Legislature(1999 - 2000)
05/14/1999 03:10 PM 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 May 14, 1999 3:10 PM TAPES SFC-99 # 139, Side A & Side B CALL TO ORDER Co-Chair John Torgerson reconvened the meeting at approximately 3:10 P.M. PRESENT In addition to Co-Chair John Torgerson, Senator Gary Wilken, Senator Al Adams, Senator Pete Kelly, Senator Lyda Green and Senator Randy Phillips were present when the meeting was reconvened. Senator Sean Parnell arrived shortly thereafter. Also Attending: Senator JERRY MACKIE; Representative VIC KOHRINGL; Representative JERRY SANDERS; ANNALEE MCCONNELL, Director, Office of Management and Budget, Office of the Governor; JACK KREINHEDER, Senior Policy Analyst, Office of Management and Budget, Office of the Governor; JEFF BUSH, Deputy Commissioner, Department of Commerce and Economic Development; LAMAR COTTEN, Deputy Commissioner, Department of Community and Regional Affairs; REMOND HENDERSON, Director, Division of Administrative Services, Department of Labor; CLARK GRUENING, Vice-Chair, Alaska Permanent Fund Board of Trustees, Department of Revenue; DEBORAH VOGT, Deputy Commissioner, Department of Revenue; NANCI JONES, Director, Permanent Fund Dividend Division, Department of Revenue; JIM KELLY, Director of Communications, Alaska Permanent Fund Corporation, Department of Revenue; PETER NAOROZ, Manager, Real Estate Investments, Alaska Permanent Fund Corporation, Department of Revenue; NORMAN COHEN, Executive Director, Coastal Villages Region Fund; aides to committee members and other members of the Legislature. SUMMARY INFORMATION HB 156-PERMANENT FUND INVESTMENTS The Committee heard from the Alaska Permanent Fund Corporation, adopted an amendment and reported the bill from Committee. HB 40-EXECUTIVE BRANCH REORGANIZATION The Committee considered ten amendments and held the bill. CS FOR HOUSE BILL NO. 156(FIN) "An Act relating to investments by the Alaska Permanent Fund Corporation; and providing for an effective date." This was the second hearing for this bill in the Senate Finance Committee. Co-Chair John Torgerson noted that there was some disagreement he had with the Alaska Permanent Fund Corporation dealing with the amount of money the corporation may borrow for real estate purposes. Under the current language, he explained, there is no limit. He told the Committee he had asked the corporation to propose an amount appropriate as a limit. Another concern of Co-Chair John Torgerson's related to Section 1 of the committee substitute ".the corporation may, either directly or through an entity in which the investment is made, borrow money." He proposed an amendment (Amendment #1) that deletes "either directly or" and said the corporation agreed to that change. Co-Chair John Torgerson referred to discussions about the management of real estate owned by the corporation. His proposed amendment adds a new subsection (C) that requires properties to be professionally managed. Co-Chair John Torgerson said he had also raised the issue of allowing the Legislative Budget and Audit Committee to review and approve real estate transactions rather than simply review and comment. However, he was assured during previous testimony that to make this change would give the legislature too large of a role in the investments of the fund. The final concern Co-Chair John Torgerson had with the bill related to the "five-percent float" and whether or not it should only exclude equities. Amendment #1: This amendment deletes, "either directly or" following "may" on page 1 line 7 of the committee substitute. The language then reads, "With respect to real property investments of the fund, the corporation may, through an entity in which the investment is made, borrow money if the borrowing is without recourse to the corporation and the fund." The amendment also adds a new subsection to Section 2 of the committee substitute that requires real estate management firms to be "professionally managed." Senator Sean Parnell moved for adoption. Senator Al Adams objected to hear the corporation's position on the amendment. JIM KELLY, Director of Communications, Alaska Permanent Fund Corporation, Department of Revenue testified that the amendment is acceptable to the corporation. He added that the first part of the amendment also addresses Co-Chair John Torgerson's concern with the borrowing limits. He offered Peter Naoroz to explain "non-recourse" and how the comfort level of the legislature can be maintained. Senator Al Adams withdrew his objection and without objection, Amendment #1 was ADOPTED. PETER NAOROZ, Manager of Real Estate Investments, Alaska Permanent Fund Corporation, Department of Revenue testified. He related how, two years ago, Mr. Kelly asked his office to review the existing statutes governing the corporation's flexibility, and come up with ways to increase the fund's return and to reduce risk. The resulting review, he told the Committee, showed opportunities to reduce operating and administrative costs. Peter Naoroz used as an example a real estate investment in Washington D.C. called Tyson's Corner; a mall that also includes an office building and surrounding land. He relayed that when the corporation went to refinance this property, the lender requested the corporation to address the statute that prohibits the corporation from borrowing money or to guarantee from the principal of the fund, the obligations of others. He said that it was thought that because the corporation held this investment in partnership with other investors, the state was in effect guaranteeing the other investors' obligations. As a result, he said, the corporation had to undergo a long process of forming a legal opinion on the interpretation of the statute and then convince the lender that the loan could be extended. He identified this situation as an area where changing the statute could show a cost saving to the State because of the delay in procuring the loan and the extra cost to obtain the legal opinion. He viewed this as a housekeeping matter. Peter Naoroz then explained how the fund is currently governed by the "Prudent Investor Standard", and because of this, the corporation looks at borrowing caps, loan-to- values, its obligations to those it borrows from as well as entities the corporation invests in. He said the corporation then compares these factors to the existing "rent roll" i.e. the existing assets of the entity, and tries to match them. The corporation also looks at several