Legislature(2003 - 2004)

03/06/2003 09:04 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                          March 06, 2003                                                                                      
                              9:04 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-03 # 16, Side A                                                                                                             
SFC 03 # 16, Side B                                                                                                             
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Gary Wilken convened  the meeting at approximately 9:04 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice-Chair                                                                                                   
Senator Robin Taylor                                                                                                            
Senator Ben Stevens                                                                                                             
Senator Donny Olson                                                                                                             
                                                                                                                                
Also Attending:    SHEILA PETERSON,  Staff to  Co-Chair Wilken;  DAN                                                          
FAUSKE, Chief  Operating Officer/Executive Director,  Alaska Housing                                                            
Finance  Corporation;  LINDA  SYLVESTER,   Staff  to Representative                                                             
Weyhrauch;  KAYE KANNE, President,  Midwives Association  of Alaska;                                                            
PAT DAVIDSON,  Director, Division  of Legislative Budget  and Audit;                                                            
RICK   URION,  Director,   Division   of   Occupational   Licensing,                                                            
Department of Community and Economic Development;                                                                               
                                                                                                                                
Attending  via  Teleconference:     From  an  off-net   location  in                                                          
Anchorage: PAUL KAPANSKY, Mortgage Operations Director, AHFC                                                                    
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB  25-AHFC LOANS TO EDUCATORS                                                                                                  
                                                                                                                                
The Committee heard from  the sponsor and the Alaska Housing Finance                                                            
Corporation. A  committee substitute was considered,  two amendments                                                            
were  considered: one  was amended  and  adopted and  the other  was                                                            
withdrawn.                                                                                                                      
                                                                                                                                
HB  71-EXTEND BOARD OF MIDWIVES                                                                                                 
                                                                                                                                
The Committee  heard from the sponsor and an industry  organization.                                                            
The bill was held in Committee.                                                                                                 
                                                                                                                                
SB  43-EXTEND STATE MEDICAL BOARD                                                                                               
                                                                                                                                
The Committee  heard from the sponsor,  the Division of Legislative                                                             
Budget  and Audit,  and the  Department  of Community  and  Economic                                                            
Development.  An amendment  was adopted  and the  bill was  reported                                                            
from Committee.                                                                                                                 
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 25(HES)                                                                                             
     "An Act relating  to the teachers' housing loan  program in the                                                            
     Alaska  Housing  Finance  Corporation;  and  providing  for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken informed  he has prepared a committee substitute for                                                            
consideration.                                                                                                                  
                                                                                                                                
SHEILA   PETERSON,  Staff   to   Co-Chair  Wilken,   asserted   this                                                            
legislation  "is about recruiting  and retaining  the best  teachers                                                            
possible for our students."  She read the sponsor statement into the                                                            
record as follows.                                                                                                              
                                                                                                                                
     Senate  Bill 25 establishes a  housing loan program  within the                                                            
     Alaska  Housing   Finance  Corporation  (AHFC)   for  teachers,                                                            
     counselors,   and  administrators   who  are  required   to  be                                                            
     certified.  The new teacher-housing  loan offered through  AHFC                                                            
     permits  a qualified  applicant to  purchase an owner-occupied                                                             
     home without paying a conventional down payment.                                                                           
                                                                                                                                
     This legislation  will provide  Alaska school districts  with a                                                            
     tool  to  help to  attract  and keep  qualified  public  school                                                            
     teachers.   The  recruitment  and  retention   of  a  qualified                                                            
     workforce  is paramount to the  operation of a successful  K-12                                                            
     educational  program. Unfortunately  many school districts  are                                                            
     experiencing  a shortage of experienced, talented  teachers and                                                            
     spend thousands of  dollars to recruit the necessary educators.                                                            
     The  proposed new housing  loan program  provides an  incentive                                                            
     for trained  teachers, counselors, and administrators  to enter                                                            
     into the profession and settle down in local communities.                                                                  
                                                                                                                                
     Senate  Bill 25 addresses  one of the  concerns highlighted  in                                                            
     the  October 2001 "Committee  Report  on the Statewide  Teacher                                                            
     Shortage"  by  the House  Special  Committee on  Education.  As                                                            
     indicated  in this report, the high cost of purchasing  a home,                                                            
     or, in some  areas of the state, the lack of  available teacher                                                            
     housing  is  a  frequent  reason  for  teachers  to  leave  the                                                            
     profession.  Senate Bill 25 recognizes  this concern  and helps                                                            
     facilitate  educators  to  obtain the  necessary  financing  to                                                            
     purchase  a  home by  eliminating  the  requirement  of a  down                                                            
     payment.  Senate  Bill 25  makes a  small, but  positive  step,                                                            
     towards  ensuring that Alaska  school districts have  the best,                                                            
     stable workforce possible.                                                                                                 
                                                                                                                                
Senator Taylor  moved to adopt CS SB 25, 23-LS0080\Q,  Cook, 3/3/03,                                                            
as a working draft.                                                                                                             
                                                                                                                                
