Legislature(2003 - 2004)
03/02/2004 01:55 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 02, 2004
1:55 P.M.
TAPE HFC 04 - 38, Side A
TAPE HFC 04 - 38, Side B
TAPE HFC 04 - 39, Side A
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 1:55 P.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Eric Croft
Representative Hugh Fate
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Carl Moses
Representative Bill Stoltze
MEMBERS ABSENT
Representative Mike Chenault
ALSO PRESENT
Pete Ecklund, Staff, Representative Bill Williams; Jim
Pound, Staff, Representative Hugh Fate; Kristin Ryan,
Director, Division of Environmental Health, Department of
Environmental Conservation; Geraldine McIntosh, Staff,
Representative Bill Williams; Diane Barrans, Executive
Director, Postsecondary Education Commission, Department of
Education; Tom Lovas, Executive Director, Four Dam Pool
Joint Action Agency (JAA), Anchorage; Bob LeResche,
Financial Advisor, Four Dam Pool Joint Action Agency,
Juneau; Bob Loeffler, Director, Mining, Land and Water
Division, Department of Natural Resources, Anchorage; Steve
Porter, Deputy Commissioner, Department of Revenue; Sheila
King, Finance Officer, Postsecondary Education Commission,
Department of Education
PRESENT VIA TELECONFERENCE
Elise Hsieh, Assistant Attorney General, Department of Law,
Anchorage; Ken Vassar, Bond Council, Alaska Commission on
Postsecondary Education (ACPE), Anchorage; Ron Miller,
Executive Director, Alaska Industrial Development and Export
Authority, (AIDEA), Anchorage; Brian Bjorkquist, Assistant
Attorney General, Department of Law, Anchorage; Eric Yould,
Executive Director, Alaska Power Association (APA),
Anchorage; Sarah Fisher-Goade, Alaska Energy Authority (AEA)
& Alaska Industrial Development and Export Authority
(AIDEA), Anchorage
SUMMARY
HB 344 An Act relating to annual rental fees for mining
claims, and providing for reduced royalties during
the first three years of production.
CS HB 344 (RES) was reported out of Committee with
a "do pass" recommendation and with a new fiscal
note by the Department of Natural Resources.
HB 378 An Act relating to the Alaska Food, Drug, and
Cosmetic Act, including sales, advertising,
certain devices, food donors, and food banks;
making certain violations of organic food
provisions and of the Alaska Food, Drug, and
Cosmetic Act unfair methods of competition and
unfair or deceptive acts or practices under
certain of the state's unfair trade practices and
consumer protection laws; and providing for an
effective date.
HB 378 was reported out of Committee with a "no
recommendation" and with zero note #1 by the
Department of Law and fiscal note #2 by the
Department of Environmental Conservation.
HB 404 An Act relating to the Alaska Commission on
Postsecondary Education; relating to the Alaska
Student Loan Corporation; relating to bonds of the
corporation; relating to loan and grant programs
of the commission; relating to an exemption from
the State Procurement Code regarding certain
contracts of the commission or corporation; making
conforming changes; and providing for an effective
date.
CS HB 404 (HES) was reported out of Committee with
"individual recommendations" and with zero note #1
by the Department of Administration, zero note #2
by the Department of Community & Economic
Development, zero note #4 by the Department of
Labor and Workforce Development and fiscal note #5
by the Department of Community & Economic
Development.
HB 495 An Act relating to the four dam pool joint action
agency; and providing for an effective date.
CS HB 495 (FIN) was reported out of Committee with
a "do pass" recommendation and with a new zero
note by the Department of Community & Economic
Development.
CS SB 283(FIN)
An Act making an appropriation to reverse the
deposit of money available for appropriation in
the general fund at the end of fiscal year 2003
into the constitutional budget reserve fund;
making an appropriation for investment management
fees for the constitutional budget reserve fund;
making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing
for an effective date.
CS SB 283 (FIN) was HEARD and HELD in Committee
for further consideration.
HOUSE BILL NO. 378
An Act relating to the Alaska Food, Drug, and Cosmetic
Act, including sales, advertising, certain devices,
food donors, and food banks; making certain violations
of organic food provisions and of the Alaska Food,
Drug, and Cosmetic Act unfair methods of competition
and unfair or deceptive acts or practices under certain
of the state's unfair trade practices and consumer
protection laws; and providing for an effective date.
REPRESENTATIVE BILL WILLIAMS explained that the legislation
was introduced as a result of complaints his office had
received regarding food inspections throughout Alaska. Last
year, he noted that he had requested Department of
Environmental Conservation to determine a plan and through
collaborative effort between the Department and his office,
HB 378 was created.
