Legislature(1993 - 1994)
04/06/1993 08:06 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 6, 1993
8:06 a.m.
TAPES
SFC-93, #51, Side 1 (000-end)
SFC-93, #51, Side 2 (575-end)
SFC-93, #53, Side 1 (000-end)
SFC-93, #53, Side 2 (575-152)
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 8:06 a.m.
PRESENT
In addition to Co-chairs Pearce and Frank, Senators
Kerttula, Rieger, and Sharp were present. Senator Kelly
arrived soon after the meeting began, and Senator Jacko
arrived as it was in progress.
ALSO ATTENDING: Senator Ellis; Don Moore, Manager,
Matanuska-Susitna Borough; Jim Sampson, Mayor, Fairbanks
North Star Borough; Riley Snell, Executive Director, Alaska
Industrial Development and Export Authority (AIDEA), Dept.
of Commerce and Economic Development; John Olson, Deputy
Director, Development, AIDEA; John Regitano, Fairbanks
Native Association; Jane Demmert, Fairbanks Native
Association; Judy Knight, Director, Employment Security
Division, Dept. of Labor; Mark Mickelson, JTPA/SDA Program
Manager, Dept. of Community and Regional Affairs; Bill
Pedlar, Princess Tours; Stan Stecubuan, Association of
ARDORS; Robert S. Hatfield, President and CEO, Alaska
Railroad Corporation; Phyllis C. Johnson, General Counsel,
Alaska Railroad Corporation; Tina Lindgren, Executive
Director, Alaska Tourism Marketing Council; Wendy Mulder,
Special Assistant, Dept. of Commerce and Economic
Development; Kit Ballentine, Acting Director, Division of
Environmental Health; Dept. of Environmental Conservation;
and aides to committee members and other members of the
legislature.
ALSO PARTICIPATING VIA TELECONFERENCE FROM FAIRBANKS: Neal
Plateau; Nellie Hensley, FNA; Holly Burns; Ted Wicken; James
Wright; Madeline Williams, Linda Pearson, Fairbanks North
Star School District; Ken Hoke; David Dean; Christina Hill,
FNA; Edna Matthew, FNA; Harry Fields; and Julie Wilson.
SUMMARY INFORMATION
SB 16 - Act relating to the financing authority of
the Alaska Industrial Development and Export
Authority and giving approval of the issuance
of bonds for an Anchorage airport seafood
facility; and providing for an effective
date.
Discussion was had in conjunction with SB
171. SB 16 provisions were incorporated
within CSSB 171 (Fin).
SB 57 - Act relating to employment contributions and
to extending the pilot project for the state
training and employment program; and
providing for an effective date.
Testimony was presented by Judy Knight, Mark
Mickelson, John Regitano, Jane Demmert, Jim
Sampson, and the above-listed individuals who
spoke via TELECONFERENCE FROM FAIRBANKS. The
bill was subsequently HELD in a subcommittee
under Senator Kelly.
SB 85 - Act extending the termination date of the
Alaska Tourism Marketing Council; and providing
for an effective date.
Testimony was presented by Bill Pedlar, Tina
Lindgren, and Wendy Mulder. CSSB 85
(Finance) was REPORTED OUT of committee with
a zero fiscal note from the Dept. of Commerce
and Economic Development.
SB 171 - Act relating to the contracting and financing
authority of the Alaska Industrial
Development and Export Authority, giving
approval of the issuance of the authority's
revenue bonds, and delaying the termination
date of the authority's business assistance
program; and providing for an effective date.
Discussion was had with Senator Ellis, Riley
Snell, and John Olson. CSSB 171 (Finance)
(incorporating SB 16 as well as revised
amendment no. 1 and amendment no. 2) was
REPORTED OUT of committee with a zero fiscal
note from the Dept. of Commerce and Economic
Development.
SENATE BILL NO. 16
An Act relating to the financing authority of the
Alaska Industrial Development and Export Authority and
giving approval of the issuance of bonds for an
Anchorage airport seafood facility; and providing for
an effective date.
Upon convening the meeting, Co-chair Pearce announced her
intention to first deal with final questions regarding SB
16. Senator Rieger inquired concerning the ownership
structure of the Anchorage airport seafood facility, asking
how much equity AIDEA would own. RILEY SNELL, Executive
Director, Alaska Industrial Development and Export Authority
(AIDEA), Dept. of Commerce and Economic Development, came
before committee. He said that of the $163 million project,
AIDEA would finance $50 million for the cold storage
facility. Senator Rieger asked if the authority would loan
100% of that amount. Mr. Snell answered affirmatively. The
Senator then asked what kind of return AIDEA would receive
as the bonds are paid off. Mr. Snell said the rate of
return would be negotiated. AIDEA has traditionally
received approximately a 6.5% return. That is the point at
which negotiations would start.
[See pages 20-21 for incorporation of SB 16 within CSSB 171
(Fin).]
SENATE BILL NO. 171
An Act relating to the contracting and financing
authority of the Alaska Industrial Development and
Export Authority, giving approval of the issuance of
the authority's revenue bonds, and delaying the
termination date of the authority's business assistance
program; and providing for an effective date.
Co-chair Pearce directed that SB 171 be brought on for
discussion and pointed to a letter of support from TESORO as
well as information from the Mat-Su Borough (copies on file
in the original Senator Finance bill file for SB 171 at the
Legislative Finance Division).
DON MOORE, Manager, Matanuska-Susitna Borough, came before
committee. Senator Kerttula observed that recently
distributed material relating to the Midrex project
indicates that the borough has already funded $2,095,000.
Mr. Moore responded affirmatively. Senator Kerttula further
noted that when the state provided moneys for the road to
Point MacKenzie, funding was justified not only by the new
lands project, but by expectation of ultimate construction
of a port. With connection via causeway to Anchorage, it
was expected that Pt. MacKenzie would become the industrial
area of Anchorage.
(Senator Kelly arrived at the meeting at this time.)
