Legislature(1995 - 1996)

03/26/1996 08:05 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
             HOUSE STATE AFFAIRS STANDING COMMITTEE                            
                         March 26, 1996                                        
                           8:05 a.m.                                           
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Jeannette James, Chair                                         
 Representative Scott Ogan, Vice Chair                                         
 Representative Joe Green                                                      
 Representative Ivan Ivan                                                      
 Representative Brian Porter                                                   
 Representative Caren Robinson                                                 
 Representative Ed Willis                                                      
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 All members present.                                                          
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 HOUSE BILL NO. 345                                                            
 "An Act relating to the procurement of investment and brokerage               
 services by the Alaska State Pension Investment Board."                       
                                                                               
      - PASSED CSHB 345(STA) OUT OF COMMITTEE                                  
                                                                               
 HOUSE BILL NO. 383                                                            
 "An Act relating to reimbursement by the state to municipalities              
 and certain established villages for services provided to                     
 individuals incapacitated by alcohol; and providing for an                    
 effective date."                                                              
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 HOUSE BILL NO. 371                                                            
 "An Act relating to the rights of terminally ill persons."                    
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 HOUSE JOINT RESOLUTION NO. 47                                                 
 Supporting continued funding of the Alaska National Guard Youth               
 Corps Challenge Program.                                                      
                                                                               
      - PASSED CSHJR 47(STA) OUT OF COMMITTEE                                  
                                                                               
 HOUSE BILL NO. 546                                                            
 "An Act providing for and relating to the issuance of general                 
 obligation bonds in the amount of $600,211,000 for the purpose of             
 paying the cost of acquiring, constructing, reconstructing, and               
 equipping public schools and of repair and major maintenance of               
 public school and University of Alaska facilities; and providing              
 for an effective date."                                                       
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 (* First public hearing)                                                      
                                                                               
 PREVIOUS ACTION                                                               
                                                                               
 BILL:  HB 345                                                               
 SHORT TITLE: PENSION INVESTMENT BOARD PROCUREMENTS                            
 SPONSOR(S): REPRESENTATIVE(S) FOSTER, Ivan                                    
                                                                               
 JRN-DATE      JRN-PG            ACTION                                        
 05/10/95      2088    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 05/10/95      2088    (H)   STATE AFFAIRS, L&C, FINANCE                       
 03/21/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 03/21/96      3259    (H)   COSPONSOR(S): IVAN                                
 03/26/96              (H)   STA AT  8:00 AM CAPITOL 102                       
                                                                               
 BILL:  HB 383                                                               
 SHORT TITLE: REIMBURSE FOR LOCAL SERVICE TO INEBRIATES                        
 SPONSOR(S): REPRESENTATIVE(S) IVAN, Brown, Elton, Nicholia                    
                                                                               
 JRN-DATE      JRN-PG            ACTION                                        
 12/29/95      2366    (H)   PREFILE RELEASED                                  
 01/08/96      2366    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/08/96      2366    (H)   CRA, STATE AFFAIRS, FINANCE                       
 01/16/96              (H)   CRA AT  1:00 PM CAPITOL 124                       
 01/16/96              (H)   MINUTE(CRA)                                       
 01/23/96              (H)   CRA AT  4:00 PM CAPITOL 124                       
 01/23/96              (H)   MINUTE(CRA)                                       
 01/25/96              (H)   CRA AT  1:00 PM CAPITOL 124                       
 01/25/96              (H)   MINUTE(CRA)                                       
 02/21/96      2846    (H)   COSPONSOR(S): BROWN                               
 02/22/96              (H)   CRA AT  1:00 PM CAPITOL 124                       
 02/22/96              (H)   MINUTE(CRA)                                       
 02/27/96              (H)   CRA AT  1:00 PM CAPITOL 124                       
 02/27/96              (H)   MINUTE(CRA)                                       
 02/28/96      2907    (H)   CRA RPT  CS(CRA) NT 3DP 2DNP 1NR                  
 02/28/96      2908    (H)   DP: ELTON, NICHOLIA, IVAN                         
 02/28/96      2908    (H)   DNP: VEZEY, KOTT                                  
 02/28/96      2908    (H)   NR: AUSTERMAN                                     
 02/28/96      2908    (H)   2 FISCAL NOTES (REV, DCRA)                        
 02/28/96      2908    (H)   ZERO FISCAL NOTE (DHSS)                           
 02/28/96      2908    (H)   REFERRED TO STATE AFFAIRS                         
 02/28/96      2944    (H)   COSPONSOR(S): ELTON                               
 03/12/96      3100    (H)   COSPONSOR(S): NICHOLIA                            
 03/19/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 03/19/96              (H)   MINUTE(STA)                                       
 03/21/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 03/21/96              (H)   MINUTE(STA)                                       
 03/26/96              (H)   STA AT  8:00 AM CAPITOL 102                       
                                                                               
 BILL:  HB 371                                                               
 SHORT TITLE: RIGHTS OF TERMINALLY ILL PERSONS                                 
 SPONSOR(S): REPRESENTATIVE(S) BROWN, TOOHEY, Finkelstein, Davies              
                                                                               
 JRN-DATE      JRN-PG            ACTION                                        
 12/29/95      2363    (H)   PREFILE RELEASED                                  
 01/08/96      2363    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/08/96      2363    (H)   HES, STATE AFFAIRS, JUDICIARY                     
 02/06/96              (H)   HES AT  3:00 PM CAPITOL 106                       
 02/06/96              (H)   MINUTE(HES)                                       
 02/13/96              (H)   HES AT  3:00 PM CAPITOL 106                       
 02/13/96              (H)   MINUTE(HES)                                       
 02/20/96              (H)   HES AT  3:00 PM CAPITOL 106                       
 02/20/96              (H)   MINUTE(HES)                                       
 02/21/96      2827    (H)   HES RPT  CS(HES) 1DP 2DNP 3NR                     
 02/21/96      2827    (H)   DP: TOOHEY                                        
 02/21/96      2827    (H)   DNP: G.DAVIS, ROKEBERG                            
 02/21/96      2827    (H)   NR: BUNDE, ROBINSON, BRICE                        
 02/21/96      2827    (H)   2 FISCAL NOTES (2-DHSS)                           
 02/21/96      2827    (H)   REFERRED TO STATE AFFAIRS                         
 03/19/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 03/19/96              (H)   MINUTE(STA)                                       
 03/21/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 03/21/96              (H)   MINUTE(STA)                                       
 03/26/96              (H)   STA AT  8:00 AM CAPITOL 102                       
                                                                               
 BILL:  HJR 47                                                               
 SHORT TITLE: AK NAT'L GUARD YOUTH CORPS CHALLENGE PROG                        
 SPONSOR(S): REPRESENTATIVE(S) BRICE, Mulder, Willis, Rokeberg,                
 James                                                                         
                                                                               
 JRN-DATE      JRN-PG            ACTION                                        
 04/28/95      1632    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 04/28/95      1632    (H)   MLV, STATE AFFAIRS, FINANCE                       
 05/01/95      1718    (H)   COSPONSOR(S): WILLIS                              
 01/22/96      2511    (H)   COSPONSOR(S):  ROKEBERG                           
 02/14/96              (H)   MLV AT  5:00 PM CAPITOL 17                        
 02/14/96              (H)   MINUTE(MLV)                                       
 02/15/96      2774    (H)   MLV RPT  CS(MLV) 6DP                              
 02/15/96      2774    (H)   DP: WILLIS, MULDER, FOSTER, IVAN, KOTT            
 02/15/96      2774    (H)   DP: DAVIES                                        
 02/15/96      2774    (H)   ZERO FISCAL NOTE (GOV)                            
 03/18/96      3186    (H)   COSPONSOR(S): JAMES                               
 03/21/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 03/21/96              (H)   MINUTE(STA)                                       
 03/23/96              (H)   STA AT 10:00 AM CAPITOL 102                       
 03/23/96              (H)   MINUTE(STA)                                       
 03/26/96              (H)   STA AT  8:00 AM CAPITOL 102                       
                                                                               
