03/11/2008 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB406 | |
| HB396 | |
| SB253 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 406 | TELECONFERENCED | |
| *+ | HB 396 | TELECONFERENCED | |
| + | SB 253 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 11, 2008
8:08 a.m.
MEMBERS PRESENT
Representative Bob Roses, Vice Chair
Representative John Coghill
Representative Kyle Johansen
Representative Craig Johnson
Representative Andrea Doll
Representative Max Gruenberg
MEMBERS ABSENT
Representative Bob Lynn, Chair
COMMITTEE CALENDAR
HOUSE BILL NO. 406
"An Act relating to a requirement for competitive bidding on
contracts for the preparation of election ballots."
- HEARD AND HELD
HOUSE BILL NO. 396
"An Act relating to and increasing the amount of the 2008
permanent fund dividend; and providing for an effective date."
- MOVED HB 396 OUT OF COMMITTEE
SENATE BILL NO. 253
"An Act relating to the appointment of members of the Board of
Game; and providing for an effective date."
- MOVED SB 253 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 406
SHORT TITLE: CONTRACTS FOR PREPARATION OF BALLOTS
SPONSOR(s): REPRESENTATIVE(s) FAIRCLOUGH
02/19/08 (H) READ THE FIRST TIME - REFERRALS
02/19/08 (H) STA, FIN
03/04/08 (H) STA AT 8:00 AM CAPITOL 106
03/04/08 (H) Scheduled But Not Heard
03/06/08 (H) STA AT 8:00 AM CAPITOL 106
03/06/08 (H) Heard & Held
03/06/08 (H) MINUTE(STA)
03/11/08 (H) STA AT 8:00 AM CAPITOL 106
BILL: HB 396
SHORT TITLE: INCREASE 2008 PERM. FUND DIVIDEND
SPONSOR(s): REPRESENTATIVE(s) THOMAS
02/19/08 (H) READ THE FIRST TIME - REFERRALS
02/19/08 (H) STA, FIN
03/06/08 (H) STA AT 8:00 AM CAPITOL 106
03/06/08 (H) Scheduled But Not Heard
03/11/08 (H) STA AT 8:00 AM CAPITOL 106
BILL: SB 253
SHORT TITLE: MEMBERS OF THE BOARD OF GAME
SPONSOR(s): SENATOR(s) HUGGINS
01/28/08 (S) READ THE FIRST TIME - REFERRALS
01/28/08 (S) RES
02/16/08 (S) RES AT 11:00 AM BUTROVICH 205
02/16/08 (S) Scheduled But Not Heard
02/18/08 (S) RES AT 3:30 PM BUTROVICH 205
02/18/08 (S) Moved SB 253 Out of Committee
02/18/08 (S) MINUTE(RES)
02/19/08 (S) RES RPT 6DP 1NR
02/19/08 (S) DP: HUGGINS, GREEN, MCGUIRE, STEVENS,
WAGONER, STEDMAN
02/19/08 (S) NR: WIELECHOWSKI
02/27/08 (S) TRANSMITTED TO (H)
02/27/08 (S) VERSION: SB 253
02/29/08 (H) READ THE FIRST TIME - REFERRALS
02/29/08 (H) STA, RES
03/05/08 (H) RES AT 2:00 PM BARNES 124
03/05/08 (H) -- MEETING CANCELED --
03/11/08 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
KEVIN FRALEY, General Manager
Print Works;
Owner Print Works Super Software, Inc.
Homer, Alaska
POSITION STATEMENT: Testified in opposition to HB 406.
PATRICK FOSTER, A.T. Publishing and Printing
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
406.
GAIL FENUMIAI, Director
Central Office
Division of Elections
Office of the Lieutenant Governor
POSITION STATEMENT: Answered questions during the hearing on HB
406.
VERN JONES, Chief Procurement Officer
Central Office
Division of General Services
Department of Administration
POSITION STATEMENT: Answered questions during the hearing on HB
406.
REPRESENTATIVE ANNA FAIRCLOUGH
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, made a request during the
hearing on HB 406.
REPRESENTATIVE BILL THOMAS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 396 as prime sponsor.
TIM JOYCE, Mayor
City of Cordova
Cordova, Alaska
POSITION STATEMENT: Testified on behalf of the City of Cordova
in support of HB 396.
PAUL D. KENDALL
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of himself during the
hearing on HB 396.
JERRY BURNETT, Director
Administrative Services Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
396.
ELLIE FITZJARRALD, Director
Division of Public Assistance
Department of Health and Social Services
Juneau, Alaska
POSITION STATEMENT: Responded to questions during the hearing
on HB 396.
JODY SIMPSON, Staff
Senator Charlie Huggins,
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced SB 253 on behalf of Senator
Huggins, prime sponsor.
ACTION NARRATIVE
VICE CHAIR BOB ROSES called the House State Affairs Standing
Committee meeting to order at 8:08:09 AM. Representatives
Coghill, Johnson, Gruenberg, Doll, and Roses were present at the
call to order. Representative Johansen arrived as the meeting
was in progress.
