                                                                   
that would place a portion of  that money into assistance for                                                                   
the municipalities.                                                                                                             
                                                                                                                                
Ms. Bailey  stated the amendment  seeks to place  a structure                                                                   
in statute that  would be counter to the  Governor's original                                                                   
intent.                                                                                                                         
                                                                                                                                
Representative  Croft argued  that would  depend on  what the                                                                   
Governor's original  intent was.  Representative  Croft noted                                                                   
that if  it were  to go for  maintenance of  a road,  then it                                                                   
would  be more  compatible  with the  Governor's  plan.   The                                                                   
amendment diverts from the general  fund specifically to road                                                                   
maintenance.   He believed that  would be what  most Alaskans                                                                   
would want with the increase.                                                                                                   
                                                                                                                                
A roll call vote  was taken on the motion to  adopt Amendment                                                                   
#2.                                                                                                                             
                                                                                                                                
IN FAVOR:      Moses, Croft, Joule                                                                                              
OPPOSED:       Meyer, Stoltze, Chenault, Foster, Williams                                                                       
                                                                                                                                
Representative Whitaker,  Representative Hawker  and Co-Chair                                                                   
Harris were not present for the vote.                                                                                           
                                                                                                                                
The MOTION FAILED (3-8).                                                                                                        
                                                                                                                                
Co-Chair  Williams  MOVED  to   adopt  Amendment  #3,    #23-                                                                   
GH118\Q.4, Kurtz, 4/28/03.  (Copy on File).                                                                                     
                                                                                                                                
Representative Joule OBJECTED  for the purpose of discussion.                                                                   
                                                                                                                                
KEVIN   JARDELL,   ASSISTANT  COMMISSIONER,   DEPARTMENT   OF                                                                   
ADMINISTRATION, explained Amendment  #3, which is a technical                                                                   
amendment that  identifies how  the State purchases  its fuel                                                                   
from  resale  to  gasoline.     Currently,  when  a  reseller                                                                   
purchases fuel from a wholesaler,  it pays the gas tax to the                                                                   
wholesaler.   When  the State  purchases  from the  reseller,                                                                   
they can  purchase the fuel without  paying the gas  tax.  At                                                                   
that point, the  reseller, under statute, can  recoup the gas                                                                   
tax that it has paid from the  Department of Revenue.  Only a                                                                   
reseller of  fuel can do  that.  One  of the benefits  of the                                                                   
new contract  is that a State  agency that has a high  use of                                                                   
fuel, can  go to any gas  station, purchase that fuel  with a                                                                   
State credit  card and  the reseller does  not have  to worry                                                                   
about going  through the  process of  recouping the  tax from                                                                   
the State.   The credit  card company  pays the reseller  the                                                                   
cost  of the  tax and  the  fuel.   Under  Amendment #3,  the                                                                   
credit card company could go and  recoup the tax it has paid.                                                                   
It would  allow the  full benefit,  use of  credit cards  and                                                                   
expands where the  State can purchase fuel given  the benefit                                                                   
of not paying the tax.                                                                                                          
                                                                                                                                
Representative  Joule asked how  "local government"  would be                                                                   
defined.    Mr.  Jardell  responded   that  local  government                                                                   
agencies would go  through certain levels.   Ms. Wilson added                                                                   
that  the statute  identifies  official use.   The  amendment                                                                   
would not change whether a government  agency could receive a                                                                   
refund or  not.   It does  not change  the tax structure  and                                                                   
would simplify paper work to make it whole.                                                                                     
                                                                                                                                
Representative  Stoltze  asked  at  what  level  would  State                                                                   
government  be defined.   He stated  for the  record that  he                                                                   
would  not  vote  for a  personal  exemption.    Mr.  Jardell                                                                   
responded that  it would only  apply to State business  as it                                                                   
now does.  He reiterated that  it would not apply to personal                                                                   
use.                                                                                                                            
                                                                                                                                
MIKE  BARNHILL,  ASSISTANT ATTORNEY  GENERAL,  DEPARTMENT  OF                                                                   
LAW, advised  that the  amendment would  not change  existing                                                                   
law.  When on  official business and using  fuel, that person                                                                   
would be exempt.                                                                                                                
                                                                                                                                
