Legislature(2001 - 2002)

04/04/2002 08:06 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         April 4, 2002                                                                                          
                           8:06 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative John Coghill, Chair                                                                                              
Representative Jeannette James                                                                                                  
Representative Hugh Fate                                                                                                        
Representative Harry Crawford                                                                                                   
Representative Joe Hayes                                                                                                        
MEMBERS ABSENT                                                                                                                
Representative Gary Stevens                                                                                                     
Representative Peggy Wilson                                                                                                     
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 487                                                                                                              
"An Act relating to fireworks; and providing for an effective                                                                   
     - HEARD AND HELD                                                                                                           
SPONSOR SUBSTITUTE FOR HOUSE JOINT RESOLUTION NO. 14                                                                            
Proposing amendments to the Constitution of the State of Alaska                                                                 
relating to the Alaska permanent fund.                                                                                          
     - HEARD AND HELD                                                                                                           
HOUSE BILL NO. 509                                                                                                              
"An Act relating to Alaska children's trust registration plates;                                                                
and providing for an effective date."                                                                                           
     - MOVED CSHB 509(STA) OUT OF COMMITTEE                                                                                     
PREVIOUS ACTION                                                                                                               
BILL: HB 487                                                                                                                  
SHORT TITLE:FIREWORKS REGULATION                                                                                                
SPONSOR(S): REPRESENTATIVE(S)KOHRING                                                                                            
Jrn-Date   Jrn-Page                     Action                                                                                  
02/19/02     2319       (H)        READ THE FIRST TIME -                                                                        
02/19/02     2319       (H)        STA, FIN                                                                                     
02/19/02     2319       (H)        REFERRED TO STATE AFFAIRS                                                                    
04/02/02                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
04/02/02                (H)        Heard & Held                                                                                 
04/02/02                (H)        MINUTE(STA)                                                                                  
04/04/02                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
BILL: HJR 14                                                                                                                  
SHORT TITLE:CONST. AM: PERMANENT FUND                                                                                           
SPONSOR(S): REPRESENTATIVE(S)CRAWFORD                                                                                           
Jrn-Date   Jrn-Page                     Action                                                                                  
02/14/01     0316       (H)        READ THE FIRST TIME -                                                                        
02/14/01     0316       (H)        STA, JUD, FIN                                                                                
04/17/01                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
04/17/01                (H)        Scheduled But Not Heard                                                                      
04/19/01                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
04/19/01                (H)        Heard & Held                                                                                 
04/19/01                (H)        MINUTE(STA)                                                                                  
04/28/01                (H)        STA AT 9:00 AM CAPITOL 102                                                                   
04/28/01                (H)        <Bill Postponed>                                                                             
03/22/02     2643       (H)        SPONSOR SUBSTITUTE INTRODUCED                                                                
03/22/02     2643       (H)        READ THE FIRST TIME -                                                                        
03/22/02     2643       (H)        STA, JUD, FIN                                                                                
04/04/02                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
BILL: HB 509                                                                                                                  
SHORT TITLE:ALASKA CHILDREN'S TRUST LICENSE PLATES                                                                              
SPONSOR(S): LABOR & COMMERCE                                                                                                    
Jrn-Date   Jrn-Page                     Action                                                                                  
03/22/02     2644       (H)        READ THE FIRST TIME -                                                                        
03/22/02     2644       (H)        STA, FIN                                                                                     
04/04/02                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
WITNESS REGISTER                                                                                                              
BRIDGET BUSHUE, Fire Marshal                                                                                                    
Fire Prevention Division                                                                                                        
Anchorage Fire Department                                                                                                       
100 East Fourth Avenue                                                                                                          
Anchorage, Alaska  99501-9510                                                                                                   
POSITION STATEMENT:  Testified on HB 487.                                                                                       
CHUCK HARRIGAN                                                                                                                  
Alaska Pyrotechnic Guild                                                                                                        
(No address provided)                                                                                                           
POSITION STATEMENT:  Testified on HB 487.                                                                                       
GRIZ SMITH, President                                                                                                           
Alaska Pyrotechnic Guild, Inc. (APGI)                                                                                           
(No address provided)                                                                                                           
POSITION STATEMENT:  Testified on HB 487.                                                                                       
GARY POWELL, Director/State Fire Marshal                                                                                        
Division of Fire Prevention                                                                                                     
Department of Public Safety                                                                                                     
5700 East Tudor Road                                                                                                            
Anchorage, Alaska  9507-1225                                                                                                    
POSITION STATEMENT:  Testified on HB 487.                                                                                       
REPRESENTATIVE ERIC CROFT                                                                                                       
Alaska State Legislature                                                                                                        
Capitol Building, Room 400                                                                                                      
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:  Testified as cosponsor of HJR 14.                                                                          
JIM KELLY, Director of Communications                                                                                           
Alaska Permanent Fund Corporation                                                                                               
Department of Revenue                                                                                                           
PO Box 2550                                                                                                                     
Juneau, Alaska  99802-5500                                                                                                      
POSITION STATEMENT:  Testified on HJR 14.                                                                                       
AMY ERICKSON, Staff                                                                                                             
to Representative Lisa Murkowski                                                                                                
Alaska State Legislature                                                                                                        
Capitol Building, Room 408                                                                                                      
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:   Presented HB 509 on behalf of the sponsor.                                                                
MARY MARSHBURN, Director                                                                                                        
Division of Motor Vehicles                                                                                                      
Department of Administration                                                                                                    
3300B Fairbanks Street                                                                                                          
Anchorage, Alaska  99503                                                                                                        
POSITION STATEMENT:  Testified in support of HB 509.                                                                            
GLENN GODFREY, Commissioner                                                                                                     
Department of Public Safety;                                                                                                    
Board Member, Alaska Children's Trust                                                                                           
PO Box 111200                                                                                                                   
Juneau, Alaska  99811-1200                                                                                                      
POSITION STATEMENT:  Testified in support of HB 509.                                                                            
ACTION NARRATIVE                                                                                                              
TAPE 02-36, SIDE A                                                                                                              
Number 0001                                                                                                                     
CHAIR  JOHN  COGHILL  called the  House  State  Affairs  Standing                                                               
Committee  meeting  to  order  at   8:06  a.m.    Representatives                                                               
Coghill, James,  Fate, and Crawford  were present at the  call to                                                               
order.    Representative Hayes  arrived  as  the meeting  was  in                                                               
