Legislature(1999 - 2000)

04/03/2000 09:05 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
MINUTES                                                                                                                         
SENATE FINANCE COMMITTEE                                                                                                        
April 3, 2000                                                                                                                   
9:05 AM                                                                                                                         
                                                                                                                                
TAPES                                                                                                                           
                                                                                                                                
SFC-00 # 74, Side A and Side B                                                                                                  
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair John Torgerson convened the meeting at                                                                                 
approximately 9:05 AM.                                                                                                          
                                                                                                                                
PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell,                                                                         
Senator Al Adams, Senator Loren Leman, Senator Randy                                                                            
Phillips, Senator Gary Wilken                                                                                                   
                                                                                                                                
Also Attending: SENATOR RICK HALFORD; SENATOR ROBIN TAYLOR;                                                                     
JEFF JESSE, Executive Director, Alaska Mental Health Trust                                                                      
Authority, Department of Revenue; RONALD HULL, Deputy                                                                           
Director, Division of Employment Security, Department of                                                                        
Labor and Workforce Development; TOM WYLIE, Unemployment                                                                        
Insurance Actuary, Research and Analysis, Division of                                                                           
Employment Security, Department of Labor and Workforce                                                                          
Development; RICHARD CROSS, Commissioner, Department of                                                                         
Education and Early Development; GARY BATER, Superintendent                                                                     
of Schools, Juneau School District; CARL ROSE, Executive                                                                        
Director, Association of Alaska School Boards; KATHLEEN                                                                         
STRASBAUGH, Assistant Attorney General, Governmental                                                                            
Affairs Section, Civil Division, Department of Law                                                                              
                                                                                                                                
Attending via Teleconference: From Delta Junction: DAN                                                                          
BECK, Superintendent of Schools, Delta Junction; From                                                                           
Fairbanks: MIKE FISHER, Assistant Superintendent, Business                                                                      
Finance, Fairbanks School District                                                                                              
                                                                                                                                
SUMMARY INFORMATION                                                                                                             
                                                                                                                                
HB 313-APPROPRIATIONS: MENTAL HEALTH                                                                                            
                                                                                                                                
The Committee heard an overview on projects from the Alaska                                                                     
Housing Finance Corporation. The bill was HELD in                                                                               
Committee.                                                                                                                      
                                                                                                                                
SB 289-TECH & VOC EDUC/ EMPLOYMENT ASSISTANCE                                                                                   
                                                                                                                                
The Committee heard from the Department of Labor and                                                                            
Workforce Development. The bill was held in Committee.                                                                          
                                                                                                                                
SB 290-PUBLIC SCHOOL FUNDING & EXPENDITURES                                                                                     
                                                                                                                                
The Committee heard from the Department of Education and                                                                        
Early Development and representatives from various school                                                                       
boards in the state. The bill was held in Committee.                                                                            
                                                                                                                                
SJR 34-CONST AM: PERM FUND CORP BD/ PUB CORP BD.                                                                                
                                                                                                                                
The Committee heard from the sponsor, adopted a technical                                                                       
amendment and reported the bill from Committee.                                                                                 
                                                                                                                                
SJR 40-CONST AM: ELECTION & TERMS OF GOV & LT GOV                                                                               
                                                                                                                                
The Committee heard from the sponsor and the Department of                                                                      
Law. The bill was held in Committee.                                                                                            
                                                                                                                                
CS FOR HOUSE BILL NO. 313(FIN) am                                                                                               
"An Act making appropriations for the operating and                                                                             
capital expenses of the state's integrated                                                                                      
comprehensive mental health program; and providing for                                                                          
an effective date."                                                                                                             
                                                                                                                                
                                                                                                                                
Co-Chair Torgerson noted that during consideration of the                                                                       
FY 01 operating budget, SB 312, the Committee had                                                                               
previously adopted a committee substitute 1-LS1305\G to SB
313 as a workdraft. He explained the committee substitute                                                                       
had removed all reference to capital projects from the                                                                          
legislation. He said the intent of this meeting was to                                                                          
consider the capital projects receiving funding from the                                                                        
Mental Health Trust Authority (MHTA).                                                                                           
                                                                                                                                
JEFF JESSE, Executive Director, Alaska Mental Health Trust                                                                      
Authority, Department of Revenue, gave detail on the items                                                                      
listed on the Mental Health Capital Projects, HB 313                                                                            
spreadsheet. [Copy on file.]                                                                                                    
                                                                                                                                
Senior Services Data Integration Project - Department of                                                                        
Administration                                                                                                                  
                                                                                                                                
Mr. Jesse stated that MHTA funds would be used to help fund                                                                     
this new project. He explained the project was to assist                                                                        
the Division of Senior Services to increase efficiency of                                                                       
the division's operations.                                                                                                      
                                                                                                                                
Telepsychiatry Video Communication System Equipment -                                                                           
Department of Corrections                                                                                                       
                                                                                                                                
Mr. Jesse told the Committee this project was a                                                                                 
continuation of a $75,000 FY 00 project that the trustees                                                                       
are involved in. He said the requested funds would assist                                                                       
the department in upgrading their system. He remarked that                                                                      
the Department of Corrections was a leader in utilizing                                                                         
video conferencing technology to increase their ability to                                                                      
provide psychiatry counseling and supervision to inmates in                                                                     
all the correctional facilities from the central mental                                                                         
health office in Anchorage. He spoke about how this project                                                                     
has been showcased at national conferences as a model                                                                           
program. He added that the program reduces professional and                                                                     
travel costs for the state. He congratulated the department                                                                     
for instituting this program using equipment that has a low                                                                     
"band width" and noted this upgrade would increase the band                                                                     
width to further increase the program's effectiveness.                                                                          
                                                                                                                                
Alaska Psychiatric Institute 2000: Replacement of Existing                                                                      
Facility - Department of Health and Social Services                                                                             
                                                                                                                                
Mr. Jesse stated this was a continuation of the Trustees'                                                                       
process of setting aside MHTA funds to further assist the                                                                       
state in making the transition from the current Alaska                                                                          
Psychiatric Institute (API) into the new facility, which he                                                                     
hoped the negotiations with the charter would be concluded                                                                      
shortly. He stated that the MHTA was working in tandem with                                                                     
the federal funds secured through the assistance of US                                                                          
Senator Ted Stevens.                                                                                                            
                                                                                                                                
Alaska Psychiatric Institute Stop-Gap Repairs - Department                                                                      
of Health and Social Services                                                                                                   
                                                                                                                                
Mr. Jesse bemoaned, "unfortunately this is not a new                                                                            
project at all." He continued that the stopgap repairs have                                                                     
been an on-going concern although the MHTA has been able to                                                                     
secure a matching program to utilize Alaska Housing Finance                                                                     
Corporation (AHFC) receipts. He explained the intent of                                                                         
this project is to keep the facilities operating as long as                                                                     
possible or until the new facility was available for                                                                            
occupancy.                                                                                                                      
                                                                                                                                
Coordination and Resource Sharing Among Mental Health                                                                           
Services Providers - Department of Health and Social                                                                            
Services                                                                                                                        
                                                                                                                                
Mr. Jesse shared that this was an exciting new project for                                                                      
the MHTA. He explained that through the auspices of the                                                                         
Governor's Council on Disabilities and Special Education                                                                        
the proposal was to review how the state operates with all                                                                      
the beneficiary nonprofit groups and providers. He said the                                                                     
project hopes to identify whether efficiencies could be                                                                         
gained and how the programs could become more results                                                                           
based. Another intent, he added was to identify whether any                                                                     
services can be integrated and the savings of which could                                                                       
be reinvested into further services for the beneficiaries.                                                                      
He summarized that this project was to improve the                                                                              
infrastructure of the mental health grant system.                                                                               
                                                                                                                                
