Legislature(1997 - 1998)
05/04/1998 09:20 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
4 May, 1998
9:20 a.m.
TAPES
SFC 98 # 155, Side A (000-566)
CALL TO ORDER
Senator Bert Sharp, Co-Chair, convened the meeting at
approximately 9:20 a.m.
PRESENT
In addition to Co-Chair Sharp, Senators Pearce, Donley,
Torgerson, Adams, Parnell and Phillips were present when the
meeting was convened.
Also Attending: Senator LYDA GREEN; Senator JERRY MACKIE;
Representative JOHN DAVIES; Representative MARK HANLEY;
Representative NORM ROKEBERG; ANNALEE MCCONNELL, Director,
Office of Management and Budget, Office of the Governor;
SHARON BARTON, Director, Division of Administration,
Department of Administration; JUANITA HENSLEY,
Administrator, Division of Motor Vehicles, DOA ; KAREN
REHFELD, Director, Division of Education Support Services,
Department of Education; JANET CLARKE, Director, Division of
Administrative Services, Department of Health and Social
Services; JOHN BITTNEY, Alaska Housing Finance Corporation,
Department of Revenue; WENDY REDMOND, Vice President,
University Relations, University of Alaska; CHRIS
CHRISTENSEN, Staff Council, Alaska Court System; TAM COOK,
Director, Legal Services, Legislative Affairs Agency; MIKE
GREANY, Director, Division of Legislative Finance; GINGER
PATTON and JIM HAUCK, Fiscal Analysts, DLF; and aides to
committee members and other members of the Legislature.
via Teleconference: DAN FAUSKE, Alaska Housing Finance
Corporation, Department of Revenue.
SUMMARY INFORMATION
SENATE BILL NO. 360
"An Act authorizing the issuance of bonds in the amount
of $257,600,000 by the Alaska Housing Finance
Corporation for certain capital projects; relating to
those bonds and to the appropriation of revenue of the
Alaska Housing Finance Corporation; and providing for
an effective date."
CS FOR SENATE BILL NO. 360(FIN)
"An Act authorizing the issuance of bonds by the Alaska
Housing Finance Corporation for certain capital
projects; relating to those bonds and to the
appropriation of revenue of the Alaska Housing Finance
Corporation; and providing for an effective date."
Co-Chair Sharp announced his intention to cover the capital
budget and the AHFC bond bill. If time permitted, other
bills would be addressed.
TAM COOK, Director of Legal Services, Legislative Affairs
Agency was invited to speak to the committee about the
latest committee substitute of SB 231. She spoke as
follows:
"Mr. Chair and members of the committee, the committee
substitute that you have in front of you does not make a
great many changes to the original bill. I will try to
identify the changes that are made and give an explanation
of those."
"On page two the significant change that is made is the
insertion of subsection E. Subsection E contains a pledge
by the state to the holders of bonds of AHFC that the state
will not appropriate or transfer money during a current
fiscal year from AHFC that exceeds the corporation's net
income for the immediately preceding fiscal year. So that
essentially the state is pledging to take no more money than
what would be available from the - what would have been the
net income from the preceding fiscal year minus the amount
it is required to pay off the bonding costs that are
associated with this bill here."
"So, what this is, is substantive law to that extent it is
no longer as an intent section. It is substantive in
effect. There is the provision that AHFC may tell the state
that it has additional unrestricted revenue. If it does the
state possibly could appropriate that."
"In addition, you will notice Section 3 has been added. And
it is a repealer provision, which did not exist, in the
original bill. This section repeals the bill to July 1 year
2006. Since the bond must mature under Section 2 not later
than January 1, 2116, it's possible that this repeal could
be changed to January 1. To be on the safe side, I put the
repeal July 1, 2006. The reason I added the repealer is so
that Section E is not of continuing duration. Section E
being the pledge of the state not to appropriate more
revenue out of AHFC than is permitted under the formula."
"And that in principle is the only significant change in
this CS as compared to the original bill that was
introduced."
Senator Adams supported the capital projects that this bill
would encompass. However, he asked about the wording saying
that one Legislature could bind and another future
Legislature refuse to bind on this type of appropriation.
