Legislature(2003 - 2004)

03/04/2004 01:43 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       March 04, 2004                                                                                           
                         1:43 P.M.                                                                                              
TAPE HFC 04 - 44, Side A                                                                                                        
TAPE HFC 04 - 44, Side B                                                                                                        
CALL TO ORDER                                                                                                                 
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 1:43 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 Hugh Fate                                                                                                        
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative   Jim   Holm;   Barbara  Cotting,   Staff   To                                                                   
Representative Holm;  Laura Baker, Budget Chief,  Division of                                                                   
Administrative  Services,  Department   of  Health  &  Social                                                                   
Services;  Pat  Davidson,  Legislative  Auditor,  Legislative                                                                   
Audit Division, Legislative Affairs  Agency; Patrick Sidmore,                                                                   
Commission on  Aging Grants, Senior and  Disability Services,                                                                   
Department of  Health & Social Services; Pete  Ecklund, Staff                                                                   
to Representative Bill Williams;  Bob Loescher, Alaska Native                                                                   
Brotherhood,  Juneau;  Steve   Porter,  Deputy  Commissioner,                                                                   
Department  of   Revenue;  Kim  Garnero,   Director,  Finance                                                                   
Division, Department of Administration;                                                                                         
PRESENT VIA TELECONFERENCE                                                                                                    
Larry   Meyers,  Deputy   Director,   Division  of   Finance,                                                                   
Department  of Revenue,  Anchorage;  Steven Borcherding  Sr.,                                                                   
General  Manager, Gold  Cash  Bingo, Anchorage;  John  Focht,                                                                   
Vice President of Prepaid Card  Products, US Bank, Milwaukee,                                                                   
Wisconsin; Peter Brown, Key Bank Alaska, Anchorage;                                                                             
HB 296    An  Act making an  appropriation for the  operation                                                                   
          of the Alaska Natural Gas Development Authority;                                                                      
          and providing for an effective date.                                                                                  
          HB 296 was heard and HELD in Committee for further                                                                    
HB 394    An Act extending the Alaska Commission on Aging.                                                                      
          CS HB 394(HES) was REPORTED out of Committee with                                                                     
          a "do pass" recommendation and with a new fiscal                                                                      
HB 494    An  Act relating  to the disbursement  of  money by                                                                   
          the   state,  including  employment   compensation,                                                                   
          unemployment    payments,   and   permanent    fund                                                                   
          dividends, and to bank  investments and deposits by                                                                   
          the state; and providing for an effective date.                                                                       
          HB 494 was heard and HELD in Committee for further                                                                    
HB 509    An Act  relating to establishing the  Alaska Gaming                                                                   
          CS HB 509(FIN) was REPORTED out of Committee with                                                                     
          individual recommendations and a previously                                                                           
          published fiscal impact note.                                                                                         
HOUSE BILL NO. 394                                                                                                            
     An Act extending the Alaska Commission on Aging.                                                                           
BARBARA COTTING, STAFF TO REPRESENTATIVE  JIM HOLM, explained                                                                   
that Section 1  extends the sunset for the  Alaska Commission                                                                   
on Aging.  Sections 2  and 3 reflect  Executive Order  108 in                                                                   
2003  which  moved  the commission  from  the  Department  of                                                                   
Administration   to  the  Department   of  Health   &  Social                                                                   
Services.   Ms.  Cotting referred  to  page 13  of the  audit                                                                   
report  (copy   on  file)   recommending  extension   of  the                                                                   
commission.   The fiscal note  indicates that  the Department                                                                   
of  Health &  Social  Services will  receive  $13 million  in                                                                   
federal  funds  because  the  commission  meets  the  federal                                                                   
Co-Chair Harris asked for clarification  of the federal funds                                                                   
on the fiscal note.                                                                                                             
PATRICK  SIDMORE,  COMMISSION  ON AGING  GRANTS,  SENIOR  AND                                                                   
DISABILITY SERVICES, DEPARTMENT  OF HEALTH & SOCIAL SERVICES,                                                                   
explained  that the Commission  on Aging  is responsible  for                                                                   
planning for  Title 3  federal money  of the Older  Americans                                                                   
Act that provides  for nutrition, transportation  and support                                                                   
services (NTS)  for seniors. Title  3 funds Meals  on Wheels,                                                                   
congregate meals, rides for seniors,  and the National Family                                                                   
Caregiver program.  The commission  is tasked with allocating                                                                   