Senator Sharp also noted a letter of support for the project
from Mayor Jim Sampson of the Fairbanks North Star Borough
(copy on file).
Co-chair Pearce queried members regarding additional
questions on either the fuel consortium project or
continuation of the small business program contained within
SB 171. No questions were raised. Co-chair Pearce directed
that the meeting be briefly recessed.
RECESS - 8:15 a.m.
RECONVENE - 8:20 a.m.
When the meeting was reconvened, Senator Rieger posed a
question regarding AIDEA payment of dividends to the state
similar to those paid by AHFC. Mr. Snell pointed to recent
independent analysis conducted by Bartle Wells Associates on
behalf of the Legislative Budget and Audit Committee. That
analysis indicates that harm might occur to AIDEA's bond
rating should moneys be removed from the authority. Mr.
Snell acknowledged that the legislature has the ability to
appropriate unrestricted surpluses from AIDEA. He
reiterated that such action would have a material affect on
access to capital. Mr. Snell stressed that dividends
provided to the state by AIDEA are in the form of jobs and
economic development. Senator Rieger advised that he had
not come to the same conclusion as the analysis. He
suggested that the appropriate form of a dividend would be a
fraction of the annual earnings of the corporation. This is
particularly true since the authority appears to be moving
in the direction of equity ownership rather than merely
serving as a financier.
In response to a further comment by Senator Rieger, Mr.
Snell acknowledged that last year AIDEA generated revenues
of $40 million. He noted that a portion of the revenue is
restricted by Red Dog Mine bonds, leaving approximately $21
or $22 in unrestricted revenues.
Co-chair Pearce directed attention to revised amendment no.
1 which she explained would add projects and funding amounts
to title language and authorize AIDEA to issue bonds to
finance the Midrex project at Port MacKenzie in the amount
of $50 million. Senator Kerttula MOVED for adoption.
Senator Rieger OBJECTED.
Senator Kelly referred to amendment no. 2 and asked if
funding the Anchorage airport fueling facility via a general
obligation rather than revenue bond would allow the facility
to be taxed by the Municipality of Anchorage. Mr. Snell
explained that development/finance projects where AIDEA
retains ownership include agreements relating to payments in
lieu of taxes. Under those agreements the principal users
must reach agreements with local municipalities. That type
of agreement would be used for this project as well.
(Senator Jacko arrived at the meeting at this time.)
In response to inquiries from Co-chair Frank and the above-
noted objection posed by Senator Rieger, JOHN OLSON, Deputy
Director, Development, AIDEA, Dept. of Commerce and Economic
Development, came before committee. He pointed to a packet
of information (copy on file in the original Senate Finance
file for SB 171) and explained that it attempts to address
three concerns, raised at the previous meeting, relating to:
1. Presentation of the projects in the early stages
of
development.
2. Ownership by AIDEA rather than the rendering of
merely
financial services by the authority.
3. AIDEA's general obligation pledge versus issue of
revenue bonds.
Speaking to the need for authorization while the projects
are in the early stages of development, Mr. Olson pointed to
statutory safeguards enacted by the legislature to guide
AIDEA in the conduct of its business. He noted that private
development projects often reach the point where they must
proceed at a time when the legislature is not in session.
Mr. Olson next outlined safeguards set forth within AS
44.88.095(c and d).
Directing attention to the third item above, Mr. Olson
explained that "general obligation" and "revenue" are terms
used to separate bonds that do or do not have the full faith
and credit of the authority. Buyers view all bond issues as
revenue bonds. AIDEA attempts to place as many projects as
possible under "revenue" status because AIDEA's "general
obligation" credit is finite. It varies depending upon
AIDEA's balance sheet. This credit is used carefully and
when necessary to get a project moving once all statutory
safeguards have been addressed. AIDEA is compensated for
use of its pledge by an interest rate markup and earnings
from the project once the debt is paid off.
Mr. Olson next spoke to ownership status, advising that by
retaining ownership, AIDEA can obtain tax-exempt bonds for
the project. The development/finance program envisioned in
AS 44.88. 172 takes advantage of this provision in the IRS
code for ports, airports, and various utility projects.
These projects are to be operated by the private sector.
Lack of ownership would require issuance of taxable bonds
which would substantially diminish the advantages of AIDEA
and the competitive position of the project. Under those
circumstances the project may not go forward. Funding for
projects is safeguarded by statutory requirements and
prudent use of authority assets.
Mr. Olson further spoke to reimbursement agreements,
feasibility analyses, and user agreements and noted
requirements associated with each.
Discussion followed between Senator Rieger and Mr. Snell
regarding financial consequences of the recently announced
layoffs and closure of the Skagway ore terminal. Mr. Snell
advised that the company remains in full compliance with all
payments to the authority. AIDEA is concerned regarding the
credit worthiness of the company. The company is the victim
of a depressed metals market. AIDEA believes that in the
long term the project will provide anticipated returns.
Senator Rieger maintained his objection to adoption of
revised amendment no. 1. He concurred in legislative action
to demonstrate support for the project, desire to see it go
forward, and intent to approve state participation upon
appropriate terms, but questioned whether approval of $50
million in bonds was an appropriate expression of that
support. Co-chair Frank said that as a policy matter the
legislature must decide whether it has confidence in AIDEA
to make a proper determination of whether or not the project
is feasible. He concurred that if the proposed legislation
contained a loan commitment or granted credit, action would
be premature. Passage of the legislation indicates the
project fits politically and conceptually, and if it meets
all statutory safeguards, it should go forward.
Co-chair Pearce called for additional comments. None were
forthcoming. She then directed that the roll be called on
revised amendment no. 1:
YEA: Sharp, Kerttula, Kelly, Jacko, Frank, Pearce
NAY: Rieger
Revised amendment no. 1 (Midrex) was thus ADOPTED on a vote
of 6 to 1.
Co-chair Pearce next directed attention to amendment no. 2
which she explained would delete the word "revenue" from
language relating to the Anchorage airport fueling facility
project. Senator Sharp MOVED for adoption. No objection
having been raised amendment no. 2 was ADOPTED.
