Legislature(2003 - 2004)

04/06/2004 02:08 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 06, 2004                                                                                           
                         2:08 P.M.                                                                                              
                                                                                                                                
TAPE HFC 04 - 77, Side A                                                                                                        
TAPE HFC 04 - 77, Side B                                                                                                        
TAPE HFC 04 - 78, Side A                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 2:08 P.M.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-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                                                                                                                
                                                                                                                                
Representative Kevin Meyer, Vice-Chair                                                                                          
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative   Max   Gruenberg;    Pete   Ecklund,   Staff,                                                                   
Representative   Bill  Williams;   Vanessa  Tondini,   Staff,                                                                   
Representative Lesil  McGuire; Doug Wooliver,  Administrative                                                                   
Attorney,  Alaska  Court  System;  Cheryl  Frasca,  Director,                                                                   
Division  of Management  & Budget,  Office  of the  Governor;                                                                   
Bruce  Tangeman,  Legislative  Analyst,  Legislative  Finance                                                                   
Division                                                                                                                        
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
none                                                                                                                            
                                                                                                                                
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 227    An  Act  increasing  the jurisdictional  limit  for                                                                   
          small  claims and  for magistrates  from $7,500  to                                                                   
          $10,000;  increasing  the jurisdictional  limit  of                                                                   
          district   courts  in  certain  civil   cases  from                                                                   
          $50,000  to $75,000;  and  amending Rule  11(a)(4),                                                                   
          Alaska  District Court  Rules  of Civil  Procedure,                                                                   
          relating to service of process for small claims.                                                                      
                                                                                                                                
          CS HB 227 (JUD) was reported out of Committee with                                                                    
          a "do  pass" recommendation and  with indeterminate                                                                   
          note #1 by the Alaska Court System.                                                                                   
                                                                                                                                
HB 298    An   Act   relating    to   the   distribution   of                                                                   
          appropriations  from   the  Alaska  permanent  fund                                                                   
          under  art.  IX, sec.  15(b),  Constitution of  the                                                                   
          State of Alaska, and  making conforming amendments;                                                                   
          and providing for an effective date.                                                                                  
                                                                                                                                
          CS HB 298 (FIN) was reported out of Committee with                                                                    
          a "no  recommendation" and with a new  zero note by                                                                   
          the Department  of Revenue and zero note  #1 by the                                                                   
          Department of Revenue.                                                                                                
                                                                                                                                
HJR 9     Proposing amendments to the Constitution of the                                                                       
          State of Alaska relating  to an appropriation limit                                                                   
          and a spending limit.                                                                                                 
                                                                                                                                
          CS HJR 9 (FIN) FAILED to MOVE out of Committee.                                                                       
                                                                                                                                
HJR 26    Proposing  amendments  to the  Constitution of  the                                                                   
          State   of   Alaska   relating  to   and   limiting                                                                   
          appropriations  from  and  inflation  proofing  the                                                                   
          Alaska permanent fund  by establishing a percent of                                                                   
          market value spending limit.                                                                                          
                                                                                                                                
          CS HJR 26 (FIN) was reported out of Committee with                                                                    
          "individual  recommendations" and  with a  new zero                                                                   
          note by  the Office of  the Governor and  zero note                                                                   
          #2 by the Department of Revenue.                                                                                      
                                                                                                                                
SB 289    An  Act  extending  the  termination  date  of  the                                                                   
          special  education  service agency;  and  providing                                                                   
          for an effective date.                                                                                                
                                                                                                                                
          SB 289 RESCINDED Committee action in adopting a                                                                       
          Letter  of Intent.    SB 289  was  reported out  of                                                                   
          Committee on April 5, 2004.                                                                                           
                                                                                                                                
SENATE BILL NO. 289                                                                                                           
                                                                                                                                
     An Act extending the termination date of the special                                                                       
     education service agency; and providing for an                                                                             
     effective date.                                                                                                            
                                                                                                                                
Representative  Stoltze  MOVED  to RESCIND  Committee  action                                                                   
taken  in adopting  a Letter  of Intent  for SB  289.   There                                                                   
being NO OBJECTION, action was RESCINDED.                                                                                       
                                                                                                                                
Representative  Stoltze  MOVED  to  WITHDRAW  the  Letter  of                                                                   
Intent.  There being NO OBJECTION,  the letter was withdrawn.                                                                   
                                                                                                                                
Co-Chair  Williams stated  that the  House Finance  Committee                                                                   
respectively requests  that the Legislative Budget  and Audit                                                                   
Committee (LBA)  authorize the Division of  Legislative Audit                                                                   
to  conduct a  performance  audit  of the  Special  Education                                                                   
Service  Agency.    The  audit   should  utilize  the  sunset                                                                   
criteria  established  in AS  44.66.050©  for evaluating  the                                                                   
agency's  performance.     Additionally,  the   audit  should                                                                   
measure   the   progress   made   by  the   agency   to   the                                                                   
recommendations  made  in  the  most  recent  sunset  review.                                                                   
(Audit  Control  No.  05-20026-04).    The  audit  should  be                                                                   
completed and available to the Legislature by January 2008.                                                                     
                                                                                                                                
The Committee  RESCINDED action taken  on SB 289  in adopting                                                                   
the Letter of Intent.   SB 289 was reported  out of Committee                                                                   
on April 5, 2004.                                                                                                               
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 26                                                                                                 
                                                                                                                                
     Proposing  amendments to the  Constitution of  the State                                                                   
     of Alaska  relating to and limiting  appropriations from                                                                   
     and  inflation proofing  the  Alaska  permanent fund  by                                                                   
     establishing a percent of market value spending limit.                                                                     
                                                                                                                                