GERALDINE MCINTOSH, STAFF, REPRESENTATIVE BILL WILLIAMS,
explained that HB 378 would amend provisions in Title 17
relating to the powers of the Commissioner of the Department
of Environmental Conservation relating to food offered or
sold to the public. The bill would make it possible for the
Department to require food-handling operators to become
trained, certified and assess fines. Both of those
capacities are needed as part of the new food safety
paradigm, Active Managerial Control. Also, the bill defines
labeling or advertising violations of the unfair trade and
consumer protection provisions.
Currently, AS 17.20.005 allows the Commissioner to issue
orders, regulations, permits, embargoes and quarantines.
That includes inspection, sanitation standards, food
handling methods and labeling. Under the proposed bill, the
Commissioner would have additional authority to ensure
knowledge of food safety and sanitation by individuals who
handle or prepare food for the public and persons who
supervise or employ those individuals. The bill authorizes
the Department to impose a civil fine for a violation of the
Alaska Food, Drug and Cosmetic Act.
Ms. McIntosh added that HB 378 clarifies that a violation of
provision, AS 17.20, or a violation of the representation
requirement in AS 17.06, as unfair or deceptive trade
practices under Alaska Statutes. The legislation would
allow the Attorney General's office to investigate labeling
violations that are not food safety or sanitation concerns.
Representative Stoltze inquired if the legislation would
supercede programs that the municipalities could have in
place.
KRISTIN RYAN, DIRECTOR, DIVISION OF ENVIRONMENTAL HEALTH,
DEPARTMENT OF ENVIRONMENTAL CONSERVATION, responded that the
Food Safety and Sanitation program has the ability to
delegate the program to local municipalities and has done so
in Anchorage. The changes would not impact those
municipalities.
Representative Croft asked how "active managerial control"
would differ from the current system. Ms. Ryan explained
currently, the State relies on inspections by government
employees to insure food safety. The legislation proposes
to transfer some responsibility to the managers and owners
of the retail food establishments. That would mean, "more
control in their hands" to insure that food is safe by
requiring that food handlers and managers are trained and
certified. Active managerial control indicates that the
control is moving into the hands of the food handlers.
Inspections will continue, but the past rate was not
sufficient. In the highest facilities, the Department was
able to send one inspector a year, 60% of the time. She
added that there are approximately 5,000 establishments with
only eighteen inspectors.
Representative Croft questioned if "self inspection" would
really work when a company is violating food safety
regulations. Ms. Ryan stated that the Department's
inspections will not decrease, however, in addition, they
will be requiring self-inspections as well as placing
certified operators in each establishment.
Representative Croft was skeptical that it would be
"realistic to think that a business would report their own
violations". Ms. Ryan responded that this was a common
model in the environmental field and that companies are
responsible for insuring themselves. It is the government's
obligation to check to make sure that information is
accurate. It may seem that they would not want to report
their own violations, however, what it does is set up a
mechanism for them to check their establishment. When the
reports are submitted, if they are shown to be false or
wrong, that establishment would be charged with breaking the
law.
Representative Croft stated that it would be a "passive
model" on the part of the State. Ms. Ryan countered that
the Department's obligation would not be decreasing but it
would be shared responsibility with businesses. She noted
that this is a common problem throughout the United States
and that no state has enough resources to do all the
inspections. There are 5,000 establishments. Every state
is attempting to come up with a model to help address needs
and financial concerns. In the past, the only enforcing
authority was the inspector's authority to issue a "Notice
of Violation" or to close the facility.
Representative Croft inquired the history of the number of
inspections over the past decade. Ms. Ryan advised that
number has stayed steady. The average of what an inspector
is capable of has stayed the same; however, the number of
inspectors doing the work, over the years, has been reduced.
She pointed out that last year there was a reduction of six
inspectors. That current system does not work. Ms. Ryan
reiterated that the number does fluctuate and usually 40% -
60% of the establishments are inspected. The goal is 80%
and it has never been reached.
Representative Stoltze understood that the certification
program would establish guidelines. Ms. Ryan acknowledged
that was the intent of the legislation. It will guarantee
that a food safety worker, working in a remote community
will have the same training as someone in a community on a
road system.
Representative Croft referenced Sections 2 & 3, which adds
sub paragraph #5, the aquatic farms. Ms. Ryan advised that
there are changes in the bill that are corrections or
additions to enforcement statutory authority and labeling
violations. The reference referred to by Representative
Croft, outlines the relationship of who will be responsible
for each section statute.