Senator Leman thought this item seemed more like an                                                                             
operating item than a capital project and asked what                                                                            
specifically would be provided with the $100,000.                                                                               
                                                                                                                                
Mr. Jesse replied that the governor's council proposed                                                                          
convening a "think tank" of representatives of the four                                                                         
boards involved with the MHTA to develop a list of areas                                                                        
within the grant structure and the service provision system                                                                     
to submit to an independent contractor. This contractor, he                                                                     
continued would evaluate and make a series of                                                                                   
recommendations as to how the MHTA could improve the                                                                            
efficiency and effectiveness of that system.                                                                                    
                                                                                                                                
Mr. Jesse suggested the reason this project was classified                                                                      
as a capital project was because it was unclear whether the                                                                     
work could be completed in one fiscal year. He said the                                                                         
MHTA thought that listing this as a capital project would                                                                       
give the greatest flexibility.                                                                                                  
                                                                                                                                
Senator Green asked if it would be possible under the                                                                           
governing federal mandate to streamline and merge some of                                                                       
these services into one group rather than break them down                                                                       
by the four distinct constituency groups.                                                                                       
                                                                                                                                
Mr. Jesse said that was one of the goals of the project, to                                                                     
identify what areas have such flexibility. He cautioned                                                                         
that some programs have strict specific membership                                                                              
requirements and missions from the federal government.                                                                          
                                                                                                                                
Fairbanks - Reopen Fahrenkamp Residential Facility -                                                                            
Department of Health and Social Services                                                                                        
                                                                                                                                
Mr. Jesse explained the goal of this project was to use the                                                                     
center for its original purpose, as a residential                                                                               
diagnostic treatment center for adolescents. He relayed                                                                         
that for many years, the facility has been used as office                                                                       
space and adolescent outpatient care by the Fairbanks                                                                           
Mental Health Center. However, he stressed there is a                                                                           
desperate need for residential services for this                                                                                
population. He noted this is a matching funds program                                                                           
between the trust and the state using AHFC receipts in                                                                          
order to make the physical modifications to the portion of                                                                      
the center that will house the adolescents and to but                                                                           
necessary equipment.                                                                                                            
                                                                                                                                
Fairbanks Community Mental Health Center Relocation -                                                                           
Department of Health and Social Services                                                                                        
                                                                                                                                
Mr. Jesse pointed out that this project exclusively                                                                             
utilizes MHTA funds to assist the center, which is                                                                              
currently located in the Fahrenkamp facility and has been                                                                       
paying only one dollar per year as rent. Because of the                                                                         
plan to reconvert the Fahrenkamp to a residential facility,                                                                     
he explained that these funds are to relocate the mental                                                                        
health center and to pay additional rental costs for the                                                                        
first year. He stated that the hope in the next year was to                                                                     
include the increased operating costs due to space rental                                                                       
into their operating budget. Otherwise, he added the center                                                                     
would need to reduce its service capacity.                                                                                      
                                                                                                                                
Housing Modifications for Mental Health Trust Beneficiaries                                                                     
- Department of Health and Social Services                                                                                      
                                                                                                                                
Mr. Jesse talked about how this continuing project                                                                              
continues the relationship that the trust has developed                                                                         
with the AHFC to identify ways to deliver housing                                                                               
modifications for beneficiaries. He described some of the                                                                       
people served, such as Alzheimer patients needing their                                                                         
house modified so they could remain in their home. He                                                                           
stressed that this has been a successful project in handing                                                                     
out relatively small grants.                                                                                                    
                                                                                                                                
Mental Health Grants - Essential Program Equipment -                                                                            
Department of Health and Social Services                                                                                        
                                                                                                                                
Mr. Jesse told the Committee that the trust had originally                                                                      
proposed this on-going project as a 50-50 matching program                                                                      
with the state. However, he said that the Governor's Office                                                                     
was only able to identify $50,000 of general funds to make                                                                      
available. He stressed that the trust deemed these grants                                                                       
particularly to smaller mental health centers, are                                                                              
essential to maintaining their capacity to operate. He                                                                          
listed computers and software as some of the items                                                                              
purchased using these grant funds.                                                                                              
                                                                                                                                
Mental Health Grants - Facilities Renovation and Deferred                                                                       
Maintenance - Department of Health and Social Services                                                                          
                                                                                                                                
Mr. Jesse continued that this project is similar to the                                                                         
previous in that it is an on-going program also proposed to                                                                     
have a 50-50 general fund match, but that this does not                                                                         
have the adequate general fund money to meet the match. He                                                                      
explained the grants are used by non-profit organizations                                                                       
for facility renovation and deferred maintenance. He                                                                            
asserted these projects are a good investment in                                                                                
maintaining the infrastructure of the mental health                                                                             
program.                                                                                                                        
                                                                                                                                
Spirit Camp Facility Development - Department of Health and                                                                     
Social Services                                                                                                                 
                                                                                                                                
Mr. Jesse explained this new project to assist what has                                                                         
already been proven to be an effective culturally                                                                               
appropriate way to allow local Native communities to take                                                                       
responsibility for their own programs. He stated this                                                                           
project helps communities develop programs that build upon                                                                      
the cultural values and strengths of those communities                                                                          
rather than simply imposing a more Anglo approach. He told                                                                      
of efforts made on a smaller scale, saying that this is the                                                                     
largest culturally relevant treatment project undertaken by                                                                     
the trust.                                                                                                                      
                                                                                                                                
Transitional Housing for Recovering Substance Abusers -                                                                         
Department of Health and Social Services                                                                                        
                                                                                                                                
Mr. Jesse stated that the purpose of this project is to                                                                         
assist substance abusers who have completed treatment but                                                                       
still need some supervision during a transition period into                                                                     
their independent living situations.                                                                                            
                                                                                                                                
Mental Health Trust Land Development and Value Enhancement                                                                      
- Department of Natural Resources                                                                                               
                                                                                                                                
Mr. Jesse stated that this is a continuing project and a                                                                        
permanent part of the MHTA land office, to hire contractors                                                                     
for subdivision sales, timber sales. He said the                                                                                
contracting-out of these services is done in lieu of hiring                                                                     
additional staff.                                                                                                               
                                                                                                                                
AHFC Beneficiary and Special Needs Housing - Department of                                                                      
Revenue                                                                                                                         
                                                                                                                                
Mr. Jesse explained this is also a continuing project, but                                                                      
at a smaller amount this year. He stressed that this is a                                                                       
critical part of the mental health program. He spoke of                                                                         
"tremendous strides" the trust has made in the ability to                                                                       
deliver treatment. However, he qualified the treatment                                                                          
system often does not give full consideration to all the                                                                        
facets of a person's life that are necessary to be                                                                              
independent and become productive members of society. He                                                                        
identified the need for developing safe, affordable housing                                                                     
as one of the most critical items for successful recovery.                                                                      
                                                                                                                                
Senator Green asked if this was temporary housing.                                                                              
                                                                                                                                
Mr. Jesse replied that a variety of mechanisms have been                                                                        
used to provide housing. He referred to a "Structured                                                                           
Production Model" of developing supported housing. He                                                                           
explained that in the past, the operational side of the                                                                         
mental health program had operational money but didn't know                                                                     
how to develop a housing project. On the other hand, he                                                                         
pointed out, AHFC knew about housing but not how to deliver                                                                     
necessary support. This project is to blend the two groups                                                                      
together to supply adequate housing facilities and also                                                                         
deliver services, according to Mr. Jesse. He added that                                                                         
this project includes a plan to assist beneficiaries into a                                                                     
home ownership situation. He stated that research shows                                                                         
that an investment in home ownership is a powerful mental                                                                       
health tool.                                                                                                                    
                                                                                                                                