Co-Chair  Harris MOVED  to WITHDRAW  the  previous MOTION  to                                                                   
MOVE adoption  of Amendment #3, #23-LS1006\V,  Cook, 3/22/04.                                                                   
There being NO OBJECTION, the motion was withdrawn.                                                                             
                                                                                                                                
Co-Chair  Harris  MOVED  to ADOPT  work  draft  version  #23-                                                                   
LS1006\Z,  Cook, 4/6/04, as  the version  of the bill  before                                                                   
the Committee.                                                                                                                  
                                                                                                                                
Representative  Croft commented that  version "Z" would  be a                                                                   
"pure  percent of  market  value (POMV)  form"  of the  bill.                                                                   
There being NO OBJECTION, it was adopted.                                                                                       
                                                                                                                                
PETE   ECKLUND,  STAFF,   REPRESENENTATIVE   BILL   WILLIAMS,                                                                   
explained the  changes made  to the work  draft version.   He                                                                   
noted that  it would be  classified as  a pure POMV  bill and                                                                   
would  place all the  Permanent  Fund into  one fund.   There                                                                   
would be no distinction between  the Earnings Reserve Account                                                                   
and the  principle.   The bill would  appropriate 5%  of that                                                                   
amount  annually   for  whatever  purposes   the  Legislature                                                                   
desires.  Mr. Ecklund noted the  one difference added to Page                                                                   
2,  Line  10,  Paragraph  (b), a  transition  section.    The                                                                   
language  in   that  section  clarifies  that   if  the  POMV                                                                   
amendment is  adopted in 2004,  the POMV mechanism  would not                                                                   
come into effect until the FY 2006 budget.                                                                                      
                                                                                                                                
Co-Chair  Harris observed  that the proposed  version  of the                                                                   
bill  would  do  nothing  to protect  the  principle  in  the                                                                   
Constitution  nor  would  it   constitutionally  authorize  a                                                                   
dividend.    It  would  only provide  5%,  regardless.    Mr.                                                                   
Ecklund  said that  was correct  and that there  would  be no                                                                   
distinction between principle and earnings reserve.                                                                             
                                                                                                                                
Representative Foster MOVED to  report CS HJR 26 (FIN) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal notes.                                                                                                      
                                                                                                                                
Representative Hawker  OBJECTED, noting a letter  in the file                                                                   
from the  Permanent Fund Corporation.   (Copy on File).   The                                                                   
letter  notes   withdrawing  their  request   for  additional                                                                   
authority for the  out reach concepts.  He  believed it would                                                                   
zero  out  the  fiscal  note.     Co-Chair  Williams  agreed.                                                                   
Representative Hawker WITHDREW his OBJECTION.                                                                                   
                                                                                                                                
Representative Fate voiced concern  that the bill would erode                                                                   
the ability of  the Legislature to raise and  allocate funds.                                                                   
He  recommended the  bill receive  full debate  on the  House                                                                   
Floor.                                                                                                                          
                                                                                                                                
Representative Foster noted that  the MOTION to MOVE the bill                                                                   
from  Committee also  included the  two zero  notes from  the                                                                   
Department  of Revenue and  the Office  of the Lt.  Governor.                                                                   
There being NO further OBJECTION, it was so ordered.                                                                            
                                                                                                                                
CS  HJR  26   (FIN)  was  reported  out  of   Committee  with                                                                   
"individual recommendations" and  with a new zero note by the                                                                   
Office of the Governor and zero  note #2 by the Department of                                                                   
Revenue.                                                                                                                        
                                                                                                                                
HOUSE BILL NO. 298                                                                                                            
                                                                                                                                
     An Act  relating to  the distribution of  appropriations                                                                   
     from  the  Alaska permanent  fund  under  art. IX,  sec.                                                                   
     15(b), Constitution  of the State of Alaska,  and making                                                                   
     conforming  amendments; and  providing for an  effective                                                                   
     date.                                                                                                                      
                                                                                                                                
Co-Chair  Harris  MOVED  to ADOPT  work  draft  #23-LS1075\C,                                                                   
Cook,  4/6/04,  as  the  version   of  the  bill  before  the                                                                   
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
PETE ECKLUND, STAFF, REPRESENTATIVE  BILL WILLIAMS, explained                                                                   
changes made to  work draft version "V".  Page  3, Section 3,                                                                   
language provides  a 5-year rolling average  and insures that                                                                   
the Legislature will not eat into  the principle and will not                                                                   
remove more from the Permanent  Fund real rate of return.  He                                                                   
pointed out that Page 3, Line  6, had been amended adding the                                                                   
language:  "The first  10  of  the 11  fiscal  years".   That                                                                   
technical change  was made to  insure that the  year-end data                                                                   
would add an additional  fiscal year.  In that  way, by using                                                                   
the 11 years, the Legislature  would be able to look back and                                                                   
take the  10-years  in order to  have the  complete data  for                                                                   
using as a comparison.                                                                                                          
                                                                                                                                
He pointed  out that on  Page 3, Line  19, the Committee  had                                                                   
previously  adopted an  amendment  indicating  that not  more                                                                   
than 50% be allocated for public  education and that language                                                                   
was  left in  the  draft.   Page  5,  Line 18,  Paragraph  2,                                                                   
provides  notification language.   The  permanent fund  check                                                                   
stub  indicates that  "X"  amount of  the  check goes  toward                                                                   
inflation  proofing by the  Legislature.   If the Percent  of                                                                   
Market Value is adopted, there  will no longer be a principle                                                                   
to inflation proof, only the fund.   The language was changed                                                                   
to read:                                                                                                                        
                                                                                                                                