Ms. Cook was uncertain how a court challenge would be ruled
upon if a future Legislature passed legislation that
violated the terms of Section E. It was possible that a
court would find the appropriation was valid, she
speculated, even if it did violate the provision. She
theorized that if the Legislature appropriated an amount
that was greater than the formula permitted in the
subsection for a particular year, but was able to show
factually that AHFC had remaining assets that were
sufficient to fully cover all the bonded obligations, the
court might find that the addition appropriation did not
actually impair a contract to the bond holder. She offered
another argument that the Legislature could not modify
substantive law on appropriations. If the Legislature was
to simply enact an appropriation of AHFC assets that was
greater than the amount permitted in Subsection E, an
argument could be made that essentially the Legislature was
either suspending or repealing the substantive effect of E
in an appropriations bill and therefore, the appropriation
was invalid, according to Ms. Cook.
She summarized that a couple of theories that could be made
to attack an appropriation in excess of the formula and
there was also the overriding power of the Legislature's
purse on the other side, which might be used to defend such
an appropriation. She guessed that the issue would probably
not come up unless the Legislature elected to attempt to
appropriate more than the formula permitted.
Senator Adams requested suggested language the committee
could use to prevent a challenge to the provisions. Ms.
Cook responded that there was a tension between the
constitutional provisions and she had nothing to suggest
that would help. Assuming that the goal of the Legislature
was to provide security in the marketplace for the bonds,
she felt that there was no alternative but to include the
provision to reassure the bondholders. She still had some
legal question as to how enforceable the provision would be.
DAN FAUSKE from the Alaska Housing Finance Corporation
joined the discussion via off-net teleconference. He told
the committee bond council was available for comment and
that he had a statement from the corporation's financial
advisor.
Co-Chair Sharp updated the committee members that several
meetings had been held with his office, AHFC, bond council
and other Department of Revenue and Department of Law
representatives as the first versions of the bill were
drafted. As a result of later discussions, Subsection E was
added. He explained that the process was a continuous
evolution to write language that was acceptable to both the
Legislature and AHFC.
The committee invited JOHN BITTNEY from AHFC to speak to the
latest CS. He commented as follows:
"We did submitted this morning, a fiscal note for the piece
of legislation that perhaps as a suggestion I could just
brief you on that."
"Assuming it's in your packets, Mr. Chairman, we have
requested one position at the corporation, which would be a
finance officer to track and monitor the expenditures of
these bond proceeds throughout the agency. We feel this is
necessary in order to monitor those expenditures.
Apparently there are restrictions of course, on the use of
bond proceeds. And therefore there will be some reporting
requirements on AHFC about the use of those. As well as we
anticipate that there's probably going to be a number of
reports that the state, Legislature are going to be asking
for over time as far as how the use of these of funds is
going."
"That's pretty much just it in a nutshell, Mr. Chairman.
It's just one position for a Range 22 Finance Officer with
some small amounts for travel, equipment and the like."
Co-Chair Sharp agreed that extra work would be added because
of Section B of the bill, where AHFC was asked to coordinate
with various agencies on the projects.
Mr. Fauske spoke about the provisions in the proposed
Section E as follows:
"The language in E has come a long ways towards the position
that the corporation wanted to maintain that a pledge was
essential for us to move forward an issue that's done on
behalf of the state of deferred maintenance - all the
projects that are listed. I have Eric Wolford (ph) here and
one of the concerns is that we have a little bit more time
to read it and possibly come back with any language we feel
might be essential to help clarify this if that'd be the
choice of the advice of our council.
"I would like to commend thought that this has come a long
ways towards the number one concern we had on making sure
that AHFC be allowed to maintain the credit rating at its
going concerned status. So that kinda resulted that a
better product is brought back to the state in reference to
the bonds that we would issue. That has been our concern
all along is to make sure that we have the tools to work
with, with the financial community so that Alaska is best
served. And this has come a long ways towards that."
Co-Chair Sharp told Mr. Fauske that the committee would
continue work on the bill to keep the legislative process
moving. AHFC would have opportunities to make further
suggestions to the committee or else in the other body, when
the bill reached it, he said.
Senator Pearce referred to a portion of Section E, which she
violently opposed. She asked if AHFC had ever come close to
defaulting on any loan payment.
Mr. Fauske replied that he didn't have any knowledge except
for an instance two years before when the Legislative Audit
proposed making a $435 million withdrawal. The corporation
was immediately placed on credit watch. He was not aware of
and defaults however.