Senator Green suggested attaining additional support from                                                                       
the residents. She asked if the housing provided included                                                                       
monitoring to ensure the participants were safe and getting                                                                     
necessary treatment.                                                                                                            
                                                                                                                                
Mr. Jesse affirmed.                                                                                                             
                                                                                                                                
AHFC Homeless Assistance Program                                                                                                
                                                                                                                                
Mr. Jesse stated this is also a continuing project and is                                                                       
instrumental in getting services to the most difficult to                                                                       
serve populations in the state. He told of how many of                                                                          
these people are not only unconnected with the normal                                                                           
mental health services systems, but that they "often don't                                                                      
want to be a member of the club." He detailed the                                                                               
difficulties this segment of the population has in getting                                                                      
employment and meeting other aspects of self-sufficiency.                                                                       
                                                                                                                                
Senator Phillips asked how many people are served in this                                                                       
program.                                                                                                                        
                                                                                                                                
Mr. Jesse began his response.                                                                                                   
                                                                                                                                
AT EASE 9:26 AM / 9:28 AM                                                                                                       
                                                                                                                                
Mr. Jesse did not have the exact data with him but noted                                                                        
the performance measures for this project rely heavily on                                                                       
how many people are served by the program. He said he would                                                                     
supply the data to the Committee.                                                                                               
                                                                                                                                
Senator Phillips asked for a breakdown showing the                                                                              
different regions of the state.                                                                                                 
                                                                                                                                
Co-Chair Torgerson asked if this funding request would                                                                          
supply the same level of support as the previous year.                                                                          
                                                                                                                                
Mr. Jesse replied that the $250,000 AHFC funding amount was                                                                     
the same as the previous year and that the $200,000 of                                                                          
MHTAAR receipts is new.                                                                                                         
                                                                                                                                
Coordinated Transportation and Vehicles - Department of                                                                         
Transportation and Public Facilities                                                                                            
                                                                                                                                
Mr. Jesse then told of this successful partnership project                                                                      
that also utilizes federal transportation funds. He                                                                             
described different non-profit groups each having a van to                                                                      
serve only those in their mental health program. He said                                                                        
this was because of the difficulties involved in                                                                                
determining who would own, maintain and operate these                                                                           
vehicles. The intent of this program, he explained, was to                                                                      
combine the use of these vehicles to serve more than one                                                                        
non-profit entity. He said that this project provides up-                                                                       
front money to allow communities to establish a local                                                                           
coordinated transportation system. He added that the                                                                            
funding would also be used to purchase new vehicles where                                                                       
necessary.                                                                                                                      
                                                                                                                                
Planning for Juneau Senior Daycare Center $100,000                                                                              
                                                                                                                                
Mr. Jesse explained this item does not appear on the                                                                            
spreadsheet because the governor had determined there was                                                                       
not an adequate general fund match for the construction                                                                         
costs. Mr. Jesse stated that the trustees want to utilize                                                                       
MHTAAR funds for the planning process in anticipation that                                                                      
once the community is able to develop a plan and identify                                                                       
more accurate costs, there may be a variety of fund                                                                             
mechanisms available to build the facility.                                                                                     
                                                                                                                                
Co-Chair Torgerson asked if the witness was working with a                                                                      
Committee member to propose such an amendment to the                                                                            
budget.                                                                                                                         
                                                                                                                                
Mr. Jesse believed so.                                                                                                          
                                                                                                                                
Co-Chair Torgerson announced a committee substitute would                                                                       
be prepared to reflect the items on the spreadsheet and he                                                                      
explained the amendment procedure.                                                                                              
                                                                                                                                
Co-Chair Torgerson ordered the bill HELD in Committee.                                                                          
                                                                                                                                
CS FOR SENATE BILL NO. 289(L&C)                                                                                                 
"An Act establishing and relating to the Alaska Board                                                                           
of Technical and Vocational Education; and providing                                                                            
for an effective date."                                                                                                         
                                                                                                                                
                                                                                                                                
This was the second hearing for this bill in the Senate                                                                         
Finance Committee. At the previous hearing, the Committee                                                                       
adopted a committee substitute, 1-LS1525\M and Co-Chair                                                                         
Torgerson asked the Department of Labor and Workforce                                                                           
Development to detail how the program works and its                                                                             
relation to language of the committee substitute.                                                                               
                                                                                                                                
AT EASE 9:33 AM / 9:35 AM                                                                                                       
                                                                                                                                
TOM WYLIE, Unemployment Insurance Actuary, Research and                                                                         
Analysis, Division of Employment Security, Department of                                                                        
Labor and Workforce Development, gave a presentation using                                                                      
a handout. [Copy on file.] He addressed the "Basic Parts of                                                                     
Unemployment Insurance (UI) Tax Rate Calculation"                                                                               
flowchart. He detailed the "First Stage: Affects Employers                                                                      
and Employees" shows the relationship of unemployment                                                                           
benefit costs to total wages and taxable wages, and the                                                                         
"Second Stage: Affects Employer Only" details the solvency                                                                      
of the trust fund and if necessary either adds to or                                                                            
subtracts from the UI tax rate.                                                                                                 
                                                                                                                                
Mr. Wylie explained that the calculations takes total                                                                           
benefit cost over a three year period and defines them by                                                                       
payroll tax cost, which then provides a ratio. He continued                                                                     
that the ratio is then multiplied by the relationship                                                                           
between taxable wages and the wage of pay by employers. He                                                                      
noted that only certain portion of wages is taxable. He                                                                         
established that the portion is $24,800 per year as set in                                                                      
state statute. Once that average is produced, he said the                                                                       
amount is divided into an employer tax and an employee tax                                                                      
with the employer paying 80 percent and the employee paying                                                                     
20 percent of that tax.                                                                                                         
                                                                                                                                
Mr. Wylie then detailed the second stage saying the trust                                                                       
fund is examined to determine its solvency in relationship                                                                      
to total payroll in the state. He told of a state UI                                                                            
statute that sets out a process of dividing the trust fund                                                                      
by total payroll and comparing it to a schedule. If the                                                                         
trust fund has fallen below 3.3 percent of total payroll,                                                                       
Mr. Wylie said an add-on tax is placed on top of the                                                                            
employer's tax, but if the fund is above 3.3 percent, the                                                                       
employer's tax is reduced. He noted that the employee tax                                                                       
is not affected by the trust fund solvency.                                                                                     
                                                                                                                                
Co-Chair Parnell asked when the last adjustment was made to                                                                     
the employer's tax rate.                                                                                                        
                                                                                                                                
Mr. Wylie replied that the rate was adjusted downward in                                                                        
the previous year and that there was no need for an                                                                             
adjustment in the current year.                                                                                                 
                                                                                                                                
Co-Chair Torgerson asked the reason anyone would receive a                                                                      
higher rate and whether experience was a factor.                                                                                
                                                                                                                                
Mr. Wylie explained how employers were placed into one of                                                                       
21 rate classes depending on their experience with                                                                              
unemployment, half of which were above the actual tax rate                                                                      
and half were below.                                                                                                            
                                                                                                                                
Mr. Wylie then stated that the committee substitute does                                                                        
not interface with the UI tax rate. Instead, he explained                                                                       
it proposes a new tax of .15 percent on both the employer                                                                       
and the employee using the UI mechanism to set the taxable                                                                      
income amount and also using the UI office to collect the                                                                       
taxes.                                                                                                                          
                                                                                                                                
