Legislature(1999 - 2000)
03/26/1999 01:38 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 26, 1999
1:38 P.M.
TAPE HFC 99 - 54, Side 1
TAPE HFC 99 - 54, Side 2
CALL TO ORDER
Co-Chair Therriault called the House Finance Committee
meeting to order at 1:38 p.m.
PRESENT
Co-Chair Therriault Representative Foster
Co-Chair Mulder Representative Grussendorf
Vice-Chair Bunde Representative Kohring
Representative J. Davies Representative Moses
Representatives Austerman, Williams and G. Davis were absent
from the meeting.
ALSO PRESENT
Doug Gardner, Assistant Attorney General, Department of Law;
Mike Krieber, Staff, Representative Kohring; Annalee
McConnell, Director, Office of Management and Budget, Office
of the Governor.
SUMMARY
HB 40 "An Act combining parts of the Department of
Commerce and Economic Development and parts of the
Department of Community and Regional Affairs by
transferring some of their duties to a new
Department of Commerce and Rural Development;
transferring some of the duties of the Department
of Commerce and Economic Development and the
Department of Community and Regional Affairs to
other existing agencies; eliminating the
Department of Commerce and Economic Development
and the Department of Community and Regional
Affairs; relating to the Department of Commerce
and Rural Development and the commissioner of
commerce and rural development; adjusting the
membership of certain multi- member bodies to
reflect the transfer of duties among departments
and the elimination of departments; creating the
office of international trade and relating to its
duties; and providing for an effective date."
HB 40 was placed in a subcommittee chaired by
Representative Therriault, and consisting of
Representative Austerman, Representative Kohring
and Representative J. Davies.
HB 102 "An Act imposing certain requirements relating to
cigarette sales in this state by tobacco product
manufacturers, including requirements for escrow,
payment, and reporting of money from cigarette
sales in this state; providing penalties for
noncompliance with those requirements; and
providing for an effective date."
HB 102 was REPORTED out of Committee with a "do
pass" recommendation and two zero fiscal notes,
one by the Department of Law and one by the
Department of Revenue.
HOUSE BILL NO. 102
"An Act imposing certain requirements relating to
cigarette sales in this state by tobacco product
manufacturers, including requirements for escrow,
payment, and reporting of money from cigarette sales in
this state; providing penalties for noncompliance with
those requirements; and providing for an effective
date."
Co-Chair Therriault observed that Mr. Gardner, Department of
Law responded to questions by the Committee in a letter
dated 3/24/99 (copy on file).
DOUG GARDNER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW
reviewed his letter to Co-Chair Therriault. He observed that
the Committee questioned if the word "generally" could be
deleted on page 3, line 11. He conferred with counsel for
Phillip Morris. Phillip Morris takes the position that it
would not be a qualifying statute with the deletion of
"generally". He stated that the state of Alaska would not
necessarily agree with Phillip Morris, but acknowledged that
the change would open the state to litigation. He
recommended that "generally" not be deleted. He emphasized
that any benefit for clarification purposes would be
outweighed by the risks of litigation.
Mr. Gardner discussed the second question that was posed by
the Committee: What is the meaning of the phrase "generally
perform its financial obligations under the Master
Settlement Agreement." He observed that counsel for Phillip
Morris would take the position that the change would render
the statute a non-qualifying statute. The Department of Law
takes the position that the term "generally perform its
financial obligations" is a catch all phrase used to
describe the myriad of financial obligations in the Master
Settlement Agreement and in and of itself does not alter the
obligations that are individually enforceable throughout the
rest of the agreement. He recommended that the proposed
change not be made.
Mr. Gardner discussed the third question: Can the committee
amend HB 102 by deleting page 3, lines 10 - 12. He concluded
that the need for the section still exists. He explained
that a company could still become a Subsequent Participating
Manufacturer (SPM).
Mr. Gardner discussed the fourth questioned: Does the bill
have the affect of limiting a Non-Participating
Manufacturer's liability to the amount a manufacturer would
be required to place in escrow under Sec. 45.53.020? He
concluded that it would not. He noted that if a Non-
Participating Manufacturer put a million dollars into an
escrow account and was found to be liable to a plaintiff in
Alaska for $2 million dollars, than the plaintiff could
recover a million dollars from the escrow fund and continue
to collect the judgement as allowed by Alaska law against
the company. The fund is a vehicle for providing for
compensation but not the only available source.
Co-Chair Therriault clarified that the finding language is
part of the model legislation.
Representative J. Davies asked what obligations and
advantages would exist under the Subsequent Participating
Manufacturer status. Mr. Gardner explained that a small
manufacturing company could sign the agreement and take
themselves out of the situation of possible liability. They
would not have the ability to increase market share without
any financial repercussions as they would have if they had
signed as a SPM earlier. If they do not become a SPM they
would have to deal with the escrow issue.
Representative J. Davies questioned if they would be subject
to advertising sanctions. Mr. Gardner replied that they
would have to comply with SPM restrictions on advertising.