Co-chair Pearce directed that both revised amendment no. 1
and amendment no. 2 be incorporated within a Senate Finance
Committee Substitute for SB 171. She then queried members
regarding disposition of the bill. Senator Kerttula MOVED
that CSSB 171 (Finance) pass from committee with individual
recommendations. Senator Jacko OBJECTED. Co-chair Pearce
directed that the roll be called on passage of CSSB 171
(Finance):
YEA: Kelly, Kerttula, Rieger, Sharp, Frank, Pearce
NAY: Jacko
The motion for passage of CSSB 171 (Finance) CARRIED on a
vote of 6 to 1, and CSSB 171 (Finance) was REPORTED OUT of
committee with a zero fiscal note from the Dept. of Commerce
and Economic Development. Co-chairs Pearce and Frank and
Senators Kelly, Kerttula, and Sharp signed the committee
report with a "do pass" recommendation. Senator Rieger
signed "no recommendation." Senator Jacko signed but made
no recommendation.
[See pages 20-21 for further action on this bill.]
SENATE BILL NO. 57
An Act relating to employment contributions and to
extending the pilot project for the state training and
employment program; and providing for an effective
date.
Co-chair Pearce directed that SB 57 be brought on for
discussion and noted a TELECONFERENCE link to Fairbanks.
She referenced backup in members' files, pointing
specifically to fiscal notes showing other than general
funds, position papers from the Dept. of Community and
Regional Affairs and the Dept. of Labor, a sectional
analysis, a sponsor statement, legal opinion, Fairbanks'
Native Association history, and a number of overviews.
JUDY KNIGHT, Director, Employment Security Division, Dept.
of Labor, came before committee. She explained that the
proposed bill would extend the STEP program for three years.
Employment Security collects and accounts for STEP revenues
along with unemployment insurance taxes from employers and
employees. STEP revenues are 1/10 of one percent of the
employee contributions that would have accrued to the
unemployment insurance trust fund to provide unemployment
benefits to Alaskan workers.
The STEP program was originally enacted in 1989 for a two-
year period. In 1991 it was extended for an additional two
years. It is scheduled to sunset June 30, 1993. When the
STEP concept was originally proposed, it recognized that the
state work force was in need of additional training to
remain competitive. Use of revenues from the unemployment
trust fund was determined to be an appropriate source of
funds, given the three purposes set forth in the original
legislation (Ch 95, SLA 1989):
1. Help prevent future claims against unemployment
benefits.
2. Foster new jobs by encouraging businesses to
locate in Alaska due to the availability of a
skilled labor force.
3. Increase training opportunities to workers
severely impacted by fluctuations in the state
economy or technological changes in the work-
place.
Ms. Knight acknowledged a commitment to employers who bear
the majority of the cost of unemployment insurance and want
to see this cost reduced. Employment and training programs
have thus been targeted and evaluated based on trust fund
savings.
In accordance with Sec. 7 of the STEP Act, last spring the
department solicited comments, recommendations, and
priorities from agencies, groups, and individuals.
Regulations were then promulgated to ensure that training
funded with STEP revenues would result in a savings to the
UI trust fund. Included in target groups to be served are
individuals presently claiming unemployment insurance
benefits (including women and minorities), persons enrolled
in the unemployed parent program (JOBS program under AFDC),
persons responsible for court-ordered child support
payments, and those who lack skills or whose skills have
been outdated.
Ms. Knight made reference to amendments to the legislation,
advised that the administration does not support the
amendments, and urged the committee to pass the original
bill. Co-chair Pearce said that amendments had not been
presented to the committee. Ms. Knight advised that a
packet of amendments had earlier been provided to the
department. Co-chair Pearce said they were not included
within members' files since they had not been offered by
anyone. Senator Kelly voiced need to hear from the
department if the amendments are offered.
Ms. Knight stressed need for Alaskan workers to obtain
better skills. Thousands of unemployed Alaskans do not have
the wherewithal to return to work. Human resources are an
important factor in economic development.
End, SFC-93, #51, Side 1
Begin, SFC-93, #51, Side 2
In response to a question from Co-chair Frank asking how
STEP moneys are expended, Ms. Knight explained that the
Dept. of Labor collects STEP revenues from unemployment
insurance payments. The department then contracts or enters
into a reimbursable services agreement with the Dept. of
Community and Regional Affairs which is responsible for
delivery of services and training. Funding is divided among
the three service delivery areas established under the Job
Training Partnership Act. The mechanism for JTPA was
utilized in an attempt to minimize overhead administrative
costs.
MARK MICKELSON, JTPA/SDA Program Manager, Dept. of Community
and Regional Affairs, next came before committee. He
explained that the federal JTPA is administered by the
department and passed along to three entities:
1. The Anchorage/Mat-Su private industry council.
2. Fairbanks private industry council.
3. The statewide private industry council, located
within
the department, that serves the balance of
the state.
The intent with the STEP program was to piggyback
administrative functions with JTPA which was already in
place. The STEP program fills an important niche in overall
program strategy in that it does not generally focus on
people with multiple barrier, severe dysfunction in terms of
the labor force. That focus is subsidized by Title 2A and
2B of JTPA.
In response to further inquiries from Co-chair Frank, Judy
Knight explained that the job training council, a 21-member
board appointed by the Governor, determines how funding will
be apportioned.
Mr. Mickelson voiced support for the STEP program,
describing it as an important contributor to the overall
effort of work force preparation.
Senator Rieger asked if the above-listed councils contract
with other entities to provide direct training. Mr.
Mickelson said that the state merely administers the
program. Training is provided by non-state private-sector
businesses, nonprofits, the Alaska Vocational Technical
Center in Seward, joint apprenticeship programs, etc. These
direct service providers are more familiar with industry
requirements and the skills that need to be developed.
Grant award is through competitive procurement.
Representatives of private industry councils sit on the
proposal review committee that makes final selections.