the money to meet the targets of federal law.                                                                                   
Co-Chair Harris  reiterated his  question of whether  federal                                                                   
money is  involved.  Mr.  Sidmore explained that  interagency                                                                   
receipts   are   administration   money  from   the   federal                                                                   
government based  on senior population.  He  said that Alaska                                                                   
receives  the minimum  amount.   Referring to  Fiscal Note  1                                                                   
dated 02/12/04, Mr.  Sidmore stated that a portion  of $202.4                                                                   
in  "Other  (1007  Interagency   Receipts)"  is  the  federal                                                                   
administration money.                                                                                                           
REPRESENTATIVE  HOLM  referred  to  the second  page  of  the                                                                   
fiscal  note,  "analysis  continuation,"  that  explains  the                                                                   
department  would lose  $13 million  in  federal dollars  for                                                                   
senior services if the commission expires.                                                                                      
Co-Chair  Harris questioned  that  the fiscal  note  analysis                                                                   
indicating  the extension  of  the commission  has no  fiscal                                                                   
impact because it  is funded in the Governor's  office, while                                                                   
the second  fiscal note shows  an increase over  the original                                                                   
fiscal  note to  reflect changes  in  the amended  Governor's                                                                   
Representative Holm was unable to respond.                                                                                      
LAURA  BAKER,   BUDGET  CHIEF,  DIVISION   OF  ADMINISTRATIVE                                                                   
SERVICES,  DEPARTMENT  OF HEALTH  & SOCIAL  SERVICES  (DHSS),                                                                   
explained  that when  DHSS updated  the fiscal  note for  the                                                                   
Senate version [Senate Bill 263],  the department realized it                                                                   
had  submitted a  budget amendment  for interagency  receipts                                                                   
for the  commission that  reflected what  would have  been in                                                                   
the   budget   if  the   department   had  not   proposed   a                                                                   
consolidation  of several  boards in  the original  proposal.                                                                   
The  $417.9 totals  the cost  of the  four current  full-time                                                                   
positions in the  commission.  With the plan  to consolidate,                                                                   
the FY 05 budget  had revised these to two part-time  and two                                                                   
full-time positions.                                                                                                            
Co-Chair  Harris asked  if the department  is proposing  four                                                                   
new permanent  full-time members.   Ms. Baker  clarified that                                                                   
the $417.9 reflects the Governor's  amended budget, and while                                                                   
there  is  a  slight  increase  over  FY  04  in  interagency                                                                   
receipts  and retirement  costs,  it shows  the  cost of  the                                                                   
aging commission if  it is extended.  She said  it is already                                                                   
built into the budget.                                                                                                          
Representative Hawker  asked if these changes  came through a                                                                   
late  amendment incorporated  in  the budget  process  rather                                                                   
than  in the  Governor's  budget.   Ms.  Baker affirmed,  and                                                                   
explained that the new fiscal  note is a technical adjustment                                                                   
showing the  increase in interagency  receipts in  the budget                                                                   
amendment.   Representative  Hawker advised  that the  budget                                                                   
amendment  resulted  from  a  negotiated  settlement  over  a                                                                   
potential lawsuit  regarding changes  proposed to  the boards                                                                   
and commissions.                                                                                                                
In response to a question by Co-Chair  Harris, Representative                                                                   
Hawker explained  that the  $417 thousand  is already  in his                                                                   
subcommittee recommendations  for the Department  of Health &                                                                   
Social Services.                                                                                                                
Representative  Fate brought  up the  Legislative Budget  and                                                                   
Audit report in FY 02 giving directives  regarding the mixing                                                                   
of funds  for sub-recipients,  and asked if those  corrective                                                                   
actions are  on-going. Mr. Sidmore explained  that corrective                                                                   
actions have  been taken.   There was  concern over  the sub-                                                                   
recipients not  reporting their older workers  in the federal                                                                   
Mature  Alaskans  Seeking Skills  Training  (MASST)  Program.                                                                   
Each  of the  larger  sub-recipient  agencies  is visited  at                                                                   
least  once  a  year  for an  audit.    The  department  also                                                                   
corrected the  reporting of federal  monies.   The department                                                                   
is  under a  new system  of managing  grants, and  the FY  02                                                                   
audit is outdated.                                                                                                              