factors, he continued, for sources to address risk mitigation. In this manner the corporation is able to secure financing on portfolios of assets, according to Peter Naoroz. Peter Naoroz felt the request for a cap on a particular investment is appropriate and should be considered, However, he thought that when the corporation is attempting to secure financing on a pool of assets, the amount could potentially be much larger, he cautioned. He noted a number of office investments in Atlanta, Washington D.C., New Jersey and San Diego that are unleveraged, where the portfolio is approximately $400 million. He stressed that in today's marketplace, the finance on this pool is very attractive compared to any single asset financing opportunity. Therefore, he said, pooling of assets gives the corporation more flexibility and additional buying power, as well as reducing the costs and enhancing returns. Peter Naoroz stated that the corporation is currently addressing the loan cap internally on a case-by-case basis. He wanted the Committee to consider allowing this practice to continue. Jim Kelly asked Peter Naoroz to give an example of the Permanent Fund's risk to borrowing on a $400 million portfolio. Peter Naoroz replied that in this situation, the corporation would approach the marketplace and request the best terms to borrow approximately $200 million. He noted that the corporation's current portfolio of this amount has between 8 1/2 and 9-percent current return and has appreciated in value since its purchase. Using this data, he predicted that the returns on the investment would be deposited into the principal of the fund and could be borrowed against. He stated that the assets in the portfolio would be the only collateral, i.e. there would be no obligation on the part of the permanent fund and the $200 million that was borrowed would be a return of principal. This is a good thing he stressed, because the corporation can then redeploy its cash or principal. He told the Committee that when he is asked to rebalance the total portfolio, the ability to aggregate the assets and place financing on them is a good tool. Co-chair Torgerson asked for the definition of "real property" versus real estate. Jim Kelly answered "real property" is defined in statute as real estate that is improved by completed and substantially rented buildings. Co-chair Torgerson wanted a comparison to "raw land." Jim Kelly responded that raw land is not allowable for permanent fund investment purposes. However, he noted proposed language that will allow raw land in some cases, such as the property adjacent to Tyson's Corner. The committee substitute will allow the corporation to invest in vacant property that is adjacent to property in which the corporation already has a vested interest in, thus adding to the portfolio. He noted this is the only instance where investment in raw land is allowed. Peter Naoroz added to the definition of real property saying it is the corporation's direct investments, whether in entities or not. The other assets considered real estate, he continued, are mortgages-both whole loans and securities mortgages for commercial mortgage backed securities, and investments in the stock of real estate operating companies and real estate investment trusts. Co-Chair John Torgerson asked if the Prudent Investment Standards are in statute or simply practiced internally. Jim Kelly responded that the standards are contained in statue under AS 37.13.120. Co-Chair John Torgerson referred to page seven of the committee substitute discussing the "five-percent float." He said he would leave it up to the Committee to decide whether or not they wanted to limit the investments allowed using five-percent of the total assets of the fund. Jim Kelly recounted when the Permanent Fund was first established and that it was given a conservative "legal list" that did not include real estate or stocks. Over time, he said, the legislature has given the corporation authority to make those investments. He stated that it has become more apparent in the investment world that risk is not a matter of one individual asset, but rather how the total portfolio is constructed. In the rules set for pension funds, he noted, it was determined that risk should be determined on a total portfolio basis. Therefore he emphasized, very risky assets, such as international investments can be held if they are included in a portfolio that also contains domestic stock to result in a portfolio with less risk. This applies to alternative investments as well, and the corporation can purchase them under the basket clause, he said. Jim Kelly advised that to construct a portfolio that has good risk management, the mix of investments should have good correlation with each other. He pointed out that the basket clause would increase the flexibility of the corporation by allowing it to either increase the allocation at an asset allocation level or at a security level. He referred to a statement made by Michael O'Leary describing how fixed income investments have evolved over time. Jim Kelly spoke of investment opportunities that have arisen that were not on the "five percent float" list, such as asset-backed securities that are considered not risky. He speculated that similar opportunities would come up in the next several years and said that the fund's trustees want an opportunity to invest in both fixed-income and equities, knowing that equities return more money. This bill, he said, has a provision to allow those investments. Jim Kelly stated that with the asset allocation currently in statute, the fund's rate of return on investment would be 7.75 percent. If the asset allocation increases five- percent in equity, he predicted the fund would earn an expected medium return of 7.94 percent. If the corporation is allowed an asset allocation of fifty-eight percent in equities, which would be two percent below the maximum, he predicted a return of 8.13 percent rate of return. Changes to the asset allocation, he qualified, would reduce the amount of return. Co-Chair John Torgerson calculated a rate of return increase of 19 points for each five percent allocation to equities. Senator Gary Wilken understood that there were two separate issues addressed in the bill. The first, he surmised, was the original intent of the bill to expand the corporation's portfolio into different markets, such as real estate. The second issue dealt with the fifty-five percent provision, he