Legislature(2009 - 2010)

04/08/2009 04:35 PM Senate FIN


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                 SENATE FINANCE COMMITTEE                                                                                       
                       April 8, 2009                                                                                            
                         4:35 p.m.                                                                                              
                                                                                                                                
4:35:39 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Stedman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 4:35 p.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Charlie Huggins, Vice-Chair                                                                                             
Senator Johnny Ellis                                                                                                            
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator Gene  Therriault; Representative Bill  Thomas; Diane                                                                    
Barrans,   Executive   Director,   Postsecondary   Education                                                                    
Commission, Department  of Education and  Early Development;                                                                    
Jerry  Burnett, Deputy  Commissioner, Division  of Treasury,                                                                    
Department of Revenue; Tom  Obermeyer, Staff, Senator Bettye                                                                    
Davis; Senator Bettye Davis;  Linda Hall, Director, Division                                                                    
of   Insurance,  Department   of  Commerce,   Community  and                                                                    
Economic  Development; Miles  Baker,  Staff, Senate  Finance                                                                    
Committee.                                                                                                                      
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Lee  Donner,  Managing  Director, First  Southwest  Company,                                                                    
Consultant,   Student   Loan  Corporation,   Department   of                                                                    
Education  and  Early   Development;  Dr.  Jeanie  Anderson,                                                                    
Katmai  Oncology; Shiela  Tallman,  Premera Blue  Cross/Blue                                                                    
Shield  of Alaska;  Hanna Smith,  Self, Fairbanks;  Dr. Mary                                                                    
Stewart,   Medical   Oncologist,  Denali   Oncology   Group,                                                                    
Anchorage;   Emily   Nenon,  Alaska   Government   Director,                                                                    
American  Cancer  Society;   Dr.  Lathasubarian;  Pat  Luby,                                                                    
Advocacy Director, Alaska Association of Retired Persons                                                                        
(AARP), Anchorage.                                                                                                              
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 10     "An Act requiring health care insurers to provide                                                                     
          insurance coverage for medical  care received by a                                                                    
          patient  during certain  approved clinical  trials                                                                    
          designed   to   test   and   improve   prevention,                                                                    
          diagnosis,  treatment,  or palliation  of  cancer;                                                                    
          directing  the  Department  of Health  and  Social                                                                    
          Services to  provide Medicaid services  to persons                                                                    
          who   participate   in  those   clinical   trials;                                                                    
          relating to experimental  procedures under a state                                                                    
          plan   offered   by   the   Comprehensive   Health                                                                    
          Insurance  Association;   and  providing   for  an                                                                    
          effective date."                                                                                                      
                                                                                                                                
          SB10 was  HEARD and HELD in  Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
SB 75     "An Act making and amending appropriations,                                                                           
          including  capital   appropriations,  supplemental                                                                    
          appropriations,  and appropriations  to capitalize                                                                    
          funds; and providing for an effective date."                                                                          
                                                                                                                                
          SB 75 was HEARD and HELD in Committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
CS HB 172(FIN)                                                                                                                  
          "An Act relating to an investment in the                                                                              
          education  loan fund;  relating  to authority  for                                                                    
          the commissioner  of revenue to enter  into a bond                                                                    
          purchase agreement  and letter of credit  with the                                                                    
          Alaska  Student  Loan Corporation;  and  providing                                                                    
          for an effective date."                                                                                               
                                                                                                                                
          CS HB 172(FIN) was HEARD and HELD in Committee                                                                        
          for further consideration.                                                                                            
                                                                                                                                
HOUSE BILL NO. 172                                                                                                            
                                                                                                                                
     "An  Act relating  to an  investment  in the  education                                                                    
     loan fund;  relating to authority for  the commissioner                                                                    
     of revenue to enter into  a bond purchase agreement and                                                                    
     letter of credit with the Alaska Student Loan                                                                              
    Corporation; and providing for an effective date."                                                                          
                                                                                                                                
4:36:36 PM                                                                                                                    
                                                                                                                                
DIANE BARRANS,  EXECUTIVE DIRECTOR,  POSTSECONDARY EDUCATION                                                                    
COMMISSION, DEPARTMENT  OF EDUCATION AND  EARLY DEVELOPMENT,                                                                    
explained  that the  legislation allows  the Alaska  Student                                                                    
Loan Corporation  (ASLC) to partner  with the  Department of                                                                    
Revenue  to provide  interim financing  for  the purpose  of                                                                    
originating  student loans.  As a  result of  the continuing                                                                    
disruption of the  capital markets, ASLC has  been unable to                                                                    
issue  student  loan backed  bonds  to  finance new  student                                                                    
loans. Internal  liquidity was used  to finance  $95 million                                                                    
in new  originated loans  for 2008 -  2009, but  these funds                                                                    
will be  exhausted by  the 2009-2010  loan year.  House Bill                                                                    
172 allows the commissioner of  the Department of Revenue to                                                                    
invest directly in  student loans with an  investment cap of                                                                    
$100 million.  The ASLC would  have to repay  the obligation                                                                    
in no more than five years.                                                                                                     
                                                                                                                                
Ms. Barrans said that this  legislation would also authorize                                                                    
the commissioner  to provide a liquidity  facility or letter                                                                    
of  credit. Under  current market  conditions,  the cost  to                                                                    
acquire a  letter of credit  or liquidity facility  in order                                                                    
to issue variable  rate bonds is so high that  ASLC would be                                                                    
unable to make student loans  available on an economic basis                                                                    
under existing statute. The liquidity  facility or letter of                                                                    
credit would act  as a standby bond  purchase agreement that                                                                    
would allow ASLC to issue  bonds that would be attractive to                                                                    
investors.                                                                                                                      
                                                                                                                                
4:40:42 PM                                                                                                                    
                                                                                                                                
Ms.  Barrans   noted  that  the  department   has  suspended                                                                    
applications   for   the   2009-2010  academic   year.   The                                                                    
suspension will continue until  the loan financing situation                                                                    
is resolved.                                                                                                                    
                                                                                                                                