Co-Chair  Wilken  detailed the  changes  proposed in  the  committee                                                            
substitute   resulting  from  discussions   of  the  Senate   Health                                                            
Education  and Social  Services Committee  on  this legislation.  He                                                            
stated  the committee  substitute  allows teachers,  counselors  and                                                            
administrators  to participate  in the  program only  once. He  also                                                            
noted the committee  substitute provides that this  legislation must                                                            
be reauthorized in five years to allow review of the program.                                                                   
                                                                                                                                
AT EASE 9:10 AM / 9:11 AM                                                                                                       
                                                                                                                                
Co-Chair  Wilken overviewed  the information  contained in  the bill                                                            
packet, including  a report by the  AHFC on the shortage  of teacher                                                            
housing, and statements  in support of this legislation.  [Copies on                                                            
file] He  gave examples of  efforts of other  states to attract  and                                                            
retain teachers.  He noted that not only is the "pool"  of qualified                                                            
teachers smaller,  competition from other states for  these teachers                                                            
is increasing.                                                                                                                  
                                                                                                                                
Senator Bunde commented  that signing bonuses have been unsuccessful                                                            
at  retaining  qualified  teachers.   He  explained  that  once  the                                                            
required  term of  employment  has  been served  as  a condition  of                                                            
receiving  the bonus,  teachers seek  employment  in another  school                                                            
district  to secure  yet another  signing  bonus. He  asked how  the                                                            
program  would ensure  that  teachers stay  in the  residences  that                                                            
these loans were used to purchase.                                                                                              
                                                                                                                                
Co-Chair  Wilken understood  that once the  mortgage is in  place it                                                            
would be difficult to track  whether the teacher maintains residency                                                            
or relocates and collects rental income on the property.                                                                        
                                                                                                                                
DAN  FAUSKE,  Chief  Operating  Officer/Executive   Director,  AHFC,                                                            
deferred to Mr. Kapansky.                                                                                                       
                                                                                                                                
PAUL KAPANSKY,  Mortgage  Operations Director,  AHFC, testified  via                                                            
teleconference  from an off net location  in Anchorage, that  once a                                                            
mortgage  is issued the  AHFC does  not track  the occupancy  of the                                                            
residence.  He stated that  the concern of  the Corporation  is that                                                            
the loan payments are made.                                                                                                     
                                                                                                                                
Senator  Bunde  voiced concerns  that  a  teacher could  secure  the                                                            
financing, move  from the community and become a landlord  utilizing                                                            
the benefit of the subsidized loan.                                                                                             
                                                                                                                                
Mr. Kapansky  clarified that  this is technically  not a  subsidized                                                            
loan but rather allows  qualified borrowers to secure a housing loan                                                            
with no down payment. However  he agreed that such a situation could                                                            
occur.                                                                                                                          
                                                                                                                                
Senator Bunde asked why  other financial institutions require a down                                                            
payment on the purchase of housing.                                                                                             
                                                                                                                                
Mr. Kapansky replied that  some loan programs exist that provide 100                                                            
percent financing,  but that state  statute currently requires  AHFC                                                            
to obtain at least five-percent  down payment. He informed that risk                                                            
of default  decreases  in instances  where borrowers  have a  vested                                                            
interest in the property.                                                                                                       
                                                                                                                                
Senator Bunde opined that  because no down payment is required, this                                                            
program  would  be  a subsidy.  He  explained  this  is due  to  the                                                            
increased potential that AHFC could sustain a loss.                                                                             
                                                                                                                                
Mr. Kapansky responded  that the risk is "covered to some extent" by                                                            
mortgage  insurance, which  reimburses a percentage  of the  loss in                                                            
the  event a  lender  forecloses on  a  property. He  explained  the                                                            
borrower is required to pay the premiums on this insurance.                                                                     
                                                                                                                                
Mr. Fauske  furthered that any loan  of 80 percent or greater  loan-                                                            
to-value ratio  requires mortgage insurance coverage.  He noted that                                                            
once the 80 percent  loan-to-value ratio is reached,  the borrower's                                                            
loan payments are reduced  because premiums are no longer collected.                                                            
                                                                                                                                
Senator Olson  asserted that rural residents do not  view housing as                                                            
investments  in the same manner as  many urban residents  because of                                                            
the lack of  appreciable interest  on rural properties. He  informed                                                            
that teachers moving into  villages are often faced with substandard                                                            
housing.  He opined that  teachers are  not normally businesspeople                                                             
"looking at something from  a for-profit perspective". He added that                                                            
often teachers  who have purchased  homes in rural communities  have                                                            
suffered a loss when reselling their property.                                                                                  
                                                                                                                                
Senator  Taylor  referenced  language  on  page  2,  line 4  of  the                                                            
committee substitute "  A teachers housing loan must be equal to 100                                                            
percent of  the value of the property  for which the loan  is made."                                                            
He asked if loans could  be issued only in the amount of 100 percent                                                            
of the property's market value.                                                                                                 
                                                                                                                                