 BILL:  HB 546                                                               
 SHORT TITLE: G.O. BONDS: SCHOOLS & UNIV.                                      
 SPONSOR(S): STATE AFFAIRS                                                     
                                                                               
 JRN-DATE      JRN-PG            ACTION                                        
 03/22/96      3270    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/22/96      3270    (H)   STA, HES, FINANCE                                 
 03/26/96              (H)   STA AT  8:00 AM CAPITOL 102                       
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 JOHN WALSH, Legislative Assistant                                             
    to Representative Richard Foster                                           
 State Capitol, Room 410                                                       
 Juneau, Alaska 99801-1182                                                     
 Telephone:  (907) 465-3789                                                    
  POSITION STATEMENT:   Provided committee substitute for HB 345.              
                                                                               
 BOB D. STORER, Chief Investment Officer                                       
 Treasury Division                                                             
 Department of Revenue                                                         
 P.O. Box 110405                                                               
 Juneau, Alaska 99811-0405                                                     
 Telephone:  (907) 465-4399                                                    
  POSITION STATEMENT:   Provided testimony on HB 345.                          
                                                                               
 TIM VOLWILER                                                                  
 8030 North Douglas Highway                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 463-4825                                                    
  POSITION STATEMENT:   Provided testimony in opposition to HB 345.            
                                                                               
 LOIS IRVIN                                                                    
 167 West Baryview Avenue                                                      
 Homer, Alaska 99603                                                           
 Telephone:  (907) 235-7172                                                    
  POSITION STATEMENT:   Provided testimony in support of HB 345.               
                                                                               
 MICHAEL J. KIRK                                                               
 1718 Evergreen Avenue                                                         
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 586-4318                                                    
  POSITION STATEMENT:   Provided testimony in support of HB 371.               
                                                                               
 DICK REGAN                                                                    
 825 Gold Belt Avenue                                                          
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 586-4318                                                    
  POSITION STATEMENT:   Provided testimony on HB 371.                          
                                                                               
 JAY LIVEY, Deputy Commissioner                                                
 Office of the Commissioner                                                    
 Department of Health and Social Services                                      
 P.O. Box 110601                                                               
 Juneau, Alaska 99811-0601                                                     
 Telephone:  (907) 465-3030                                                    
  POSITION STATEMENT:   Provided testimony in support of HB 371 on             
 behalf of the Administration.                                                 
                                                                               
 SID HEIDERSDORF, Representative                                               
 Alaskans For Life                                                             
 P.O. Box 020658                                                               
 Juneau, Alaska 99802                                                          
 Telephone:  (907) 789-9858                                                    
  POSITION STATEMENT:   Provided testimony in opposition to HB 371.            
                                                                               
 REPRESENTATIVE TOM BRICE                                                      
 Alaska State Legislature                                                      
 State Capitol, Room 426                                                       
 Juneau, Alaska 99801-1182                                                     
 Telephone:  (907) 465-3466                                                    
  POSITION STATEMENT:   Sponsor of HJR 47.                                     
                                                                               
 REPRESENTATIVE JERRY MACKIE                                                   
 Alaska State Legislature                                                      
 State Capitol, Room 404                                                       
 Juneau, Alaska 99801-1182                                                     
 Telephone:  (907) 465-4925                                                    
  POSITION STATEMENT:   Provided introduction of HB 546, a bill                
 sponsored by the House State Affairs Committee.                               
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 96-40, SIDE A                                                            
 Number 0015                                                                   
                                                                               
 The House State Affairs Committee was called to order by Chair                
 Jeannette James at 8:05 a.m.  Members present at the call to order            
 were Representatives Ivan, Willis, Porter, Green, Ogan, Robinson              
 and James.  No members were absent.                                           
 HB 345 - PENSION INVESTMENT BOARD PROCUREMENTS                              
                                                                               
 CHAIR JEANNETTE JAMES called on John Walsh, Legislative Assistant             
 to Representative Richard Foster, to present the committee                    
 substitute (9-LS1179/C).                                                      
                                                                               
 JOHN WALSH, Legislative Assistant to Representative Richard Foster,           
 explained based on the testimony last week (Thursday, March 21,               
 1996), a committee substitute was drafted (9-LS1179/C).  He                   
 referred the committee members to page 3, and explained the change            
 split the procurement by contract, and the investment and brokerage           
 services.  The testimony indicated last week that the state did not           
 procure brokerage services by contract, therefore, the language               
 needed to be clarified.  He called it a technical change.  He would           
 be glad to answer any questions from the committee members.                   
                                                                               
 Number 0175                                                                   
                                                                               
 REPRESENTATIVE SCOTT OGAN asked Mr. Walsh how much latitude would             
 the board have to determine the requisite skills addressed in the             
 bill?                                                                         
                                                                               
 MR. WALSH replied it was the intention of the sponsor to hold any             
 investment to a high standard.  There was no intention to lower the           
 standard in any way.  However, by putting this into statute,                  
 investments in Alaska would be looked at harder.  He explained                
 there were investments in Alaska that would not jeopardize the                
 performance of the fund.  Furthermore, the securities exchange                
 requirements, background checks, or performance bonds, for example,           
 would not be lowered.  He said the bill created a potential for a             
 partnership arrangements with larger firms or joint ventures with             
 Alaskan investment counsellors.  He reiterated the sponsor did not            
 intend to jeopardize or diminish the integrity of the fund.                   
                                                                               
 Number 0322                                                                   
                                                                               
 REPRESENTATIVE BRIAN PORTER asked Mr. Walsh where the 7 percent               
 figure came from?  He further wondered if the committee substitute            
 doubled the brokerage service from 7 percent to 14 percent.  He               
 stated the language was unclear.                                              
                                                                               
 Number 0345                                                                   
                                                                               
 MR. WALSH replied the 7 percent was requested in the beginning as             
 part of the negotiation process.  He could not say if it was high             
 or low figure, however.  He further explained there was procurement           
 by contract for investment advisory service and the actual                    
 acquisition of securities.  The first was a professional management           
 service and the second was the actual acquisition of the security.            
 Therefore, the investment was not doubled.                                    
                                                                               
 Number 0432                                                                   
                                                                               
 REPRESENTATIVE PORTER wondered if the security acquisition ever               
 occurred without the assistance of an investment service.                     
                                                                               
 Number 0439                                                                   
                                                                               
 MR. WALSH asked, in other words, could the board buy directly?  It            
 was possible, he replied.  He did not know if it was or had been              
 done before, however.                                                         
                                                                               
 Number 0454                                                                   
                                                                               
 REPRESENTATIVE OGAN said he also read the new language to indicate            
 that it was doubled to 14 percent.                                            
 Number 0488                                                                   
                                                                               
 MR. WALSH suggested calling on the Department of Revenue for                  
 further clarification.                                                        
                                                                               
 CHAIR JAMES called on Bob Storer, Department of Revenue (DOR).                
                                                                               