JERRY  BURNETT, DEPUTY  COMMISSIONER, DIVISION  OF TREASURY,                                                                    
DEPARTMENT  OF REVENUE,  explained that  the Alaska  Student                                                                    
Loan Corporation had come to  the department over a year ago                                                                    
for  assistance in  securing funding  and liquidity  for the                                                                    
loan program. Mr. Burnett  furthered that discussions ensued                                                                    
with the  Office of  Management and  Budget and  all options                                                                    
were carefully  considered. A direct appropriation  from the                                                                    
General Fund,  specifically the  GeFONSI pool  (General Fund                                                                    
and  Other Non-segregated  Investments) up  to $100  million                                                                    
was  concluded to  be the  workable solution.  He elaborated                                                                    
that the plan would use  GeFONSI funds to directly invest in                                                                    
the Corporation's loan fund and  create a liquidity facility                                                                    
to back the  loans.  The GeFONSI pool has  a current balance                                                                    
of $7.2 billion  and in the last 14 years  has never dropped                                                                    
below  $600 million.  The department  is confident  the pool                                                                    
could  support   the  $206  million  provided   for  in  the                                                                    
legislation  as illiquid  investments.  He  stated that  the                                                                    
department would  charge the corporation interest  at market                                                                    
rates on the loan, and still  earn the 15 basis point fee on                                                                    
the credit  facility, which  would allow  it to  continue to                                                                    
invest in other securities.                                                                                                     
                                                                                                                                
4:43:26 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman asked  if  Power  Cost Equalization  (PCE)                                                                    
funds  were  included  in  the  GeFONSI  fund.  Mr.  Burnett                                                                    
replied that the  PCE endowment is not in  the fund, however                                                                    
some PCE funds are in the baseline group.                                                                                       
                                                                                                                                
Co-Chair  Stedman  asked  for  clarification  regarding  the                                                                    
baseline  group. Mr.  Burnett  responded  that the  baseline                                                                    
group  contains  funds  that   retain  a  relatively  stable                                                                    
balance over  time, such  as the  Oil &  Hazardous Substance                                                                    
Response   Account.   The   GeFONSI   fund   also   contains                                                                    
approximately 100  other funds, including the  general fund,                                                                    
the  statutory   budget  reserve  and  the   capital  income                                                                    
account.                                                                                                                        
                                                                                                                                
Co-Chair  Stedman requested  additional backup  and detailed                                                                    
information regarding the composition of the GeFONSI Fund.                                                                      
Mr. Burnett replied that he  would obtain and distribute the                                                                    
information. He  added that  GeFONSI is  currently comprised                                                                    
of $2.4 billion unrestricted  general funds and $4.8 billion                                                                    
of other encumbered  funds. He emphasized that  GeFONSI is a                                                                    
pooled  investment fund.  Co-Chair Stedman  inquired if  the                                                                    
$2.4  billion  fund   contained  the  Constitutional  Budget                                                                    
Reserve (CBR)  and the Statutory  Budget Reserve  (SBR). Mr.                                                                    
Burnett replied  that only the  SBR is included in  the $4.8                                                                    
billion pool of other  funds. Co-Chair Stedman remarked that                                                                    
the  committee  has  concerns  regarding  liquidity  of  the                                                                    
funds.                                                                                                                          
                                                                                                                                
4:46:29 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman  asked  what  the  returns  on  the  funds                                                                    
amounted to over the last  year. Mr. Burnett replied that he                                                                    
did not  have that  information with him  but would  make it                                                                    
available to the committee.  Co-Chair Hoffman requested that                                                                    
Mr. Burnett  estimate the amount. Mr.  Burnett reported that                                                                    
the returns  were positive; mostly short  term, fixed income                                                                    
investments.                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  reiterated  his questions  regarding  PCE                                                                    
funds.  Mr.  Burnett clarified  that  PCE  was removed  from                                                                    
GeFONSI and a separate PCE endowment was created in 2005.                                                                       
                                                                                                                                
4:47:36 PM                                                                                                                    
                                                                                                                                
Co-Chair   Hoffman   asked   for  details   concerning   the                                                                    
guidelines and  schedule ASLC has  to repay the  loan funds.                                                                    
Mr. Burnett  replied that the  details of repayment  had not                                                                    
been negotiated. The  funds will be backed  by student loans                                                                    
and  the intent  is to  have the  corporation refinance  the                                                                    
loans as soon as capital markets allow.                                                                                         
                                                                                                                                
Co-Chair Hoffman  noted the breakdown  of student  loans; 60                                                                    
percent in  state and 40 percent  out of state. He  asked if                                                                    
the  same ratio  is expected  if the  plan is  approved. Ms.                                                                    
Barrans remarked that she did  not expect the composition of                                                                    
borrowers  or  borrowing  behavior  to  change  due  to  the                                                                    
funding source. She suggested that  there may be an increase                                                                    
in  the  percentage  of  loans   for  attendance  in  Alaska                                                                    
primarily due to the impact  the current economic crisis has                                                                    
on families.                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman  asked  if  a  preference  were  given  to                                                                    
students  who remain  in Alaska.  Ms. Barrans  reported that                                                                    
there is no  preference to students to access  the loans but                                                                    
a preferred interest rate of  one-half percent is granted to                                                                    
students who return to or attend in Alaska.                                                                                     
                                                                                                                                
4:50:26 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  wondered what the number  of student loans                                                                    
is  anticipated  to be  issued  by  next June.  Ms.  Barrans                                                                    
estimated  12,000 loans  would  be issued  at  a total  loan                                                                    
volume of $85 - $95  million. Co-Chair Stedman asked if $100                                                                    
million will  be sufficient. Ms. Barrans  expounded that the                                                                    
corporation believes this approach  is significant enough to                                                                    
avoid another  appropriation request  next year.  She stated                                                                    
that if the market  disruption continues and the corporation                                                                    
could not successfully issue bonds  in the interim that this                                                                    
proposal,  allowing  for  the  internal  receipt  of  funds,                                                                    
potentially  provides  enough  funds through  the  2010-2011                                                                    
cycle. She believes  ASLC will be able to  issue debt within                                                                    
the next six months via variable rate demand bonds.                                                                             
                                                                                                                                
Co-Chair Stedman  cited the  Department of  Revenue's fiscal                                                                    
note (DOR 4)  analysis and asked for an  explanation of what                                                                    
fiduciary duties  apply and how  that will earn a  return to                                                                    
the  state. Mr.  Burnett  explained that  the bill  requires                                                                    
that  the  bridge  loan  to the  corporation  be  backed  by                                                                    
student loans.  Therefore, the department will  enter into a                                                                    
contractual  agreement with  ASLC that  states the  terms of                                                                    
repayment of  the principle with  interest. The loan  to the                                                                    
corporation will be over collateralized  with respect to the                                                                    
default rate  on student loans  and an origination  fee will                                                                    
be charged.                                                                                                                     
                                                                                                                                