Mr.  Fauske  understood  the  language  to reiterate  that  no  down                                                            
payment is required.                                                                                                            
                                                                                                                                
Senator Taylor predicted  that if an appraisal determined a property                                                            
to be of a  higher value than the  market value, the borrower  could                                                            
only secure a loan for  the higher value under this program. He also                                                            
ascertained  the language  to prohibit  the borrower  from making  a                                                            
down   payment.  He   suggested  "equity   to   value"  or   similar                                                            
terminology.                                                                                                                    
                                                                                                                                
Mr. Fauske  did not interpret  the language  to prohibit a  borrower                                                            
from making a down payment.                                                                                                     
                                                                                                                                
Mr. Kapansky explained  the advantage of this program to teachers is                                                            
the exemption  from  making a  down payment  and  that this  program                                                            
provides  no other  benefit  to  borrowers.  He explained  that  the                                                            
appraisal  or the sales  price, whichever  is lower, determines  the                                                            
loan-to-value.  He suggested  the  language could  be clarified  and                                                            
changed from "must" to "may".                                                                                                   
                                                                                                                                
Amendment  #2: This amendment  deletes "must"  and inserts  "may" on                                                            
page 2  line 4.  The amended  language reads,  "A teachers'  housing                                                            
loan may be  equal to 100 percent  of the value of the property  for                                                            
which the loan is made."                                                                                                        
                                                                                                                                
Senator Taylor moved for adoption.                                                                                              
                                                                                                                                
Co-Chair  Green objected  and pointed  out this  change would  imply                                                            
that the  loan could  be issued  for more  than 100  percent of  the                                                            
value of the property.                                                                                                          
                                                                                                                                
Mr. Fauske  assured  that this  would not  be practiced  due to  the                                                            
Corporation's  underwriting  criteria.  He informed  that  borrowers                                                            
could  obtain  loans in  amounts  greater  than  the value  for  the                                                            
purpose  of make  improvements to  the property;  however  borrowers                                                            
could not receive cash in excess of the value.                                                                                  
                                                                                                                                
Co-Chair Green asked the  incentive for a borrower willing to make a                                                            
down payment.                                                                                                                   
                                                                                                                                
Mr. Fauske  stressed that  a borrower could  make a down payment  if                                                            
they chose under this program.  He reiterated that this would lessen                                                            
the risk  of default  as well as  shorten the term  of the loan.  He                                                            
surmised that if a borrower  had a down payment, they might choose a                                                            
different AHFC loan.                                                                                                            
                                                                                                                                
Co-Chair  Green  wanted  to  ensure that  this  amendment  does  not                                                            
provide something that is unintended.                                                                                           
                                                                                                                                
Mr. Kapansky recommended  alternate language, "may be made up to 100                                                            
percent of the value of  the property", which is similar to statutes                                                            
governing other AHFC loans.                                                                                                     
                                                                                                                                
Senator Taylor  offered an amendment to the amendment  to delete "be                                                            
equal to"  and insert  "be no  greater than".  The amended  language                                                            
reads, "A teachers'  housing may be  no greater than 100  percent of                                                            
the value of the property for which the loan is made.                                                                           
                                                                                                                                
Co-Chair  Wilken clarified  "value of  property"  is defined as  the                                                            
sales price or appraisal, whichever is less.                                                                                    
                                                                                                                                
Mr. Fauske  deemed this language compatible  with the Corporation's                                                             
underwriting criteria.                                                                                                          
                                                                                                                                
Senator Bunde  asked for a comparison  of interest rates  offered by                                                            
AHFC to that of other lenders.                                                                                                  
                                                                                                                                
Mr. Fauske  responded that  currently, the  interest rates  for AHFC                                                            
loans  for rural  properties are  approximately  five percent;  tax-                                                            
exempt  first-time  homebuyers  and veterans  is 5.38;  taxable  and                                                            
taxable  first-time  homebuyers   is  5.5.  He  commented  that  the                                                            
Corporation  is "generally  competitive" in  the lending market  for                                                            
conventional taxable and taxable first-time homebuyers loans.                                                                   
                                                                                                                                
Senator Bunde  commented that the  proposed AHFC loans for  teachers                                                            
would  have  no advantage  to  qualified  borrowers  making  a  down                                                            
payment.                                                                                                                        
                                                                                                                                
Senator Bunde asserted  that he supports efforts to provide adequate                                                            
teacher housing in rural Alaska.                                                                                                
                                                                                                                                
There was no  objection and the amendment  was AMENDED and  ADOPTED.                                                            
                                                                                                                                
Senator  Bunde  continued  speaking   to  the  fiscal  aptitudes  of                                                            
teachers.  He  concluded that  this  proposal  would not  provide  a                                                            
significant  subsidy, although  the  ability to obtain  a home  loan                                                            
without a down  payment would be an  advantage not available  to the                                                            
general public.  He was assured that  this program would  not impact                                                            
AHFC's  "bottom  line",  nor  would  it reduce  the  amount  of  the                                                            
dividend the Corporation pays to the State general fund.                                                                        
                                                                                                                                