Senator Pearce wanted to know if there was any true
financial repercussion to the state as a result of the
audit. Mr. Fauske described the actual status compared to
ideal circumstances financial analysts would prefer. He
said that the issuance of dept as proposed in this bill was
a different type of obligation than previous AHFC
circumstances.
Senator Pearce stressed that neither AHFC nor the
Legislature had ever failed to step forward to cover debt
reimbursement. Mr. Fauske appreciated the comment but
pointed out the difference with this situation. He pointed
out the trend with Wall Street investment advisers and other
investors regarding housing authorities use by legislatures
to cover agency costs in other states besides Alaska.
He added that investors were leery of issues where there
wasn't something set to insure their investment was
protected and show what the operation was to entail. It
wasn't so much a criticism by AHFC, just an attempt to
insure security for the investor, he stated. Investors were
very impressed with intent language for the corporation
during the last four-year period, according to Mr. Fauske.
Senator Adams pointed out that many of the projects in the
bill were sidelined from typical AHFC programs and wanted to
know the effect it would have on the bond rating. Mr.
Fauske felt confident that with the discussed amount and
type of projects proposed the bond rating should be
maintained or strengthened.
Senator Adams offered that once this pattern of funding was
started, it would be hard to stop. He requested a plan for
future years showing the amount of money that could be used
for this purpose and not harm the agency or its bond rating.
Mr. Fauske replied that some of that information was
included with the current bill and that the corporation
would give him more information.
Senator Parnell moved for adoption of CS SB 360 Version H.
Senator Pearce objected.
Senator Pearce said she didn't like the legislative intent
language. She stressed that the legislature had never
failed to meet its obligations under debt retirement. She
thought the language with too far and the original language
was clear. She wasn't opposed to adding a repealer, but did
not want the legislature to give up the power of
appropriation.
Senator Adams suggested that the bill would be repealed in
the year 2006 even without the language.
Senator Pearce agreed but noted that until then, the
legislature would give up its appropriation power, which she
did not approve.
Co-Chair Sharp appreciated Senator Pearce's reluctance to
accept Section E. However, he felt that forcing the issue
was not in the best interest. He spoke of the insurance and
comfort given to investors with the pledge. After all, he
commented, the bonds had to be sold and given the best
interest rates. He did agree with Senator Pearce that if
AHFC had good years in the near future, the legislature
might have some difficulty participating in the profits.
Senator Donley requested some time to think about the
matter.
Co-Chair Sharp reminded the committee this bill would be
linked with the capital budget bill. He preferred to not
move either bill from committee until both were complete.
Funds appropriated in the capital budget would need to come
from the bonds, he pointed out.
Senator Pearce asked if the proposed projected needed to be
rolled into SB 360. Co-Chair Sharp said committee members
and other senators would be more comfortable knowing what
projects the bonds authorized.
Senator Parnell withdrew his motion to adopt CS SB 360
Version H. There was no objection and it was so ordered.
Co-Chair Sharp ordered the bill held in committee.
Senator Pearce requested a copy of the Legislative Audit
mentioned earlier.
The committee took an At Ease at approximately 9:45 a.m.,
resuming at approximately 10:20 a.m.
SENATE BILL NO. 231
"An Act making and amending capital appropriations and
reappropriations and capitalizing funds; and providing
for an effective date."
CS FOR SENATE BILL NO. 231(FIN)
"An Act making and amending capital, supplemental, and
other appropriations; making appropriations to
capitalize funds; making appropriations under art. IX,
sec. 17(c), Constitution of the State of Alaska, from
the constitutional budget reserve fund; and providing
for an effective date."
The committee resumed consideration of amendments. Co-Chair
Sharp announced the amendments to be addressed.
FRONT #10: Senator Torgerson moved for adoption. Senator
Adams objected for a question. Discussion was as follows.
Co-Chair Sharp spoke to the motion he sponsored. He
explained this was a reappropriation of old railbelt energy
money that was appropriated in 1994. There was $3 million
appropriated to the City of Seward as a loan. That amount
had not been used and was available for reappropriation to
projects in the amendment, he told the committee. He listed
the projects and pointed out that the communities were
matching at least fifty-percent of the project costs.
Senator Adams was concerned on the original loan to the City
of Seward for the transmission line to the Lawson station.
He wanted to know that the project had been taken care of.
Senator Torgerson assured him that the City of Seward found
an alternative funding source and no longer needed the
funds.
Senator Adams removed his objection. The amendment was
ADOPTED without objection.