Representative  Foster MOVED to  report CSHB 394(HES)  out of                                                                   
Committee with  the accompanying  fiscal note and  individual                                                                   
HOUSE BILL NO. 509                                                                                                            
          An Act relating to establishing the Alaska Gaming                                                                     
Co-Chair Harris MOVED to ADOPT  Work Draft 23-LS1768, Version                                                                   
U. There being NO OBJECTION, it was so ordered.                                                                                 
Representative Croft asked for explanation of the changes.                                                                      
SUE STANCLIFF,  STAFF TO  REPRESENTATIVE KOTT explained  that                                                                   
the new changes in Version U have  resulted from working with                                                                   
the gaming  industry.  On page 2,  "Creation of  commission,"                                                                   
the commission  would still consist  of five voting  members,                                                                   
but  would  now  include  two  non-voting  members  from  the                                                                   
industry. Addressing a question  that arose during a previous                                                                   
hearing, she  stated that  one voting  member must  have five                                                                   
years' experience  in law enforcement.   One of  the industry                                                                   
members must  hold a  permit or license  under AS  05.15, and                                                                   
the other ex-officio nonvoting  member must hold a license or                                                                   
permit under AS 04.11. The voting members elect the chair.                                                                      
Ms.  Stancliff noted  that  in Subsection  (b),  page 2,  the                                                                   
voting members  serve staggered terms  of three years  and it                                                                   
is already  defined in  AS 39.05.55.   The nonvoting  members                                                                   
serve a non-staggered three-year  term. The change on page 3,                                                                   
(f) sets out that  an ex officio member may not  serve if the                                                                   
person has been convicted of a crime                                                                                            
In  response  to  a question  by  Representative  Croft,  Ms.                                                                   
Stancliff advised  that ex officio  members can  hold permits                                                                   
for charitable  gaming, must submit to a  criminal background                                                                   
check,  and cannot  serve on the  commission  if they have  a                                                                   
criminal record.  She stated that there would  be five voting                                                                   
members and two non-voting members.                                                                                             
Ms.  Stancliff  referred  to  page  4,  explaining  that  the                                                                   
provision  that the  commission  may participate  with  other                                                                   
states in multi-gaming activities  was moved from "Duties and                                                                   
powers   of  the  commission"   in  Version   S  to   "Gaming                                                                   
activities" in Version U.                                                                                                       
Ms. Stancliff  pointed  out a  change on page  5, "Duties  of                                                                   
director."   The director  now  would be exempt  but not  the                                                                   
director's employees.   This change  resulted from  a concern                                                                   
that   the  seven   current  non-exempt   employees  in   the                                                                   
Department of Revenue  would gain exempt status  by moving to                                                                   
the commission.                                                                                                                 
Ms.  Stancliff  referred  to  page  5,  line  8,  "Duties  of                                                                   
director," and explained that  the contractual questions with                                                                   
agents have  been removed in  the current version  because no                                                                   
gaming  is  allowed under  AS  05.18.    On page  6,  "Gaming                                                                   
activities,"  language  has been  removed  that stated,  "the                                                                   
commission  may not  authorize a  charitable gaming  activity                                                                   
unless  that activity  is authorized  under AS  05.15."   The                                                                   
language was unnecessary because  this section speaks only to                                                                   
AS 05.18.                                                                                                                       
Ms. Stancliff  pointed out  a change  on page 6,  "Prohibited                                                                   
acts," which removed  price fixing from the  previous version                                                                   
because  it  would be  inappropriate  for  the state  to  set                                                                   
prices on  raffle tickets.  She  added that it  was confusing                                                                   
language that doesn't apply to AS 05.15.                                                                                        
PETE  ECKLUND,   STAFF  TO   REPRESENTATIVE  BILL   WILLIAMS,                                                                   
clarified  that AS 05.15  is the  charitable gaming  statute.                                                                   
Most  of this  bill would  create a  new section  of law,  AS                                                                   
O5.18,  for future new  gaming. He  noted existing  confusion                                                                   
over how AS 05.15 and AS 05.18  interplay, and he pointed out                                                                   
that these are totally separate sections of law.                                                                                
Ms. Stancliff noted that page  6, "Prohibited acts," (b) does                                                                   
not reflect a change but speaks  only to AS 05.18 under which                                                                   