Senator Olson  asked about  the original  teachers' loan program  in                                                            
rural Alaska.                                                                                                                   
                                                                                                                                
Mr. Fauske  replied that the original  Housing Assistance  Loan Fund                                                            
(HALF) program  began in  the middle 1980s  was intended to  provide                                                            
teacher  housing and  was  expanded to  allow participation  by  all                                                            
citizens.  He told  of difficulties  and efforts  to provide  multi-                                                            
family housing  in rural  communities. He  noted that loan  activity                                                            
for single-family dwellings  occurs "in spurts".  He reported little                                                            
activity  of teachers purchasing  homes in  small villages,  stating                                                            
that  the teacher  participation   in the  existing  program  occurs                                                            
primarily  in  larger "hub"  communities  such  as  Barrow,  Bethel,                                                            
Kotzebue  and  Nome. He  expressed  that  the  Corporation  supports                                                            
additional  efforts to  provide housing  loans for  teachers,  as it                                                            
would  provide  "business"  for  the  Corporation  and  housing  for                                                            
teachers.                                                                                                                       
                                                                                                                                
Senator  Olson asked  if the witness  could suggest  changes  to the                                                            
committee  substitute  to streamline  the  process  of constructing                                                             
multi-family housing facilities in villages.                                                                                    
                                                                                                                                
Mr. Fauske  informed of  options under consideration  that  would be                                                            
possible if additional  federal funding could be secured. He told of                                                            
the  Section 8  voucher  certificate  program, whereby  the  federal                                                            
government  subsidizes rental  payments to  landlords. He  described                                                            
this rental  assistance program in  which the federal government  is                                                            
no longer constructing  large public  housing units. He shared  that                                                            
AHFC is  participating in  this program and  told of a test  program                                                            
recently implemented  in Barrow to expand the rental  market in that                                                            
community.  He  qualified  that  the  loan  programs  could  not  be                                                            
utilized  in some  communities because  there is  no "inventory"  or                                                            
true real estate market.                                                                                                        
                                                                                                                                
Amendment #1:  This amendment changes the title of  the bill to read                                                            
as follows.                                                                                                                     
                                                                                                                                
     "An  Act relating to  the acquisition  of teachers' housing  by                                                            
     regional educational  attendance areas and to teachers' housing                                                            
     loan programs  in the Alaska  Housing Finance Corporation;  and                                                            
     providing for an effective date."                                                                                          
                                                                                                                                
This amendment  also inserts a new bill section on  page 1 following                                                            
line 3 to read as follows.                                                                                                      
                                                                                                                                
     Section 1. AS 14.08.101(9) is amended to read:                                                                             
                (9) provide housing for rental to teachers, by                                                                  
     leasing  existing housing  from a local  agency or individual,                                                             
     [OR]  by entering into  contractual arrangements  with  a local                                                            
     agency or individual  to lease housing that will be constructed                                                            
     by  the local  agency or  individual  for that  purpose, or  by                                                            
     constructing  or otherwise acquiring housing  that is owned and                                                            
     managed by the regional  educational attendance area for rental                                                            
     to teachers;                                                                                                               
                                                                                                                                
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
This amendment also inserts  a new bill section on page 2, following                                                            
line 6 to read as follows.                                                                                                      
                                                                                                                                
     Sec. 3. AS 18.56.580(a) is amended to read:                                                                                
          (a) In addition to the powers authorized by AS 18.56.400,                                                             
     the  corporation  shall adopt  regulations  under AS  18.56.088                                                            
     allowing  the use of money in the housing assistance  loan fund                                                            
     to make loans  to regional education attendance  areas or other                                                          
     borrowers  for the purchase or  development of teacher  housing                                                          
     in  small  communities.  The  regulations  must  implement  the                                                            
     requirements  of (b) of this section and establish  other terms                                                            
     and  conditions  for teacher  housing  loans,  including  those                                                            
     relating  to borrower eligibility and the number  of loans that                                                            
     may be made  to a single borrower. The corporation  may require                                                            
     the borrower to pay costs associated with a loan.                                                                          
                                                                                                                                
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
Senator Olson moved for adoption.                                                                                               
                                                                                                                                
Co-Chair Wilken objected for an explanation.                                                                                    
                                                                                                                                
Senator Olson stated the  intent of this amendment is to clarify how                                                            
this legislation  would assist teacher  housing in rural  Alaska. He                                                            
recalled   other  legislation   considered   during   the   previous                                                            
legislation  session  to  enhance  the  retention  of  teachers  and                                                            
emphasized  the need  for adequate  housing to  retain teachers.  He                                                            
proposed that some Rural  Education Attendance Area (REAA) districts                                                            
could participate  in this program and construct rental  housing for                                                            
teachers.                                                                                                                       
                                                                                                                                
