Legislature(1997 - 1998)
03/14/1997 09:10 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
March 14, 1997
9:10 A.M.
TAPES
SFC-97, Tapes 58 and 59
CALL TO ORDER
Senator Bert Sharp, Co-Chair, convened the meeting at 9:10
a.m.
MEMBERS PRESENT
Senator Sharp, Co-Chair
Senator Pearce, Co-Chair
Senator Donley
Senator Parnell
Senator Phillips
MEMBERS ABSENT
Senator Adams
Senator Torgerson
ALSO PRESENT
Annalee McConnell, Director, Office of Management and
Budget, Office of the Governor; Janet Clarke, Director,
Administrative Services, Department of Health and Social
Services; Guy Bell, Director, Administrative Services,
Department of Commerce, Community and Economic Development;
Kevin Brooks, Director, Administrative Services, Department
of Fish and Game; Ken Bischoff, Director, Division of
Administrative Services, Department of Public Safety; Mike
Pauley, Legislative Aide to Senator Leman; Marie Sansone,
Assistant Attorney General, Civil Division, Department of
Law; fiscal analysts and aides to committee members.
PRESENT VIA TELECONFERENCE
Janice Adair, Director, Division of Environmental Health,
Department of Environmental Conservation.
SUMMARY
SB 41 ENVIRONMENTAL AUDITS
CSSB 41(FIN) was REPORTED OUT with a previous
zero fiscal note from Department of Health and
Social Services, a new zero fiscal note from the
Department of Labor, and new reduced fiscal notes
from the Court System (35.9), and the Department
of Law (121.3).
REVIEW: GOVERNOR'S SUPPLEMENTAL BUDGET APPROPRIATION
REQUESTS
Co-Chair Pearce pointed to page 2 of a supplemental list
provided by the Legislative Finance Division. She noted
that the Department of Revenue, Permanent Fund Dividend
Division had submitted a request for $3.35 million for the
payment of back dividends.
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR, explained that the
Permanent Fund Dividend Division had been making
significant headway to reduce the number of backlogged
dividends requiring payment. As a result the number of
individuals qualifying for the dividend had risen above the
department's original estimate. The administration
recommended making an appropriation from the earnings
reserve account in order to payout dividends on a timely
basis. She relayed that her office had briefed Co-Chair
Pearce and Senator Hanley the past week.
DEBORAH VOGT, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE
noted that the estimation process for calculating the
dividend amount was not an exact science at the time the
potential number of eligible applicants was determined.
There were a number of applications that had yet to be
processed for the year; the calculation was made annually
in September and applications began being processed in
January. She explained that at the time the calculation had
been made the prior year there had been 25,000 applications
yet to be processed. The department had estimated that out
of the 25,000 approximately 12,000 would be paid by the end
of that year. She elaborated that a higher percentage of
applicants had been paid than had originally been
anticipated. Changes had been made to make the Permanent
Fund Dividend application process easier to navigate for
Alaskans, which had resulted in the higher percentage of
dividends being paid. Additionally, every year there was
typically a roll forward from the prior year; there were
always outstanding applications at the end of the year. She
addressed that the division had increased its efforts to
process the backlog of applications in the current year.
Due to the increase more money was needed to pay dividends.
Co-Chair Sharp asked if there were any policy changes that
accounted for the higher percentage of application
approval.
Ms. Vogt agreed that the percentage seemed high; however,
looking at the larger picture showed that the amount was
less than 0.5 percent of $642 million. She spoke to a
couple of recent changes. The methodology on requests for
further information had been changed the prior year; the
group of individuals who were asked to provide further
information had previously been denied in May or June; if
the individuals did not respond to the request they were
not given a dividend. The process had been changed to give
the individuals until the end of the year to submit the
requested further information. Secondly, the department
decided that a qualified applicant would receive a dividend
notwithstanding that the information was not received by an
arbitrary deadline. She discussed that some out of state
college students had registered to vote in another state
and had subsequently been denied a dividend. The division's
policy had been changed to allow those students to correct
their voter registration, which would allow them to apply
for a dividend the following year.
Co-Chair Sharp asked for verification that the annual March
31 application deadline had not been modified. Ms. Vogt
replied in the affirmative.