     (2)       Disclose the amount of each dividend                                                                             
               attributable   to   [Income   earned  by   the                                                                   
               Permanent  Fund  from] deposits  to that  fund                                                                   
               required  under art.IX, sec.  15. Constitution                                                                   
               of the State of Alaska."                                                                                         
                                                                                                                                
Co-Chair Harris stated  for the record that  he maintains the                                                                   
percentage should  be 60%  for dividends and  40% to  be used                                                                   
for education rather than the  proposed 50/50 split.  He said                                                                   
that he was not offering that  as an amendment but wanted the                                                                   
record to indicate his intent.                                                                                                  
                                                                                                                                
Representative   Hawker  concurred   with  Co-Chair   Harris,                                                                   
stating that he looked forward  to continuing the debate.  He                                                                   
added,  consideration should  be made  to the possibility  of                                                                   
municipal revenue sharing.                                                                                                      
                                                                                                                                
Representative Foster MOVED to  report CS HB 298 (FIN) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal notes.  There  being NO OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CS  HB 298  (FIN)  was reported  out  of Committee  with  "no                                                                   
recommendation" and  with a new  zero note by  the Department                                                                   
of Revenue and zero note #1 by the Department of Revenue.                                                                       
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 9                                                                                                  
                                                                                                                                
     Proposing amendments to the Constitution of the State                                                                      
     of Alaska relating to an appropriation limit and a                                                                         
     spending limit.                                                                                                            
                                                                                                                                
Co-Chair  Harris  MOVED  to ADOPT  work  draft  #23-LS0435\J,                                                                   
Cook, 4/6/04,  as the version  of the legislation  before the                                                                   
Committee.  There being NO OBJECTION, it was so ordered.                                                                        
                                                                                                                                
PETE ECKLUND, STAFF, REPRESENTATIVE  BILL WILLIAMS, explained                                                                   
the changes made from the "E"  version, to the "J" version of                                                                   
the bill.  Page  1, Line 6, changes the first  section of the                                                                   
bill to reflect  the numbers used to calculate  either growth                                                                   
in the spending  limit or negative numbers in  the percentage                                                                   
change to  the cost  of living or  population.  The  spending                                                                   
cap  could  increase  or decrease.    The  language  provides                                                                   
clarification regarding the spending  limit and if it depends                                                                   
on those factors.                                                                                                               
                                                                                                                                
Representative   Croft   questioned    using   the   language                                                                   
"increased or  decreased by the lesser  of".  He asked  if it                                                                   
were a negative number, would  the number still be used.  Mr.                                                                   
Ecklund  responded   that  "lesser   of"  refers   to  either                                                                   
calculations  under   (1)  or  (2).     Representative  Croft                                                                   
clarified  that  if  the  calculation  under  #1  produced  a                                                                   
decrease by  1% and #2 decreased  by 2%, the lesser  2% would                                                                   
be applied.  Mr. Ecklund agreed.                                                                                                
                                                                                                                                
Mr.  Ecklund  noted  that  language   on  Page  2,  Line  17,                                                                   
incorporates   a  change  taken   at  the  Committee   table,                                                                   
providing  an  appropriation  for permanent  fund  for  State                                                                   
residents.    Page  2,  Line 21,  Subparagraph  4,  adds  new                                                                   
language: "An appropriation to  a separate fund or account in                                                                   
the  general fund  from which  expenditures may  not be  made                                                                   
without an additional  appropriation from that  separate fund                                                                   
or  account".   The language  would take  care of  duplicated                                                                   
funds  such as  the Marine  Highway  funds and  it would  not                                                                   
count the  appropriations coming out  of the fund.   It would                                                                   
not double count an appropriation.                                                                                              
                                                                                                                                
Representative  Croft asked why  they were not  being counted                                                                   
as  they  are  spent  on  the  actual  votes.    Mr.  Ecklund                                                                   
corrected his  previous statement, noting that  they would be                                                                   
counted going into the fund not  coming out of the fund.  The                                                                   
intent is that the expenditures are only counted once.                                                                          
                                                                                                                                
Mr. Ecklund continued,  Page 2, Line 31, (9),  language which                                                                   
clarifies that  a State agency  can RSA funds  between either                                                                   
agencies  or within  the same  agency and that  they are  not                                                                   
counted  twice.     Page  3,  Line  13,  added   (14):    "An                                                                   
appropriation of  dedicated funds".   There are six  or seven                                                                   
dedicated funds that have been  in existence since before the                                                                   
State Constitution was adopted.   They would be excluded from                                                                   
the spending limit.  He listed those funds:                                                                                     
                                                                                                                                
     ·    Fish and Game Fund                                                                                                    
     ·    School Fund                                                                                                           
     ·    Cigarette tax                                                                                                         
     ·    Second Injury Fund Reserve Account                                                                                    
     ·    Fishermen's Fund                                                                                                      
     ·    Public School Fund                                                                                                    
     ·    Fishermen's Fund Income                                                                                               
                                                                                                                                
Co-Chair Harris  questioned how much had been  deposited into                                                                   
those  accounts.   Mr. Ecklund  advised that  the balance  in                                                                   
those accounts was $72 million dollars.                                                                                         
                                                                                                                                
Representative  Stoltze  inquired  if Legislative  Legal  had                                                                   
approved that  language.  Mr.  Ecklund responded that  he had                                                                   
not specifically asked about that  language but that they had                                                                   
reviewed it and did not "raise a red flag" on the issue.                                                                        
                                                                                                                                
CHERYL  FRASCA, DIRECTOR,  DIVISION OF  MANAGEMENT &  BUDGET,                                                                   
OFFICE OF THE  GOVERNOR, understood that the  dedicated funds                                                                   
have existed since the time the  Constitution was drafted and                                                                   
had been "grandfathered" in.                                                                                                    
                                                                                                                                