noted. Therefore, he concluded that there were really two questions the Committee must decide on, either independently or together. He expressed he was comfortable supporting both items. He commented that he did not think the corporation request of five percent of the total assets to use in other investments was unreasonable. He believed that the fund managers would remain conservative in the investment strategy of the overall fund. Senator Loren Leman echoed Senator Gary Wilken's comments in support of the bill. Senator Gary Wilken offered a motion to report from Committee, SCS CS HB 156(FIN). Without objection, it was REPORTED from Committee with individual recommendations and the House fiscal note for the Department of Revenue, Revenue Operations in the amount of $3,154.6. The committee took a brief at ease. CS FOR HOUSE BILL NO. 40(FIN) am "An Act merging certain departments in the executive branch of state government; changing the names of certain departments in the executive branch of state government; transferring duties among departments and offices in the executive branch of state government; providing that certain discretionary duties formerly performed by the Department of Community and Regional Affairs are mandatory in the department to which those duties are transferred; relating to the licensing of child care facilities; relating to the division of vocational rehabilitation; relating to the Alaska Human Resource Investment Council; adjusting the membership of certain multi-member bodies; providing that a certain commissioner may designate department employees to serve in the commissioner's place on a board, council, or similar entity; providing for advice to be given by a department head to the governor and other commissioners on the delivery of government services to rural areas and providing for recommendations to be made to the governor and other commissioners by that same commissioner about policy changes that would affect rural governments and rural affairs; relating to the federal community development quota program; eliminating references to the division of tourism; eliminating a reference to manpower training programs; eliminating references to the director and deputy director of international trade; eliminating the requirement for a local advisory committee for consideration of rural electrification loans; and providing for an effective date." This was the second hearing for this bill in the Senate Finance Committee. In the previous hearing, a committee substitute, 1-LS0056/N, 5/11/99, was moved for adoption and then withdrawn. Amendment #1: This amendment places the Statewide Independent Living Council under the authority of the Department of Labor and Workforce Development as established elsewhere in this legislation. It changes Section 77 of the bill to read: Sec. 47.80.300. Statewide independent living council. There is established the Statewide Independent Living Council. For budgetary purposes. the council is located in the Department of Labor and Workforce Development [EDUCATION]. The Department of Labor and Workforce Development [EDUCATION] shall provide reasonable and necessary professional and technical assistance when requested by the council. Senator Randy Phillips moved for adoption. Co-Chair John Torgerson advised the Committee that he submitted this amendment on behalf of Administration and that it is a technical amendment intended to conform to changes made the bill by the other body. MIKE KRIEBER, staff to Representative Vic Kohring testified that the Representative had reviewed and does support the amendment. The amendment was ADOPTED without objection. Amendment #2: This amendment makes the following changes to the bill. Page 52, lines 18 -23: Delete: "(a) A loan committee consisting of five [SEVEN] members is established. The committee is composed of [THE COMMISSIONER OF COMMUNITY AND REGIONAL AFFAIRS,] the commissioner of community [COMMERCE] and economic development, the director of management and budget, or the designees of the commissioner [COMMISSIONERS] or the director, and three [FOUR] public members." Insert: "(a) A loan committee consisting of five [SEVEN] members is established. The committee is composed of the executive director of the Alaska Industrial Development and Export Authority [COMMISSIONER OF COMMUNITY AND REGIONAL AFFAIRS, THE COMMISSIONER OF COMMERCE AND ECONOMIC DEVELOPMENT], the director of management and budget, or the designees of the executive director [COMMISSIONERS] or the director, and three (FOUR] public members. Sec. 48. AS 42.45.060(c) is amended to read: (c) The executive director of the Alaska Industrial Development and Export Authority (COMMISSIONER OF COMMUNITY AND REGIONAL AFFAIRS] serves as chair of the committee. The committee may elect other officers as necessary. A majority of the members of the committee constitute a quorum and may exercise the powers of the committee. Sec. 49. AS 42.45.990 is amended by adding a new paragraph to read: (6) "authority" means the Alaska Industrial Development and Export Authority." Page 58, line 13: Delete all material. Page 77, following line 22: Insert a new bill section to read: Sec. 66. AS 44.88.070 is amended to read: Sec. 44.88.070. Purpose of the authority. The purpose of the authority is to promote, develop, and advance the general prosperity and economic welfare of the people of Alaska, to relieve problems of unemployment. and to create additional employment by (1) providing various means of financing and means of facilitating the financing. in cooperation with federal, state, and private institutions, of industrial, manufacturing, export, small business, and business enterprises and the other facilities referred to in AS 44.88.010(a) in the state; (2) owning and operating the enterprises and other facilities described in AS 44.88.172; (3) fostering the expansion of exports of Alaska goods, services, and raw materials; (4) cooperating and acting in conjunction with other organizations, public and private, the objects of which are the promotion and advancement of export trade activities in the state; (5) establishing a source of funding credit guarantees and insurance, not otherwise avai1able, to support export development; (6) providing and cooperating or participating with federal, state, and private institutions to provide actual and potential Alaska exporters, particularly small- and medium- sized exporters, with financial assistance in support of export transactions; (7) carrying out the powers and duties assigned to it under AS 42.45." Page 83, line 3, following "42.45.030": Insert ", 42.45,990(1)" Page 84, line 27, following "REFERENCES.": Insert "(a)" Page 85, line 10: Delete all material. Page 85, following line 15: Insert a new subsection to read: "(b) The revisor of statutes shall change references to "department" to read "authority" in the following statutes; AS 42.45.010. 