Legislature(1995 - 1996)
03/26/1996 08:10 AM Senate FIN
| Audio | Topic |
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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
March 26, 1996
8:10 a.m.
TAPES
SFC-96, #51, Side 1 and 2
SFC-96, #52, Side 1
SFC-96, #52, Side 2 (575-207)
CALL TO ORDER
Senator Steve Frank, Co-chairman, convened the meeting at
approximately 8:10 a.m.
PRESENT
In addition to Co-chairmen Frank and Halford, Senators
Phillips, Rieger, Sharp, and Zharoff were present. Senator
Donley arrived as the meeting was in progress.
ALSO ATTENDING: Senator Green; Senator Torgerson; Barbara
Ritchie, Deputy Attorney General, Civil Division, Dept. of
Law; Laurie Otto, Deputy Attorney General, Criminal
Division, Dept. of Law; Alison Elgee, Deputy Commissioner,
Dept. of Administration; Dick Pegues, Director,
Administrative Services Division, Dept. of Law; Nancy
Slagle, Director, Budget Review, Office of Management and
Budget; Kevin Ritchie, Executive Director, Alaska Municipal
League; Bill Rolfzen, State Revenue Sharing, Division of
Municipal and Regional Assistance, Dept. of Community and
Regional Affairs; Vern Voss, Cash Manager, Treasury
Division, Dept. of Revenue; Brett Huber, aide to Senator
Green; Annette Kreitzer, aide to Senator Leman; Kathryn
Daughhetee, fiscal analyst, Legislative Finance Division;
and aides to committee members and other members of the
legislature.
ALSO PARTICIPATING VIA TELECONFERENCE: Christopher Kennedy,
Assistant Attorney General, Environmental Section, Dept. of
Law, Anchorage; Pat Poland, Director, Division of Municipal
and Regional Assistance, Dept. of Community and Regional
Affairs, Anchorage; and John Stein of Wasilla;
SUMMARY INFORMATION
HB 468 - APPROPRIATION: SUPPLEMENTAL & OTHERS
Review of the Dept. of Law request within Sec. 9
of the bill was had with Barbara Ritchie, Laurie
Otto, and Nancy Slagle. The supplemental was held
in committee for continued review at 8:00 a.m.,
Friday, March 29, 1996.
SB 20 - ALASKA MUNICIPAL BASIC SERVICES PROGRAM
Discussion was had with Senator Torgerson, Kevin
Ritchie, Bill Rolfzen, Vern Voss, and via
teleconference with Pat Poland and John Stein. An
amendment by Senator Rieger was adopted for
incorporation within a finance committee
substitute. CSSSSB 20 (Fin) was then REPORTED OUT
of committee with a zero fiscal note from the
Dept. of Community and Regional Affairs and a
($874.0) note from the Dept. of Revenue.
SB 112 - DISCOVERY ROYALTY CREDIT
Review and discussion of CSSB 112 (Res) was had
with Annette Kreitzer. The bill was subsequently
held in committee for further review and answer to
the question of whether or not the state could
receive a minimum of less than 5%.
SB 152 - GEOGRAPHIC PAY DIFFERENTIALS
Discussion was had with Alison Elgee. Due to lack
of time, the bill was held in committee for
further review.
SB 177 - CONCEALED HANDGUN PERMIT AMENDMENTS
Discussion was had with Senator Green and Brett
Huber. A draft CSSB 177 (Fin) (3/25/96) and
amendments by Senators Donley, Phillips, and
Rieger were adopted. CSSB 177 (Fin) was then
REPORTED OUT of committee with zero fiscal notes
from the Dept. of Law and Dept. of Corrections and
a (117.6) note from the Dept. of Public Safety.
SB 181 - PROHIBITED HIGHWAY ADVERTISING
Discussion was had with Senator Green. A draft
CSSSSB 181 (Fin) (3/22/96) was adopted and
REPORTED OUT of committee with a $40.0 fiscal note
from the Dept. of Transportation and Public
Facilities.
CS FOR HOUSE BILL NO. 468(FIN) am
An Act making supplemental appropriations for the
expenses of state government and making and
amending appropriations; ratifying certain state
expenditures; and providing for an effective date.
Co-chairman Frank directed that the FY 96 supplemental
budget be brought on for discussion and asked that
representatives of the administration speak to department
requests.
Dept. of Law
BARBARA RITCHIE, Deputy Attorney General, Civil Division,
Dept. of Law, came before committee. She explained that the
$369.3 request under Sec. 9(a) would fund various judgments
and claims against the state that accumulated over the year.
NANCY SLAGLE, Director of Budget Review, Office of
Management and Budget, noted that the $369.3 includes $144.0
in judgments plus $225.3 for a settlement from the
international airport revenue fund, relating to safety
officers at the Anchorage International Airport.
Mrs. Ritchie next described the class action against the
City of Kodiak and the state over conditions at the Kodiak
Jail--a community jail under contract to the state. This
case, which has been ongoing over five years, involves
complicated questions of confinement. Additional questions
related to state liability for a city-operated jail under
contract to hold state prisoners. The state won a partial
summary judgment clarifying that the Cleary case does not
apply to community jails. In the settlement, the state paid
25 percent of awarded attorney fees of $104.0 and $2.0. The
City of Kodiak paid the remaining 75 percent.
Senator Sharp asked if Alaska Legal Services was funded by
the state. Mrs. Ritchie explained that it is primarily
funded by federal appropriations. However, it has
historically received some state funding via grants through
community and regional affairs. Senator Sharp suggested
that the $27.0 award for attorney fees be removed from the
supplemental.
