Legislature(2003 - 2004)

04/06/2004 08:01 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 6, 2004                                                                                          
                           8:01 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bruce Weyhrauch, Chair                                                                                           
Representative Jim Holm, Vice Chair                                                                                             
Representative John Coghill                                                                                                     
Representative Bob Lynn                                                                                                         
Representative Paul Seaton                                                                                                      
Representative Max Gruenberg                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Ethan Berkowitz                                                                                                  
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 547                                                                                                              
"An  Act  relating  to  the  dividends  of  individuals  claiming                                                               
allowable absences; and providing for an effective date."                                                                       
                                                                                                                                
     - MOVED HB 547 OUT OF COMMITTEE                                                                                            
                                                                                                                                
HOUSE BILL NO. 476                                                                                                              
"An   Act   establishing   the   Alaska   Statehood   Celebration                                                               
Commission; and providing for an effective date."                                                                               
                                                                                                                                
     - MOVED CSHB 476(STA) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 527                                                                                                              
"An  Act  relating  to  the   Alaska  Securities  Act,  including                                                               
reports,  proxies,  consents, authorizations,  proxy  statements,                                                               
and other  materials, civil penalties,  refunds of  proceeds from                                                               
violations, restitution, and  investment adviser representatives;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
     - MOVED CSHB 527(STA) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 331                                                                                                              
"An Act  relating to federal  requirements for  governmental plan                                                               
and  other qualifications  for the  teachers' retirement  system,                                                               
the  public  employees'  retirement   system,  and  the  judicial                                                               
retirement system; and providing for an effective date."                                                                        
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 547                                                                                                                  
SHORT TITLE:PFD: DELAY PAYMENT FOR ALLOWABLE ABSENCES                                                                           
SPONSOR(S): STATE AFFAIRS                                                                                                       
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/29/04     3110       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/29/04     3110       (H)        STA, FIN                                                                                     
03/30/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
03/30/04                (H)        Heard & Held                                                                                 
                                   MINUTE(STA)                                                                                  
04/06/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
                                                                                                                                
BILL: HB 476                                                                                                                  
SHORT TITLE:AK STATEHOOD CELEBRATION COMMISSION                                                                                 
SPONSOR(S): REPRESENTATIVE(S) ANDERSON                                                                                          
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
02/16/04     2600       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
02/16/04     2600       (H)        STA, FIN                                                                                     
04/01/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
04/01/04                (H)        Heard & Held                                                                                 
                                   MINUTE(STA)                                                                                  
04/06/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
                                                                                                                                
BILL: HB 527                                                                                                                  
SHORT TITLE:ALASKA SECURITIES ACT                                                                                               
SPONSOR(S): STATE AFFAIRS                                                                                                       
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/01/04     2790       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/01/04     2790       (H)        STA, JUD, FIN                                                                                
03/09/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
03/09/04                (H)        Heard & Held                                                                                 
03/09/04                (H)        MINUTE(STA)                                                                                  
03/26/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
03/26/04                (H)        Scheduled But Not Heard                                                                      
04/01/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
04/01/04                (H)        Heard & Held                                                                                 
04/01/04                (H)        MINUTE(STA)                                                                                  
04/06/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
                                                                                                                                
BILL: HB 331                                                                                                                  
SHORT TITLE:RETIREMENT:TEACHERS/JUDGES/PUB EMPLOYEES                                                                            
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR                                                                                      
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
05/21/03     2070       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
05/21/03     2070       (H)        STA, L&C, FIN                                                                                
05/21/03     2070       (H)        FN1: ZERO(ADM)                                                                               
05/21/03     2070       (H)        GOVERNOR'S TRANSMITTAL LETTER                                                                
03/30/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
03/30/04                (H)        <Bill Hearing Postponed to                                                                   
                                   Thurs. 4/1/04>                                                                               
04/01/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
04/01/04                (H)        Scheduled But Not Heard                                                                      
04/06/04                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SHARON BARTON, Director                                                                                                         
Central Office                                                                                                                  
Permanent Fund Dividend Division                                                                                                
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions on behalf of the                                                                        
division during the hearing on HB 547.                                                                                          
                                                                                                                                
JIM SHINE, Staff                                                                                                                
to Representative Tom Anderson                                                                                                  
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Reviewed committee substitute (CS) to HB                                                                   
476, Version LS-1744\D, Utermohle, 4/2/04, on behalf of                                                                         
Representative Anderson, sponsor.                                                                                               
                                                                                                                                
VINCE USERA, Senior Securities Manager                                                                                          
Division of Banking, Securities & Corporations                                                                                  
Department of Community & Economic Development (DCED)                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions on behalf of the                                                                        
division during the hearing on HB 527.                                                                                          
                                                                                                                                
TERRY ELDER, Alaska Representative                                                                                              
Investment Company Institute (ICI)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and  answered questions during the                                                               
hearing on HB 527.                                                                                                              
                                                                                                                                
ANSELM STAACK, Chief Financial Officer                                                                                          
Division of Retirement & Benefits                                                                                               
Department of Administration (DOA)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified and answered  questions on behalf                                                               
of the division during the hearing on HB 331.                                                                                   
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 04-54, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
CHAIR  BRUCE WEYHRAUCH  called the  House State  Affairs Standing                                                             
Committee meeting  to order at  8:01 a.m.   Representatives Holm,                                                               
Seaton,  Coghill,  and Weyhrauch  were  present  at the  call  to                                                               
order.    Representatives  Lynn  and  Gruenberg  arrived  as  the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
HB 547-PFD: DELAY PAYMENT FOR ALLOWABLE ABSENCES                                                                              
                                                                                                                                
Number 0147                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH announced that the  first order of business would                                                               
be  HOUSE BILL  NO. 547,  "An Act  relating to  the dividends  of                                                               
individuals  claiming allowable  absences; and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
Number 0160                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON referred  to  a  [two-page chart]  listing                                                               
allowable absences from  the years 1999 to 2003  [included in the                                                               
committee packet].   He noted some of the amounts  of absences on                                                               
the  chart,  for  categories  such  as  "accompanied,"  "enrolled                                                               
college,"  "active  duty,"  and  "medical."   In  response  to  a                                                               
question from  Chair Weyhrauch, he  confirmed that the  chart was                                                               
prepared by the [Permanent Fund Dividend] Division.                                                                             
                                                                                                                                
Number 0245                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON moved to adopt HB 547 as a work draft.                                                                    
                                                                                                                                
CHAIR WEYHRAUCH objected for discussion purposes.                                                                               
                                                                                                                                
Number 0265                                                                                                                     
                                                                                                                                
SHARON BARTON, Director, Central  Office, Permanent Fund Dividend                                                               
Division, Department  of Revenue (DOR), offered  a brief overview                                                               
of the previously  mentioned chart.  She noted that  the chart is                                                               
an initial  response to  a request  from the  committee to  see a                                                               
breakdown  in the  numbers involved  in  the allowable  absences.                                                               
She  reminded the  committee that  it  had requested  information                                                               
regarding  "behavior patterns  beyond that,"  including how  long                                                               
people are  staying out [of Alaska]  and whether or not  they are                                                               
returning.  She explained that  the division has that information                                                               
stored, but  because of  the age  of its  computers, it  would be                                                               
labor  intensive to  retrieve the  information.   Notwithstanding                                                               
that,  she said  the  division would  carry  out the  committee's                                                               
request  "if it  ends  up being  pivotal  ... to  decision-making                                                               
here."                                                                                                                          
                                                                                                                                
Number 0388                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON offered his  understanding that the request                                                               
had been for the division to  take the applications at "six years                                                               
and  ten years,"  and follow  those  applications to  see if  the                                                               
allowable absences  ended with a  permanent fund  granted without                                                               
allowable absences or [if they were] terminated.                                                                                
                                                                                                                                
MS. BARTON  confirmed that was  true, but clarified that  is what                                                               
would be  "terribly labor intensive for  us to dig out  for you."                                                               
She  illustrated  that  it  would mean  taking  staff  away  from                                                               
important work in order to complete this request.                                                                               
                                                                                                                                
REPRESENTATIVE SEATON  asked if  following a single  year instead                                                               
of two years would cut the work in half.                                                                                        
                                                                                                                                