42.45.020. 42.45.040, 42.45.050, 42.45.060, 42.45.100, 42.45.110, 42.45.120, 42.45.140, 42.45.160, 42.45.170, 42.45.180, 42.45.200, 42.45.250, 42.45.400, and 42.45.410." Co-Chair John Torgerson said that he would not be offering this amendment. Amendment #3: This amendment changes the bill as follows. Sec. 54. AS 44.33.020(11) is amended to read: (11) if directed by the governor to do so, adopt regulations that authorize the state to participate in the administration of the western Alaska community development quota program to the extent, and in the manner, authorized by Congress, the U.S. Secretary of Commerce, and the North Pacific Fishery Management Council. Senator Al Adams moved for adoption. Co-Chair John Torgerson objected. Senator Al Adams spoke to his motion saying this amendment is clarification language that emphasizes state participation in the community development program if directed to do so by the governor. He noted that there are several board members on the North Pacific Fisheries Management Council who are appointed by the governor. Therefore, Senator Al Adams surmised, the governor would have to direct them to adopt the necessary regulations. Senator Lyda Green voiced her objection to the amendment. The committee took a brief at ease. ANNALEE MCCONNELL, Director, Office of Management and Budget, Office of the Governor testified she had concerns with the ambiguity of administering the community development program. Given the importance of the program, she believed it would be advisable to retain the existing language since it clearly defined the responsibilities. She quoted the proposed language, ".participate in the administration if directed by the governor." saying this leaves questions relating to the administration of the program and there could be unforeseen consequences. Senator Al Adams requested that Norm Cohen, be allowed to explain the amendment and answer Senator Loren Leman's question. NORMAN COHEN, Executive Director, Coastal Villages Region Fund, explained that his organization is one of the CDQ groups involved in the program. He stated that the sole purpose of the amendment is to clarify that the regulation authority of the department must be consistent with the regulations that were and are adopted by the Secretary of Commerce and the laws passed by the U.S. Congress. In other words, he said the amendment sets the perimeters that the state regulations must follow. Co-chair Torgerson stated he maintained his objection. The amendment FAILED to be adopted by a vote of 3-5-1. Senator Loren Leman, Senator Al Adams and Senator Randy Phillips voted in favor. Amendment #4: This amendment inserts a new bill section on page 25 following line 22 and amends the next two sections to read: Sec. 14. AS 18.62 is amended by adding a new section to read: Sec. 18.62.090. Definition. In this chapter, "department" means the Department of Community and Economic Development. Sec. 15. AS 18.63.030 is amended to read: Sec. 18.63.030. Fee. The department [COMMISSIONER] shall establish the triennial fee for a hazardous painting certificate by regulation. The fee must reflect the department's approximate costs or projected costs for the hazardous painting certification program. Sec. 16. AS 18.63.100(1) is amended to read: (1) "department" means the Department of Community and Economic Development [LABOR];" Senator Lyda Green moved for adoption. Co-Chair John Torgerson and Senator Al Adams OBJECTED. Senator Lyda Green explained that in the process of reviewing the missions and measures and attempting to realign functions, she concluded it would be beneficial to move all licensing procedures into the Division of Occupational Licensing. Representative Vic Kohring requested the Administration address the amendment. Annalee McConnell recommended against the change noting the expertise in the Department of Labor is important to maintain for the certification and licensing programs. She also pointed out there would be no savings with the amendment. Senator Sean Parnell commented on Annalee McConnell's testimony that because there are working relationships in the Department of Labor, no changes should be made. He noted that this is the case in every department. He asked if there would be disadvantages or a poor mission alignment if the amendment were adopted. Why is it better to stay in already established relationships, he wanted to know. Ms. McConnell stated that the expertise of administering the program resides in the Department of Labor. She explained that the licensing function relates to the other functions that the Department of Labor staff will continue to perform after the reorganization. She suggested that someone from the Department of Labor would be better suited to detail the reasoning. She noted that the Office of Management and Budget had looked at whether any efficiencies would be gained with this amendment, and determined that because the Division of Occupational Licensing already RSA'd the task to the Department of Labor, there was no advantage to moving the function to the new Department of Community and Economic Development. Senator Lyda Green countered that it would be anticipated that the expertise would follow the move. She thought that separation was needed and suggested that a board, funded through licensing fees, could be formed to oversee the licensing functions. Representative Vic Kohring said he would not recommend adoption of the amendment. He did not feel the timing was right. However, he stated he would be happy to work with Senator Lyda Green over the interim to draft other legislation to address the issue. Senator Lyda Green granted that there is often reluctance to change, but noted there are important considerations to be given to aligning occupational licensing and having all licensing approvals handled in the same manner. Senator Pete Kelly asked if the Department of Labor should testify. REMOND HENDERSON, Director, Division of Administrative Services, Department of Labor qualified that he is not the expert in this field