Mrs. Ritchie explained that the State v. Meyer case involved
a sexual discrimination appeal filed against the Alaska
Dept. of Fish and Game and the Alaska Human Rights
Commission in March of 1987. Both the superior and supreme
courts ruled in favor of Ms. Meyer and ordered that court
costs and attorney fees of $1,148.25 be paid by the state.
LAURIE OTTO, Deputy Attorney General, Criminal Division,
Dept. of Law, explained that Durham v. Kincheloe relates to
Cleary. The plaintiff sued saying it was unconstitutional
under a U.S. Supreme Court case to require that the inmate
take psychotropic medication. The state argued that Cleary
provisions were controlling. The court disagreed and found
that state procedures for administering psychotropic
medicines against an inmate's will did not comply with the
U.S. Supreme Court mandate. The state voluntarily rewrote
its policies and procedures to comply. It was, however,
required to pay the plaintiff's attorney fees for litigating
the issue.
Discussion followed regarding the function of the disability
law center. Ms. Otto noted that in the Durham case the
inmate had a severe mental illness. Senator Randy Phillips
asked that the department determine whether the center
receives state appropriations.
Senator Rieger voiced his understanding that the Cleary
settlement was in conflict with the U.S. Constitution. He
then asked if the department has the ability to revise the
settlement without a separate court order. Ms. Otto said
the final order in Cleary spells out a procedure for
administering psychotropic medicines against an inmate's
will. The U.S. Supreme Court issued an opinion which
conflicts with Cleary. The U.S. Constitution always
controls over an order of a lower court. It is possible to
litigate whether or not certain provisions of the Cleary
final order are unconstitutional. It is more difficult to
re-litigate other portions of it, although re-litigation is
possible. The fact that a portion of the settlement is
found to be deficient does not negate the remainder.
In response to a question from Senator Sharp, Ms. Otto
explained that an employee of the Dept. of Corrections
(Kincheloe) was sued in his official capacity as the
superintendent of the institution where the drugs were
administered. The original request for attorney fees was
$65.0. The department was able to negotiate a reduction to
$45.0. The fees will accrue to the disability law center.
Attorney fees in the amount of $1,219.0 in CSED v. Allsop
reflect an Alaska Supreme Court award. Mrs. Ritchie
explained that as a result of statutory changes, these types
of cases will disappear. The instant case involved CSED's
role in dis-establishment of paternity. Statutory revisions
now allow the division to dis-establish paternity
administratively. Discussion of particulars of the case
followed.
Senator Rieger noted indications that attorney fees had been
reduced by 80 percent and asked who would bear that portion
of the cost. Mrs. Ritchie replied that it would have to be
paid by Mr. Allsop. Senator Rieger stated his concern that
it appears the defendant will be made to bear the cost of
setting the record straight. Mrs. Ritchie stressed that one
reason the case was pursued was to clarify CSED's role in
these cases and obtain a definitive ruling. The law has
since been corrected. Co-chairman Halford concurred that
the individual should not be made to pay the cost of "an
impossible case where the state was wrong."
Mrs. Ritchie explained that in the case of City of Fairbanks
v. State Dept. of Labor (Workers' Compensation) the
$2,838.62 in attorney fees and costs of $525.17 would be
paid to the office of the city attorney in Fairbanks. The
case involves the Workers' Compensation Board denial of the
city's application for self-insurance. When the city
appealed, the superior court reversed the board decision.
The city moved for full attorney fees and was granted half
by the court. The Dept. of Law has subsequently worked with
the Workers' Compensation Board regarding different
regulatory requirements, between public and private
entities, for determining eligibility requirements for self-
insurance.
The $42,855.00 payable to Trustees for Alaska in the suit
against the Dept. of Natural Resources involves a challenge
to state best interest findings for a particular oil and gas
lease sale on behalf of the trustees, the city of Kaktovik,
and numerous environmental organizations. The supreme
court remanded best interest findings to DNR for further
findings. As the prevailing party, the trustees were
granted attorney fees in both the superior court case and
the supreme court appeal. Fees in the appeal have been
paid. This claim is for superior court fees. The trustees
charged that DNR did not give adequate consideration to the
environmental risks of transporting oil from the off-shore
lease area to market. Litigation has helped clarify the
scope of best interest findings and the required depth of
analysis to support findings in future lease sales. The
state prevailed on all issues before the superior court.
The trustees prevailed on two issues upon appeal. The state
objected to attorney fees and costs at both court levels,
arguing that fees should be reduced to reflect only work on
the two issues on which the trustees ultimately prevailed.
Both courts awarded the trustees substantially all of the
fees they requested. Senator Sharp suggested that
deductions be made in the court budget to cover the awarded
fees.
The $11,829.76 payable to the disability law center in Weiss
v. State represents interim costs and fees following the
1985 supreme court decision in the mental health trust lands
case. The court found that the state breached the trust by
redesignating trust lands. On remand the court awarded
these interim costs and fees to the plaintiff. Co-chairman
Frank asked for a breakdown of all attorney fees paid in the
case and who the payments were to. Senator Sharp asked if
the state expects continuing expenses from the case. Mrs.
Ritchie noted that the merits case on the mental health
trust appeal is pending before the supreme court. A
briefing schedule was recently issued. Briefing will occur
through summer and into fall. There are 180 points on
appeal. Mrs. Ritchie said she would provided a memorandum
updating the status of litigation.
Senator Rieger inquired concerning particulars of the
$261.00 payable in CSED v. Bond. Mrs. Ritchie explained
that the award of attorney fees stems from a paternity suit
which questioned whether Rule 82 fees should apply to CSED
paternity cases. The court ruled affirmatively and limited
the fees to the Rule 82 amount. The defendant sought full
fees.