Co-Chair Stedman asked how  internal policies and procedures                                                                    
will  be addressed.  Mr. Burnett  stated  that new  policies                                                                    
will  be  created  to  be   consistent  with  the  fiduciary                                                                    
requirements of  the legislation. He explained  that current                                                                    
policies would  not allow  for the  investment concentration                                                                    
in one asset [student loans] that the bill establishes.                                                                         
                                                                                                                                
4:53:52 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  requested  the  schedule  of  outstanding                                                                    
student loans. Ms.  Barrans replied that as  of December 31,                                                                    
2007 the  balance of  outstanding alternative  student loans                                                                    
was  $561  million with  $81  million  of student  loans  in                                                                    
default.  She  explained that  she  could  provide a  report                                                                    
containing  additional  characteristic   information  and  a                                                                    
summary of the status of the outstanding student loans.                                                                         
                                                                                                                                
Co-Chair  Hoffman   requested  the  information   include  a                                                                    
breakdown  between in-state  and out-of-state  students. Co-                                                                    
Chair Hoffman  asked what other  states provide  state loans                                                                    
that  allow students  to  attend out-of-state  institutions.                                                                    
Ms. Barrans replied that all  other state's alternative loan                                                                    
programs  allow portability.  Co-Chair  Hoffman wondered  if                                                                    
they were  similar to the  ASLC program. Ms.  Barrans stated                                                                    
that they are all similar  in many respects. She exemplified                                                                    
New  York  State's loan  program  that  contains a  fund  to                                                                    
guarantee  those loans  against default  as an  example that                                                                    
while  some  elements  of other  states  programs  might  be                                                                    
different they all allow portability.                                                                                           
                                                                                                                                
4:57:54 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman cited the April  7th letter from ASLC (Copy                                                                    
on File)  to the  committee. He  asked for  clarification of                                                                    
the information  submitted to the committee  specifically to                                                                    
the requested  sum of $100 million  for approximately 12,000                                                                    
loans and what  amount will be issued within  the next year.                                                                    
Ms. Barrans  replied that it would  be over a period  of one                                                                    
to two years depending on  loan volume. She guessed that the                                                                    
volume  will  drop  slightly due  to  the  tightened  credit                                                                    
standards  being implemented.  She  expected  the amount  to                                                                    
total  close to  $85  million next  year. Co-Chair  Steadman                                                                    
requested the discussion focus on  the issues as they relate                                                                    
to a one year period.                                                                                                           
                                                                                                                                
Co-Chair  Stedman  asked  Mr.  Burnett  to  explain  if  the                                                                    
economic crisis credit seize up  as it relates to the Alaska                                                                    
housing  issue earlier  this year  causes  exposure for  the                                                                    
state  and if  it  still  has an  effect  on current  credit                                                                    
conditions.  Mr.  Burnett  responded  that  except  for  the                                                                    
period  of last  September  through December  there has  not                                                                    
been  a  serious  liquidity  issue that  cannot  be  met  by                                                                    
existing  credit providers  such as  Alaska Housing  Finance                                                                    
Corporation. He stated  that DOR is not  considered a credit                                                                    
provider.                                                                                                                       
                                                                                                                                
Co-Chair Stedman  queried the  corporation for  other ideas,                                                                    
solutions,  and options  rather  than  soliciting for  state                                                                    
funds.                                                                                                                          
                                                                                                                                
4:59:59 PM                                                                                                                    
                                                                                                                                
Ms. Barrans  answered that the corporation  along with their                                                                    
financial  advisor   had  studied  solutions   other  states                                                                    
employed  to solve  this problem.  She said  that each  case                                                                    
required  some  financial  support  from  their  state.  She                                                                    
reiterated that the dilemma is  that the capital markets the                                                                    
student   loan   entities   would  be   accessing,   without                                                                    
dependence  on their  state are  no longer  available at  an                                                                    
affordable  cost. The  other option  discussed  was for  the                                                                    
state  to finance  the program  with a  direct appropriation                                                                    
from the general  fund for a period of time.  The option was                                                                    
rejected because  the ASLC program was  initially created to                                                                    
avoid dependence on  the use of state general  funds and the                                                                    
variability of  those funds from  one year to the  next. Ms.                                                                    
Barrans   stressed   that    this   market   disruption   is                                                                    
unprecedented. Co-Chair Stedman surmised  that there are not                                                                    
a lot of alternative solutions available.                                                                                       
                                                                                                                                
Senator  Huggins asked  for the  interest rates  on in-state                                                                    
and  out-of-state  loans.  Ms.  Barrans  answered  that  the                                                                    
interest rates are 6.8 percent  for in-state and 7.3 percent                                                                    
for  out-of-state  alternative  loans. She  added  that  the                                                                    
loans  offered  through  the federally  guaranteed  Stafford                                                                    
loan  program present  the lowest  risks to  the corporation                                                                    
and can be offered at interest rates of 6 percent or below.                                                                     
                                                                                                                                
Senator Huggins  asked what  the interest  rates will  be in                                                                    
2010-2011. Ms. Barrans expected rates  to remain in the same                                                                    
range. She said there was a statutory cap of 8.25 percent.                                                                      
                                                                                                                                
5:04:08 PM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman  requested the amount that  the corporation                                                                    
was able  to sell the bonds  for and at what  interest rates                                                                    
over the previous five years.  Ms. Barrans replied she would                                                                    
provide the information.                                                                                                        
                                                                                                                                
Co-Chair  Stedman asked  if this  bill was  the only  option                                                                    
available to fund higher education in Alaska.                                                                                   
                                                                                                                                