Mr. Ecklund referenced the change  made to Page 3, Lines 23 &                                                                   
24.                                                                                                                             
                                                                                                                                
BRUCE  TANGEMAN,  LEGISLATIVE  ANALYST,  LEGISLATIVE  FINANCE                                                                   
DIVISION, explained  the change.   He pointed out  that since                                                                   
we are in the midst of the FY04  budget and building the FY05                                                                   
budget, in  order to know more  precisely what FY06  is going                                                                   
to be, 3.3% was  incorporated into the base of  FY04 and 3.4,                                                                   
the base  for FY05.   The  numbers are  sufficiently high  to                                                                   
allow  for whatever  may  happen.   The  theory  is to  allow                                                                   
"enough headroom" for FY06.                                                                                                     
                                                                                                                                
Representative  Stoltze  commented   that  the  numbers  were                                                                   
"conservatively  liberal".   He asked  Ms. Frasca what  other                                                                   
funds  beside the  general  funds had  been  included in  the                                                                   
larger number.   Ms. Frasca responded that the  total run was                                                                   
$2.9 billion dollars  and would include all  the other funds,                                                                   
providing  a number  of where  the State is  presently.   Mr.                                                                   
Tangeman added  that those are  general funds and  other non-                                                                   
duplicated funds such as the Alaska Marine Highway.                                                                             
                                                                                                                                
Mr.  Ecklund concluded  his  testimony  and pointed  out  the                                                                   
handouts  provided  by Legislative  Finance  Division,  which                                                                   
describe  how the  spending limit  and  spending base  works.                                                                   
(Copy  on  File).    Mr.  Tangeman  noted  that  the  handout                                                                   
highlights how  FY06 was calculated  and shows what  has been                                                                   
incorporated into the FY06 budget.                                                                                              
                                                                                                                                
Representative  Croft  inquired  the difference  between  the                                                                   
three-year  average growth  and the three-year  growth.   Mr.                                                                   
Tangeman  explained that  the average  growth would  be 4%  a                                                                   
year.   Unfortunately, that would  be applied to a  base year                                                                   
average three  years ago,  providing a  4% increase  over the                                                                   
amount appropriated three years  ago.  That would work out to                                                                   
be 1.3%  a year,  carry forward.   If  there is  accumulative                                                                   
growth, it would be 4% + 4% +  4% = 12%, and would be applied                                                                   
to the  base year of  three years ago.   That should  allow a                                                                   
more realistic growth rate.                                                                                                     
                                                                                                                                
Mr.  Ecklund pointed  out that  the  blue line  on the  chart                                                                   
reflects that number.  The language  is very tightly written.                                                                   
There is  an amendment that will  change the manner  in which                                                                   
growth is calculated.  The language  addresses the ceiling so                                                                   
that future  legislatures do  not have  to appropriate  up to                                                                   
the ceiling.  Given the three-year  rolling base could affect                                                                   
it, if less than the ceiling was appropriated.                                                                                  
                                                                                                                                
Co-Chair Williams interjected  that there are amendments that                                                                   
will change  the bill.   He  added that  he had been  working                                                                   
with the  sponsor of the  bill.  Co-Chair Williams  requested                                                                   
that Mr. Ecklund continue with the overview.                                                                                    
                                                                                                                                
Mr.  Ecklund referenced  Page  1, Line  4,  Section 1,  which                                                                   
clarifies that  if the spending  limit were passed,  it would                                                                   
repeal  the current  spending limit  on the  books.  Page  1,                                                                   
Line  6,  the appropriation  limit,  should  not  exceed  the                                                                   
earliest  three  of  the four  fiscal  years  preceding  that                                                                   
fiscal year and increased or decreased  by the lesser of.  He                                                                   
stated that the average of the  fiscal years would be used as                                                                   
the base.   Page  1, Line 10,  50% of the  sum of  the annual                                                                   
rate of  change and  the cost  of living  for three  calendar                                                                   
years would adjust  the base.  For FY 06, the  calendar years                                                                   
2001, 2002, & 2003, would average  out the rate of change and                                                                   
cost  of living  and then  take 1/2  of that  average.   That                                                                   
number would be added to the percentage  equal to the percent                                                                   
rate of  change.    In a  calendar year,  one would  take the                                                                   
average, by 1/2 and then adjust the base by that amount.                                                                        
                                                                                                                                
Page  2, Line  1,  (2), explains  that  the  average rate  of                                                                   
change  in  personal  income of  State  residents  for  three                                                                   
calendar years  preceding the calendar year during  which the                                                                   
immediate  preceding  fiscal  year  began.    The  calculated                                                                   
adjustment  of cost  of living  and  State population  cannot                                                                   
exceed the  rate of change in  personal income.   If personal                                                                   
incomes are  declining or flat,  the base cannot  be adjusted                                                                   
up even if the  cost of living is rising.   The ceiling would                                                                   
be the State income for residents.                                                                                              
                                                                                                                                
Page 2, Line 5, Section ©, is  the accidence section.  If for                                                                   
some reason the  Legislature needed to exceed  the determined                                                                   
spending limit,  they could do that  by 2% if they  got a 2/3                                                                   
vote in  both bodies.  If  they needed to exceed  that amount                                                                   
by  4%, they  would  need  a 3/4  vote  in  each body.    The                                                                   
Legislature could  address that  through a separate  piece of                                                                   
legislation.    Mr. Ecklund  advised  that accidence  of  the                                                                   
limit must  be an exception, not  the rule.  It would  not be                                                                   
built into the base for following years.                                                                                        
                                                                                                                                