but noted he had discussed the matter with the director of the Division of Occupational Licensing. He learned that the working relationships and expertise referred to the mechanical inspectors who work directly with the licensing staff. He concluded that it is not advantageous to move only one of the two functions, licensing and inspection. Senator Lyda Green recalled that the Division of Occupational Licensing already handles the administrative functions of regulating Master Electricians and Master Plumbers. Therefore, she thought the division would more appropriately handle this function as well. By a roll call vote of 4-4-1, the amendment FAILED to be adopted. Co-Chair John Torgerson, Senator Gary Wilken, Senator Al Adams and Senator Pete Kelly voted in opposition. Senator Dave Donley was absent. Amendment #5: This amendment makes the following changes to the safety inspection provision of the bill. Page 25, lines 23 -28: Delete all material. Insert new bill sections to read: "Sec. 14. AS 18.60 is amended by adding a new section to article 3 to read: Sec. 18.60.399. Definition. In AS 18.60.180- 18.60.399, unless the context otherwise requires, "division" means the division of safety inspections, Department of Public Safety. Sec. 15. AS 18.60 is amended by adding a new section to article 4 to read: Sec. 18.60.465. Definition. In AS 18.60.400 -18.60.465, unless the context otherwise requires, "division" means the division of safety inspections, Department of Public Safety. Sec. 16. AS 18.60.580 is amended to read: Sec. 18.60.580. Minimum electrical standards. After the American National Standards Institute approves a new, published edition of the National Electrical Code or a new, published edition of the National Electrical Safety Code, the division of safety inspections, Department of Public Safety, [LABOR} may, by regulation, adopt the most recent codes to constitute the minimum electrical safety standards of the state. Sec. 17. AS 18.60.660 is amended by adding a new paragraph to read: (5) "division" means the division of safety inspections, Department of Public Safety. Sec. 18. AS 18.60.740(4) is amended to read: (4) "inspector" means a qualified inspector employed by, designated by, or under contract to the division [DEPARTMENT OF LABOR]. Sec. 19. AS 18.60.740 is amended by adding a new paragraph to read: (5) "division" means the division of safety inspections, Department of Public Safety. Sec. 20. AS 18.60 is amended by adding a new section to article 10 to read: Sec. 18.60.825. Definition. In AS 18.60.800- 18.60.825, "division" means the division of safety inspections, Department of Public Safety. Sec. 21. AS 18.70.081 is amended to read: Sec. 18.70.081. Approval of fire protection systems. Before October 30 of each year, the division of safety inspections, Department of Public Safety, shall prepare and make available a list of approved fire protection systems to [THE DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS,] the Department of Community [COMMERCE] and Economic Development [,] and the public." Page 77, following line 17: Insert a new bill section to read: Sec. 70. AS 44.41 is amended by adding a new section to read: Sec. 44.41.023. Division of safety inspections. There is established in the Department of Public Safety a division of safety inspections. The Alaska Safety Advisory Council and the position of state fire marshall are included within the division. The division shall perform the duties of the Department of Public Safety that are specified for the (1) state fire marshall; and (2) division of safety inspections under AS 18.60, AS 18.70.081, and AS 45.45.910." Page 77, following line 22: Insert new bill sections to read: Sec. 72. AS 45.45.910(a) is amended to read: (a) Unless exempted by the division [DEPARTMENT] under (d) of this section, a person may not sell, offer to sell, or otherwise transfer in the course of the person's business a consumer electrical product that is manufactured after August 14, 2 1990, unless the product is clearly marked as being listed by an approved third-party certification program. Sec. 73. AS 45.45.910(d) is amended to read: (d) If a consumer electrical product is a work of art or an item that has an unusual application that makes approval by a third-party certification program not reasonably available, the division [DEPARTMENT] shall upon request exempt the item from (a) of this section. The division [DEPARTMENT] shall establish by regulation guidelines to identify consumer electrical products that qualify for an exemption under this section. Sec. 74. AS 45.45.910(e) is amended to read: (e) The warning label required by this section must be a brightly colored label that contains in simple, direct language a warning that the electrical product is not listed by an approved third-party certification program. The division [DEPARTMENT] shall adopt regulations establishing the exact content, color, design, and use of the warning label. Sec. 75. AS 45.45.910(f) is amended to read: (f) Unless a later version has been adopted by the division [DEPARTMENT] by regulation, a certification program must meet the requirements of ANSI Z-34.1 - 1987, American National Standards for Certification - Third-Party Certification Program, published by the American National Standards Institute, in order to qualify as an approved third-party certification program under this section. The division [DEPARTMENT] may adopt by regulation later versions of the American National Standards for Certification - Third-Party Certification Program, as the standard for third-party certification programs under this section. If the division [DEPARTMENT] has adopted a later version, a certification program must meet the requirements of the most recent version adopted by the division [DEPARTMENT] in order to qualify as an approved third-party certification program under this section. Sec. 76. AS 45.45.910(g) is amended by adding a new paragraph to read: (4) "division" means the division of safety inspections, Department of Public Safety." Page 83, line 2, following "REPEALER.": Insert "AS 18.60.660(1), 18.60.660(2), 18.60.740(2), 18.60.740(3);" Page 83, line 11, following "44.47.998;": Insert "AS 45.45.910(g)(3);" Page 84, following line 25: Insert a new bill section to read: Sec. 99. TRANSFERS FROM DEPARTMENT OF LABOR TO DIVISION OF SAFETY INSPECTIONS, DEPARTMENT OF PUBLIC SAFETY. The revisor of statutes shall change references to the "Department of Labor" and "commissioner of labor" to read "division" in the following statutes: AS 18.60. 