LEE  DONNER,  MANAGING  DIRECTOR, FIRST  SOUTHWEST  COMPANY,                                                                    
CONSULTANT,   STUDENT   LOAN  CORPORATION,   DEPARTMENT   OF                                                                    
EDUCATION  AND   EARLY  DEVELOPMENT   (via  teleconference),                                                                    
explained  that  the provisions  of  the  legislation is  to                                                                    
provide  interim  financing  and a  stand-by  bond  purchase                                                                    
agreement  or  letter of  credit.  He  stated that  if  this                                                                    
strategy  works the  corporation  should be  able to  access                                                                    
capital  markets  and raise  capital  in  the open  markets,                                                                    
within the  next six  months to  finance the  FFELP (Federal                                                                    
Family Education  Loan Program)  and fixed  rate alternative                                                                    
loans. The combined  financing of both types  of loans would                                                                    
allow  the corporation  to repay  the interim  financing. He                                                                    
agreed with  Ms. Barrans  that other  states options  to the                                                                    
loan  crisis   all  involved  direct   intervention,  albeit                                                                    
different  approaches.  Other plans  vary  in  costs to  the                                                                    
state ranging from direct appropriation,  to risk of general                                                                    
obligation  coverage  on  the  debt,  to  plans  similar  to                                                                    
Alaska's  with the  little associated  risk. He  exemplified                                                                    
the state of  Texas direct involvement to  grant the state's                                                                    
general obligation  to the bondholders.  The debt  becomes a                                                                    
general  obligation  of the  state  of  Texas. In  contrast,                                                                    
Alaska's  plan  has  no  cost  to the  state,  if  the  bond                                                                    
purchase agreement  or letter of credit  is adequately rated                                                                    
as  anticipated,   and  has  the  potential   of  generating                                                                    
revenue. He  noted that in the  event that the state  has to                                                                    
purchase  the bonds  there is  an  applicable interest  rate                                                                    
that the bonds  bear to the state during the  length of time                                                                    
the state owns the bonds.                                                                                                       
                                                                                                                                
5:08:51 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman referred  to the  historic balance  of the                                                                    
GeFONSI account indicated  on the graph provided  in the DOR                                                                    
handout (copy  on file) and  asked what the  minimum balance                                                                    
was  since  1996.  Mr.  Burnett  replied  that  the  minimum                                                                    
balance was  $600 million. Co-Chair  Stedman asked  when the                                                                    
$100 million  tied up as  liquidity would  be a risk  to the                                                                    
state  especially   if  there  are  repeated   requests  for                                                                    
additional appropriations.  Mr. Burnett  stated that  he was                                                                    
comfortable  with an  amount well  below  $600 million.  Co-                                                                    
Chair Stedman  recapped that  the department  is comfortable                                                                    
with the  $100 million  request but  repeated appropriations                                                                    
are  not  advisable. Mr.  Burnett  agreed  that this  amount                                                                    
would cause concern after two years.                                                                                            
                                                                                                                                
Ms. Barrans  reminded the committee  that $100 million  is a                                                                    
maximum cap, not  per annum request. She  explained that the                                                                    
$100 million  could be expended  over a period of  more than                                                                    
one year. She added that  the corporation does not expect to                                                                    
request additional funds.                                                                                                       
                                                                                                                                
5:11:52 PM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman  asked if the  economy continues  to falter                                                                    
would the  department return to the  legislature and request                                                                    
additional loan guarantees. Mr.  Burnett replied that if the                                                                    
markets continue to fail over  a two year period the student                                                                    
loan  corporation   will  need  to  consider   more  extreme                                                                    
measures such  as termination of the  program. He emphasized                                                                    
that  the  state could  not  continue  to loan  under  those                                                                    
circumstances.                                                                                                                  
                                                                                                                                
CSHB 172(FIN)  was HEARD and  HELD in Committee  for further                                                                    
consideration.                                                                                                                  
                                                                                                                                
5:14:00 PM          AT EASE                                                                                                   
5:17:14 PM          RECONVENED                                                                                                
                                                                                                                                
SENATE BILL NO. 10                                                                                                            
                                                                                                                                
     "An  Act  requiring  health care  insurers  to  provide                                                                    
     insurance  coverage  for  medical care  received  by  a                                                                    
     patient   during  certain   approved  clinical   trials                                                                    
     designed  to test  and  improve prevention,  diagnosis,                                                                    
     treatment,  or  palliation  of  cancer;  directing  the                                                                    
     Department  of Health  and Social  Services to  provide                                                                    
     Medicaid services  to persons who participate  in those                                                                    
     clinical  trials; relating  to experimental  procedures                                                                    
     under a state plan  offered by the Comprehensive Health                                                                    
     Insurance Association;  and providing for  an effective                                                                    
     date."                                                                                                                     
                                                                                                                                
5:17:24 PM                                                                                                                    
                                                                                                                                
TOM   OBERMEYER,  STAFF,   SENATOR  BETTYE   DAVIS,  SPONSOR                                                                    
explained  that the  legislation  requires health  insurance                                                                    
providers  in  Alaska  cover  the  costs  of  routine  care,                                                                    
incurred to a patient  participating in an approved clinical                                                                    
trial relating to  cancer. He expounded that  the insurer is                                                                    
required to provide coverage only  if the patients physician                                                                    
determines  there   are  no  superior   existing  treatments                                                                    
available  and  the  pre-clinical data  shows  a  reasonable                                                                    
expectation that  the clinical (investigative)  treatment is                                                                    
as efficacious  as conventional therapy. Mr.  Obermeyer then                                                                    
read from the Sponsor Statement (Copy on File):                                                                                 
                                                                                                                                
     Clinical  trials are  research  studies  that test  how                                                                    
     well  new medical  approaches work  in patients.   Each                                                                    
     study answers  scientific questions  and tries  to find                                                                    
     better ways to prevent,  screen for, diagnose, or treat                                                                    
     disease.   Patients  who take  part in  cancer clinical                                                                    
     trials  have  an  opportunity   to  contribute  to  the                                                                    
     knowledge of,  and progress against cancer.   They also                                                                    
     receive state-of-the art treatment  from experts in the                                                                    
     field. The  National Cancer Institute,  as part  of the                                                                    
     U.S.  National  Institutes  of  Health,  reports  6,000                                                                    
     cancer trials in  the United States any  one time. They                                                                    
     include  trials  in prevention,  screening,  diagnosis,                                                                    
     treatment, quality-of-life, and genetic studies.                                                                           
                                                                                                                              
     CSSB   10    removes   important   barriers    to   the                                                                    
     participation of patients in  cancer clinical trials in                                                                    
     Alaska.    It  requires  that  applicable  health  care                                                                    
     plans, including  Medicaid, cover routine  patient care                                                                    
     costs for  patients enrolled in all  phases of clinical                                                                    
     trials,  including  prevention,  detection,  treatment,                                                                    
     and palliation  (supportive care) of  cancer. Currently                                                                    
     Alaska health  plans may  exclude coverage  for routine                                                                    
     patient-care  costs  while  a patient  with  cancer  is                                                                    
     enrolled in a clinical  trial. Providers of health care                                                                    
     plans often  conclude that money is  saved by excluding                                                                    
     care  while patients  participate  in clinical  trials.                                                                    
     But  these  patients,  if   not  enrolled  in  clinical                                                                    
     trials, will  continue to receive  conventional therapy                                                                    
     at roughly the same or  slightly increased costs in the                                                                    
     short-run.                                                                                                                 
                                                                                                                              