HB 406-COMPETITIVE BIDDING FOR BALLOT PREP
8:08:53 AM
VICE CHAIR ROSES announced that the first order of business was
HOUSE BILL NO. 406, "An Act relating to a requirement for
competitive bidding on contracts for the preparation of election
ballots."
[Before the committee as a work draft was the proposed committee
substitute (CS) for HB 406, Version 25-LS1487\C, Bullard,
2/28/08.]
8:11:53 AM
VICE CHAIR ROSES reopened public testimony [closed on 3/6/08].
8:12:56 AM
KEVIN FRALEY, General Manager, Print Works; Owner Print Works
Super Software, Inc., stated that he has printed the state's
ballots for the last three to four election cycles. He referred
to his written testimony [in the committee packet] and clarified
that he is not accusing anyone of impropriety. He stated, "I
don't have any kind of evidence to push an agenda like that. I
want to stand on my own record and my own quality and ... my own
passion for doing a good job with the election process."
MR. FRALEY said he feels that he is under attack, but recognizes
that that may be unfounded. He emphasized that his biggest
concern "is that we are talking about two vendors." He said the
company that did certifications no longer offers them. He said
the State of Alaska is going to have to come up with some kind
of certification process [printing ballots] "is not just putting
ink on paper." Mr. Fraley said there are many printers in the
state that have the ability to do the job; however, there needs
to be a process in place that keeps the printer under check to
make sure that these ballots are printed properly and that
accountability is taken into consideration. He offered an
example to describe the intensity of the accountability required
when printing ballots, noting that one ballot picked up and set
down accidentally in another pile can mean someone voting on a
ballot intended for another precinct.
8:16:17 AM
VICE CHAIR ROSES closed public testimony. He announced that he
would allow the committee to ask questions of Mr. Fraley, Mr.
Noblin, and Mr. Foster - the latter two having testified during
the 3/6/08 hearing on HB 406.
8:16:38 AM
REPRESENTATIVE GRUENBERG observed that in the committee packet
is one substantive letter, dated 3/3/08, from Mr. Fraley, and a
rebuttal letter from Mr. Foster, dated 3/7/08. He asked if
those two letters "are the main documents."
8:17:20 AM
MR. FRALEY confirmed that his letter expresses "his main
argument and concern in opposition to HB 406."
8:17:32 AM
PATRICK FOSTER, A.T. Publishing and Printing, stated that he
chose the format of a letter in which to address some of the
points in Mr. Fraley's letter.
8:17:53 AM
REPRESENTATIVE GRUENBERG said Mr. Fraley's main concern, as
expressed today, is in regard to the importance of quality. He
questioned if the consideration in choosing printers would be
limited only to cost if HB 406 were to pass, or if quality and
security would also be considerations.
8:18:30 AM
GAIL FENUMIAI, Director, Central Office, Division of Elections,
Office of the Lieutenant Governor, responded that the bill, as
written, would result in a bid that would be awarded strictly
based upon lowest cost.
REPRESENTATIVE GRUENBERG asked if that is the normal basis upon
which the state considers bids.
MS. FENUMIAI offered her understanding that there are a variety
of bidding processes, including an invitation to bid and request
for proposals (RFPs), both of which she said she believes allow
other factors of consideration to be made.
REPRESENTATIVE GRUENBERG asked, "But you believe this one does
not?"
MS. FENUMIAI replied that that's her understanding. In response
to a follow-up question from Representative Gruenberg, she said
she has not ascertained a legal opinion from the assistant
attorney general regarding this matter; however, she said the
division has consulted with Vern Jones, the chief procurement
officer for the state, who she said "offered testimony to that
effect at the last committee hearing."
8:20:02 AM
VERN JONES, Chief Procurement Officer, Central Office, Division
of General Services, Department of Administration, stated that
when the department uses the term, "bids," it means a situation
in which it offers specifications, and the responsible bidder
that meets those specifications and responds with the lowest
price is the winner. He said typically when the department
wants to evaluate quality and other factors in addition to
price, it uses either competitive sealed proposals or RFPs. He
concluded, "My reading of this is that it does say competitive
bids, and to us that means low bids award."
8:20:51 AM
REPRESENTATIVE GRUENBERG directed attention to page 4, line 6,
of Version C, which specifies "the lowest responsible and
responsive bidder". He asked Mr. Jones if, after reviewing that
language, his answer remains the same or changes.
MR. JONES responded that he would maintain his answer.
REPRESENTATIVE GRUENBERG asked what language Mr. Jones would
suggest to ensure that the division could consider the
[printer's] ability to perform in a satisfactory manner, rather
than choosing a printer based solely on cost.
MR. JONES suggested that the words "competitive bids", on page
2, line 2, of Version M, could be changed to "competition".
VICE CHAIR ROSES offered his understanding that Representative
Johnson had discussed possible language to address this issue at
the last hearing of HB 406, and an amendment would be
forthcoming.