At the request of Co-Chair Torgerson, Mr. Wylie then                                                                            
explained the STEP program. He told how current statute                                                                         
requires diverting 0.1 percent of the employee's taxable                                                                        
wages from the trust fund into the STEP program. The                                                                            
employee's UI tax rate is then credited and the employee                                                                        
has met the UI contribution requirement. This information                                                                       
was detailed on the second page of the handout.                                                                                 
                                                                                                                                
Co-Chair Torgerson asked if an amount would be collected                                                                        
for vocational training assessment separately from the                                                                          
usual UI mechanism.                                                                                                             
                                                                                                                                
Mr. Wylie affirmed and stated that the UI tax office would                                                                      
collect this tax because it is the most convenient method,                                                                      
but that the funds would not be deposited into a separate                                                                       
account than the UI trust fund. He described how the money                                                                      
would be diverted into this account.                                                                                            
                                                                                                                                
Co-Chair Torgerson asked for verification that the                                                                              
employee's deduction would not be affected.                                                                                     
                                                                                                                                
Mr. Wylie assured him that was correct.                                                                                         
                                                                                                                                
Co-Chair Torgerson began to address where the adjustment                                                                        
would be made to allow for the vocation training assessment                                                                     
fund.                                                                                                                           
                                                                                                                                
Mr. Wylie stated that further implications of this                                                                              
additional fund would be the resulting diversion away from                                                                      
the UI trust fund and the lower collection into the trust                                                                       
fund. He noted the impact would not be seen during the                                                                          
first stage of the tax collection, but would be seen in the                                                                     
second because the calculations would show a need to                                                                            
increase the employer's tax rate to build up the balance of                                                                     
the trust.                                                                                                                      
                                                                                                                                
RONALD HULL, Deputy Director, Division of Employment                                                                            
Security, Department of Labor and Workforce Development,                                                                        
noted the committee substitute is not like the STEP program                                                                     
because there is no credit and requires an additional add-                                                                      
on tax. He stated there are two different options to fund                                                                       
the vocational training assessment program, one that does                                                                       
not affect the UI tax rates and the other that does.                                                                            
                                                                                                                                
Co-Chair Torgerson said that the UI tax rate would not                                                                          
necessarily be affected by the add-on tax if 0.2 percent of                                                                     
the employee's tax was used and depending on the strength                                                                       
and solvency of the fund.                                                                                                       
                                                                                                                                
Mr. Wylie agreed and explained the likelihood that once the                                                                     
program was established the tax for the vocational fund                                                                         
would be indiscernible from the many other factors                                                                              
influencing the amount of the total UI tax.                                                                                     
                                                                                                                                
Senator P. Kelly asked how the credit was calculated for                                                                        
the employee portion of the tax.                                                                                                
                                                                                                                                
Mr. Wylie clarified this bill has no credit and he                                                                              
explained the current STEP process. He said that Co-Chair                                                                       
Torgerson approach, as proposed in the committee                                                                                
substitute, was to fund the vocational training component                                                                       
differently.                                                                                                                    
                                                                                                                                
There was further discussion between Senator P. Kelly and                                                                       
the witness regarding the current calculation of the UI                                                                         
taxes.                                                                                                                          
                                                                                                                                
Senator Phillips referred to page 6 of bill and asked if                                                                        
state or federal law prohibited private schools from                                                                            
receiving funds generated from this source.                                                                                     
                                                                                                                                
Co-Chair Torgerson stated that the money collected this                                                                         
year would be disbursed under the current method and the                                                                        
money collected the next year would go to accredited                                                                            
institutions. He stressed that there were no limitations on                                                                     
private schools receiving the funds other than that they                                                                        
must be accredited.                                                                                                             
                                                                                                                                
Senator Phillips then asked why there was a special                                                                             
provision for a transitional period.                                                                                            
                                                                                                                                
Co-Chair Torgerson responded that he used his discretion as                                                                     
chair in making that decision.                                                                                                  
                                                                                                                                
Senator Phillips asked the witness to look into whether                                                                         
there were any state or federal laws restricting which                                                                          
schools received these funds.                                                                                                   
                                                                                                                                
Senator Wilken referred to the flowchart and asked that                                                                         
even with the decrease of 0.2 percent funding the trust                                                                         
fund, if the balance went down and total wages increased,                                                                       
there would be no difference to the amount taxed.                                                                               
                                                                                                                                
Mr. Hull replied that because the Alaskan economy varies                                                                        
greatly over time, many of the changes to the tax amount                                                                        
could be "overwhelmed by economic forces within the state."                                                                     
Therefore, he said Senator Wilken's question couldn't be                                                                        
answered unless all other factors were equal. He used the                                                                       
current year as an example of how the proposed provisions                                                                       
would affect the tax amount. He stated that if employment                                                                       
greatly increased and unemployment was reduced, the trust                                                                       
fund might then increase on its own and there would be no                                                                       
need to increase the tax.                                                                                                       
                                                                                                                                
                                                                                                                                
Tape: SFC - 00 #74, Side B    9:55 AM                                                                                           
                                                                                                                                
                                                                                                                                
Mr. Hull continued explaining how different factor affect                                                                       
the trust fund.                                                                                                                 
                                                                                                                                
Senator Wilken commented that as a small business employer                                                                      
he was not interested in imposing a higher tax rate, but at                                                                     
the same time, wanted a fully trained workforce. He noted                                                                       
that this legislation does not necessarily increase the tax                                                                     
rates automatically and that they could actually decrease.                                                                      
                                                                                                                                
Mr. Wylie agreed.                                                                                                               
                                                                                                                                
Co-Chair Torgerson ordered the bill HELD in Committee and                                                                       
announced his intention to amend the bill to mirror the                                                                         
STEP program. He stated it was not his intent to jeopardize                                                                     
the trust fund.                                                                                                                 
                                                                                                                                
SENATE BILL NO. 290                                                                                                             
"An Act relating to state funding for transportation                                                                            
of public school students; and providing for an                                                                                 
effective date."                                                                                                                
                                                                                                                                
                                                                                                                                
This was the second hearing for this bill in the Senate                                                                         
Finance Committee. The original version of the bill, 1-                                                                         
LS1555\A, was unchanged.                                                                                                        
                                                                                                                                
DAN BECK, Superintendent of Schools, Delta Junction,                                                                            
testified via teleconference from Delta Junction to ask                                                                         
what would happen if a new route were established and if                                                                        
the district would have to pay 50 percent of that cost.                                                                         
                                                                                                                                
Co-Chair Torgerson answered that according to the                                                                               
legislation, the district would pay 50-percent of all new                                                                       
costs incurred after the FY 01 base was established.                                                                            
                                                                                                                                
Mr. Beck stated that he therefore did not support the bill.                                                                     
He said that during this time when the state is trying to                                                                       
put more money directly into instruction, this bill would                                                                       
hamper that effort.                                                                                                             
                                                                                                                                
Co-Chair Torgerson commented that recent Alaska Board of                                                                        
Education action gave districts more flexibility in                                                                             
classifying administrative costs as instructional. The                                                                          
board adopted regulations allowing the entire                                                                                   
administrative expenditure category of the uniform                                                                              
accounting system to be considered as instructional rather                                                                      
than administrative.                                                                                                            
                                                                                                                                
Amendment #1: This amendment inserts new language into the                                                                      
title of the bill and adds a new section as follows:                                                                            
                                                                                                                                