Further discussion followed regarding paper handling and
reporting responsibilities at various levels within the
program. In response to comments by Co-chair Frank, Mr.
Mickelson said that the private industry council provides
planning, oversight, and guidance to administrative staff.
JANE DEMMERT and JOHN REGITANO next came before committee on
behalf of the Fairbanks Native Association. Mrs. Demmert
noted that the Fairbanks Native Association is unique in its
30-year history of service in Fairbanks. While it was
originally established to serve the Native community, many
services have been extended and expanded to serve all
ethnicities in Fairbanks. Services include education,
social services, services to elders, alcohol and addiction
prevention and treatment to adults and adolescents, and
employment counseling, training, and placement.
The employment services component was established during the
pipeline construction days and has provided services with
public funds since that time.
Mrs. Demmert noted that the Association is not a tribal
entity. It is not eligible for tribal job training funding
as are some regional nonprofits. The Association focus is
upon provision of services to residents of the Fairbanks
North Star Borough. One becomes eligible for services after
residing in the Fairbanks area 30 days.
Mrs. Demmert next spoke to allegations that the Fairbanks
Native Association prefers not to go through the competitive
process to apply for funding. That is not the case. The
purpose of this appearance before committee is to suggest
that a competitive process which would enable organizations
such as the Fairbanks Native Association to be a part of the
STEP program would serve the state very well. Mrs. Demmert
directed attention to the Association's position paper on SB
57.
Mr. Regitano spoke to needed adjustments in the bill to
better serve the large demand for employment assistance
among minority populations in the Fairbanks North Star
Borough. The timing of awards is now sporadic and does not
allow FNA and other organizations seeking employment
assistance money to apply for and obtain funding on a year-
round basis to provide a continuum of service to clients.
A further problem is the screening process for STEP
applicants. That process is long and so detailed that it
discourages many from seeking employment assistance.
The requirement that STEP applicants must have contributed
to the unemployment insurance fund within the last three
years is prohibitive and eliminates any people. During the
past year, two out of three individuals "who came through
the door" were not eligible and had to be denied service.
Mr. Regitano stressed need for flexibility and adjustment of
eligibility criteria to cover a broader range of people.
Some mechanism should be built into SB 57 to directly tie
funding cycles to the state fiscal year. Mr. Regitano
acknowledged that the current unscheduled cycle serves some
programs but not FNA. He again voiced need for adjustments
providing FNA equal access to funding.
Mr. Regitano noted that FNA competition for funding would
not interrupt the flow of moneys to PIC (private industry
council). Dept. of Community and Regional Affairs figures
for FY 92 indicate $552.0 in unused STEP moneys.
Co-chair Frank inquired concerning the success rate for FNA
programs. He asked that representatives elaborate on other
federal funds for the FNA employment program and indicate
how a competitive mechanism could be implemented in the
legislation. Mr. Regitano proposed a competitive process at
the Dept. of Community and Regional Affairs similar to that
utilized by the Dept. of Health and Social Services where
RFPs issue in April or May for funding to be made available
July 1. Following application, review, and award by June
30, organizations would then know what amounts they would be
receiving.
In further discussion with Co-chair Frank, Mr. Regitano
expressed a preference for award to be made at the 21-member
state JTPA council level.
Speaking to the success rate of FNA programs, Jane Demmert
advised that long-term follow-up of clients placed in jobs
indicates 69% have remained in permanent employment. That
is a significant turn around. Those individuals are no
longer on state welfare rolls, and they are contributing to
the state economy.
Addressing the question of alternative funding, Mrs. Demmert
explained that FNA is not eligible for categorical funds
provided to Indian tribes. FNA is thus not eligible for
specific JTPA funding.
Co-chair Frank asked if FNA programs duplicate similar
programs offered by the private industry council or other
entities. Mrs. Demmert said that 75% of the clients served
by FNA are Native and other minorities. The reverse is true
of the Fairbanks private industry council. Approximately
30% of those clients are Native or other minorities. Need,
demand, and response is such that the two programs serve
different client groups and hopefully meet the employment
needs of the entire community of Fairbanks.
Senator Kerttula inquired concerning FNA overhead. Mr.
Regitano answered that the currently approved rate is 19.3%.
Delivery is thus at 81%. The STEP program, however, is
capped at 15%.
Discussion followed between Mr. Regitano and Senator
Kerttula regarding the cross referencing of services.
Senator Kelly inquired concerning FNA's annual budget. Mr.
Regitano advised that the most recent audit evidenced $5.1
million. The STEP program is merely one piece of a total
service system. It is an important piece in that FNA works
on a multiple department basis, offering community service,
family intervention, education, and the largest (80%) drug
and alcohol prevention and rehabilitation programs.
Employment is a key component of these services. Mr.
Regitano observed that clients who receive assistance
through other FNA services but who are subsequently unable
to find work, are often readmitted to assistance programs.
Senator Kelly voiced his understanding that the STEP program
is currently successful. FNA is requesting a change in
funding source, criteria, screening, etc. He then asked why
that should be done when the program is working well. Mr.
Regitano acknowledged that the program is working for "a
certain group." He then voiced his opinion that it is
"missing a large group of people." Further, there is
available funding that could be used to serve those
individuals. FNA is only asking for changes in order to be
able to compete.
In response to an additional question by Senator Kelly, Co-
chair Frank noted that FNA seeks to serve the long-term
unemployed as well as short-term. Senator Kelly suggested
that STEP is not designed to do that. Mr. Regitano advised
that those who have been out of work for a longer period are
not being served. He noted that minority population
unemployment in Fairbanks is double that of the majority.
Co-chairman Frank acknowledged a teleconference link to
Fairbanks and directed that testimony from the
teleconference site commence.
NEAL PLATEAU, (683-2698) Alascan, Inc., first testified. He
voiced support for the STEP program, saying that it has been
of great benefit in enabling the company to employ new
techniques that allow Alascan to lower the cost of its
product. Without STEP, Alascan would not be able to keep
its employees working full time. The program is working
well as it is. It should not be changed. Alaska needs
manufacturing and other industry. Under STEP, more
businesses can utilize funds for special training than if
certain amounts of funding are dedicated to a particular
group.