8:22:48 AM
REPRESENTATIVE JOHNSON asked Mr. Jones, "If we were to bring you
under the procurement code, would that allow you to do the RFP
and ... stretch it that way, or would we need to put in this
bill that it would be by RFP?"
MR. JONES answered, "That would certainly allow us to do RFPs
and proposals if this were subject to the procurement code. It
would be a choice at that point." In response to a follow-up
question from Representative Johnson, he explained that
subjecting the service to the procurement code would open up a
number of possibilities. He expounded:
It could be done via bid, where ... the division would
specify as they needed and award based on lowest
price. They could offer a request for proposals, in
which they could set a number of criteria for quality
and experience and qualifications and certification
and so on, in addition to price. The procurement code
... also has alternate procurement types in there:
single source, emergency, limited competition ....
There are small procurements; if any of these jobs
were to be under $50,000, it could be done under small
procurements, which would be essentially getting
quotes or informal proposals.
8:24:42 AM
REPRESENTATIVE JOHNSON said he wants to "open it up to
competitive bidding," but also wants a timing that will ensure
quality. He asked if inserting language to the title regarding
having bids every five years and adding a new section that would
bring the process in the procurement code would still allow for
a sole source contract under the procurement code.
MR. JONES responded:
I'm not sure what changing the title would be.
Subjecting the service to the procurement code could
potentially result in an alternate procurement
situation, depending on the circumstances. If clearly
the intent was spelled out somewhere that it would be
competed, I'm sure that the division would follow that
direction.
8:26:11 AM
REPRESENTATIVE GRUENBERG said the suggestions for amending the
bill, made by Representative Johnson, are complex, and he would
like to see a written amendment.
REPRESENTATIVE JOHNSON suggested making the changes
conceptually.
8:27:28 AM
REPRESENTATIVE ANNA FAIRCLOUGH, Alaska State Legislature, as
prime sponsor of HB 406, expressed her wish that the committee
hold the bill and hear it at its next meeting to give her time
to work on the bill language with an attorney. She explained
that she had contacted the Division of Elections, as well as the
Office of the Lieutenant Governor, and was told explicitly "that
they needed to be left out of the procurement code, and that's
why this is written how it is." She said she would be happy to
ensure "that we're under competitive bid and under the
procurement code," and she thinks it is appropriate to have a
five-year contract period, "with a possible renewal period for
good conduct." Representative Fairclough said the bill would
create AS 15.15.031, which would ensure that an Alaska printer
gets the job, and she would want to secure that guarantee should
the entire Section 15.15.031 be deleted from the bill.
REPRESENTATIVE FAIRCLOUGH said she spoke at length with Mr.
Fraley, who raises some valid points. However, she stated, "His
company competes in Anchorage already for the same vote." She
said she respects that Mr. Fraley is protecting an asset that he
has developed, but it is possible to compete for bids with the
State of Alaska. Representative Fairclough said she understands
that Mr. Fraley has done an exceptional job in responding to the
State of Alaska in all aspects of his performance, and she
respects that and applauds it; however, she stated her belief
that "that same expectation should be set for all who would want
to enter into this process and understand that accountability."
REPRESENTATIVE FAIRCLOUGH asked the committee members to let her
know any other concerns they may have before she talks to
"procurement," so that she can meet those expectations.
REPRESENTATIVE ROSES said he would hear HB 406 another day to
give Representative Fairclough the time she requested. He asked
committee members to continue with their line of questioning.
8:30:15 AM
REPRESENTATIVE COGHILL suggested that there may be issues of
timing under the procurement code. He mentioned process issues
that "may be more complex than you can do under this." He
suggested an RFP in relation to Section 15.15.031. He said, "It
would be more directive, and then kind of takes the [Office of
the] Lieutenant Governor ... out of the hot seat with regard to
having to make choices." He said bidding [for ballot printing]
is probably quite different than any other bidding issues in the
state because of the timing involved.
8:31:03 AM
REPRESENTATIVE DOLL said she is interested in finding out what
the additional costs in doing an RFP might be, including the
time to put together the RFP and the additional staff that may
be needed.
8:32:31 AM
MR. JONES responded to a question from Representative Johansen
as follows:
If this were subject to the procurement code, single
source procurement requests over $50,000 go to the
chief procurement officer, so I would be making that
decision. However, I believe that the situation
that's gone on before, if it were subject to the
procurement code, could not stand. I don't know any
basis to be able to make a determination under the
procurement code that this qualifies as a single
source procurement. I think obviously the only reason
that it's been able to be awarded the way it is, is
because it's not been subject to the procurement code.
So, I don't see a basis sitting here for making a ...
single source award for a service like this when there
are numerous companies capable of performing.
REPRESENTATIVE JOHANSEN asked for clarification that Mr. Jones
meant that "you couldn't just simply decide that this company
was going to get it, because of the rules of the procurement
code."
MR. JONES said the decision would be that of the chief
procurement officer, but it would have to be supported by
factual evidence that documents and proves that the competitive
sealed bidding or proposal process is not practical and award to
a single, individual firm is in the state's best interests. He
stated, "And, at least from what I've seen, I doubt that I'd be
able to make those two determinations ... to satisfy the
statute."