Page 1, line 1, following "students;":                                                                                          
Insert "and to minimum expenditure for                                                                                          
instruction;"                                                                                                                   
                                                                                                                                
Page 1, following line 13:                                                                                                      
 Insert a new bill section to read:                                                                                             
  "Section 2. AS 14.17.520 is amended to read:                                                                                  
  (a) A district shall budget for and spend a                                                                                   
minimum of 80 [70] percent of its school operating                                                                              
expenditures in each fiscal year on the instructional                                                                           
component of the district budget."                                                                                              
                                                                                                                                
New text underlined [DELETED TEXT BRACKETED]                                                                                    
                                                                                                                                
[Note: This amendment was never offered but was discussed.]                                                                     
                                                                                                                                
MIKE FISHER, Assistant Superintendent, Business Finance,                                                                        
Fairbanks School District, testified via teleconference                                                                         
from Fairbanks talked about the district's pride in the low                                                                     
percentage spent on administrative costs and how this bill                                                                      
would adversely affect their efforts. He spoke of the                                                                           
district's efforts to meet an 80-percent for instruction                                                                        
goal, saying that for some districts this figure could be                                                                       
unrealistic.                                                                                                                    
                                                                                                                                
Co-Chair Torgerson agreed that 80 percent of funds as a                                                                         
minimum allowed for instructional costs was "a shot in the                                                                      
dark." He again referred to the Board of Education's                                                                            
actions, which essentially lowered the percentage to 75.5.                                                                      
                                                                                                                                
Senator Wilken asked the witness if there was a principal                                                                       
for every school.                                                                                                               
                                                                                                                                
Mr. Fisher responded there is.                                                                                                  
                                                                                                                                
Senator Wilken wanted to know who decides on the number of                                                                      
assistant principals and support staff for the assistant                                                                        
principals.                                                                                                                     
                                                                                                                                
Mr. Fisher answered the number of assistant principal                                                                           
positions was a school board decision and that the                                                                              
principal of each school has discretion as to how many                                                                          
support staff positions are incurred. He noted these                                                                            
positions along with the principal are a strong component                                                                       
of the school level administration.                                                                                             
                                                                                                                                
Senator Wilken spoke of the accounting methods for showing                                                                      
these administrative costs. He asked if a new category                                                                          
"405" could be added to list assistant principals and their                                                                     
support staff separately.                                                                                                       
                                                                                                                                
Mr. Fisher assured that the district would have no problem                                                                      
accounting for those positions separately. He said that it                                                                      
could affect the instructional percentage by 2.5 to three                                                                       
percent.                                                                                                                        
                                                                                                                                
Senator Wilken asked if the witness thought that most other                                                                     
school districts in the state could also follow this                                                                            
method.                                                                                                                         
                                                                                                                                
Mr. Fisher replied that most districts could adjust their                                                                       
system to separately account for their assistant principals                                                                     
and support staff.                                                                                                              
                                                                                                                                
Senator Wilken commented that was the same issue he and Co-                                                                     
Chair Torgerson talked about when testifying before the                                                                         
Board of Education. Senator Wilken stressed this was simply                                                                     
a function of cost accounting to isolate the cost of                                                                            
administration. He warned that if the legislature allows                                                                        
school districts, school boards and principals to determine                                                                     
what qualifies as an instructional component, the system is                                                                     
opened up to creative accounting. That was the reason he                                                                        
was in support of a sub-account to account for principals                                                                       
and assistant principals.                                                                                                       
                                                                                                                                
Senator Green asked if this matter was before the                                                                               
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Torgerson replied that a proposed amendment was                                                                        
distributed but that a motion was not on the table.                                                                             
                                                                                                                                
RICHARD CROSS, Commissioner, Department of Education and                                                                        
Early Development, spoke to the proposed amendment to                                                                           
increase the percentage of expenditures for instructional                                                                       
purposed from 70 percent to 80 percent. He urged the                                                                            
Committee not adopt the amendment, in part because the                                                                          
department has supported the legislature's efforts to                                                                           
reduce administrative costs. He stressed that school                                                                            
districts did not support this provision in SB 36 from the                                                                      
20th legislative session, saying it was an oversimplified                                                                       
answer to a complex problem. He said the department could                                                                       
not oppose the concept of moving administrative                                                                                 
expenditures to instructional areas.                                                                                            
                                                                                                                                
Mr. Cross disagreed with Senator Wilken's statement that a                                                                      
sub-account for assistant principals and support staff is a                                                                     
matter of cost accounting, saying it is instead a matter of                                                                     
how schools work. He stressed that the principals directly                                                                      
supervise the teachers, which improves the quality of                                                                           
instruction. He stated that creative accounting is already                                                                      
occurring with some districts that list their assistant                                                                         
principals as head teachers. He said that head teachers are                                                                     
not required to hold an Alaska Type B certificate but that                                                                      
without this certificate, the teacher cannot evaluate other                                                                     
teachers. As a result, he lamented, teachers are being                                                                          
evaluated by people who do not work in the same school                                                                          
building but rather central office administrators, thus                                                                         
there is no direct supervision. He cautioned that this is                                                                       
not effective supervision of instruction. He said that the                                                                      
department is attempting to remedy this by including those                                                                      
positions that are directly involved in the supervision of                                                                      
instruction as a part of the instruction component. The                                                                         
current categories are too broad in his opinion. He                                                                             
suggested further delineation, as proposed by Senator                                                                           
Wilken to separate those administrators that directly                                                                           
supervise instruction. Other costs that are not directly                                                                        
related to instruction, he felt should not be classified as                                                                     
instructional.                                                                                                                  
                                                                                                                                
Mr. Cross spoke of the progress made with the school                                                                            
districts in their willingness to strive toward the 70                                                                          
percent for instruction provision. He urged that this sub-                                                                      
account be created and that those costs be considered                                                                           
instructional to allow the districts to meet the 70 percent                                                                     
goal. He warned that by simply raising the percentage, most                                                                     
districts would be unable to meet that goal and that so                                                                         
many would require waivers, the test would not be taken                                                                         
seriously.                                                                                                                      
                                                                                                                                
Co-Chair Torgerson interjected saying that the witness's                                                                        
proposed sub-account method was not what the Board of                                                                           
Education implemented. Instead, he admonished, the board                                                                        
allowed the entire "400" component, to be considered                                                                            
instructional, which includes supplies, travel expenses and                                                                     
all support staff working in a central administrative                                                                           
facility. He stated that if the board had made allowances                                                                       
only for principals and assistant principals, the proposed                                                                      
amendment would not have been drafted.                                                                                          
                                                                                                                                
Mr. Cross defended the board's action saying the "400"                                                                          
component was not delineated at this time to allow for                                                                          
specific instructional expenditures. He said the board gave                                                                     
specific direction to the department to break down the                                                                          
expenditures afterwards to ensure that those administrators                                                                     
directly involved with instruction were classified                                                                              
separately.                                                                                                                     
                                                                                                                                
Co-Chair Torgerson accused the department of counting the                                                                       
administrative costs twice, once as instructional and again                                                                     
as administrative.                                                                                                              
                                                                                                                                
Mr. Cross disagreed with the assessment.                                                                                        
                                                                                                                                
Co-Chair Torgerson asked what deductions are being made to                                                                      
teachers and instruction costs versus administrators and                                                                        
administrative costs under the current school budget                                                                            
deliberations.                                                                                                                  
                                                                                                                                