MS. BARTON answered that it  wouldn't matter.  She specified that                                                               
it's a  matter of  asking the computer  to track  each individual                                                               
applicant through  some 12 million records,  using an inefficient                                                               
system.  Manual  effort would be used to  program each individual                                                               
[search].  She  clarified, "So, it doesn't really  matter how far                                                               
back we go; once we get  into each individual record, [we] can go                                                               
back as far as that record goes."                                                                                               
                                                                                                                                
Number 0505                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM noted  [on the chart] that in  1999, only two                                                               
people were  listed under the category  of "secondary education,"                                                               
and since  then there have  been close to  1,000.  He  asked what                                                               
caused the change.                                                                                                              
                                                                                                                                
MS.  BARTON answered  that she  suspects that's  an error  in the                                                               
data.                                                                                                                           
                                                                                                                                
Number 0569                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH closed public testimony on HB 547.                                                                              
                                                                                                                                
REPRESENTATIVE  SEATON asked  Ms. Barton  if the  fiscal note  is                                                               
accurate,  or if  the division  would be  filing a  more detailed                                                               
one.                                                                                                                            
                                                                                                                                
MS.  BARTON confirmed  that more  work needs  to be  done on  the                                                               
fiscal  note  because  the  one before  the  committee  was  done                                                               
quickly for the last hearing.                                                                                                   
                                                                                                                                
Number 0608                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  said it bothered  him that  approximately $7                                                               
million is  being given  away and  Ms. Barton  had said  that the                                                               
division has an inefficient computer system with which to work.                                                                 
                                                                                                                                
MS.  BARTON said  she  thinks  the inefficiency  is  a result  of                                                               
different pieces of [the computer  system] being built at various                                                               
times  and not  working well  together.   She indicated  that the                                                               
division has submitted  a request for funds to  change the system                                                               
to a more cohesive one.  She offered details.                                                                                   
                                                                                                                                
REPRESENTATIVE HOLM  asked how the  processing of  permanent fund                                                               
dividend (PFD) checks is paid for.                                                                                              
                                                                                                                                
MS.  BARTON  replied that  the  division's  operations are  fully                                                               
funded out  of the PFD  fund.   In response to  another question,                                                               
she relayed that  updating the division's computer  system is now                                                               
the department's number one priority, as well as her own.                                                                       
                                                                                                                                
Number 0860                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  offered his understanding  that "this  assumes a                                                               
$50,000 expenditure ... in 2005."   He noted that the fiscal note                                                               
does not clarify "what that would be going for."                                                                                
                                                                                                                                
MS. BARTON  confirmed that is  the assumption and  explained that                                                               
it was  the staff's  quick estimate at  the programming  costs if                                                               
the  research was  handled  as  a special  project  - a  one-time                                                               
event.   She explained that the  division is working on  what the                                                               
cost would  be "if  we weave  it in to  this upgrade  we're doing                                                               
right now."  She added, "We believe  we can hone it down from the                                                               
$50,000."                                                                                                                       
                                                                                                                                
CHAIR WEYHRAUCH  asked if  one possible impact  of passage  of HB                                                               
527 would be  a decline in the applications and  payments, and if                                                               
that would be reflected in the fiscal note.                                                                                     
                                                                                                                                
MS. BARTON surmised  that there would be  an indeterminate amount                                                               
of people  who, because  of the bill,  would be  discouraged from                                                               
filling out an application for a  PFD because they know that they                                                               
will  not  be  coming  back  to  Alaska.    Out  of  the  625,000                                                               
applications  received   every  year,  she  said,   the  division                                                               
probably won't notice a change in workload.                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH asked  what kind  of authorization  the division                                                               
would need to print on the  checks the total amount of PFD checks                                                               
that are mailed to out-of-state addresses.                                                                                      
                                                                                                                                
MS. BARTON responded that the division  could do that as a matter                                                               
of procedural policy; it does  not need statutory authority to do                                                               
so.  The [lack of] room on  the check would be a limiting factor,                                                               
although the division could find room.                                                                                          
                                                                                                                                
Number 1006                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON  noted that there is  a discrepancy between                                                               
the number of checks mailed and  the amount of money sent [out of                                                               
state], and asked why.                                                                                                          
                                                                                                                                
MS.  BARTON answered  that  some  of the  people  who would  have                                                               
applied for the  allowable absence PFD check  would have returned                                                               
to Alaska  and received  the check  at their  home address.   She                                                               
confirmed that  another reason  could be  that they  are students                                                               
and the check was mailed to their parents' Alaska address.                                                                      
                                                                                                                                
Number 1061                                                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL, regarding checks  that are mailed out [of                                                               
state], asked  how the division  is presently set up  to discover                                                               
fraudulent applications.                                                                                                        
                                                                                                                                
MS. BARTON  answered that the  division has just  reorganized its                                                               
"fraud  unit" and  has reestablished  working relationships  with                                                               
fraud enforcement  people across the  state, as well as  with the                                                               
federal government.   She revealed that the  division is probably                                                               
most successful  discovering fraud through tips  from the public.                                                               
She  stated that  the division  gets  hundreds of  tips from  the                                                               
public  and investigates  each one.   Additionally,  the division                                                               
performs focused audits.   For example, all  applications with an                                                               
out-of-state postmark are audited,  as well as those applications                                                               
submitted  by people  who  have refused  jury  duty because  they                                                               
claimed not  to be residents of  the state.  Ms.  Barton reported                                                               
the findings  of the fraud investigator  for the past year.   She                                                               
noted  that  the office  of  the  inspector general  in  Seattle,                                                               
Washington, has  agreed to  take all  of the  division's identity                                                               
theft cases, of which there are presently three.                                                                                
                                                                                                                                
Number 1217                                                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL  said he  is trying to  decide:   "Is this                                                               
huge policy call worth the effort of those very, very few?"                                                                     
                                                                                                                                
Number 1250                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH   asked  if  the   identity  theft   arose  from                                                               
electronically generated applications, or paper [applications].                                                                 
                                                                                                                                
MS. BARTON answered she doesn't have that information.                                                                          
                                                                                                                                
Number 1330                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  turned attention to [Section  1, subsection (a)]                                                               
of the bill, which read as follows:                                                                                             
                                                                                                                                
     *Section  1.  AS  43.23  is amended  by  adding  a  new                                                                  
     section to read:                                                                                                           
          Sec. 43.23.009.  Dividends of individuals with                                                                      
     allowable  absences.     (a)     Notwithstanding  other                                                                  
     provisions   regarding   payment  of   dividends,   the                                                                    
     dividend  of  an individual  who  was  absent from  the                                                                    
     state  during  the qualifying  year  as  allowed in  AS                                                                    
     43.23.008(a)(1)-(8) or (10)-(13) shall  be paid to that                                                                    
     individual  on  the  first  subsequent  year  that  the                                                                    
     individual is eligible for  a dividend without claiming                                                                    
     an  allowable absence  under AS  43.23.008(a)(1)-(8) or                                                                    
     (10)-(13).   A  dividend  that has  not become  payable                                                                    
     under  this  subsection  may  not   be  paid  under  AS                                                                    
     43.23.005(h).                                                                                                              
                                                                                                                                
CHAIR WEYHRAUCH  - noting that  currently, [paragraph (9)]  of AS                                                               
43.23.008(a) pertains to members of  the United States Congress -                                                               
brought attention to a possible  Amendment 1, to insert [existing                                                               
paragraph  (9) of  statute] in  Section 1,  thus having  the bill                                                               
apply  to paragraphs  (1)-(13)  of the  current  statute.   Chair                                                               
Weyhrauch explained  that he thinks  it would be unfair  to treat                                                               
members of the U.S. Congress differently.                                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG  stated opposition  to Amendment 1.   He                                                               
indicated that he had been on  a naval ship and he considers that                                                               
part  of  the United  States.    He  said  he thinks  an  Alaskan                                                               
congressman's turf in  Washington, D.C., is part of  the state of                                                               
Alaska.                                                                                                                         
                                                                                                                                
REPRESENTATIVE SEATON noted that he  has received 17 e-mails that                                                               
have raised concerns about the bill,  and 15 e-mails that were in                                                               
favor of it.   One of the e-mails in  support expressed the point                                                               
of view that everyone should be treated equally.                                                                                
                                                                                                                                