In  response  to  comments  made   by  Co-Chair  Harris,  Mr.                                                                   
Barnhill pointed  out that  the definition  of motor  fuel in                                                                   
current  statute  excludes  purchases  by  State,  local  and                                                                   
federal government agencies for official use.                                                                                   
                                                                                                                                
Representative Foster  asked if it would affect  diesel fuel.                                                                   
Mr. Barnhill replied that it would.                                                                                             
                                                                                                                                
In response to  queries by Representative Foster,  Ms. Wilson                                                                   
explained   that   off-road  vehicles   and   big   equipment                                                                   
not  used  in conjunction  with  vehicle  license,  currently                                                                   
amounts to a net $.02 cents.                                                                                                    
                                                                                                                                
Representative  Joule asked  if that  would apply  to the  De                                                                   
Long  transportation system,  also  known as  the Haul  Road.                                                                   
Ms.  Wilson  replied  that  the   off-road  refund  would  be                                                                   
available  if the  vehicle  is  not licensed  to  be used  on                                                                   
public ways.                                                                                                                    
                                                                                                                                
Representative Joule WITHDREW  his OBJECTION to Amendment #3.                                                                   
There being NO further OBJECTION, it was adopted.                                                                               
                                                                                                                                
Representative  Joule  MOVED  to  ADOPT  Amendment  #4,  #23-                                                                   
GH1118\H.2, Kurtz, 4/14/03.  (Copy on File).                                                                                    
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Representative Joule  explained the amendment,  which provide                                                                   
for those  areas not connected  to road systems,  continue to                                                                   
pay  at  the   current  rate.    He  emphasized   that  rural                                                                   
communities are already paying "huge" prices for fuel.                                                                          
                                                                                                                                
Ms.  Bailey  inquired the  effect  of  the amendment  on  the                                                                   
revenue derived from tax.  Ms.  Wilson responded that she did                                                                   
not  know  the   numbers  that  would  be  foregone   by  the                                                                   
amendment.   Wholesalers pay  the tax in  the State  and they                                                                   
are not required  to tell where the fuel is sold.   She could                                                                   
not provide that information at this time.                                                                                      
                                                                                                                                
Ms. Bailey  maintained that  given the  fact that Ms.  Wilson                                                                   
was unable to access  the net effect, it would  be better for                                                                   
the Committee  to pass the  bill amended with  only Amendment                                                                   
#3.   She believed that  Amendment #4 would have  detrimental                                                                   
effects on the Governor's long-term plan.                                                                                       
                                                                                                                                
Co-Chair  Williams encouraged  Representative  Joule to  work                                                                   
with the Administration regarding his concern.                                                                                  
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Moses, Joule                                                                                                     
OPPOSED:       Stoltze, Chenault, Foster, Meyer, Harris,                                                                        
               Williams                                                                                                         
                                                                                                                                
Representative    Whitaker,    Representative   Hawker    and                                                                   
Representative Croft were not present for the vote.                                                                             
                                                                                                                                
The MOTION FAILED (2-6).                                                                                                        
                                                                                                                                
Representative  Foster commented  that  within his  district,                                                                   
there are  airports instead of  roads.  There are  50 runways                                                                   
that serve the population.  The  Department of Transportation                                                                   
& Public Facilities spends $10  million dollars a year in the                                                                   
Northern Region.  He claimed that  was a good return on their                                                                   
money and that the money on the  gas tax would be helping out                                                                   
those area runways and keeping them open for emergencies.                                                                       
                                                                                                                                
Representative  Foster  supported  the  3% increase  to  keep                                                                   
airports open and roads working.   Village areas do not spend                                                                   
much  on keeping  their  infrastructure  in  tact and  it  is                                                                   
crucial to keep runways open.   He acknowledged that everyone                                                                   
must pay a little to help up with the expenses.                                                                                 
                                                                                                                                
Co-Chair Harris asked Representative Foster how much he paid                                                                    
for fuel in his area.  Representative Foster responded that                                                                     
cost fluctuates between $1.75 and $4.00 dollars per gallon.                                                                     
                                                                                                                                
Co-Chair Williams stated that HB 156 would be HELD in                                                                           
Committee for further consideration.                                                                                            
                                                                                                                                
TAPE HFC 03 - 68, Side B                                                                                                      
                                                                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 5:17 P.M.                                                                                          
                                                                                                                                
                                                                                                                                

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