Page  2, Line  15, lists  items outside  the spending  limit.                                                                   
Paragraph 1, the appropriation  to the Alaska Permanent Fund,                                                                   
cannot fall  under the  spending limit.   Mr. Ecklund  listed                                                                   
all the calculations made under  (a) and (c) of that section.                                                                   
#(1) through #(15), Page 2, Lines  15-31 and Page 3, Lines 1-                                                                   
14.                                                                                                                             
                                                                                                                                
Mr. Ecklund continued,  Page 3, Line 15, Section  2, adding a                                                                   
new Section #30, providing the  transition language.  He read                                                                   
the  language  on  Page  3, Lines  17-22.    The  legislation                                                                   
inserts (1) fiscal  year 2004 equals $3,300,000,000;  and (2)                                                                   
fiscal year  2005 equals $3,400,000,000.   Section  (b), Line                                                                   
25 clarifies that if the voters  pass the amendment, it would                                                                   
reappear on the ballot in 2010.                                                                                                 
                                                                                                                                
Co-Chair Harris  referenced Page 2,  Line 5, ©, and  asked if                                                                   
it could exceed the amount that  would be calculated with the                                                                   
increase by no more than 2% if  there was a 2/3 majority vote                                                                   
of both bodies  and 3/4 vote for a 4% increase.   He inquired                                                                   
if there was  any provision that would allow  the Legislature                                                                   
to exceed the 4%  in case of some event other  than a natural                                                                   
disaster.  Mr. Ecklund emphasized  that it is a hard cap, 4%,                                                                   
and cannot exceed what the spending limit is.                                                                                   
                                                                                                                                
Co-Chair Harris commented that  there should be an option for                                                                   
a super  majority to have ability  to spend above  and beyond                                                                   
the  constitutional limit.   He  asked what  would happen  if                                                                   
more  money had  to be  spent because  some event  occurring,                                                                   
requiring the State to spend above  that amount.  Mr. Ecklund                                                                   
replied that  as currently  written, 4%  is the maximum  that                                                                   
can exceed, absent a natural disaster.                                                                                          
                                                                                                                                
Co-Chair Harris  did not think  that was good  public policy.                                                                   
He admitted that  it should be difficult to  access but noted                                                                   
that sometimes  there are "tough"  choices that must  be made                                                                   
by the elected officials.  He  recommended that there be some                                                                   
sort of "escape" valve.                                                                                                         
                                                                                                                                
Representative   Stoltze   admitted  that   the   legislation                                                                   
attempted to address  all concerns without creating  too many                                                                   
loopholes.                                                                                                                      
                                                                                                                                
Co-Chair Harris  asked if it would  make sense to  indicate a                                                                   
compromise of a  3% increase with 2/3 vote and  if a 3/4 vote                                                                   
occurs,  then the  legislation could  address very  important                                                                   
needs.  Representative  Stoltze pointed out that  there could                                                                   
be  a special  election  for voter  approval  if that  should                                                                   
happen.                                                                                                                         
                                                                                                                                
                                                                                                                                
TAPE HFC 04 - 77, Side B                                                                                                      
                                                                                                                                
                                                                                                                                
Representative Hawker  commented that it is  important to not                                                                   
constrain  future legislatures  but to  keep the  legislation                                                                   
effective.      There   is   no   language   to   accommodate                                                                   
extraordinary  circumstances.   He recommended an  additional                                                                   
provision    as    an   identification    of    extraordinary                                                                   
circumstances.                                                                                                                  
                                                                                                                                
Representative Fate  commented that might cause  problems for                                                                   
an electorate  passage.  Co-Chair  Williams pointed  out that                                                                   
legislation provides a new spending  cap.  The current cap is                                                                   
not working.                                                                                                                    
                                                                                                                                
Representative Chenault  referenced items #5 &  #6, asking if                                                                   
a project  could be bonded.   If the  State intended to  be a                                                                   
part  of the  gas  line project,  could  the  State then  use                                                                   
Railroad bonds or general obligation  (GO) bonds.  He thought                                                                   
that would work without addition of the new language.  Co-                                                                      
Chair Williams agreed.                                                                                                          
                                                                                                                                
Representative  Croft noted  that  the capital  had not  been                                                                   
excluded.  Mr. Ecklund acknowledged that was correct.                                                                           
                                                                                                                                
Representative  Croft  referenced the  chart,  asking if  the                                                                   
blue average growth line, represents  the State at this time.                                                                   
Mr.   Ecklund  acknowledged   that  line   was  the   current                                                                   
representation.                                                                                                                 
                                                                                                                                
Representative  Croft pointed out  that the manner  in, which                                                                   
the language was previously written  would have limited it to                                                                   
a 2/3%  growth.  It could  stabilize there when  inflation is                                                                   
increasing 3%  every year.   Mr. Ecklund reiterated  that the                                                                   
current version is tightly written.                                                                                             
                                                                                                                                
Representative Croft  asked what kind of public  policy sense                                                                   
does  that  make.   Mr.  Ecklund  advised  that there  is  an                                                                   
amendment,  addressing that  concern.   Representative  Croft                                                                   
stressed that capping  it at 2% or 3% does not  work as costs                                                                   
continue  to  grow.   He  thought  that each  scenario  would                                                                   
guarantees that every year, the  State will be getting behind                                                                   
a point or two.                                                                                                                 
                                                                                                                                
Co-Chair  Harris MOVED  to ADOPT amended  Amendment  #8, #23-                                                                   
LS0435\J.1, Cook, 4/6/04.  (Copy on File).                                                                                      
                                                                                                                                
Mr. Ecklund explained  that the amendment would  average $110                                                                   
million  dollars per year  potential growth  to the  spending                                                                   
cap.                                                                                                                            
                                                                                                                                