Senator Rieger noted that a review of judgment awards
indicates that private individuals who sue the state "get
pennies" compared to agencies in the business of suing the
state. The pattern in award of attorney fees appears
backward. Mrs. Ritchie suggested that greater fees indicate
greater complexity and substantially more attorney time.
CSED cases tend to be single issue. Mrs. Ritchie stressed
that awards depend upon a number of factors. The department
consistently attempts to reduce awards as much as possible
and requires opposing parties to justify attorney fees.
Senator Zharoff inquired regarding the effect of not paying
judgments. Mrs. Ritchie said she was not aware of any
judgments against the state that have not been paid.
Referencing the judgment for Alaska Legal Services, Mrs.
Ritchie explained that the agency could be awarded attorney
fees just as any private lawyer or law firm. That is a
separate matter from the Dept. of Community and Regional
Affairs grant to the agency.
Ms. Otto suggested that failure to pay court judgments would
trigger more litigation, place the state in contempt, and
lead to additional liability for attorney fees for
litigation of non-payment of fees, plus interest. Senator
Randy Phillips asked if the court has the power to force the
Legislature to appropriate funding. Does the court have the
power of appropriation? Ms. Otto said the issue has been
researched within the context of Cleary fines. She declined
to answer the question "in this setting." Co-chairman
Halford remarked that the question represents a
constitutional standoff. He cited incidences wherein courts
have used mandamus to force appropriations. The other side
of the coin is the fact that the Legislature has the court's
budget. He noted that whether justified or not, judgments
against the state have eventually been paid. He remarked
that the one that "stands out as a little bit ridicules is
the fine . . . to the general fund of the state for the
Cleary case because it's an absolute circle."
Senator Zharoff asked the department to provide information
on original requests versus the amount of each negotiated
judgment.
Referencing the $1,285,000.00 for Toksook Bay v. State, Co-
chairman Halford explained that the request from last year
totals approximately the same as this year. However, last
year, the feeling was that the state was walking into a
precedent that would hold the state liable under strict
liability for things it had no control over and that
occurred under both federal ownership and state ownership.
That was not the intent of strict liability law. The
Legislature decided to deal with the issue only if there was
a solution to the strict liability question. Co-chairman
Halford said he would support the request if a House
amendment to SB 69 becomes law, because new language would
limit strict liability as it applies to the state.
Co-chairman Frank next referenced the $225.0 judgment
against the Dept. of Transportation and Public Facilities
for wrongful termination at the Anchorage International
Airport.
END: SFC-96, #51, Side 1
BEGIN: SFC-96, #51, Side 2
Mrs. Ritchie explained that the Alaska Police Standards
Council denied certification to two long-term airport safety
officers when new legislation required that the officers
have certification. The superior court found that the
council abused its discretion in denying certification and
directed that the officers be certified. In the interim,
DOTPF terminated the employees because they lacked
certification. The judgment compensates the two officers
for lost pay. The case involved application of new
standards to existing long-term employees. The court held
it was unfair to terminate employees who had proven their
ability to do the job. The case also involved a dispute
between the council, which regulates and certifies certain
state employees, and the department that employs them.
DOTPF had no alternative but to terminate the officers when
the council denied certification, even if the department
disagreed with the denial.
Co-chairman Frank asked why the council was not sued and the
officers allowed to keep their jobs pending outcome of the
case. He voiced frustration over repeated instances in
which employees have been terminated and the state must
provide back pay for the time cases progress through the
courts. He suggested that employees be kept on the job
pending a determination. Ms. Otto stressed that the statute
contains "an absolute prohibition on being employed in that
capacity unless you are certified by the Alaska Police
Standards Council." Once certification was denied, DOTPF
would have been breaking the law in continuing to employ the
officers. Co-chairman Frank noted that the officers'
individual rights were violated by wrongful termination.
Ms. Otto noted that future problems could be avoided if
legislation effecting new standards contains grandfathering
provisions. That was discussed when the new standards
legislation was pending, but the Legislature chose not to
include the provision.
Further discussion of vision requirements giving rise to
denial of certification followed. The court reached the
conclusion that because the officers had been employed and
carried weapons for many years, the regulation, as it
applied to them, was not valid. Further discussion of
regulatory standards of the council followed. Co-chairman
Frank asked that the Dept. of Law determine the number of
employees terminated each year, how many terminations are
appealed through the grievance process, and how many go to
court. Mrs. Ritchie remarked that the numbers are
significant, and she agreed to provide statistics.
RECESS
At this time, Co-chairman Frank announced that he would
recess review of supplemental requests until 8:00 a.m.,
Friday, March 29, 1996, at which time discussion would
commence with Berger v. State. The meeting was recessed at
9:05 a.m.
RECONVENE
Co-chairman Halford reconvened the meeting at approximately
9:13 a.m. and announced that the committee would consider
legislation in the order listed on the agenda.
SENATE BILL NO. 177
An Act relating to permits to carry concealed
handguns.
Co-chairman Halford directed that SB 177 be brought on for
discussion, referenced a draft Senate Finance Committee
Substitute, and noted proposed amendments. Senator Green,
sponsor of the legislation, explained that work draft 9-
LS1139\D, Luckhaupt, 3/25/96, incorporates amendments
offered at an earlier hearing. In addition, concern raised
by members regarding the drafting style used in provisions
relating to state ferries was addressed by new language at
page 6, line 32, and a new Sec. 14 on page 8.
Senator Sharp MOVED for adoption of CSSB 177 (Fin), "D"
version as the mark-up vehicle. No objection having been
raised, CSSB 177 (Fin) was ADOPTED.