Number 1448                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH stated  he understands Representative Gruenberg's                                                               
point, but  thinks of this issue  as a policy statement  and thus                                                               
looks at the  definition of what would be considered  part of the                                                               
state a little more tightly.  He  said, "It looks fair, to me, to                                                               
treat them like everybody else,  including those who have to care                                                               
for a  dying family member  or going  to school or  the military;                                                               
once  they  come  back,  they'll   receive  a  large  payment  of                                                               
dividends that indicate their leave out of the state."                                                                          
                                                                                                                                
REPRESENTATIVE  GRUENBERG responded  that  [members  of the  U.S.                                                               
Congress]  represent the  state;  they don't  just represent  one                                                               
person, as  in the  case of  someone caring for  a relative.   He                                                               
offered more examples.   He said, "Frankly, I don't  think any of                                                               
us  do as  much for  the  state as  our congressional  delegation                                                               
does,  and  I think  it's  just  as  symbolic  to give  them  the                                                               
dividend, even if you don't give it to anybody else."                                                                           
                                                                                                                                
Number 1533                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON pointed out  that, currently, the bill does                                                               
not include congressional "staffers" for exemptions.                                                                            
                                                                                                                                
REPRESENTATIVE  GRUENBERG said  the only  people exempted  in the                                                               
bill are  the three  members of U.S.  Congress, and  "they're the                                                               
people who  push the button on  the floor (indisc. -  voice faded                                                               
out)."                                                                                                                          
                                                                                                                                
Number 1579                                                                                                                     
                                                                                                                                
REPRESENTATIVE  COGHILL commented  that  given  the longevity  of                                                               
Alaska's  congressional delegation,  its  members  may never  get                                                               
[the PFD].                                                                                                                      
                                                                                                                                
REPRESENTATIVE HOLM remarked  that "you could argue  this on both                                                               
sides."                                                                                                                         
                                                                                                                                
Number 1600                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH withdrew Amendment 1.                                                                                           
                                                                                                                                
REPRESENTATIVE  SEATON emphasized  that the  proposed legislation                                                               
is not  so much  concentrated on  fraud as it  is on  offering an                                                               
incentive  for people  to  return  from outside  the  state.   He                                                               
indicated that the system is the  creation of the state and there                                                               
is nothing  inherently right  or wrong about  it; the  state just                                                               
needs  to  figure  out how  it  wants  to  run  the system.    He                                                               
indicated that  most of  the comments sent  in opposition  to the                                                               
bill were [from  those in] the military or college  students.  He                                                               
said   the  comments   from   the  military   seemed   to  be   a                                                               
misinterpretation   that  the   dividends  would   be  cut   off.                                                               
Representative  Seaton emphasized  that's not  the intent  of the                                                               
bill.  Conversely,  the bill just states that if  a person who is                                                               
out of the state qualifies for  the dividend, he/she will get the                                                               
dividends upon his/her return to the  state.  He pointed out that                                                               
several [e-mails]  from people in  the military state  support of                                                               
that concept.                                                                                                                   
                                                                                                                                
Number 1729                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HOLM noted  that  in  Fairbanks, military  people                                                               
don't have to get a state  license plate, but they receive a PFD.                                                               
He stated that  he finds it bizarre that "we  would allow that to                                                               
happen."     He  characterized   the  bill  as   "an  interesting                                                               
differential," and applauded Representative  Seaton for taking it                                                               
on; however,  he stated that  he is  not convinced that  it's the                                                               
right program to  have for Alaska.  He said  he thinks it [sends]                                                               
a bad message that people  somehow deserve a "welfare check" just                                                               
for being citizens of Alaska."                                                                                                  
                                                                                                                                
REPRESENTATIVE SEATON  referred to a memorandum  from Legislative                                                               
Legal and  Research Services [included in  the committee packet],                                                               
and said  Legislative Legal  and Research  Services was  asked to                                                               
address the  issues regarding due  process and  equal protection.                                                               
He focused  attention on the  end of  the first paragraph  on the                                                               
second page of the memorandum  showing examples of cases in which                                                               
a regulation  permitting absences  from Alaska  - if  the absence                                                               
was no  longer than the  time physically  present in the  state -                                                               
was  upheld.   He  added,  "But apparently  that's  no longer  in                                                               
effect."                                                                                                                        
                                                                                                                                
Number 1856                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  offered  his understanding  that  that                                                               
referred to the  180-day provision - that a person  cannot be out                                                               
of the  state for over half  of the year  - but added that  he is                                                               
not certain of that.                                                                                                            
                                                                                                                                
MS.  BARTON,  regarding  the  length of  time  for  an  allowable                                                               
absence not  exceeding the  time a  person is  a resident  in the                                                               
state, said she  doesn't know if that was ever  a regulation, but                                                               
it is not one now.  She continued as follows:                                                                                   
                                                                                                                                
     I know  in looking  at these  extended absences  at the                                                                    
     five-year   point  where   we  do   review  them   more                                                                    
     carefully,  we certainly  look at  that as  one factor.                                                                    
     ... If  they were only a  resident of the state  for 18                                                                    
     months and have been gone  for five years, they need to                                                                    
     have  done  many of  the  other  due-diligent kinds  of                                                                    
     things  to  establish  residency and  their  intent  to                                                                    
     return.                                                                                                                    
                                                                                                                                
Number 1926                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  said he would  be interested in  finding out                                                               
what   the  results   would  be   of  getting   a  second   fraud                                                               
investigator.   He  noted  that  the provisions  on  the PFD  are                                                               
rather  specific as  to what  the penalties  are "if  some things                                                               
happen."  He  asked whether any of the checks  sent to fraudulent                                                               
applicants were recovered.                                                                                                      
                                                                                                                                
MS.  BARTON  replied that  the  division  goes after  the  money,                                                               
though, in some  cases, it doesn't press criminal  charges if the                                                               
money  is  paid  back,  but   the  person  loses  the  next  five                                                               
dividends.  She  indicated that it is a little  more difficult to                                                               
retrieve  money from  those  who are  out-of-state.   She  added,                                                               
"And, of course,  to penalize them for  five subsequent dividends                                                               
doesn't mean a thing."                                                                                                          
                                                                                                                                
Number 1991                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG read the numbers,  from 1999 to 2003, in                                                               
the active duty category of the  chart.  He asked if the increase                                                               
was also consistent prior to 1999.                                                                                              
                                                                                                                                
MS.  BARTON  answered  that  she doesn't  know,  but  offered  to                                                               
research it.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG stated  his assumption  that, with  the                                                               
exception of 2001  to 2002, the accompanied  category has "pretty                                                               
steadily  increased, as  well."   He stated  his assumption  that                                                               
"that reflects those folks who are accompanying military folks."                                                                
                                                                                                                                
MS. BARTON  stated that  category is mainly  made up  of military                                                               
spouses  and  families, although  it  also  includes spouses  and                                                               
families of students and of someone  out of the state for medical                                                               
treatment.     In   response  to   a   follow-up  question   from                                                               
Representative Gruenberg,  she stated  that she doesn't  know how                                                               
many  active duty  military people  are  in Alaska  at any  given                                                               
time.                                                                                                                           
                                                                                                                                
Number 2068                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON  referred  to  e-mails  in  the  committee                                                               
packet.    He  indicated  that  some  of  the  e-mails  expressed                                                               
opposition to  the fact  that college  students and  others who's                                                               
PFDs  were being  held would  not  be earning  interest on  those                                                               
dividends.  He  shared that another e-mail was in  support of the                                                               
bill because many  high school students choose to  turn down free                                                               
tuition  [to  Alaska's  University  system] in  order  to  attend                                                               
colleges out-of-state and so they  should also wait for their PFD                                                               
checks until they return; however,  the students should receive a                                                               
reasonable amount  of interest on  those checks.   Representative                                                               
Seaton explained that he just wanted  it on the record that those                                                               
comments had been received by e-mail.                                                                                           
                                                                                                                                
REPRESENTATIVE SEATON  noted that some people  had expressed that                                                               
college students often  don't receive a lot of  income, and those                                                               
people suggested  a shorter  time period,  for example,  a "four-                                                               
year grace."                                                                                                                    
                                                                                                                                
Number 2154                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH removed his objection  [to the previous motion to                                                               
adopt HB 547 as a work draft].                                                                                                  
                                                                                                                                