     Over  2600  Alaskans  are diagnosed  with  cancer  each                                                                    
     year.  In FY 2007  an estimated 4,600 patients received                                                                    
     cancer treatments through  Alaska's Medicaid program at                                                                    
     a  cost of  $21.5  million.   The  average payment  per                                                                    
     beneficiary was  about $4,675.  The  federal government                                                                    
     reimburses the state  at about 50% of  the total costs.                                                                    
     Without  in-state facilities  and  support of  clinical                                                                    
     trials participants in Alaska  currently have to travel                                                                    
     out  of state,  increasing  the  cost of  non-emergency                                                                    
     transportation  which is  about  3%  of total  Medicaid                                                                    
     costs.                                                                                                                     
                                                                                                                              
     Studies have shown that only 2%  to 3%  of adult cancer                                                                    
     patients and  less than  0.5% Medicare  patients enroll                                                                    
     in  clinical trials  of the  approximately 20%  who are                                                                    
     eligible -largely  due to fear of  denial of insurance.                                                                  
     A recent study found  only slight increase in treatment                                                                    
     costs  for adult  clinical trial  patients compared  to                                                                    
     nonparticipants, $35,418  versus $33,248 or  about 6.5%                                                                    
     increase  in  costs  for  clinical  trial  participants                                                                    
     compared to  nonparticipants.   Even if  enrollment was                                                                    
     increased to  the full 20%,  it is unlikely  that these                                                                    
     numbers  will  significantly  impact overall  costs  to                                                                    
     health  plans.    See   National  Conference  of  State                                                                    
     Legislatures, "Clinical Trials:  What are States Doing?                                                                    
     February, 2009 Update:"                                                                                                    
     www.ncsl.org/programs/health/clinicaltrials.htm.                                                                           
                                                                                                                                
     Twenty-three or more states  have passed legislation or                                                                    
     instituted  special agreements  requiring health  plans                                                                    
     to  pay  the  cost  of routine  medical  care  patients                                                                    
     receive   while  participating   in  clinical   trials.                                                                  
     Passage  of  CSSB 10  will  result  in more  successful                                                                    
     outcomes  in  cancer  treatments  in  Alaska,  increase                                                                    
     retention of patients in Alaska  for their cancer care,                                                                    
     and also, after full implementation, result in cost                                                                        
     savings in the short and long term.                                                                                        
                                                                                                                                
     A description of "The Access to Cancer Clinical Trials                                                                     
                                th                                                                                              
     Act of 2009"  H.R. 716, 111   Congress 2009-2010, (Rep.                                                                    
     Sue Myrick) per "The  Hill's Congress Blog" January 30,                                                                    
     2009  sums  up  to  a  large extent  what  CSSB  10  is                                                                    
     attempting to do:                                                                                                          
                                                                                                                                
                                                                                                                                
          Clinical trials  are so critical for  patients and                                                                    
          or medical  research, yet many patients  find that                                                                    
          their  health insurance  won't cover  the rest  of                                                                    
          their routine  cancer treatment if they  decide to                                                                    
          enroll  in  clinical  trials.   We're  not  asking                                                                    
          insurance companies to pay for clinical trials.                                                                       
          This  bill   simply  states  that   insurers  must                                                                    
          continue  to pay  for  routine  treatments -  that                                                                    
          they would be paying  for regardless - if patients                                                                    
          enroll in a clinical trial.                                                                                           
                                                                                                                                
          No patient should ever have  to fear exploring all                                                                    
          treatment   options   at   the  cost   of   losing                                                                    
          coverage.  We should  be encouraging participation                                                                    
          in  clinical   trials,  not  discouraging   it  by                                                                    
          removing coverage  for routine care.  Were  it not                                                                    
          for  patients who  have enrolled  in past  trials,                                                                    
          the medial  advancements we've  experienced toward                                                                    
          finding a cure for cancer would not be possible.                                                                      
                                                                                                                                
5:23:29 PM                                                                                                                    
                                                                                                                                
Mr. Obermeyer  noted that there  are two zero  fiscal notes;                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
and Department of Health and Social Services.                                                                                   
                                                                                                                                
Senator Olson wondered who besides  a university is carrying                                                                    
out these clinical  trials. Mr. Obermeyer stated  he was not                                                                    
able to answer. He offered  that the trials must be approved                                                                    
by agencies  like the  National Institute  of Health  or the                                                                    
Department of Defense and are held to defined standards.                                                                        
                                                                                                                                
Senator Olson  asked why  an insurer  would refuse  to cover                                                                    
costs if  the clinical  trials are  funded by  a university.                                                                    
Mr. Obermeyer  clarified that the  clinical trial  costs are                                                                    
paid for  by the  research entity  conducting the  trial. He                                                                    
stated that  this legislation  would ensure  that associated                                                                    
medical costs to  the patient are covered.  An example would                                                                    
be a follow up visit with the patient's own oncologist.                                                                         
                                                                                                                                
Senator Thomas asked  if the bill provides  coverage for all                                                                    
stages  of  the  clinical  trial.  Mr.  Obermeyer  affirmed.                                                                    
Senator  Thomas noted  that the  bill does  not require  the                                                                    
insurer to pay  for charges that would not be  covered if no                                                                    
insurance existed or otherwise reimbursable charges.                                                                            
                                                                                                                                
5:25:55 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman  stated  that   he  provides  health  care                                                                    
coverage  for his  employees in  his  personal business.  He                                                                    
addressed  concern about  the rising  costs of  premiums. He                                                                    
cited a letter  from Premera (copy on file)  dated April 7th                                                                    
that  states concerns  that the  legislation  would force  a                                                                    
premium   increase   for    small   group   and   individual                                                                    
policyholders.  He asked  about  keeping  the premium  costs                                                                    
down for providers.                                                                                                             
                                                                                                                                