no gaming is allowed.   The Governor and his  staff can still                                                                   
buy a raffle ticket under AS 05.15.                                                                                             
Ms. Stancliff  explained  one requested  change that  was not                                                                   
made to  Version U.  The Department  of Law  asked for  added                                                                   
language on  page 8,(C), stating "expressly  authorized under                                                                   
AS 05.15 or 05.18." The legal  drafter thought it would apply                                                                   
to  specific  activities  like  Blackjack  and  that  it  was                                                                   
Representative Hawker  MOVED to ADOPT Amendment  1.  Co-Chair                                                                   
Williams OBJECTED for purposes of discussion.                                                                                   
     Amendment 1 reads:                                                                                                         
     Page 3, following line 25:                                                                                                 
          Insert a new subsection to read:                                                                                      
          "(c) The voting members of the commission may                                                                         
     exclude the ex officio members from executive sessions                                                                     
     otherwise permitted by law."                                                                                               
Ms. Stancliff explained that Am#1  would give only the voting                                                                   
non-industry  members  the  authority to  go  into  executive                                                                   
Co-Chair Williams WITHDREW his OBJECTION.                                                                                       
Representative  Hawker MOVED to  ADOPT Amendment  2. Co-Chair                                                                   
Williams OBJECTED for purposes of discussion.                                                                                   
     Amendment 2 reads:                                                                                                         
     Page 6, line 5, following "if":                                                                                            
     Insert "that participation and those activities are"                                                                       
Ms.  Stancliff explained  that  Am#2 was  recommended by  the                                                                   
gaming  industry  and the  sponsor  does  not object  to  the                                                                   
Representative Stoltze  asked for examples of  these types of                                                                   
activities.  Ms.  Stancliff replied that Am#2  falls under AS                                                                   
05.18,  which  currently has  no  gaming activities,  so  the                                                                   
expansion  of new  gaming could  not take  place without  the                                                                   
authority of the legislature.                                                                                                   
Co-Chair Williams WITHDREW his OBJECTION.                                                                                       
LARRY   MEYERS,  DEPUTY   DIRECTOR,   DIVISION  OF   FINANCE,                                                                   
DEPARTMENT   OF  REVENUE,   VIA  TELECONFERENCE,   ANCHORAGE,                                                                   
provided  background on  staffing  of the  charitable  gaming                                                                   
unit.  He  explained  that  it  is  a  regulatory  unit  that                                                                   
oversees  1200 permittees  who,  in FY  03,  paid about  $2.6                                                                   
million in  taxes and fees to  the state.  While  gambling is                                                                   
illegal  and  falls  outside  the  gaming  unit's  regulatory                                                                   
authority, charitable gaming is the exception.                                                                                  
STEVEN  BORCHERDING SR.,  GENERAL MANAGER,  GOLD CASH  BINGO,                                                                   
VIA TELECONFERENCE,  ANCHORAGE, expressed  that he's  been in                                                                   
the  industry  for fourteen  years,  and  that this  bill  is                                                                   
nothing more  than a springboard  for full scale  gambling in                                                                   
the future.   He stated  that charitable gaming  is currently                                                                   
working very  well, with enforcement and  regulatory statutes                                                                   
in  place.   The majority  of  the gaming  industry is  truly                                                                   
charitable and non-profit.                                                                                                      
BOB  LOESCHER,  ALASKA  NATIVE   BROTHERHOOD  (ANB),  JUNEAU,                                                                   
explained  that he  has worked  with a  number of  charitable                                                                   
permittees,   including  the   ANB   and  the   Tlingit-Haida                                                                   
Community Council.   The ANB has worked with  the legislature                                                                   
for two years on charitable gaming  legislation. He expressed                                                                   
the   ANB's  support   of   HB   509;  in   particular,   the                                                                   
restructuring  that  would  move the  Department  of  Revenue                                                                   
commission to a new commission,  and separation of charitable                                                                   
gaming and any  new gaming in the future.  He  stated that he                                                                   
has  received  assurances that  any  changes  to statute  and                                                                   
regulation would  come before  the legislature.  He expressed                                                                   
support that the industry is included  in an advisory role as                                                                   
part  of the  commission.   He  expressed that  the issue  of                                                                   
taxes and fees  is an important condition of  his support for                                                                   
HB  509  because  the ANB  believes  the  legislature  should                                                                   
establish taxes and fees.                                                                                                       
Representative  Foster MOVED  to report  CSHB 509, Version  U                                                                   