Co-Chair Harris asked about the $210.0 thousand dollar
operating fiscal note submitted by the Department, noting
the decline in FY06. Ms. Ryan explained that relates
primarily to the purchase of the training and certification
on-line equipment needed. It would be a one-time cost of
approximately $70 thousand dollars for the database.
Co-Chair Harris inquired how the Division anticipates
receiving their receipt money. Ms. Ryan indicated that the
Department proposed charging a $10 dollar fee for the food
handler certification. The fee and certification would last
for three years. It is similar to a model used by other
states. She stressed that the fee was reasonable and would
help maintain that aspect of the program.
Co-Chair Harris pointed out two new employees. He noted the
$80 thousand dollars anticipated in new revenue for FY05 and
asked if it would come from receipt support services. Ms.
Ryan acknowledged that at this time in that component, the
Department does over collect.
Co-Chair Harris asked if the Department anticipates
collecting $290 thousand dollars. Ms. Ryan explained the
fluctuation in revenue sources resulting from changes in the
three-year cycle for the renewal of the permit and the slow
inception of the requirement. She noted the intent of
implanting the program slowly. The Department does not
anticipate a large number of people coming forward the first
year, as it will not be required until FY06. This would be
a tri-annual fee.
Co-Chair Williams asked if fees would be decreasing. Ms.
Ryan responded that the Department has proposed drafting a
regulation to decrease permit fees.
Representative Stoltze requested an example of violation to
the organic food provision. Ms. Ryan could not provide
that. She pointed out that would be the responsibility of
the Division of Agriculture. She understood that the impact
would address misbranding and labeling problems.
Representative Stoltze noted that he did have an interest in
the labeling for organic foods and asked that Ms. Ryan
follow-up on that concern.
ELISE HSIEH, (TESTIFIED VIA TELECONFERENCE), ASSISTANT
ATTORNEY GENERAL, DEPARTMENT OF LAW, ANCHORAGE, offered to
answer questions of the Committee.
Representative Foster asked if schools in the bush would be
exempt from the proposed regulation. Ms. Ryan stated that
they would not be exempt, however, the Department has been
working closely to determine ways to easily implement it in
those areas.
Co-Chair Harris asked if the proposed legislation would be a
"burden" to rural Alaska. Representative Foster suggested
that the costs could be absorbed by a school district,
however, he wondered how it would affect workers in
locations outside the big cities. Ms. Ryan acknowledged
that had been a concern for the Division and that it was not
the intent to create a program that would not work for rural
Alaska. That is why the Division is proposing the
interactive website, as a way for training and certification
to happen. In communities that are unable to take the tests
in that way, there will be proctor exams set up by the
inspectors in those locations. She reiterated that it is
the Department's intent to make the test as accessible as
possible.
Co-Chair Harris voiced concern with the unintended
consequences of passing the legislation. He noted that he
did support the bill but asked to hear about on-going
efforts in rural Alaska. He did not want to see violations
in those areas. Ms. Ryan acknowledged that was a priority
and that the Division wants the system to be effective no
matter where the person is located in the State.
Representative Foster MOVED to report HB 378 out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
HB 378 was reported out of Committee with a "no
recommendation" and with zero note #1 by the Department of
Law and fiscal note #2 by the Department of Environmental
Conservation.
HOUSE BILL NO. 344
An Act relating to annual rental fees for mining
claims, and providing for reduced royalties during the
first three years of production.
REPRESENTATIVE HUGH 'BUD' FATE noted that the bill was
designed to keep the small Alaska mining industry in
business. Since 1980's, Alaska has seen the small miner
disappear because of the costs associated with that
industry. There is a 'glitch' in the Alaska statutes. The
language causes a miner to automatically lose their claim if
the required paperwork was filed a day late.
HB 344 would "fix" that language, granting a deadline
extension. New language would allow a miner to keep claims
by filing the paperwork and paying a penalty equal to one
years rent. He pointed out that Alaska was founded on
mining before oil was important to the State's industry.
Small mines have brought cash to the local communities. HB
344 is an important first step in reviving an industry that
is good for local communities and the State as a whole.
JIM POUND, STAFF, REPRESENTATIVE HUGH 'BUD' FATE, offered to
answer questions of the Committee.
BOB LOEFFLER, DIRECTOR, MINING, LAND AND WATER DIVISION,
DEPARTMENT OF NATURAL RESOURCES, pointed out that often
times the miners are late in their filings. He commented on
circumstances that affect the miners. HB 344 provides
flexibility and alternatives. It will help to save some
claims and will help small miners remain viable.