REPRESENTATIVE  LYNN objected.    He stated  that  he thinks  the                                                               
intent of the bill is good,  but doesn't think the military needs                                                               
"this kind of hassle."  He  noted that [those in the military] go                                                               
where  they are  ordered, and  "they take  Alaska with  them when                                                               
they  go somewhere  else."    He commented  that  there are  many                                                               
students who  are not born  with a  silver spoon in  their mouths                                                               
and can use  every dollar they can get.   He stated that although                                                               
he knows  it is not the  intent of the sponsor,  "we're inferring                                                               
that the military  and students tend to be cheats,  more than the                                                               
rest  of the  population."   He  said he  thinks  these kinds  of                                                               
things  need to  be investigated  on  a case-by-case  basis.   He                                                               
concluded, "We need  to protect the PFD - it's  our obligation to                                                               
do so -  but I'm afraid that  this bill throws the  baby out with                                                               
the bathwater, and I cannot support it."                                                                                        
                                                                                                                                
Number 2246                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON  responded, "This  is  a  system that  the                                                               
legislature  designed to  allow  extraordinary absences,"  noting                                                               
that  the  conditions  that are  placed  on  those  extraordinary                                                               
absences  are for  the legislature  to decide.   He  continued as                                                               
follows:                                                                                                                        
                                                                                                                                
     It  doesn't  mean that  anybody  is  cheating; it  just                                                                    
     means that we  are designing a system  that pays people                                                                    
     to be  outside.  And if  that is our intention,  to pay                                                                    
     people to  be gone  from the  state, that  is sometimes                                                                    
     the outcome of what the system  has crept to.  And that                                                                    
     is the  entire purpose  of the bill,  to give  people a                                                                    
     reason to  become and remain ...  physical residents at                                                                    
     the end  of their  extended allowable absence.  ... And                                                                    
     so there  is no  intent and there  is no  action saying                                                                    
     that the  people that  are receiving  extended absences                                                                    
     that we allow  are in any way cheats.   So, I want that                                                                    
     really  clear.   Fraud  is  something  that is  totally                                                                    
     different  than a  system that  we  create that  allows                                                                    
     people to be paid to be gone from the state.                                                                               
                                                                                                                                
REPRESENTATIVE  LYNN said  he understands,  but  stated that  the                                                               
gist of his previous remarks remains.                                                                                           
                                                                                                                                
Number 2314                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG directed  the committee's  attention to                                                               
page 3, lines 2-5, which read as follows:                                                                                       
                                                                                                                                
          (c)  Notwithstanding other provisions, a dividend                                                                     
     that has not become payable  to an individual under (a)                                                                    
     of  this section  is not  subject  to levy,  execution,                                                                    
     garnishment, attachment,  or any  other remedy  for the                                                                    
     collection of debt until  that dividend becomes payable                                                                    
     or is paid to the individual.                                                                                              
                                                                                                                                
REPRESENTATIVE GRUENBERG  said if  he were  a bankruptcy-planning                                                               
attorney, he might want to  use that language to protect somebody                                                               
who doesn't have  a lot of assets  but has a fair  amount tied up                                                               
in dividends.                                                                                                                   
                                                                                                                                
TAPE 04-54, SIDE B                                                                                                            
Number 2343                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG continued as follows:                                                                                  
                                                                                                                                
     That   can  be   utilized  to   sequester  funds   from                                                                    
     creditors, in  a (indisc.)  planning situation,  like I                                                                    
     would  be if  I  were a  JAG  [Judge Advocate  General]                                                                    
     lawyer advising  military who have  some debts  and are                                                                    
     about  to be  transferred  from the  state.   It  could                                                                    
     sequester   a  fair   amount  of   money  from   Alaska                                                                    
     creditors.  And  I haven't really thought  about how to                                                                    
     deal with that.   But if somebody could be  gone for 5,                                                                    
     10, [or]  15 years, that could  be $15,000, ultimately,                                                                    
     that's sequestered from creditors.                                                                                         
                                                                                                                                
REPRESENTATIVE  SEATON clarified  that  it  wouldn't be  somebody                                                               
leaving the state, because he/she  doesn't have any future credit                                                               
for dividends; therefore, it would  only be somebody who has left                                                               
the state and  has had allowable absences, and was  not in Alaska                                                               
for an extended  period of time, but then  declared bankruptcy or                                                               
something else outside of the state.                                                                                            
                                                                                                                                
REPRESENTATIVE GRUENBERG concurred.                                                                                             
                                                                                                                                
Number 2292                                                                                                                     
                                                                                                                                
REPRESENTATIVE  COGHILL noted  that  what first  appealed to  him                                                               
regarding  the bill  was  "the  draw to  bring  people back  into                                                               
Alaska to  receive their benefit";  however, the more  he thought                                                               
about the practical  "outplay" of the bill, the  more problems he                                                               
had  with  it.   He  said  he appreciates  Representative  Lynn's                                                               
comments.   He stated  that the  check distribution  would almost                                                               
become  "a banking  of  sorts," where  money has  to  be held  in                                                               
account for people.  He indicated  that he is not certain whether                                                               
he  wants that  [additional work]  given to  the [division].   He                                                               
suggested  that   the  intended   consequences  may   be  getting                                                               
outweighed  by the  unintended consequences.   He  also mentioned                                                               
that there might  be an inherent unfairness.  He  noted that less                                                               
than 5 percent of [Alaska's]  overall population has been outside                                                               
of the  state with allowable  absences.  He estimated  that about                                                               
1-2 percent  may be military.   He stated that he  knows there is                                                               
fraud, but said he doesn't know  that it would be worth "having a                                                               
big bureaucratic system and delayed recipients for all that."                                                                   
                                                                                                                                
REPRESENTATIVE  LYNN  said  Alaska   has  no  problem  attracting                                                               
military to the state with or without "this program."                                                                           
                                                                                                                                
REPRESENTATIVE   SEATON  offered   his  understanding   that  the                                                               
division already had an accounting system for holding checks.                                                                   
                                                                                                                                
MS. BARTON stated that the  division currently has to account for                                                               
18-year-old filers [whose  parents or guardians did  not file for                                                               
their PFDs] and  for estates [where someone has died].   She said                                                               
she doesn't think [HB 547]  will create a huge accounting burden.                                                               
She  explained  that  the  applications  will  be  processed  and                                                               
pended, so  in any given  year, the  division will know  what the                                                               
possible liability  is and  those funds will  be retained  in the                                                               
fund until such time as they can be released.                                                                                   
                                                                                                                                
MS.  BARTON, responding  to previous  remarks regarding  possible                                                               
interest  on [the  withheld dividend]  monies, said  the division                                                               
would  have  to think  through  the  process she  just  described                                                               
differently if interest were a part of the equation.                                                                            
                                                                                                                                
Number 2053                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  offered his  understanding that  as the                                                               
bill is  currently written,  the interest  would remain  with the                                                               
fund.                                                                                                                           
                                                                                                                                
MS.  BARTON said  that's correct.    In response  to a  follow-up                                                               
question  from Representative  Gruenberg,  she said  she did  not                                                               
know how  much that would  be per  year, but offered  to research                                                               
that.                                                                                                                           
                                                                                                                                
REPRESENTATIVE LYNN  said, "It would seem  to me that if  we were                                                               
... paying interest on money  being withheld, this interest would                                                               
belong to the  person that this money would  eventually belong to                                                               
when they return  to the state, rather than to  the state.  You'd                                                               
be  getting interest  on somebody  else's money  - a  pretty good                                                               
deal."                                                                                                                          
                                                                                                                                
Number 2018                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH said, "All right, there's  a motion on HB 547 and                                                               
an  objection."   [Although  the motion  pending  was whether  to                                                               
adopt  HB  547  as  a  work  draft,  the  committee  treated  the                                                               
following roll call  vote as if it pertained to  a motion to move                                                               
the bill from committee.]                                                                                                       
                                                                                                                                
A roll  call vote  was taken.   Representatives  Gruenberg, Holm,                                                               
Seaton, and Weyhrauch voted in  favor of HB 547.  Representatives                                                               
Coghill  and  Lynn voted  against  it.    Therefore, HB  547  was                                                               
reported out of  the House State Affairs Standing  Committee by a                                                               
vote of 4-2.                                                                                                                    
                                                                                                                                