Co-Chair Sharp concluded the extension was only for
applicants who needed to supply further information. Ms.
Vogt responded in the affirmative.
Co-Chair Sharp asked for confirmation that there had been
no loosening of qualifications for individuals out of
state. He asked if policy changes had resulted in more
dividends going out of state. Ms. Vogt replied that she did
not have the statistics; however, most dividend recipients
received dividends at Alaska addresses. Some dividends were
sent to students out of state.
Co-Chair Sharp did not have a problem with sending checks
out of state to college students; however, he thought it
would be suspicious if an increased number of checks were
sent out of state for other reasons. Ms. Vogt did not
believe the number had increased.
Co-Chair Pearce moved on to address RPLs:
RPL 570626: Department of Education and Early
Development (DEED), Teaching and
Learning Support, Special and
Supplemental Services
Ms. McConnell hoped that that the RPLs would provide
clarification on how they should be handled in the future.
The administration had provided additional information on
existing timing issues. The administration was open to
making changes in the 1998 budget process related to which
federal receipts were shown. For example, there were a
number of cases particularly in DEED where the state was
currently holding federal funds that were to be distributed
to school districts; the state did not have the federal
expenditure authority to make the distributions at present.
She discussed that over the past several years there had
been an effort by the legislature and administration to
look at federal program receipts to try to bring the budget
estimates closer to historical figures. She elaborated that
whether the state would receive federal grants was
speculative; given the federal budget cycle timing, the
administration was not able to provide a definitive answer
about the receipt of particular federal funds. She
explained that most of the funds for DEED would be passed
directly to those entitled to them after distribution
approval was granted.
Ms. McConnell discussed that the administration had
encouraged Mt. Edgecumbe to use its facility as much as
possible with additional workshops and other in order to
help with the overall facility expenses. She discussed an
opportunity with the Sitka Jumpers and relayed that the
administration wanted the ability to provide the school
with as much notice on whether the program could be held in
the school facility. She continued that the administration
did not consider the items to be emergencies, but it was
interested in funding the items quickly. She observed that
supplemental budgets were approved by the legislature at
different times during session each year. The
administration was happy to have the DEED items included in
the supplemental if it would proceed quickly. She concluded
that it would require the legislature and the
administration to be on the same page regarding the
handling of the 1998 budget with respect to federal funds
and other program receipts that were variable in nature.
RPL 670144: Alaska Psychiatric Institute (API)
Department of Health and Social
Services
$200,000 General Fund Program Receipts
Co-Chair Pearce noted that the Legislative Finance Division
recommendation had been to defer the item until the finance
subcommittee had reviewed the RPL along with the FY 98
budget request for API.
JANET CLARKE, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT
OF HEALTH AND SOCIAL SERVICES (DHSS) addressed the RPL. She
explained that API was funded through an intricate
mechanism called disproportionate share through Medicaid.
She elaborated that the federal government agreed to pay a
lump sum to the state given that API served a
disproportionate share of low income individuals. She
furthered that the federal government did not treat API as
a state facility, but as a hospital when providing the
payment; therefore, the state had to comply with hospital
accounting for the facility. The payment formula was based
on the previous year's expenditures for API. All revenue
was backed out of what the hospital earned from third-party
insurers regardless of whether they had been budgeted or
not. She elaborated that the prior year API had some
increases in third-party revenues that went into the state
General Fund as program receipts; $2 million had been
earned from Medicare, the Veterans Administration, and
other, with only $1.3 million budgeted. Therefore, when the
federal government had calculated its payment, it required
API to back out the entire $2 million. She explained that
the process was used because typically hospitals spend all
of the money they make.
Ms. Clarke relayed that the prior summer the department had
devised a plan to deal with the shortfall due to the
calculation problem and subsequently the RPL had been
submitted to OMB in October to ensure the facility was
operating safely. Coincidentally there had been a number of
serious assaults on staff at API the prior spring and
summer; therefore, the department was concerned about
liability, safety, and security. Subsequently the
department had increased the number of staff per ward
during graveyard shifts from two up to three people. She
relayed that the RPL had been deferred twice by the
Legislative Budget and Audit Committee (LB&A). The
department had also been concerned that it may have a
shortfall that would require supplemental funding; however,
that had been worked out internally. The department had
done budget projections that would allow it to have a safe
and secure hospital.
