Legislature(2003 - 2004)

04/09/2003 09:05 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                          April 09, 2003                                                                                      
                              9:05 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-03 # 43, Side A                                                                                                             
SFC 03 # 43, Side B                                                                                                             
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Gary Wilken convened  the meeting at approximately 9:05 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice Chair                                                                                                   
Senator Ben Stevens                                                                                                             
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
Also Attending: LANDA BAILY,  Special Assistant to the Commissioner,                                                          
Department  of  Revenue;  JOHN  MACKINNON,  Deputy  Commissioner  of                                                            
Highways  & Public  Facilities,  Department  of  Transportation  and                                                            
Public  Facilities;  JOEL GILBERTSON,  Commissioner,  Department  of                                                            
Health  and   Social  Services;  EDGAR   BLATCHFORD,  Commissioner,                                                             
Department  of  Community  and  Economic  Development;  TOM  LAWSON,                                                            
Director,  Division   of  Administrative  Services,   Department  of                                                            
Community  and  Economic  Development;  RICHARD  SCHMITZ,  Staff  to                                                            
Senator John Cowdery                                                                                                            
                                                                                                                                
Attending via  Teleconference: From  Anchorage: MARC MARLOW,  Alaska                                                          
Enfranchise  Facilities,   Inc.;  SUSANNE  DIPEITRO,  Co-President,                                                             
Government Hill Community Council                                                                                               
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB 106-FEE FOR STUDDED TIRES                                                                                                    
                                                                                                                                
The Committee  adopted a  committee substitute  and heard  testimony                                                            
from the Department of  Revenue and the Department of Transportation                                                            
and Public Facilities. The bill reported from Committee.                                                                        
                                                                                                                                
SB 105-MEDICAID: CHILDREN/PREGNANT WOMEN/FACILITY                                                                               
                                                                                                                                
The  Committee  heard  from  the Department  of  Health  and  Social                                                            
Services and reported the bill from Committee.                                                                                  
                                                                                                                                
SB 173-SCIENCE & TECH FOUNDATION/BIDCO/INT.TRADE                                                                                
                                                                                                                                
The Committee  heard from the Department  of Community and  Economic                                                            
Development and held the bill in Committee.                                                                                     
                                                                                                                                
SB 153-LONG-TERM LEASES OF ALASKA RR LAND                                                                                       
                                                                                                                                
The Committee  heard from  the sponsor, took  public testimony,  and                                                            
held the bill in Committee.                                                                                                     
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 106(TRA)                                                                                            
     "An Act relating to studded tires; and providing for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This  was the third  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Green moved to  adopt CS HB 106,  Version 23-GS1127\V,  as                                                            
the working draft.                                                                                                              
                                                                                                                                
There being  no objection, the committee  substitute was  adopted as                                                            
the working draft.                                                                                                              
                                                                                                                                
Co-Chair Wilken explained  that the Version "V" committee substitute                                                            
incorporates the word "new"  into the language on page 1, line 8, of                                                            
Section 2, as follows.                                                                                                          
                                                                                                                                
     Sec. 43.98/025. Tire fees. (a) A fee of $2.50 a tire is                                                                    
     imposed on the retail sale of new tires for motor vehicles                                                                 
     designated for use on a highway.                                                                                           
                                                                                                                                
Co-chair Wilken  noted that additional  language is incorporated  on                                                            
page 2, lines 14 through 19, as follows.                                                                                        
                                                                                                                                
     (g)  The fees  imposed  in this  section  do not  apply to  the                                                            
     following  tires and  [or] services if  the purchaser  provides                                                            
     the seller  with a certificate  of use on a form prescribed  by                                                            
     the Department:                                                                                                            
        (1) tires or services sold to federal, state, or local                                                                  
        government agencies for official use; or                                                                                
        (2) tires for resale.                                                                                                   
                                                                                                                                
Senator  Bunde asked for  further clarification  regarding  the tire                                                            
for resale process, as  he understands this language to apply to the                                                            
sale of used  tires rather than to  a store purchasing tires  from a                                                            
distributor for resale.                                                                                                         
                                                                                                                                
Co-Chair  Wilken detailed  a situation wherein  an individual  would                                                            
purchase  tires for their  vehicle from a  service station  that the                                                            
service station  had purchased from, for example,  a Sears store. He                                                            
stated that the intent  of this language is to clarify that the tire                                                            
tax would  be charged  exclusively  to the customer  at the  service                                                            
station  rather than  to the service  station  purchasing the  tires                                                            
from the Sears store.                                                                                                           
                                                                                                                                