Representative Grussendorf maintained that "generally" is
vague. He stressed that without "generally" the original
agreement would be clear.
Representative J. Davies MOVED to ADOPT Amendment 1 (copy on
file).
Page 3, line 27
Delete "Such money itself:"
Insert "Money placed into escrow and interest earned on
money in escrow"
Representative J. Davies expressed the concern that the
phase "Such money itself" could be interpreted as relating
only to the principle.
Mr. Gardner concluded that the phrase applies to both the
interest and the principle amount. He emphasized that the
language is clarified with the addition of page 4, lines 12
- 15.
Representative J. Davies Withdrew Amendment 1.
Co-Chair Therriault questioned if the language on page 4
line 12 should read "subsection". Mr. Gardner stated that
he thought the language should be "subsection".
Co-Chair Therriault noted that there are two zero fiscal
notes.
Vice-Chair Bunde MOVED to report HB 102 out of Committee
with the accompanying fiscal notes.
HB 102 was REPORTED out of Committee with a "do pass"
recommendation and two zero fiscal notes, one by the
Department of Law and one by the Department of Revenue.
HOUSE BILL NO. 40
"An Act combining parts of the Department of Commerce
and Economic Development and parts of the Department of
Community and Regional Affairs by transferring some of
their duties to a new Department of Commerce and Rural
Development; transferring some of the duties of the
Department of Commerce and Economic Development and the
Department of Community and Regional Affairs to other
existing agencies; eliminating the Department of
Commerce and Economic Development and the Department of
Community and Regional Affairs; relating to the
Department of Commerce and Rural Development and the
commissioner of commerce and rural development;
adjusting the membership of certain multi- member
bodies to reflect the transfer of duties among
departments and the elimination of departments;
creating the office of international trade and relating
to its duties; and providing for an effective date."
Co-Chair Therriault observed that the legislation would be
placed into a subcommittee.
REPRESENTATIVE KOHRING, SPONSOR, spoke in support of HB 40.
He gave a brief history of the legislation. He observed that
the bill was introduced in the previous legislative session
as HB 400. HB 40 was based on earlier legislation sponsored
by Representative Kelly. He maintained that HB 40 would save
the state money by merging the Department of Community and
Regional Affairs with the Department of Commerce and
Economic Development. He stressed that the budget deficient
cannot be addressed just by cutting out programs. He
emphasized that programs and services must be delivered more
efficiently. He maintained that the legislation would
deliver programs with greater efficiency and fewer dollars.
Upper management would be reduced. The legislation would
save approximately $900 thousand dollars. The existing
program structure would be retained. He maintained that the
integrity of programs in rural Alaska would remain.
Representative Kohring observed that there are nine programs
that are being administered by both the Department of
Environmental Conservation and Department of Community and
Regional Affairs. He observed that one of the two
commissioner's offices would be eliminated. He maintained
that the legislation would shield programs that are
important for the development of Alaska's economy. He
explained that childcare programs would be transferred to
the Department of Health and Social Services. Job related
programs would be transferred to the Department of Labor. He
stressed that without these two components the department
can focus strictly on economic development.
Representative Kohring estimated that the cost of the merger
would be approximately $200 thousand dollars. He
acknowledged that the Administration estimates the cost at
approximately $750 thousand dollars. He emphasized that
there would be minimal staff disruption. He stated that
staff associated with Headstart and job training would be
the only ones that would need to move. He pointed out that
the initial cost of the merger would not be repeated in
subsequent years.
Representative Kohring observed that the Department would be
named the Department of Commerce and Rural Development. He
stressed that the programs and intent of the Department of
Community and Regional Affairs would be retained. He
reviewed support for the legislation.
Representative Kohring discussed the one-stop shopping
concept. He discussed changes to the legislation made by the
House Community and Regional Affairs Committee. He noted
that in response to concerns by Representative Joule the
word "may" was changed to "shall" in section 77. A rural
affairs advocate was also added in section 65. He reiterated
that the legislation would benefit rural Alaska. He stressed
that there would be a greater focus on economic development
and commerce in rural Alaska. He stressed that
infrastructure and construction would be maximized. He
asserted that urban Alaska would benefit from enhanced
economic activity in rural Alaska.
Representative Kohring pointed out that the merger would
create an agency that would still be the fourth smallest in
the state. There would be additional management oversight,
but not additional duties or responsibility.
Representative Kohring thanked the Administration for their
cooperation on the legislation.
Representative Kohring referred to a letter of support by
Don Tanner, former Deputy Commissioner, Department of
Community and Regional Affairs (copy on file). Mr. Tanner
stated that: "Having one department responsible for
improving our economy will help all communities and
businesses." He also referred to a letter by former
commissioner of the Department of Commerce and Economic
Development, Paul Fuhs, dated March 17, 1998 (copy on file).
Former Commissioner Fuhs stated that there would be many
advantages to combining the state's economic development
programs. He maintained that combined programs would be more
effective.
Representative Kohring concluded that the legislation would
allow economic growth to be enhanced while preserving and
protecting the integrity of programs.