HB 487 - FIREWORKS REGULATION                                                                                                 
Number 0056                                                                                                                     
CHAIR COGHILL  announced that the  first order of  business would                                                               
be  HOUSE  BILL NO.  487,  "An  Act  relating to  fireworks;  and                                                               
providing for an effective date."                                                                                               
Number 0183                                                                                                                     
BRIDGET   BUSHUE,  Fire   Marshal,   Fire  Prevention   Division,                                                               
Anchorage  Fire Department,  testified via  teleconference.   She                                                               
told the committee  that there is a  wildlands-urban fire problem                                                               
in  Anchorage.    Although  glad  to see  the  efforts  made  for                                                               
requiring   some  type   of  fire   safety  program,   fees,  and                                                               
information, she  expressed some concerns.   The department would                                                               
like to see  a permit requirement for fireworks.   House Bill 487                                                               
states if there is a fire  danger, then fireworks will be banned,                                                               
but once  the fireworks are sold  and people have them,  there is                                                               
no  mechanism to  contact people  that have  them, other  than by                                                               
public service  announcements (PSAs).  Currently,  when fireworks                                                               
are  advertised on  the television,  there might  be only  a two-                                                               
second blurb  in tiny print  that says "fireworks are  illegal in                                                               
the municipality of wherever."                                                                                                  
MS.  BUSHUE  suggested a  permit  process  would allow  the  fire                                                               
department to  contact people  with fireworks  and let  them know                                                               
not  to use  them  at certain  times.   Right  now in  Anchorage,                                                               
people need  to get a permit  to burn spruce bark  beetle [trees]                                                               
in their yard; yet fireworks  are allowed, which have been proven                                                               
to  be  an extreme  fire  hazard  in  wildland urban  areas  like                                                               
Miller's Reach.   Other states  have adopted  legislation whereby                                                               
permits are required, and there  are areas where fireworks can be                                                               
safely discharged.   The  permit fees pay  for the  education and                                                               
for the maintenance of this program.                                                                                            
Number 0373                                                                                                                     
MS. BUSHUE suggested that when  the firework companies advertise,                                                               
there should be  obvious mandatory statements - not  just in tiny                                                               
print -  saying they're  illegal in the  municipality.   When the                                                               
fire department confiscates fireworks over  the Fourth of July in                                                               
Anchorage,  the   most  common   statement  is,   "Well,  they're                                                               
advertised on TV, so I thought it  was okay."  That has created a                                                               
major problem, she stated.   Ninety-nine percent of the fireworks                                                               
sold  in the  [Matanuska-Susitna  area] and  in  Anchorage are  a                                                               
problem.  She  reiterated that the fire department  would like to                                                               
see the advertising message and some  type of records kept on who                                                               
bought  the fireworks.   She  suggested it  be done  through some                                                               
type of permit process.                                                                                                         
MS. BUSHUE  explained that if there  is a burning ban  because of                                                               
high  fire danger,  the fire  department can  contact those  with                                                               
[burn]  permits  and  tell  them  not to  burn.    There  are  no                                                               
provisions  in  HB  487  for   people  in  Anchorage,  where  the                                                               
fireworks are  illegal, who buy  them in  Houston.  Some  type of                                                               
formalized permit process would  be more efficient in controlling                                                               
Number 0561                                                                                                                     
REPRESENTATIVE JAMES  asked Ms. Bushue  if the person  buying the                                                               
fireworks would be given the permit.                                                                                            
MS. BUSHUE answered that was correct.   She told the members that                                                               
Honolulu  requires a  permit;  adults have  to  have fire  safety                                                               
training  on how  to safely  discharge fireworks,  and there  are                                                               
areas to discharge fireworks.   The permit fees collected pay for                                                               
that education component.                                                                                                       
REPRESENTATIVE JAMES  asked if the  purpose of the record  of the                                                               
permittees is an opportunity for  the department to challenge the                                                               
seller if something goes wrong.                                                                                                 
MS. BUSHUE  replied that the  purpose of  a permit is  to educate                                                               
the adults  on safe and  proper use  of fireworks and  to contact                                                               
them if there is a ban in effect.                                                                                               
Number 0778                                                                                                                     
REPRESENTATIVE  JAMES  commented  that  it seems  Ms.  Bushue  is                                                               
talking about  a problem  in a  municipality where  fireworks are                                                               
not allowed.                                                                                                                    
MS. BUSHUE agreed.                                                                                                              
REPRESENTATIVE JAMES noted there would  be no permits allowed for                                                               
in the city of Anchorage.  It  seems to her that problem could be                                                               
solved by a local ordinance.                                                                                                    
MS. BUSHUE said  that fireworks are illegal  in the municipality,                                                               
but they  are sold in the  state.  It's the  selling of fireworks                                                               
in Wasilla that  is causing a major problem  in the municipality.                                                               
They are  not sold in  the municipality, but the  problem doesn't                                                               
go away.                                                                                                                        
CHAIR  COGHILL pointed  out that  HB  487 would  put together  an                                                               
advisory   committee    that   would   make   those    kinds   of                                                               
recommendations.     A  statewide  permitting  process   had  not                                                               
anticipated that  problem, so it  would be something  well within                                                               
the purview of the advisory committee.                                                                                          
REPRESENTATIVE JAMES asked  if fireworks on New Year's  Day is as                                                               
problematic as on the Fourth of July.                                                                                           
MS. BUSHUE  answered no, because  of the ground cover,  but there                                                               
have been structure fires when  fireworks have been stored inside                                                               
residences.  She explained that the  risk of a wildfire or forest                                                               
fire is greatly decreased because of the snow cover.                                                                            
Number 0997                                                                                                                     
CHUCK   HARRIGAN,  Alaska   Pyrotechnic   Guild,  testified   via                                                               
teleconference.    He  told the  committee  his  nonprofit  trade                                                               
association is interested in the  education, training, and safety                                                               
of its  members and  the public  at large.   He referred  to Sec.                                                               
18.72.101(a) on  reduction of  insurance requirements.   Millions                                                               
of dollars  of insurance is required  to produce a show;  that is                                                               
appropriate because  if somebody's house is  burned down, $50,000                                                               
is not an appropriate amount to rebuild the house.                                                                              
MR.  HARRIGAN  referred  to  Sec.  18.72.035,  which  essentially                                                               
restricts  what and  when  people  can discharge.    There is  no                                                               
distinction  between  class B  and  class  C [fireworks]  in  the                                                               
proposed legislation.  He explained  that class C [fireworks] are                                                               
sold  over  the  counter,  and   class  B  [fireworks]  are  what                                                               
[professional  pyrotechnicians] discharge;  however, professional                                                               
pyrotechnicians   discharge  class   C   also.     The   proposed                                                               
legislation  says bottle  rockets can't  be used;  bottle rockets                                                               
are used in  shows for people who  don't have a lot  of money but                                                               
want a  show.  These  are things  that can be  used in a  show to                                                               
flesh them out a bit, that don't  cost a whole lot, and that give                                                               
the customer the "most bang for the buck."                                                                                      
MR.  HARRIGAN  explained that  a  wide  variety of  products  and                                                               
shells are  used out  there.  The  [professionals] would  have to                                                               
comply with a lot of regulations just  to put on a show.  Already                                                               