Senator Randy Phillips MOVED for adoption of Amendment No.
3. Co-chairman Frank requested an explanation. Senator
Phillips raised a question regarding whether the ability of
one to carry a concealed weapon supercedes the right of a
homeowner to prevent those carrying concealed weapons from
coming into one's home. Under current law a homeowner must
post a sign or verbally advise that he or she does not want
those carrying concealed weapons on the premises. Senator
Phillips voiced his belief that the right of a homeowner to
prevent entry of those carrying concealed weapons supercedes
the rights of those carrying weapons. The person carrying a
weapon should have to seek permission to enter the property.
Co-chairman Halford agreed that the rights of the homeowner
should prevail, but he raise a question concerning notice
requirements.
Discussion followed among members regarding amendment
language requiring that express permission to bring a
concealed handgun into a residence be obtained from an
"adult" residing in the residence. Senator Zharoff
questioned whether the language might be too broad, but
alternative language was not developed.
Senator Green stated her opposition to the amendment. She
suggested that if a homeowner desires that someone not carry
a concealed handgun onto the premises, the homeowner should
make his or her wishes known. A homeowner has the right to
deny anyone access to the owner's home. She suggested that
the amendment makes false, prejudicial assumptions about
those who carry concealed weapons. Senator Rieger noted
that, at times, homeowners allow individuals they do not
know well to enter their homes. Alaskans are hospitable
people. The point made by the amendment addresses governing
priorities within the walls of an individual's residence.
Co-chairman Halford called for a show of hands on adoption
of the amendment. Amendment No. 3 was ADOPTED on a vote for
4 to 3.
Senator Randy Phillips next referenced an amendment for the
Mary Conrad Center. He voiced his understanding that the
bill allows the department to implement regulations
prohibiting the carrying of concealed weapons in certain
places such as on the marine highway system. He then asked
whether provisions should be placed in statute or dealt with
via regulation. Senator Sharp noted that entities have the
right to post notice "against anything coming into their
building, whether it's handguns or backpacks." Senator
Phillips stressed that the concern is larger than the issue
of concealed weapons. Is the Legislature going to allow the
bureaucracy to implement regulations based on what the law
says or otherwise? Co-chairman Frank concurred that no
parameters had been established. Senator Phillips voiced a
preference for statutory listing of establishments within
which the carrying of concealed weapons is prohibited.
Senator Green directed attention to language at the bottom
of page 6 and noted that it speaks to state and federal
prohibitions against possession of a deadly weapon or
firearm. BRENT HUBER, aide to Senator Green, briefly came
before committee. He explained that language at page 6
referencing state and federal law was included to allow
existing regulations for the ferry system to "take care of
their concern." It was later determined that ferry system
prohibitions are policy rather than regulation. The ferry
system was thus specifically cited in the bill.
Senator Phillips again referenced an amendment for the Mary
Conrad Center and asked if the facility could prohibit
possession of concealed weapons. Mr. Huber responded
affirmatively, advising that the facility would merely have
to post a sign advising of the prohibition. Senator Green
noted that the same ability would be available to facilities
providing services to victims of domestic violence and
sexual assault set forth in Senator Rieger's amendment.
Senator Rieger explained that his amendment responds to
testimony from the director of the council on domestic
violence who did not want shelters excluded from current
law. Amendment language reinstates those facilities.
Senator Rieger further cautioned that the criminal trespass
statute referred to as a means of "keeping people out" is
being removed elsewhere in the bill as one of the violations
providing grounds for revoking a permit to carry a concealed
weapon. Senator Sharp noted that the trespass law remains
strong in terms of prohibiting entry. Removal of trespass
as grounds for revoking a permit has no relation to posting
of notices prohibiting concealed weapons in facilities.
Further discussion focused on provisions at page 4, line 10,
of the work draft. Senator Donley noted that brackets
enclosing citation of AS 11.46.320 and 11.46.330 should have
been removed from the bill as part of an earlier motion.
Co-chairman Halford directed that the brackets be removed.
Senator Rieger MOVED for adoption of the domestic violence
amendment. Discussion followed regarding the process for
prohibiting concealed weapons on public versus private
property. Senator Donley advised that private property
owners need merely post notice while prohibition on public
property must be set in statutes. Additional discussion
followed regarding ferry system policy regarding weapons.
Referencing the proposed amendment, Senator Green noted that
victims of domestic violence are sometimes permit holders.
She then suggested that the amendment would prohibit them
from entering shelters. She noted that, under the propose
bill, shelters could formulate policy that regulates the
issue and post the premises, if management chooses to do so.
Senator Rieger stressed that those living at shelters are
living in great fear and want nothing around them that could
cause additional fear. They seek assurance that the shelter
is a safe place. Senator Green reiterated that the facility
has the right to post notice of prohibition. Senator Rieger
suggested that the ability to post is not clear under
existing language.
Co-chairman Halford called for a show of hands on adoption
of the amendment. The domestic violence facility amendment
was ADOPTED on a vote of 4 to 3.
Directing attention to page 6, Senator Zharoff again raised
a question concerning areas cited in subsections (4) through
(12) and posed for removal. Senator Sharp MOVED that CSSB
177 (Fin) pass from committee with individual
recommendations and accompanying fiscal notes. No objection
having been raised, CSSB 177 (Fin) was REPORTED OUT of
committee with zero notes from the Dept. of Law and Dept. of
Corrections and a note from the Dept. of Public Safety
showing a revenue reduction of ($117.6). Co-chairmen
Halford and Frank and Senators Donley and Sharp signed the
committee report with a "do pass" recommendation. Senators
Phillips, Rieger, and Zharoff signed "no recommendation."
