Legislature(1993 - 1994)

03/23/1993 09:33 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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                             MINUTES                                           
                    SENATE FINANCE COMMITTEE                                   
                         March 23, 1993                                        
                            9:33 a.m.                                          
                                                                               
  TAPES                                                                        
                                                                               
  SFC-93, #42, Side 1 (000-end)                                                
  SFC-93, #42, Side 2 (end-250)                                                
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Senator Steve  Frank,  Co-chair,  convened  the  meeting  at                 
  approximately 9:33 a.m.                                                      
                                                                               
  PRESENT                                                                      
                                                                               
  In addition to  Co-chairs Pearce and Frank,  Senators Kelly,                 
  Kerttula, and Sharp were present.  Senators Jacko and Rieger                 
  arrived while the meeting was in progress.                                   
                                                                               
  ALSO ATTENDING:  Willis  Kirkpatrick, Director, Division  of                 
  Banking, Securities and Corporations, Department of Commerce                 
  and Economic  Development; Jeff  Bush, Attorney  at Law,  on                 
  contract  with  the  Department  of  Commerce  and  Economic                 
  Development; Art Peterson, Attorney  at Law; Clark Gruening,                 
  Attorney at Law,  Alaska Credit  Union League; Mike  Greany,                 
  Director, Jeff Hoover,  Fiscal Analyst, Legislative  Finance                 
  Division; and aides to committee members.                                    
                                                                               
  SUMMARY INFORMATION                                                          
                                                                               
  SB 100 -  An   Act   making    supplemental   and    special                 
            appropriations   for   the   expenses   of   state                 
            government;   making,   amending,   and  repealing                 
            capital   and   operating    appropriations;   and                 
            providing for an effective date.                                   
                                                                               
            Scheduled but not heard.                                           
                                                                               
  CSSB 154- An Act relating to the economic development grant                  
  (L&C)     program; and providing for an effective date.                      
                                                                               
            Co-chair  Pearce announced that  a new zero fiscal                 
            note  for  the  Dept.   of  Community  &  Economic                 
            Development had been received.  CSSB 154(L&C)  was                 
            REPORTED OUT of  committee with a new  zero fiscal                 
            note   for  the  Dept.  of  Community  &  Economic                 
            Development, and a  fiscal note  for the Dept.  of                 
            Administration  in  the  amount  of  $67.7.    All                 
            members signed "do pass."                                          
                                                                               
  CSSB 112- An   Act   relating   to   the   Uniform                           
            Commercial Code;                                                   
                                                                               
                                                                               
  (JUD)     amending Alaska Rules of Civil Procedure 8 and 82,                 
            and Alaska Rule of Evidence 402; and providing for                 
            an effective date.                                                 
                                                                               
            Testimony was  heard by  Senator Kerttula  and Art                 
            Peterson,  Attorney  at Law,  in  support of  CSSB                 
            112(JUD).    Discussion  was   had  regarding  the                 
            unconscionable clause  by Senator  Rieger and  Mr.                 
            Peterson.   Senator Rieger  MOVED an amendment and                 
            then WITHDREW it adding words to page 93, line 20.                 
            CSSB 112(JUD)  was REPORTED OUT  of committee with                 
            zero  fiscal  notes  for   the  Dept.  Commerce  &                 
            Economic  Development, the  Dept. of Law,  and the                 
            Dept. of Natural Resources.                                        
                                                                               
  SB 149 -  An  Act  revising  the  laws  governing  financial                 
            institutions and relating to trust companies,  the                 
            Alaska Small Loans Act, and the Premium  Financing                 
            Act; amending Alaska Rule of Criminal Procedure 17                 
            and  Alaska  Rule of  Civil  Procedure 45(b);  and                 
            providing for an effective date.                                   
                                                                               
            Senator Kelly  spoke in support of SB 149.  Willis                 
            Kirkpatrick,   Director,   Division   of  Banking,                 
            Securities   and   Corporations,   Department   of                 
            Commerce and Economic Development; and Jeff  Bush,                 
            Attorney at Law,  on contract with  the Department                 
            of  Commerce  and Economic  Development; explained                 
            and spoke  in support of  SB 149.   Discussion and                 
            questions followed between Senators Rieger, Frank,                 
            Pearce and Kerttula.   Clark Gruening, Attorney at                 
            Law, Alaska Credit Union League, spoke in  support                 
            of  amendment  1 dated  March  22, 1993.   Senator                 
            Kelly MOVED for the  adoption of amendment 1.   It                 
            PASSED with unanimous  consent.  CSSB 149(FIN)  as                 
            amended was REPORTED  OUT of committee with  a "do                 
            pass" and  with a  zero fiscal  note for Dept.  of                 
            Commerce & Economic Development.  Co-chairs  Frank                 
            and  Pearce, Senators  Jacko, Kelly,  and Kerttula                 
            signed  "do  pass."   Senators  Rieger  and  Sharp                 
            signed "no recommendation."                                        
                                                                               