they're  under close  scrutiny,  heavily  permitted and  licensed                                                               
with insurance, and  they take all safety precautions.   There is                                                               
concern that  this is going  to make someone less  accountable by                                                               
the insurance requirements and place  restrictions on the type of                                                               
shows that can be done.                                                                                                         
Number 1260                                                                                                                     
CHAIR COGHILL announced  his intention of holding HB  487 over to                                                               
discuss this  with the sponsor.   He told Mr. Harrigan  that he'd                                                               
brought  up some  excellent points,  and that  the bill  may need                                                               
further work to cover all the concerns expressed.                                                                               
Number 1310                                                                                                                     
GRIZ  SMITH, President,  Alaska Pyrotechnic  Guild, Inc.  (APGI),                                                               
testified via teleconference.   He informed the  members that the                                                               
guild is the state's only  manufacturing and display company.  It                                                               
held an emergency  meeting on March 9, 2002, to  form a consensus                                                               
of the proposed  changes with respect to HB 487.   He referred to                                                               
Sec. 18.72.020(a) and gave the following testimony:                                                                             
     The  APGI, the  Alaska Pyrotechnic  Guild, Inc.,  feels                                                                    
     very strongly that insurance  requirements should in no                                                                    
     way be reduced  but rather should be increased.   As an                                                                    
     example, ... the  Miller's Reach fire was  in excess of                                                                    
     $11  million in  firefighting costs  alone.   This does                                                                    
     not  include the  property  damage, temporary  housing,                                                                    
     relief  agency expenditures,  or  any  of the  numerous                                                                    
     costs associated  with this disaster.   We suggest that                                                                    
     a  more  appropriate level  of  insurance  would be  $5                                                                    
     million in liability coverage,  including $2 million in                                                                    
     premise/operation coverage, and  increased coverage for                                                                    
     bodily injury damage to $4 million  per occurrence.  We                                                                    
     feel  that  as infraction  has  increased  the cost  of                                                                    
     living, medical  costs, and  replacement values,  it is                                                                    
     logical    to   increase    the   insurance    coverage                                                                    
     requirements to reflect this.                                                                                              
     Additionally, we  feel another  point should  be raised                                                                    
     with  regard   to  the  liabilities  of   the  sale  of                                                                    
     fireworks  to  the  general public.    Considering  the                                                                    
     bartender  who serves  a  customer,  then the  customer                                                                    
     leaves  the  server's  premises,   the  server  has  no                                                                    
     control over  the ensuing actions of  the customer, yet                                                                    
     can  be   held  accountable   in  civil   and  criminal                                                                    
     proceedings for  the actions of  his customer.   Should                                                                    
     it  not be  the case  of the  best interest  of similar                                                                    
     aggressive parties  to be able  to pay for  the medical                                                                    
     expenses or replacement of  a dwelling incurred through                                                                    
     no  fault   of  their   own,  other  than   having  the                                                                    
     misfortune  of being  in the  proximity  of a  careless                                                                    
Number 1510                                                                                                                     
MR. SMITH referred to Sec. 18.72.035 and gave the following                                                                     
     The  APGI disagrees  with the  wording of  this section                                                                    
     for  several  reasons.    For  a  fireworks  production                                                                    
     company/wholesaler  to deliver  a show  to a  customer,                                                                    
     the  product  must  be  sold  and  transferred  to  the                                                                    
     sponsor.   This section therefore restricts  the option                                                                    
     that a wholesaler  can sell or that a  customer can buy                                                                    
     to  produce the  legally  permitted  show, which  often                                                                    
     includes both  class C and class  B pyrotechnic devices                                                                    
     of many  types, which  are now not  necessarily aerial.                                                                    
     No  distinction is  made of  types or  classes in  this                                                                    
     language.   While the APGI  recognizes the  intent [of]                                                                    
     the  language is  to address  the dry  season potential                                                                    
     for fire,  we feel the  language is too broad  in scope                                                                    
     and  restrictive to  professionally produced  shows for                                                                    
     professional  pyrotechnics  are   already  required  to                                                                    
     comply with  the plethora of  laws and  regulations set                                                                    
     down  by   the  USDOT  [United  States   Department  of                                                                    
     Transportation], the  BATF [Bureau of  Alcohol, Tobacco                                                                    
     and   Firearms],   NFPA   [National   Fire   Protection                                                                    
     Association],  USCG  [United  State Coast  Guard],  the                                                                    
     Alaska   Department  of   Public   Safety,  and   local                                                                    
     agencies.   We  feel  restrictions of  this nature  may                                                                    
     only lead to further  restriction of our already highly                                                                    
     regulated  trade  and  the  manner   in  which  we  are                                                                    
     permitted  to display  fireworks for  the enjoyment  of                                                                    
     the people of Alaska.                                                                                                      
Number 1600                                                                                                                     
MR. SMITH referred to Sec. 18.72.045 and gave the following                                                                     
     Many different  types of violations occur  all the time                                                                    
     by  unscrupulous display  operators -  for an  example,                                                                    
     using  a  rented  box  van   without  any  placards  to                                                                    
     transport  fireworks.     The   APGI  feels   that  the                                                                    
     amendment should address more  than just a violation of                                                                    
     this     chapter.         It    should     include    a                                                                    
     provision/regulation  authorizing  the  enforcement  of                                                                    
     any  and  all  applicable  federal,  state,  municipal,                                                                    
     borough,  and  community  rules  and  regulations  with                                                                    
     regard    to   the    purchase,   sale,    manufacture,                                                                    
     transportation,  and   other  activities   relating  to                                                                    
     fireworks.   For an  example, if a  violation of  a DOT                                                                    
     regulation occurred  in the  North Slope  Borough, this                                                                    
     could  be  difficult  in regard  to  the  reporting  of                                                                    
     enforcement of  it.  The  APGI believes the  state fire                                                                    
     marshal's   office  should   have   the  authority   to                                                                    
     investigate  all   DOT,  NFPA,  and  ATF,   et  cetera,                                                                    
     violations.   This  should  not be  a  problem, as  the                                                                    
     agency has already adopted the  laws and regulations of                                                                    
     these agencies as policies.                                                                                                
Number 1690                                                                                                                     
     Additionally,  the  APGI  believes  a  $1,000  fine  is                                                                    
     minimal.   The fine  should be  increase to  $5,000 per                                                                    
     occurrence.   The APGI agrees with  this amendment with                                                                    
     clarification  and  a  larger  fine.   We  propose  the                                                                    
     amendment  read   as  follows:    "a   regulation  that                                                                    
     includes;  subject  to  any  and  all  state,  federal,                                                                    
     borough,   city,   and   community  laws,   rules   and                                                                    
     regulations   pertaining   to  the   purchase,   sales,                                                                    
     manufacturing, transportation, storage,  and display of                                                                    
     fireworks by any and all  federal and state regulations                                                                    
     that a  person or  persons who recklessly  violates the                                                                    
     provision in  this chapter is  liable after  notice and                                                                    
     opportunity for a hearing to  the State of Alaska for a                                                                    
     civil penalty of $5,000 or more each violation."                                                                           