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 181
An Act relating to the promotion of Alaska
businesses through signs, displays, and devices
within or adjacent to highway rights-of-way, to
municipal regulation of directional signs,
displays, and devices, and to penalties for
violations related to outdoor advertising.
Co-chairman Halford directed that SSSB 181 be brought on for
discussion. Senator Green again came before committee. She
referenced a work draft CSSSSB 181 (9-LS1164\U, Utermohole,
3/22/96) and explained that it incorporates an amendment by
Senator Rieger within both title language and Sec. 4.
Contact with staff from the Federal Highway Administration
indicates the program will work within federal guidelines.
(See March 25, 1996, correspondence from FHA on file in the
original Senate Finance Committee file for SB 181.)
Senator Randy Phillips MOVED for adoption of CSSSSB 181
(Fin). No objection having been raised, CSSSSB 181 (Fin)
was ADOPTED. Senator Sharp MOVED that CSSSSB 181 (Fin) pass
from committee with individual recommendations and accompany
fiscal notes. No objection having been raised, CSSSSB 181
(Fin) was REPORTED OUT of committee with a $40.0 fiscal note
from the Dept. of Transportation and Public Facilities. Co-
chairmen Frank and Halford and Senators Donley and Sharp
signed the committee report with a "do pass" recommendation.
Senators Phillips, Rieger, and Zharoff signed "no
recommendation."
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 20
An Act establishing the Alaska municipal basic
services program, relating to certain programs of
state aid to municipalities and recipients in the
unorganized borough; and providing for an
effective date.
Co-chairman Halford directed that SSSB 20 be brought on for
discussion. KEVIN RITCHIE came before committee on behalf
of the Alaska Municipal League and the Alaska Conference of
Mayors. He voiced support for the bill and described
efforts that led to development of the legislation over the
past two years.
END: SFC-96, #51, Side 2
BEGIN: SFC-96, #52, Side 1
SENATOR TORGERSON, sponsor of the legislation, next came
before committee. He explained that the bill renames the
"municipal assistance" portion to "revenue sharing for safe
communities." Provisions require moneys received from safe
communities to be spent on certain public purposes, require
municipalities to list notice to taxpayers of the amount of
money received from safe communities, and allow the base
amount to be prorated. Since establishment in 1978, the
base amount was held harmless from cuts. This funding is
the former business license tax. The legislation "takes
money from all the communities and raises the minimum
entitlement to smaller communities to $40.0." Funding
required for the transition totals $238.9. That amount is
prorated from each community. The bill also changes the
date of the payment to coincide with the earlier payment so
that both sections are paid on July 31. That results in one
payment for both revenue sharing and safe communities. The
remainder of the bill involves housekeeping measures.
The sponsor further described past efforts to rewrite
municipal assistance and revenue sharing programs. He said
he had been involved in attempts to change the formula so
that "We wouldn't have many winners and losers when we tweak
the formula." The approach proposed within CSSSSB 20 (CRA)
is overwhelmingly supported by the Conference of Mayors, the
Alaska Municipal League, and communities that are not
members of either of the foregoing organizations.
Senator Torgerson attested to past controversy over the
fiscal note. The fiscal note from the Dept. of Revenue
derives from moving the $29.4 million payment from February
to July 31. Senator Torgerson said he did not agree with
the resulting ($874.0) fiscal note. He advised that part of
the reason for advancing the payment date is the fact that
July is one of the only months in which the state has a
surplus. The proposed bill would entail expenditure of part
of the surplus and would not involve the constitutional
budget reserve.
In response to a question from Co-chairman Halford, Senator
Torgerson directed attention to a tabulation (copy on file)
listing funding to be received under the existing municipal
assistance program versus that in the proposed bill. He
then spoke to impact on specific communities.
Responding to a question from Co-chairman Halford, Senator
Torgerson explained that the idea behind the $40.0 minimum
entitlement is to transform every community below that level
up to that mark. That would take care of this fiscal year.
In future years, if there is a reduction in the program,
each community will take the same amount of reduction. The
$40.0 is not held harmless forever. Co-chairman Halford
asked if the one-third, two-third split between safe
communities and state revenue sharing, respectively, would
remain in place. Senator Torgerson responded affirmatively.
He added that state revenue sharing is distributed on a per
capita basis while the one-third split is distributed "into
the safe communities portion." Co-chairman Halford voiced
his understanding that the appropriation goes through that
separation and is prorated for each community. He then
asked if separation and proration apply to both total and
minimum entitlements. Senator Torgerson said that the
minimum entitlement is not subject to "the safe communities
portion." Minimum entitlement "comes out up front."
BILL ROLFZEN, State Revenue Sharing, Division of Municipal
and Regional Assistance, Dept. of Community and Regional
Affairs, came before committee. Speaking to the one-
third/two-third split, he explained that the intent was to
allow the base amount to be subject to cuts in the future.
For the FY 96 appropriation to the municipal assistance
program, one-third went to the base amount and two-thirds
went to the per capita account. If the overall
appropriation is reduced, each account would be subject to
the same amount of cuts.
In response to a question from Co-chairman Halford asking
how the minimum entitlement would be impacted, Mr. Rolfzen
responded,
Okay, we go through the revenue sharing program.
We go through the municipal assistance (now called
the safe communities formula). If after we go
through the entire formula, there are some
municipalities that don't have a total of $40.0,
going to that municipality, we go to the per
capita account under the safe communities fund and
grab enough money to bring everybody up to $40.0.
Mr. Rolfzen further added, "But, no one gets an absolute
$40.0. The intent was that all municipalities share in
bringing up the smaller communities to $40.0." If there is
a cut, they are also to share in that cut. He then directed
attention to the distributed tabulation and noted that for
the first year some municipalities at the $40.0 level would
actually be receiving $39.9.