HB 476-AK STATEHOOD CELEBRATION COMMISSION                                                                                    
                                                                                                                                
CHAIR WEYHRAUCH announced  that the next order  of business would                                                               
be HOUSE BILL NO. 476,  "An Act establishing the Alaska Statehood                                                               
Celebration Commission; and providing for an effective date."                                                                   
                                                                                                                                
Number 1953                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH moved to adopt  the proposed committee substitute                                                               
(CS) for  HB 476,  Version 23-LS1744\D,  Utermohle, 4/2/04,  as a                                                               
work draft.                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM objected.                                                                                                   
                                                                                                                                
Number 1942                                                                                                                     
                                                                                                                                
JIM  SHINE, Staff  to Representative  Tom Anderson,  Alaska State                                                               
Legislature,  reviewed  Version  D on  behalf  of  Representative                                                               
Anderson,  sponsor.   He noted  that Version  D would  reduce the                                                               
number of  members on the commission  from 17 to 9,  would reduce                                                               
the number  of public  members on  the commission  from 12  to 4,                                                               
would provide  for one  member from  each judicial  district, and                                                               
would eliminate the four "at-large" members.                                                                                    
                                                                                                                                
MR. SHINE  directed the  committee's attention  to page  2, lines                                                               
18-19, of  Version D, which read  in part:  "or  if a legislative                                                               
member  of  the   commission  is  no  longer  a   member  of  the                                                               
legislative  body  from  which  the  member  was  appointed,  the                                                               
officer responsible  for appointing  that member shall  appoint a                                                               
replacement member as soon as possible."                                                                                        
                                                                                                                                
CHAIR WEYHRAUCH closed public testimony.                                                                                        
                                                                                                                                
Number 1886                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM asked  Mr. Shine if going to  9 members would                                                               
affect the fiscal note.                                                                                                         
                                                                                                                                
MR. SHINE responded that although a  new fiscal note has not been                                                               
received, he  anticipates that there  will be a reduction  in the                                                               
fiscal note.  He noted that  the next committee of referral would                                                               
be the House Finance Committee.                                                                                                 
                                                                                                                                
REPRESENTATIVE HOLM removed his objection.                                                                                      
                                                                                                                                
Number 1847                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM moved  to report the proposed CS  for HB 476,                                                               
Version  23-LS1744\D, Utermohle,  4/2/04, out  of committee  with                                                               
individual  recommendations and  the  [forthcoming] fiscal  note.                                                               
There being no  objection, CSHB 476(STA) was reported  out of the                                                               
House State Affairs Standing Committee.                                                                                         
                                                                                                                                
HB 527-ALASKA SECURITIES ACT                                                                                                  
                                                                                                                                
CHAIR WEYHRAUCH announced  that the next order  of business would                                                               
be HOUSE BILL NO. 527, "An  Act relating to the Alaska Securities                                                               
Act, including reports,  proxies, consents, authorizations, proxy                                                               
statements,  and other  materials,  civil  penalties, refunds  of                                                               
proceeds  from violations,  restitution,  and investment  adviser                                                               
representatives; and providing for an effective date."                                                                          
                                                                                                                                
Number 1793                                                                                                                     
                                                                                                                                
REPRESENTATIVE  LYNN  moved  [to adopt]  the  proposed  committee                                                               
substitute  (CS)  for  HB 527,  Version  23-LS1792\Q,  Bannister,                                                               
4/5/04, [as a work draft].                                                                                                      
                                                                                                                                
CHAIR WEYHRAUCH objected for discussion purposes.                                                                               
                                                                                                                                
CHAIR WEYHRAUCH  reviewed that at the  last hearing on HB  527, a                                                               
representative  of the  New York  attorney  general's office  had                                                               
testified.  He also reminded  the committee of the correspondence                                                               
in  the  committee  packet from  [Warren  E.  Buffet,  Chairman],                                                               
Berkshire Hathaway.   He stated  that he  is not certain  that HB                                                               
527 does what  he would like it  to do.  He  said his inclination                                                               
is to  "get into  this with  both feet,"  but thinks  there isn't                                                               
time, nor is  there the inclination by the committee  to do that.                                                               
He said,  "I just think that  we have an obligation  to equip our                                                               
state  with the  means  to do  those kind  of  things the  public                                                               
sector  is normally  charged  to do,  without  the public  sector                                                               
paying for it when there's wrong-doing."                                                                                        
                                                                                                                                
CHAIR WEYHRAUCH  noted that there  were concerns raised  by other                                                               
members  of the  administration  regarding some  portions of  the                                                               
bill, which he said have been addressed in Version Q.                                                                           
                                                                                                                                
Number 1715                                                                                                                     
                                                                                                                                
VINCE  USERA, Senior  Securities  Manager,  Division of  Banking,                                                               
Securities  & Corporations,  Department of  Community &  Economic                                                               
Development  (DCED),  described   his  involvement  working  with                                                               
[Legislative  Legal  and  Research  Services]  to  come  up  with                                                               
Version Q.                                                                                                                      
                                                                                                                                
Number 1690                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  stated that  he also wanted  to proceed                                                               
as Chair Weyhrauch  did.  He said, "There are  lots of securities                                                               
problems in the state, but I think  this is an area that has some                                                               
troubling aspects  on a national scale,  and I'd like to  see our                                                               
state  in  the forefront  of  protecting  our consumers.    We're                                                               
basically  a consumer  state, in  this area."   He  expressed his                                                               
appreciation of Mr. Usera's willingness  to look at "the Takeover                                                               
Bid Disclosure  Act."  He  stated for  the record that  he thinks                                                               
"we" probably all  agree that the Alaska  Takeover Bid Disclosure                                                               
Act is  probably unconstitutional and  needs to be repealed.   He                                                               
mentioned working  in the House  Judiciary Standing  Committee to                                                               
develop a new  Act to add to  the bill.  He asked  Mr. Usera, "Is                                                               
that not correct?"                                                                                                              
                                                                                                                                
MR. USERA answered, "That's correct."                                                                                           
                                                                                                                                
REPRESENTATIVE GRUENBERG directed attention  to page 3, [line 17-                                                               
19], which read in part as follows:                                                                                             
                                                                                                                                
        The amount of the restitution paid to the harmed                                                                        
      person may be two times the amount of loss caused to                                                                      
     the person by the violator.                                                                                                
                                                                                                                                
REPRESENTATIVE  GRUENBERG  commented  that's  almost  a  kind  of                                                               
punitive damage,  except that it goes  to the victim, not  to the                                                               
state.  He asked how "two times" became established.                                                                            
                                                                                                                                
CHAIR WEYHRAUCH said  he added that language.   He explained that                                                               
it's intended  to deter wrongful  conduct, to pay those  who have                                                               
been  harmed, and  to give  notice to  those potential  offenders                                                               
that "if they're going to do  business here, ... they have to cut                                                               
square corners  with the consumer  and, if they don't,  they have                                                               
to  pay   a  penalty."     He  revealed  that  he   had  received                                                               
confirmation from the drafters of  the bill that "this would pass                                                               
muster if it were challenged."   He noted that this is similar to                                                               
"the wage and hour statutes."                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked, "Was it  a policy call  for 'two                                                               
times', or  was it more  of a  recognition of the  maximum extent                                                               
constitutionally permissible?"                                                                                                  
                                                                                                                                
CHAIR WEYHRAUCH responded, "There's  a tension there, because the                                                               
idea embodied  in the statute is  'two times', but that's  to the                                                               
maximum extent allowed by the constitution."                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG asked Chair  Weyhrauch how he would feel                                                               
about allowing the  amount of a recovery to be  determined by the                                                               
administrator    to   the    maximum   extent    constitutionally                                                               
permissible,  thus "leaving  it  to that  person's discretion  to                                                               
that extent."                                                                                                                   
                                                                                                                                
CHAIR   WEYHRAUCH   responded   that   the   problem   with   the                                                               
constitutional issue  and punitive damages cases  is that they're                                                               
subject to "what ... seems right to a judge."  He said:                                                                         
                                                                                                                                
     This is  a tension between attracting  business capital                                                                    
     in  the state  and  wanting to  do  business here,  and                                                                    
     having a certainty for businesses  in order to do their                                                                    
     work here.   By spelling out in statute,  as opposed to                                                                    
     allowing  an  ambiguous  judge-made  sanction,  you  do                                                                    
     provide  that ...  level  of  certainty to  businesses,                                                                    
     which I  think they  need, as  opposed to  a judge-made                                                                    
     fine.                                                                                                                      
                                                                                                                                