BOB SWOPE next spoke in support of continued funding through
FY 96. He explained that as a non-Native client of
Fairbanks Native Association services he benefited from
FNA's job referral program.
End, SFC-93, #51, Side 2
Begin, SFC-93, #53, Side 1
It represents a proactive rather than reactive response to
problems associated with getting a younger generation of
Native men and women trained and employed in the work force.
There is an overwhelming savings from reduction of the
number of individuals on unemployment rolls and social
service programs that far outweighs the cost of the STEP
program. Mr. Swope asked that regardless of whether funding
issues through grants or competitive proposals, the
committee ensure that the level remains the same or
increases.
NELLIE HENSLEY, Program Director, Fairbanks Native
Association employment program, next testified. She
explained that over the past two years the program has
served over 1,000 clients. That number reflects the FNA
STEP program, a federal program, and a small JTPA project.
If these clients had not been served, they would qualify for
AFDC or other welfare programs for economically
disadvantaged individuals. Of the 1,000, FNA placed 301
individuals in jobs, and 69% have retained their employment
and are contributing to the unemployment insurance system.
The FNA program is needed. It provides services to a
population that is not being served through present
employment and training programs available in Fairbanks.
There is need for both the STEP program and changes to
enhance the program.
HOLLY BURNS voiced support for the program. (Unclear
transmission and noises in the committee room make Ms.
Burns' brief teleconference testimony difficult to
understand.)
TED WICKEN next spoke in support of the program. He
explained that it made a great difference in his life.
After having worked construction for many years, he is now
undergoing training through STEP so he can continue to
support his family.
JAMES WRIGHT next spoke via teleconference from Fairbanks.
He advised that he is an Alaska Native, originally from
Ruby, who is presently undergoing FNA training in cadastral
surveying. Mr. Wright urged continued support for the
program.
MADELINE WILLIAMS advised that she is a Native from Huslia
and a client at FNA. She voiced support for FNA training
and urged that support continue.
LINDA PEARSON, Counselor, Hutchinson Career Center,
Fairbanks North Star Borough School District, next
testified. She explained that the career center has
traditionally prepared students for the job market. Ms.
Pearson attested to the fact that a number of adult minority
clients have taken classes and thereafter secured jobs. She
voiced support for FNA's employment program. It provides a
one-stop-shopping type service to a unique clientele (75%
minority), with a personal touch. In addition to job
development, education, work experience, and day-labor
placement, counselors teach clients how to get and keep a
job. Clients explore their interests and assets. They work
on application and resume development and practice
interviewing in order to improve interview skills. It is
the personal touch that reaches discouraged individuals who
might not otherwise seek help from job service or the
private industry council. It is valuable in that it puts to
work individuals who might not otherwise have an
opportunity. Speaking from a national perspective, Ms.
Pearson said that job readiness skills are as important as
actual job training.
KENNY HOKE, member, Fairbanks Private Industry Council, next
spoke to committee. He voiced private-sector support as
well as support for FNA's competitive bid approach. He
suggested that that approach could be more readily addressed
through regulatory rather than statutory change. He urged
support of SB 57 without the amendments.
In response to a question from Co-chairman Frank, Mr. Hoke
suggested that proposed changes should address funds that
lapsed to the general fund. Unused unemployment insurance
funds from the previous year should be held in a special
account and issued via competitive bid.
DAVID DEAN, executive director, Fairbanks Private Industry
Council, next testified. He referred to earlier comments by
Mr. Regitano that two out of three individuals coming to FNA
are not eligible for the STEP program. That analysis is
based upon a designated grant to FNA. It does not represent
the statistics of the Fairbanks Private Industry Council.
Council statistics indicate that far more are eligible for
the program.
Addressing comments regarding STEP funding cycles, Mr. Dean
said funding is based upon actual allocation arrival at
private industry councils. There is no delay in advertising
for proposals or award of contracts.
Mr. Dean noted that the long-term unemployed are served
under Title 2 of JTPA. Councils administer those programs.
Long-term unemployed individuals would certainly meet the
economically disadvantaged criteria. The council is
currently serving approximately 30% minority clients in a
city with a minority population of less than 20%.
The Fairbanks Private Industry Council has cooperative
agreements with the Fairbanks Native Association and the
Tanana Chiefs Conference, and clients are referred by both
agencies.
Mr. Dean next read a letter of support for SB 57, without
amendments, from the chairman of the Fairbanks Private
Industry Council. In response to an inquiry from Senator
Kelly, Mr. Dean advised that a copy of the March 31, 1993,
correspondence was faxed to each Senator's office.
CHRISTINA HILL, member, FNA, next spoke in support of the
bill. She explained that she is a public employee who
employs approximately 23 Native staff members. She urged
continuation of funding for FNA services and requested that
the legislature consider expansion of funding sources,
noting that agencies that directly serve the Native
community and other minority communities should be able to
compete for funding.
EDNA MATTHEW, employment specialist, Fairbanks Native
Association, next testified, requesting continued funding of
FNA STEP programs. There are presently 262 clients being
served by three counselors at FNA. Each client is provided
orientation regarding the association's programs and
services. They then progress through intake and work skill
assessment. Clients are provided a job readiness class and
learn resume skills prior to referral to jobs or additional
training. FNA services are not duplicating similar
programs. Although minorities may only be 20% of the
Fairbanks population, they are disproportionately
represented in the unemployed sector. FNA's employment
program serves a need that must be met in Fairbanks.
HARRY FIELDS next voiced support for the STEP program on
behalf of the private industry council. (Teleconference
testimony is unclear and difficult to discern.)
JULIE WILSON next testified. She explained that she is an
instructor at the Fairbanks Native Association. She then
voiced support for continued funding of the FNA employment
program through STEP moneys. Ms. Wilson said that she works
specifically with adult basic education, academic assessment
of clients, and job readiness workshops. FNA services do
not duplicate other programs in the Fairbanks area.