LANDA BAILY,  Special Assistant to  the Commissioner, Department  of                                                            
Revenue, concurred.                                                                                                             
                                                                                                                                
Co-Chair  Wilken  and Ms.  Baily  established  for  Senator  Bunde's                                                            
benefit that  the tax would  be implemented  at the point of  retail                                                            
sale rather  than at the  wholesale level  to avoid an inflation  of                                                            
the original purchase price.                                                                                                    
                                                                                                                                
Senator Hoffman commented  that the original intent of this bill, as                                                            
introduced  by  Governor  Frank Murkowski,  was  to  levy  a tax  on                                                            
studded  tires to  offset  "the extensive  damage"  they inflict  to                                                            
"paved highways."  He asked for verification  that studded  tires do                                                            
create damage.                                                                                                                  
                                                                                                                                
JOHN   MACKINNON,  Deputy   Commissioner   of   Highways  &   Public                                                            
Facilities,  Department  of  Transportation  and  Public  Facilities                                                            
responded  that  the  Department  "conservatively"   estimates  that                                                            
studded  tires  are responsible  for  approximately  $5  million  of                                                            
damage to roadways  annually due to  "excessive wear that  the studs                                                            
cause."                                                                                                                         
                                                                                                                                
Senator Hoffman  voiced that were this the logic for  implementing a                                                            
tax on studded  tires then  it should be noted  that of the  seventy                                                            
communities  in District S  that he represents,  less than  ten have                                                            
paved highways.  He voiced the understanding that  the intent of the                                                            
tax would be  to recoup "the tremendous"  expense incurred  annually                                                            
to  repair  studded  tire damage  to  the  State's  paved  roadways.                                                            
Therefore, he contended,  while the bill is well intended, it should                                                            
not be a broad  tax unless the intent is for "general  maintenance."                                                            
                                                                                                                                
Mr. Mackinnon  agreed that  the original intent  of the bill  was to                                                            
specifically  offset road damage caused  by studded tires;  however,                                                            
he continued,  "it has evolved" to  include general maintenance  for                                                            
the State's paved roads.                                                                                                        
                                                                                                                                
Senator  Hoffman  declared  that  while  it may  have  evolved,  the                                                            
original intent of the  bill was valid. He supported "the concept of                                                            
the people  who  benefit from  a service"  should pay  the costs  of                                                            
providing that  service and, in addition, "the people  who cause the                                                            
damage  should pay",  and he  noted that  the Legislature  has  been                                                            
addressing these situations  through cost-saving measure discussions                                                            
and legislation.  He contended that State road maintenance  in rural                                                            
areas of the  State is oftentimes  "non-existent," and he  furthered                                                            
that  some  rural areas  do  not even  require  their  residents  to                                                            
acquire a driver's  license. He stated that "this  tax is very, very                                                            
broad  and  that  residents  in rural  Alaska  end  up  paying  for"                                                            
services they  might not receive from the Department,  or "where the                                                            
State has little  presence and if  they do have presence,  it is for                                                            
aviation."                                                                                                                      
                                                                                                                                
Mr. Mackinnon  acknowledged Senator Hoffman's comments;  however, he                                                            
pointed out that although  road maintenance might not be provided in                                                            
some  rural areas,  Department  personnel or  Department  contracted                                                            
personnel maintain rural airfields.                                                                                             
                                                                                                                                
Senator Hoffman  concurred  but stressed that  studded tires  do not                                                            
incur any damage  to State roads or to the airports  in those areas.                                                            
                                                                                                                                
Mr. MacKinnon agreed.                                                                                                           
                                                                                                                                
Co-Chair  Wilken asked  the amount  of  money the  State spends  for                                                            
rural airport maintenance.                                                                                                      
                                                                                                                                
Mr. MacKinnon  replied that  he did not have  that information,  but                                                            
could provide it.                                                                                                               
                                                                                                                                
Senator Bunde  asserted that this version of the bill  applies a tax                                                            
on all tires, and "is an  opportunity for all Alaskans to contribute                                                            
money to the general  fund to assist in paying for  all the benefits                                                            
they receive."                                                                                                                  
                                                                                                                                