8:34:44 AM
REPRESENTATIVE GRUENBERG directed attention to the second to
last paragraph of the second page of a letter in the committee
packet, written by Mr. Fraley, [dated 3/3/08], which read:
The bottom line is that there are two certified
printers in the state of Alaska to print AccuVote
ballots. Premier Election Solutions is no longer
certifying any new vendors for ballot printing.
Passage of HB 406 will remove control from the
Division of Elections for the sake of one vendor.
REPRESENTATIVE GRUENBERG then directed attention to a
corresponding rebuttal from Mr. Foster, [dated 3/7/08 and
included in the committee packet], which read as follows
[original punctuation provided]:
This means only that Diebold no longer is taking $5000
from Alaskan printing companies wanting to print
ballots. Now, all companies can participate in the
process, not just two of us. There is available an
email statement from Premier Elections Solutions that
they are out of the business of certifying, but are
willing to work with individual state's desiring some
form of printing certification. They recognize the
printing of ballots requires much more than simple ink
on paper.
REPRESENTATIVE GRUENBERG explained that he had read the excerpts
as clarification for Mr. Fraley, and he asked Mr. Fraley if Mr.
Foster is correct.
MR. FRALEY said although the question is a difficult one to
answer, he would have to "lean towards 'no.'" He said he spoke
with Premier Elections Solutions yesterday "to clarify that
statement." He continued:
They did specifically work with the State of
California to develop a certification process for
printers in California. They would be willing, if the
state was to pay a contract to Premier Elections
Solutions, to develop some sort of certification
process for printers in the state of Alaska.
My argument is that in order for this bill to be
useable in the way it's written, that process would
have to be sorted out so that there is some kind of a
certification system and a [qualifying] on a yearly or
every-five-years basis. ... Until more printers are
certified, we are still talking about two printers.
REPRESENTATIVE GRUENBERG asked Mr. Foster if he would like to
respond.
8:38:52 AM
MR. FOSTER noted he had spoken with Michael Lindroos of Premier
Elections Solutions. He said the company provides ballot
readers for "20-some states," and California is the only state
with which the company worked on an agreement. He stated, "I do
believe that Mr. Fraley's right that some ... form of
certification is required, because not just any printer can do
the ballots. But I do know that it's a simple process to be
worked out." He said it may involve a contract or working with
Diebold; however, he said Diebold does not sound too interested
in certifying individual printers.
8:40:16 AM
MR. FOSTER, in response to a question from Representative
Johnson, said some states print their state ballots at a county
level. Some counties have the authority to single source their
printing, while some "go to competitive bid." But by and large,
he stated, a vast majority of states do have a competitive
bidding process.
REPRESENTATIVE DOLL asked if Diebold is the sole source for
purchasing voting machines.
8:41:20 AM
MS. FENUMIAI said Diebold is the only provider of the AccuVote
optical scan voting machine used by the State of Alaska.
REPRESENTATIVE DOLL asked what role Diebold plays in
certification.
MS. FENUMIAI said she is not familiar with the certification
process for printers. She indicated that the software,
hardware, and firmware that is used in the Diebold machines are
certified at a federal level.
VICE CHAIR ROSES proffered, "And that's for the machines
themselves, but not the printing of the ballots; those are two
separate issues."
MS. FENUMIAI answered that's correct.
8:42:44 AM
REPRESENTATIVE FAIRCLOUGH, in response to a request for
clarification from Representative Gruenberg, said that after
speaking with Mr. Fraley, she learned that the State of Alaska
was sold hardware and told at the time of the purchase that
"Diebold at the time, now Premier Elections [Solutions]" would
provide a certification process for the machines and for the
printers in the state of Alaska. However, since the transaction
was made, the company has shut down its certification process
for the state's printers. She stated her intention to call the
company to find out if the state will now have to "pick up a
certification process as an expense." Representative Fairclough
opined that just because the state was sold "a past bill of
goods that is inappropriate," that does not mean there should be
no competition in the process.
REPRESENTATIVE FAIRCLOUGH said she is not advocating for Mr.
Fraley to lose his bid or for the other certified printer in the
state to get the bid; what she is saying is that there should be
competition. She stated her belief that the sole reason for
[selecting a printer] should not be based on the lowest bid.
She said she believes in quality assurance, but does not agree
that the state should now stay with one person because that's
the only person who qualified under a certification process that
is no longer available. She said she has discussed the matter
with Mr. Fraley extensively and thinks his company has done a
remarkable job; however, "when one person only has a product to
sell, it can become expensive over time." Representative
Fairclough said Mr. Fraley has convinced her that during the
course of time in which he has printed ballots for the State of
Alaska, he has not increased his bid.
REPRESENTATIVE FAIRCLOUGH stated that without certification
available to other printers, the State of Alaska could be "at a
disadvantage in receiving a fair price for the citizens of
Alaska." She said she does not mean her remarks to be
disparaging. She remarked that [Mr. Fraley] has spoken well to
"all of the issues that are there," but she does not "buy into
fear factor when it comes to capitalism." She said she wants
Alaska to get a fair return for its money. She related that Mr.