Mr. Obermeyer  responded that overall  cost may not  be that                                                                    
great.  He related  that presently  cancer patients  needing                                                                    
treatment are  getting their  routine treatments  covered by                                                                    
their  insurance provider.  Insurers  might  realize a  cost                                                                    
savings  by  allowing   patients  participation  in  trials.                                                                    
Routine follow up  care is required regardless  of whether a                                                                    
patient participates in a trial  or not. He summized that SB
10  requires that  routine follow  up care  charges will  be                                                                    
covered if  a patient chooses  to participate in  a clinical                                                                    
trial and the trial will   not be considered experimental by                                                                    
the insurer. He  felt passage of the legislation  was in the                                                                    
best interest of the patient and advancement of medicine.                                                                       
                                                                                                                                
5:29:38 PM                                                                                                                    
                                                                                                                                
SENATOR  BETTYE  DAVIS,   responded  to  Co-Chair  Hoffman's                                                                    
question.  She  affirmed  that she  had  been  contacted  by                                                                    
Premera  stating their  concerns that  not all  phases of  a                                                                    
clinical trial be  covered [phases 1 and  4]. She emphasized                                                                    
that  based  on  doctor's  testimony in  the  Senate  Health                                                                    
Social  Services  committee  from   around  the  state  they                                                                    
determined  that all  phases are  important  and that  their                                                                    
costs are  being overstated by insurers.  She qualified that                                                                    
Premera did not enter into  a constructive dialogue with her                                                                    
office  regarding the  legislation except  to recommend  the                                                                    
exclusion of those two phases.                                                                                                  
                                                                                                                                
Co-Chair Stedman asked  if the legislation has  an impact on                                                                    
state  employees.  Senator Davis  answered  that  it has  no                                                                    
impact  on state  employee plans.  She  explained that  when                                                                    
state employee  plans come  up for review  in July  they may                                                                    
opt in to new programs.                                                                                                         
                                                                                                                                
                                                          th                                                                    
Co-Chair  Hoffman cited  the  Premera  letter of  April  7,                                                                     
2009. He reported that Premera's  concerns are for treatment                                                                    
efficacy and patient safety.                                                                                                    
                                                                                                                                
Mr. Obermeyer  spoke to the  concerns raised in  the Premera                                                                    
                     th                                                                                                         
letter dated  April 7,   for  mandatory coverage  for phases                                                                    
one and  four. He pointed out  that in phase one  trials are                                                                    
offered  to  a  very  limited number  of  participants.  The                                                                    
medications  administered are  done  typically to  determine                                                                    
safe  dosage  levels. Many  of  the  drugs administered  are                                                                    
approved  by  the FDA.  He  stated  that phase  four  trials                                                                    
generally involve  follow up paid for  by the pharmaceutical                                                                    
firms  to  determine  the  efficacy  of  the  treatment.  He                                                                    
concluded that  given the small  number of  participants any                                                                    
added expense to insurers would  be minimal. He reminded the                                                                    
committee  that  oncologists   advised  extending  insurance                                                                    
coverage to  all phases of  the trial. They agreed  it would                                                                    
be in  the best interest of  the patient and based  on their                                                                    
experience additional cost is minimal.                                                                                          
                                                                                                                                
5:33:31 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman referred  to page 2, line 29  and asked for                                                                    
clarification. He  wondered if this alluded  to experimental                                                                    
treatments  received  in  phase one  trials.  Mr.  Obermeyer                                                                    
pointed  out   that  the  section,  starting   on  line  27,                                                                    
describes exclusions  to the  bill. Co-Chair  Stedman stated                                                                    
that he was  under the impression that all  phase one trials                                                                    
are experimental.                                                                                                               
                                                                                                                                
Mr. Obermeyer reiterated  that many drugs used  in phase one                                                                    
trials  already have  FDA approval.  He exemplified  that in                                                                    
one   trial  an   approved  drug   for   colon  cancer   was                                                                    
administered  to  a  brain   cancer  patient  with  positive                                                                    
results.                                                                                                                        
                                                                                                                                
Senator Olson  asked if  stem cell  research is  included in                                                                    
this bill.                                                                                                                      
                                                                                                                                
5:35:57 PM                                                                                                                    
                                                                                                                                
Mr. Obermeyer believed it was not.                                                                                              
                                                                                                                                
Senator Huggins cited  a letter from the  NFIB dated January                                                                    
  th                                                                                                                            
20,   (copy  on file)  that the  legislation excludes  state                                                                    
employee  plans. He  opined that  if it  excludes government                                                                    
plans it  does not  provide a  level playing  field. Senator                                                                    
Davis  asserted  that  the bill  will  require  Medicaid  to                                                                    
provide  coverage   but  does  not  mandate   the  state  to                                                                    
participate.  She  reasoned  that  the state  might  opt  in                                                                    
because it is in the best interest of the employees.                                                                            
                                                                                                                                
5:38:25 PM                                                                                                                    
                                                                                                                                
DR. JEANIE  ANDERSON, KATMAI ONCOLOGY  (via teleconference),                                                                    
testified in  support of the  legislation. She  clarified an                                                                    
earlier  discussion regarding  clinical trial  settings. She                                                                    
said that  most of  the clinical trials  in Alaska  are also                                                                    
open to  participants throughout  the country  in university                                                                    
and  community  institutions.   All  of  these  institutions                                                                    
require that  the routine medical  costs are covered  by the                                                                    
patient's insurer.  This is care  the patient  would receive                                                                    
regardless of  whether one  is a participant  in a  study or                                                                    
not.                                                                                                                            
                                                                                                                                
Dr. Anderson  noted that Medicare has  included coverage for                                                                    
clinical trial  participation since 2000. She  countered the                                                                    
concerns raised by Blue Cross/Blue  Shield by asserting that                                                                    
patient  safety and  efficacy of  treatment is  maximized by                                                                    
patient  participation   in  clinical  trials   without  any                                                                    
significant  cost increase.  The medical  community benefits                                                                    
by maximizing cancer  treatment knowledge without increasing                                                                    
costs. She  included details in previous  written testimony.                                                                    
[Testimony  on  SB 280,  from  4/3/08  was provided  to  the                                                                    
committee by Senator Davis (copy in file).]                                                                                     
                                                                                                                                
5:41:48 PM                                                                                                                    
                                                                                                                                
SHIELA  TALLMAN, PREMERA  BLUE CROSS/BLUE  SHIELD OF  ALASKA                                                                    
(via  teleconference),   testified  in  opposition   to  the                                                                    
legislation. She referenced  the letter of April  7, 2009 to                                                                    
the  committee and  reiterated Premera's  concerns mandating                                                                    
phases  one  and four  of  clinical  trials. She  considered                                                                    
phase  one trials  experimental and  questioned whether  all                                                                    
policy holders should be funding  basic development of these                                                                    
drugs, devices and procedures  for the manufacturer. Patient                                                                    
safety  must  also  be considered.  In  phase  four  trials,                                                                    
Premera would  cover medically  necessary treatment  only if                                                                    
existing   medical  treatments   are  not   determined  more                                                                    
effective. She surmised that mandates  can increase the cost                                                                    
of  health insurance.  Specific costs  will be  difficult to                                                                    
project in this instance.                                                                                                       
                                                                                                                                