Co-Chair Pearce asked if the funding request would only
occur one time due to changes in accounting practices. Ms.
Clarke replied in the affirmative. She elaborated that the
conference committee authorization for API was
approximately $15 million in FY 97 and FY 98. The federal
government payment was approximately $6 million to $7
million per year; however, the facility was still required
to comply with hospital accounting rules that did not work
very well with the way the state accounted for revenue.
RPL 670196: Indoor Radon Monitoring Grant
Department of Health and Social
Services
Ms. Clarke explained that the $99,300 request included two
items. One portion was for part of a federal tuberculosis
(TB) grant and the other portion was for funds received
from the Environmental Protection Agency (EPA) for a radon
program. She explained that the request had been discussed
at an LB&A meeting; there had been a request for additional
information about the radon program and how it worked with
the University of Alaska. The department had submitted a
significant amount of additional information to the
committee. She shared that the funds went to the university
and were focused on an area identified in the Fairbanks
region where radon detection had occurred. She did not
believe the committee had a problem with the program, but
it had not been acted on at the last meeting.
Co-Chair Pearce asked for verification that the federal
grant was passed through DHSS and on to the university.
Senator Phillips noted that LB&A had seen the RPLs two to
three weeks earlier and had been operating on limited time.
The committee had decided to act on the most time critical
RPLs. The committee had run out of time and had not been
able to deal with the remaining RPLs.
Co-Chair Pearce asked what the university would do with its
portion of the funding. Ms. Clarke replied that the funds
would go to the University of Fairbanks Cooperative
Extension Service; the service had been the recipient of
the EPA grant in the past. She explained that an additional
grant had been developed and funded through DHSS to help
supplement the work done by the cooperative extension. The
funding was primarily for training of contractors,
builders, and other on how to detect radon. She elaborated
that workshops were primarily held in Fairbanks that
provided participants with credits towards contractor
licensing. The effort was specialized and provided
technical assistance for interested parties.
Co-Chair Pearce wondered why DHSS asked for the grant if
the money was used by the university. She questioned why
the university did not apply directly for the grant. She
surmised the university would receive more money if it did
not have to pay the administrative fee.
Ms. Clarke answered that sometimes the federal government
tried to funnel some portions of its grants through the
primary state agency, which was one reason DHSS was more
involved in federal programs than most agencies. She did
not have further information.
Co-Chair Pearce noted that DHSS received $78,000 and passed
$71,100 on to the university. She wondered what the
administrative take was for the university before the money
was passed on for workshops. Ms. Clarke did not know the
precise administrative take, but knew that a portion of the
funds would go to that purpose. She would follow up with
the specific amount.
Co-Chair Pearce believed the goal was positive and that
federal funds should be captured when available; however,
she opined that hitting one grant with two administrative
fees was excessive. She asked about the TB portion of the
grant.
Ms. Clarke responded that the department had some existing
federal funds for the TB program; the RPL supplemented the
program.
Co-Chair Pearce remarked that it looked like the request
was for additional receipt authority for a grant that had
been received. Ms. Clarke replied that the cost was higher
than the budgeted amount.
Co-Chair Pearce asked for verification that the request was
for additional funds for a current program. Ms. Clarke
replied in the affirmative. Co-Chair Pearce surmised there
was no impact to the department's general fund spending.
Ms. Clarke replied in the affirmative.
Ms. Clarke relayed that she would follow up with the
committee on why the federal funds had not gone directly to
the university. She would also provide the information on
administrative charges to the grant.
RPL 870163: Department of Commerce, Community and
Economic Development
GUY BELL, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT relayed that
the request was for a total of $4,300 in third-party travel
reimbursements from the National Conference on Weights and
Measures. He elaborated that the current Division of
Weights and Measures chief had been appointed to be the
chairman of the national conference for the next year.
Subsequently, the appointee would be traveling out of state
several times to take on chairman duties. He explained that
all expenses would be reimbursed by the conference;
authority to receive and expend the money was necessary due
to a requirement that third-party travel payments had to be
authorized for expenditure by the legislature. The
department had $3,000 budgeted for convention and meeting
travel; the cost in the RPL was above the budgeted amount
and had been unanticipated.