out  of  committee  with the  accompanying  fiscal  note  and                                                                   
individual recommendations.                                                                                                     
Representative Stoltze OBJECTED.                                                                                                
A roll  call vote was  taken on the  motion to move  the bill                                                                   
from committee.                                                                                                                 
IN FAVOR: Moses, Chenault, Croft, Fate, Foster, Hawker,                                                                         
          Joule, Harris, Williams                                                                                               
OPPOSED: Stoltze                                                                                                                
Vice-Chair Meyer was not present for the vote.                                                                                  
The MOTION PASSED (9-1).                                                                                                        
Representative  Foster commented that  he does not  object to                                                                   
the  concept of  the  bill, but  he expressed  concerns  over                                                                   
creating   another  commission   that  would   come  to   the                                                                   
legislature with additional funding requests.                                                                                   
CSHB 509(FIN)  was REPORTED out of Committee  with individual                                                                   
recommendations and one fiscal note.                                                                                            
HOUSE BILL NO. 296                                                                                                            
     An Act making an appropriation for the operation of the                                                                    
     Alaska Natural Gas Development Authority; and providing                                                                    
     for an effective date.                                                                                                     
REPRESENTATIVE ERIC CROFT explained  that HB 296 is identical                                                                   
to Senator Therriault's  bill [SB 241]. It  would appropriate                                                                   
$2.15  million   to  the   Alaska  Natural  Gas   Development                                                                   
Authority (ANGDA) so that the  authority can proceed with its                                                                   
work.  He expressed frustration  that neither the legislature                                                                   
nor the  administration has shown  support for  the authority                                                                   
and has  taken six months to  appoint the board and  fund the                                                                   
authority. The  authority received  some funding  in November                                                                   
2003,  a year  after  it was  established,  but  it is  still                                                                   
awaiting  significant funding  to implement  the will  of the                                                                   
Alaska voters.                                                                                                                  
Co-Chair Williams  stated his intention to hear  and hold the                                                                   
bill today.                                                                                                                     
STEVE  PORTER, DEPUTY  COMMISSIONER,  DEPARTMENT OF  REVENUE,                                                                   
acknowledged  that  the  issue  concerns  the  plans  of  the                                                                   
Department of Revenue and ANGDA  for the funding requested in                                                                   
this  legislation. He  noted that  Harold  Heinze, the  Chief                                                                   
Executive   Officer  of  ANGDA,   has  provided   substantial                                                                   
information  to the  committee  on ANGDA's  budget needs  and                                                                   
Mr. Porter  pointed out  that the  Department of Revenue  has                                                                   
compiled a  3-page list of  items requiring funding  over the                                                                   
next  eighteen  months  to  meet   the  requirements  of  the                                                                   
Stranded  Gas Act,  and to allow  ANGDA to  proceed (copy  on                                                                   
file.)   The  department  is  currently responding  to  three                                                                   
stranded gas  applications, and  supporting ANGDA as  well as                                                                   
energy  legislation.  He  explained that  the  department  is                                                                   
cooperating with the Canadian  government on pipeline issues.                                                                   
He gave a breakdown, explaining  that the broad projection in                                                                   
FY 04  and FY 05  with the producers  is about $2.6  million,                                                                   
with MidAmerican at about $450  thousand, the Port Authority,                                                                   
if the application  is approved, at about $700  thousand, and                                                                   
ANGDA  at about  $450 thousand.    Mr. Porter  said that  the                                                                   
energy  bill  in FY  04-  FY 05  could  take  as much  as  $1                                                                   
million.  The total request is $3.48 million.                                                                                   
Mr. Porter  stated that  some these  projected costs  may not                                                                   
actually  have to be  spent because  of potential  negotiated                                                                   
agreements, but he said that the  department needs nearly all                                                                   
of the $3 million that it has recommended.                                                                                      
Mr.  Porter informed  the committee  that  although ANGDA  is                                                                   
earmarked for only  $450 thousand, some of the  benefit ANGDA                                                                   
will  receive   is  through   contracts  the  department   is                                                                   
negotiating on the  Stranded Gas Development Act.    There is                                                                   
about  $200 thousand  spread through  different groups,  with                                                                   