5:45:29 PM                                                                                                                    
                                                                                                                                
HANNA  SMITH, CANCER  RESEARCH  REGISTERED NURSE,  FAIRBANKS                                                                    
(via   teleconference)   testified   in   support   of   the                                                                    
legislation.     She  recounted   an  experience   with  her                                                                    
hospital's   participation  in   a  clinical   trial  deemed                                                                    
beneficial   for   a   patient.  She   asserted   that   the                                                                    
administrative costs  incurred to appeal the  patient's four                                                                    
previous denials  by the insurer  was the only  related cost                                                                    
increase. It  cost the insurer  substantially less  to cover                                                                    
the patient as part of the trial.                                                                                               
                                                                                                                                
5:49:05 PM                                                                                                                    
                                                                                                                                
DR.  MARY  STEWART,  MEDICAL ONCOLOGIST,  PRESIDENT,  DENALI                                                                    
ONCOLOGY  GROUP, ANCHORAGE  (via  teleconference), spoke  in                                                                    
support of SB 10. She  echoed the importance and benefits of                                                                    
phase  one   and  four   clinical  trials,   especially  the                                                                    
knowledge gained  by the medical oncology  community for new                                                                    
and  more   effective  beneficial  cancer   treatments.  She                                                                    
emphasized that trials do not cost more.                                                                                        
                                                                                                                                
5:51:45 PM                                                                                                                    
                                                                                                                                
EMILY NENON, ALASKA  GOVERNMENT RELATIONS DIRECTOR, AMERICAN                                                                    
CANCER SOCIETY  CANCER ACTION NETWORK  (via teleconference),                                                                    
stated support for the legislation.  Ms Nenon cited a paper,                                                                    
submitted  by The  American Cancer  Society  (ACS) (copy  on                                                                    
file).  The  paper  compiled results  that  determine  costs                                                                    
associated with  routine cancer care provided  in a clinical                                                                    
study  are comparable  to the  costs of  standard care.  She                                                                    
emphasized  the importance  of covering  all  phases of  the                                                                    
trial treatment. She believed  the legislation would protect                                                                    
patients while  maintaining access to insurance  and quality                                                                    
care.                                                                                                                           
                                                                                                                                
5:57:01 PM          AT EASE                                                                                                   
5:57:11 PM          RECONVENED                                                                                                
                                                                                                                                
DR. LATHASUBARIAN, MEDICAL  ONCOLOGIST, ANCHORAGE, SELF (via                                                                    
teleconference),  testified   in  support  of  SB   10.  She                                                                    
emphasized that  insurers have been  a barrier  to patient's                                                                    
participation   in  clinical   trials.   She  asserted   the                                                                    
necessity of clinical trials in  cancer research as the only                                                                    
way to  develop new lifesaving or  life extending therapies.                                                                    
She concluded that the medical  and societal benefits of the                                                                    
research  and  care   advancements  discovered  in  clinical                                                                    
trials are immeasurable.                                                                                                        
                                                                                                                                
6:01:24 PM                                                                                                                    
                                                                                                                                
PAT LUBY,  ADVOCACY DIRECTOR, ALASKA ASSOCIATION  OF RETIRED                                                                    
PERSONS  (AARP), ANCHORAGE  (via teleconference),  testified                                                                    
in support of  SB 10. Mr. Luby pointed out  that if patients                                                                    
pay health insurance premiums they  should have the right to                                                                    
the coverage paid for that includes routine cancer care.                                                                        
                                                                                                                                
6:02:53 PM                                                                                                                    
                                                                                                                                
LINDA HALL,  DIRECTOR, DIVISION OF INSURANCE,  DEPARTMENT OF                                                                    
COMMERCE,   COMMUNITY   AND  ECONOMIC   DEVELOPMENT,   spoke                                                                    
specifically  to  the issue  of  mandated  programs and  the                                                                    
costs associated with mandates. Ms.  Hall stated she did not                                                                    
know what the  cost of the program would be  for health care                                                                    
insurers. She  noted with  regards to  the zero  fiscal note                                                                    
for  the Division  of Insurance  (FN 2)  that it  is only  a                                                                    
reflection of their administrative  costs. She suggested the                                                                    
committee analyze the benefit of  the mandate and segment of                                                                    
the population being  served in relation to  any increase in                                                                    
premium costs.  Ms. Hall  referred to  a pie  chart, "Health                                                                    
Coverage of  Alaska's Population"  (copy on file)  and noted                                                                    
the  32%  unregulated  segment.  She  reiterated  that  this                                                                    
legislation  would  only  impact the  individual  and  small                                                                    
group rate payers reflected mostly  in this group. The small                                                                    
group  segment consists  of small  private sector  employers                                                                    
who are likely  to drop employee health  coverage as premium                                                                    
costs  rise.  She  concluded  by  suggesting  the  committee                                                                    
examine the broader picture of  who the mandate benefits and                                                                    
what segment of the population bears the cost.                                                                                  
                                                                                                                                
6:07:57 PM                                                                                                                    
                                                                                                                                
Senator Ellis  queried about  the logic  of a  cancer victim                                                                    
requesting  participation  in  a clinical  trial  but  being                                                                    
denied  payment  for  routine treatments  by  the  insurance                                                                    
company even if it is cost effective to the insurer.                                                                            
                                                                                                                                
Ms. Hall conjectured  that there may have  been costs beyond                                                                    
the routine care  being offered. She contended  that she can                                                                    
not explain insurance company  logic. Senator Ellis restated                                                                    
his earlier  point and alleged  that the insurer  was acting                                                                    
unethically.  Ms.  Hall   stated  that  different  insurance                                                                    
companies  have different  coverage  forms particularly  for                                                                    
individuals  and  small   groups  that  potentially  contain                                                                    
adverse selection.  She pointed  out that  Alaska's statutes                                                                    
provide for  oversight and review.  If a procedure  or trial                                                                    
is not covered, it has  a specific exclusion and contractual                                                                    
provision known in advance.                                                                                                     
                                                                                                                                