Vice-Chair Bunde asked if there were other states with
similar agencies.
MIKE KRIEBER, STAFF, REPRESENTATIVE KOHRING responded that
there are similar programs in at least two other states,
Pennsylvania and Florida.
Representative J. Davies questioned if the commissioner of
the Department of Community and Regional Affairs or the
commissioner of the Department of Commerce and Economic
Development would be eliminated.
Mr. Krieber explained that the legislation eliminates the
department of Community and Regional Affairs. Representative
Kohring stressed that either department could be eliminated.
Representative J. Davies questioned if rural Alaskans would
be comfortable with the deletion of the Department of
Community and Regional Affairs.
Co-Chair Therriault observed that the new agency would take
over the functions of the Department of Community and
Regional Affairs. He stated that he would look at the issue
in subcommittee.
Representative J. Davies noted that a commissioner would be
eliminated. He questioned which of the duties that the
commissioners are doing would be eliminated.
Representative Kohring stated that the intent was not to
eliminate the Department of Community and Regional Affairs'
commissioner in particular. He stated that only upper
management and oversight personnel would be eliminated. He
did not think that there would be a negative impact on
programs.
Representative Kohring stressed that there was no
alternative motive, as far as focusing on the commissioner
of the Department of Community and Regional Affairs'
position. He stated that either commissioner position could
be eliminated. He reiterated that only upper management
would be affected. He asserted that there would be no
negative impact to programs and pointed out that the rural
advocate would be a cabinet level position. He reiterated
his sincerity in maintaining the integrity of rural
programs.
Mr. Krieber explained that the rural advocate position would
observe other departments and their rural activities in
order to look at state government as a whole.
Representative J. Davies pointed out that commissioners do
real work. He questioned which of their duties would not be
done with the elimination of one commissioner.
Representative Kohring stated that the current duties of the
Department of Community and Regional Affairs' commissioner
would not be eliminated. He stressed that the Division
director and the rural advocate would continue the duties.
Representative J. Davies asked how the duties could be
combined without something being lost. Representative
Kohring stated that the rural advocate position would assume
the commissioner's responsibilities.
Co-Chair Mulder stated that they would be asking fewer
people to do more work. Representative J. Davies stated that
the approach assumes that people can do more work and that
they are not already working long hours. Representative
Kohring reiterated that there would not necessarily be more
work. He stressed that upper management would have more
oversight.
Representative Kohring reviewed the organization of the new
Department of Commerce and Rural Development. There would be
four Divisions: Rural Affairs Division, Statewide Economic
Development Division, Division of Administration, and
Independent Agencies
(Tape Change, HFC 99 - 54, Side 2)
Representative Kohring stated his intent for a strong
bipartisan effort with a strong level of trust.
Representative J. Davies expressed concern that the
constitutional provision for local government be met. He
asked where the general community emphasis for local
government would fall.
Mr. Krieber maintained that the new department would
continue to be an advocate for communities. Representative
Kohring stated that the structure would allow the department
to focus on the needs of both urban and rural Alaska.
Representative J. Davies stressed that their needs are
broader than commerce. Representative Kohring stated that
the intent is to give a focus and attention of economic
development in addition to reducing the budget and
streamlining government.
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR explained that in an attempt
to outline reductions the Governor identified areas that can
be consolidated. The Administration concluded that job
training and childcare programs would benefit from
consolidation. She noted that job training programs have
been placed in different departments, in part, due to
federal mandates. She observed that recent changes at the
federal level allow consolidation of some of the services.
She suggested that there could be a realigning of services
in the Department of Labor, Department of Community and
Regional Affairs, and Department of Commerce and Economic
Development. She observed that some components could be
transferred to other agencies. Childcare programs could be
transferred to the Department of Health and Social Services.
She emphasized that consolidation would accomplish a number
of key goals in addition to budget savings. The Governor's
goals include improving access in rural areas and
maintaining a clear focus on rural Alaska. She noted that
Power Cost Equalization is one of the most important
functions of the Department of Community and Regional
Affairs. It is the Governor's goal to find a solution to the
delivery of Power Cost Equalization (PCE) funding in the
process. She stressed that none of the functions currently
being provided by the three departments can be eliminated
without significant impacts.
Representative Foster asked if other departments would be
reviewed for consolidation. Ms. McConnell stated that they
did not have plans to consolidate other departments.
Co-Chair Therriault noted that this consolidation has been
under review for a number of years. He spoke in support of
the consolidations and identified areas that can be improved
by the consolidation. He observed that the legislation would
impact the operating budget. He explained that the FY00
operating budget would be based on the current structure. If
the consolidation occurs the conference committee can adopt
fiscal notes to make the structural changes in the operating
budget.
Co-Chair Therriault stated that the subcommittee would
consist of Co-Chair Therriault as chair, Representative
Austerman, Representative Kohring, and Representative J.
Davies.
HB 40 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 2:45 p.m.
House Finance Committee 9 3/26/99
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