Co-Chair Green  moved to report CS SB 106 (FIN) from  Committee with                                                            
individual recommendations and accompanying fiscal note.                                                                        
                                                                                                                                
There being  no objection, CS SB 106  (FIN) REPORTED from  Committee                                                            
with  a new  $72,200 fiscal  note,  dated April  8,  2003, from  the                                                            
Department of Revenue.                                                                                                          
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 105(HES)                                                                                            
     "An Act relating to eligibility requirements for medical                                                                   
     assistance for certain children, pregnant women, and persons                                                               
     in a medical or intermediate care facility; and providing for                                                              
     an effective date."                                                                                                        
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-chair   Wilken  informed   that  this   bill  would  amend   "the                                                            
eligibility income levels  for Denali KidCare and Medicaid under the                                                            
special  income limits  for  nursing homes  and home  and  community                                                            
based waiver services."                                                                                                         
                                                                                                                                
JOEL  GILBERTSON,  Commissioner,  Department  of Health  and  Social                                                            
Services, explained that  this bill was introduced by Governor Frank                                                            
Murkowski  and  was  subsequently  amended  by  the  Senate  Health,                                                            
Education  & Social  Services (HES)  Committee. He  stated that  the                                                            
Governor's  bill specified  that the eligibility  income levels  for                                                            
the Denali KidCare  program and pregnant women "would  be frozen" at                                                            
the federal maximum  allowable poverty level of 200  percent, and at                                                            
300  percent of  the special  income  standards for  individuals  in                                                            
long-term  care  under  the Medicaid  program  and  for individuals                                                             
receiving home and community based waiver services.                                                                             
                                                                                                                                
Commissioner Gilbertson  continued that the HES version  of the bill                                                            
amends these levels to  175 percent of poverty levels for the Denali                                                            
KidCare program and pregnant  women program, and he noted that a new                                                            
negative  $7,151,300  fiscal  note, dated  April  8, 2003  from  the                                                            
Department  of  Health  and  Social  Services  accompanies  the  HES                                                            
version of the  bill. He stated that the poverty level  specified in                                                            
the HES  version of  the bill  would eliminate  an additional  1,200                                                            
individuals  from the  Title 21  Denali KidCare  and pregnant  women                                                            
programs  above the  number  specified in  the Governor's  bill.  He                                                            
stated  that  some  of  the  impact  "is  buffered"   by  provisions                                                            
specifying  that pregnant women and  children in the Denali  KidCare                                                            
program who  establish eligibility  by June 30, 2003 would  continue                                                            
to  be   provided  coverage   for  nine   months  and  six   months,                                                            
respectively, under existing eligibility rules.                                                                                 
                                                                                                                                
Commissioner  Gilbertson  stated  that  the  Governor  continues  to                                                            
support the  bill at the 200 percent  of poverty level for  children                                                            
in the  Denali KidCare program  and pregnant  women and 300  percent                                                            
for individuals needing long-term care.                                                                                         
                                                                                                                                
Co-Chair Green  asked whether Alaska's poverty calculation  receives                                                            
additional adjustments at the federal level.                                                                                    
                                                                                                                                
Commissioner   Gilbertson   explained  that   the  State   currently                                                            
specifies the eligibility  level for the Denali KidCare and pregnant                                                            
women program at 200 percent  of the federal poverty level, which he                                                            
noted, is adjusted  and inflation-proofed annually.  Furthermore, he                                                            
declared,  the federal  government  awards  the State  of Alaska  an                                                            
additional inflation factor  of 25 percent. Therefore, he clarified;                                                            
the State's  established  poverty level  for these  programs is  200                                                            
percent  above the  national poverty  level calculated  for  Alaska.                                                            
Additionally,  he pointed out that  individuals in the programs  are                                                            
held  harmless  for  their  permanent  fund   dividends  (PFDs).  He                                                            
qualified that  "the income standards are uniquely  adjusted for the                                                            
Alaska situation"  in terms of the federal calculated  poverty level                                                            
and "the hold harmless clause" for the PFDs.                                                                                    
                                                                                                                                
Commissioner  Gilbertson reiterated  that the Governor continues  to                                                            
support the levels specified  in the original bill as opposed to the                                                            
HES version's amended levels.                                                                                                   
                                                                                                                                
Co-Chair Green  calculated that the State's poverty  level for these                                                            
programs "is  250 percent above" the  normed federal poverty  level.                                                            
                                                                                                                                