190(a), 18.60.200, 18.60.210(a)(9)(A), 18.60.210(c), 18.60.220, 18.60.230, 18.60.240, 18.60.270(a), 18.60.280, 18.60.290, 18.60.300(a), 18.60.310, 18.60.315, 18.60.320(a)(4), 18.60.340, 18.60.350, 18.60.360(a), 18.60.360(c), 18.60.370, 18.60.395(a), 18.60.420, 18.60.440, 18.60.800(a), 18.60.800(b), and 18.60.820." Senator Lyda Green moved for adoption. Senator Al Adams objected. Senator Lyda Green told the Committee about a letter given to her, unsolicited, from a former inspector and current International Brotherhood of Electrical Workers (IBEW) member, Gerald Newton. (Copy of letter on file.) Senator Lyda Green explained that the amendment involves the consolidation of public safety issues under the Department of Public Safety into a newly created Division of Safety Inspections. Gerald Newton's letter explains that the Department of Public Safety, through its Fire Marshall's Office, is responsible for enforcing compliance to the National Electrical Code (NEC), which has the purpose of "protecting persons and property from the hazards arising from the use of electricity." The State Fire Marshall is also responsible for enforcement of NICET certification of personnel performing fire alarm system installations, according to Gerald Newton. In addition, the letter claims the Department of Labor employs electrical inspectors to perform inspections on new commercial installations. Gerald Newton concluded that two departments performing these parallel functions is redundant. Senator Lyda Green therefore suggested maintaining the Occupational Health and Safety Act (OSHA) within the Department of Labor and moving the other inspection functions into the Department of Public Safety. She explained that this would keep the inspections that involve the specific safety of workers in the Department of Labor and place the inspections affecting all those who would use facilities into the Department of Public Safety. ANNALEE MCCONNELL stated that the Administration had scrutinized the amendment and found more reason to keep the inspections with the other functions performed by the Department of Labor. She noted the status quo prevents unnecessary duplication in the same facilities, which the separation would require. She stated that the alignment of functions currently proposed in the bill is the most streamlined. Representative Vic Kohring stated he could not support this amendment either. The amendment FAILED to be adopted by a vote of 3-5-1. Senator Loren Leman, Senator Lyda Green and Senator Randy Phillips cast yea votes. Senator Dave Donley was absent. Amendment #6: This amendment inserts a new bill section on page 26 following line 3 to read as follows. Sec. 16. AS 23.05.360(a) is amended to read: (a) There is established within the Department of Law [LABOR] the Alaska labor relations agency. The agency is comprised of six members appointed by the governor and confirmed by the legislature. The term of office of a member is three years. Members serve staggered terms in accordance with AS 39.05.055. A vacancy in an unexpired term shall be filled by appointment by the governor for the remainder of the term. The agency must include two members with a background in management, two members with a background in labor, and two members from the general public. All members must have relevant experience in labor relations matters." Senator Lyda Green moved for adoption. Senator Al Adams objected. Senator Lyda Green spoke of the Alaska Labor Relations Agency, located within the Department of Labor, that deals with grievances filed under union contracts. She stated that there could be a conflict of interest in the current system that allows an employee who files a grievance to possibly impact existing contracts. She thought there should be "an arm's length" between the grievance process and the implementation of contracts and therefore suggested moving the agency into the Department of Law. While she noted that the Department of Law had expressed there could be a conflict of interest in performing these functions, she disagreed and noted that the Department of Law has argued many issues in which it has been on opposing sides. Ms. MCCONNELL indicated her office had contacted the Department of Law regarding this matter. She clarified that the Department of Law very rarely handles cases which they represent both sides of an argument. She noted that the Department of Law already advises agencies on cases pending and therefore, she did not recommend having the same department perform the functions of the Alaska Labor Relations Agency. She noted that the agency's board does not report to the commissioner and that the department only handles the administrative functions of the agency. She added that there had been no complaints registered against the current location of the agency and she felt the Department of Labor is the most logical location for the agency. Representative Vic Kohring said he is not looking for conflict with the amendment's sponsor but could only recommend a "no" vote. By a vote of 2-6-1, the amendment FAILED to be adopted. Senator Lyda Green and Senator Randy Phillips voted in favor of the motion. Senator Dave Donley was absent. Amendment #7: Page 52, lines 18- 23: Delete: "(a) A loan committee consisting of five [SEVEN] members is established. The committee is composed of [THE COMMISSIONER OF COMMUNITY AND REGIONAL AFFAIRS,] the commissioner of community [COMMERCE} and economic development, the director of management and budget, or the designees of the commissioner [COMMISSIONERS] or the director, and three [FOUR} public members." Insert: "(a) A loan committee consisting of five [SEVEN] members is established. The committee is composed of the executive director of the Alaska Energy Authority [COMMISSIONER OF COMMUNITY AND REGIONAL AFFAIRS, THE 13 COMMISSIONER OF COMMERCE AND ECONOMIC DEVELOPMENT], the director of management and budget, or the designees of the executive director [COMMISSIONERS] or the director, and three [FOUR] public members. Sec. 48. AS 42.45.06Q(c) is amended to read: (c) The executive director of the Alaska Energy Authority [COMMISSIONER OF COMMUNITY AND REGIONAL AFFAIRS] serves as c1air of the committee. The committee may elect other officers as necessary. A majority of the members of the committee constitute a quorum and may exercise the powers of the committee. Sec. 49. AS 42.45.990 is amended by adding