Fraley had told her his belief is that "there was liability with
that certification process," and she said she does not want to
expose the state to that liability. She said she would research
for the facts related to this matter.
8:46:31 AM
MR. FRALEY confirmed that a representative of Premier Elections
[Solutions] told him yesterday that the reason the company
stopped its certification process was because of liability. He
said the problem specifically was that printers were lowering
their standards and "they were becoming frustrated with the need
to recertify because of the quality standards that were being
ignored." He said one area of certification relates to a
requirement to meet certain ink and registration specifications.
He explained that means that an image must be printed in a
certain location on the ballot on the front and back, because
both sides are scanned simultaneously and the image has to line
up perfectly. Another area of certification is the cutting of
the ballots. The quality of the ballot and the machinery is
what is certified.
8:48:14 AM
REPRESENTATIVE FAIRCLOUGH, in response to a remark by
Representative Johnson, concurred that the attorney general
should be involved if Alaska does not have support for a system
in which it has invested.
8:48:42 AM
REPRESENTATIVE GRUENBERG said he thinks this problem is
solvable, and he hopes the committee will allow Representative
Fairclough to proceed as she has suggested rather than offering
the conceptual amendment previously discussed by Representative
Johnson [but not offered].
REPRESENTATIVE JOHNSON said he would not move to adopt an
amendment today in deference to the bill sponsor.
VICE CHAIR ROSES announced that HB 406 was heard and held.
HB 396-INCREASE 2008 PERM. FUND DIVIDEND
8:49:53 AM
VICE CHAIR ROSES announced that the next order of business was
HOUSE BILL NO. 396, "An Act relating to and increasing the
amount of the 2008 permanent fund dividend; and providing for an
effective date."
8:50:49 AM
REPRESENTATIVE BILL THOMAS, Alaska State Legislature, presented
HB 396 as prime sponsor. He paraphrased the first paragraph of
the sponsor statement, which read as follows:
The high cost of fuel is affecting everyone, and it is
hitting Alaska particularly hard. Our state
contributes a significant amount of natural resources
to the nation, yet we still pay some of the highest
prices for fuel. Soaring fuel costs translate into
high prices for groceries, building materials, and all
other goods. Families are being forced to chose
between putting gas in their vehicles or food in their
mouths. If these kinds of hardships continue without
relief, it will force many families to leave the state
for a lower cost of living.
REPRESENTATIVE THOMAS noted as a point of reference that the
cost of electricity in Haines ranges from 22 to 58 cents per
kilowatt, while the cost is 8.5 cents in Juneau and 8 cents in
Anchorage and Wrangell. He pointed out that there is a handout
in the committee packet showing the cost of gas around the
state.
8:52:58 AM
REPRESENTATIVE THOMAS said the proposed bill would treat
everyone, rich or poor, equally, [by increasing the amount of
the 2008 permanent fund dividend (PFD) check by $500 per
recipient]. He said the price of oil is currently $107 dollars
a barrel, and at 700,000 barrels, massive amounts of money are
going into the state's coffers, up to $3.6 billion in savings.
Some of that savings should be shared with the people of Alaska,
he opined.
REPRESENTATIVE THOMAS said the Alaska's Clear and Equitable
Share (ACES) bill read, "It is the intent of the legislature
that the legislature will responsibly invest the amount received
after December 31, 2007, as a result of this enactment of this
Act that exceeds the amount that would have been received." He
said the language in that bill lists intended appropriations,
including "statewide energy needs of Alaskans to assist with
grave, rising energy costs." He stated, "I have not seen a bill
around that addresses that equally to everybody."
8:55:53 AM
TIM JOYCE, Mayor, City of Cordova, testified in support of HB
396. He echoed the bill sponsor's statement that energy costs
are becoming a major expense for families in Alaska today, far
outstripping inflation in the state. He listed the following
prices in Cordova: propane, $4.10 a gallon; fuel oil for home
heating, as of 3/7/08, $4.38 a gallon; stove oil used in certain
furnaces for home heating, $4.49 a gallon; gasoline, $4.43 a
gallon; and Mr. Joyce's own electric bill for one month, $218
for 667 kilowatts of energy. He said it is difficult to make
compensation for the price of energy when it rises so rapidly.
8:58:31 AM
VICE CHAIR ROSES noted that the next person to testify, Paul D.
Kendall, had sent numerous pages of information to the committee
by facsimile, and he asked Mr. Kendall to focus on his position
regarding the PFD and "what that $500 would look like."
8:59:06 AM
PAUL D. KENDALL, stated that he is concerned that the
legislature and the general public is not aware of what is
happening behind the scenes with "some of these companies." He
spoke of a full-page advertisement placed by BP to build the
first hydrogen power station in Scotland, which would serve
250,000 homes, and he said there is no reason that that could
not be built in Alaska. He emphasized the importance of
ensuring that future generations will be aware of and involved
in state of the art [energy sources].