Commissioner Gilbertson  stated that when comparing Alaska's poverty                                                            
level  standards to  the national  standard  poverty  level for  the                                                            
"Lower 48," that is correct.                                                                                                    
                                                                                                                                
Co-Chair Green  asked whether additional  adjustments result  from a                                                            
State-conducted asset test regarding the Denali KidCare program.                                                                
                                                                                                                                
Commissioner  Gilbertson clarified  that the State does not  conduct                                                            
an asset test for the Denali KidCare program.                                                                                   
                                                                                                                                
Co-Chair Green  noted therefore "it  is a fairly short window  of an                                                            
income level  at a certain  level that qualifies  a person  for this                                                            
program."                                                                                                                       
                                                                                                                                
Commissioner Gilbertson responded yes.                                                                                          
                                                                                                                                
Co-Chair Green  specified that the program recipients  "could either                                                            
be uninsured or underinsured."                                                                                                  
                                                                                                                                
Commissioner Gilbertson concurred.                                                                                              
                                                                                                                                
Senator  Hoffman declared  that  this bill  reduces  health care  to                                                            
pregnant  women,  children,  and  the disabled  to  save  less  than                                                            
$300,000 in general  funds. He noted that other cost  saving options                                                            
must  be available  "that have  less impact"  on those  in need.  He                                                            
asked for confirmation  that the Administration supports  these cuts                                                            
that would affect  approximately 800 individuals to  save this level                                                            
of funding.                                                                                                                     
                                                                                                                                
Commissioner  Gilbertson responded  that, were  the Governor's  bill                                                            
adopted,  approximately 800  people would  be affected. However,  he                                                            
clarified  that the  HES version,  which  is before  the  Committee,                                                            
would  narrow the  program further.  He clarified  that the  savings                                                            
resulting from the Senate HES version would be $7.2 million.                                                                    
                                                                                                                                
Commissioner Gilbertson  informed the Committee that this bill is an                                                            
effort by  the Administration  to contain  "the rapid escalation  of                                                            
growth of our program,  40 percent growth in the last five years" of                                                            
these three  Medicaid programs.  He advised  that to strengthen  the                                                            
program  and ensure  continuing Medicaid  benefits  "for low  income                                                            
beneficiaries,  …. this is the size  of a Medicaid program  that the                                                            
we can support  in terms of the number of eligible  individuals." He                                                            
stated that  the State  currently has the  highest income  standards                                                            
allowed under federal law,  and that the Governor's bill "would lock                                                            
in" those standards.                                                                                                            
                                                                                                                                
Commissioner   Gilbertson  continued   that  rather  than   being  a                                                            
statement  that this  reduction would  have "no  impact," the  State                                                            
"has undergone  exponential growth in our Medicaid  program," and in                                                            
order to  continue the  program, "some of  the optional categories"                                                             
must be  addressed.  He continued  that the  State must acknowledge                                                             
that  it "has  reached  a capacity  where  further growth  in  those                                                            
programs  will threaten  the  viability of  the program  itself  and                                                            
threaten the ability  of the State itself to fund  the core services                                                            
that  are  covered   for  individuals  currently  enrolled   in  the                                                            
program." He stated  that the poverty levels in the  Governor's bill                                                            
would  not jeopardize  those individuals  currently  in the  program                                                            
provided they not experience  an increase in their income level, but                                                            
would allow  for a downsizing  of the program  over time. He  stated                                                            
that  the  Senate  HES  committee  version   "would  roll  back  the                                                            
standards,"  and consequently  incur a larger  reduction. He  stated                                                            
that  the   bill  recognizes   that  there   are  benefits   to  the                                                            
continuation of these types  of programs such as reducing the amount                                                            
of  low birth  rate  babies  and providing  insurance  coverage  for                                                            
pregnant  women, children  and the  disabled; however  the costs  of                                                            
these programs "coupled  together" is leading to a situation wherein                                                            
the ability  of the State  "to pay for good  services and have  good                                                            
reimbursement   rates  for  those  individuals  who   are  currently                                                            
covered" is being threatened.                                                                                                   
                                                                                                                                
Senator Hoffman expressed  that while this bill might produce short-                                                            
term savings, the long-term costs might increase.                                                                               
                                                                                                                                