                                                                               
  CS FOR SENATE BILL NO. 154(L&C):                                             
                                                                               
       An  Act  relating  to the  economic  development  grant                 
       program; and providing for an effective date.                           
                                                                               
  CO-CHAIR DRUE PEARCE announced that CSSB 154(L&C) was before                 
  the  committee  with  a  new   zero  fiscal  note  from  the                 
  Department of Commerce  & Economic Development.   She stated                 
  that the fiscal note for the Department of Administration in                 
  the amount of $67.7 would accompany the bill.                                
                                                                               
                                                                               
  SENATOR  GEORGE  JACKO MOVED  that  CSSB 154(L&C)  pass from                 
  committee  with accompanying  fiscal  notes.   No  objection                 
  having  been  raised,  CSSB  154(L&C)  was REPORTED  OUT  of                 
  committee with a new zero fiscal  note for the Department of                 
  Commerce & Economic  Development, and a fiscal  note for the                 
  Department of Administration  in the amount  of $67.7.   All                 
  members signed "do pass."                                                    
                                                                               
                                                                               
  CS FOR SENATE BILL NO. 112(JUD):                                             
                                                                               
       An  Act  relating  to  the   Uniform  Commercial  Code;                 
       amending Alaska Rules of Civil  Procedure 8 and 82, and                 
       Alaska  Rule  of  Evidence 402;  and  providing  for an                 
       effective date.                                                         
                                                                               
  Co-chair Pearce announced that CSSB  112(JUD) was before the                 
  committee.  SENATOR  JAY KERTTULA, prime sponsor  of SB 112,                 
  spoke  in  support of  CSSB  112(JUD).   He  said  that this                 
  legislation  had been  requested by the  Supreme Court.   He                 
  explained that it would bring the Uniform Commercial Code in                 
  Alaska up to date.  He listed some of  the changes contained                 
  in the bill.                                                                 
                                                                               
  Co-chair Pearce asked Art Peterson, Attorney at Law, to give                 
  an  overview of  CSSB 112(JUD)  and, by  request  of Senator                 
  Kelly, provide a brief explanation of the Uniform Commercial                 
  Code.                                                                        
                                                                               
  ART  PETERSON  said  he was  appearing  in  his  capacity as                 
  Uniform  Law  Commissioner  for the  state,  and  voiced his                 
  support of CSSB 112(JUD).  He said the UCC was a compilation                 
  of all  the commercial  law in  the country  enacted by  the                 
  states.  It also serves as an international model.  He  said                 
  there have been some amendments to  the articles in the last                 
  few decades.                                                                 
                                                                               
  SENATOR   STEVE  RIEGER   asked   for   an  explanation   of                 
  unconscionability  on  page  93.    Mr. Peterson  said  that                 
  because of an existing  law in Alaska, this section  made it                 
  clear that the national version would be in effect, assuring                 
  predictability  and less  litigation.   Discussion  followed                 
  between  Senator  Rieger  and  Mr.  Peterson  regarding  the                 
  determination of attorney's fees and unconscionability.   In                 
  response to  Senator Rieger,  Mr. Peterson  recommended that                 
  this  section  not  be  amended,  but  agreed to  raise  the                 
  question with the  editorial board and develop  an amendment                 
  for next  year if appropriate.  Senator Kerttula agreed that                 
  any  change  be  proposed through  the  editorial  board and                 
  incorporate it into a national amendment.                                    
                                                                               
  Discussion  followed  between   Senators  Rieger  and  Frank                 
                                                                               
                                                                               
  regarding  attorney's  fees  and how  consistent  those were                 
  across the  nation.   Mr. Peterson  said that  style changes                 
  were given  a  low priority  but  that the  issue  regarding                 
  attorney's fees was important.  Mr. Peterson said that there                 
  was  a great value to Alaska to  have the uniformity of such                 
  laws, especially for Alaskans doing  business outside of the                 
  state, or for  individuals from other states  doing business                 
  in Alaska.                                                                   
                                                                               
  Senator Rieger MOVED  for adoption of  an amendment on  page                 
  93,  line  20, after  the  word  "known", to  add  the words                 
  "should  have  known."   Mr.  Peterson recommended  that the                 
  amendment  be  withdrawn  and  the  committee  take  Senator                 
  Kerttula's   suggestion   and   contact  Professor   Miller,                 
  University  of Oklahoma,  Executive  Director, The  National                 
  Conference of Commissioners in Uniform State Laws, regarding                 
  this issue.  Senator Rieger WITHDREW his amendment and asked                 
  Mr.  Peterson to  contact Prof.  Miller  for review  of this                 
  issue by the editorial board.                                                
                                                                               