Representative Foster voiced his appreciation for the
legislation. He asked what would happen if a miner filed
late and another miner "staked" that claim. Mr. Loeffler
replied that had been extensively discussed with the Mining
Association. The bill could rectify the claim as long as no
one had staked intervening rights. If someone staked in the
interim, the language would not cure the problem. He
pointed out that this is part of a long tradition from the
1872 mining bill.
Representative Croft asked the penalty and if interest would
be calculated. Mr. Loeffler replied that the miner would be
required to pay whatever was owed and an additional one-year
rental.
Representative Croft inquired if the bill had originally
addressed royalties. Mr. Pound responded that it did and
after calculation, it was determined that would save only
about $20 to $60 dollars so it was decided not to be worth
the process. Representative Fate interjected that the
legislation started the same as HB 232, but that bill did
not "meaningfully help the small miner".
Representative Fate MOVED to report CS HB 344 (RES) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 344 (RES) was reported out of Committee with a "do
pass" recommendation and with a new note by Department of
Natural Resources.
HOUSE BILL NO. 404
An Act relating to the Alaska Commission on
Postsecondary Education; relating to the Alaska Student
Loan Corporation; relating to bonds of the corporation;
relating to loan and grant programs of the commission;
relating to an exemption from the State Procurement
Code regarding certain contracts of the commission or
corporation; making conforming changes; and providing
for an effective date.
DIANE BARRANS, EXECUTIVE DIRECTOR, POSTSECONDARY EDUCATION
COMMISSION, DEPARTMENT OF EDUCATION, noted that she has
previously requested support for agency initiatives. In
2001, Alaska Student Loan Corporation (ASLC) requested
approval to redefine its role in becoming Alaska's full
service financial aid assistance and postsecondary education
planning agency. The Legislature has consistently exhibited
bipartisan support for ASLC mission to promote postsecondary
participation and success by Alaskans.
Ms. Barrans requested support for the current legislation,
HB 404. The Commission and Corporation, having successfully
implemented the AlaskAdvantage suite of programs and
services for Alaskans, seeks support for the next step of
organizational growth.
Ms. Barrans outlined the legislation's objectives:
· To broaden the scope of the Corporation's bonding
authority to include the ability to bond for the
general benefit of the State.
· To contribute to statewide efforts to use assets as
efficiently as possible, the corporation has
developed a plan to return a substantial portion of
the capital originally given. The change is
requested to insure that the capacity to return
contributed capital back to the State; there would
be a variety of means to do that.
· To provide the Commission with greater flexibility
in offering loan consolidation options to borrowers.
Current statutes limit the way in which, the
Commission can offer consolidation and certain
customers, who have borrowed from both the
discontinued loan program and the AlaskAdvantage
loans, and hence, cannot currently be served through
consolidation.
· At the recommendation of the Department of Law, the
bill will clarify the Commission's ability to
administratively issue liens in the collection of
defaulted education loans and set out the due
process for appealing such an action by the
Commission.
· To provide an exemption from the State Procurement
Code for certain services related to guaranteeing
and disbursing education loans. Under the current
business structure for education loans, a lender
must be prepared to conduct business with the
guarantors and disbursing agents preferred by the
schools participating in the loan programs.
Ms. Barrans commented on the corporation's activities
leading up to developing the "Return of Capital" plan. In
2001, the corporation managers and financial advisors began
planning to modify the education loan programs' financing
structure. In order to do so, they identified assets within
the original master trust indenture. Because of substantial
improvement in portfolio performance that could be
identified as excess above the asset to debt coverage level
required by the terms of the 1988 master indenture.
In 2002, in tandem with the implementation of the
AlaskAdvantage Programs, a new master trust was created
using the cash and assets transferred from the 1988 Trust.
Out of the 2002 Trust, the Alaska Student Loan Corporation
(ASLC) has noted intent to continue the issuance of bonds to
finance core programs. The Return of Capital plan is
designed to continue capturing the "excess" from the 1988
Trust, without waiting until 2018 when the final outstanding
bonds are paid off.
Representative Stoltze asked about the procurement code
model. Ms. Barrans explained that the exemption requested
by the Commission, would allow doing business with school
business partners. In order to follow the State procurement
code with the dispersing agent, they would go through the
RFP process. It might be disadvantageous to continue using
"paper checks" with an agent who won the contract. She
stated that in respect to the guarantee agency, no cost is
paid out of hand. Under the federal education loan model,
receipt of income on the loan volume provides a federal
government guarantee. That business relationship would be a
"poor fit" for the procurement code and the services would
be used but not paid for.