Senator Bunde  qualified his knowledge  of rural Alaska is  limited;                                                            
however, he  could not understand  the interest to purchase  housing                                                            
in an  area  where the  investment  would depreciate.  He  suggested                                                            
expanding  this  provision  to  apply  to  urban  school  districts,                                                            
although this would be in competition with private industry.                                                                    
                                                                                                                                
Senator Olson  clarified that lack of depreciation  on property does                                                            
not occur in the same manner as in urban areas.                                                                                 
                                                                                                                                
Senator B. Stevens asked  the percentage of teachers in rural Alaska                                                            
that live in REAA-owned housing units.                                                                                          
                                                                                                                                
Senator Olson  did not have an exact figure, but noted  that because                                                            
REAAs are not  currently permitted  to participate in this  program,                                                            
these  school districts  have been  unable to  purchase housing.  He                                                            
stated that instead,  teachers have limited availability  of housing                                                            
of  private  rental  units.  He told  of  teachers  who  must  board                                                            
together and one teacher  living in a school boiler room rather than                                                            
the substandard housing otherwise available.                                                                                    
                                                                                                                                
Co-Chair Wilken stated  that the intent of this program is to create                                                            
the buy-in  of a teacher into the  community. He asserted  that this                                                            
amendment does not reflect  this intent and instead fosters the buy-                                                            
in of a governmental entity.                                                                                                    
                                                                                                                                
Co-Chair  Wilken also voiced  concerns about  repayment of  the debt                                                            
incurred  by REAAs  for multi-family  housing units  and asked  what                                                            
revenue stream  could support this debt. He listed:  grants, federal                                                            
funds,  State funds,  and local  contributions  as possible  funding                                                            
sources.  He gave  an example  of  a $500,000  loan  to construct  a                                                            
fourplex unit.                                                                                                                  
                                                                                                                                
Senator Olson  replied that rental  income would be used  to pay the                                                            
mortgage  on these loans.  He stated  that there  would always  be a                                                            
need  for teacher  housing  and  therefore  the units  would  remain                                                            
occupied,  unless  the  population  of  the  village  significantly                                                             
reduced. He clarified that  multi-family dwellings are not typically                                                            
built in small  villages due to the  expense of constructing  larger                                                            
facilities.  Rather, he said, most  housing units are single  family                                                            
or duplexes.                                                                                                                    
                                                                                                                                
Co-Chair Wilken surmised  that rental income would therefore provide                                                            
the revenue  stream for the 15 or  30-year term of the mortgage.  He                                                            
asked the witness if this were viable.                                                                                          
                                                                                                                                
Mr.  Fauske asserted  that  normal underwriting  criteria  would  be                                                            
applied to any  loan application and that consideration  is given to                                                            
rental income, grants and  other revenues that could be dedicated to                                                            
repayment of  the loan. He furthered  that vacancy rates  and rental                                                            
reserves are also considered.                                                                                                   
                                                                                                                                
Co-Chair Wilken  asked if education  foundation formula funds  would                                                            
be expected to support this debt.                                                                                               
                                                                                                                                
Senator Olson deferred to Mr. Fauske.                                                                                           
                                                                                                                                
Mr. Fauske replied that  the AHFC would consider all revenue sources                                                            
when  reviewing  a loan  application.  He  informed that  a  revenue                                                            
source based on an annual  appropriation would be of concern because                                                            
of the uncertainty that it would be available each year.                                                                        
                                                                                                                                
Mr. Fauske  also pointed  out that in some  communities, the  school                                                            
district  subsidizes  rental  payments  for  teachers.  He  exampled                                                            
Kotzebue  and described the  leases granted  for 12 months  although                                                            
the  teachers  are  only  present  for  9 months  a  year.  In  this                                                            
instance,  he said,  the school  district pays  the remaining  three                                                            
months of  rent. He stated  this would be  a concern in determining                                                             
the ability of the REAA to meet the loan obligation.                                                                            
                                                                                                                                
Senator Bunde announced  that unless such a housing facility is part                                                            
of the  school itself, he  would not support  the use of  foundation                                                            
formula funds to pay a mortgage for teacher housing.                                                                            
                                                                                                                                
Senator Bunde declared  that facilities would always experience some                                                            
vacancy.   He voiced concern  that unorganized  communities  without                                                            
taxing  authority would  not have  an ability to  generate funds  to                                                            
offset the  absence of sufficient  rental income. He suggested  this                                                            
provision should only apply to organized areas.                                                                                 
                                                                                                                                
Senator Olson agreed that  complications and potential ramifications                                                            
could be discussed,  but he emphasized, "We all agree  that teachers                                                            
certainly are  necessary" for an education system.  He remarked that                                                            
he offered this  amendment as a method to attract  teachers to rural                                                            
Alaska.                                                                                                                         
                                                                                                                                