Mr. Cross responded that school districts were making                                                                           
decisions to reclassify personnel in include them in                                                                            
instruction costs.  He thought those decisions were not in                                                                      
the best interest of improving the quality of teacher                                                                           
performance. He gave the replacement of assistant                                                                               
principals with head teachers as an example. He stressed                                                                        
that the department's interest was not cost accounting but                                                                      
placing those administrators who make decisions regarding                                                                       
improving teachers' performance in the school rather than                                                                       
at a central office.                                                                                                            
                                                                                                                                
Senator Wilken gave a scenario of a district currently at                                                                       
68 percent for instruction and its attempt at reaching 70                                                                       
percent the next year by simply hiring an assistant                                                                             
principal and support staff and classifying them as                                                                             
instructional expenditures.                                                                                                     
                                                                                                                                
Mr. Cross replied that would be a decision that could work                                                                      
under the Board of Education's recent action to allow                                                                           
principals to be classified as instructional expenditures.                                                                      
                                                                                                                                
Senator Wilken asked if the department was working to                                                                           
develop sub-accounts for principals and support staff                                                                           
within the "400" category.                                                                                                      
                                                                                                                                
Mr. Cross responded that the Board of Education when                                                                            
adopting the aforementioned regulations, gave the                                                                               
department specific instructions to separate the costs of                                                                       
those personnel directly related to instruction. He said                                                                        
the board does not agree that the other costs should be                                                                         
considered instructional and directed the department to                                                                         
report back with the specific figures.                                                                                          
                                                                                                                                
Co-Chair Torgerson remarked that the board adopted                                                                              
regulations to allow the entire "400" category anyway.                                                                          
                                                                                                                                
Mr. Cross agreed the board did allow the entire category,                                                                       
but that it was the only option available to them.                                                                              
                                                                                                                                
Senator Leman asked if the Board of Education's                                                                                 
deliberations suggested that a principal could be both                                                                          
supervising instruction and also performing other non-                                                                          
instruction related administrative duties.  He wanted to                                                                        
know if accounting of the position could be broken down to                                                                      
reflect the amount of time spend on each area.                                                                                  
                                                                                                                                
Mr. Cross answered that the breakdown can be done and that                                                                      
principals in many small schools supervise instruction and                                                                      
also directly provide instruction. In larger schools, he                                                                        
said, it was unreasonable to expect one principal to                                                                            
provide supervision to all the teachers and that a vice-                                                                        
principal is also necessary to assist with supervision. He                                                                      
continued that an additional vice-principal might be                                                                            
necessary to provide discipline or over see other                                                                               
activities. He stressed that school leaders' efforts to                                                                         
improve the quality of teaching are an important part of                                                                        
instruction.                                                                                                                    
                                                                                                                                
Senator Leman asked if those personnel who perform duel                                                                         
roles could break down the time spent on each function.                                                                         
                                                                                                                                
Mr. Cross responded that kind of cost accounting can be                                                                         
done, but should be avoided. He talked about federal                                                                            
requirements for timesheets and the need to account                                                                             
incremental minutes for each federal program. He cautioned                                                                      
that too much time spent on cost accounting wastes money                                                                        
and negates any efficiency gained.                                                                                              
                                                                                                                                
Senator Adams commented that while we all want the most                                                                         
money spent in classroom as possible, there were problems                                                                       
getting funding for students in rural Alaska. He asked how                                                                      
many waivers were granted in the previous year for those                                                                        
districts meeting 65 percent of expenditures to                                                                                 
instruction. He then asked if this amendment were adopted                                                                       
how many waivers would be necessary.                                                                                            
                                                                                                                                
Mr. Cross believed that 13 waivers were considered in the                                                                       
current year to schools meeting 65 percent of expenditures                                                                      
for instruction.                                                                                                                
                                                                                                                                
Senator Adams wanted to know how many school districts met                                                                      
the 80 percent to instruction criteria.                                                                                         
                                                                                                                                
Mr. Cross answered that almost all of districts met this                                                                        
goal.                                                                                                                           
                                                                                                                                
Senator Green commented that all staff is included in the                                                                       
formula when miscellaneous school expenditures are                                                                              
calculated using the Pupil Teacher Ratio (PTR)                                                                                  
calculations, a process she has questioned. She suggested                                                                       
that if the PTR calculation process was used in preparing                                                                       
SB 36 it may have been a mistake.                                                                                               
                                                                                                                                
Co-Chair Torgerson replied that the calculations used were                                                                      
recommended in the McDowell study on school funding and                                                                         
that he did not think PTR was considered.                                                                                       
                                                                                                                                
Senator Wilken noted that the Committee had found in its                                                                        
consideration of SB 36, that four school districts had more                                                                     
money going to administration than to the classroom.                                                                            
                                                                                                                                
Senator Wilken next relayed the two important elements of                                                                       
cost accounting. First, he said is the need for clear                                                                           
definitions of the uniform chart of accounts and the second                                                                     
element is to analyze as a function of time and track                                                                           
changes. Therefore, he stated that if the legislature                                                                           
allows school districts, school boards or individual                                                                            
schools to vary the definitions, the changes over time are                                                                      
meaningless. He understood the importance of assistant                                                                          
principals, but thought those positions need to be in a                                                                         
sub-account category that could be observed and compared                                                                        
against other districts.                                                                                                        
                                                                                                                                
For Senator Green's benefit, Mr. Cross repeated the earlier                                                                     
conversation regarding the B certificates required by                                                                           
evaluating teachers but not by head teachers. He again                                                                          
stressed the department's belief that teachers need to be                                                                       
supervised on a daily basis by someone working in the same                                                                      
school rather than a removed central administration                                                                             
facility.                                                                                                                       
                                                                                                                                
Co-Chair Torgerson noted that some rural schools were                                                                           
showing zero percentage of expenditures spent on                                                                                
administrative costs because they were already shifting                                                                         
their accounts.                                                                                                                 
                                                                                                                                
Senator Green wondered if the administrative percent                                                                            
includes superintendents hired under contract.                                                                                  
                                                                                                                                
GARY BATER, Superintendent of Schools, Juneau School                                                                            
District, spoke in opposition to the bill. He stressed that                                                                     
the hardest addition to a school district's budget is an                                                                        
administrative position. He stated that whenever cuts are                                                                       
proposed, the public clamors to eliminate administrators.                                                                       
He thought school districts were under constraint with or                                                                       
without the 70 percent for instruction restrictions.                                                                            
                                                                                                                                
He stated that SB 290 is about shifting future increases of                                                                     
pupil transportation to local school districts and away                                                                         
from the state. He said pupil transportation was an                                                                             
essential component of education. He thought the current                                                                        
law has worked well. He believed the Juneau School                                                                              
District's rate of growth and pupil transportation costs                                                                        
have been below the rate of inflation once adjusted for                                                                         
increased enrollment.                                                                                                           
                                                                                                                                
Senator Wilken asked how the school district views its                                                                          
participation with pupil transportation.                                                                                        
                                                                                                                                
Mr. Bater responded that the district does not make any                                                                         
changes without approval from the Department of Education                                                                       
and Early Development. Rather, he said the district                                                                             
proposes to the department for approval of a new route when                                                                     
enrollment increases and busses become overcrowded. He                                                                          
asserted the department asks tough questions and is                                                                             
thorough in its review. He detailed the process to obtain a                                                                     
new bus route. He stated that the district views itself as                                                                      
an agent of the department.                                                                                                     
                                                                                                                                
Senator Wilken and the witness discussed the levels of bus                                                                      
routes and the ability to change from a three-tier system                                                                       
to a two-tier system and the expense involved.                                                                                  
                                                                                                                                
Senator Green pointed out that the state is not required to                                                                     
cover the pupil transportation costs, noting the word,                                                                          
"may" rather than "shall" in statute.                                                                                           
                                                                                                                                