Representative Hawker  questioned if the numbers  listed were                                                                   
annual numbers  or the average  of the previous  three years.                                                                   
Mr. Tangeman  responded that they  were based on  the numbers                                                                   
from  the  preceding  three  years.    Representative  Hawker                                                                   
emphasized  that the  chart  only represents  "modeling"  and                                                                   
that it  would only be 3%  per year inflation.   He commented                                                                   
that the average  of 3% per year  would be nine, the  same as                                                                   
population growth.   The formula is interpreted  as averaging                                                                   
the two  changes together.   He  believed that the  amendment                                                                   
would move the State in the right direction.                                                                                    
                                                                                                                                
There being NO OBJECTION, Amendment #8 was adopted.                                                                             
                                                                                                                                
Representative  Croft  reiterated   that  with  the  proposed                                                                   
scenario,  each year  the  State will  be  moving 1%  further                                                                   
behind on  public service spending.   The charts  always make                                                                   
the future look even and smooth  and the past appears jagged.                                                                   
He asked if the  changes to personal income would  be used in                                                                   
calculating the  spreadsheets.   Mr. Tangeman explained  that                                                                   
personal income had  not been included in the  graph and that                                                                   
it is higher  than the percentages currently  being analyzed.                                                                   
He added  that assumes 3% with  1% growth and if  the numbers                                                                   
decrease,  the limit  could decrease.   Representative  Croft                                                                   
pointed out  that information  provided would be  the maximum                                                                   
of  what  could be  allowed  at  the  3%,  1% scenario.    He                                                                   
inquired if the  numbers were available from  15 years moving                                                                   
backward  on   inflation,  population  and   personal  income                                                                   
changes.  Mr.  Tangeman said they are.   Representative Croft                                                                   
questioned why 15 years was not being used.                                                                                     
                                                                                                                                
Representative Croft  MOVED to ADOPT Amendment #4.   (Copy on                                                                   
File).  Representative Stoltze OBJECTED.                                                                                        
                                                                                                                                
Representative  Croft  explained  that  the  amendment  would                                                                   
remove the  spending cap concept  and replaces it with  a tax                                                                   
cap.  It would be a tax prohibition.   An income or sales tax                                                                   
could  not  be added  without  a  vote  of  the people.    He                                                                   
questioned  why  government  should  be  restricted  in  such                                                                   
things  as building  new schools,  stressing that  government                                                                   
should  be restricted  in its  ability to tax.   He  observed                                                                   
that if  he had  capped his  personal expenses  right out  of                                                                   
college that would have "tied  his hands" when his employment                                                                   
improved.   There should  be a  balance between revenues  and                                                                   
expenditures.                                                                                                                   
                                                                                                                                
Representative Stoltze  spoke against the  amendment, stating                                                                   
that  it  provides  a  wide  deviation  from  the  growth  of                                                                   
possible taxes.                                                                                                                 
                                                                                                                                
Representative Hawker  acknowledged that the  amendment makes                                                                   
sense.   The power  to appropriate should  be limited  to the                                                                   
revenue  available.   He  stated that  he  would support  the                                                                   
amendment if it  were revised deleting reference  to personal                                                                   
income  or sales  tax and  instead  was to  prohibit "a  tax"                                                                   
without  a  vote  of  the  people.    He  questioned  if  the                                                                   
amendment could accomplish Representative Croft's goal.                                                                         
                                                                                                                                
Representative Joule pointed out  that there is no long-range                                                                   
fiscal  plan.   He  spoke  against  the implementation  of  a                                                                   
personal income or sales tax,  however, mentioned that if one                                                                   
were needed, it is the obligation  of the Legislature to make                                                                   
that decision.                                                                                                                  
                                                                                                                                
Representative  Croft   stated  that  he  would   support  an                                                                   
amendment to prohibit a tax on  individual Alaskans.  He felt                                                                   
that a  spending cap  was poor public  policy.  He  recounted                                                                   
that  members  have  indicated   support  that  it  could  be                                                                   
necessary  to ensure  the  use  of the  Permanent  Fund.   He                                                                   
argued  against  tying  the  hands  of  future  legislatures.                                                                   
Representative Croft maintained  that the power to tax should                                                                   
be taken before the power to appropriate.                                                                                       
                                                                                                                                
Representative  Stoltze  stated that  his  motivation is  not                                                                   
tied to the to Percent of Market Value or other issues.                                                                         
                                                                                                                                
Representative  Hawker stressed  that  there is  no quid  pro                                                                   
quo.  He   maintained  that  the   issue  is  the   basis  of                                                                   
credibility  in  the  eyes  of  the public.    He  felt  that                                                                   
legislators  make the best  decision that  they can  based on                                                                   
the  facts before  them.   He observed  that the  Legislature                                                                   
lacks a certain  amount of credibility before  the public and                                                                   
that the  legislation would  be a  referendum by the  public.                                                                   
He  thought   that  the   public  perception   is  that   the                                                                   
Legislature  wants  to go  "on  a  wild spending  spree"  and                                                                   
viewed  the legislation  as a  cooling  off bill.   The  bill                                                                   
provides State voters "comfort"  while legislators are making                                                                   
spending decisions.  The sunset  provision is critical to the                                                                   
bill.     He  did   not  think  that   the  bill   should  be                                                                   
characterized as binding future legislatures.                                                                                   
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Croft, Chenault, Moses                                                                                           
OPPOSED:       Stoltze, Fate, Foster, Hawker, Williams,                                                                         
               Harris                                                                                                           
                                                                                                                                
Representatives Meyer and Joule were absent from the vote.                                                                      
                                                                                                                                
The MOTION FAILED (3-8).                                                                                                        
                                                                                                                                