Co-Chair Harris commented on the federal receipt fiscal
note. Ms. Barrans clarified that was correct for operating
funds, however, there is a capital fund amount requested to
purchase the software to administer the State grant program.
Vice Chair Meyer noted concern with $85 thousand dollars
being spent on software. Ms. Barrans pointed out that
number was approximately $15 thousand dollars less than the
Corporation has been able to find. She stressed that the
type of database that is being developed for State agencies
to administer grant programs is very expensive to build.
Discussion followed between Ms. Barrans and Vice Chair Meyer
regarding the software capabilities of that program and the
complexities of the process.
Representative Foster MOVED to report CS HB 404 (HES) out of
Committee with individual recommendations and with the
fiscal notes. There being NO OBJECTION, it was so ordered.
CS HB 404 (HES) was reported out of Committee with
"individual recommendations" and with zero note #1 by the
Department of Administration, zero note #2 by the Department
of Community & Economic Development, zero note #4 by the
Department of Labor and Workforce Development and fiscal
note #5 by the Department of Community & Economic
Development.
HOUSE BILL NO. 495
An Act relating to the four dam pool joint action
agency; and providing for an effective date.
Co-Chair Harris MOVED to adopt work draft version #23-
LS168\H, Craver, 3/2/02, as the version of the legislation
before the Committee. There being NO OBJECTION, it was
adopted.
PETE ECKLUND, STAFF, REPRESENTATIVE BILL WILLIAMS, stated
that the main purpose of HB 495 is to allow the Four Dam
Pool Power Agency (FDPPA), the first agency formed under the
statute allowing the joint action agencies (JAA's) to
refinance approximately a $73 million dollar loan owed to
the Alaska Industrial Development and Export Authority
(AIDEA).
Mr. Ecklund stated that HB 495 would clarify existing JAA
statute to explicitly defined that joint action agencies are
political subdivisions of the State for the purpose of
securities law. That action is necessary if the Four Dam
Pool Power Agency (FDPPA) is to avoid certain expensive and
damaging hurdles having to do with registration of
securities under bond sale circumstances. The legislation
also allows the agency to mortgage the Four Dam Pool assets.
The assets are presently mortgaged to AIDEA.
The legislation re-states the important principal
established by the Legislature that the Four Dam Pool assets
might not be sold to a party outside the FDPPA without
legislative approval. It does clarify that mortgaging the
assets or a foreclosure, under the terms of that mortgage,
would not constitute a sale under the restriction, providing
that certain requirements are met.
TAPE HFC 04 - 38, Side B
Mr. Ecklund pointed out that when the refinancing occurs and
the AIDEA loan is retired, the State and consumers in a
large part of Alaska would benefit by:
· Allowing the FDPPA to return approximately $73
million dollars to AIDEA for other uses; and
· Helping consumers of Four Dam Pool power by
lowering interest rates and administrative costs
associated with the acquisition.
Co-Chair Harris asked if the legislation would allow JAA
bonding agency to go out and get financing or bonding at a
lower rate than they are currently getting from AIDEA,
making them "out from under the State's ownership umbrella".
He thought that savings could be passed on to the consumer.
Mr. Ecklund agreed. The purpose is to allow refinancing at
a lower rate. They, currently, are paying AIDEA, 6.5%.
Co-Chair Harris inquired what the "downside" could be.
TOM LOUVAS, CHIEF EXEUCTIVE OFFICER, FOUR DAM POOL JOINT
ACTION AGENCY (JAA), ANCHORAGE, explained that the intent is
to be able to go into the open market, issue a tax-exempt
debt and pay off or refinance the existing AIDEA loan. The
proceeds would be a cash infusion to the State of Alaska
through AIDEA and would allow a lower debt service rate on
an annualized basis. Estimates range upwards from $1 to
$1.5 million dollars per year in revenue requirements. The
reduction in debt service costs would flow to the benefit of
the ratepayers, jointly participating in the Four Dam Pool
Power Agency.
Mr. Louvas listed points for refinancing:
· Reducing annual debt service costs for owning and
operating the units;
· Removing certain operating restrictions that the
Agency faces; and
· Providing more financial flexibility into the
future.
Mr. Louvas noted that the intent of the Board indicates that
the lower interest rate could be passed on to ratepayers
after the adjustment.