Co-Chair Pearce asked for verification that the $3,000 had
been appropriated in general funds whereas the RPL
represented funds that would be reimbursed to the state.
Mr. Bell replied in the affirmative.
Senator Phillips wondered how the state directly benefited
from employees working for national organizations. Mr. Bell
replied that the national conference set national standards
for weighing and measuring. He believed providing Alaska
with exposure on a national level was positive; it also
ensured that the state's employees were up to date
nationwide. He believed the state's participation in
developing national standards was beneficial to Alaska.
Co-Chair Pearce asked about public disclosure requirements
related to travel for executive branch employees. She noted
that legislators were required to disclose expenditures for
similar travel. Mr. Bell did not believe there was an
ethics disclosure requirement in the particular case. The
travel was considered travel in the capacity of a state
employee.
Senator Donley asked who was paying the state for the
travel. Mr. Bell answered that the entity was the National
Conference on Weights and Measures. Senator Donley asked if
the state paid the entity a membership fee. Mr. Bell would
follow up on the question.
Senator Phillips asked for a specific example of how the
state benefited from the conference appointment. Mr. Bell
replied that his prior answer included indirect benefits to
the state. He did not know a specific direct benefit and
would follow up with an answer.
Co-Chair Pearce noted that the legislature did not normally
receive similar requests. She surmised that departments
generally had excess program receipt authority. She asked
for verification that the department had no excess program
receipt authority. She wondered whether the situation was
unusual. Mr. Bell replied that the Division of Measurement
Standards had its own single appropriation; therefore, it
could not transfer program receipts from one area to
another. The division had a small amount of program
receipts included in its budget, which had been fully used.
He elaborated that existing budget authority for designated
program receipts was for weights and measures inspection
related travel where a company needed to have a scale
certified for a construction related job; inspectors were
paid to certify the scales.
Ms. McConnell followed up on Senator Phillips' question.
She explained that the administration had been concerned
about federal changes in the transportation area. Alaska's
transportation situation was very different than that of
other states. She noted that while it may be difficult to
pin down specifics, it had helped the state to have
visibility on the national level related transportation
issues. Communications was another area where Alaska's
geographic makeup was different than other states.
Subsequently, the state was working to stay on top of
communications and transportation at the national level to
ensure that changes did not adversely affect the state.
Another advantage included conferences coming to Alaska.
She shared that Anchorage and Fairbanks were working to
boost their shoulder season; many times the participation
of Alaskans on executive committees of some national
associations had helped bring conferences to the state. She
pointed to a large conference that had been held in
Anchorage related to the Division of Insurance.
RPL 1170234 Wildlife Conservation Special Projects
Department of Fish and Game
Co-Chair Pearce noted that the request was all federal
funds but some carried forward new federal funds.
KEVIN BROOKS, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT
OF FISH AND GAME (DFG), discussed that several projects
were included. The largest was a sea lion marine mammal
project. Projects would begin as early as April 1 of the
current year; all funds requested would be expended by June
30, 1997. He explained that the fiscal year ended in the
middle of the department's field season; therefore, it was
difficult for DFG to gauge the exact funding level it would
need. The prior year DFG had run into difficulty when the
marine mammal project had been late getting into the field;
therefore, some of the expenditures were pushed into FY 97
instead of FY 96, which caused a shortfall. A budget
request to increase federal authority for FY 98 had been
made in order to prevent needing to make RPL requests in
the future.
Co-Chair Sharp pointed to backup documents and observed
that the papers included information on spotted seals but
not sea lions. Mr. Brooks responded that the sea lion
project fell under the National Marine Fisheries Service
(NMFS) marine mammal program. He did not have the same
backup documentation and would look into the question.
Co-Chair Sharp looked at the second largest project request
in the amount of $100,000 that focused on determining the
sustainable harvest of heavily hunted populations of black
bear in the Tanana Flats area. He noted that backup stated
the money would be spent in FY 97 for radio collaring and
scientific data. He wondered if the project would be
ongoing. Mr. Brooks answered that DFG expected the project
to continue; therefore, DFG had increased its federal
receipt authority in the FY 98 budget to enable for the
collection of the funds in the future.