 Number 0515                                                                   
                                                                               
 BOB D. STORER, Chief Investment Officer, Treasury Division,                   
 Department of Revenue, said he read the new language as two                   
 separate distinct services.  He did not read it as a double-up.               
                                                                               
 Number 0544                                                                   
                                                                               
 REPRESENTATIVE PORTER further stated he also read it as an "up to"            
 requirement.  He asked Mr. Storer, if it would be easier to                   
 administer, if the language read "up to" 7 percent rather than "at            
 least" 7 percent?                                                             
                                                                               
 Number 0577                                                                   
                                                                               
 MR. STORER replied it was more complicated than that because the              
 money managers transacted for a multitude of plan sponsors                    
 simultaneously.  Therefore, the money managers were obligated to              
 execute their trades first, then the DOR's trades.  He called it a            
 layered process.  The money manager would view this in the                    
 aggregate so that at the end of the year, 7 percent of the volume             
 of trade was through Alaska, rather than 7 percent of the DOR's               
 trades.                                                                       
                                                                               
 Number 0648                                                                   
                                                                               
 REPRESENTATIVE JOE GREEN asked Mr. Storer to explain the 7 percent            
 figure.  Why 7 percent and not 10 percent, for example?                       
                                                                               
 Number 0654                                                                   
                                                                               
 MR. STORER replied he did not participate in the discussions                  
 surrounding the figure, so he could not answer that question.                 
                                                                               
 Number 0663                                                                   
                                                                               
 REPRESENTATIVE CAREN ROBINSON stated prior testimony indicated                
 there was a fear that this bill might jeopardize the integrity of             
 the fund.  She asked Mr. Storer if those fears were warranted?                
                                                                               
 Number 0684                                                                   
                                                                               
 MR. STORER explained HB 345 legislated investment policy.                     
 Furthermore, any time an investment policy was legislated, there              
 was a negative, because it defined certain acts.  He explained the            
 dynamics in the investment world had changed over the years.                  
 Legislation, therefore, would inhibit the ability to function in              
 the best interest of the beneficiaries.                                       
                                                                               
 Number 0751                                                                   
                                                                               
 REPRESENTATIVE ED WILLIS asked if it was possible that the state              
 might have to bail out the fund if decisions were mandated?                   
                                                                               
 Number 0780                                                                   
                                                                               
 MR. STORER responded he was not prepared to say if that could                 
 happen.  There were a number of implications as a result of HB 345,           
 however, because it dictated investment policy.                               
                                                                               
 Number 0930                                                                   
                                                                               
 REPRESENTATIVE GREEN wondered if it would be necessary to error               
 above 7 percent because trades could continue right up to the end             
 of the year.                                                                  
                                                                               
 Number 0959                                                                   
                                                                               
 MR. STORER replied it was a moving target.  Representative Green              
 was correct.  The market dictated the activity.  He explained one             
 could front load the activity, or force trades with non-specialty             
 firms.                                                                        
                                                                               
 Number 1008                                                                   
                                                                               
 CHAIR JAMES explained she was very familiar with fiduciary                    
 responsibility.  She had taught classes on that very issue because            
 many were not familiar with their responsibilities.  However, she             
 felt uncomfortable forcing a certain percentage.  On the other                
 hand, she was disappointed that this was an issue being discussed             
 today.  The union funds indicated that they invested in Alaska.               
 They were not told to do so, they just did it.  She would be more             
 comfortable if the pension board just listened to the presentations           
 from Alaska.  She did not want to mandate to interfere with the               
 earning power of the fund, however.  Of course, the beneficiaries             
 wanted the board to make the best possible decisions.  If she were            
 on the board, she would be scared to death due to the activity of             
 the stock market right now.  She was afraid some of the funds were            
 in jeopardy.  She called the responsibilities of the board awesome.           
 She reiterated the board needed to be encouraged, as an option, to            
 invest in Alaska.  She reiterated she had strong feeling on both              
 sides of the issue.  She stated there were good investments in                
 Alaska such as the gas line.  On the other hand, she did not want             
 to mandate a certain percentage and potentially jeopardize the                
 fund.  She really wanted a cooperative effort between the fund                
 managers and the state.                                                       
                                                                               
 Number 1227                                                                   
                                                                               
 MR. STORER said he agreed with Chair James.  He explained two-way             
 communication was the main issue involved here.  He said there had            
 been two presenters before the board from Alaska - a fixed income             
 manager, and a mortgage manager.  There was an educational aspect             
 as well.  As-long-as the board was communicating and being educated           
 by the investment professionals in Alaska, that would help form the           
 thinking of the board.                                                        
                                                                               
 Number 1295                                                                   
                                                                               
 REPRESENTATIVE WILLIS said the statutes called for the adoption of            
 a policy for investment education for the trustees.  He asked if              
 this had been accomplished?                                                   
                                                                               
 Number 1304                                                                   
                                                                               
 MR. STORER replied the trustees met formally between 8 to 10 times            
 each year.  A two day meeting was organized in the Spring after the           
 legislative session, devoted purely to education to stay abreast of           
 the investment topics.  Furthermore, last Sunday, a meeting was               
 organized by the board to discuss real estate investments.                    
                                                                               
 Number 1353                                                                   
                                                                               
 REPRESENTATIVE WILLIS further said the statutes called for an                 
 investment advisory council.  He wondered if the council had been             
 appointed.                                                                    
                                                                               
 Number 1360                                                                   
                                                                               
 MR. STORER replied three members had been appointed to the                    
 investment advisory council.  The board allowed up to five members,           
 however.  There was also a general consultant outside of the                  
 council.  He explained the council was comprised of members with              
 specific type of expertise.  Currently, the council was comprised             
 of experts in the fields of academia, plan sponsorship, and                   
 investment management.                                                        
                                                                               
 Number 1394                                                                   
                                                                               
 CHAIR JAMES stated she would like to see the board encourage the              
 people to bring the opportunities to them.  She said "funds of                
 money are like magnets."  Therefore, if there was an opportunity              
 people would gravitate to it.  The message should be loud and clear           
 that the board should be giving consideration to Alaskan                      
 investments.                                                                  
                                                                               
 Number 1458                                                                   
                                                                               
 MR. WALSH stated testimony last week indicated that other funds in            
 other states and some private funds were required to look at the              
 local market prior to looking at the global market.  He said it               
 tied the hands of those board, but it was a commitment.                       
                                                                               
 Number 1505                                                                   
                                                                               
 CHAIR JAMES commented the pension fund would not be here today if             
 it were not for legislation.  Therefore, the legislature did have             
 the right to make specific demands.  It was not out of its                    
 bailiwick.  The legislature needed to decide if it wanted to send             
 a message, or mandate something.  She was not willing to answer               
 that today, however, but was willing to listen.                               
                                                                               
 Number 1548                                                                   
                                                                               
 REPRESENTATIVE WILLIS asked Mr. Walsh if the private union funds              
 had a specific percentage they were bound by?                                 
                                                                               
 Number 1553                                                                   
                                                                               
 MR. WALSH replied he could not remember if they were bound by a               
 specific figure.  However, other states such as Oregon and Texas,             
 were bound by a certain percentage.                                           
                                                                               
 Number 1588                                                                   
                                                                               
 MR. STORER said there was a study done of which about 17 percent of           
 the public funds used this type of investment vehicle.                        
                                                                               
 CHAIR JAMES called on the first witness in Juneau, Tim Volwiler.              
                                                                               