ANGDA  receiving  substantially   more  benefit  than    $450                                                                   
thousand. He said the $450 thousand  is attributable to ANGDA                                                                   
and  it  cannot  benefit the  Stranded  Gas  Development  Act                                                                   
TAPE HFC 04 - 44, Side B                                                                                                      
Representative  Croft questioned  the infrastructure  support                                                                   
for ANGDA in  the department's proposal.  Mr.  Porter replied                                                                   
that  it  is  in  operating  budget  for  the  Department  of                                                                   
Revenue, which includes  a line item for ANDGDA  allocated to                                                                   
the  CEO  and staff.    The  money  in  HB 296  would  go  to                                                                   
contractors  and additional  support.   Representative  Croft                                                                   
asked the  amount.  Mr. Porter  replied that the  details are                                                                   
being worked  out, but  he thought it  would be between  $150                                                                   
and $274 thousand.                                                                                                              
Vice-Chair Meyer  stated that he  is co-sponsoring HB  296 in                                                                   
order  to keep  all avenues  open  for development  of a  gas                                                                   
pipeline.   He asked if  MidAmerica will meet  their contract                                                                   
deadline  by March  12 and  expressed  concern about  getting                                                                   
ANGDA  funded   sooner  if  MidAmerica  does   not  meet  the                                                                   
Mr. Porter  replied that there  is always the  possibility of                                                                   
reaching  agreement  by  March  12  if  the  details  can  be                                                                   
negotiated. For  ANGDA to be  strong and viable,  the funding                                                                   
is needed quickly in order to execute contracts.                                                                                
In  response  to  a question  by  Representative  Croft,  Mr.                                                                   
Porter clarified that  he never told the ANGDA  board that it                                                                   
wouldn't get any funding if it  didn't support the $3 million                                                                   
request.   He admitted  making statements  to the board  that                                                                   
the best  way to get funding  for ANGDA and the  Stranded Gas                                                                   
Act  is the  vehicle  the Department  of  Revenue put  before                                                                   
Representative  Croft argued that  a number of  board members                                                                   
have told him that  they heard from Mr. Porter  that this was                                                                   
only  way they  would get  significant funding.   Mr.  Porter                                                                   
replied  he would  clarify it  with the ANGDA  board in  open                                                                   
session during their March 15 meeting.                                                                                          
Representative Hawker asked the  sponsor if the $2.15 million                                                                   
is consistent  with the lapse  date of 2009.   Representative                                                                   
Croft replied  no, that most  of the  money would need  to be                                                                   
spent  soon, and  he chose  2009  as the  expected date  that                                                                   
construction  would  begin.   He  offered  to shorten  it  if                                                                   
Representative Hawker would like.                                                                                               
Representative  Hawker  asked  Co-Chair Williams  to  arrange                                                                   
public testimony  from the ANGDA board because  he is hearing                                                                   
conflicting perceptions.  Co-Chair  Williams affirmed that it                                                                   
could be arranged.                                                                                                              
In response to  a question by Representative  Croft, Co-Chair                                                                   
Williams clarified that more committee  work would be done on                                                                   
the bill to keep the numbers but change the language.                                                                           
Representative Joule  asked Mr. Porter if  ANGDA participated                                                                   
in the budget.  Mr. Porter responded that Mr.  Heinze had not                                                                   
seen this  report. He said  that because Mr.  Heinze's budget                                                                   
does  not include  research costs  for the  Stranded Gas  Act                                                                   
negotiations, the numbers would not necessarily match.                                                                          
Representative Croft  expressed continuing concern  that only                                                                   
a small  portion of  the $3  million would  reach ANGDA.   He                                                                   
stated  that only $450  thousand is  not good  administrative                                                                   
efficiency, and not what he intended  in sponsoring the bill.                                                                   
His  intention  was  that  ANGDA  receive  the  entire  $2.15                                                                   
appropriation.   He  expressed   support  for  the   separate                                                                   
structure  of  the board  to  make decisions  independent  of                                                                   
political administrations or the legislature.                                                                                   
Co-Chair  Williams commented  that  Representative Croft  has                                                                   
not had direct  discussion with the ANGDA board  on a day-to-                                                                   
day basis.                                                                                                                      
HB  296  was   heard  and  HELD  in  Committee   for  further                                                                   
HOUSE BILL NO. 494                                                                                                            