Co-Chair  Wilken requested  the sponsor withdraw  the amendment  and                                                            
consult with AHFC  to determine whether, and how,  this loan program                                                            
could be  extended to REAAs  while guaranteeing  that no  foundation                                                            
formula funding would be used in the repayment of the debt.                                                                     
                                                                                                                                
                                                                                                                                
SFC 03 # 16, Side B 09:53 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Co-Chair  Wilken continued,  declaring  "In no  way will  foundation                                                            
money be  used to support  this type  of an effort  until the  local                                                            
contribution on behalf of these people is put in place."                                                                        
                                                                                                                                
Senator Olson  WITHDREW his  motion to adopt  the amendment  without                                                            
objection.                                                                                                                      
                                                                                                                                
Co-Chair Green spoke to  her opposition of the bill. She pointed out                                                            
that this legislation  does not require  that an area demonstrate  a                                                            
need for teachers,  nor does it require  that a borrower  under this                                                            
program continue  to teach.  She furthered  that the provision  does                                                            
not include  a first time  buyer requirement,  an "age factor"  or a                                                            
maximum  loan  amount.  She  opined,  "If this  is  good  for  young                                                            
teachers  coming into a community,  it's good  for the young  people                                                            
who have graduated  from a voc-tech  school, nurses or a  whole rash                                                            
of other people."                                                                                                               
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
[Note: Remainder of meeting is recorded on SFC-03 #16-II.]                                                                      
                                                                                                                                
                                                                                                                                
     HOUSE BILL NO. 71                                                                                                          
     "An  Act  extending  the  termination  date  of  the  Board  of                                                            
     Certified Direct-Entry Midwives."                                                                                          
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken explained the legislation as follows.                                                                           
                                                                                                                                
     House  Bill  71 extends  the Board  of  Certified Direct-Entry                                                             
     Midwives  four years  to June 30, 2007.  The extension  matches                                                            
     the Division of Legislative  Budget and Audit's recommendation.                                                            
                                                                                                                                
LINDA SYLVESTER,  Staff to Representative Weyhrauch,  sponsor of the                                                            
bill, informed  that all of the Representative's children  were born                                                            
using the services  of a direct-entry midwife. Ms.  Sylvester read a                                                            
statement as follows.                                                                                                           
                                                                                                                                
     The  Board has  served as  a means  to make  people  practicing                                                            
     midwifery  aware of the level of experience and  education that                                                            
     is  expected of  them. The  State  of Alaska  women seeking  an                                                            
     alternative  to hospital care for a normal pregnancy  and birth                                                            
     rely on the diligence  of the Board to enhance both the quality                                                            
     and accessibility of their health care.                                                                                    
                                                                                                                                
     Based  on the recommendations  of legislative audit,  the Board                                                            
     is operating well and it should be extended.                                                                               
                                                                                                                                
     The   regulation  and   licensure  of   direct-entry   midwives                                                            
      contributes to the protection of the public's welfare.                                                                    
                                                                                                                                
Ms. Sylvester  asserted  that  the members  do not  oppose the  high                                                            
licensure  fees, as they  realize they are  small group. She  stated                                                            
that  the Board  should  not be  merged  with a  board representing                                                             
another  medical profession  for the  sole purpose  of lowering  the                                                            
license fees.                                                                                                                   
                                                                                                                                
Senator Taylor supported  the bill and indicated he had reviewed the                                                            
audit  report.  He  offered   a motion   to  report  the  bill  from                                                            
Committee.                                                                                                                      
                                                                                                                                
KAYE KANNE,  President,  Midwives Association  of Alaska,  testified                                                            
that  she served  on the  Board  for two  terms beginning  with  its                                                            
inception  in  1992.  She  remarked  that the  Board  has  "done  an                                                            
excellent job." She informed  that when the Board was first created,                                                            
the  certified  direct-entry  midwives   performed  a  "very  small"                                                            
percentage of  the births in Alaska and that currently  midwives are                                                            
attending almost ten percent  of the births. She pointed out that in                                                            
some areas, this  percentage is higher: 25 percent  of births in the                                                            
Mat-Su Borough,  16 percent in Juneau, and 12 percent  in Fairbanks.                                                            
She  reported  "very  low"  incidences  requiring  cesarean-section                                                             
delivery and overall,  "really good outcomes for mothers  and babies                                                            
and a very low cost to the State."                                                                                              
                                                                                                                                
Ms.  Kanne reminded  that  in  1998, midwifery  services  have  been                                                            
eligible for Medicaid coverage  and attested this is less costly for                                                            
the State.                                                                                                                      
                                                                                                                                
Senator Olson asked the licensure fee.                                                                                          
                                                                                                                                
Ms. Kanne  listed  $1,350 as  the fee  for a two-year  license.  She                                                            
compared this to the original  fee of $1,500 and the $950 fee of two                                                            
years ago.                                                                                                                      
                                                                                                                                
Senator  Olson  asked if  any  actions  have  been taken  against  a                                                            
licensee.                                                                                                                       
                                                                                                                                