a new paragraph to read: (6) "authority means the Alaska Energy Authority." Page 77. following line 22: Insert two new bill sections to read: Sec. 66. AS 44.83.070 is amended to read: Sec. 44.83.070. Purpose of the authority. The purpose of the authority is to promote, develop, and advance the general prosperity and economic welfare of the people of the state by providing a means of financing and operating power projects and facilities that recover and use waste energy and by carrying out the powers and duties assigned to it under AS 42.45. Sec. 67. AS 44.83.080 is amended to read: Sec. 44.83.080. Powers of the authority. In furtherance of its corporate purposes, the authority has the following powers in addition to its other powers: (1) to sue and be sued; (2) to have a seal and alter it at pleasure; {3) to make and alter bylaws for its organization and internal management; {4) to adopt regulations governing the exercise of its Corporate powers; {5) to improve, equip, operate, and maintain power projects; (6) to issue bonds to carry out any of its corporate purposes and powers, including the establishment or increase of reserves to Secure or to pay the bonds or interest on them, and the payment of all other costs or expenses of the authority incident to and necessary or convenient to carry out its corporate purposes and powers; (7) to sell, lease as lessor or lessee, exchange, donate, convey, or encumber in any manner by mortgage or by creation of any other security interest, real or personal property owned by it, or in which it has an interest, when, in the judgment of the authority, the action is in furtherance of its corporate purposes; (8) to accept gifts, grants, or loans from, and enter into contracts or other transactions regarding them, with any person; (9) to deposit or invest its funds, subject to agreements with bondholders; (10) to enter into contracts with the United States or any person and, subject to the laws of the United States and subject to concurrence of the legislature, with a foreign country or its agencies, for the financing, operation, and maintenance of all or any part of a power project, either inside or outside the state, and for the sale or transmission of power from a project or any right to the capacity of it or for the security of any bonds of the authority issued or to be issued for the project; (11) To enter into contracts with any person and with the United States, and, 34 subject to the laws of the United States and subject to the concurrence of the legislature, with a foreign country or its agencies for the purchase, sale, exchange, transmission, or use of power from a project, or any right to the capacity of it; (12) to apply to the appropriate agencies of the state, the United States, and to a foreign country and any other proper agency for the permits, licenses, or approvals as may be necessary, and to maintain and operate power projects in accordance with the licenses or permits, and to obtain, hold, and use the licenses and permits in the same manner as any other person or operating unit; (13) to enter into contracts or agreements with respect to the exercise of any of its powers, and do all things necessary or convenient to carry out its corporate purposes and exercise the powers granted in this chapter; (14) to recommend to the legislature (A) the pledge of the credit of the state to guarantee repayment of all or any portion of revenue bonds issued to assist in construction of power projects; (B) an appropriation from the general fund (i) for debt service on bonds or other project purposes; or (ii) to reduce the amount of debt financing for the project. (15) to carry out the powers and duties assigned to it under AS 42.45. Page 83, line 3, following "42.45.030": Insert ", 42.45.990(1)" Page 84, line 27, following "REFERENCES.": Insert "(a)" Page 85, line 10: Delete all material. Page 85, following line 15: Insert a new subsection to read: "(b) The revisor of statutes shall change references to "department" to read "authority" in the following statutes: AS 42.45.010, 42.45.020, 42.45.040, 42.45.050, 42.45.060, 42.45.100, 42.45.110, 42.45.120, 42.45.140, 42.45.160, 42.45.170, 42.45.180, 42.45.200, 42.45.250, 42.45.400, and 42.45.410." Senator Sean Parnell moved for adoption. Co-Chair John Torgerson noted that the amendment was submitted at the request of Senator Jerry Mackie. Senator JERRY MACKIE stated that this amendment replaces Amendment #2 that was not offered. He referenced a packet of information before Committee members. The first page is titled, "Division of Energy (DOE) Program Description" and the packet also includes a photocopy of the relevant state statutes. (Copy on file.) Tape: SFC - 99 #139, Side B Senator Jerry Mackie explained that this amendment moves the functions of the Division of Energy from the Department of Community and Regional Affairs to the Alaska Industrial Development and Export Authority (AIDEA). He noted that the amendment was drafted with the input of the Administration because of the Administration's concerns that the transfer could have a negative affect on the authority's bond rating. Senator Jerry Mackie emphasized that he had no intention of influencing the bond rating and therefore decided to make the transfer to the Alaska Energy Authority (AEA), which is a "shell" corporation that resides within AIDEA. He stated that the protection of the AEA would shield the Division of Energy Program from any effect on the bond rating. Annalee McConnell qualified that while this amendment was submitted late in the legislation's process, the transfer is actually a concept the Administration has been considering and supports. She said the reason the amendment was not made to the bill earlier was due to concerns from rural legislators, which have since been alleviated. She stated that the Administration thinks this is a positive alignment of services. Senator Pete Kelly requested further elaboration on the benefits of the transfer. Knowing what he does about the Division of Energy and how it relates to AIDEA, which functions more as a corporation than a government service agency, he did not see how the two could be successfully combined. Ms. McConnell clarified that the Division of Energy would actually transfer to the AEA, which is a subsidiary of AIDEA. She stated that the AEA already has certain responsibilities for providing government services and this amendment specifies the responsibilities even further. LAMAR