Commissioner   Gilbertson  acknowledged   that  there  are   savings                                                            
resulting from  providing State funded  insurance coverage  although                                                            
other health care  options, such as community health  centers, "3-30                                                            
grants and clinics,"  uncompensated care awards, volunteer  services                                                            
by providers,  and other insurance  coverage might be available.  He                                                            
acknowledged  that the State does  "have a problem with individuals                                                             
being  uninsured or  underinsured."  However, he  continued, as  the                                                            
programs  continue  to experience  growth  and "the  State's  income                                                            
standards  rise  to the  point where  we  see individuals  that  are                                                            
moving  into  higher  income  brackets   being  eligible  for  State                                                            
programs,"  the State might not have  the resources "to provide  its                                                            
match  so we  can have  a good  reimbursement  rate  for low  income                                                            
individuals and provide needed services."                                                                                       
                                                                                                                                
Senator  Hoffman acknowledged  this,  but asked  whether the  fiscal                                                            
note's projected  program savings  or other State programs  would be                                                            
negatively  affected by not  providing these  services to the  three                                                            
identified groups.                                                                                                              
                                                                                                                                
Commissioner   Gilbertson   clarified   that   the   HES   committee                                                            
substitute,  rather than the Governor's  version of the bill,  would                                                            
affect  program  eligibility  standards.  He  stated  that  the  HES                                                            
committee  substitute  is  projected  to  produce  $7.1  million  in                                                            
savings,  and he continued,  research does  not indicate  additional                                                            
demand would  be placed on other services  the Department  provides.                                                            
He  stated  that pregnant  women  currently  in  the  program  would                                                            
continue  to receive care.  He acknowledged  that prenatal  care has                                                            
positive results  in terms of health care dollars  spent and that it                                                            
is unknown  what health  care options  future  pregnant women  could                                                            
receive, but  "it is expected that  they would still receive  care."                                                            
                                                                                                                                
Senator Hoffman  voiced that the long-term costs of  the HES version                                                            
of the bill would outweigh the short-term savings.                                                                              
                                                                                                                                
Commissioner Gilbertson  stated that the Administration  agrees that                                                            
savings  do  occur  from  providing  health  care  to  children  and                                                            
pregnant women, and that  is the reason the Governor's bill proposes                                                            
to "lock in" the current standards.                                                                                             
                                                                                                                                
Senator  Hoffman  asked  whether the  Department  supports  the  HES                                                            
amended standards.                                                                                                              
                                                                                                                                
Commissioner    Gilbertson    expressed    that    the    Governor's                                                            
administration does not support the HES committee substitute.                                                                   
                                                                                                                                
Senator  Hoffman voiced  support of  the Governor's  version of  the                                                            
bill.                                                                                                                           
                                                                                                                                
Co-Chair  Wilken asked  for clarification  that 150  percent of  the                                                            
federal  poverty  level  is  the  minimum   level  the  State  could                                                            
authorize,  as referenced  in the "2003  Federal Poverty  Guidelines                                                            
for Alaska" [copy on file] chart provided by the Department.                                                                    
                                                                                                                                
Commissioner  Gilbertson  responded, that  in order  "to access  the                                                            
federal enhanced  match rate,"  the State  must establish a  minimum                                                            
150 percent  of federal poverty level  standard. He shared  that the                                                            
enhanced  match rate increases  the federal  match contribution  for                                                            
the Denali KidCare program from 60 percent to 71 percent.                                                                       
                                                                                                                                
Co-Chair Wilken  asked for confirmation  that the income  figures in                                                            
the chart do not include the permanent fund dividend.                                                                           
                                                                                                                                
Commissioner Gilbertson replied that is correct.                                                                                
                                                                                                                                
Senator  B. Stevens  asked  whether  the  information  in the  chart                                                            
includes the 25 percent Cost of Living Allowance (COLA).                                                                        
                                                                                                                                
Commissioner Gilbertson responded that it does.                                                                                 
                                                                                                                                
Co-Chair Wilken noted that  1,200 individuals "would lose services."                                                            
He asked the  Department to provide  detailed information  as to who                                                            
would be affected.                                                                                                              
                                                                                                                                
Commissioner Gilbertson  responded that this information is included                                                            
on page two of  the HES fiscal note. He noted that  both the HES and                                                            
Governor's  version  of the bill  maintain  the 300  percent of  the                                                            
special income standard  for individuals requiring long-term care or                                                            
home  or  community  based  waiver  services.  He  stated  that  the                                                            
Governor's 200  percent of federal poverty standard  would reflect a                                                            
net decease  of  61 cases  in the Denali  KidCare  program in  2004,                                                            
whereas the HES  version would incur a net decrease  of 1,213 cases.                                                            
                                                                                                                                