Co-Chair Harris asked if an agreement had been reached from
all four utilities. Mr. Louvas stated that the participants
in the power agency are the cooperatives of Kodiak Electric
Association, Copper Valley Electric Association and three
municipalities, Ketchikan, Wrangell and Petersburg. The
Board of Directors has been informed of the proposed action
and they "strongly" support it.
Vice Chair Meyer noted that the current rate with AIDEA was
6.85%. Mr. Louvas reported that they think they can get a
4.8% - 4.9% rate for an insured issuance, which would be a
significant interest reduction during a twenty-five year
borrow. Mr. Louvas understood from information provided by
AIDEA that there had been a recent AIDEA issue at 5%. He
emphasized that time is of the essence when dealing with the
interest market.
Vice Chair Meyer inquired if they could refinance through
AIDEA.
BOB LERESCHE, FINANCIAL ADVISOR, FOUR DAM POOL JOINT ACTION
AGENCY, JUNEAU, noted that the agency had asked AIDEA if
they could refinance and AIDEA was not willing. An
additional reason for going outside AIDEA is that it would
allow moving outside present restrictions of the loan. He
emphasized that they are "properly" strict. Mr. LeResche
pointed out that it represents an actual financial cost. At
present time, there is $30 million dollars in reserved funds
invested in securities earning 2%, while at the same time,
paying 6.5% on that to AIDEA. That amount adds up to $1.2 -
$1.4 million dollars per year for those restrictions.
Vice Chair Meyer understood that this was one of the "better
loans that AIDEA had made" and he thought that they would
regret loosing it.
Representative Fate noted that AIDEA distributes a dividend
that involves Power Cost Equalization (PCE) funds with about
$3 million dollars accruing in interest off of the $73
million dollars. He asked what would happen if the $73
million dollars went to AIDEA and was not directed to the
full benefit of PCE.
RON MILLER, (TESTIFIED VIA TELECONFERENCE), EXECUTIVE
DIRECTOR, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT
AUTHORITY, (AIDEA), ANCHORAGE, introduced Ms. Goade and
requested that she answer questions of the Committee.
SARAH FISHER-GOADE, (TESTIFIED VIA TELECONFERENCE), ALASKA
ENERGY AUTHORITY (AEA) & ALASKA INDUSTRIAL DEVELOPMENT AND
EXPORT AUTHORITY (AIDEA), ANCHORAGE, noted that there is
confusion regarding the relationship between the Four Dam
Pool and the PCE program. Proceeds of the sale were
deposited into the PCE endowment; there was no additional
anticipation that extra funds would go to the PCE endowment.
Representative Fate asked if there would be no more accrual
and if then, the endowment would "dry up". Ms. Fisher-Goade
explained that the Four Dam Pool was an asset of AEA. When
the project was sold, the proceeds then went to another AEA
program through the PCE endowment. That loan was financed
through AIDEA. If there were a pay-off of the loan, that
would become AIDEA funds. There is no additional
relationship to the PCE program at this point.
Co-Chair Harris noted that when the Four Dam Pools were sold
to the utilities, some of that money went into the PCE
endowment fund. The State uses a portion of those earnings
to fund PCE, subsidized with general funds to make up the
roughly $15 million dollar expenditure. The money spent on
PCE comes from two sources, earning of the PCE endowment and
the general fund. The intent was for the PCE fund to be
large enough to fund PCE. He advised that has not yet been
the case and that it is usually subsidized each year with
general funds.
BRIAN BJORKQUIST, (TESTIFIED VIA TELECONFERENCE), ASSITANT
ATTORNEY GENERAL, DEPARTMENT OF LAW, ANCHORAGE, offered to
answer questions of the Committee.
ERIC YOULD, (TESTIFIED VIA TELECONFERENCE), EXECUTIVE
DIRECTOR, ALASKA POWER ASSOCIATION (APA), REPRESENTING THE
ELECTRIC UTILITY INDUSTRY IN THE STATE OF ALASKA, ANCHORAGE,
spoke in strong support of HB 495. He stated that the
legislation would help to lower rates to the consumers of
the Four Dam Pool. He clarified that any financing or
easing of debt of the Four Dam Pool agency would have no
impact on the Power Cost Equalization Program. The proceeds
from the sale of the Four Dam Pool have already gone into a
trust fund for PCE along with $100 million dollars from the
Constitutional Budget Reserve (CBR) distributed two years
ago. The combination of those two make up a trust fund,
which added with some general funds, comprise roughly $15.7
million dollars for Power Cost Equalization. He reiterated
that APA strongly supports the proposed bill.
Representative Foster MOVED to report CS HB 495 (FIN) out of
Committee with individual recommendations and attached
fiscal note.