6:11:56 PM                                                                                                                    
                                                                                                                                
Senator Ellis  argued that he  would have been  reluctant to                                                                    
support  the   legislation  if  it  mandated   coverage  for                                                                    
experimental procedures  with extravagant  associated costs.                                                                    
He emphasized  that the bill  requires coverage  for routine                                                                    
care that  the patient is  entitled to  and has paid  for in                                                                    
their premiums  and that the  insurer's payment  denials are                                                                    
indefensible.                                                                                                                   
                                                                                                                                
                                           th                                                                                   
Senator Huggins referred  to the January 20   letter stating                                                                    
that the legislation is a  mandate to small business and not                                                                    
to  programs provided  by the  state. He  asked Ms.  Hall if                                                                    
this  was  accurate. Ms.  Hall  affirmed.   Senator  Huggins                                                                    
wondered why the  legislation is not a mandate  to all state                                                                    
plans.  Ms.  Hall  responded  that the  state  plan  is  not                                                                    
considered insurance  and is not  regulated by  the Division                                                                    
of  Insurance.  She  explained   that  the  mandate  in  the                                                                    
legislation is specific to Title  21 oversight, which has no                                                                    
regulatory  authority  over  the various  state  plans.  She                                                                    
pointed  out   that  the   legislature  and   or  collective                                                                    
bargaining  units could  choose to  include coverage  of the                                                                    
mandate  in  the  select benefits  section  of  the  state's                                                                    
plans.                                                                                                                          
                                                                                                                                
6:14:46 PM                                                                                                                    
                                                                                                                                
Senator  Olson referred  to cancer  treatment and  the three                                                                    
common  treatments: chemotherapy,  surgical, and  radiation.                                                                    
He asked if the plan covers all three.                                                                                          
                                                                                                                                
Senator  Davis replied  that she  did not  know the  answer.                                                                    
She  shared  that  the  bill   has  circulated  through  the                                                                    
legislature for three years. She  felt that participation in                                                                    
these programs  is very important  and lifesaving.  She felt                                                                    
that the  bill has  been thoroughly  vetted from  the health                                                                    
and insurers'  standpoint and determined cost  is minimal to                                                                    
the insurer.   She  asked for the  Committee's consideration                                                                    
of SB 10 in a timely manner.                                                                                                    
                                                                                                                                
SB  10  was   HEARD  and  HELD  in   Committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
6:19:37 PM          AT EASE                                                                                                   
6:27:43 PM          RECONVENED                                                                                                
                                                                                                                                
SENATE BILL NO. 75                                                                                                            
                                                                                                                                
     "An Act  making and amending  appropriations, including                                                                    
     capital  appropriations,  supplemental  appropriations,                                                                    
     and appropriations  to capitalize funds;  and providing                                                                    
     for an effective date."                                                                                                    
                                                                                                                                
6:27:55 PM                                                                                                                    
                                                                                                                                
Senator  Hoffman  MOVED  to ADOPT  Work  Draft  26-GS1003\C,                                                                    
Kane, 4/8/09. There being NO OBJECTION, it was so ordered.                                                                      
                                                                                                                                
MILES  BAKER,  STAFF,  SENATE FINANCE  COMMITTEE,  explained                                                                    
that  the  appropriations in  version  C,  CSSB 75(FIN)  are                                                                    
depicted  in  the  summary  handouts  "2009  Capital  Budget                                                                    
Agency  Summary,  Senate   Structure"  and  "Capital  Budget                                                                    
Statewide  Totals, Senate  Structure" (copies  on file).  He                                                                    
explained  that  the  various   columns  correspond  to  the                                                                    
sections noted in the CS.                                                                                                       
                                                                                                                                
6:33:22 PM                                                                                                                    
                                                                                                                                
Mr. Baker called attention to  the Funds Transfer section on                                                                    
page 62, Section 14, subsections  (a) through (e). He called                                                                    
attention to subsection (a) the  transfer of income from the                                                                    
Amerada Hess  earnings to the capital  income fund estimated                                                                    
at $21  million. He also  pointed out that Section  17, page                                                                    
64,  contains  the  legislative re-appropriations  based  on                                                                    
lapsing or unexpended  unobligated prior year appropriations                                                                    
based on  consultations with  each individual  member broken                                                                    
out by House district.                                                                                                          
                                                                                                                                
Mr. Baker cited Section 37,  page 75 the re-appropriation of                                                                    
legislatures    lapsing   operating    appropriations   from                                                                    
Legislative   Council,   Legislative    Budget   and   Audit                                                                    
Committee,  and  legislative  operating  appropriations.  He                                                                    
summarized that  most of the  re-appropriated money  will be                                                                    
spent on  capital improvements in  the Capitol  Building and                                                                    
noted  that  $300,000   is  re-appropriated  to  Legislative                                                                    
Council to develop a statewide energy plan.                                                                                     
                                                                                                                                
6:36:03 PM                                                                                                                    
                                                                                                                                
Mr. Baker  noted that  Section 39,  page 76,  delineates the                                                                    
appropriations  of  the  federal  Coastal  Impact  Assistant                                                                    
Program. He explained that these  funds are to help mitigate                                                                    
the impact of oil and  gas development.  The larger boroughs                                                                    
in the state receive 35 percent  of the funds directly via a                                                                    
federal  designation,  Costal Political  Subdivisions.  This                                                                    
group is expected to receive  approximately $29 million. The                                                                    
amount that is  passed through the state is  estimated to be                                                                    
$53.6 million.  The distribution of these  funds is detailed                                                                    
in Section 39.                                                                                                                  
                                                                                                                                
6:39:29 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman summarized  that the  capital bill  totals                                                                    
approximately $1.8  billion, which includes the  DOT federal                                                                    
economic  stimulus funds.  He stated  that out  of the  $1.8                                                                    
billion  roughly,  $483 million  are  state  funds and  $1.3                                                                    
billion are federal funds. This  bill produces less spending                                                                    
than  the  administration's  original  proposal  of  $513.14                                                                    
million.                                                                                                                        
                                                                                                                                
Co-Chair Stedman voiced that  this capital budget represents                                                                    
a balance between the need  to stimulate the economy without                                                                    
consuming the state's savings accounts too precipitously.                                                                       
                                                                                                                                
CSSB  75  was  HEARD  and  HELD  in  Committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
6:42:57 PM                                                                                                                    
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 6:42 PM.                                                                                           

Document Name Date/Time Subjects