In response to a question from Co-chairman Halford, Mr.
Rolfzen acknowledged that under existing revenue sharing the
minimum is $25.0 times the cost-of-living differential.
There is no minimum entitlement under municipal assistance.
The proposed bill would set a minimum of $40.0 and bring
approximately 41 of the "very small communities" up to
$40.0. It would cost approximately $238.0 statewide.
Smaller communities would also share in bringing communities
to the $40.0 threshold.
PAT POLAND, Director, Division of Municipal and Regional
Assistance, Dept. of Community and Regional Affairs, next
spoke via teleconference from Anchorage. He expressed
support for the bill and advised that it contains
improvements to municipal assistance and revenue sharing
programs. It effects changes in a fair and "generally
balanced manner." It is important that the state protect
its investment in public infrastructure made through
municipal governments. Establishment of a minimum funding
level is an important step in that direction. Removal of
the holdharmless provision will provide for better program
equity. Moving the date for the safe communities payment
forward will enable larger municipalities to minimize
impacts from cuts. In his concluding remarks, Mr. Poland
acknowledged a difference between departments over the
fiscal impact of the date change. He then voiced support
for a date that "basically gives us the fiscal impact at the
lower end of the fiscal note submitted by the Dept. of
Revenue."
Senator Rieger referenced a proposed amendment and explained
that when the legislature passed legislation relating to the
ranking of school projects, the listing of a priority list
in statutes produced an awkward result in which the first
item on the list was required to be exhausted, in its
entirety, before proceeding to the next item. That was not
the intent. To clarify the situation, the proposed
amendment contains the following language:
Subsection (c) of this section may not be
construed to require a municipality to fund all
requests it receives for services in a category
with a higher ranking of priority before funding
services in a category with a lower ranking of
priority.
The Senator then MOVED for adoption of the amendment.
Senator Torgerson acknowledged that the amendment clears up
problems within the bill. No objection having been raised,
Senator Rieger's amendment was ADOPTED.
To an inquiry from Co-chairman Frank concerning the repeal
within Sec. 13, Senator Rieger explained that the clause
required a municipality to reduce taxes in response to
revenue sharing and municipal assistance increases.
Co-chairman Frank asked if the bill deals with both revenue
sharing and municipal assistance. Senator Torgerson
responded, "basically just municipal assistance." The Co-
chairman then voiced his understanding that the primary
thrust is to increase the minimum entitlement to $40.0.
Senator Torgerson added that it also removes holdharmless
provisions. Discussion followed regarding the current
workings of holdharmless language. Additional discussion
followed regarding minimum entitlements under the proposed
bill. Co-chairman Frank asked if the legislation would
cover unincorporated areas. Senator Torgerson responded
negatively.
In response to inquiries from Co-chairman Frank concerning
municipal support, Senator Torgerson said that both the
mayor of the Fairbanks Borough and the mayor of the City of
Fairbanks worked with the mayor of Anchorage in putting the
proposed plan together.
VERN VOSS, Cash Manager, Treasury Division, Dept. of
Revenue, came before committee in response to questions
regarding cash flow and the department fiscal note. He
explained that if funds are paid to municipalities in
February versus July, the state must borrow money from the
constitutional budget reserve or another source. In the
alternative, if excess funds are available, early payment
would effect a reduction in interest income.
JOHN STEIN next testified via teleconference from Wasilla.
He voiced support for the legislation, saying that the
Alaska Municipal League and the legislature have developed
"something that sort of makes sense out of municipal
funding." He voiced further support for the public
relations campaign to explain to voters that "This is really
a sloughing . . . a pushing down of costs to the municipal
governments." That should be understood. Mr. Stein urged
support for the bill and local governments.
Co-chairman Frank MOVED for passage of CSSSSB 20 (Fin) with
individual recommendations and accompanying fiscal notes.
CSSSSB 20 (Fin) was REPORTED OUT of committee with a zero
fiscal note from the Dept. of Community and Regional Affairs
and a note from the Dept. of Revenue projecting a revenue
reductions of $(874.0). Co-chairmen Frank and Halford and
Senators Sharp and Zharoff signed the committee report with
a "do pass" recommendation. Senators Donley, Phillips, and
Rieger signed "no recommendation."
SENATE BILL NO. 112
An Act establishing a discovery royalty credit for
the lessees of state land drilling exploratory
wells and making the first discovery of oil or gas
in commercial quantities.
Co-chairman Halford directed that SB 112 be brought on for
discussion. ANNETTE KREITZER, aide to Senator Leman, came
before committee. She explained that changes within CSSB
112 (Res) address problems with terms contained within the
original bill. Concern relates to:
1. What constitutes first discovery?
2. What are commercial quantities?
3. What is the geologic structure?
4. What is the discovery date?
5. Does the discovery royalty apply to all zones in a
lease?
As introduced, the bill would allow new discovery rules to
apply to the exploration licensing program (Sec. 1). The
bill is ultimately to encourage early exploration through a
reduced royalty. Language within subsection (3) (page 2,
lines 2 through 11) narrows the scope to the Cook Inlet
sedimentary basin.
Directing attention to page 4 of the bill, Ms. Kreitzer
noted that the legislation includes non-unitized leases as
well as non-producing leases. Language also states that
leases that carry the former discovery royalty provision
cannot apply under the new program.
In her closing remarks, Ms. Kreitzer reiterated that the
royalty program applies only to leases in the Cook Inlet
sedimentary basin (effective on all non-producing, non-
unitized leases) and future leases certified as first
discovery by the commissioner six months after the effective
date of the act.