Representative Croft OBJECTED for a comment. He indicated
that of all the bills addressing the Four Dam Pool, this one
is the best one. Representative Croft WITHDREW his
OBJECTION, and the bill moved from Committee.
CS HB 495 (FIN) was reported out of Committee with a "do
pass" recommendation and with a new zero note by the
Department of Community & Economic Development.
CS FOR SENATE BILL NO. 283(FIN)
An Act making an appropriation to reverse the deposit
of money available for appropriation in the general
fund at the end of fiscal year 2003 into the
constitutional budget reserve fund; making an
appropriation for investment management fees for the
constitutional budget reserve fund; making
appropriations under art. IX, sec. 17(c), Constitution
of the State of Alaska, from the constitutional budget
reserve fund; and providing for an effective date.
Co-Chair Williams moved Amendment #1. (Copy on File).
Representative Croft OBJECTED for purpose of discussion.
At Ease: 3:01 p.m.
Reconvened: 3:04 p.m.
Representative Croft stated that there was interest in the
Minority Caucasus to give some Constitutional Budget Reserve
(CBR) money directly to the Alaska Natural Gas Pipeline
Development Authority (ANGDA). He warned against CBR money
going directly to the Department of Revenue for ANGDA needs.
He stressed that option is not something that the Minority
is interested in doing. Representative Croft warned passing
the request would endanger entire sweep bill.
Co-Chair Harris agreed with Representative Croft's statement
and requested to hear from the Department of Revenue, Steve
Porter.
STEVE PORTER, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
commented that the requested dollars would keep the project
moving forward. He spoke to the contracts for ANGDA for
research in the amount of $426 thousand dollars. He
addressed the socio-impact study beneficial to the ANGDA
project for understanding the impacts to municipalities.
Mr. Porter commented on the reasons for the money to go
through the Department of Revenue resulting from a funding
conflict. The expenses directly related to reimbursement
between Conoco Phillips, British Petroleum (BP) and EXXON
and their applications to the State are reimbursable.
Anything spent on responding to an application by
contractors can be reimbursed to do that. There is an
overlap for all those concerns. The Department is
attempting to determine how to allocate the money for the
contracts between the parties. He added that the Department
is trying to address issues relating to feasibility and
stated that they would like to use the analysis and the
questions that arise from it to do the research and assess
the risk.
Co-Chair Harris asked how much money would ANGDA need to
accomplish the items mentioned. Mr. Porter responded that
there are about $750 thousand dollars worth of contracts at
this time and with additional needed funding.
Co-Chair Harris pointed out that if Amendment #1 passed the
House Finance Committee and the House Floor, for
implementation, there would need to be a ¾ vote. He noted
that there would be a good chance that the reverse sweep
would not be adopted. He questioned if it would be better
to adopt the reverse sweep clean or accept the amendment.
Mr. Porter responded that if the addition of the amendment
does not pass in the sweep bill, the Department of Revenue
would go back to $3 million dollar request, which is the
preferred amount. He mentioned on the Stranded Gas Act,
requesting that it move forward. He concluded that the
Department would be willing to defer to the judgment of the
Legislature on timing.
Co-Chair Harris inquired how important was the reversed
sweep bill to the Department. Mr. Porter stated that they
do not want to stop the reverse sweep bill and if they
cannot get the ¾ majority, the Legislature should not put
the attachment on the bill.
Co-Chair Harris MOVED that the bill be HELD in Committee for
further deliberation.
th
Vice Chair Meyer asked if there was a March 12 deadline
with the Mid America paperwork. Mr. Porter responded that
there is an impact statement needed that would not be ready
th,
for March 12 meeting as the contract is not yet available.
Vice Chair Meyer asked if the Supplemental budget was the
"other vehicle" referenced. Mr. Porter did not think so,
pointing out that there are a couple of other bills that
could be vehicles for the authority.
Representative Hawker asked if the Department had been in
discussion with the Alaska Natural Gas Pipeline Development
Authority Board regarding the structuring of the money. Mr.
Porter responded that there was a thorough discussion with
the Board and they passed a resolution in favor of providing
$3 million dollars for support of ANGDA and Stranded Gas.
Representative Hawker questioned if that meeting involved
both public and executive sessions. Mr. Porter acknowledged
that and noted it resulted in a unanimous resolution.
Representative Hawker admitted that he had heard different
interpretations of those sessions and that they had been
"spirited" and "cohesive". Representative Hawker asked how
Mr. Porter would characterize what lead to the resolution.