     An  Act relating  to the  disbursement of  money by  the                                                                   
     state, including  employment compensation,  unemployment                                                                   
     payments,  and permanent  fund  dividends,  and to  bank                                                                   
     investments  and deposits  by the  state; and  providing                                                                   
     for an effective date.                                                                                                   
SUE STANCLIFF,  STAFF TO REPRESENTATIVE KOTT,  explained that                                                                   
HB 494  relates to  the disbursement  of money  by the  state                                                                   
including   unemployment   payments    and   Permanent   Fund                                                                   
dividends, and  bank investments  and deposits by  the state.                                                                   
The bill  would change how the  state disburses funds  and it                                                                   
has the potential  of saving the state considerable  money in                                                                   
the  reduction  of  check fraud,  reissuing  lost  or  stolen                                                                   
checks, postage, check printing  costs, bank fees and reduced                                                                   
labor costs.                                                                                                                    
Ms. Stancliff commented that the  sponsor would work with the                                                                   
administration   to   refine  the   legislation.   Statistics                                                                   
provided  by the  administration  indicate that  as of  2003,                                                                   
electronic deposits  executed 89%  of the state  payroll. She                                                                   
noted  that the issue  of vendors  poses a  difficulty.   The                                                                   
department has almost 50,000 vendors  and currently only 500,                                                                   
or  1.3%,  are   using  electronic  payment.   Ms.  Stancliff                                                                   
expressed that the sponsor would  like to see vendor payments                                                                   
increased, and  believes it is achievable even  though labor-                                                                   
Ms.  Stancliff explained  that  the payroll  and first  check                                                                   
issuance  must be  by a  warrant.   The committee  substitute                                                                   
will address that issue and build in flexibility.                                                                               
KIM  GARNERO, DIRECTOR,  DIVISION OF  FINANCE, DEPARTMENT  OF                                                                   
ADMINISTRATION,  expressed  concern regarding  the  mandatory                                                                   
language in  Section 19 of the  current version.   She stated                                                                   
that the department would work  with the sponsor on the bill,                                                                   
which benefits  the way the  state does business.  She shared                                                                   
the  history   of  electronic  payments,  noting   that  wire                                                                   
transfers have been  used for decades and are  both expensive                                                                   
and  labor intensive.  She said  that  all of  the big  state                                                                   
revenues  including royalties  and  large  tax payments,  and                                                                   
most  of   the  $1.7  billion   received  from   the  federal                                                                   
government last  year come  in electronically. She  explained                                                                   
that currently 67%  of public assistance payments  and 90% of                                                                   
pension  payments   to  retirees  are  made   electronically.                                                                   
Electronic  payments to  vendors  began in  1999  and it  has                                                                   
about doubled each year.                                                                                                        
Ms.   Garnero  provided   examples  of   agencies  that   use                                                                   
electronic deposit  for payment.  The Department  of Revenue,                                                                   
Treasury Division,  is developing an Automated  Clearinghouse                                                                   
(ACH)  origination   software  to  either  send   or  receive                                                                   
payments that will likely be a payment system for Medicaid.                                                                     
In response  to a question  by Vice-Chair Meyer,  Ms. Garnero                                                                   
clarified  that the  state is  paying  by electronic  deposit                                                                   
almost  $1  billion  per year  to  vendors  and  contractors.                                                                   
Vice-Chair Meyer asked if it could  be made a requirement for                                                                   
vendors.   Ms. Garnero  replied that the  state has  tried to                                                                   
expand  to vendors  without success.  In rural  areas of  the                                                                   
state, the  post office  or grocery store  often serves  as a                                                                   
bank. Workers  Compensation electronic payments  would not in                                                                   
state's  best  interest.  Ms.  Garnero  stated  it  would  be                                                                   
difficult to make electronic deposit mandatory.                                                                                 
Vice-Chair  Meyer  wondered  if  the state  could  include  a                                                                   
preference  for Electronic  Data  Interchange  (EDI) when  it                                                                   
puts  work  out  to  bid.   Ms.  Garnero  affirmed  that  the                                                                   
department could  add the preference to  procurements because                                                                   
of a continuing relationship with the contractors.                                                                              
Representative Hawker expressed  strong support for the bill.                                                                   
He noted  that "the  heart" of  the bill is  Section 19.   He                                                                   