MR.  SMITH referred  to  Sec. 18.72.080  and  gave the  following                                                               
     The APGI  agrees with and  supports the formation  of a                                                                    
     fireworks  advisory  committee  as  described  in  this                                                                    
     amendment.   The APGI would  like to thank you  for the                                                                    
     opportunity  to express  our opinions  and concerns  on                                                                    
     this  matter.   We commend  you on  the intent  of this                                                                    
     legislation  to   make  our  industry  safer   for  all                                                                    
     Alaskans.   We recognize that the  legislators' time in                                                                    
     session is  limited and valuable,  and believe  that an                                                                    
     amended bill  which addresses our concerns  will enable                                                                    
     the  language to  withstand potential  unconstitutional                                                                    
     challenges with regard to restriction of trade.                                                                            
Number 1888                                                                                                                     
GARY  POWELL,  Director/State  Fire  Marshal,  Division  of  Fire                                                               
Prevention,   Department   of   Public  Safety,   testified   via                                                               
teleconference.   He pointed out that  the insurance requirements                                                               
have not changed in the  new bill; the existing requirements were                                                               
exactly the  same.  Part of  the confusion may be  that the scope                                                               
of  HB 487 is  to  address  retail fireworks  sales  and not  the                                                               
pyrotechnic  displays;  if there  is  confusion,  however, it  is                                                               
probably a good idea to hold  it over and clarify the pyrotechnic                                                               
REPRESENTATIVE FATE asked  how many members are in  the APGI, and                                                               
how many retailers are in the state.                                                                                            
MR. POWELL  replied that there is  an average of about  18 retail                                                               
licenses  per  year.     So  far  this  year,   only  eight  have                                                               
registered, but typically, there will  be more the closer it gets                                                               
to the Fourth of July.                                                                                                          
MR. SMITH  told Representative Fate that  there are approximately                                                               
50 licensed display operators in the state of Alaska.                                                                           
CHAIR COGHILL announced that HB 487 would be held over.                                                                         
The committee took an at-ease from 8:34 a.m. to 8:35 a.m.                                                                       
HJR 14 - CONST. AM: PERMANENT FUND                                                                                            
CHAIR COGHILL announced that the  next order of business would be                                                               
SPONSOR SUBSTITUTE  FOR HOUSE JOINT RESOLUTION  NO. 14, Proposing                                                               
amendments to  the Constitution of  the State of  Alaska relating                                                               
to the Alaska permanent fund.                                                                                                   
Number 2099                                                                                                                     
REPRESENTATIVE CRAWFORD, sponsor, said  SSHJR 14 is being brought                                                               
forward  with  a  bit  of  reluctance  because  of  the  possible                                                               
implications.    He  and   cosponsor  Representative  Croft  feel                                                               
compelled  to do  this mainly  because  of the  direction of  the                                                               
talks in  the long-term fiscal  policy [caucus].  When  the long-                                                               
term fiscal policy  caucus was started over a year  ago, the talk                                                               
was about going to the percent  of market value payout (POMV) for                                                               
the permanent fund, and using  1 percent of that 5 percent payout                                                               
for general  fund type  spending.   As the  talks went  along, it                                                               
quickly went to 50 percent of the  payout.  A week or two ago, it                                                               
was  up  to  60 percent  of  the  payout:    40 percent  for  the                                                               
operating budget, 20  percent for the capital  [budget], and only                                                               
40 percent for the dividend.                                                                                                    
REPRESENTATIVE  CRAWFORD  said  he  feels there  needs  to  be  a                                                               
protection for the dividend.  The  dividend is one of the state's                                                               
most important programs.   Over the last decade,  Alaska has been                                                               
the only  state in the  Union in which  the bottom 25  percent of                                                               
people,  based on  income,  haven't  lost ground  to  the top  25                                                               
percent.   The dividend and  its effect is  the reason why.   The                                                               
dividend serves so  many good purposes throughout the  state.  It                                                               
provides  a cash  economy throughout  rural Alaska  that wouldn't                                                               
necessarily be  there without it.   He said  he has been  told if                                                               
the permanent  fund is  curtailed or taken  away, it  will damage                                                               
the  economy.   He wants  to get  this discussion  out there,  he                                                               
said, and  Representative Croft has  suggested a way  to mitigate                                                               
the tax consequences.                                                                                                           
Number 2306                                                                                                                     
REPRESENTATIVE  ERIC CROFT,  Alaska State  Legislature, cosponsor                                                               
of  HJR  14, agreed  there  are  people  in  the state  and  many                                                               
legislators  who  would  like to  provide  reassurance  that  the                                                               
dividend program  will stay.   The  most consistent  criticism of                                                               
the  1999  fiscal plan  was  that  there  were no  sideboards  on                                                               
government's growth  or government's  access to funds;  no limits                                                               
were  defined.   He  and  Representative  Crawford had  discussed                                                               
defining limits, which  led them to introduce a tax  cap, and HJR
14 came out  of the discussion.   He said, "If you  provide a tax                                                               
cap and you provide a limit  on the amount that government can go                                                               
into  the dividend  fund, you  have  effectively constrained  the                                                               
growth  by limiting  the places  they can  go."   The combination                                                               
might be  a way to give  confidence to the public  that there are                                                               
certain limits  and to provide  a general limitation on  how much                                                               
government could grow in the "out"  years.  He said, "It seems to                                                               
me, it's  an important  consideration whether  you want  a fiscal                                                               
plan or not, or  want a specific fiscal plan or not.   You can be                                                               
for something like this solely on protecting the dividend."                                                                     
REPRESENTATIVE CROFT said he believes  a majority of Alaskans and                                                               
many  legislators  would  like  to protect  the  dividend.    The                                                               
problem is the danger of federal taxation of the dividend.                                                                      
REPRESENTATIVE  CROFT stated  that  there would  probably be  two                                                               
levels  of discussion:    "Do we  want  to do  this  as a  policy                                                               
matter?" and "Even  if we want to do  it, can we do it  in such a                                                               
way that  we can minimize the  risk ... or assure  ourselves that                                                               
the risk is small that that  taxation would happen?"  He told the                                                               
members that  he was asked  by Representative Crawford  for legal                                                               
advice  to put  together ways  that  would protect  it from  that                                                               
taxation issue.   He explained that there are sort  of three ways                                                               
to justify  the non-tax  status [of  the corporation],  and those                                                               
ways are encompassed in HJR 14.                                                                                                 
Number 2485                                                                                                                     
REPRESENTATIVE CROFT noted that  the permanent fund board pointed                                                               
out that all  of these cases can go  on for a long time.   If the                                                               
Internal  Revenue  Service (IRS)  initially  ruled  that it  [the                                                               
permanent  fund] was  taxable, then  there would  be a  three- or                                                               
four-year litigation.   To be prudent money  managers, they would                                                               
have to escrow  the potential tax liability for those  years.  He                                                               
said,  "We don't  want them  to do  that, so  we've presented  an                                                               
amendment that takes that section [out]."                                                                                       
REPRESENTATIVE  CROFT indicated  that  he had  asked Tamara  Cook                                                               
[Director, Legislative  Legal and  Research Services]  to present                                                               
an  amendment   that  essentially  adds  two   protections.    He                                                               
     The amendment says  if the IRS rules that  you might be                                                                    
     taxable,  we're  going to  suspend  this  for a  while,                                                                    
     while that  litigation occurs.   So,  at the  most, you                                                                    
     have to  escrow one  year.   If it  actually determines                                                                    
     against  us, then  it  drops  out.   It's  sort of  two                                                                    