Representative Croft interrupted, requesting a Point of
Order. He asked if Representative Hawker was asking for
information of what had been said in Executive Session.
Representative Hawker asked to qualify his question,
recognizing that some of the sessions were in Executive
Session and others were in the public domain. He asked how
the nature of those discussions could be characterized. Mr.
Porter responded that the board members are a group of
strong-minded individuals and in the public sessions,
concerns had been openly discussed.
Representative Hawker asked if it was true that funding
through the Department of Revenue was not the Board's first
choice. Mr. Porter explained that before the best course of
action was defined that could have been true. Understanding
how the finances are, the proposed idea is the best course
of action.
Representative Hawker thought that the best course of action
would be direct funding rather than through the Department
of Revenue. He asked what the Department did that persuaded
the Board that funding through the Department of Revenue
would be the best course of action. Mr. Porter replied that
the Board saw that maximum value would be received by
administering through the Department of Revenue.
Representative Hawker understood that the relationship
between ANGDA and the Department of Revenue was not always
easy, but that they were attempting to work out their
differences. Mr. Porter stated from the Department's point
of view, they have always been interested in supporting the
viability of that project.
Representative Hawker asked if the ANGDA Board has reason to
fear that if the money were appropriated through the
Department of Revenue, would they then be able to access the
funds needed to do the work that they need to accomplish
th
between now and June 30. He asked will there be adequate
resources for the Board. Mr. Porter replied that they do
have reason to "fear", as $1.6 million dollars may not be
sufficient.
Representative Hawker asked if the Department had $3 million
dollars, would they be able to assure the Board adequate
resources. Mr. Porter responded that with $3 million
dollars, the Department believes that they could have
adequate resources through the end of the year with enough
to ask the necessary questions for contracts to provide a
viable determination.
Representative Hawker expressed "grave concerns" with the
answers being provided by the Department of Revenue. Mr.
Porter commented that was a "different concern" from the one
originally presented. He did not see this as an issue.
Each project would either fund and benefit ANGDA or benefit
the industry. He suggested that he was being asked to
choose between ANGDA and oil, claiming that the real
question is how to distribute the cash. If the industry
receives a proportionate share, there would then be value to
everyone.
Representative Croft asked if Mr. Porter had ever told the
ANGDA Board that the only way to get significant money was
to support the $3 million dollar request. Mr. Porter did
not remember stating that.
Representative Croft pointed out that the Board was
historically an independent agency and that the tendency has
been to make that Board more dependant and wrapped into the
Department of Revenue. The funding for stranded gas is
okay. Representative Croft stated that there are many
appropriate uses for $2 million dollars but the fact that
Mr. Porter may need $2 million for the Stranded Gas Project
negotiations is very interesting. Representative Croft
noted that the Minority was interested in having an
independent look at those issues. If it is going to be
"dependant", then that is not something that the Minority is
willing to spend on. He warned that the proposed amendment
"threatens" the reversed sweep legislation.
Mr. Porter countered that the actual patrol of the Board has
not changed moving it to the Department of Revenue. The
move could change the Board's ability to spend on stranded
gas versus ANGDA and the ability to manage the way in which
the systems are billed out. The actual control over the
ANGDA Board has not changed. He added that Board is very
important to the State and they need to get to a place where
the public can believe that they are strong and viable.
Co-Chair Williams commented that the Committee has addressed
what the Board wants by passing the proposed amendment.
Vice Chair Meyer noted that the Senate had passed the bill
without the amendment. He asked if discussion had been
presented on the Senate side regarding the idea. He voiced
his concern with continual delays in passage of the bill.
Co-Chair Williams indicated that he had spoken with the
Senate leadership and that they indicated that they did not
have a problem with the language of the amendment.
Co-Chair Harris pointed out that the bill passed from the
Senate side was a "clean bill". The Minority has strictly
indicated interest only for ANGDA and nothing else. Since
that occurred, there has been many conversations. Co-Chair
Harris did not believe that there was ¾ vote available on
the Senate side to support the amendment. Co-Chair Harris
stressed that time is of the essence. He commented that he
would like to see that the bill kept clean.
TAPE HFC 04 - 39, Side A
(Tape Malfunction)
Vice Chair Meyer suggested that perhaps the amendment could
be passed through the supplemental.
Co-Chair Williams commented that the bill had sat in
Committee for three weeks and that no amendments had been
brought forward. Co-Chair Williams noted that it was not
his intent to move the bill from Committee at this time.
CS SB 283 (FIN) was HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 3:37 P.M.
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