Number 1395                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG stated  that "these  ... administrative                                                               
actions" sometimes  involve brokerage  houses, and the  amount to                                                               
an individual  investor may be small.   He noted that  the number                                                               
of investors in [Alaska] in a  given corporation may be small and                                                               
[so the  bill would] hardly  provide any  deterrence at all.   He                                                               
suggested  that it  might be  constitutionally permissible  and a                                                               
wise policy  to allow  discretion by  the administrator  to award                                                               
more damages.                                                                                                                   
                                                                                                                                
MR. USERA  noted that the  consumer protection statutes  in Title                                                               
45 allow for treble damages.  He continued as follows:                                                                          
                                                                                                                                
     The way we've administered the  statute in the past has                                                                    
     been  to  try to  levy  enough  fines to  convince  the                                                                    
     wrongdoer  to  make  the  victim   whole.    If  it  is                                                                    
     egregious and we can double  that amount, that would be                                                                    
     an  excellent outcome.   I  don't  have any  experience                                                                    
     with  levying two  times  the fine  or  things of  that                                                                    
     nature, ... but I don't see any harm coming from this.                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  pointed out  that the  language reads  that [the                                                               
restitution paid] "may" be two times - it's discretionary.                                                                      
                                                                                                                                
MR. USERA said  [the double amount] would only  be implemented in                                                               
the case of an egregious wrong, and  then it may be in place of a                                                               
fine.  He concluded, "This would  give us the ability to make the                                                               
victim whole, and perhaps a little bit more than whole."                                                                        
                                                                                                                                
REPRESENTATIVE GRUENBERG asked how  the department would feel "if                                                               
this were  allowed to  be treble damages,  to be  consistent with                                                               
the unfair trade factor?"                                                                                                       
                                                                                                                                
MR. USERA replied that he would  like the ability to do that, but                                                               
he only sees that coming about in an unusual situation.                                                                         
                                                                                                                                
REPRESENTATIVE  GRUENBERG   said,  "At   least  you'd   have  the                                                               
discretion."                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  Chair  Weyhrauch  if  he  would                                                               
consider that a friendly amendment.                                                                                             
                                                                                                                                
CHAIR  WEYHRAUCH  suggested  that the  House  Judiciary  Standing                                                               
Committee  could decide  to make  that change  when it  hears the                                                               
bill.                                                                                                                           
                                                                                                                                
Number 1145                                                                                                                     
                                                                                                                                
TERRY  ELDER, Alaska  Representative for  the Investment  Company                                                               
Institute  (ICI),  told  the  committee   that  the  ICI  is  the                                                               
professional  organization  whose  members are  the  mutual  fund                                                               
industry.   Because  many  of the  mutual  funds have  investment                                                               
advisors  that  are  federally  registered,  [the  ICI]  is  also                                                               
interested  in  issues  that  affect  those  advisors  and  their                                                               
representatives.   He noted that  the ICI  is active both  at the                                                               
federal level and  at the state level, and  has historically been                                                               
cooperative with Alaska's state regulations.   Mr. Elder said the                                                               
ICI has  always supported both  state and federal  regulations of                                                               
the security industry  and works closely with all  the states and                                                               
the  North American  Securities  Administrators Association,  for                                                               
example,  regarding  common  language  that  is  in  the  Uniform                                                               
Securities Act.                                                                                                                 
                                                                                                                                
MR.  ELDER turned  attention to  Section 1  [of Version  Q].   He                                                               
explained that  Section 1  would exempt  the Securities  Act from                                                               
[AS]  37.10.050,   which  deals  with   fees  that  are   set  by                                                               
regulation.   He  stated  that  the ICI's  position  would be  to                                                               
encourage the  committee to  delete Section  1 before  moving the                                                               
bill out of  committee.  He explained that  when executive branch                                                               
agencies  set  fees   by  regulation  and  those   fees  have  no                                                               
relationship to  the cost  of regulation,  that becomes  an issue                                                               
for the ICI.  He continued as follows:                                                                                          
                                                                                                                                
     We  think [that]  to exempt  the Securities  Act almost                                                                    
     all by  itself there, sort of  jumps out at you.   It's                                                                    
     one  of fairness;  you're singling  out the  securities                                                                    
     industry for exemption from  that limitation, which the                                                                    
     ICI doesn't think is fair.   The ICI already provides a                                                                    
     sea of revenue to the  State of Alaska that exceeds the                                                                    
     total  cost of  the Division  of Banking,  Securities &                                                                    
     Corporations,  and so  we would  argue from  a fairness                                                                    
     standpoint  that ...  industries  shouldn't be  singled                                                                    
     out for exemption ....                                                                                                     
                                                                                                                                
MR. ELDER, on the subject  of delegating legislative power to the                                                               
executive branch,  said [the ICI]  doesn't have any  problem with                                                               
legislatures  setting   fees  in  statutes.     The  problem,  he                                                               
explained,  is  allowing the  executive  branch  to set  fees  by                                                               
regulation.  He said AS  37.10.050 makes sense if the legislature                                                               
were to  say, "Okay  go ahead  and do that  by regulation  and we                                                               
aren't going  to get  involved in  that or  worry about  that, as                                                               
long as  you're covering your costs."   He said he  doesn't think                                                               
anybody would disagree with that.   For example, he said, "If you                                                               
spent $10  million in regulation and  you wanted to bring  in $50                                                               
million of  revenue, that  would be more  of a  legislative issue                                                               
than  we  think   should  be  delegated  to   an  agency  through                                                               
regulation."                                                                                                                    
                                                                                                                                
Number 0831                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH said [Section 1 of  Version Q] was added to allow                                                               
the executive  branch to collect  fees, because of the  volume of                                                               
work  that  it does  through  the  securities  area.   He  added,                                                               
"Certainly that's  subject to  any review  and comment  period by                                                               
the  industry  on  that  regulation."     He  remarked  that  the                                                               
legislature  is   always  troubled  when  the   executive  branch                                                               
implements  regulations that  stray  from  what [the  legislature                                                               
intends].                                                                                                                       
                                                                                                                                
MR. ELDER noted that a lot  of discussion when [AS 37.10.050] was                                                               
last amended was  focused around resource agencies  and not other                                                               
agencies such as the securities  division.  That's another reason                                                               
it would be "more appropriate to do  it as a general look at that                                                               
issue and deal with all of  them," he said, adding, "Our position                                                               
is  that they  should reflect  costs, unless  they're set  by the                                                               
legislature."                                                                                                                   
                                                                                                                                
CHAIR  WEYHRAUCH told  Mr. Elder  that the  bill would  "pick up"                                                               
issues more  related to the securities  area when it is  heard in                                                               
the House Judiciary  Standing Committee, so "it may  be even more                                                               
relative in the next committee."                                                                                                
                                                                                                                                
Number 0652                                                                                                                     
                                                                                                                                
MR. ELDER clarified:                                                                                                            
                                                                                                                                
     The fees  that we're talking  about here that  are paid                                                                    
     by the mutual fund for this  are not paid by large Wall                                                                    
     Street companies.  These are  fees that are paid by the                                                                    
     shareholders;  they're  expenses  of the  fund  and  so                                                                    
     they're   passed   on   directly  to   the   individual                                                                    
     shareholders.   And  ...  that's  another concern  that                                                                    
     everybody  has;  if  you're concerned  about  the  fees                                                                    
     charged  within the  mutual  fund  industry, then  that                                                                    
     would show up as one of those fees.                                                                                        
                                                                                                                                
Number 0592                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG asked  how much the fees  are for [state                                                               
notice].                                                                                                                        
                                                                                                                                
MR. ELDER  offered his  understanding that  currently there  is a                                                               
flat  fee of  $600 for  [a] one-year  notice and  $1,100 for  two                                                               
years, so right now it's a flat  fee.  And  it's a notice filing,                                                               
not  a   registration,  because   in  1996,  when   the  National                                                               
Securities   Market   Improvement   Act  was   passed,   Congress                                                               
established  what it  called "federal  covered  securities."   He                                                               
explained  that  mutual  fund shares  are  considered  a  federal                                                               
covered security.   He  explained what that  means is  that since                                                               
1996,  states can't  require registration  of the  securities and                                                               
can't regulate  what's in the  prospectus, for example,  but they                                                               
retain enforcement authority,  with respect to fraud.   He added,                                                               
"And  so, it's  limited  to fraud  on the  state  level, and  the                                                               
Securities Act reflects that now,  because it was amended in 1999                                                               
and we also changed to a flat fee."                                                                                             
                                                                                                                                