Co-Chair Wilken asked the  deadline for individuals to qualify under                                                            
the existing standards.                                                                                                         
                                                                                                                                
Commissioner Gilbertson responded that it is June 30, 2003.                                                                     
                                                                                                                                
Co-Chair  Wilken  asked  the  total number  of  individuals  in  the                                                            
affected programs.                                                                                                              
                                                                                                                                
Commissioner   Gilbertson  responded   that  the  total   number  of                                                            
individuals  in the  program would  be supplied.  He estimated  that                                                            
approximately  26,000 children  are in the  Denali KidCare  program;                                                            
therefore,  he calculated  that approximately  four  percent of  the                                                            
children in the program would be affected.                                                                                      
                                                                                                                                
Co-Chair Wilken asked the  Department to provide the total number of                                                            
individuals in  the programs as well as information  regarding other                                                            
health care options.                                                                                                            
                                                                                                                                
Senator  Hoffman  questioned  the percentage  calculation  of  those                                                            
being affected by changes in the Denali KidCare program.                                                                        
                                                                                                                                
Co-Chair Wilken  asked the Department  to confirm the percentage  of                                                            
program participants who would be affected.                                                                                     
                                                                                                                                
Co-Chair Green  moved to report CS SB 105 (HES) from  Committee with                                                            
individual recommendations and accompanying fiscal note.                                                                        
                                                                                                                                
Senator Hoffman objected.                                                                                                       
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Bunde, Senator B. Stevens, Co-chair Green, and                                                                
 Co-chair Wilken                                                                                                                
                                                                                                                                
OPPOSED: Senator Hoffman, Senator Olson                                                                                         
                                                                                                                                
ABSENT: Senator Taylor                                                                                                          
                                                                                                                                
The motion PASSED (4-2-1)                                                                                                       
                                                                                                                                
CS SB  105(HES)  was REPORTED  from Committee  with  a new  negative                                                            
$7,151,300 fiscal  note, dated April 8, 2003 from  the Department of                                                            
Health and Social Services.                                                                                                     
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 173                                                                                                        
     "An  Act repealing statutes  pertaining  to the Alaska  Science                                                            
     and  Technology  Foundation   and  transferring  money  in  the                                                            
     foundation's  endowment;  repealing  statutes  relating to  the                                                            
     BIDCO assistance program;  repealing statutes pertaining to the                                                            
     international  trade  and business endowment  and transferring                                                             
     money  in  the  international  trade  and  business  endowment;                                                            
     transferring  oversight  administration  of outstanding  Alaska                                                            
     Science  and  Technology Foundation  loans  and  grants to  the                                                            
     Alaska   Industrial    Development   and   Export    Authority;                                                            
     establishing   an  Alaska  BIDCO   assistance  program   to  be                                                            
     administered  by  the  Department  of  Community  and  Economic                                                            
     Development;  making conforming  amendments; and providing  for                                                            
     an effective date."                                                                                                        
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-chair Wilken explained  that this bill, which is requested by the                                                            
Governor, would  repeal the statutes relating to the  Alaska Science                                                            
and Technology  Foundation  (ASTF)  and its programs.  He  specified                                                            
that the  BIDCO (Business  and Industrial  Development Corporation)                                                             
assistance  program  would be  replaced with  a program  within  the                                                            
Department   of  Community  and  Economic   Development,   and  that                                                            
oversight  of the former  ASTF program would  be transferred  to the                                                            
Alaska Industrial Development & Export Authority (AIDEA).                                                                       
                                                                                                                                
EDGAR  BLATCHFORD,   Commissioner,   Department  of  Community   and                                                            
Economic Development read  the language included in the title of the                                                            
bill. He then read a portion  of the Department overview titled "The                                                            
Alaska Science  and Technology  Foundation,"  [copy on file],  dated                                                            
March 25, 2003 as follows.                                                                                                      
                                                                                                                                