 Number 1618                                                                   
                                                                               
 TIM VOLWILER said he was a teacher with 16 years of service.  He              
 expressed his opposition to HB 345.  He said the economic benefit             
 to the state would come from the retirees actually receiving their            
 money and spending it instate.  A study conducted by the Permanent            
 Fund indicated that local businesses benefited when the fund was              
 distributed.  Furthermore, he was afraid of any change to the                 
 current structure.  He stated the board was working well now.  It             
 had not been in existence for many years so "lets leave it alone."            
 Currently, there was nothing that prohibited the board from using             
 instate services.  He believed in leaving the board to chose as it            
 saw fit.  He was also opposed to joint ventures.  He said let the             
 free market prevail.  The stock market was volatile so any                    
 restrictions placed on the board could present a problem.                     
 Moreover, he suggested targeting specific funds to encourage                  
 economic development rather than the pension fund.  As an employee,           
 he felt he earned his salary and his retirement, therefore, "this             
 pot of money should be for those that would retire."  The board was           
 established because of the massive losses in the junk bonds.  The             
 beneficiaries, therefore, were reluctant to change the board's                
 direction.                                                                    
                                                                               
 Number 1840                                                                   
                                                                               
 REPRESENTATIVE GREEN moved that CSHB 345(STA) (9-LS1179/C) be                 
 adopted for consideration.  Hearing no objection, it was so                   
 adopted.                                                                      
                                                                               
 Number 1860                                                                   
                                                                               
 CHAIR JAMES said the House State Affairs Committee had heard a                
 great deal of testimony on this issue.  The next committee of                 
 referral was the House Labor and Commerce Committee.  The details             
 could be hammered out there, therefore, she was willing to move the           
 bill forward today.                                                           
                                                                               
 Number 1870                                                                   
                                                                               
 REPRESENTATIVE OGAN said he wanted to discuss a possible amendment.           
 He was concerned about the language on page 3, line 1, "investment            
 services that the board procures by contract, and seven percent of          
 the..."  He was concerned it would be read to mean 14 percent                 
 rather than 7 percent.  He suggested changing the word "and" to               
 "or."                                                                         
                                                                               
 Number 1895                                                                   
                                                                               
 CHAIR JAMES stated she was more concerned about the language on               
 page 2, line 31, "services provided by persons located in the state           
 to at least seven percent of the...."  She suggested changing the           
 language "at least" to read "up to."  The word "or" as                        
 Representative Ogan suggested could imply less than 7 percent.                
                                                                               
 Number 1945                                                                   
                                                                               
 REPRESENTATIVE OGAN said he brought it up for discussion only.  He            
 agreed with the language "up to" that Chair James suggested.  It              
 would give the board the latitude to invest in Alaska while not               
 being a mandate.                                                              
                                                                               
 Number 1956                                                                   
                                                                               
 CHAIR JAMES said a motion was needed to discuss the specifics.                
                                                                               
 Number 1965                                                                   
                                                                               
 REPRESENTATIVE OGAN moved that on page 2, line 31, delete the                 
 language "at least" and insert the language "up to."  The motion              
 was followed with discussion.                                                 
                                                                               
 Number 2006                                                                   
                                                                               
 REPRESENTATIVE GREEN said he was concerned about micro-managing.              
 He asked what would happen if a good deal came along that did not             
 fit the guidelines?  Therefore, he did not support the amendment.             
                                                                               
 Number 2035                                                                   
                                                                               
 REPRESENTATIVE ROBINSON said the language really did not make a lot           
 of difference.                                                                
                                                                               
 Number 2041                                                                   
                                                                               
 REPRESENTATIVE PORTER suggested a friendly amendment to include the           
 language "to a level up to" rather than "up to."  Furthermore, he             
 did not agree with a mandate but agreed more with encouraging a               
 policy to try to get to reach this level.  The new language would             
 work towards that purpose.                                                    
                                                                               
 CHAIR JAMES called for a roll call vote.  Representatives Ogan,               
 Porter, Robinson, and Willis voted in favor of the friendly                   
 amendment.  Representatives James, Green and Ivan voted against the           
 friendly amendment.  The friendly amendment passed.                           
                                                                               
 Number 2122                                                                   
                                                                               
 REPRESENTATIVE ROBINSON stated she did not agree with a mandate.              
 She suggested a resolution or a letter through the House State                
 Affairs Committee voicing its concerns.  She would not hold the               
 bill, however.                                                                
                                                                               
 Number 2150                                                                   
                                                                               
 CHAIR JAMES agreed with Representative Robinson.  She reiterated              
 she was disappointed that it was even an issue being discussed                
 today.                                                                        
                                                                               
 Number 2156                                                                   
                                                                               
 REPRESENTATIVE IVAN moved that CSHB 345(STA) (9-LS1179/C) move from           
 the committee with individual recommendations and attached fiscal             
 notes as amended.  Representative Willis objected.  A roll call               
 vote was taken.  Representatives James, Ogan, Green, Ivan and                 
 Porter voted in favor of the motion.  Representatives Robinson and            
 Willis voted against the motion.  The bill was moved to the next              
 committee of referral.                                                        
 HB 383 - REIMBURSE FOR LOCAL SERVICE TO INEBRIATES                          
                                                                               
 The next order of business to come before the House State Affairs             
 Committee was HB 383.                                                         
                                                                               
 CHAIR JAMES called on Representative Ivan Ivan, sponsor of the                
 bill.                                                                         
                                                                               
 Number 2240                                                                   
                                                                               
 REPRESENTATIVE IVAN read the following sponsor statement into the             
 record.                                                                       
                                                                               
 "Widespread alcohol abuse not only damages Alaska's families and              
 society, but also drains public coffers at an alarming rate.  Local           
 governments constantly struggle under the financial burden of their           
 efforts to cope with alcohol problems.                                        
                                                                               
 "Those problems include the many public inebriates evident in our             
 municipalities.                                                               
                                                                               
 "Under AS 47.37.170, local police take into protective custody a              
 person who appears to be intoxicated and incapacitated in a public            
 place and place that person in an approved public treatment or                
 detention facility.  A licensed physician or other qualified health           
 practitioner must then examine the inebriate as soon as possible.             
 If the person if found to be incapacitated by alcohol, he or she is           
 detained for no more than 48 hours in a health facility or for no             
 more than 12 hours in a detention facility.  Tremendous costs                 
 accrue to municipalities and public health facilities due to this             
 program.                                                                      
                                                                               
 "By two methods, House Bill 383 will reduce or eliminate the                  
 financial burden that local governments and public health                     
 facilities bear each year fulfilling this unfunded mandate.                   
                                                                               
 "First, the bill provides for direct state grants to municipalities           
 and traditional village councils to reimburse them for the cost of            
 dealing with inebriates.                                                      
                                                                               
 "Second, the bill gives local governments the power to set taxes on           
 alcoholic beverages at whatever rate they want, regardless of                 
 whether or not they tax other sales.                                          
                                                                               
 "To help defray the state's granting cost as well as closing the              
 fiscal gap, reducing alcohol consumption and fighting crime, the              
 bill raises the alcohol excise tax for the first time since 1983."            
                                                                               
 REPRESENTATIVE IVAN further stated the bills that allowed for the             
 increase in alcohol tax were originally sponsored by Representative           
 Kay Brown, HB 96 and HB 97.  He explained they had been                       
 incorporated into HB 383 to reimburse the municipalities.  He                 
 reiterated the bill was trying to address the problems faced by               
 municipalities when taking care of inebriates.  It was a direct               
 result of an argument between the community of Dillingham and                 
 Bristol Bay in his district of who should take care of the                    
 inebriates.                                                                   
                                                                               