MR. KENDALL said, as stated in his letter [dated 3/10/08], that
he would favor the money [proposed through HB 396], but
indicated that he would like to see it spent in "some smart
way." He listed some examples, such as: the Susitna Dam
Project, Tom Staudenmiers' all-Alaskan owned "Grid Network
Consolidation proposal," weatherization and conservation
outlays, and rural energy subsidies. He stated, "When you look
at all of these things combined, energy is so large I just don't
see how you cannot address this in some [Alaska Gasline
Inducement Act] (AGIA)-type hearing, where everybody comes on
board as quickly as possible. I think time is of the essence
here."
9:01:10 AM
MR. KENDALL said the projected number of PFD checks for 2007 is
604,149, and, multiplied by $500 each, the total cost would be
approximately $300 million. Continued for a three-year period,
the amount would be about a billion dollars. He said most
people don't realize that out of an entire energy bill, only 11-
15 percent is applied to distribution costs, while 65-80 percent
of it goes to the feed stock provider, which Mr. Kendall posited
"provides no incentive for them to be taken into account or for
the political leaders to plan for the energy which I think has
to have a new direction."
MR. KENDALL said [the proposed legislation] is well-intended,
but indicated that he has another suggestion. He stated that a
properly functioning free enterprise system is supposed to
adjust itself by natural market means in the commercial,
institutional, industrial, and military application. He
explained his concern is that there is no way for a single
family home to absorb those costs. He talked about the factors
that negatively affect society.
MR. KENDALL suggested that the state could use the
aforementioned $300 million to "put in enough megawatts" to
serve somewhere in the area of 150,000 homes with electricity
for 25 years. He asked that the committee carefully weigh how
it chooses to spend its funds. Mr. Kendall said he would like
to see a discussion take place comparable to that which occurred
during consideration of AGIA, where "everybody is sworn in and
testifies." He emphasized the importance of dealing with the
issue of energy.
Mr. KENDALL said if the legislature does decide to pass HB 369
and "disperse the $500," he would like to see check-off boxes at
the bottom [of the PFD application] asking everyone if he/she
would like to give that money to another cause, and, if so, how
much? He indicated that he would give his $500 toward the
purchase of one of many energy products. If 1,000 PFD
applicants did the same, he said, that would be a half million
dollars. He outlined other details of his vision to create a
people's co-op of some type, allow remote villagers to apply for
a [wind] turban, and apply the energy only to the single family
home, which Mr. Kendall characterized as "the foundation of all
of our society." He continued:
It's the home and the rental. Everything that you
have, ladies and gentleman - everything - comes from
those two structures; they are the foundations of all
society. And before you can get to that, you have to
have the air, ... water, and energy. So, the energy
is, in essence, a fundamental erosion of that which
begets you everything else. Those oil companies
cannot sell the oil, without having a society which
represents thousands of communities like ours. It is
on that on which they bring these huge increases, so
you have to stop that assault right now.
MR. KENDALL offered to send more information to the committee
pertaining to alternative energy sources. He concluded, "If you
address this issue, you, ladies and gentlemen, will portend the
next structure of the next society which is going to come one
way or another."
9:06:41 AM
REPRESENTATIVE THOMAS related that there is an energy bill
currently before the Senate Finance Committee, which proposes
the renewable energy that Mr. Kendall is promoting.
9:07:36 AM
VICE CHAIR ROSES closed public testimony.
9:07:51 AM
REPRESENTATIVE THOMAS reminded the committee that HB 396 is a
one-year, one-time bill. He said, "Hopefully we'll find a
permanent solution that will treat everybody equitably." In
response to a question from Representative Coghill, he confirmed
that it is not his intention to create an additional dividend
every year.
REPRESENTATIVE COGHILL warned there is always a danger in
offering something like this once, then finding it difficult not
to do it again.
9:09:10 AM
REPRESENTATIVE GRUENBERG pointed out a typographical error - an
incomplete sentence - in the analysis portion of the fiscal note
prepared by the Permanent Fund Dividend Division, dated 3/3/08.
9:09:59 AM
JERRY BURNETT, Director, Administrative Services Division,
Department of Revenue, in response to Representative Coghill,
said the department believes that the appropriation required for
HB 396 would be $305 million.
REPRESENTATIVE COGHILL asked Mr. Burnett how much the permanent
fund earned and what is now available for appropriation from
those earnings.
MR. BURNETT responded:
I don't have the exact numbers with me. [The] last
financial statement I looked at ... was ... somewhere
around the $4 billion range there. The realized
earnings, which [are] what the dividend is calculated
on, were - from ... July 1, 2007, through January 31,
2008 - about $2.2 billion.
REPRESENTATIVE COGHILL explained that he is trying to figure out
the annual earnings compared to the amount available for
appropriation - "what that $300 million-plus is going to leave
as a whole there." He mentioned inflation-proofing and the PFD,
and he asked Mr. Burnett to help him understand "in big chunks,
what that looks like."