  Senator Kerttula  MOVED for  passage of  CSSB 112(JUD)  from                 
  committee with  individual recommendations.   No  objections                 
  being raised, it  was REPORTED OUT  of committee with a  "do                 
  pass" and with zero fiscal notes for the Department Commerce                 
  &  Economic  Development,  the Department  of  Law,  and the                 
  Department of Natural Resources.   Senators Kelly, Jacko and                 
  Kerttula  signed "do pass."  Senators Rieger, Sharp, and Co-                 
  chairs Pearce and Frank signed "no recommendation."                          
                                                                               
                                                                               
  SENATE BILL NO. 149:                                                         
                                                                               
       An   Act   revising   the   laws  governing   financial                 
       institutions  and  relating  to  trust  companies,  the                 
       Alaska Small Loans Act, and  the Premium Financing Act;                 
       amending  Alaska  Rule  of  Criminal  Procedure 17  and                 
       Alaska Rule of Civil Procedure 45(b); and providing for                 
       an effective date.                                                      
                                                                               
  Co-chair  Pearce  announced  that  SB  149  was  before  the                 
  committee.  SENATOR  TIM KELLY spoke  in support of SB  149.                 
  He  said  that he  knew  of  no opposition  to  the proposed                 
  legislation by  the banking industry  in Alaska.   He stated                 
  that he  would offer  an amendment suggested  by the  Credit                 
  Union League.                                                                
                                                                               
  WILLIS   KIRKPATRICK,   Director,   Division   of   Banking,                 
  Securities  and  Corporations,  Department  of Commerce  and                 
  Economic Development, asked  Jeff Bush, Attorney at  Law, on                 
  contract  with  the  Department  of  Commerce  and  Economic                 
  Development, to join him in testifying in support of SB 149.                 
  Senator  Kelly stated that these new  statutes apply only to                 
  the  five  state-chartered  banks  in  Alaska,  one  section                 
                                                                               
                                                                               
  effects pawn  shops, and  a few  provisions apply to  state-                 
  chartered credit unions.   It does not  concern the national                 
  chartered banks.  Mr. Kirkpatrick said that  Key Bank, North                 
  Rim,  Denali  State   Bank  in  Fairbanks,  First   Bank  in                 
  Ketchikan, and  Mt. McKinley  Mutual in  Fairbanks, are  the                 
  five banks that apply.                                                       
                                                                               
  Mr. Kirkpatrick said  that the  marketplace changes and  the                 
  advent of the  banking problems of the mid-80's  pointed out                 
  some  incompatibilities  and  obsolete   laws  that  are  in                 
  Alaska's statutes created in the 1930s.  The state of Oregon                 
  has recodified its laws  at least twice since then,  and its                 
  revised regulations were used as a model for this  bill.  He                 
  said  this  bill  would  correct  the  obsolescence  in  the                 
  marketplace  and regulatory  enforcement  action, and  allow                 
  banks to be more attune to the community needs of Alaska.                    
                                                                               
  End SFC-93 #42, Side 1                                                       
  Begin SFC-93 #42, Side 2                                                     
                                                                               
  Co-chair Pearce asked if Mr.  Kirkpatrick had spoken to  Mr.                 
  Walsh regarding future  international insurance issues  that                 
  were  tied  to  the banking  community,  that  SB  149 would                 
  coincide  with  international  market opportunities  as  set                 
  forth  by Mr.  Walsh in  a  bill passed  last session.   Mr.                 
  Kirkpatrick answered  that he  had worked  closely with  Mr.                 
  Walsh  through the staff of the Commissioner's office in the                 
  Department of Commerce & Economic Development.                               
                                                                               
  In answer  to  Senator Jacko,  Mr. Kirkpatrick  said that  a                 
  state-chartered financial institution is one that applies to                 
  the state and  agrees to conform  to state laws through  its                 
  corporation and licensing  and to the  laws of the state  of                 
  Alaska.  A  charter through the  federal government is  also                 
  available through the Department of the Treasury.  There are                 
  more state chartered banks than  national chartered banks in                 
  Alaska, but more assets  are held by national banks  than by                 
  state banks.                                                                 
                                                                               
  Discussion  was  had by  Senator  Sharp and  Mr. Kirkpatrick                 
  regarding federal  reserve requirements  for  banks and  the                 
  banks need for liquidity.   Mr. Kirkpatrick agreed that this                 
  bill  would  allow the  state  division of  banking  to make                 
  different liquidity rules than the national  chartered bank,                 
  and give the state banks an advantage.                                       
                                                                               