DOT #2 REV REV: Senator Donley moved for adoption. Senator
Torgerson objected for explanation. Discussion was as
follows.
Senator Donley explained the change made since the previous
meeting was an adjustment to AMAT allocations and
appropriations. He referred to the Ship Creek Trail, which
had been inadvertently deleted by the Department of
Transportation, but should have been included on the AMAT
list.
Senator Adams had a question regarding page two, line 19.
He wanted to know if the funds listed were new general fund
money or utilized within the AMAT system.
Senator Donley asked what was Senator Adams' definition of
AMAT money. Senator Adams replied it was more that
presently appropriated.
There was further debate between the two senators.
The committee took a brief At Ease at approximately 10:25
a.m.
TAPE MALFUNCTION - portion of meeting not recorded
The amendment was ADOPTED by a vote of 6-1. Senator Adams
cast the nay vote.
BOND #2: Senator Pearce moved for adoption. Senator Adams
objected. Discussion was as follows.
Co-Chair Sharp spoke to the amendment he sponsored. Senator
Adams asked about changes to the Fish and Wildlife
Protection Aircraft language on page 25.
Senator Parnell explained the change was to correct language
to clarify the project was for the Department of Fish and
Game rather than the Department of Public Safety; Division
of Wildlife Protection.
Senator Adams removed his objection.
Co-Chair Sharp noted the last paragraph had been removed.
The amendment was ADOPTED without objection.
HSS #2: Senator Torgerson said he would not offer the
amendment action taken with BOND #2.
HSS #7: Senator Adams said he would not offer the amendment
due to action taken with BOND #2.
DOA #5: Senator Phillips moved for adoption. It was pointed
out that the amendment was identical to DOA #4 already acted
upon. Senator Phillips withdrew his motion.
DOA #4: Senator Phillips moved to rescind action taken
earlier.
Senator Phillips spoke about the request to use retirement
and benefits funds to purchase new office furniture for the
Division of Retirement and Benefits.
Without objection, action taken on DOA #4 was rescinded.
Senator Phillips moved for adoption. Without objection, the
amendment was ADOPTED.
The committee discussed another Department of Administration
capital budget request for Electronic Commerce equipment, a
Lease Database using AIDA funds. At the request of Senator
Phillips, SHARON BARTON, Director of the Division of
Administrative Services, DOA, came to the table.
Ms. Barton spoke of the need for this project and the
inability to use AIDA funds. She asked if general funds
could be used instead.
Co-Chair Sharp replied that other users should pay for the
project through receipts. If not, he concluded the issue
was dead.
Ms. Barton countered that without the program, agencies
would be faced with between $700,000 to $1,300,000 in
additional new charge-backs in FY 99. That would translate
into program reductions, she speculated. She added that the
projects, if undertook, would result in cost savings in the
future.
Co-Chair Sharp said the committee would consider removing
the project altogether if the agencies didn't think they
could fund it.
The committee took an At Ease at approximately 10:40 a.m.
The meeting was turned over to Senator Phillips to chair.
CS FOR HOUSE JOINT RESOLUTION NO. 2(JUD)
Proposing an amendment to the Constitution of the State
of Alaska relating to repeal of regulations by the
legislature.
Representative NORM ROKEBERG, sponsor of the bill, was
invited to join the committee to speak to the constitutional
amendment. He testified as follows:
"[Along with] Representative James from North Pole, [we are
the] two prime sponsors on this constitutional amendment to
return to the legislature its rightful ability to repeal
regulations by resolution, which was removed by the court in
1980 in the State of Alaska v. ALIVE Volunteer case."
"I think everybody's familiar with this. I think the
difference this year by returning to voters, I believe I
have commitments from business groups around the state to
support the ballot initiative with some money to educate the
voters on the importance of the separation of powers and
rebalancing to equilibrium the balance between the
legislature and the executive branch."
"With that, Mr. Chairman, I would ask that you favorably act
on this. Its only got a $3,000 [undecipherable] fiscal
note."
There were no other witnesses to testify on this bill and no
discussion by committee members.
Senator Donley offered a motion to move from committee, HJR
2 with accompanying fiscal notes. Without objection, it was
moved out of committee.
ADJOURNMENT
Senator Phillips recessed the meeting at approximately 10:55
a.m. and did not resume.
SFC-98 (10) 5/4/98 am
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