Co-Chair Pearce disclosed that she sat on the AWAIC [Abused
Women's Aid in Crisis] board, which was a grant recipient
from the Council of Domestic Violence and Sexual Assault.
RPL 1270124: Council of Domestic Violence and
Sexual Assault
Department of Public Safety
KEN BISCHOFF, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF PUBLIC SAFETY, explained that the
request was for an increment of two federal grants to carry
over from FY 97 into FY 98. He discussed that the grants
contained one aspect to encourage mandatory arrests related
to domestic violence kits. He elaborated that the council
had advised the department that if the kits could be
accelerated that a price break would be received; after
March 1 the council believed it would incur another $38,000
in cost. He explained that approval of the RPL would allow
the department to issue purchase orders for the kits and
would save the $38,000.
Senator Donley mentioned discussion on rehabilitating
offenders. He had been contacted with concern that the
mandate had not been funded. He believed in the importance
of treatment programs and their role in breaking the
[domestic violence] cycle. He did not believe shifting the
funds to other items was appropriate.
Mr. Bischoff was not aware of the grant details. He would
follow up with the council to address the question.
RPL 2170165 Child Assistance, Head Start, and
Community and Regional Affairs
$50,000
Ms. McConnell communicated that occasionally there was
opportunity to receive additional federal funds in overall
programs. She pointed to additional one-time federal
receipts; the specific pot of money had not been
anticipated when the budget had been prepared the prior
year. The funds would allow for improvements in training
for early childhood providers.
Co-Chair Pearce asked if the state could expend the funds
without an adverse impact on the program the following year
given that the funds would only be received once. Ms.
McConnell replied that when one-time funds were received
the administration worked to ensure that the funds were
directed in a way that would provide a boost, but not an
ongoing dependence.
Co-Chair Pearce noted that additional DEED RPLs would be
heard the following Thursday. She asked Ms. McConnell if
she was prepared to address the debt service figure. She
wondered whether the administration had made a letter
regarding the debt service available to all committee
members.
Ms. McConnell replied that the letter had been provided to
the House and Senate Finance Committee co-chairs. She asked
Co-Chair Pearce if she wanted to discuss the Sitka training
academy.
Co-Chair Pearce replied in the affirmative.
Ms. McConnell relayed that the two projects were capital
requests. Given tight capital budget constraints the
administration had been unable to include funding for the
Police Academy shooting range and a women's dormitory. The
administration had worked to locate the funds in another
location. The administration had found capacity within the
Alaska Housing Finance Corporation (AHFC) FY 97 capital
budget. She pointed to a $50 million AHFC dividend and $53
million in capital projects. The legislature had
appropriated approximately $2 million less than the
available amount the prior session, meaning that there was
still some money that could be appropriated. The
administration felt that it would be appropriate to use
AHFC funds on a dormitory project. She explained that the
partnership would allow for the shooting range; costs had
been brought down significantly in work with City and
Borough of Sitka; the city was contributing $300,000. The
AHFC funds, city funds, and a small appropriation from old
DPS capital projects would enable the project to proceed
quickly. Sitka would do the shooting range construction in
an agreement between the city and the state.
Senator Donley wondered why the project was more important
than dealing with overcrowding in the state's correctional
system. Ms. McConnell replied that the issues were equally
important. The administration had recommended a proposal to
set aside Cleary [litigation] fines as part of a capital
appropriation, with specifics to be determined by the
legislature. She did not believe one issue was more
important than the other, but the administration did not
believe there was reason to hold back on the police
training academy; the need had long been identified.
Senator Donley asked for verification that the
administration believed the police academy project was as
important as overcrowding in the state's correctional
facilities (the state was currently being fined daily by
the federal government for not meeting the requirement).
Ms. McConnell replied that both issues were important. The
administration had included money in the supplemental
budget for corrections. She expounded that the
administration had presented a long-term corrections plan
to the legislature the prior session that had not passed
and was still under discussion. She believed it was well
known that the administration was very concerned about
overcrowding in prisons, which was why it had proposed
using the fines to address the problem.