MR. BURNETT replied that "in big chunks," regular dividends are
approximately $1 billion this year, based on likely
calculations; realized earnings are, year-to-date, in excess of
$2 billion; and the earnings reserve is in the neighborhood of
$4 billion. He added, "So, I don't think this has any effect;
it should not create a concern at this point." He explained,
"Even though market earnings are down, realized earnings are not
down, necessarily, ... and that's where you get your earnings
reserve and your ability to pay dividends."
REPRESENTATIVE COGHILL said, "Normally, we are depositing money
into the fund on a consistent basis for inflation proofing." He
offered his understanding that "normally that's short of a
billion dollars."
MR. BURNETT said he does not know what the amount will be this
year, but it will be based upon inflation and will probably be
in excess of $1 billion.
9:12:43 AM
REPRESENTATIVE JOHNSON said he knows there is a calculation by
which the PFD is figured out, and he asked how the $305 million
appropriation would affect future dividends.
MR. BURNETT responded that what the future earnings will be is
unknown, but paying a larger dividend this year would have an
effect on all future dividends. The effect to each dividend
would be in the $10-$20 range, he estimated.
9:14:10 AM
VICE CHAIR ROSES asked Mr. Burnett to confirm that a one-time
increase in the amount of the PFD, if sourced from surplus money
deposited once to the permanent fund in the amount of $305
million, would have no effect on future dividends.
MR. BURNETT confirmed that's correct.
9:15:25 AM
REPRESENTATIVE COGHILL referred to [the analysis section of the
fiscal note prepared by Ellie Fitzjarrald, Director, Public
Assistance, dated 3/3/08], which read as follows:
This legislation increases the 2008 Permanent Fund
Dividend by $500 in recognition of the recent increase
in energy costs. The additional $500 payment will be
funded by transfers from the earnings reserve account
to the dividend fund.
The Food Stamp, Social Security Supplemental Income
(SSI), and Adult Public Assistance (APA) programs
count the Permanent Fund Dividend (PFD) as income in
determining whether a person or household qualifies
for benefits. PFD money that is not spent and is kept
after the month of receipt is also considered an
available asset (cash on hand or money in the bank)
for program applicants.
REPRESENTATIVE COGHILL asked, "Are all of those in the hold
harmless, or only part of them?"
ELLIE FITZJARRALD, Director, Division of Public Assistance,
Department of Health and Social Services, responded as follows:
People who receive Adult Public Assistance and [Social
Security Supplemental Income] (SSI) are also held
harmless, but the permanent fund dividends have been
high enough in the last few years that all of their
benefits are hold harmless. So, this additional $500
payment, the one time for this fiscal year, would not
add additional hold harmless expenditures to them,
because ... the PFDs are high enough that they're
already put on the hold harmless program.
REPRESENTATIVE COGHILL said the cost is picked up by the state
"for the hold harmless." He asked, "So, what would be the
anticipated level under this condition?"
MS. FITZ explained as follows:
What happens is that their benefits that are currently
general fund are replaced with the hold harmless
benefit that is paid for with the ... earnings of the
permanent fund; so, it's that special appropriation in
statute. ... So, there is no additional general fund
cost or savings, if that's what you're asking.
REPRESENTATIVE COGHILL responded:
But there is a cost to the permanent fund earnings,
and so, help me understand what that is. Because
we're going to give them $500, and what is the
underside of that? Because we're going to make up the
social service benefits with permanent fund earnings
money. And so, what I'm trying to see is $500, plus
what?
MS. FITZJARRALD stated:
Our annual permanent fund hold harmless expenditures
are about $12 million for all programs. The reason
this fiscal note only ... adds costs for the Food
Stamp program is because the ... majority of
expenditures are on the Adult Public Assistance and
people who are receiving Social Security Supplemental
[Income] Benefits .... That hold harmless benefit
that they get is already in that $12 million that we
have budgeted for hold harmless. This one-time
payment isn't going to add a new hold harmless
expenditure for them; we're already replacing their
benefit. ... The maximum income a person on SSI can
have is $640, and then when you add the Adult Public
Assistance of about $300 - some receive a little more,
some a little less - it's about $962 a month, the
maximum amount of income somebody on APA can have.
So, since the PFDs have been lots higher than $962 a
month, we're replacing their benefit already. So,
this bill does not affect those expenditures at all,
because we're already giving them a hold harmless
benefit, because their PFDs are high enough that we
have to replace it entirely now.
REPRESENTATIVE COGHILL offered his understanding that the
aforementioned $12 million is what it takes to pay the federal
government back. He estimated that would equal approximately
$3-$4 off of each Alaskan's PFD check.
MS. FITZJARRALD suggested that Mr. Burnett could answer
questions regarding the amount of each PFD that goes towards the
payment of the hold harmless expenditures. She related that
those expenditures have significantly reduced the caseload for
the "temporary assistance families."
9:20:22 AM
REPRESENTATIVE DOLL said she does not favor a discretionary
fund. She stated that she would rather see the money go to
those who really need it rather than across the board.