CARL ROSE, Executive Director, Association of Alaska School                                                                     
Boards spoke specifically to the issue of requiring the                                                                         
districts to co-pay any increased costs, saying it was                                                                          
inappropriate at this time. He spoke of aligned contracts,                                                                      
which were too recent to see any realized savings. He also                                                                      
stressed how funds allocated to classroom instruction would                                                                     
be further stretched to cover pupil transportation costs.                                                                       
He called the bill an unfunded mandate.                                                                                         
                                                                                                                                
Mr. Rose continued that when the co-pay issue is raised in                                                                      
the future, the foundation formula should be adjusted to                                                                        
increase revenue to cover the district's costs of pupil                                                                         
transportation. He suggested that an incentive should be                                                                        
created to allow any realized pupil transportation savings                                                                      
to be retained by the district.                                                                                                 
                                                                                                                                
Co-Chair Torgerson interrupted to ask if the witness                                                                            
believed that a 48 percent increase to the cost of pupil                                                                        
transportation was entirely attributable to an adjustment                                                                       
to the contracts.                                                                                                               
                                                                                                                                
Mr. Rose responded that he thought there were a number of                                                                       
reasons the costs increased. He pointed out that other                                                                          
costs incurred in the previous contracts were omitted from                                                                      
the new contracts.                                                                                                              
                                                                                                                                
Co-Chair Torgerson said he has offered to all parties the                                                                       
opportunity to present a better system. However, he said                                                                        
there has been no suggestions other than having the state                                                                       
pay the entire cost and if savings can be identified with                                                                       
the contracts, having the state pay to the district the                                                                         
difference.                                                                                                                     
                                                                                                                                
Mr. Rose appreciated the co-chair's concerns but warned                                                                         
about later costs and an unfunded mandate.                                                                                      
                                                                                                                                
Mr. Rose commented on the accounting of assistant principal                                                                     
positions separately saying he agreed with this suggestion,                                                                     
but that he did not see any advantage to a breakdown                                                                            
between assistant principal and principal positions. He                                                                         
also opposed changing the total instructional percentage to                                                                     
80 percent of expenditures. He asked the Committee to have                                                                      
patience in allowing the 70 percent goal to be reached.                                                                         
                                                                                                                                
Amendment #2: This amendment inserts language on page 1,                                                                        
line 13, following "district" as follows:                                                                                       
                                                                                                                                
"; the 50 percent limitation imposed under this                                                                                 
paragraph does not apply to student transportation                                                                              
system operating costs that are incurred as a result                                                                            
of an increase in student enrollment"                                                                                           
                                                                                                                                
[Note: This amendment was never offered but was discussed.]                                                                     
                                                                                                                                
Mr. Rose stated that he supported this amendment. He                                                                            
commented that the overall impact of the bill was yet to be                                                                     
seen and listed figures of recent student enrollment.                                                                           
                                                                                                                                
Co-Chair Torgerson asked for explanation of the witness's                                                                       
implication that costs have been passed along to local                                                                          
communities.                                                                                                                    
                                                                                                                                
Mr. Rose listed the reduction of state revenues provided to                                                                     
the school districts and the possible reduction in                                                                              
municipal assistance grants. He predicted that the local                                                                        
residents could be required to pay an additional $6                                                                             
million.                                                                                                                        
                                                                                                                                
Co-Chair Torgerson asked if the witness was suggesting                                                                          
throwing the entire foundation funding formula out.                                                                             
                                                                                                                                
Mr. Rose clarified that was not his suggestion but that the                                                                     
association wanted a certain percentage of funds spent on                                                                       
instruction. However, he stated that the state is                                                                               
allocating less money to districts by the state and that                                                                        
the percentage of local contributions is subsequently                                                                           
rising.                                                                                                                         
                                                                                                                                
Mr. Rose then asked the co-chair if SB 105, relating to                                                                         
public school buildings was being considered for inclusion                                                                      
in SB 290.                                                                                                                      
                                                                                                                                
Co-Chair Torgerson answered that it may be.                                                                                     
                                                                                                                                
Co-Chair Torgerson ordered the bill HELD in Committee.                                                                          
                                                                                                                                
                                                                                                                                
Tape: SFC - 00 #75, Side A    10:42 AM.                                                                                         
                                                                                                                                
CS FOR SENATE JOINT RESOLUTION NO. 34(L&C)                                                                                      
Proposing amendments to the Constitution of the State                                                                           
of Alaska relating to departments, agencies, and                                                                                
public corporations.                                                                                                            
                                                                                                                                
                                                                                                                                
This was the first hearing for this bill in the Senate                                                                          
Finance Committee.                                                                                                              
                                                                                                                                
SENATOR RICK HALFORD stated that this issue of appointing                                                                       
officers to state-owned corporations has been before the                                                                        
legislature many times since the creation of the permanent                                                                      
fund. He directed the members' attention to a list of all                                                                       
state-owned corporations. [Copy on file.]                                                                                       
                                                                                                                                
Senator Halford referred to an amendment considered by the                                                                      
Senate Labor and Commerce Committee sponsored by Senator                                                                        
Drue Pearce relating to "overhang commissioners." Although                                                                      
this amendment was not adopted, he stated a related title                                                                       
change was inadvertently made to the legislation.                                                                               
                                                                                                                                
Senator Halford then addressed the constitutional amendment                                                                     
itself explaining how the legislature confirms members to                                                                       
State Of Alaska boards and commissions. However, he                                                                             
stressed, the legislature has no control over the                                                                               
appointment of members to the boards of directors of the                                                                        
Permanent Fund Corporation, the Alaska Housing Finance                                                                          
Corporation (AHFC), the Alaska Industrial Export Authority                                                                      
and the other state-operated corporations.                                                                                      
                                                                                                                                
Senator Halford stated that of all the relating                                                                                 
constitutional amendments he has seen attempting to address                                                                     
this issue, this was the simplest, the most straightforward                                                                     
and the most justified.  He surmised that if corporations                                                                       
of the size and scope of the aforementioned existed at the                                                                      
time of statehood, the framers of the constitution would                                                                        
have included them with the board and commissions'                                                                              
requirements for legislative confirmation of membership                                                                         
appointments.                                                                                                                   
                                                                                                                                
Senator Halford assured that this legislation makes no                                                                          
major changes to the constitution other than to provide for                                                                     
the legislative confirmation of appointments to the boards                                                                      
of state-owned corporations.                                                                                                    
                                                                                                                                
Senator Halford detailed the previous proposals made in the                                                                     
Senate to require these legislative confirmations.                                                                              
                                                                                                                                
Senator Phillips referred to language on page one, line                                                                         
ten, stating that members "may be removed as provided by                                                                        
law" and asked if the standards are the same for the                                                                            
corporations as they are for the other boards and                                                                               
commissions already included in the legislative                                                                                 
confirmation process.                                                                                                           
                                                                                                                                
Senator Halford responded that the standards are not the                                                                        
same, and that they are the standards provided in the law                                                                       
that created the particular state-owned corporations. He                                                                        
said that some board member dismissals can be made only                                                                         
"for cause" and others can be made at the pleasure of the                                                                       
governor.                                                                                                                       
                                                                                                                                
Senator Leman supported the intent of the sponsor and                                                                           
agreed this legislation is simple and necessary but he                                                                          
argued that it was not the simplest and most necessary.                                                                         
                                                                                                                                