Ms. Kanne  told of one  investigation of  unlicensed activities  and                                                            
another investigation  pending. She did not have details  of the on-                                                            
going instance.                                                                                                                 
                                                                                                                                
Senator  Olson asked  if  action would  be  taken against  a  person                                                            
attending to a home birth for a family member or friend.                                                                        
                                                                                                                                
Ms. Kanne  assured that this  activity is  legal and indicated  that                                                            
statutes   specifically  protect   Native   and  cultural   birthing                                                            
practices. She  stated that the Board and licensure  is intended for                                                            
modern-day midwives.                                                                                                            
                                                                                                                                
Senator  Olson  wanted to  ensure  that health  aides  operating  in                                                            
smaller  communities  are  "free   from  prosecution  to  a  certain                                                            
degree."                                                                                                                        
                                                                                                                                
Co-Chair Wilken  referenced page 11  of the Division of Legislative                                                             
Budget  and  Audit  report,   "The  Board  believes  it  is  in  the                                                            
profession's  and the  public's  best interest  to  require all  CDM                                                            
applicants  and  renewals to  pass  an exam  on State  statutes  and                                                            
regulations  applicable  to the profession."  He  noted that such  a                                                            
provision  is not  included in  this legislation  and  asked if  the                                                            
witness would prefer one.                                                                                                       
                                                                                                                                
Ms.  Kanne  explained  that  the  Board  supports   a jurisprudence                                                             
requirement,  although  the  consensus  of  the  Association  is  to                                                            
request   this   in   separate   legislation    along   with   other                                                            
"housekeeping"  items.  She clarified  she would  not object if  the                                                            
provision were added to this bill.                                                                                              
                                                                                                                                
Co-Chair Wilken  commented that extension  of lapse dates  of boards                                                            
and commissions  is  partially intended  as an  opportunity to  make                                                            
changes such as proposed  in the audit. He requested the sponsor and                                                            
the witness collaborate  with Finance Committee staff to incorporate                                                            
the "housekeeping" matters into this bill.                                                                                      
                                                                                                                                
Senator  Taylor  WITHDREW   his  motion  to  report  the  bill  from                                                            
Committee without objection.                                                                                                    
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 43                                                                                                         
     "An Act extending the termination date of the State Medical                                                                
     Board."                                                                                                                    
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken read an explanatory statement as follows.                                                                       
                                                                                                                                
     Senate Bill 43 extends the State Medical Board eight years to                                                              
     June 30, 2011. This extension matches the Division of                                                                      
     Legislative Budget and Audit's recommendation.                                                                             
                                                                                                                                
PAT DAVIDSON,  Director, Division  of Legislative Budget  and Audit,                                                            
explained the  unusual request to  extend the term of the  Board for                                                            
eight  years. She  told of  the previous  eight-year  extension  and                                                            
noted that  the Board did not wait  until the lapse date  renewal to                                                            
proceed with changes,  which was beneficial to the  operation of the                                                            
Board.                                                                                                                          
                                                                                                                                
Senator Taylor  asked number of licensed  the Board has revoked  and                                                            
"at what level" the Board is conducting investigations.                                                                         
                                                                                                                                
Ms.  Davidson indicated  she  would provide  the  number of  revoked                                                            
licenses. She stated that  it is difficult to evaluate the amount of                                                            
time spent  on investigations of each  occupation board because  the                                                            
Division of Occupation  Licensing retains investigative staff, which                                                            
is not assigned  to one particular  board. Therefore, she  explained                                                            
the  amount  of  time  allocated  to individual   investigations  is                                                            
weighed against the priorities of all the boards.                                                                               
                                                                                                                                
Senator  Taylor commented  that  the  Alaska Bar  Association  could                                                            
provide  the exact  details  on  investigations  and the  number  of                                                            
attorneys disciplined or  disbarred. He ascertained from discussions                                                            
with members  of the  State Medical  Board that  the Board does  not                                                            
revoke  medical licenses.  He expressed  interest  in learning  "how                                                            
long and how deep the old boys club runs in Alaska."                                                                            
                                                                                                                                
Senator Olson  assured that the Board has taken licensure  action in                                                            
the recent past.                                                                                                                
                                                                                                                                
Senator Bunde  told of two high profile  cases involving  revocation                                                            
of licenses for doctors practicing in the Anchorage area.                                                                       
                                                                                                                                
Senator  B.   Stevens  referenced   page  11  of  the  Division   of                                                            
Legislative  Budget and Audit, which  listed 413 investigations  and                                                            
the number of cases closed in the last three years.                                                                             
                                                                                                                                
Ms. Davidson interjected  to point out that multiple  complaints are                                                            
sometimes reported against one physician.                                                                                       
                                                                                                                                