 Number 2397                                                                   
                                                                               
 CHAIR JAMES announced the House State Affairs Committee would only            
 hear testimony today.  There would not be any action taken on the             
 bill, however.                                                                
                                                                               
 CHAIR JAMES called on the first witness via teleconference in                 
 Homer, Lois Irvin.                                                            
                                                                               
 Number 2397                                                                   
                                                                               
 LOIS IRVIN explained Homer had been trying to address this issue              
 for the past year.  There was a problem surrounding the use of a              
 facility to hold the inebriates.  Moreover, according to the bill             
 there was also a funding issue involved.  She expressed her support           
 of HB 383.                                                                    
                                                                               
 TAPE 96-40, SIDE B                                                            
 Number 0010                                                                   
                                                                               
 REPRESENTATIVE OGAN said alcohol was probably the single biggest              
 problem for municipalities.  He had mixed feelings about the bill,            
 however.  He did not really want to raise a tax.  He wanted to hear           
 from Representative Porter, as the former police chief, and the               
 committee members further.  He had been a member of a task force              
 that tried to address this issue in the past.  One suggestion was             
 to abolish alcohol.  He said that was not going to happen, but it             
 was a strong suggestion indicating a strong problem.                          
                                                                               
 Number 0062                                                                   
                                                                               
 CHAIR JAMES said she was concerned because the symptom was being              
 addressed and not the problem.  This was a reoccurring issue in the           
 United States.  The proportion of alcohol was probably the best               
 thing to adjust.  Moreover, the problems of society were based on             
 despair, unemployment, and hopelessness.  Therefore, until a                  
 sufficient economic base and jobs were available, the problem would           
 not be addressed.  Therein lied the problem of government spending.           
 She wondered if money should be appropriated to the core of the               
 problems, or to the programs to help the symptoms.  She said she              
 did not have a solution, only a direction, and she was not sure if            
 HB 383 was going in the same direction.                                       
                                                                               
 Number 0128                                                                   
                                                                               
 REPRESENTATIVE ROBINSON said she supported HB 383, 100 percent.               
 She explained Juneau increased the sales tax on alcohol, and the              
 tax money went directly to the social service programs.  She felt             
 that every other community in the state should have the same option           
 without having to fight it in court.                                          
                                                                               
 Number 0152                                                                   
 REPRESENTATIVE PORTER said he had spent more time in his life                 
 considering the solutions to this problem compared to anybody else            
 here.  The unfortunate truth, however, was that the drinking                  
 problem in Juneau was not any different compared to any other                 
 community.  If Juneau did not have a drinking problem, he would               
 "sign up on this bill in a heartbeat."  However, that was not the             
 case.  The only way to solve the problem was to create an attitude            
 that made people want to stop drinking.  The sobriety program aimed           
 at the bush addressed this attitude.  He explained he was sponsor             
 of a bill that incorporated the sobriety program as part of state             
 policy.  There were a multitude of approaches - prohibition,                  
 increased taxation - but he was concerned about repeating history.            
 He was reluctant to go down those roads again.  Therefore, he would           
 not greatly support HB 383.                                                   
                                                                               
 Number 0250                                                                   
                                                                               
 REPRESENTATIVE GREEN wondered what ever happened to the antabuse              
 program?  He asked if it was rendered unconstitutional?                       
                                                                               
 Number 0266                                                                   
                                                                               
 REPRESENTATIVE PORTER replied it was being used more frequently in            
 sentencing practices now.                                                     
                                                                               
 Number 0279                                                                   
                                                                               
 REPRESENTATIVE IVAN said society was just scratching the surface of           
 this problem.  He explained, there were two other bills in the                
 process, and a resolution, to look at establishing a statewide task           
 force to address the issue further.                                           
                                                                               
 CHAIR JAMES announced the bill would be held for a while in the               
 committee.                                                                    
 HB 371 - RIGHTS OF TERMINALLY ILL PERSONS                                   
                                                                               
 The next order of business to come before the House State Affairs             
 Committee was HB 371.                                                         
                                                                               
 CHAIR JAMES announced the House State Affairs Committee would only            
 be hearing from those that were not able to testify on Thursday,              
 March 21, 1996.                                                               
                                                                               
 CHAIR JAMES called on the first witness in Juneau, Michael Kirk.              
                                                                               
 Number 0361                                                                   
                                                                               
 MICHAEL KIRK said those that heard him testify on the pension fund            
 last week might wish today that he was terminally ill, and those              
 that heard him testify today on the rights of the terminally ill              
 might wish he were pensioned and retired.  He stated, amongst the             
 Eskimo people, the elders sacrificed their lives by their own free            
 will through the cold and hunger.  They were not considered                   
 suicidal but honored for their actions.  The majority of people who           
 requested to end their lives were doing so for their family and               
 community.  He said according to Scripture, greater love had no man           
 than he or she sacrificed his life for the life of another.  The              
 truth was elusive to human beings, so he wondered when the experts            
 lectured, what was the truth?  He explained, soldiers, policemen,             
 and firemen freely and willingly sacrificed their lives for others.           
 Furthermore, fathers, mothers, siblings and even pets sacrificed              
 their lives for others.  According to health care practitioners,              
 more money was spent on the last few days of the terminally ill,              
 against their will, than what was spent on keeping the person                 
 healthy.  He wondered if it was possible that the experts had                 
 another purpose than love, justice and truth.  He maintained that             
 purpose was possibly to impose their will onto the rest so that we            
 could not exercise our free will.  Please consider that today, he             
 said.  He thanked the committee members for their time.                       
                                                                               
 Number 0588                                                                   
                                                                               
 REPRESENTATIVE PORTER complimented Mr. Kirk on his testimony.  He             
 said it was a pure joy to listen to.  He did not necessarily agree            
 with everything he said, however.                                             
                                                                               
 Number 0599                                                                   
                                                                               
 CHAIR JAMES said to Mr. Kirk he did a very good job of telling the            
 committee members how he felt "from the bottom of your toes to the            
 top of your head."  She agreed with Mr. Kirk that religion was a              
 personal contact with a higher power.  It should not be imposed on            
 others, however.  The responsibility of the legislators was to                
 balance the decisions of society and the constituents.  It was                
 difficult to vote against one's personal belief, and if it was                
 impossible then one should not be a legislator.  It was impossible            
 to insulate a person from their religion, however.                            
                                                                               
 Number 0676                                                                   
                                                                               
 REPRESENTATIVE GREEN complimented Mr. Kirk on the use of the                  
 English language.                                                             
                                                                               
 CHAIR JAMES called on the next witness in Juneau, Dick Regan.                 
                                                                               
 Number 0698                                                                   
                                                                               
 DICK REGAN said he had long supported the concept of HB 371.  He              
 was anxious to see the bill move forward to the next committee of             
 referral.  He himself was a victim of an inoperable terminal                  
 illness.  It was incidental to his interest in the bill, however.             
 He believed it was a well drafted bill.  It was conservatively                
 drafted.  The bill provided for the state regulations that were               
 addressed in the opinion of the Ninth Circuit Court of Appeals.  He           
 thanked the committee members for their consideration of this                 
 issue.  He reiterated he would like to see the bill moved to the              
 next committee of referral.                                                   
                                                                               