Co-chair Pearce called for additional testimony on the bill.
None was forthcoming. Upon conclusion of the
teleconference, Co-chair Pearce directed that SB 57 be HELD
in committee pending arrival of Mayor Jim Sampson from
Fairbanks.
[See page 22 for further comments on this legislation.]
SENATE BILL NO. 85
An Act extending the termination date of the Alaska
Tourism Marketing Council; and providing for an
effective date.
Co-chair Pearce directed that SB 85 be brought on for
discussion and further directed attention to amendments for
the bill. She recalled prior committee discussion relating
to need to shorten the time of sunset and place a task force
on tourism into temporary law. The task force is to work
during the interim and make recommendations next January for
new methods of funding tourism marketing on a public/private
basis. The legislature is interested in a greater private-
sector infusion into the ATMC program. That is reflected in
the budget. Both the Governor's and the Senate budgets
increase the private portion to 20%. The House budget shows
an increase to 22.5%.
Directing attention to page 2, lines 21 and 22, of the
Senate Labor and Commerce version of the bill, Co-chair
Pearce noted that, at the request of the department, bill
language removes the director of tourism as the presiding
officer of the board. Senate Finance received a request
from the Governor's office through boards and commissions
that the Governor be allowed to appoint the presiding
officer from among board members.
BILL PEDLAR, Princess Tours, came before committee. He
advised that all Alaskan businesses in the tourism industry
benefit greatly from cooperative marketing. As a
destination, Alaska competes with Canada, Europe, and other
locations where millions are spent at the federal level to
promote those destinations. Travel to Alaska often ranks as
a foreign vacation rather than travel to another state.
Mr. Pedlar took exception to the perception that certain
members of the industry--most notably, cruise ship
operators--have disproportionately benefitted from
cooperative marketing. From 1986 through 1993, the cruise
industry in Alaska has grown from 201,000 beds to 320,000
beds. That represents over a 60% increase. During that
time, pleasure vacations and visits to friends and relatives
grew only 43%. The cruise market outsupplied growth in the
vacation pleasure/visitor market. That was accomplished by
two things: marketing and supply. The cruise industry is a
supply based segment of the industry. It will find a price
that will clear the supply in the marketplace. If inherent
demand is not there for the destination, the industry will
find a way of liquidating its product at a price that will
fill its assets. From 1986 to 1993, Princess Cruises
increased its marketing budget from $6.1 million to $13
million to market $383 million worth of assets deployed in
the trade. That represents $63 million worth of assets in
the State of Alaska, including hotels, motor coaches, rail
cars, and an equivalent investment of $320 million worth of
ships.
Alaska is the only trade in which Princess Cruises markets
the destination first and the mode of transportation second.
During the time that Princess Cruises increased its
marketing budget 113%, funding for cooperative marketing
increased from $4.5 million to $6.2 million. The industry
contribution increased from $1.2 million to $1.4 million.
The Division of Tourism budget increased from $2 million to
$3.2 million in that same period.
Mr. Pedlar voiced his contention that the cruise industry
has not disproportionately benefitted from cooperative
marketing. It has benefitted from application of its own
resources to an expanding market. He noted that in 1993,
Alaska has no more market share of the world cruise
deployment than it had in 1986. The cruise growth in Alaska
has maintained its position since that time.
The council does an excellent job with the funds it is
given. While the 21 members have not always worked
harmoniously, eleven of the 21 must agree upon how to spend
state funds and the private industry match. It is the best
check and balance the state has to ensure that funds are
spent in an intelligent manner. No one person or one entity
on the council can expend funds. There is no subterfuged
control.
In his closing remarks, Mr. Pedlar voiced support for
continuation of the council, reiterating that there is no
disproportionate benefit to any one entity from generic
marketing. He again attested to the effectiveness of
existing checks and balances associated with council
expenditures. Mr. Pedlar urged committee support for
continued and increased funding for the council.
Co-chair Pearce asked if the marketing increase from $6.1 to
$13 million represents Princess Cruise marketing for Alaska
or for the entire company. Mr. Pedlar answered that
marketing is tracked by trade. The Alaska trade has grown.
Marketing the Alaska destination in light of worldwide
global competition has required additional funds.
In response to a question from Co-chair Frank, Mr. Pedlar
acknowledged that he was in favor of expanding year round
television at the expense of "some of the travel planners."
The last 100,000 distribution of travel planners may not be
the most cost effective advertising. Mr. Pedlar voice his
belief that "One of the things that . . . has hurt the
growth in other segments is the overall, generic appearance
of Alaska in the marketplace." When Princess Cruises
markets Alaska, it has a vested corporate interest in the
minds of consumers. When the state produces generic
television ads featuring the beauty of Alaska, there is
great credibility that builds consumer interest and
awareness. That part of the budget has constantly been
eroded since 1981. When faced with impending budget cuts,
the council reassessed its efforts and felt there was
greater need for consumer awareness of Alaska as a
destination, via increased television advertisements. That
meant sacrificing, in the short term, "a couple of
distributions of travel planners." That was done with the
hope that the planner could again go forward once consumer
awareness was built.
Responding to comments by Senator Kerttula, Mr. Pedlar said
that the general fund allocation to the Alaska Tourism
Marketing Council was approximately $6.2 million for 1993.
Advertising and distribution associated with the travel
planner comprises $4.5 million of that total. The remainder
is for public relations, fam trips, administration, etc.
What is left over is utilized for network or cable
television. Market place rating points for 1993 are not
even close to those of 1983 and 1984.
Co-chair Pearce directed attention to packet information
(copy on file in the original SFC bill file at the
Legislative Finance Division) demonstrating distribution of
funds since 1989.
Co-chair Frank asked if domestic marketing includes the
Alaska Highway. Mr. Pedlar answered affirmatively. He
explained that the Division of Tourism has commenced the
Tourism North project. It funds a strategic market focused
on highway travel.