RICK   URION,  Director,   Division   of   Occupational   Licensing,                                                            
Department  of  Community and  Economic  Development,  testified  in                                                            
support  of  the  bill. He  stressed  that  the  Board  does  revoke                                                            
licenses  and that  many  investigations  are ongoing  with  actions                                                            
pending. He noted  that the two Division investigators  dedicated to                                                            
matters  relating to  the medical  field  handle 60  percent of  the                                                            
Division's  investigations.  He asserted,  "We  are overloaded."  He                                                            
told of  time delays  in the  investigative process  and efforts  to                                                            
reduce these delays.                                                                                                            
                                                                                                                                
Mr. Urion  remarked that  the State Medical  Board "has done  a very                                                            
good job." He  compared the Division's office size  and condition in                                                            
Anchorage  to  the   considerably  larger  Alaska  Bar  Association                                                             
offices.                                                                                                                        
                                                                                                                                
Senator Bunde asked the  cost of a State medical license. He assumed                                                            
the fee is based on the cost of investigations of the Board.                                                                    
                                                                                                                                
Senator Olson answered the cost of a license is currently $600.                                                                 
                                                                                                                                
Mr. Urion furthered  that statute requires that the  fee be based on                                                            
a two-year  average  of investigative  expenses.  He noted that  the                                                            
investigation activities  have been considerable higher than average                                                            
in the past year and the  Board is subsequently $90,000 over-budget.                                                            
He  anticipated  this would  "average  out" over  the  next year  or                                                            
license fees would be increased.                                                                                                
                                                                                                                                
Senator  Bunde asked  the  process to  obtain additional  staff  and                                                            
better facilities if necessary.                                                                                                 
                                                                                                                                
Mr.  Urion responded  that  such changes  could not  be implemented                                                             
during the current fiscal  year, but stressed that improvements must                                                            
be done eventually as the system is "bogged down".                                                                              
                                                                                                                                
Senator Bunde  wanted to  know if these improvements  could  be made                                                            
without impacting the State general fund.                                                                                       
                                                                                                                                
Mr. Urion affirmed  the intent is to increase license  fees to cover                                                            
the additional expenses.                                                                                                        
                                                                                                                                
Senator Taylor commented  that the physicians would "have the amount                                                            
of enforcement that they want to pay for."                                                                                      
                                                                                                                                
Amendment  #1: This amendment  changes the  termination date  of the                                                            
State Medical Board from 2011 to 2007.                                                                                          
                                                                                                                                
Senator Olson moved for adoption.                                                                                               
                                                                                                                                
Co-Chair Wilken objected for an explanation.                                                                                    
                                                                                                                                
Senator Olson  relayed that as a member of the State  Medical Board,                                                            
he identified areas in  need of improvement. He told of changes made                                                            
the previous session to  the locum tenens law intended to streamline                                                            
the process to  attract and retain additional physicians  to Alaska.                                                            
He wanted  an opportunity  to measure the  success of these  efforts                                                            
after a four-year period.                                                                                                       
                                                                                                                                
Mr. Urion favored  the later termination  date. He pointed  out that                                                            
the boards  are always  subject to legislative  evaluation  and that                                                            
audits could be ordered at any time.                                                                                            
                                                                                                                                
Senator B. Stevens  asked if the locum tenens law  could be reviewed                                                            
in four years without requiring an extension of the Board.                                                                      
                                                                                                                                
Senator Olson  replied that the locum tenens law is  only one of the                                                            
issues that must be reviewed,  citing the witness's indications that                                                            
the investigative process needs improvement.                                                                                    
                                                                                                                                
Senator Bunde  supported the  amendment due  to the workload  of the                                                            
Legislature  each year.  He predicted  that unless  the termination                                                             
date requires  an  extension, the  review of  these related  matters                                                            
could be overlooked.                                                                                                            
                                                                                                                                
Co-Chair  Wilken asserted  that he  supports  the amendment  because                                                            
Senator  Olson, a physician,  recommends  that this  is in the  best                                                            
interest of the people of Alaska.                                                                                               
                                                                                                                                
Senator  B.  Stevens asked  if  the  Board has  issued  an  official                                                            
position on the preferred length of the extension date.                                                                         
                                                                                                                                
Senator  Olson did not.  He informed  that the  Board membership  is                                                            
undergoing transition.                                                                                                          
                                                                                                                                
Co-Chair  Wilken predicted  that if  the Board  opposes the  amended                                                            
extension   date,  testimony   could  be   presented  as  House   of                                                            
Representatives  committees   consider  the  bill.  He  removed  his                                                            
objection to the adoption of the amendment.                                                                                     
                                                                                                                                
The amendment was ADOPTED without objection.                                                                                    
                                                                                                                                
Senator  Taylor offered  a motion to  report SB  43 as amended  from                                                            
Committee.                                                                                                                      
                                                                                                                                
There was no objection  and CS SB 43 (FIN) MOVED from Committee with                                                            
individual recommendations  and accompanying $729,700 fiscal note #1                                                            
from the Department of Community and Economic Development.                                                                      
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 10:24 AM                                                                          

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