 CHAIR JAMES called on the next witness in Juneau, Jay Livey,                  
 Department of Health and Social Services.                                     
                                                                               
 Number 0811                                                                   
                                                                               
 JAY LIVEY, Deputy Commissioner, Office of the Commissioner,                   
 Department of Health and Social Services, presented a statement               
 from the Administration.                                                      
                                                                               
 "The Administration supports HB 371 because an individual's                   
 decision to end one's life due to a terminal illness is intensely             
 personal and one in which the government should not be involved."             
                                                                               
 CHAIR JAMES called on the next witness in Juneau, Sid Heidersdorf.            
                                                                               
 Number 0840                                                                   
                                                                               
 SID HEIDERSDORF, Representative, Alaskans For Life, said the                  
 organization was opposed to HB 371.  He explained he had been to              
 four hearing on this issue now, and quit a few people had testified           
 that they were opposed to suicide, but were in favor of "death with           
 dignity."  He found that astonishing and disturbing because it was            
 still suicide, a person was intentionally taking his own life or              
 asking someone to assist him.  This was indeed a physician assisted           
 suicide bill.  The recent decision by the court was not the last              
 word, he suspected it would go to the Supreme Court.  He asked the            
 committee members to not "jump on the train" because maybe it was             
 heading off the cliff.  He asked the committee members to do what             
 was right and not what might happen in the courts.  He questioned             
 the polls and the support of HB 371 due to the wording of the                 
 questions asked.  Furthermore, the law was a teacher.  He wondered            
 what this law taught society?  He replied it would teach society              
 that suicide was morally acceptable.  Suicide was a problem amongst           
 the youth already.  He called the bill terrible public policy.  The           
 supporters of HB 371 testified that they did not want other                   
 people's morals forced upon them.  However, he believed this bill             
 would affect the value system of society by involving the medical             
 profession, health institutions and pharmacies.  It was a terrible            
 mistake to involve the doctors in killing in addition to healing.             
 They should be limited to healing.  This law would give physicians            
 great power.  He cited the country of Holland whereby the                     
 physicians were exercising their power and not the individuals.               
 Moreover, this bill was one step from euthanasia.  He called this             
 entire issue a "slippery slope."  He equated it to the Nazi                   
 concentration camps because the same logic was used.  He believed             
 those that were terminally ill deserved to have their pain managed            
 and receive compassionate care.  The law should be asking how the             
 final days could be made better and not how to end one's life.  He            
 was offended by the term "death with dignity."  It implied those              
 that died without killing themselves died without any dignity.  He            
 asked the committee members to reject HB 371 not because of what it           
 might lead to, but because of what it was.  In conclusion, he read            
 from a booklet in defense of euthanasia titled The Destruction of            
 Life Devoid of Value, "the situation of imminent death is not being          
 changed only the cause of death is being replaced by another cause            
 which has the advantage of being painless.  Legally speaking, this            
 is no killing, only the changing of the cause of unavoidable death.           
 In truth it is a pure healing action, the elimination of pain is              
 also healing.  This we have to conclude we are not dealing here               
 with an established exception of the law, not to kill.  We are not            
 dealing here will an unlawful killing, but with an unprohibited               
 human action carried out as a blessing for the suffering as a pain            
 relief for the nearly dead since it is not done for the purpose of            
 killing them, but to relieve suffering."  The language he quoted              
 was used as a rational for the basis of the Nazi killing programs.            
 He said, "those who do not know history are forced to relive it."             
                                                                               
 Number 1730                                                                   
                                                                               
 CHAIR JAMES announced the House State Affairs Committee would not             
 be taking any action on this bill today.   The issue would not go             
 away, however.  She felt society was already sliding down the                 
 slippery slope.  Therefore, the legislature needed to determine how           
 to slide down it with the least disastrous results.  She believed             
 the issue needed more time.  She suggested talking to the people              
 further before taking any action.                                             
                                                                               
 Number 1779                                                                   
                                                                               
 REPRESENTATIVE PORTER asked Mr. Heider what his view was on the               
 practice of the cessation of artificial life support?                         
                                                                               
 Number 1799                                                                   
                                                                               
 MR. HEIDER replied the organization believed that extraordinary               
 means were not required.  If the on-going practice of a community             
 considered the use of artificial lungs, for example, as                       
 extraordinary care, then it was not required.  He said that was               
 dying from the disease which was vastly different than involving              
 the health care profession in ending a person's life.                         
                                                                               
 Number 1860                                                                   
                                                                               
 REPRESENTATIVE OGAN thanked Mr. Heider for his testimony.  He                 
 explained his wife had been a health care professional for many               
 years.  She had held the hand of more than one person who expired.            
 He said there would be an exodus of health care workers from the              
 field, if they were forced to participate in this type of activity.           
 It took a very special person to have a job that dealt with death.            
 He had the highest respect for those that dealt with it.  He felt,            
 philosophically, that society placed a low value on life and cited            
 abortion as an example.  He said, it further degraded human life,             
 if it was decided it was appropriate to take the life of someone              
 that had a few less days than the rest of us.  We were all                    
 terminal.  Furthermore, he was concerned about the message this               
 bill was sending to society.  It was the highest calling as a                 
 legislature to protect the sanctity of life.                                  
                                                                               
 Number 2032                                                                   
                                                                               
 MR. HEIDER said the bill, of course, provided for a conscientious             
 objection as a safeguard.  He encouraged the committee members to             
 read the handout titled, "International Anti-Euthanasia Task Force"           
 fact sheet.  He said the safeguards according to the fact sheet               
 became meaningless in Holland.                                                
                                                                               
 Number 2116                                                                   
                                                                               
 REPRESENTATIVE ROBINSON asked Chair James what the plan was for the           
 bill?                                                                         
                                                                               
 CHAIR JAMES replied she did not have an immediate plan.  She was              
 not ready to deal with the issue today, however, because there were           
 many unanswered questions.                                                    
 HJR 47 - AK NAT'L GUARD YOUTH CORPS CHALLENGE PROG                          
                                                                               
 The next order of business to come before the House State Affairs             
 Committee was HJR 47.                                                         
                                                                               
 CHAIR JAMES called on Representative Tom Brice, sponsor of HJR 47.            
                                                                               
 Number 2216                                                                   
                                                                               
 REPRESENTATIVE TOM BRICE explained HJR 47 showed legislative                  
 support for the Alaska National Guard Youth Corps ChalleNGe                   
 Program.  It was funded 100 percent by the federal government and             
 just received a budget cut of $600,000.  The cut would dramatically           
 reduce its ability to continue to help as many youth as it had in             
 the past.  Therefore, HJR 47 asked that Congress continue the                 
 funding.  He explained the ChalleNGe Program was designed for the             
 youth at-risk, the youth that had dropped out of school, and the              
 youth that had been identified as a criminal risk and offered them            
 a 22 month course to allow them to develop or to complete their               
 General Education Degree (GED).  The program gave them a small                
 stipend at the end to be used for furthering their education.  He             
 cited there was about an 85 percent success rate.  In conclusion,             
 he called HJR 47 a timely resolution; it was time to consider the             
 actions in Washington D.C.  Moreover, it was a program that                   
 addressed the problems of juvenile justice in a broad fashion.  He            
 would be happy to answer any questions of the committee members.              
                                                                               
 TAPE 96-41, SIDE A                                                            
 Number 0013                                                                   
                                                                               