     levels  of protection  within  the  constitution.   The                                                                    
     third protection,  if you  will, is  an attempt  to put                                                                    
     legislative  findings  and  intent  on  the  record  to                                                                    
     buttress our potential case if it comes to that.                                                                           
REPRESENTATIVE CROFT noted that  a legislative letter of findings                                                               
to  accompanying [HJR  14; copy  in packets]  has been  submitted                                                               
that hopefully  would help  that case  by having  the legislature                                                               
declare, "We are an instrumentality  of the state, that we should                                                               
be considered in that way."                                                                                                     
REPRESENTATIVE  CROFT referred  to a  1998 legal  opinion to  Jim                                                               
Baldwin  [of  the  Department  of   Law]  that  talks  about  the                                                               
development  of cases  in the  last ten  years.   He said  he was                                                               
heartened by  a Michigan  educational trust case  out of  the 6th                                                               
Circuit [Court  of Appeals]  that deals  with states'  setting up                                                               
educational  trusts so  people can  invest  in them  and use  the                                                               
money for tuition.  The advantage is  that it is tax-free.  It is                                                               
set up  as a separate  corporation in  Michigan.  The  funds came                                                               
from the individual people putting money  in; it was managed by a                                                               
board.    There  were  a   number  of  similarities  to  Alaska's                                                               
[permanent  fund]  and  number  of   ways  Michigan  had  a  more                                                               
difficult case because it started  with separate funds, not state                                                               
funds like  Alaska's.   Nevertheless, the  6th Circuit  [Court of                                                               
Appeals] agreed that it was exempt from taxation.                                                                               
Number 2663                                                                                                                     
REPRESENTATIVE CROFT  said that case  should give some  solace to                                                               
Alaska in  that it is in  the right direction and  positive.  The                                                               
IRS  didn't  like  that  ruling and  fought  it,  and  eventually                                                               
Congress  was  compelled to  agree  that  the Michigan  case  was                                                               
exempt.   He commented that  the IRS  was so troublesome  in this                                                               
that  eventually  Congress  just  authorized  educational  trusts                                                               
explicitly to  get the IRS off  this issue.  He  told the members                                                               
that there is  a window here, if it's done  carefully, to protect                                                               
the  dividend.    This  doesn't  enshrine  the  current  dividend                                                               
structure.   It  allows the  dividend  structure, but  it sets  a                                                               
floor of no  less than 50 percent.  [HJR 14]  would enshrine some                                                               
protection for the dividend, put  some general limitations on the                                                               
growth  of state  government,  and do  it in  a  way, if  written                                                               
right, that  will not result in  the taxation of the  fund, which                                                               
no one wants.                                                                                                                   
Number 2715                                                                                                                     
CHAIR COGHILL  asked Representative Croft to  explain Amendment 1                                                               
before  it  was  offered.    Amendment  1,  22-LS0526\O.1,  Cook,                                                               
3/26/02, read:                                                                                                                  
     Page 2, lines 5 - 8:                                                                                                       
          Delete all material and insert:                                                                                       
          "Section   30.      Suspension   and   Repeal   of                                                                  
     Subsection.  (a)  Notwithstanding  Section 1 of Article                                                                  
     XIII, Section 15(c)  of Article IX is  suspended on the                                                                    
     date  of  an  initial  determination  by  the  Internal                                                                    
     Revenue Service that all or  a portion of the permanent                                                                    
     fund is  subject to federal  taxation.   The suspension                                                                    
     is terminated on  the date Section 15(c)  of Article IX                                                                    
     is  repealed under  (b)  of this  section  or 180  days                                                                    
     after the  date of  a final, nonappealable  judgment or                                                                    
     order by  a federal court  deciding that no  portion of                                                                    
     the  permanent   fund  would  be  subject   to  federal                                                                    
     taxation  as a  result  of the  application of  Section                                                                    
     15(c) of Article IX.                                                                                                       
          (b)  Notwithstanding Section 1 of Article XIII,                                                                       
     Section 15(c) of Article IX  is repealed 180 days after                                                                    
     the date  of a final,  nonappealable judgment  or order                                                                    
     by a  federal court deciding  that all or a  portion of                                                                    
     the permanent fund is subject to federal taxation.                                                                         
          (c)  In this section, "final, nonappealable                                                                           
     judgment or""                                                                                                              
Number 2824                                                                                                                     
REPRESENTATIVE  CROFT told  the  members that  Ms.  Cook and  the                                                               
permanent fund board had explained  that the more the court cases                                                               
drag on,  no one wants to  be escrowing money for  every year the                                                               
case goes on.  So, the effect  of adopting Amendment 1 is to have                                                               
two  levels of  protection, and  Ms. Cook  had separated  it into                                                               
sections (a), (b), and (c) of  the amendment.  He said he thought                                                               
the amendment was a good idea to further protect this issue.                                                                    
Number 2872                                                                                                                     
JIM  KELLY, Director  of  Communications,  Alaska Permanent  Fund                                                               
Corporation  (APFC), Department  of Revenue,  told the  committee                                                               
that  the  Board  [of  Trustees  of  the  Alaska  Permanent  Fund                                                               
Corporation]  looked  at  the  proposals  still  pending  in  the                                                               
legislature  relating to  the permanent  fund, which  resulted in                                                               
the letter signed  by Jim Sampson [in the members'  packet].  The                                                               
letter synthesizes  where the  board stands in  terms of  all the                                                               
legislation pending  on that  subject.   Regarding [HJR  14], the                                                               
board  is very  supportive of  the first  15 lines  of the  first                                                               
page; it encourages  the passage of that  legislation.  Regarding                                                               
the additional  language at the end  of the bill, he  quoted from                                                               
page 2 the letter, which read in part:                                                                                          
      In simple words, the Board is concerned that putting                                                                      
      the dividend program into the constitution would put                                                                      
        the Fund at risk by jeopardizing its current tax-                                                                       
     exempt  status.   We understand  that some  legislative                                                                    
     members   may  believe   it   is   possible  to   draft                                                                    
     constitutional language which  would mitigate the risk.                                                                    
     In our view, the risk/reward benefits are not there.                                                                       
MR.  KELLY  noted  that  this   is  a  very  conservative  board.                                                               
Although it deals  in the business of risk and  return, this is a                                                               
significant risk.  If the desire  is to protect the dividend, the                                                               
board would  argue that the best  way to protect the  dividend is                                                               
to  pass  the  legislation  as  originally  proposed.    The  "do                                                               
nothing" approach to the legislation  proposed by the trustees is                                                               
what puts  the dividend  at risk, not  the concern  about whether                                                               
the dividend  program is going  to end.   It is the  most popular                                                               
program in  the state of Alaska  and probably in the  country, he                                                               
TAPE 02-36, SIDE B                                                                                                              
Number 2989                                                                                                                     
MR.  KELLY said  "In terms  of the  first part  of the  bill, the                                                               
constitutional amendment  that would place the  new language into                                                               
the constitution  that would  limit the  payout of  the permanent                                                               
fund income  each year to  5 percent  of the fund's  market value                                                               
averaged over  the last  five years.   That  is the  board's best                                                               
perspective  on  how  to  protect the  fund;  how  to  completely                                                               
inflation-proof  the fund  for future  generations."   There  are                                                               