   ASFT was  created in  1988 with an  endowment  of more than  $100                                                            
   million to  support  grants for  technology  projects,  knowledge                                                            
   projects, small  business  innovative research  bridging  grants,                                                            
   and direct grants  to teachers. Through  its endowment,  ASTF has                                                            
   generated about $126 million in  income for distribution. Between                                                            
   1988 and 2002, one half  of the endowment income  - $63 million -                                                            
   has been appropriated and spent for "non-ASTF purposes":                                                                     
                                                                                                                                
     · $35 million for University of Alaska operations, Alaska                                                                  
        Aerospace Development (AADC) Corporation operations, and                                                                
        International Trade and Development office operations;                                                                  
     · $11 million was used to match federal funding for                                                                        
        construction of the AADC's $39 million Kodiak Rocket Launch                                                             
        Center; and                                                                                                             
     · $17 million was appropriated to the state general fund.                                                                  
                                                                                                                                
   Distributions to  support core programs  totaled: $25 million  in                                                            
   technology grants,  $10 million  for other  knowledge grants;  $8                                                            
   million for business  partners, and $2 million  in grants to math                                                            
   and science teachers.  Foundation operating expenses  totaled $13                                                            
   million, equal to 35%  of the $45 million spent  for core purpose                                                            
   grants.                                                                                                                      
                                                                                                                                
   In mid-March the Legislature passed  and the Governor signed into                                                            
   law  a  supplemental   appropriation   reducing   ASTF  FY   2003                                                            
   operations to amounts  spent and obligated  to date and  included                                                            
                                                             th                                                                 
   instruction  to ASTF  to wind  down operations  by May  15.   The                                                            
   Governor's FY 2004  budget supports  the Legislative directive  -                                                            
   no funding is provided for ASTF.                                                                                             
                                                                                                                                
Commissioner Blatchford  informed the Members that due to serving on                                                            
a Native  tribal  council, which  has applied  for  ASTF grants,  he                                                            
wished to declare  a potential conflict of interest  on this matter.                                                            
                                                                                                                                
Senator  Stevens asked  the identity  of the  business partners  who                                                            
received the $8 million.                                                                                                        
                                                                                                                                
TOM  LAWSON,   Director,   Division  of   Administrative   Services,                                                            
Department  of Community  and Economic Development,  specified  that                                                            
the  partners  include the  BIDCO  entities  of: the  Alaska  Growth                                                            
Capital; Alaska  Manufacturer's Association;  Alaska InvestNet;  and                                                            
the Alaska  Hi-Tech Business Council.  He stated that the  money was                                                            
allotted  to  those  entities  to  allow  them  to  operate  various                                                            
functions.                                                                                                                      
                                                                                                                                
Co-Chair Wilken asked for  information regarding language in Section                                                            
5 (1) on page 2, line 15 of the bill that reads as follows.                                                                     
                                                                                                                                
     (1) administering the Alaska BIDCO assistance program related                                                              
     to loans and other financial assistance made or provided under                                                             
     AS 37.17.500 - 37.17.690;                                                                                                  
                                                                                                                                
Mr.  Lawson  responded  that the  intent  of  this language  is  "to                                                            
replicate  the BIDCO  program" in  the Department  of Community  and                                                            
Economic  Development rather  than in ASTF.  He asserted that  while                                                            
the  "shell  of the  program"  is  being transferred,  there  is  no                                                            
accompanying   request   for  funding.   He  stated   that   further                                                            
information regarding the language would be supplied.                                                                           
                                                                                                                                
Co-chair Wilken  asked that information regarding  Alaska statute AS                                                            
37.17.500  be  supplied  to  the  Committee,  as  it  is  frequently                                                            
referenced in the bill.                                                                                                         
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 153                                                                                                        
     "An Act authorizing a long-term lease of certain Alaska                                                                    
     Railroad Corporation land at Anchorage; and providing for an                                                               
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken explained  that this legislation  "would allow  the                                                            
Alaska Railroad  to lease certain corporation land  in Anchorage for                                                            
a period  in  excess of  55 years  without  reserving  the right  to                                                            
terminate the lease."                                                                                                           
                                                                                                                                