COTTEN, Deputy Commissioner, Department of Community and Regional Affairs testified that the Rural Utility Business Assistance (RUBA) program currently in the Division of Energy would remain in the Department of Community and Regional Affairs under the Division of Municipal and Regional Assistance. In addition, he noted that the Power Project Loan Program would be better suited if included in AIDEA because AIDEA oversees other loan programs. He stated that it would be important in the next fiscal year to review the transfers to determine which are successful and if other changes are necessary. Representative Vic Kohring advised that he supported the amendment. The amendment was ADOPTED without objection. Amendment #8: This amendment exempts the Alaska Railroad Corporation from AS 44.33.010. Senator Gary Wilken moved for adoption. Co-Chair John Torgerson objected for explanation. Senator Gary Wilken explained that the bill specifically allows that when a statute appoints a commissioner as a member of a board or council the commissioner may designate an employee of the department to act in his or her place. He shared that the Alaska Railroad Corporation contacted him with concerns about this provision. He said that in 1992 the railroad was set up with an "arms-length relationship between the state and the corporation" and was restricted by statute from allowing voting by proxy. Therefore, this legislation creates a conflict, he noted. He elaborated saying the commissioner of the Department of Community and Economic Development sits as one of the seven board members of the Alaska Railroad Corporation and deals with expensive, weighty and important issues on a regular basis. The corporation expressed concerns that by allowing a representative of the commissioner partake in the board proceedings there would be a lack of consistency. Co-Chair John Torgerson said he could see the potential for problems with allowing a designee to sit on the board rather than the commissioner. Annalee McConnell supported the amendment. She said the Administration felt it is appropriate to have the Commissioner sit on the board. Co-Chair John Torgerson asked if there were any other boards or commissions that should also be exempted from the provision to allow the commissioner to appoint a representative to serve in his or her place. He wondered if the entire section should be eliminated from the bill. Senator Loren Leman suggested inserting the language, "unless otherwise provided for by law" wherever this matter arose. This would prevent other conflicts like the one with the Alaska Railroad Corporation, he surmised. Co-Chair John Torgerson thought similar language was already present elsewhere in statute that allows a representative of the commissioner may participate in boards or commissions unless otherwise prohibited. Therefore, he did not believe AS 44.33.010, as proposed in the bill, is necessary. Annalee McConnell suggested clarifying the other relevant statute to say that if a designee is appropriate, that person may serve in place of the commissioner. She noted that because the departments are changing, it is necessary to specify which commissioner is appointed to which boards. There will no longer be a commissioner of the Department of Community and Economic Development, she stated and therefore, the language needs to provide a replacement commissioner. Co-Chair John Torgerson withdrew his objection to the amendment. JEFF BUSH, Deputy Commissioner, Department of Commerce and Economic Development felt this amendment would make the statute consistent with the ongoing practice. He pointed out that the only board or commission with a statutory requirement that the commissioner him or herself must sit on, is the Railroad. Without objection Amendment #8 was ADOPTED. Amendment #9: This amendment makes the following changes to the bill. Page 83, line 4: Delete "AS 44.29.020(a)(14);" Page 83, line 13, following "44.19.627;": Insert "AS 44.29.020(a)(14);" Page 86, line 1, following "Act,": Insert "the amendment made to AS 44.27.020(3) and (4) by sec. 51 of this Act," Page 86, line 2, following "63,": Insert "73 -76," Senator Sean Parnell moved for adoption. Annalee McConnell stated that this is a technical amendment that the Administration recommends. JACK KREINHEDER, Senior Policy Analyst, Office of Management and Budget, Office of the Governor testified that this is to fix a drafting oversight made in the House Finance Committee. He explained that the effective dates of the transfer of childcare licensing to the Department of Education from the Department of Health and Social Services did not coincide. This amendment expands the effective date for the Department of Health and Social Services to prevent a one-year lapse in service. Representative Vic Kohring stated he had no objection. There was no objection and the amendment was ADOPTED. Amendment #10: This amendment deletes "Department of Education and Child Development" everywhere it appears in the bill and replaces it with "Department of Education". Senator Loren Leman moved for adoption. Senator Al Adams and Senator Gary Wilken objected. Representative Vic Kohring deferred to the Administration saying he did not have a strong opinion on the amendment. Annalee McConnell testified that the commissioner of the Department of Education felt it is important to clarify that the department's responsibilities will broaden beyond the traditional K-12 services. Senator Gary Wilken spoke against the amendment saying he felt the expansion of the responsibilities of the Department of Education to include aspects of child care is one of the best features of the bill. He thought the title of the department should reflect the added responsibilities. While, he remained concerned with the multiple acronyms that this bill would create and hoped they could be reduced, he believed this particular one should remain. Senator Loren Leman stressed that the functions of the departments remained the same and he felt the department titles should be as simple as possible. He recommended keeping the title of Department of Education. The amendment FAILED to be adopted by a vote of 3-4-1. Co- Chair Sean Parnell, Senator Loren Leman and Senator Randy Phillips voted in favor. Senator Dave Donley was absent. ADJOURNMENT Co-Chair John Torgerson recessed the Committee until after the floor session at approximately 4:20 PM. SFC-99 (27) 5/14/99
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