Co-Chair Pearce added that she had received a letter from
one of the plaintiff's attorneys in the Cleary settlement
stating that it was nice that the administration had asked
for $2.3 million in supplemental funds, but they did not
consider it as an offset to the fines. She stated that it
was clear to her that unless the attorneys got to make the
decisions that they had no interest in working with the
legislature on taking care of some of the problems.
Senator Donley surmised that what the plaintiffs' attorneys
wanted and what the court said were two different things.
He did not believe the police academy project compared to
the corrections need. He believed the state may want to
consider getting out of the business of training the
state's police officers. He was concerned that investing
more capital funding into the area would sink the state
further into the program, which may or may not be
appropriate for the state to continue.
Co-Chair Sharp agreed and thought that the state should
look into how many other states maintained training
academies. He wondered whether there were regional training
academies that handled the needs of multiple states. He
rated the priority of a women's facility higher than a
shooting range and dormitory.
Ms. McConnell acknowledged that there was reason to discuss
the state's role in training individuals around the state;
however, the state had an obligation to ensure that its own
employees were well trained. She stressed that the issue
was a significant state responsibility.
Mr. Bischoff remarked that the items were all significant
public policy issues. He believed the primary issue in
Alaska was that most of its smaller police departments did
not have the infrastructure. He discussed the issues of why
police standards and training were needed, where smaller
cities should come up with money for training, should there
be multiple academies throughout the state, should officers
go south for training, and other. Over the past 25 years
the issue had evolved and currently Anchorage had an
academy that handled approximately half of the state's
population; the Sitka academy handled the other half. The
academies trained troopers, municipal police, students,
state agencies, and external agencies. The administration
believed that based on Alaska's dynamics that the current
setup was the most efficient way to provide training for
quality public safety officers.
Senator Donley wondered about the impact of a five-year
plan for increased AHFC spending. Co-Chair Pearce clarified
that the funds did not represent an increase; they were a
reappropriation.
Ms. McConnell clarified that the funds were not a
reappropriation. The available $53 million in capital funds
for AHFC had not fully been used in the current fiscal
year. She detailed that money was not being redirected.
Co-Chair Pearce believed the funds would not affect the
$103 million dividend from AHFC in the current year. The
question related to funds in the current year was how much
would be used for capital and how much would go to the
General Fund. She discussed the difference between the
legislature's plan versus the governor's plan.
Senator Donley asked if the legislature's five-year plan
from the prior year showed an expenditure for $53 million
or the actual expenditure. Co-Chair Pearce replied that
they would need to look at the item. She elaborated on the
AHFC funding method. She noted that the legislature could
take the $2.3 million that had not been spent on capital
for deposit into the General Fund.
Co-Chair Sharp noted that the $2 million could be used to
fund project overages.
Co-Chair Pearce believed the project should be put
alongside all other projects in the capital budget request
and should be prioritized along with the others. She moved
on to discuss a request for $23,000 in General Funds from
the Alaska Court System to pay for outside counsel for two
current investigations.
Senator Parnell communicated that when the original
supplemental request had come through the commission had
not had a meeting; the meeting occurred on February 7. He
explained that up to that point there had been one
investigation going; following February 7 a second
investigation was ongoing; both investigations were
requiring more funds than anticipated. He detailed that the
first investigation had gone beyond the probable cause
stage and required further work. The $23,000 would pay
outside counsel to continue the investigations.
Senator Donley noted that the money was in the court's
constitutional function. He opined that the committee
should ensure that the funds were provided if needed. He
voiced concern related to efficiencies of the commission
and noted that it had received a budget increase in recent
years that he did not believe was warranted.
Co-Chair Pearce relayed that she would provide committee
members with a March 13, 1997 request for amendments to the
governor's operating budget. She asked Ms. McConnell to
address the amendment related to debt retirement.