several good points  about passing that portion of  the bill [the                                                               
first 15 lines],  he commented.  It allows the  people to vote on                                                               
what should  be done to the  permanent fund, and it  does provide                                                               
sideboards to future spending.                                                                                                  
MR.  KELLY stated  that the  spending limit  makes sure  that the                                                               
fund  is going  to be  completely protected  for the  future, and                                                               
that the income it will be able  to produce for every year in the                                                               
future will grow  in real dollar terms, but it  also ensures that                                                               
there will be  a significant amount of money to  debate about how                                                               
to use in future years, which  maybe won't happen if this kind of                                                               
a limit isn't established.                                                                                                      
MR.  KELLY explained  that in  the last  25 years,  the permanent                                                               
fund has  produced about $25  billion worth  of income.   A large                                                               
portion  of that  has been  put back  into the  fund to  grow and                                                               
protect against inflation.  About  $10 billion to $11 billion has                                                               
been paid out.  Over the next  25 years, if the fund is protected                                                               
in the way  that the trustees are proposing, the  amount of money                                                               
that would be  available for distribution is  probably four times                                                               
that  amount -  $40  billion,  which is  a  large  number all  by                                                               
itself.   It's also  twice as  much as can  be expected  from oil                                                               
according  to the  projections from  the  Department of  Revenue.                                                               
So, it is the single largest  source of money that the state has,                                                               
and this is the way to protect and ensure it.                                                                                   
Number 2863                                                                                                                     
CHAIR COGHILL  asked Mr.  Kelly to comment  on enshrining  the 50                                                               
percent payout constitutionally.                                                                                                
MR. KELLY  said the board has  never varied on that  point.  It's                                                               
the board's  job to  protect the  money and  to grow  the income;                                                               
it's the legislature's job to decide how to use the income.                                                                     
CHAIR COGHILL  referred to Section 2  of SSHJR 14, Section  30 of                                                               
Amendment 1, and asked if the board had studied that issue.                                                                     
MR. KELLY answered that the  amendment hasn't been looked at, but                                                               
the board  did look at the  sponsor substitute for HJR  14 at its                                                               
meeting.   It didn't have  the benefit  of its legal  counsel, so                                                               
the resolution wasn't reviewed as  thoroughly.  He noted that the                                                               
board's position hasn't changed much  over the years.  This issue                                                               
has been before it for a long time,  and the risk is such that it                                                               
advises going forward without it.                                                                                               
Number 2790                                                                                                                     
MR.  KELLY  said  one  of  the  concerns  that  legislators  have                                                               
expressed to  the board this year  is that they were  afraid that                                                               
the citizens wouldn't  be very supportive of  this proposal; they                                                               
would consider  it to be tinkering  with the permanent fund.   He                                                               
called  attention to  a vote  taken  in Anchorage  two days  ago.                                                               
Proposition No.  4 was before  the voters to amend  the municipal                                                               
charter to basically  do the same thing to their  trust fund that                                                               
is being proposed to be done  to the state's permanent fund.  The                                                               
voters supported  it by a 70-percent  margin.  He noted  that the                                                               
board believes that if this  were placed before the voters, there                                                               
would be a lot of support for it.                                                                                               
Number 2685                                                                                                                     
REPRESENTATIVE  FATE  asked  if   there  is  a  spreadsheet  that                                                               
projects into the future what  the permanent fund corpus would be                                                               
provided  it went  to the  5 percent  of the  last five  years on                                                               
percent of market value.                                                                                                        
MR.  KELLY answered  that there  is  such a  spreadsheet, but  he                                                               
didn't have it with him.                                                                                                        
REPRESENTATIVE  FATE  asked  if   the  spreadsheet  reflects  the                                                               
possible legislation  of reducing it  back to 25  percent instead                                                               
of 50 percent.                                                                                                                  
MR. KELLY  replied that  the one  they have does  not.   He asked                                                               
Representative Fate if he was  asking about just the principal or                                                               
total funds.                                                                                                                    
REPRESENTATIVE FATE said the principal.                                                                                         
MR. KELLY said there is a spreadsheet that relates to that.                                                                     
REPRESENTATIVE FATE requested that a copy be sent to his office.                                                                
Number 2598                                                                                                                     
REPRESENTATIVE  CRAWFORD   moved  to  adopt  Amendment   1  [text                                                               
provided previously].                                                                                                           
REPRESENTATIVE FATE objected.  He said  he has a problem with the                                                               
whole concept.  Even though this  may mitigate the problem of IRS                                                               
taxation, there  has been no testimony  to assure that.   He said                                                               
he isn't  sure voting on  the amendment is the  way to go  if the                                                               
legislation isn't  either going to  get out of committee  or pass                                                               
at all.  He  said it seems to him that  "they're putting the cart                                                               
before the horse."                                                                                                              
REPRESENTATIVE  CROFT reiterated  that Amendment  1 adds  another                                                               
level of protection.   If this committee chooses not  to pass the                                                               
resolution out,  he encouraged the  committee to clean it  up and                                                               
get  it in  the best  form.   This goes  some way  toward meeting                                                               
those  concerns,  although whether  it  goes  all  the way  is  a                                                               
legitimate disagreement.                                                                                                        
REPRESENTATIVE  JAMES said  she doesn't  have a  problem amending                                                               
the  resolution.   She  agreed with  Representative  Fate on  the                                                               
conclusion of  this piece of legislation.   She said it  seems to                                                               
her that  the dividend is the  first thing to talk  about in even                                                               
getting a fiscal  plan.  She acknowledged that there  are lots of                                                               
solutions and concerns  about the dividend, and this  bill is one                                                               
suggestion.  She  said she would like to see  every suggestion in                                                               
a row,  and talk  about them all.   She agrees  there won't  be a                                                               
conclusion to  this issue  in this  legislative session,  but she                                                               
said the public needs to be fully informed.                                                                                     
Number 2450                                                                                                                     
A roll  call vote  was taken.   Representatives  Crawford, Hayes,                                                               
James, and  Coghill voted for  Amendment 1.   Representative Fate                                                               
voted against it.   Therefore, Amendment 1 was adopted  by a vote                                                               
of 4-1.                                                                                                                         
CHAIR COGHILL  said the broader question  is how to proceed  as a                                                               
policy matter, not  only with the 5 percent issue,  which has had                                                               
some discussion  in this committee,  but on enshrining it  in the                                                               
constitution -  at least  50 percent  of the  amount appropriated                                                               
under  this 5  percent  payout during  the fiscal  year.   He  is                                                               
reluctant to  do that, he said.   The only advantage  that he can                                                               
see is  the fact  that then  it would go  before the  voters, and                                                               
they would  be faced with  what to  do with the  dividend, rather                                                               
than having  the "dirty rascals down  in Juneau" do it.   He said                                                               
he thinks that  the tax question begs so strongly,  and there are                                                               
other  avenues  to getting  that  question  out; he  would  speak                                                               
against it.                                                                                                                     
Number 2381                                                                                                                     
REPRESENTATIVE CRAWFORD agreed the question  has been there for a                                                               