questioned an  account established by  a state agency  and an                                                                   
electronic payment card.  Ms.  Garnero was unable to respond.                                                                   
JOHN  FOCHT, VICE  PRESIDENT  OF  PREPAID CARD  PRODUCTS,  US                                                                   
BANK, VIA TELECONFERENCE, MILWAUKEE,  explained that the bank                                                                   
delivers  electronic products  in five  states, to more  than                                                                   
100,000 recipients. He explained  the methodology, which is a                                                                   
debit card  for VISA or Mastercard.  Instead of setting  up a                                                                   
checking or savings  account, the bank establishes  a funding                                                                   
account. The state then creates  a direct deposit file (ACH),                                                                   
and that  amount is  deposited to the  card.  The  cardholder                                                                   
can go to an ATM anywhere in the  world and access the money.                                                                   
Representative  Hawker  asked   if  those  states  using  the                                                                   
product for  their state programs  are pleased with it.   Mr.                                                                   
Focht  replied yes,  and added  that  Iowa, one  of the  five                                                                   
states,  made it  mandatory that  benefits  to child  support                                                                   
recipients are by electronic deposit.  The other three states                                                                   
have made the  program voluntary, and 25% have  opted for the                                                                   
card.  Mr.  Focht said  the  model  is working  in  Colorado,                                                                   
Washington, Minnesota, Iowa and Oregon.                                                                                         
Representative Hawker  asked if Mr. Focht has  any experience                                                                   
in controlling misappropriation  or fraud. Mr. Focht admitted                                                                   
that he does not have expense  reduction information from the                                                                   
five  states  regarding  fraud,   returned  checks,  or  stop                                                                   
payments. As the financial institution,  US Bank has taken on                                                                   
responsibilities that include  managing and minimizing fraud.                                                                   
Representative  Hawker asked the  cost to  the state  for the                                                                   
product.  Mr. Focht  replied that  there  is tremendous  cost                                                                   
savings  through   reduced  check  production   and  mailing,                                                                   
reduced  handling  of  lost checks,  and  reduced  fraudulent                                                                   
activity. The  state is not billed  for any of  the services,                                                                   
but  it  has   higher  costs  due  to   increased  electronic                                                                   
deposits,  which   he  feels  is  a  minor   offset  to  cost                                                                   
reduction.  US  Bank benefits  from  the deposits  until  the                                                                   
actual  money  is spent,  because  payroll is  not  withdrawn                                                                   
entirely or spent  immediately. His bank also  makes money by                                                                   
the  merchants'   discount  on  VISA  and   Mastercard,  with                                                                   
merchants paying  a small fee  to the bank whenever  the card                                                                   
is used.  Fees are  assigned to the  cardholder, but  for the                                                                   
most part, the card can be used without charge.                                                                                 
Representative  Fate  asked  if  there could  be  a  judgment                                                                   
against  the   card  in  case  of  indebtedness.   Mr.  Focht                                                                   
clarified that  because the bank authorizes  transactions, it                                                                   
wouldn't authorize  above the amount  on the card.   The bank                                                                   
would  deal directly  with overdrafts  by  the client,  which                                                                   
could happen.                                                                                                                   
PETER  E.  BROWN,   KEY  BANK  ALASKA  AND   VICTORY  CAPITAL                                                                   
MANAGEMENT,  VIA TELECONFERENCE,  ANCHORAGE,  expressed  that                                                                   
the  administration  would  achieve  economies  through  this                                                                   
legislation.  He  felt  that   latitude  is  needed  to  make                                                                   
disbursements  in   the  old  manner,  but   that  electronic                                                                   
payments  should be  used  whenever possible  and  practical.                                                                   
Instead of  a   difficulty  imposed on rural  bush residents,                                                                   
it could be a boon if the recipient  is able to transact with                                                                   
a merchant  over the telephone  or the Internet with  a card.                                                                   
He said that the technology not too distant.                                                                                    
Representative Hawker requested  that Mr. Brown work with the                                                                   
sponsor to craft  language addressing the  exception problems                                                                   
from the  industry perspective.   Mr.  Brown replied  that he                                                                   
and his staff  would assist. Representative  Hawker commented                                                                   
on the  need for community  input on  changes that  would not                                                                   
compromise cost efficiency to the state.                                                                                        
HB  494  was   heard  and  HELD  in  Committee   for  further                                                                   
The meeting was adjourned at 3:14 P.M.                                                                                          

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