Ms. McConnell shared that the state had a number of old
general obligation bond funds that had been used for
projects. She detailed that sometimes, due to the nature of
a project, it took considerable time for something to be
cleared completely out. The administration had been able to
close some of the bond funds the prior year; it had
recently completed a review in consultation with Department
of Transportation and Public Facilities, which determined
that three additional bond funds could be closed. She noted
that there were still some pending obligations against some
of the bonds and the money had been reserved aside. One of
the bonds was a fund from 1978; the other two were bond
packages from 1980. The total to be released from the funds
was $7.7 million. She explained that the administration
would make a recommendation to the state bond committee to
release the funds. When the unobligated portion of the
funds were released they would drop into the state debt
fund, which meant the state did not need to invest as many
new General Fund dollars into the account to fully pay its
obligations for FY 98. She relayed that there were very few
of the bond funds remaining; the administration continued
to review them for eventual closure. She added that the
administration would provide committee members with a
detailed letter on how much money would come from each of
the retiring funds.
Co-Chair Pearce noted that the committee would hear from
DEED on its RPLs the following Thursday.
Co-Chair Sharp pointed to the $3.75 million DEED RPL. He
asked the department to bring detailed information
regarding the request. Ms. McConnell would provide the
information.
Co-Chair Pearce discussed her intention related to future
committee action on the supplemental budget bill.
SENATE BILL NO. 41
"An Act relating to environmental audits to determine
compliance with certain laws, permits, and
regulations."
CO-CHAIR SHARP announced that the committee would continue
with pending action on SB 41, which had been heard
yesterday. Amendment 3 by Senator Parnell was on the table.
SENATOR PARNELL WITHDREW Amendment 3 without objection.
SENATOR PARNELL MOVED Amendment 10. SENATOR PHILLIPS
OBJECTED for the purpose of discussion.
MIKE PAULEY, STAFF TO SENATOR LEMAN, addressed the
committee regarding the amendment. The senator,
representatives from the administration and the drilling
contractors tried to come up with new language to address
their concerns. The redefinition of owner and operator
brings independent contractors under the definition making
them eligible for privileges and immunity under the bill.
SENATOR PHILLIPS asked if the Department of Environmental
Conservation (DEC) understood the amendment.
CO-CHAIR SHARP called on JANICE ADAIR, DIRECTOR, DIVISION
OF ENVIRONMENTAL HEALTH, DEPARTMENT OF ENVIRONMENTAL
CONSERVATION, who was available to the committee via
teleconference. He asked her to speak to Amendment 10.
MS. ADAIR asked Mr. Pauley if the amendment was their
definition of owner and operator they had prepared
yesterday. MR. PAULEY affirmed that it was the same
definition except the words "all or part of" had been
inserted before "regulated facility, operation or
property."
MS. ADAIR stated that DEC had no problems with the
amendment.
CO-CHAIR SHARP asked if there were further questions or
comments. SENATOR PHILLIPS WITHDREW his OBJECTION. There
being no further objection, Amendment 10 was ADOPTED.
SENATOR PARNELL stated he did not plan to offer Amendments
4 and 5. He believed the Alaska Oil and Gas Association had
withdrawn the amendments.
CO-CHAIR PEARCE MOVED Amendment 8 on behalf of Senator
Adams. SENATOR PARNELL OBJECTED.
CO-CHAIR PEARCE read the rationale for the record:
"In almost all cases the facts needed to prove
exceptions (a)(1)-(4) to the self-audit privilege will
be only within the knowledge and control of the owner
or operator who conducted the audit. Without knowing
what is in the privileged audit or communication, the
party seeking disclosure would find it virtually
impossible to establish that the privileged
information falls within the exception. Our U. S.
Supreme Court has held that 'The ordinary rule, based
on considerations of fairness, does not place the
burden upon a litigant of establishing facts
peculiarly within the knowledge of his adversary. The
9th Circuit has said the same.'" Our supreme court has
recognized that the burden of proof generally falls
upon the party asserting a fact, particularly where
that party controls the evidence bearing upon the
fact."
CO-CHAIR PEARCE believed Amendment 8 had been requested by
the Department of Law. She was not familiar with the entire
argument and hoped to have Senator Leman's staff speak to
it.
MR. PAULEY opposed Amendment 8 because it substantially
undermined the privilege the bill provided. The subject of
contention is language on page 7, lines 14-15 regarding the
burden of proof. He said the language had been used in
Oregon's law, the first state to pass audit privilege
legislation. Of twenty states that have passed this law,
the majority have that exact language. The proposed
amendment unfairly shifts the burden on the industry that
is asserting the privilege, in that the party claiming the
privilege has the burden of establishing that the
exceptions in (a)(1)-(4) don't apply. Mr. Pauley gave an
example to illustrate his point, suggesting that everyone
asserting this privilege has to prove they're not a crook.