MR. ELDER, in response to a question from Representative                                                                        
Gruenberg, explained the difference between a registration and a                                                                
notice filing as follows:                                                                                                       
                                                                                                                                
     When you register, you can  also be denied.  [When] you                                                                    
     register,  you have  to meet  a whole  laundry list  of                                                                    
     criteria  that would  be  in the  statute  in terms  of                                                                    
     whatever  you're  registering  for, and  usually  those                                                                    
     things would  be listed and  disclosed to  investors in                                                                    
     prospectuses  and things  like  that.   And they  would                                                                    
     submit that  to a  state under a  registration concept,                                                                    
     and  the state  would  review that  and  say, "Yes,  it                                                                    
     meets it" or  "No, it doesn't," and either  allow it or                                                                    
     disallow it.                                                                                                               
                                                                                                                                
     In  a  notice  filing,   it  is  recognized  that  what                                                                    
     Congress  did  was  essentially take  the  registration                                                                    
     authority away from the state.   They are now federally                                                                    
     registered;  they're  registered  with  the  SEC  [U.S.                                                                    
     Securities and Exchange Commission].   And so, what the                                                                    
     state  gets is  in fact  a  notice filing  ... for  two                                                                    
     reasons:   One is to  sort of  let the state  know that                                                                    
     we're ...  going to  be selling  this security  in your                                                                    
     state, and two, it was a  way for the state to continue                                                                    
     to receive  fees.   Because obviously,  one of  the big                                                                    
     issues in  1996, when the federal  government made that                                                                    
     change,  was, "If  we take  the registration  authority                                                                    
     away from the states, won't  that have a big fee impact                                                                    
     on  them?"   And  they  decided  to make  that  revenue                                                                    
     neutral, to  the extent they  could; it  wasn't totally                                                                    
     revenue neutral,  but they tried  to do that.   And so,                                                                    
     one way to  do that was to allow notices  to the states                                                                    
     for  federally covered  securities.    The state  can't                                                                    
     say, "No, I don't want you  to sell XYZ in Alaska," but                                                                    
     the state  can say,  "This is what  we charge  for this                                                                    
     notice."                                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG stated that he thinks that Section 1 is                                                                
an issue that the House State Affairs Standing Committee should                                                                 
address.                                                                                                                        
                                                                                                                                
Number 0268                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM asked how many companies "this" would                                                                       
involve.                                                                                                                        
                                                                                                                                
MR. ELDER answered  he isn't certain.  He explained  that the ICI                                                               
represents  95   percent  of  the  industry,   and  the  industry                                                               
registers at  the federal level  and notices at the  state level,                                                               
by fund.  He surmised  that approximately 8,000 funds are noticed                                                               
in Alaska.   He  clarified that in  terms of  "mother companies,"                                                               
there would be  fewer than that, because, for  example, a company                                                               
may have a number of funds and  will notice each one of the funds                                                               
that  they  want to  sell  in  Alaska.   Each  of  the funds  are                                                               
separate securities that have their own management.                                                                             
                                                                                                                                
Number 0161                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  stated that the  intent [of the bill]  is to                                                               
ensure that  there's no skullduggery  going on with the  funds to                                                               
the detriment  of the investors from  Alaska.  He added:   "Which                                                               
leads me to my thought as to  why we're having a notice of filing                                                               
other than for  the purpose of oversight.  It  appears to me that                                                               
if we  don't really have  much oversight  other than the  fact we                                                               
know you're here."                                                                                                              
                                                                                                                                
MR.  ELDER said  that's correct.   He  noted that  there are  two                                                               
reasons for  the notice  filing, and  one is  simply to  "make it                                                               
revenue neutral to  the state."  He said, "You  can maintain your                                                               
fee  income by  having this  notice filing  and charging  for the                                                               
notice.   That's  why one  must be  careful not  to slip  and use                                                               
"registration"  instead   of  "notice,"  because  it   means  two                                                               
different  things.    He  concurred   that  there  is  much  more                                                               
oversight   involved  with   registration  than   with  [notice].                                                               
Notwithstanding  that, he  said,  "Where you  do have  authority,                                                               
however,  in terms  of ...  oversight, is  in enforcement  issues                                                               
related to  fraud."  He  reiterated that  the ICI has  never been                                                               
against that idea.                                                                                                              
                                                                                                                                
TAPE 04-55, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  directed attention  to Section 6,  and asked                                                               
Mr. Elder if [the amount of  restitution that may be paid] was of                                                               
concern.                                                                                                                        
                                                                                                                                
MR. ELDER responded that the only  thing he is concerned about is                                                               
Section 1.  Notwithstanding that, he added the following:                                                                       
                                                                                                                                
     The only thing that you  might want to think about with                                                                    
     the others is whether or  not you want to differentiate                                                                    
     between   fines   and   potential  fines   related   to                                                                    
     intentional     violations,    versus     unintentional                                                                    
     violations.  But the ICI is not taking that position;                                                                      
     I'm just offering that as a friendly suggestion.                                                                           
                                                                                                                                
MR.  ELDER,  in  response  to   a  question  from  Representative                                                               
Gruenberg, revealed that  he worked in the  Division [of Banking,                                                               
Securities & Corporations]  for eight years and  was director for                                                               
the last four years, before his retirement.                                                                                     
                                                                                                                                
Number 0102                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked Mr. Elder if  he, personally, had                                                               
any other suggestions for the committee to consider.                                                                            
                                                                                                                                
MR. ELDER,  specifying that he  was responding with  his personal                                                               
opinions, noted  that the State of  Alaska has a long  history of                                                               
using uniform  language, and stated  that he  personally supports                                                               
that as  useful because it's  good for  industry to know  what to                                                               
expect from one state  to another.  He noted that  there is a new                                                               
Uniform Securities  Act of 2002,  which was recently  passed, and                                                               
both  the North  American  Securities Administrative  Association                                                               
and  the ICI  support it.   He  also suggested  that it  might be                                                               
appropriate to  look at the  Uniform [Securities] Act, or  at the                                                               
statute in total, rather than doing something piece meal.                                                                       
                                                                                                                                
MR.  ELDER   noted  that  currently,   there  is   a  substantial                                                               
differentiation    between    intentional    and    unintentional                                                               
violations; for  example, he  said, he  has seen  violations that                                                               
are bad and violations that are  technical, and so he thinks they                                                               
should be differentiated in the way they are fined.                                                                             
                                                                                                                                
Number 0455                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH asked Mr. Usera to address Section 1.                                                                           
                                                                                                                                
MR. USERA noted, "Section 1 of  the bill allows us to charge what                                                               
we're charging now, plus any increases  that may come along."  He                                                               
said he has  estimated that the fees that are  charged now "would                                                               
add something  in the range of  .0000006 of a cent  to the dollar                                                               
amount of a mutual fund."   He clarified that if somebody owns 50                                                               
shares, he/she  is not even going  to see a penny  added to their                                                               
fees.   He admitted that this  is one area where  the state takes                                                               
in more than it  spends.  He said it's always been  that way.  He                                                               
noted that  currently the  amount taken  in is  approximately $10                                                               
million.   Doing  away with  Section  1 probably  would have  the                                                               
effect of losing  $10 million to the general fund,  which he said                                                               
would  be a  "pretty strong  hit."   He said,  "We're one  of the                                                               
profit centers  of state  government and  I personally  don't see                                                               
anything wrong with making a profit."                                                                                           
                                                                                                                                
MR. USERA remarked:                                                                                                             
                                                                                                                                