 REPRESENTATIVE OGAN said he was very impressed with the program.              
 He said one of his legislative assistants had a child in the                  
 program which turned his behavior around.  He said this program was           
 a proactive approach rather than a reactive approach.  He announced           
 he would sign on as a cosponsor.                                              
                                                                               
 REPRESENTATIVE BRICE replied, "thank you."                                    
                                                                               
 CHAIR JAMES called on the first witness via teleconference in                 
 Anchorage, Carla Pettigrew.                                                   
                                                                               
 Number 0110                                                                   
                                                                               
 CARLA PETTIGREW explained her son was in the program, Andy Penman.            
 She said Andy used drugs and did not stay in school.  Andy agreed             
 to enter the program.  She was very proud of him today, he was a              
 very successful human being upon leaving the program.  He obtained            
 his GED and his life skills improved tremendously.  He was                    
 currently employed by a hotel in Anchorage.  His self-confidence              
 also increased as a result of the program.  He turned into a leader           
 instead of remaining a follower.  She asserted without the program            
 she strongly believed her son would have been a ward of the state             
 at some point.  She contributed the success of the program to its             
 military structure and its ability to bring out the best of an                
 individual.  She strongly supported HJR 47.                                   
                                                                               
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Andy Penman.                                                       
                                                                               
 Number 0359                                                                   
                                                                               
 ANDY PENMAN said the Alaska National Guard Youth Corps ChallENge              
 Program had taught him more about life compared to any other place.           
 It also taught him initiative, self-confidence, and respect for               
 others.  The program made him think about a lot of things.  He                
 explained the first stage, hard core, was spent in the woods.  The            
 second stage was in the classroom.  He participated on a drill team           
 that won second place in a competition.  Furthermore, a bond was              
 established with the other classmates that could not be broken by             
 anything.  The awards he won meant a lot to him, but he valued what           
 he learned more.                                                              
                                                                               
 Number 0580                                                                   
                                                                               
 REPRESENTATIVE PORTER said he was familiar with the program.  It              
 might not be the appropriate approach for everyone, but it was                
 appropriate for many.  It had produced singularly exceptional                 
 results.  He suggested, for inspiration, to see the kids before and           
 after the program.  After the program, the kids were together,                
 inspired and motivated.  The program provided the same results as             
 basic training; the feeling of an accomplishment in the end.                  
                                                                               
 Number 0679                                                                   
                                                                               
 REPRESENTATIVE GREEN explained he had seen the kids before and                
 after the program.  The transformation was incredible.  Some even             
 lost their addictions during the program.                                     
                                                                               
 Number 0748                                                                   
                                                                               
 REPRESENTATIVE BRICE suggested amending the language on page 1,               
 line 5, to read "nearly 200" based on recent information he just              
 received from his staff.                                                      
                                                                               
 REPRESENTATIVE GREEN moved that on page 1, line 5, delete the                 
 language "more than 136" and insert the language "nearly 200."                
 (Amendment 1)  Hearing no objection, it was so moved.                         
                                                                               
 Number 0800                                                                   
                                                                               
 REPRESENTATIVE ROBINSON moved that CSHJR 47(STA) (9-LS1035/C) be              
 adopted for consideration.  Hearing no objection, it was so                   
 adopted.                                                                      
                                                                               
 Number 0834                                                                   
                                                                               
 REPRESENTATIVE ROBINSON moved that CSHJR 47(STA) (9-LS1035/C) move            
 from the committee with individual recommendations and attached               
 fiscal notes, as amended.  Hearing no objection, it was so moved              
 from House State Affairs Committee.                                           
 HB 546 - G.O. BONDS: SCHOOLS & UNIV.                                        
                                                                               
 The next order of business to come before the House State Affairs             
 Committee was HB 546.                                                         
                                                                               
 CHAIR JAMES announced HB 546 was a House State Affairs Committee              
 bill, but it was similar to a bill by Representative Jerry Mackie,            
 so he would present the introduction.                                         
                                                                               
 Number 0884                                                                   
                                                                               
 REPRESENTATIVE JERRY MACKIE explained several weeks ago he                    
 introduced HB 507 on the last day of the deadline because bonding             
 was important to consider for school construction issues.  It was             
 discovered since then that there simply was not enough money in the           
 capital budget to fund maintenance for public schools.  Therefore,            
 a creative approach was needed.  He asked Chair James to agree to             
 work with him to address this issue.  He said a committee backing             
 was needed to get the attention that this issue was warranted.  He            
 referred the committee members to the handout titled, "Legislative            
 Proposal Relating to Statewide School Major Maintenance and                   
 Construction"  He explained it was prepared by the Southeast                  
 Regional Resource Center (SERRC), an education group that provided            
 technical and professional assistance to school districts around              
 the state.  The resource center outlined the critical needs in the            
 state and the possible ways to accomplish this.  He referred the              
 committee members to page 2, and read some of the recommended                 
 criteria, "health and life safety of students, structural                     
 preservation...."  The current process of the Department of                   
 Education (DOE) was flawed according to any school district, unless           
 it was number one on the list.  The urban communities did not                 
 provide equity and parity to those areas, and it was heavily                  
 weighted to the rural areas.  House Bill 546 contained DOE's entire           
 list for 1996, word for word; and dollar for dollar.  It was a                
 place to start.  However, he felt there was not equity in this bill           
 for Southcentral, Anchorage, Kenai Peninsula, or Mat-Su                       
 communities.  There was about $80 million to $90 million for the              
 Fairbanks region.  The bill was heavily weighted to the rural                 
 areas.  According to the DOE, that was where most of the                      
 maintenance and new construction was needed.  He introduced the               
 bill knowing and understanding that there was not equity, but it              
 was a place to start.  He suggested looking at criteria such as               
 what was offered by SERRC to determine how to equalize the bill.              
 He explained he sent a letter to the caucus leaders in the various            
 regions of concern to ask them what it would take to achieve                  
 equity.  He said to move through the legislature a bill needed to             
 be equitable to all areas of the state.  Furthermore, before the              
 people would approve a bond initiative it would have to have                  
 fairness and equity as well.  He said, "please do not be alarmed at           
 the current structure of the list now."  He would be the first to             
 admit it needed a lot of work.  He suggested looking at the                   
 Anchorage School District and its current bond debt program as a              
 possible solution.  Furthermore, there were many rural schools that           
 did not need to be on the list because some were more critical than           
 others.  That was the case throughout the state.  He reiterated a             
 criteria was needed to determine which schools were more critical             
 than others.  He said he was wide open to come up with a solution.            
 He said this was a billion dollar problem, including the University           
 of Alaska facilities, so it would be hard to scratch the surface,             
 unless a creative approach was taken such as bonding.  The current            
 market for bonds was favorable.  Interest rates were low, the debt            
 was consistently going down, so the time was now to look at                   
 bonding.  The Administration also felt it was an excellent time.              
 In conclusion, there was a big maintenance problem throughout the             
 state that needed to be addressed, or it would cost the state more            
 money in the future to repair if it was left unattended now.                  
                                                                               
 Number 1345                                                                   
 REPRESENTATIVE ROBINSON agreed with the direction of HB 546, 100              
 percent.  She was concerned about the maintenance and school needs            
 that were left unattended.  She wondered what would happen to the             
 existing groups that were already in the capital budget.  Would               
 they move forward, or be taken out of the budget?                             
                                                                               