Senator Rieger asked if discovery royalty provisions were
known at the time of the sale of original leases or were
they enacted after the lease sale. Ms. Kreitzer said she
would obtain an answer.
Senator Sharp voiced his understanding that Cook Inlet
leases on which there has been no discovery would be
entitled to a 5 percent royalty on future discoveries for
ten years. Ms. Kreitzer noted that the royalty would apply
to discoveries in the Cook Inlet sedimentary basin. If a
non-producing, non-unitized lease is involved, the owner
could apply for first discovery (one per lease).
Senator Sharp voiced his understanding that all production
from the lease, regardless of the number of wells, would be
subject to the 5 percent royalty. In response to a question
from Senator Sharp concerning the number of leases involved,
Ms. Kreitzer directed attention to backup materials (copies
on file in the original Senate Finance Committee file for SB
112) and referenced a list of leases as well as a legal
decision outlining problems with the previous program.
Discussion followed regarding the proposed royalty program
and the existing exploration incentive credit. Ms. Kreitzer
noted that the exploration license is separate and unrelated
to discovery royalty credits. One working under an
exploration license could apply for a discovery royalty.
Ms. Kreitzer next spoke to situations surrounding earlier
passage of the exploration license program. She voiced her
understanding that regulations for the program were only
recently promulgated by the department.
Senator Sharp asked if the proposed bill would allow one to
pyramid discovery benefits or exploration credits to where
the "state would be receiving less than a minimum of 5
percent on oil production." Ms. Kreitzer responded that
while that is not the intent of the proposed legislation,
she would review the situation to determine whether it is a
possibility and whether there is need for limiting language.
END: SFC-96, #52, Side 1
BEGIN: SFC-96, #52, Side 2
Senator Sharp directed attention to page 3, line 25, and
expressed need for clarification of new language commencing
there and continuing to the next page. Ms. Kreitzer asked
if it was the intent of the committee that the bill not
allow opportunity for one to apply under more than one
program, resulting in more than a 5 percent royalty
reduction. Senator Sharp again voiced concern regarding
opportunity, through the proposed bill in combination with
other programs, for the state to receive less than the 5
percent minimum. Ms. Kreitzer said she did not know whether
bill language needed to be clarified to preclude that
opportunity. Co-chairman Halford acknowledged need to
answer that question and directed that the bill be held in
committee pending receipt of additional information.
SENATE BILL NO. 152
An Act relating to geographic differentials for
the salaries of certain state employees who are
not members of a collective bargaining unit;
relating to periodic salary surveys and
preparation of an annual pay schedule regarding
certain state employees; relating to certain state
aid calculations based on geographic differentials
for state employee salaries; and providing for an
effective date.
Co-chairman Halford directed that SB 152 be brought on for
discussion. ALISON ELGEE, Deputy Commissioner, Dept. of
Administration, came before committee. She explained that
the bill contains a lower cost of living than presently
being paid state employees who are not represented by a
union or covered by collective bargaining. A relatively
small group would initially be impacted. However, union
contracts now before the Legislature contain reopener
clauses that would allow the state to negotiate a new pay
differential for union members, based on passage of the
proposed bill. Ms. Elgee next directed attention to a
handout demonstrating differences between existing and
proposed differentials. She explained that the current
differential is tied to other statutes. In developing the
proposed bill, the Governor attempted to impact only state
employees.
Sec. 1 maintains magistrates at the existing statutory
level. Ms. Elgee said the court has been conducting a
review of magistrate salaries "and does not believe this
section is any longer necessary." Co-chairman Halford asked
if the cost to the state would be raised or lowered by
removal of Sec. 1. Ms. Elgee responded that costs would be
lower if the new differential was applied to magistrates.
However, the fiscal note does not represent "any of the
court system employees." It covers only the executive
branch. The Legislature would have to indicate its desire
to apply the bill to court system employees as well.
In response to a question from Co-chairman Frank, asking how
the court system proposed to handle the differential, Ms.
Elgee termed the magistrates "a real unique little bunch."
The court is conducting salary review of "just the
magistrates." They are the only group specifically tied by
statute to the existing differential. As a practice, the
court system has followed the statutory differential for
non-covered employees as well.
Ms. Elgee explained that Sec. 2 makes clear that the revenue
sharing calculation currently tied to the existing area cost
differential would continue. That would ensure that taking
action on the proposed bill would produce no unintended
reduction of revenue sharing to municipalities. The
Governor did not want to complicate the legislation by
bringing in issues such as aid to municipalities. That
should be dealt with separately.
Sec. 3 applies specifically to the minimum payment level in
revenue sharing statutes.
Sec. 4 lays out the proposed differential. It has been ten
years since a complete cost-of-living differential study was
conducted for Alaska. The 1985 study resulted in what is
known as the "union differential." Two years ago, the
courts dictated that the state abide by existing statutory
language that requires an annual salary survey. Since there
was no funding for the survey, the department used $20.0 to
contract with the Runzheimer Group to prepare a cost-of-
living differential study. Ms. Elgee noted that the study
produced odd results. In preparing the proposed bill, the
administration used Runzheimer's work as an indication that
the cost-of-living differential across the state is coming
down but did not utilize it as the basis for the
administration's proposal. Ms. Elgee cited study figures
for cost-of-living differentials at Nome and Ketchikan as
evidence of apparent inaccuracies. In developing SB 152,
the administration utilized House districts and looked for
geographic similarities among the districts and common modes
of transportation.