9:21:22 AM
REPRESENTATIVE COGHILL said the need is there; people on fixed
incomes are enduring huge pressure these days. Some people may
misuse the proposed $500 boost to their PFD check, but those in
duress would not, he predicted. He commented that handing out
money to everyone could increase the money coming back into
communities; however, he stated that it is true that a shot in
the arm makes people think things are better than they actually
are. He stated, "At this point, with all the bills in play in
this legislature, I think this is one solution that needs to
move forward."
9:23:59 AM
REPRESENTATIVE GRUENBERG said both previous speakers have
expressed some of his concerns. He noted that during a
community council meeting in his district, several people asked
about the bill, and he thinks the idea of getting an extra $500
is a popular one. However, he stated, "Cracking open the egg is
hard once the egg is cracked."
9:25:20 AM
REPRESENTATIVE JOHANSEN echoed the sentiment of Representatives
Coghill and Gruenberg that "once this gets out" there is the
possibility that the legislature could lose control over the
appropriation. He said he thinks there are other programs
through which the legislature can appropriate money to help
those in need. Furthermore, the money could be used to support
"facilities that will take care of the cost of energy
permanently." He said he would not hold up the bill, but he
expressed concern about writing checks to people 50 years down
the road for those who cannot afford energy, when the problem
could have been addressed now.
9:27:20 AM
REPRESENTATIVE JOHNSON concurred with Representative Coghill
that the bill should pass out of committee to "be part of the
discussion" and "part of the mix"; however, he expressed concern
that voting raises for citizens is "just the first step to the
downfall of democracy."
9:28:14 AM
REPRESENTATIVE COGHILL said there are several things he thinks
the committee needs to keep in mind: First, a big chunk of the
state's money comes from the oil industry, and the permanent
fund has been a success story of how to turn a nonrenewable
source into a renewable one. Next, he said the amount of money
going to the needy of Alaska through Welfare and health care has
"crested $2 billion" since he has served in the legislature.
The number of the recipients of that money "fall[s] short of
200,000." He said there could be an argument that by giving the
people of Alaska an extra $500 each, the legislature could be
"subsidizing the things that we want to stop." Also, he said
paying out $500 could open a discussion of whether or not the
earnings of the permanent fund should "ever only be used for
personal income uses." He warned that there could be federal
problems on taxation. Last, he said the legislature is
significantly "matching" a low-income heating assistance program
from the federal government, which is a huge benefit.
REPRESENTATIVE COGHILL clarified that he had said the bill
should go forward to put pressure on the legislature to
determine if it will take care of those with the greatest need
first. He said this issue needs to propel the discussion of
"hydro issues," because if hydro power can be delivered to
greater portions of Alaska, everybody in the state will benefit.
He said the legislature has tried to "equalize out some of those
things through several state programs," but must invest in
lower-cost energy in the state. He reiterated that although
giving $500 would be like giving a man a fish instead of
teaching him to fish, it would be a shame for the legislature to
sit on $4 million and make no investment. He said he would like
to see discussion of HB 396 push forward the discussion of the
previously mentioned alternative energy bill currently in the
Senate Finance Committee.
9:32:34 AM
REPRESENTATIVE COGHILL moved to report HB 396 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 396 was reported out of the
House State Affairs Standing Committee.
SB 253-MEMBERS OF THE BOARD OF GAME
9:32:47 AM
VICE CHAIR ROSES announced that the last order of business was
SENATE BILL NO. 253, "An Act relating to the appointment of
members of the Board of Game; and providing for an effective
date."
9:33:09 AM
JODY SIMPSON, Staff, Senator Charlie Huggins, Alaska State
Legislature, introduced SB 253 on behalf of Senator Huggins,
prime sponsor. She said the bill, if enacted, would change the
expiration date for the terms for members of the Alaska Board of
Game from March 1 to June 30. She said the statute change will
accomplish the following: prevent problems that arise from the
short time frame for newly appointed board members to prepare
for the large regulatory board meetings that occur near the
beginning of March, annually; reduce confusion among the public
regarding which board member to contact on issues; clarify a
time by which appointments to the board should be made; and
bring the terms in line with those of the Alaska Board of
Fisheries.
MS. SIMPSON said the proposed change will also void problems
resulting from having two or three of the seven board members
serve in an unconfirmed status during the March meeting each
year. She stated, "Few members are aware their March meeting
voting record will be examined during their legislative
confirmation hearing, and there can be undue scrutiny on a
single vote instead of a voting record in overall
qualifications." She stated that the proposed adjustment in the
term expiration date recognizes the importance of the Alaska
Board of Game and the complexity of the issues that come before
it.
9:35:42 AM
REPRESENTATIVE GRUENBERG moved to report SB 253 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, SB 253 was reported out of the
House State Affairs Standing Committee.
9:36:14 AM
VICE CHAIR ROSES announced the upcoming committee calendar.
REPRESENTATIVE JOHANSEN announced an upcoming meeting for the
subcommittee addressing bill's related to conflict of interest.
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at
9:37:38 AM.
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