Senator Halford responded that he believed if the framers                                                                       
of the state constitution had an indication of the                                                                              
magnitude of these corporations, they would have written                                                                        
the legislative confirmation provision directly into the                                                                        
constitution. He stated that he had not heard opposition by                                                                     
those framers on this matter as had been heard on other                                                                         
matters.                                                                                                                        
                                                                                                                                
Co-Chair Parnell read language from the sponsor statement,                                                                      
"It would ensure that the people who control Alaska's                                                                           
largest assets are subject to a formal appointment,                                                                             
confirmation and removal process, not the whim of a newly                                                                       
elected governor." He asked if the sponsor was aware of any                                                                     
problems with these boards.                                                                                                     
                                                                                                                                
Senator Halford shared that the past two governors had                                                                          
entirely changed the board members of the permanent fund,                                                                       
while the previous governors did not make those drastic                                                                         
changes. While he did not disagree with any of the actual                                                                       
appointments, he did not believe the entire management team                                                                     
of a large corporation should be changed all at once. He                                                                        
pointed out that during a governor's administration,                                                                            
several board member terms would expire and therefore, the                                                                      
governor still has a great impact on the makeup of these                                                                        
boards.                                                                                                                         
                                                                                                                                
Co-Chair Torgerson asked about any necessary statutory                                                                          
changes to implement this constitutional amendment.                                                                             
                                                                                                                                
Senator Halford replied that the Department of Law had made                                                                     
recommendations and that there are certain political                                                                            
implications of this legislation. He stated that the larger                                                                     
corporations would be subject to legislative confirmation                                                                       
but that exemptions could be made for some of the smaller                                                                       
corporations.                                                                                                                   
                                                                                                                                
Senator Adams asked why the legislation includes the Alaska                                                                     
Railroad Corporation and the AHFC when the only board with                                                                      
a significant amount of money under its authority is the                                                                        
Permanent Fund Corporation.                                                                                                     
                                                                                                                                
Senator Halford responded that there was a strong belief                                                                        
that any entity that handles millions of dollars should                                                                         
have some oversight. He gave details on the large holdings                                                                      
of the railroad corporation.                                                                                                    
                                                                                                                                
Amendment #1: This technical, conceptual amendment deletes                                                                      
"department, agencies and" from the title on page 1, line 2                                                                     
of CS SJR 34 (RES).                                                                                                             
                                                                                                                                
Senator Phillips moved to adopt the amendment. There was no                                                                     
objection and it was ADOPTED.                                                                                                   
                                                                                                                                
Senator Phillips offered a motion to report from Committee,                                                                     
SJR 34, 1-LS1373\G, as amended. Without objection, the                                                                          
resolution MOVED FROM COMMITTEE.                                                                                                
                                                                                                                                
SENATE JOINT RESOLUTION NO. 40                                                                                                  
Proposing amendments to the Constitution of the State                                                                           
of Alaska providing that the governor, United States                                                                            
senators, United States representative, and electors                                                                            
of the President and Vice-President of the United                                                                               
States be elected by a majority vote.                                                                                           
                                                                                                                                
This was the first hearing for this bill in the Senate                                                                          
Finance Committee.                                                                                                              
                                                                                                                                
SENATOR ROBIN TAYLOR expressed that in light of elections                                                                       
won by candidates, who received less than a majority of the                                                                     
votes, he believed the constitution should be amended to                                                                        
require a winning candidate to secure more than 50 percent                                                                      
of the votes.                                                                                                                   
                                                                                                                                
Senator Taylor stipulated that this amendment would result                                                                      
in a runoff election should a candidate receive less than                                                                       
50 percent of the ballots cast.                                                                                                 
                                                                                                                                
Senator Taylor stated that he supported the resolution,                                                                         
which he said was sponsored by the Senate Judiciary                                                                             
Committee at the request of the Senate Majority.                                                                                
                                                                                                                                
Co-Chair Torgerson asked why the president and vice-                                                                            
president were included in this resolution.                                                                                     
                                                                                                                                
Senator Taylor replied that the president and vice-                                                                             
president are actually elected through the Electoral                                                                            
College and that the delegates themselves are elected. He                                                                       
asserted that the delegates should receive a majority of                                                                        
the votes as well rather than a plurality.                                                                                      
                                                                                                                                
Senator Phillips asked for clarification of the definition                                                                      
of "majority" in the resolution.                                                                                                
                                                                                                                                
Senator Taylor answered a majority is 50 percent plus one                                                                       
vote. He did not know if the definition was specifically                                                                        
described in state statute, but argued this is what                                                                             
majority means.                                                                                                                 
                                                                                                                                
Co-Chair Torgerson said he inquired on the definition of                                                                        
majority from Department of Law and was supplied with the                                                                       
same answer as listed in a Black's Law Dictionary and                                                                           
others.                                                                                                                         
                                                                                                                                
KATHLEEN STRASBAUGH, Assistant Attorney General,                                                                                
Governmental Affairs Section, Civil Division, Department of                                                                     
Law, brought three items to the Committee's attention.                                                                          
First, she stated was the definition of majority, which                                                                         
caused confusion among others besides members of the                                                                            
Committee. She suggested that the definition should be                                                                          
detailed in the constitution along with this amendment.                                                                         
                                                                                                                                
The second issue Ms. Strasbaugh brought up was the language                                                                     
on page 1 line 16, through page 2, line 1 of the resolution                                                                     
stipulating that the legislature determines the procedure                                                                       
for arriving at a majority vote. She cautioned that this                                                                        
language could give the legislature more latitude than the                                                                      
resolution drafters intended.                                                                                                   
                                                                                                                                
Ms. Strasbaugh continued with the third item concerning the                                                                     
delegates to the Electorate College. She referenced AS                                                                          
15.30 that stipulates "a vote for the president is a vote                                                                       
for the elector." Article 5 Section 1 of the Alaska                                                                             
Constitution relates to the election of the president and                                                                       
the vice-president. She warned against enshrining the                                                                           
electorate in the constitution and then have the Electorate                                                                     
College extinguished, which she stressed, is a threatened                                                                       
possibility. She suggested leaving the existing language                                                                        
regarding the election of the president and vice president                                                                      
unchanged in the constitution.                                                                                                  
                                                                                                                                
Senator Adams asked if this resolution is a constitutional                                                                      
amendment or a revision.                                                                                                        
                                                                                                                                
Ms. Strasbaugh replied that the full implications of the                                                                        
outcome of Bess vs. Ulmer were not yet known and that this                                                                      
constitutional amendment litigation could change the                                                                            
resolution from an amendment to a proposed revision. She                                                                        
commented that this legislation looked simple but that it                                                                       
does propose changes to the state's electoral process,                                                                          
which might have other affects.                                                                                                 
                                                                                                                                
Senator Adams wanted to get a legal opinion on whether this                                                                     
resolution is considered an amendment or a revision. He                                                                         
stressed that without an opinion, a "gray area" would exist                                                                     
regarding this issue.                                                                                                           
                                                                                                                                
Co-Chair Torgerson commented that until the Supreme Court                                                                       
has ruled on the case, he thought it would not be possible                                                                      
to get a legal opinion. However, he requested the                                                                               
department try to prepare an opinion.                                                                                           
                                                                                                                                
Co-Chair Torgerson requested that Senator Taylor prepare                                                                        
answers to the questions posed by the department and he                                                                         
ordered the bill HELD in Committee.                                                                                             
Co-Chair Torgerson recessed the meeting to the call of the                                                                      
chair at 11:00 AM.                                                                                                              
                                                                                                                                
ADJOURNED                                                                                                                       
                                                                                                                                
Senator Torgerson adjourned the meeting at 2:10 PM.                                                                             
SFC-00 (28) 04/03/00                                                                                                            

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