RICHARD SCHMITZ,  Staff to Senator John Cowdery, explained  that the                                                            
purpose  of  this   legislation  is  to  allow  Alaska  Enfranchise                                                             
Facilities, Inc  to build a multi-family, senior housing  project on                                                            
leased  Alaska  Railroad  land  on  Government  Hill  in  Anchorage,                                                            
utilizing a federal Housing  and Urban Development (HUD), Section 2,                                                            
grant.  He continued that  "the way  the law now  reads, the  Alaska                                                            
Railroad  can approve  leases in excess  of 55  years; however,  the                                                            
railroad  must reserve  the right  to terminate  the  leases in  the                                                            
event  the  land is  needed  for  railroad  purposes."  However,  he                                                            
continued,  recently enacted federal  regulations require  a minimum                                                            
75-year lease,  and in  order to accommodate  this grant's  timeline                                                            
requirement, this  bill seeks to remove the termination  clause from                                                            
the lease agreement.  He noted that State statute  allows the Alaska                                                            
Railroad to request this  language exemption as exampled by previous                                                            
legislation, CS HB 344(FIN) [copy on file].                                                                                     
                                                                                                                                
Mr.  Schmitz noted  that  Alaska Enfranchise  Facilities,  Inc.  has                                                            
received  a  55-year   lease,  but  requires  this  legislation   to                                                            
accommodate the federal grant provisions.                                                                                       
                                                                                                                                
                                                                                                                                
SFC 03 # 43, Side B 09:52 AM                                                                                                    
                                                                                                                                
                                                                                                                                
MARC  MARLOW, Alaska  Enfranchise  Facilities,  Inc., testified  via                                                            
teleconference  from Anchorage  to explain  that Alaska Enfranchise                                                             
Facilities, Inc (AEF) is  a 501-C3 non-profit entity, which proposes                                                            
to construct senior  housing on the property it is  leasing from the                                                            
Alaska Railroad. However,  he continued, in order to qualify for two                                                            
federal  grants to  fund the  project, a  75-year lease  must be  in                                                            
place.                                                                                                                          
                                                                                                                                
SUSANNE DIPEITRO,  Co-President, Government  Hill Community  Council                                                            
(GHCC),  testified  via  teleconference   from  Anchorage  to  voice                                                            
concerns regarding  this lease. She informed the Committee  that two                                                            
entities were  interested in leasing  the land and applying  for the                                                            
HUD grants; and,  she opined, Mr. Marlow signed the  lease paperwork                                                            
with the knowledge  that the 55-year  lease did not qualify  for the                                                            
HUD grant.  Now, she continued, after  eliminating "the competitive                                                             
process," he is  "asking for you to essentially change  the terms of                                                            
the  lease,"  so that  he  can  qualify  for money  that  the  other                                                            
applicant does not have the benefit of."                                                                                        
                                                                                                                                
Ms. DiPeitro  continued that the GHSS  would like to participate  in                                                            
the  discussion  regarding  what is  constructed  on the  site.  She                                                            
continued that  she has furthered this request with  Mr. Marlow, and                                                            
she voiced  that "an understanding"  about this communication  could                                                            
be  possible;  however, she  stated,  the  Community Council  is  on                                                            
record in opposition to this legislation.                                                                                       
                                                                                                                                
Co-chair  Wilken noted  that  the Committee  has a  letter [copy  on                                                            
file] from the GHSS, dated  March 21, 2003, stating its position. He                                                            
specified  that  the  information  supplied  by  Alaska Enfranchise                                                             
Facilities,  Inc.  titled  "Providing  safe,  Clean  and  affordable                                                            
Housing for Alaskan Seniors"  [copy on file] has also been received.                                                            
                                                                                                                                
Co-Chair  Green asked  Mr. Marlow  for information  regarding  other                                                            
legislation that he has previously submitted to the Legislature.                                                                
                                                                                                                                
Mr. Marlow responded  that he was involved in legislation  "to amend                                                            
Alaska Statute  45 that would have allowed municipalities  to extend                                                            
property tax relief to  projects that would provide for facilitating                                                            
urban redevelopment."                                                                                                           
                                                                                                                                
Co-Chair  Green asked  the  name of  the building  that legislation                                                             
involved.                                                                                                                       
                                                                                                                                
Mr.  Marlow  identified  the  building  as  the  McKay  Building  in                                                            
downtown Anchorage.                                                                                                             
                                                                                                                                
Co-Chair  Green asked  whether the  previous  request involved  more                                                            
than one piece of legislation.                                                                                                  
                                                                                                                                
Mr. Marlow  stated that the bill was  introduced in one Legislative                                                             
session,  but was not acted  upon. Therefore,  he continued,  it was                                                            
re-introduced the following session.                                                                                            
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 09:58 AM                                                                          

Document Name Date/Time Subjects