  JEFF BUSH, Attorney at Law,  on contract with the Department                 
  of Commerce and Economic Development, said that the proposed                 
  regulations set a figure of 15  percent of total deposits as                 
  a required reserve.   The current  statute is 20 percent  of                 
  demand deposits  and 8  percent of  timed savings  deposits,                 
  which is  no longer  enforced.   The current  statute is  no                 
  longer in force.   Also,  current regulations require  vault                 
  cash for reserve and  do not recognize current needs  in the                 
                                                                               
                                                                               
  marketplace.  The  proposed regulation  expands what can  be                 
  used for calculating reserves to  include liquid assets such                 
  as government  bonds and  deposits on  deposit with  federal                 
  reserve  in  other  banks.    He  said  that  the   proposed                 
  regulations will  not negatively impact or  increase reserve                 
  requirements for in state banks.                                             
                                                                               
  In  answer  to  Senator Kerttula's  comments  regarding real                 
  estate, Mr. Bush  said that  the proposed legislation  would                 
  liberalize   lending   and    remove   specific    statutory                 
  restrictions that  exist on  real estate  lending and  would                 
  allow bank management  more freedom  in the decision  making                 
  process.                                                                     
                                                                               
  In  answer  to  Senator Rieger  question  about  the reserve                 
  requirement for national chartered banks,  Mr. Bush said the                 
  requirement  was  calculated based  on  a list  of different                 
  types of deposits and those numbers  would shift as a method                 
  to control the  money supply.   Mr. Kirkpatrick said at  one                 
  time a  bank did  not have  to be  a member  of the  federal                 
  reserve, and now, whether you are a member or not, a bank is                 
  required to follow  federal reserve requirements.   Mr. Bush                 
  said that this  bill is  designed to be  independent of  the                 
  federal requirements, because the numbers change so rapidly.                 
  He explained that if requirements are inconsistent, the bank                 
  would  have  to meet  both.    For example,  if  the federal                 
  reserve requirement  is higher  than the  state's, the  bank                 
  would have to meet the higher federal requirement.                           
                                                                               
  In answer to Co-chair Pearce,  Mr. Kirkpatrick answered that                 
  CSSB 149(FIN)  would not change audit functions  in any way.                 
  Co-chair Pearce voiced  her frustrations  in the 1980s  when                 
  some banks  closed, some  merged, and  some sold  their real                 
  estate packages to  institutions outside Alaska.   In answer                 
  to  Co-chair  Pearce,  Mr.  Kirkpatrick  said there  was  no                 
  provision in the bill  that would provide for a  local agent                 
  in case  a real estate loan  package was sold  out of state.                 
  Mr.  Bush  explained that  this  was  a consumer  issue  and                 
  addressing it in this bill would have been difficult.                        
                                                                               
  CO-CHAIR STEVE  FRANK asked  if HFC  had  a regulation  that                 
  required an in-state  service office.  Mr.  Kirkpatrick said                 
  that type of regulation had been considered but did not know                 
  if it was  in effect.   Senator Kerttula voiced his  support                 
  for this type of legislation.                                                
                                                                               
  Co-chair  Pearce invited  Clark Gruening,  Attorney at  Law,                 
  Alaska  Credit Union League,  to join  the committee  at the                 
  table and speak  to the amendments regarding  credit unions.                 
  CLARK GRUENING  stated that the  Credit Union League  was an                 
  association of all eighteen credit unions in Alaska (sixteen                 
  federal and two state charters).  The amendments would bring                 
  the state credit  union act on  par with the federal  credit                 
  union act.    Most  are  small  technical  changes  but  one                 
                                                                               
                                                                               
  significant  change  allows the  board  of directors  of the                 
  state chartered credit unions to appoint a credit committee.                 
  In  practice, the loan  committee is  already chosen  by the                 
  board but the statutory requirements maintain another credit                 
  committee.   He  said  there  was  no  opposition  to  these                 
  amendments  by the  department or  the credit  unions.   Mr.                 
  Kirkpatrick said he also supported the amendments.                           
                                                                               
  Senator Kelly  MOVED  for  adoption  of  amendment  1.    No                 
  objections being raised, amendment 1 was ADOPTED.                            
                                                                               
  Senator Kelly MOVED for passage of CSSB  149(FIN) as amended                 
  from  committee   with  individual   recommendations.     No                 
  objections being raised,  it was  REPORTED OUT of  committee                 
  with  a "do  pass"  and  with a  zero  fiscal note  for  the                 
  Department  of Commerce &  Economic Development.   Co-chairs                 
  Frank and Pearce, Senators Jacko,  Kerttula and Kelly signed                 
  "do  pass."     Senators   Rieger  and   Sharp  signed   "no                 
  recommendation."                                                             
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting was adjourned at approximately 10:45 a.m.                        
                                                                               

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