number of  years.  He  said he  believes in putting  the language                                                               
in.  If it's wrong, the  question will be decided, and then he'll                                                               
rest the case.  He said he  doesn't believe that it puts the fund                                                               
at  risk  if the  constitutional  amendment  the people  vote  on                                                               
states  that if  the IRS  rules this  is taxable  and the  courts                                                               
agree, then  it'll be  dropped from the  constitution.   He would                                                               
like to  have this  question answered not  only for  his children                                                               
but his  grandchildren.   Due to the  dividend, his  children are                                                               
going to  be able  to go  to college and  start life  out without                                                               
being  in debt.   He  would like  that for  his grandchildren  as                                                               
REPRESENTATIVE  CRAWFORD   said  Alaskans  hold   the  subsurface                                                               
mineral  rights in  common, not  individually,  and the  dividend                                                               
goes  out to  people  in  common, without  respect  to income  or                                                               
anything else.  Being a citizen  of Alaska gives one the right to                                                               
that income.   He would  like that renewable dividend  to benefit                                                               
many generations to come.                                                                                                       
Number 2259                                                                                                                     
REPRESENTATIVE  JAMES   acknowledge  that  she,  too,   wants  to                                                               
maintain a  healthy dividend  over the  long term.   If  there is                                                               
agreement how to  do it, it can be done  statutorily.  She agreed                                                               
with Representative Crawford  that it has been a big  boon to the                                                               
low-income people in  the state.  But the  demographics show that                                                               
there  are more  low-income people  now than  there were  before.                                                               
There is some anecdotal information  and some real cases where it                                                               
shows that people  have come to Alaska for that  very reason, she                                                               
REPRESENTATIVE JAMES  commented that she didn't  have any problem                                                               
with helping "our"  disabled and poor; there is  an obligation to                                                               
do that.   She said she doesn't  want to take care  of those from                                                               
other states.   She said  she doesn't believe that  Alaska should                                                               
become a  magnet state for  that reason.   People should  come to                                                               
Alaska because it is a great place to live.                                                                                     
REPRESENTATIVE JAMES  said she  believes that  a dividend  can be                                                               
maintained over the  long term.  It is the  very first thing that                                                               
needs to  be addressed before  dealing with  a fiscal plan.   The                                                               
dividend  is the  issue  that  has kept  the  legislature in  the                                                               
direction it's going, which is a very hurting position.                                                                         
Number 2170                                                                                                                     
REPRESENTATIVE  JAMES commented  that there  are nearly  tears in                                                               
the eyes  of people who are  trying to provide K-12  education in                                                               
Alaska without sufficient  funding.  To hold  this issue hostage,                                                               
which is  what's being  done, is painful  to her,  she commented.                                                               
She said she believes that the  permanent fund was set up so that                                                               
the money  wouldn't be blown; it  would be saved for  some future                                                               
time when  there wouldn't  be enough money  for things  the state                                                               
REPRESENTATIVE  JAMES  explained  that  when Alaska  was  made  a                                                               
state, the  federal government disagreed  that Alaska  would ever                                                               
be  able  to support  itself;  that  is  the reason  the  federal                                                               
government  gave the  subsurface  rights to  the  state, and  the                                                               
state can't give them away.   The state needs them to support not                                                               
only the  poor and disabled people,  but also those who  are able                                                               
and working  and expanding their  abilities to get some  place in                                                               
their lives.   There  needs to  be a way  of balance  and support                                                               
over the long term.                                                                                                             
Number 2105                                                                                                                     
REPRESENTATIVE JAMES acknowledged  that one of the  reasons it is                                                               
so difficult to get a fiscal  plan is because "which comes first,                                                               
the  chicken or  the  egg?"   If  something  isn't  done soon  to                                                               
increase the economic  activity and create wealth  in Alaska, she                                                               
said, "We'll  just funnel ourselves  down into a little  pit, and                                                               
we'll never be  able to see out  over the top of the  hole."  The                                                               
big picture has to be looked at.   The state needs to spend time,                                                               
money, and  effort to  create new  opportunities for  people, and                                                               
the  state needs  to wean  itself off  dependency on  the federal                                                               
REPRESENTATIVE  JAMES  declared that  Alaska  is  a great  state.                                                               
There are huge  resources, the environment can  be protected, and                                                               
the  old and  young can  be  taken care  of, if  people can  work                                                               
together  on this  issue.   She  stated that  the permanent  fund                                                               
dividend is  what is holding  them back.   She has heard  for ten                                                               
years that  same fear in  every single legislator this  year that                                                               
"we have  to keep giving this  money away to them;  otherwise, we                                                               
cannot  make  a decision  on  how  we  should  go forward.    She                                                               
commented, "If we  don't figure out how  to do that soon  - and I                                                               
don't have an answer, I have lots  of ideas - ... but if we don't                                                               
get that idea solved first, we'll never get to the next part."                                                                  
Number 2016                                                                                                                     
REPRESENTATIVE  JAMES   said  she  is   not  willing  to   put  a                                                               
constitutional amendment  before the  public [for  a vote].   She                                                               
commented, "Of course it's popular  when you're giving a check in                                                               
October!  Who wouldn't like that?   The only people we're hearing                                                               
that don't like it  are the people who want to  have money in the                                                               
education and other important issues.   Those are the people that                                                               
[say], 'I'll  give up my dividend  in a heartbeat if  we can just                                                               
get some money,'  and we can't get some money  until we deal with                                                               
the  dividend issue."   Something  that seems  compatible to  the                                                               
public must  be done,  she indicated.   These  issues need  to be                                                               
discussed  with the  public this  summer before  the election  so                                                               
people know what the consequences will be of these decisions.                                                                   
REPRESENTATIVE JAMES assured  the members that they  will be able                                                               
to get there.   They are all  trying to do the  right thing; they                                                               
just  may not  all be  on  the same  page.   She  added that  she                                                               
doesn't  want  to discount  the  makers  of this  legislation  or                                                               
anyone else who comes  to testify.  It is a  tough issue that has                                                               
to be faced.                                                                                                                    
Number 1915                                                                                                                     
REPRESENTATIVE  HAYES stated  that he  supports moving  this bill                                                               
from committee because  there are not any attorneys  on the House                                                               
State  Affairs  Standing  Committee.     There  are  a  few  more                                                               
safeguards  in going  to the  House Judiciary  Standing Committee                                                               
and  House  Finance  Committee.    He  would  like  to  see  more                                                               
discussion on this bill in the other committees, he commented.                                                                  
REPRESENTATIVE  FATE indicated  that wasn't  sure whether  he was                                                               
willing to  go forward as a  policy issue, not whether  or not it                                                               
should go  to another committee.   He wondered whether  5 percent                                                               
of the last  five years' average of the POMV  would be enough for                                                               
the state  to grow  or keep  up with growth  if it  should occur.                                                               
Alaska has been  subsisting under a low-growth economy.   He sees                                                               
[HJR 14] as  holding back the kind of economic  expansion that is                                                               
needed, he noted.   This is his fear as a  policy matter.  Alaska                                                               
can't stay  stagnant.   The economy  needs to  be increased.   He                                                               
said  he's afraid  that this  bill, with  these strictures,  will                                                               