Representative  Croft advised that  Amendments #5, #6  and #7                                                                   
had   been  incorporated   into   the  committee   substitute                                                                   
presently before the Committee.                                                                                                 
                                                                                                                                
Representative Stoltze MOVED to  report CS HJR 9 (FIN) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal notes.  Representative Croft OBJECTED.                                                                      
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Chenault, Hawker, Stoltze, Harris, Williams                                                                      
OPPOSED:       Croft, Fate, Foster, Moses                                                                                       
                                                                                                                                
Representative  Joule and Vice  Chair Meyer were  not present                                                                   
for the vote.                                                                                                                   
                                                                                                                                
The MOTION FAILED (5-4).                                                                                                        
                                                                                                                                
HJR 9 was HELD in Committee.                                                                                                    
                                                                                                                                
HOUSE BILL NO. 227                                                                                                            
                                                                                                                                
     An  Act increasing  the jurisdictional  limit for  small                                                                   
     claims  and  for  magistrates from  $7,500  to  $10,000;                                                                   
     increasing the  jurisdictional limit of  district courts                                                                   
     in  certain civil  cases  from $50,000  to $75,000;  and                                                                   
     amending Rule  11(a)(4), Alaska District Court  Rules of                                                                   
     Civil  Procedure,  relating to  service  of process  for                                                                   
     small claims.                                                                                                              
                                                                                                                                
VANESSA   TONDINI,  STAFF,   REPRESENTATIVE  LESIL   MCGUIRE,                                                                   
advised  that the  jurisdictional limit  for district  courts                                                                   
was  last raised  in  1990 when  the Legislature  raised  the                                                                   
limit  from  $35,000 to  $50,000  dollars.   By  raising  the                                                                   
jurisdictional  limit from $50,000  to $100,000, HB  227 will                                                                   
allow  for  increases  in  inflation  and  provide  increased                                                                   
flexibility  for  litigants  regarding  whether  to  file  in                                                                   
district court or superior court.                                                                                               
                                                                                                                                
Ms.  Tondini added  that the  jurisdictional  limit on  small                                                                   
claims court  and magistrate  court was  last raised  in 1997                                                                   
when the Legislature  raised the limit from  $5,000 to $7,500                                                                   
dollars.   Small  claims court  offers  many advantages  over                                                                   
district court  to private  litigants, including  less formal                                                                   
discovery  requirements,  reduced  filing fees,  and  relaxed                                                                   
evidentiary  rules.   The bill  would increase  the limit  to                                                                   
$10,000 dollars.   She added that the bill  would also remove                                                                   
prohibitions  against the district  court hearing  claims for                                                                   
false   imprisonment,    libel,   slander,    and   malicious                                                                   
prosecution.   The  restrictions were  adopted shortly  after                                                                   
statehood.   District  court judges  are  well qualified  and                                                                   
there is no reason to prohibit  them from hearing these types                                                                   
of cases.                                                                                                                       
                                                                                                                                
Ms.  Tondini  concluded  that  the bill  would  expand  small                                                                   
claims  jurisdiction  over  out-of-state   defendants.  Under                                                                   
current  law,  small  claims   actions  against  out-of-state                                                                   
defendants may only be brought  under the landlord-tenant act                                                                   
or under  AS 09.05.020, which  authorizes service  of process                                                                   
against owners or operators of  motor vehicles involved in an                                                                   
accident  in  the State.    The  bill would  authorize  small                                                                   
claims  jurisdiction   over  out-of-state   defendants  under                                                                   
traditional  long-arm  principles.    The  expanded  long-arm                                                                   
jurisdiction   is   limited   to   district   court   judges.                                                                   
Magistrates  would continue  to be limited  by the  standards                                                                   
set forth in current law.                                                                                                       
                                                                                                                                
REPRESENTATIVE MAX  GRUENBERG offered to answer  questions of                                                                   
the Committee.                                                                                                                  
                                                                                                                                
Co-Chair Harris  asked what the  benefits of the  legislation                                                                   
would be.   Representative  Gruenberg  replied that  it would                                                                   
become more simple and faster than district court.                                                                              
                                                                                                                                
     ·    Section  1 increases  the  jurisdictional limit  of                                                                   
          district courts from $50,000 to $100,000 dollars.                                                                     
     ·    Sections 2  increases the jurisdictional  limits of                                                                   
          the  small  claims  court from  $7,500  to  $10,000                                                                   
          dollars.                                                                                                              
     ·    Section 3 extends the  jurisdiction of the district                                                                   
          court  to include  claims  for false  imprisonment,                                                                   
         libel, slander and malicious prosecution.                                                                              
     ·    Section 4  increases the jurisdictional  amount for                                                                   
          claims heard by magistrates  from $7,500 to $10,000                                                                   
          dollars.                                                                                                              
     ·    Section 5 precludes  magistrates from hearing cases                                                                   
          brought    under   the   expanded    small   claims                                                                   
          jurisdiction over out-of-state  defendants provided                                                                   
          for in  Section 6 of  the bill.  Magistrates  would                                                                   
          continue to be able  to hear claims against out-of-                                                                   
          state  defendants  only under  the  landlord-tenant                                                                   
          act or in accordance  with the AS 09.05.20 relating                                                                   
          to  service  of  process on  nonresident  owner  or                                                                   
          operator of motor vehicle.                                                                                            
     ·    Section  6  amends  District  Court Rule  11(a)  to                                                                   
          allow suits  in small claims court  against out-of-                                                                   
          state   defendants   under   traditional   long-arm                                                                   
          jurisdictional authority.                                                                                             
     ·    Section  7 provides  that Sections 5  and 6  of the                                                                   
          bill only take effect  if the court rule changes in                                                                   
          Section  6  of  the  bill  receive  the  two-thirds                                                                   
          majority  vote of each  house required by  art. IV,                                                                   
          sec. 15 of the Alaska Constitution.                                                                                   
                                                                                                                                