Base levels (areas in which no geographic differential would
apply) are Anchorage, Juneau, the Kenai Peninsula, Matanuska
Valley, and the Fairbanks area. For coastal communities
with ferry access but no road access, the bill proposes a 5
percent differential. For interior communities on the road
system, the proposal is a 10 percent differential. The
proposed differential is 20 percent for western and
northwestern communities. The out-of-state differential has
also been modified. In the past, the differential applied
to all out-of-state workers. The bill proposes that it
apply only to Washington state, and that the state adopt an
approach similar to that used for foreign offices for other
locations. That approach is specific to information
relative to the cost of living in each location. Ms. Elgee
cited need for flexibility to deal with unique circumstances
such as salaries for state employees in Washington, D.C.,
where the cost of living is extremely high, as well as those
temporarily stationed in Louisiana pending construction of
the new state ferry.
Co-chairman Halford asked if the proposed bill would
increase pay for employees in Seattle by 20 percent. Ms.
Elgee concurred that it would increase pay for non-covered
employees, but it would reduce pay for union members
residing in Seattle by approximately 10 percent. Co-
chairman Halford voiced his understanding that the factor
change increases Seattle from 79.1 percent to 100 percent
for non-covered and 13 percent for union employees. Ms.
Elgee clarified that the bill proposes a zero differential
for Washington state. She concurred that should unions,
through collective bargaining, adopt the factor, the
foregoing would be the case. Co-chairman Halford questioned
reduction of pay at Alaskan locations while increasing it
for employees in Seattle. Ms. Elgee responded, "This is
just a reflection of what we're seeing in the American
Chamber of Commerce studies on cost-of-living
differentials." It appears that the cost of living in the
Seattle area is comparable to the cost of living in
Anchorage.
Senator Rieger presented a handwritten amendment to change
the factor for Seattle to -10 percent. Co-chairman Frank
asked that the committee be provided a copy of the
Runzheimer report. Ms. Elgee agreed to do so, but stressed
that it has little value since it does not accurately
reflect community-by-community cost of living differentials
for Alaska. She said she would also make available
information developed by the American Chamber of Commerce
research group, which relates to specific communities in
Alaska.
In response to a question from Co-chairman Frank, Ms. Elgee
explained that upon passage of the proposed bill, the
administration and unions would go back to the bargaining
table to renegotiate the cost-of-living differential
applicable to union members. Each contract currently
contains its own area cost differential. With the exception
of PSEA, they all reflect the differential outlined on the
handout. Members questioned the administration's ability to
engage unions in such negotiations without giving up
something and suggested that the differential should be set
in statutes and applied to all, union and non-union alike.
Senator Donley directed attention to Senator Rieger's
amendment and noted ASMI claims that it pays its employees
in Washington state 18 percent below the rate in Alaska and
continues to obtain quality workers. He then suggested that
the reduction in the amendment should be -20 rather than -10
percent. Senator Donley further directed attention to page
3, line 3, and voiced need to change the salary portion
($30.0) to which the differential applies so that it applies
to the whole salary range.
In response to earlier comments regarding renegotiations
with unions, Ms. Elgee said that the unions are "all very
well aware of this legislation." The administration made
clear its intent to conform area cost differentials to
statutory changes. Reopeners were negotiated with that
understanding.
Co-chairman Frank referenced the $30.0 set forth at page 3,
subsection (b) and asked if the current differential is
applicable to the entire salary. Ms. Elgee responded
affirmatively, advising that bill language would modify
application to cover only "that portion of salary that we
would deem to be for the actual basic cost of living and not
the discretionary portion of any individual salary."
Senator Sharp suggested that the $30.0 appears arbitrary in
light of current low income and poverty numbers.
Co-chairman Frank raised questions concerning lack of a
differential for Fairbanks, citing the cost of heating fuel
as an example of costs higher than those in Anchorage or
Ketchikan. Ms. Elgee explained that differentials reflect a
market basket survey. She cited offsetting factors between
communities. Fairbanks is included in national chamber of
commerce surveys. Information provided by that group
indicates that the cost of living in Anchorage and Fairbanks
is "almost identical."
Senator Sharp voiced interest in reviewing the federal CPI
for Seattle compared to Anchorage and Fairbanks.
Senator Donley requested an assessment of Alaska pay for
employees residing in Washington state versus salaries paid
state workers by the state of Washington.
Discussion among members followed regarding numbers cited
for North Pole, Alaska.
Co-chairman Frank inquired regarding the dynamics associated
with achieving parity between covered and non-covered
workers when reducing differentials. Ms. Elgee pointed to a
one-year transition. At the time of passage of the
legislation, the department would notify all impacted
employees who would be frozen in current salaries for a
year. Thereafter the salaries would be reduced to the new
differential. The feeling was that a year's notice would
give people an opportunity to readjust their financial
circumstances or look for other employment. The state
cannot afford a freeze, forever, given cutbacks in operating
budget funding.
Co-chairman Frank asked why new differentials rather than
merely reopeners were not negotiated in union contracts.
Ms. Elgee said that the state has no substantive information
allowing for renegotiation. Passage of the proposed
legislation would put the administration in a position to do
so. Otherwise, absent expenditure of $300.0 to $400.0 for
an area-cost-differential study, the state has no basis.
In response to further comments from Co-chairman Frank, Ms.
Elgee said that for ten years non-covered employees have
enjoyed a differential that far exceeds that of union
employees. Unions are not interested in "continuing to lead
that particular action without modification of this
schedule." Contracts have been ratified by employees with
the reopener in place.
Senator Zharoff raised a question regarding differentials
for coastal communities with ferry service. He noted lack
of service by the TUSTUMENA from October through April and
asked that the administration review the consistency of
service for individual communities.
ADJOURNMENT
The meeting was adjourned at approximately 11:05 a.m.
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