     And it  just seems to  me to  be an improvident  act to                                                                    
     limit  state government  to what  it  spends -  there's                                                                    
     just  no rhyme  or  reason  to it.    We don't  propose                                                                    
     raising  fees beyond  an exorbitant  amount.   I  mean,                                                                    
     right  now  they're  $600.   We  are  proposing  a  fee                                                                    
     change,  ... in  regulation,  basing it  on the  assets                                                                    
     under  management:   One fee  for  under $100  million,                                                                    
     another fee  for up  to $750  million, and  another fee                                                                    
     for those who are $750  million and beyond.  That seems                                                                    
     to be reasonable.  And ...  the cost would be passed on                                                                    
     to  the individual  owner.   If all  50 states  were to                                                                    
     charge  that,  you  might  add  on  fifty  cents  to  a                                                                    
     customer's mutual  fund. ...  The mutual  fund industry                                                                    
     has  been discovered  to have  overcharged fees  in the                                                                    
     range of  $10, $12,  $15 per person,  and ...  the fees                                                                    
     that we would  charge would pale in  comparison to what                                                                    
     they're gouging their customers for now.                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG stated,  "In view of what  Mr. Usera has                                                               
said and  hearing what Mr. Elder  has said, I'm not  convinced we                                                               
should delete Section (indisc. - voice trailed off)."                                                                           
                                                                                                                                
CHAIR WEYHRAUCH closed public testimony.                                                                                        
                                                                                                                                
Number 0775                                                                                                                     
                                                                                                                                
CHAIR  WEYHRAUCH offered  his  understanding that  Representative                                                               
Lynn had "moved CS  for HB 527, Version Q."   He asked, "Is there                                                               
objection to  moving this  with individual  [recommendations] and                                                               
attached  fiscal note?"    He said,  "Seeing  none, so  ordered."                                                               
[Although the committee  treated the proposed CS  as having moved                                                               
from committee, the motion that  was actually pending was whether                                                               
to adopt Version Q as a work draft].                                                                                            
                                                                                                                                
HB 331-RETIREMENT:TEACHERS/JUDGES/PUB EMPLOYEES                                                                               
                                                                                                                                
CHAIR WEYHRAUCH announced  that the last order  of business would                                                               
be HOUSE BILL  NO. 331, "An Act relating  to federal requirements                                                               
for governmental plan and other  qualifications for the teachers'                                                               
retirement system,  the public employees' retirement  system, and                                                               
the judicial  retirement system;  and providing for  an effective                                                               
date."                                                                                                                          
                                                                                                                                
Number 0840                                                                                                                     
                                                                                                                                
REPRESENTATIVE   GRUENBERG   moved   [to  adopt   the   committee                                                               
substitute (CS) for HB 331,  Version 23-GH1009\D, Craver, 4/1/04,                                                               
as  a work  draft].   There  being no  objection,  Version D  was                                                               
before the committee.                                                                                                           
                                                                                                                                
Number 0865                                                                                                                     
                                                                                                                                
ANSELM STAACK, Chief Financial Officer,  Division of Retirement &                                                               
Benefits, Department of Administration  (DOA), told the committee                                                               
that the division  takes care of the  Public Employees Retirement                                                               
System  (PERS),   the  Teachers  Retirement  System   (TRS),  the                                                               
Judicial  Retirement  System,  the  Supplemental  Benefit  System                                                               
(SBS), and Deferred  Compensation.  He offered a  history of "how                                                               
we got here," and stated  that PERS, TRS, the Judicial Retirement                                                               
System,  and SBS  are all  qualified  plans.   He explained  that                                                               
there are  positive aspects to  a plan remaining  qualified, even                                                               
for a tax-exempt agency like the  State of Alaska.  It means that                                                               
members of the retirement system  can "pay their contributions in                                                               
free tax."   He  said that's a  tremendous benefit,  which lowers                                                               
the cost of the system itself.                                                                                                  
                                                                                                                                
CHAIR  WEYHRAUCH   asked,  "Is  that  the   state  deferred  comp                                                               
program?"                                                                                                                       
                                                                                                                                
MR. STAACK  answered:  "No, that  is all of them.   For instance,                                                               
any contributions  you make to  the public  employees', teachers'                                                               
retirement   system,   judicial   retirement  system,   and   the                                                               
supplemental benefit  system are all  pre-tax, in terms  of their                                                               
contribution."   He said the  SBS is  what is called  the defined                                                               
contribution  plan,  while  the   PERS,  TRS,  and  the  Judicial                                                               
Retirement System are what are  called defined benefit plans.  In                                                               
response  to questions  from Chair  Weyhrauch, he  clarified that                                                               
the basic  difference between those types  of plans is that  in a                                                               
defined contribution  plan, the  employer puts  in money  and the                                                               
employee  makes a  match, and  the employee  directs his/her  own                                                               
investments  and walks  off with  whatever amount  is there  when                                                               
he/she  terminates.   The  employer is  not  responsible for  any                                                               
residual or for  paying any money in the future.   For the [PERS,                                                               
TRS, and the  Judicial Retirement System], on the  other hand, it                                                               
is required  by law that  the employee gets paid  irrespective of                                                               
whether  the system  earns  enough  money to  do  it;  it is  the                                                               
responsibility of the state to make up the balance.                                                                             
                                                                                                                                
Number 1029                                                                                                                     
                                                                                                                                
MR. STAACK, in  response to a question  from Representative Holm,                                                               
noted who  falls under which systems:   Under the PERS,  there is                                                               
the  State  of  Alaska,  plus   154  other  employers,  including                                                               
municipalities and school districts; under  the TRS, there are 62                                                               
school  districts; under  the Judicial  Retirement System,  there                                                               
are judges  and certain  members of the  court system;  and under                                                               
SBS,  there  is  the  State  of Alaska  employees  and  14  other                                                               
political  subdivisions that  are no  longer in  social security.                                                               
In response  to a follow-up  question, he said the  University of                                                               
Alaska has its own separate plan.                                                                                               
                                                                                                                                
Number 1085                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH stated that he would  like to have an overview of                                                               
the PRS and  TRS.  He noted that the  legislature is "funding the                                                               
shortfalls as  a separate line  item in  the state."   He related                                                               
his understanding of  an issue that was brought  to his attention                                                               
regarding  why there  is  a  huge debt  owed  for  PERS/TRS.   He                                                               
explained that  it is a  result of some assumptions  of projected                                                               
contributions during  a "bear" market.   Now that the  market has                                                               
rebounded,  he  said, whoever  is  responsible  for making  those                                                               
assumptions that  the legislature has to  fund it has not  met to                                                               
revisit what  the legislature  needs to do  to fund  the program;                                                               
therefore,  the  legislature  is   acting  on  improper  data  in                                                               
planning [the  state's] financial  future.  Chair  Weyhrauch said                                                               
it seems  to him  that the  legislature may be  in a  position of                                                               
requiring that  the PRS/TRS  people who  make the  estimates meet                                                               
more often to provide better information to the legislature.                                                                    
                                                                                                                                
MR. STAACK  responded that  he could  bring information  to Chair                                                               
Weyhrauch  and  the committee  that  "we  went through  with  the                                                               
PERS/TRS  board,"  including  an  actuarial  evaluation  and  the                                                               
projections that  were done,  and including  all the  earnings up                                                               
through January 2004  and any projections that were  made for the                                                               
next 25  years that assumed what  would happen with "a  very rosy                                                               
scenario."                                                                                                                      
                                                                                                                                
Number 1203                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH indicated that the  committee members needed more                                                               
information.                                                                                                                    
                                                                                                                                
MR. STAACK indicated a willingness  to help the committee in that                                                               
regard.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  GRUENBERG  mentioned  technical problems  in  the                                                               
field  of family  law  with  respect to  the  pension plans,  and                                                               
offered an example.                                                                                                             
                                                                                                                                
Number 1286                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON  asked  Mr. Staack  to  provide  scenarios                                                               
based on the 2004 mortality tables.                                                                                             
                                                                                                                                
MR. STAACK replied that what will  be used are the 1994 mortality                                                               
tables.   He explained that  those are the mortality  tables that                                                               
are used  for the PRS and  TRS.  He  noted that there is  a newer                                                               
mortality table called "RP2000,"  which will update the mortality                                                               
[table] that's used in the retirement systems.                                                                                  
                                                                                                                                
[HB 331, Version D, was held over.]                                                                                             
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
Number 1337                                                                                                                     
                                                                                                                                
There being no  further business before the  committee, the House                                                               
State Affairs  Standing Committee meeting was  adjourned at 10:00                                                               
a.m.                                                                                                                            

Document Name Date/Time Subjects