Representative  Hawker asked  if to  date, there  had been  a                                                                   
compelling argument against the legislation.                                                                                    
                                                                                                                                
                                                                                                                                
TAPE HFC 04 - 78, Side A                                                                                                      
                                                                                                                                
                                                                                                                                
DOUG WOOLIVER, ADMINISTRATIVE  ATTORNEY, ALASKA COURT SYSTEM,                                                                   
stated that  the Court  is neutral  on the  bill.   There are                                                                   
potential  down sides in  making the  proposed changes.   The                                                                   
bill  is  consistent  with  the  Courts  overall  philosophy.                                                                   
Section 1  raises the juristical  limit of district  court to                                                                   
$100,000  dollars,  which  the  court  does  not  object  to.                                                                   
Sections 2 & 4 raise from $7,500  dollars to $10,000 dollars,                                                                   
the jurisdictional  limit  for small  claims courts.   Judges                                                                   
are split if  that is a good  idea or not.  The  concerns are                                                                   
if that change is necessary, it  is a lot of money to have at                                                                   
stake and  that most people  cannot avail themselves  of that                                                                   
amount.                                                                                                                         
                                                                                                                                
Mr. Wooliver  continued, another  category of complaint  of a                                                                   
more  serious nature  is  claims up  to  $10,000 dollars  are                                                                   
consistent  with the  purpose  of small  claims  court.   The                                                                   
purpose in general is to move  many small claims more quickly                                                                   
through.   He pointed out that  the higher the  claim amount,                                                                   
the more tenaciously  the cases are fought, which  could be a                                                                   
potential downside.   Also, related to that,  the same things                                                                   
that make  it easier  to sooth somebody  in the small  claims                                                                   
court, can make  it easier to loose in that arena.   It would                                                                   
be a  trade off  between speed,  efficiency and due  process.                                                                   
Several   judges  are   concerned   that   with  the   higher                                                                   
jurisdictional  limit,  the  more   likely  it  is  that  the                                                                   
unsophisticated defendants  are going  to loose.  It  is true                                                                   
that  they have  the option  for more  formal district  court                                                                   
action.   Many people do  not understand the  distinctions or                                                                   
the benefits between the two types of courts.                                                                                   
                                                                                                                                
Regarding the limit of $10,000  dollars, he advised that most                                                                   
judges and magistrates are comfortable  moving to that level,                                                                   
however, it needs to be understood  that defendants can loose                                                                   
out in the process.  The other  significant change deals with                                                                   
more  out-of-state  defendants  in the  small  claims  court.                                                                   
That does  not create  new problems  but it  would be  moving                                                                   
into a  more informal process.   Out-of-state  defendants are                                                                   
frequently more time consuming.                                                                                                 
                                                                                                                                
Mr.  Wooliver  reiterated that  the  Alaska Court  System  is                                                                   
neutral  on the  bill.   He pointed  out that  more and  more                                                                   
people are coming to court without attorneys.                                                                                   
                                                                                                                                
Co-Chair Harris  referenced the interminent fiscal  note from                                                                   
the Alaska  Court System.   Mr.  Wooliver clarified  that the                                                                   
Alaska Court System  does not know the impact.   Small claims                                                                   
courts are easier,  faster and cheaper for litigants  but not                                                                   
necessarily for the Court System.   There could be more court                                                                   
effort involved.   Co-Chair Harris  did not think  the fiscal                                                                   
impact would be much.                                                                                                           
                                                                                                                                
Representative Stoltze thought  that increasing the amount to                                                                   
$10,000  dollars  would  increase caseloads  and  that  there                                                                   
would be  more court action.   Mr. Wooliver pointed  out that                                                                   
the last two times that the jurisdiction  rate was raised for                                                                   
small claims, the courts did not  see a spike in those files.                                                                   
                                                                                                                                
Representative   Fate  commented   on  damage  recovery   and                                                                   
problems  associated  with  that in  the  lower  jurisdiction                                                                   
courts.    Mr.  Wooliver  was not  aware  of  the  connection                                                                   
between  those two  factors.   He  acknowledged  it would  be                                                                   
interesting  to see if  there was  a correlation between  the                                                                   
amount in small court and recovery percentages.                                                                                 
                                                                                                                                
Representative  Fate  believed  that  recovery  could  become                                                                   
problematic and thought it could  be predicated on the amount                                                                   
at stake.                                                                                                                       
                                                                                                                                
In response to Representative  Fate, Representative Gruenberg                                                                   
advised  that  all the  bill  does  is  to clarify  that  the                                                                   
decision  can  be  brought  to  either  small  claims  court,                                                                   
district  and/or superior  court.  The  judgment will  remain                                                                   
the same.                                                                                                                       
                                                                                                                                
Representative Croft pointed out  that small claims court are                                                                   
generally handled  without lawyers and the situation  is more                                                                   
relaxed.   Lawyer fees can get  high quickly.  If  the amount                                                                   
discussed was  under $7,500  dollars, the person  previously,                                                                   
could  stay in the  small claim  court venue.   Small  claims                                                                   
court  is  the simplified  place  for  people to  go  without                                                                   
having to hire an attorney.                                                                                                     
                                                                                                                                
Representative Foster MOVED to  report CS HB 227 (JUD) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal note.                                                                                                       
                                                                                                                                
CS HB  227 (JUD)  was reported  out of  Committee with  a "do                                                                   
pass" recommendation  and with  indeterminate note #1  by the                                                                   
Alaska Court System.                                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 4:02 P.M.                                                                                          

Document Name Date/Time Subjects