Co-chair Frank spoke to criticism that marketing does not
focus on Alaskan-owned businesses and is dominated by the
cruise ship industry. He then suggested that it would be
worthwhile for generic advertising to include various
methods of getting to Alaska. Mr. Pedlar said that generic
marketing, through distribution of the travel planner,
features different methods of traveling to the state. The
other impression attempted to convey through ads is the
myriad of interesting things in Alaska. He conceded that
perhaps a picture of an R.V. should be worked into
advertising. Mr. Pedlar next spoke to problems associated
with attempting to target marketing for a specific region or
type of travel under a generic banner, indicating that such
an approach means that there is usually not enough money "to
do anything really well."
End, SFC-92, #53, Side 1
Begin, SFC-92, #53, Side 2
Mr. Pedlar acknowledged that cruise ship marketing sometimes
supplants state marketing in the minds of potential
travelers. He further acknowledged that pricing calculated
to fill ships often makes highway travel appear less
economical.
Co-chair Frank voiced his belief that many potential
visitors do not even know that it is possible to drive to
Alaska. He noted that the recent Alaska Highway 50th
anniversary celebration would have provided a good
opportunity to focus on that type of travel.
Senator Sharp suggested that most state advertising moneys
have been channelled to benefit those who can most afford to
advertise, at the expense of others. There should be
opportunity to channel funding toward a broad scope of
advertisement that benefits many.
Senator Kerttula spoke to the value of the vacation planner,
advising of support from constituents. He voiced concern
over reduced distribution and attested to need to promote
rural wilderness experiences. Increases in the budget
should be dedicated to destination tourism.
Senator Jacko questioned support for expenditure of general
fund moneys for tourism in light of resistance to
expenditure of general funds for seafood marketing.
Co-chair Pearce directed attention to Amendment No. 1,
requested by the Governor's Office, and explained that it
would add the following language at page 2, lines 21 through
23:
the governor shall appoint a presiding officer from
among board members;
Senator Kelly MOVED for adoption. Senator Kerttula
OBJECTED, inquiring concerning the reasoning behind the
change. Co-chair Pearce explained that the director of the
division of tourism currently serves as chairman. The
director did not feel it appropriate that he automatically
be designated. The board consists of 21 members (10
appointed by the Governor, 10 appointed by AVA, and the
director of tourism). The Senate Labor and Commerce
Committee included language requiring that the board elect
the chairman. The Governor's Office indicated that since
the state is funding 77.5% of the marketing effort, the
administration should select the chairman from among board
members. Senator Kelly noted that the director of the
division of tourism would continue to sign all contracts,
regardless of whether he serves as chairman. That provides
additional protection.
Co-chair Frank voiced his preference for retention of the
director of tourism as chairman. That arrangement provides
integration between domestic and international marketing
efforts. He also attested to the benefits of having an
individual working full time in tourism do necessary
background work and form the agenda. To expect a lay person
to fill that role is unrealistic.
TINA LINDGREN, Executive Director, Alaska Tourism Marketing
Council, and WENDY MULDER, Special Assistant, Dept. of
Commerce and Economic Development, next came before
committee. Ms. Lindgren concurred in foregoing comments
that the director of tourism asked that he be removed as
presiding officer of the council. She explained that at
times he has been put in an awkward position when the
Governor's viewpoint is in conflict with the council's
position.
Senator Sharp raised questions concerning the following
explanation associated with Amendment No. 1:
This board approves millions of dollars each year for
state funded tourism promotion. It would certainly
injure the public perception of the ATMC to have the
AVA-dominated board selecting their own chair. At the
least, the chair should be accountable to the public,
not just one private organization. Allowing the
governor to appoint the chair will accomplish this.
He noted that the governor could appoint a representative of
a strong private organization as chairman. He then
suggested that Amendment No. 1 would not preclude the
situation warned of in the above language and advised that
he could not support the amendment. Co-chair Frank
concurred in lack of support.
Co-chair Pearce called for a show of hands on adoption of
Amendment No. 1. The motion carried on a vote of 4 to 3,
and AMENDMENT NO. 1 was ADOPTED.
Co-chair Pearce directed attention to Amendment No. 2 and
explained that it would establish, in temporary law, a task
force on tourism. She attested to concern regarding long-
term funding for generic marketing and past utilization of
those moneys. Senator Kerttula asked if Senate Labor and
Commerce could undertake the effort if provided the
necessary funding. Senator Kelly said that as chairman of
Senate Labor and Commerce Committee, he was not interested
in performing the work. He then suggested that there should
not be great expense associated with the task force. Co-
chair Pearce concurred, advising that no staff would be
involved. Travel would be paid from leadership funds in
both houses of the legislature.
Senator Kelly MOVED for adoption of Amendment No. 2. No
objection having been raised, AMENDMENT NO. 2 was ADOPTED.
Co-chair Pearce directed attention to Amendment No. 3. She
explained that the bill currently has a sunset date of 1997.
Because of concerns surrounding ATMC and the task force, the
proposed amendment would replace June 20, 1997, with
December 30, 1994. That date was chosen since the council
markets on a seasonal bases rather than the state fiscal
year. The task force could thus return to the legislature
with recommendations prior to sunset. Senator Kerttula
voiced support and MOVED for adoption of AMENDMENT No. 3.
Senator Kelly OBJECTED. He said he saw no reason for the
one-year extension. While voicing support for the task
force, he advised that the council "does a fine job." There
is no need to hold the extension over council members'
heads. Co-chair Pearce spoke to concern that extension may
not be forthcoming from the House. It is hoped that the
shortened time frame and interim task force would aid
passage and avoid impending sunset of the Council.
Co-chair Pearce called for a show of hands on adoption of
Amendment No. 3. The motion carried on a vote of 5 to 1,
and AMENDMENT NO. 3 was ADOPTED.
Co-chair Frank suggested that the following language be
added at page 2, following Line 17:
including the promotion of Alaska as a destination and
all form of travel to Alaska, including travel by air,
highway, water
Co-chair Pearce designated the foregoing as Amendment No. 4.