 Number 1370                                                                   
                                                                               
 REPRESENTATIVE MACKIE said there were one or two schools budgeted             
 for new construction, and four or five budgeted for major                     
 maintenance.  They were included in the bill because they were high           
 on the Administration's priority list.  That money, perhaps, could            
 be taken from the capital budget.  If there was bi-partisan support           
 for this bill those schools would not need to be a part of the                
 capital budget because they would participate under the criteria              
 ranking as all the other schools in the state.                                
                                                                               
 Number 1404                                                                   
                                                                               
 REPRESENTATIVE ROBINSON wondered what would happen if the bond                
 issue was not supported by the people.  How would that affect the             
 schools in the current capital budget?  She was looking out for the           
 schools in her district.                                                      
                                                                               
 Number 1445                                                                   
                                                                               
 REPRESENTATIVE MACKIE said he would be concerned also if that was             
 the situation in his district as well.  The initiative would go to            
 the ballot in November and become effective next year.  Therefore,            
 the current schools in the capital budget would probably not be               
 affected.  He said he was looking at the bigger problem throughout            
 the state, but he reiterated he understood the position of                    
 Representative Robinson.  It would have to be dealt with                      
 appropriately.                                                                
                                                                               
 Number 1473                                                                   
                                                                               
 REPRESENTATIVE ROBINSON wondered about the new needs in the                   
 communities that had not been forwarded to the Department of                  
 Education.                                                                    
                                                                               
 Number 1497                                                                   
                                                                               
 REPRESENTATIVE MACKIE said the reality was that the $1 billion in             
 need would probably turn into $2 billion in need, if it appeared              
 the bill was to move forward.  He believed the most critical needs            
 were identified in the bill right now, however, because it was hard           
 to believe that the DOE would not know about the critical needs in            
 the communities.  It was such a big issue in the state right now              
 due to a lack of attention from previous Administrations, that the            
 bonding approach was the only way to address the problems.                    
                                                                               
 Number 1583                                                                   
                                                                               
 REPRESENTATIVE GREEN stated there were some schools in Anchorage              
 that should be on the list in HB 546.  The kids were skirting                 
 around puddles on the floor from leaking roofs in some schools, for           
 example.  He asked Representative Mackie if the British Petroleum             
 Settlement had been used up?  He also wondered if the money had               
 been misappropriated.  He stated he championed the idea of the                
 bill.                                                                         
                                                                               
 Number 1617                                                                   
                                                                               
 REPRESENTATIVE MACKIE replied a number of the Majority's schools              
 were taken care of during the settlement four years ago.  It did              
 take care of a lot of the problems, but there were still major                
 maintenance problems and new construction needs.  He cited a school           
 in Craig that was built for 110 students of which 400 students were           
 attending the school.  That was just one example of the many.                 
 Every district could point to a problem that existed.                         
                                                                               
 Number 1674                                                                   
                                                                               
 REPRESENTATIVE GREEN wondered if Representative Mackie knew the               
 amount that was allocated to the schools from the settlement.  He             
 further wondered if there was a chance that the money would be                
 siphoned off.                                                                 
                                                                               
 Number 1692                                                                   
                                                                               
 REPRESENTATIVE MACKIE said the amount was approximately $200                  
 million in the form of direct grants to the districts for their               
 construction projects.  The money did take care of the identified             
 projects.  He did not see how it could have be misappropriated,               
 however, because the problems were so critical.                               
                                                                               
 Number 1738                                                                   
                                                                               
 REPRESENTATIVE PORTER said he took offense that the majority                  
 benefited from the settlement money while the minority did not.  He           
 asserted that was not the case.  Furthermore, direct grants                   
 probably could not be mismanaged assuming it was justifiable in the           
 first place.  However, if the University of Alaska was included in            
 the bond project, specific language was needed.  He explained money           
 had been appropriated before to the university for a specific                 
 purpose but was never used for that purpose.  He asked                        
 Representative Mackie what would the debt service requirement be              
 for the state?                                                                
                                                                               
 Number 1800                                                                   
                                                                               
 REPRESENTATIVE MACKIE said the DOE was reluctant to provide that              
 information because it was currently working on a bond proposal for           
 the Administration for prisons.  He explained it would depend on              
 the final number for the schools which ranged from $8 million to              
 $30 million depending on the number of schools.  More information             
 would be available at the next scheduled hearing.                             
                                                                               
 Number 1845                                                                   
                                                                               
 CHAIR JAMES said it was obvious after numerous discussions with               
 individuals regarding this issue that many of the larger districts            
 probably had not submitted projects knowing full well that they               
 would not be funded.  She suggested an allocation process based on            
 an estimated need for each district.  She said in the Fairbanks               
 area that would be difficult, however, because it was an active               
 community.  Moreover, in 1993, $20 million of the approximately               
 $173 million spent on schools, went to the Fairbanks Northstar                
 Borough School District along with a bonding package of which the             
 state would pay 70 percent of a bond.  The school district in                 
 Fairbanks went to the people twice with bond projects and each time           
 it was turned down.  It was called the "$65 million high school"              
 discussion in 1993.  A future vote was in the works in May of this            
 year.  She felt it would be passed or the money would be lost to              
 another district.  She agreed the DOE process was not equitable.              
 She believed in more local control.                                           
                                                                               
 Number 2080                                                                   
                                                                               
 REPRESENTATIVE MACKIE stated he did mean any disrespect regarding             
 his comment about the Majority.  The urban areas did not receive              
 the money nor was the DOE's list followed.  It was widely                     
 acknowledged it was not a fair process.  Therefore, the committee             
 process was selected to ensure a fair process.  Furthermore, he did           
 not believe the DOE's process was flawed or unfair.  The department           
 looked at the current needs.  He felt an allocation system to the             
 various school districts was unfair because most rural communities            
 did not have the ability to bond.  The only solution he could think           
 of was a critical needs analysis using an objective criteria rather           
 than a political criteria.  He did not have all the answers,                  
 however, but stated the best way was to include all the regions.              
 He explained the Department of Education was required by law to               
 defend its list in HB 546.  The dollar amount could be used,                  
 according to the DOE, and the legislature could determine the                 
 disparity allocating the additional money needed, for example.                
                                                                               
 Number 2253                                                                   
                                                                               
 CHAIR JAMES said everything that had been applied to the state for            
 was in the list in HB 546.  That, however, was not all the needs.             
 She reiterated there were some areas that probably did not submit             
 anything because they felt like there was not a need.                         
                                                                               
 Number 2267                                                                   
                                                                               
 REPRESENTATIVE IVAN said he was confused about the final list of              
 the DOE.  He explained there was a prior list.  He asked for                  
 clarification.                                                                
                                                                               
 Number 2281                                                                   
                                                                               
 CHAIR JAMES replied she had been trying to determine that herself.            
 Moreover, she felt this would have to be a political decision                 
 because every decision made in Juneau was a political decision.  It           
 was a dream to assume that any other type of decision would be                
 made.  There was a political reality to this issue.                           
                                                                               
 Number 2327                                                                   
                                                                               
 REPRESENTATIVE MACKIE said he did not disagree with Chair James.              
 He said the areas that were not equalized needed to be addressed in           
 HB 546 politically, and not according to the DOE's list.  He felt             
 it was necessary to look at the list and use the numbers while                
 looking at the other inequities around the state to come up with a            
 package that would pass the legislature and the voters.  The only             
 way to reach that was through equity.                                         
 Number 2350                                                                   
                                                                               
 ADJOURNMENT                                                                   
                                                                               
 CHAIR JAMES adjourned the House State Affairs Committee meeting at            
 10:23 a.m.                                                                    
                                                                               
                                                                               

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