It didn't make sense to him. He sent the proposed language
to a number of lawyers representing different industries
that would be affected by SB 41. He had heard back from
AOGA and they strongly disapproved of Amendment 8 and
believed it would nullify the privilege the bill offers.
SENATOR PHILLIPS asked to hear from DEC on the amendment.
MS. ADAIR stated that the issue had been identified in
earlier testimony as one that still needed to be resolved.
They had a different amendment prepared that was something
between Amendment 8 and what is currently in the bill. The
department thought the current drafting of the bill was
problematic, regarding asking that a potentially harmed
party be required to prove information that they have no
specific knowledge of or control over the documents that
could produce that knowledge. They had suggested that the
party, whether private, third-party or the state, make a
prima facie case before the court that there was reason to
believe that the audit documents should be disclosed for
one of the reasons established in the bill. The department
would like to see this problem addressed.
MS. ADAIR confirmed that they would be happy with Amendment
8, but recognized that the sponsor had difficulty with it.
They were prepared to continue to work to find compromise
language.
MR. PAULEY provided an additional concern that the
amendment included third parties seeking to overcome the
privilege. He clarified that the bill requires a 15-day
advance notice of intent by the agency to conduct an audit
in order to get the privilege and the immunity. The notice
has to state when the audit will begin, end, and the scope
of the audit, all of which was not privileged information,
although the audit report is privileged. The notice
information is available to the public and a third party
could be aware of this and routinely file motions in court
saying they believe the audit is being done for a
fraudulent purpose. At that point, the burden of proof
immediately shifts to the company doing the audit and they
have to somehow prove that they are not undertaking it for
a criminal purpose. Therefore, the legal counsel for
companies doing audits would be forever tied up in court
defending the fact that they aren't doing audits for a
criminal purpose. He summarized by strongly opposing the
amendment because it would injure the purpose of the bill.
MS. ADAIR briefly responded to Mr. Pauley's comments. She
stated that was the reason they had suggested the prima
facie showing so they wouldn't end up with "fishing
expeditions." With a prima facie showing, the court would
have to be given solid information as to why the exception
applies and it would insure fairness on both sides.
CO-CHAIR PEARCE WITHDREW Amendment 8 with the understanding
that they would try again if the department came up with
language that all could agree to. There was NO OBJECTION to
the motion and Amendment 8 was WITHDRAWN.
There were no further amendments offered.
SENATOR PARNELL MOVED CSSB 41(FIN) from committee with
accompanying fiscal notes. CO-CHAIR PEARCE asked if the
approved amendments changed some of the fiscal notes
accompanying the bill.
MR. PAULEY stated his understanding that the pipeline
tariff amendment (Amendment 6 adopted the previous day)
might have an impact on the fiscal note. CO-CHAIR SHARP
asked if it would be a positive or negative impact.
MR. PAULEY responded that it would reduce the assessed
costs of the bill.
CO-CHAIR SHARP requested a reconsideration of the fiscal
notes. SENATOR PHILLIPS suggested modifying the motion
pending fiscal notes. He asked to hear from the Department
of Law.
MARIE SANSONE, ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION,
DEPARTMENT OF LAW, addressed the committee. The fiscal note
they had submitted included $75,000 for expert witnesses on
the pipeline tariff cases, which would come out with
Amendment 6. CO-CHAIR SHARP directed Senator Parnell to
modify his motion.
SENATOR PARNELL WITHDREW his original motion without
objection. SENATOR PARNELL MOVED CSSB 41(FIN) from
committee with individual recommendations and fiscal notes,
with the exception of a downward revised fiscal note from
the Department of Law.
Without objection, CSSB 41(FIN) was REPORTED OUT with a
previous zero fiscal note from Department of Health and
Social Services, a new zero fiscal note from the Department
of Labor, and new reduced fiscal notes from the Court
System (35.9), and the Department of Law (121.3).
ADJOURNMENT
The meeting was adjourned at 10:55 a.m.
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