just maintain it.                                                                                                               
MR. KELLY responded to Representative  Fate that 1 percent of the                                                               
fund's market value of $25 billion  is $250 million, so 5 percent                                                               
is $1  billion, 250 million.   Last year a little  over a billion                                                               
dollars was paid out for dividends.   At the very least, it is an                                                               
increase that  allows for an  increased payment compared  to what                                                               
is done now, he said.  The 5  percent was chosen because it is on                                                               
the high end of achievable for  what the fund can accomplish with                                                               
the asset allocation that it already has in the statutes.                                                                       
Number 1688                                                                                                                     
MR. KELLY  explained that  there could  be a 6,  7, or  8 percent                                                               
payout,  but the  question would  be, "Would  that give  you more                                                               
money over time?"  The answer is,  "It would not."  If there were                                                               
even a 6 percent payout over  the next 25 years, less money would                                                               
be paid out than  with a 5 percent payout.  He  said 5 percent is                                                               
a balance.  It is a  number that balances the distribution of the                                                               
benefits  of the  permanent fund  between the  current generation                                                               
and the future  generations.  If a higher percentage  is paid out                                                               
over the  next 10  or 15  years, more  money will  be put  in the                                                               
economy, but then  future generations will get quite  a bit less.                                                               
He  said 5  percent is  the way  to pay  out the  most amount  of                                                               
money; it is the way for  individuals to get the most benefit out                                                               
of the permanent  fund and to add the most  money to the economy.                                                               
Every dollar of permanent fund income  paid out is new money into                                                               
the state.  It  is like an industry, so those  dollars need to be                                                               
maximized.  This proposal maximizes  those dollars, he noted, and                                                               
there is no doubt about that over the long term.                                                                                
REPRESENTATIVE FATE  asked if there  would be a reduction  of the                                                               
dividend  under  [this  legislation] compared  with  the  present                                                               
MR. KELLY said yes.                                                                                                             
REPRESENTATIVE FATE commented that his  point is that this money,                                                               
combined with  a broad-based  tax, will fill  the gap  but really                                                               
won't do  a great deal  to increase the infrastructure  so needed                                                               
to expand the economy.  "We'll just  stay the same way we are now                                                               
as we proceed into the future," he said.                                                                                        
MR. KELLY said  how the money is divvied up  is the legislature's                                                               
business.  But even if it  were to be 50-50 between the dividends                                                               
and the  government, $40 billion  dollars could be  expected over                                                               
the  next 25  years.   Half  of that,  if  it were  paid out  for                                                               
government, would  be $20 billion,  which is equal to  the amount                                                               
to be  expected from oil  over 25 years.   The permanent  fund is                                                               
big, he commented,  but it is not  able to do all things.   It is                                                               
not going  to be able to  solve all the state's  problems, but it                                                               
can, through  taking this step  [HJR 14], ensure that  its future                                                               
income stream  will be there.   It can  give $20 billion  over 25                                                               
years to use for government to promote economic development.                                                                    
Number 1405                                                                                                                     
CHAIR COGHILL announced that HJR 14 would be held over.                                                                         
HB 509 - ALASKA CHILDREN'S TRUST LICENSE PLATES                                                                               
Number 1363                                                                                                                     
CHAIR COGHILL  announced that the  final order of  business would                                                               
be  HOUSE BILL  NO. 509,  "An Act  relating to  Alaska children's                                                               
trust registration plates; and providing for an effective date."                                                                
Number 1302                                                                                                                     
AMY  ERICKSON, Staff  to  Representative  Lisa Murkowski,  Alaska                                                               
State Legislature,  presented HB 509 on  behalf of Representative                                                               
Murkowski,  sponsor.   She  explained that  HB  509 makes  Alaska                                                               
children's trust  license plates  available to any  commercial or                                                               
non-commercial  passenger  vehicle,  truck, bus,  van,  or  motor                                                               
home.  The  original version included motorcycles,  which was not                                                               
the intent of  the sponsor.  The motorcycle plates  are too small                                                               
to  accommodate   the  standard-sized  plate,  so   the  proposed                                                               
committee   substitute   excludes    motorcycles   and   includes                                                               
commercial and non-commercial vehicles.                                                                                         
CHAIR  COGHILL  moved to  adopt  CSHB  509, version  22-LS1641\C,                                                               
Ford,  4/1/02,  as   the  working  document.     There  being  no                                                               
objection, Version C was before the committee.                                                                                  
Number 1244                                                                                                                     
MS. ERICKSON  told the  committee that the  bill makes  one minor                                                               
change to Alaska Statute to  allow the Alaska children's trust to                                                               
market trust plates to commercial  motor vehicle owners.  Current                                                               
statutes only  allow owners of  non-commercial vehicles  to apply                                                               
for the plates.  This mirrors  the structure of the University of                                                               
Alaska plates  program.  The  small change in statute  will allow                                                               
the  trust to  respond  positively to  requests  by industry  and                                                               
private business to purchase the  plates for their fleet vehicles                                                               
and to  market sales to  an additional 56,000 vehicle  owners who                                                               
support  the  mission and  activities  of  the Alaska  children's                                                               
trust.  This  could boost the trust by  $5,650,000 for prevention                                                               
of neglect  and child abuse.   There is a one-time-only  $100 fee                                                               
for the plates.                                                                                                                 
MS.  ERICKSON explained  that the  trust was  established by  the                                                               
legislature in  1988, and  it is a  savings account  dedicated to                                                               
funding  community-based projects  to eliminate  child abuse  and                                                               
neglect.     The  trust  fund  grows   through  gifts,  bequests,                                                               
corporate     and    individual     contributions,    legislative                                                               
appropriations,  federal funds,  sales of  heirloom marriage  and                                                               
birth certificates, and the children's  trust plates.  Passage of                                                               
HB 509 will  greatly expand the children's  trust savings account                                                               
and the ability to fund  projects through grants.  She encouraged                                                               
the committee's support.                                                                                                        
Number 1115                                                                                                                     
MARY MARSHBURN, Director, Division  of Motor Vehicles, Department                                                               
of Administration,  testified via  teleconference.   She informed                                                               
the  committee that  there are  no costs  associated with  HB 509                                                               
because the  plates are already  on hand.  She  expressed support                                                               
for the proposed committee substitute.                                                                                          
Number 1068                                                                                                                     
GLENN GODFREY,  Commissioner, Department of Public  Safety; Board                                                               
Member,  Alaska Children's  Trust, testified  via teleconference.                                                               
He added  his support to this  bill.  Any support  for additional                                                               
funding  to help  protect Alaska's  children  is appreciated,  he                                                               
Number 1031                                                                                                                     
REPRESENTATIVE  JAMES  moved  to  report CSHB  509  [version  22-                                                               
LS1641\C,  Ford,   4/1/02]  out  of  committee   with  individual                                                               
recommendations and  the attached  fiscal note.   There  being no                                                               
objection,  CSHB 509(STA)  was reported  out of  the House  State                                                               
Affairs Standing Committee.                                                                                                     
There being no  further business before the  committee, the House                                                               
State  Affairs  Standing  Committee   meeting  was  adjourned  at                                                               
9:30 a.m.                                                                                                                       

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