She then directed that action on the amendment be held in
abeyance pending formal presentation of the language in
written form.
Senator Kelly referenced title language at page 1, line 12,
and spoke to need to remove the word "substantial"
therefrom. He explained that Senate Labor and Commerce
Committee action deleted a requirement that certain ATMC
board members be substantially involved in a visitor or
recreation industry business. Such language should also be
removed from the title.
Co-chair Pearce directed that discussion of SB 85 be HELD IN
ABEYANCE pending formal presentation of Amendment No. 4.
[See pages 22-23 for continued discussion of SB 85.]
SENATE BILL NO. 171
An Act relating to the contracting and financing
authority of the Alaska Industrial Development and
Export Authority, giving approval of the issuance of
the authority's revenue bonds, and delaying the
termination date of the authority's business assistance
program; and providing for an effective date.
Senator Kerttula MOVED to rescind committee action passing
CSSB 171 (Finance) from committee. No objection having been
raised, IT WAS SO ORDERED. CSSB 171 (Finance) was again
before committee.
SENATOR JOHNNY ELLIS came before committee, asking that the
substance of SB 16 (AIDEA BONDS: ANCHORAGE SEAFOOD FACILITY)
be incorporated within CSSB 171 (Finance). He then offered
an amendment to that effect.
(Recording problem. Minutes relating to action on CSSB 171
(Finance) and testimony on SB 57 reflect transcription of
shorthand notes. There is no recording.)
Co-chair Pearce directed that the amendment be designated
Amendment No. 3 and called for objections. She also advised
of her preference for inclusion of all three projects
contained in CSSB 171 (Finance) within title language.
Senator Kerttula MOVED for adoption of Amendment No. 3 and a
listing of the projects within title language. Senator
Kelly initially OBJECTED and then WITHDREW his OBJECTION.
Senator Rieger reiterated his earlier expressed concern
regarding lack of information associated with projects
within the bill. Co-chair Pearce called for a show of hands
on the motion. The motion CARRIED on a vote of 5 to 1, and
AMENDMENT NO. 3 and the TITLE CHANGE were ADOPTED.
Senator Kerttula then MOVED for passage of CSSB 171
(Finance) with individual recommendations. No objection
having been raised, CSSB 171 (Finance) was REPORTED OUT of
committee with a zero fiscal noted from the Dept. of
Commerce and Economic Development. Co-chair Pearce and
Senators Kelly, Kerttula, and Sharp signed the committee
report with a "do pass" recommendation. Senator Rieger
signed "no recommendation." Senator Jacko signed without
making a recommendation.
SENATE BILL NO. 57
An Act relating to employment contributions and to
extending the pilot project for the state training and
employment program; and providing for an effective
date.
JIM SAMPSON, Mayor, Fairbanks North Star Borough, came
before committee in support of SB 57. He said that a good
public policy argument could be made for investment in long-
term programs allowing unemployed individuals to develop
skills needed in the current job market. He voiced his
belief that FNA should be allowed to compete for funding and
stressed need for earlier receipt of STEP moneys. The mayor
concurred in previous testimony regarding need to provide
programs for the long-term unemployed.
Co-chair Pearce directed that SB 57 be placed in a
subcommittee under Senator Kelly.
SENATE BILL NO. 85
An Act extending the termination date of the Alaska
Tourism Marketing Council; and providing for an
effective date.
(Remaining minutes reflect tape transcription.)
Co-chair Pearce directed that discussion revert to SB 85.
Co-chair Frank distributed Amendment No. 4 and explained
that the intent is to place in statute, under ATMC duties,
direction that the council promote Alaska as a destination
in all forms of travel, including air, highway, and water.
He suggested that the new directive would send a signal that
the legislature is concerned about all aspects of the
tourism market.
TINA LINDGREN, Executive Director, Alaska Tourism Marketing
Council, again came before committee. She advised that the
council is attempting to accomplish the intent embodied
within the proposed amendment, noting that the vacation
planner contains information on different modes of travel.
Ms. Lindgren voiced concern that the amendment might
restrict the marketing of highway travel per se since it
might preclude the council from conducting a specific
promotion. Co-chair Frank advised that he did not foresee
that becoming a problem.
Senator Kelly reiterated earlier comments (see page 20 of
these minutes) regarding need to delete the word
"substantially" from title language. He then MOVED for
adoption of that technical amendment. No objection having
been raised, IT WAS SO ORDERED.
[NOTE the drafter subsequently determined that since the
legislation would delete the requirement that certain
members of the council be substantially involved in a
visitor or recreation business, it was necessary to retain
"substantially" within title language. That retention was
cleared with Senator Kelly's office, and "substantially"
remained within the title of CSS 85 (Finance).]
Co-chair Frank MOVED for adoption of Amendment No. 4. Co-
chair Pearce initially OBJECTED to allow time for review of
specific wording by members. Following review of amendment
language, Tina Lindgren advised that she did not foresee a
problem. Wendy Mulder voiced support for the amendment on
behalf of the Dept. of Commerce and Economic Development.
Co-chair Pearce REMOVED her OBJECTION to adoption of
Amendment No. 4. She then called for further objections.
None were forthcoming, and Amendment No. 4 was ADOPTED.
Senator Jacko MOVED that CSSB 85 (Finance) pass from
committee with individual recommendations. Senator Sharp
OBJECTED. Co-chair Pearce called for a show of hands. The
motion CARRIED on a vote of 5 to 1, and CSSB 85 (Finance)
was REPORTED OUT of committee with a zero fiscal note from
the Dept. of Commerce and Economic Development. Co-chairs
Pearce and Frank and Senators Jacko, Kelly, and Rieger
signed the committee report with a "do pass" recommendation.
Senator Sharp signed "Do not pass." Senator Kerttula had
left the meeting and did not sign.
ADJOURNMENT
The meeting was adjourned at approximately 11:15 a.m.
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