Legislature(1993 - 1994)
04/06/1993 08:06 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE April 6, 1993 8:06 a.m. TAPES SFC-93, #51, Side 1 (000-end) SFC-93, #51, Side 2 (575-end) SFC-93, #53, Side 1 (000-end) SFC-93, #53, Side 2 (575-152) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 8:06 a.m. PRESENT In addition to Co-chairs Pearce and Frank, Senators Kerttula, Rieger, and Sharp were present. Senator Kelly arrived soon after the meeting began, and Senator Jacko arrived as it was in progress. ALSO ATTENDING: Senator Ellis; Don Moore, Manager, Matanuska-Susitna Borough; Jim Sampson, Mayor, Fairbanks North Star Borough; Riley Snell, Executive Director, Alaska Industrial Development and Export Authority (AIDEA), Dept. of Commerce and Economic Development; John Olson, Deputy Director, Development, AIDEA; John Regitano, Fairbanks Native Association; Jane Demmert, Fairbanks Native Association; Judy Knight, Director, Employment Security Division, Dept. of Labor; Mark Mickelson, JTPA/SDA Program Manager, Dept. of Community and Regional Affairs; Bill Pedlar, Princess Tours; Stan Stecubuan, Association of ARDORS; Robert S. Hatfield, President and CEO, Alaska Railroad Corporation; Phyllis C. Johnson, General Counsel, Alaska Railroad Corporation; Tina Lindgren, Executive Director, Alaska Tourism Marketing Council; Wendy Mulder, Special Assistant, Dept. of Commerce and Economic Development; Kit Ballentine, Acting Director, Division of Environmental Health; Dept. of Environmental Conservation; and aides to committee members and other members of the legislature. ALSO PARTICIPATING VIA TELECONFERENCE FROM FAIRBANKS: Neal Plateau; Nellie Hensley, FNA; Holly Burns; Ted Wicken; James Wright; Madeline Williams, Linda Pearson, Fairbanks North Star School District; Ken Hoke; David Dean; Christina Hill, FNA; Edna Matthew, FNA; Harry Fields; and Julie Wilson. SUMMARY INFORMATION SB 16 - Act relating to the financing authority of the Alaska Industrial Development and Export Authority and giving approval of the issuance of bonds for an Anchorage airport seafood facility; and providing for an effective date. Discussion was had in conjunction with SB 171. SB 16 provisions were incorporated within CSSB 171 (Fin). SB 57 - Act relating to employment contributions and to extending the pilot project for the state training and employment program; and providing for an effective date. Testimony was presented by Judy Knight, Mark Mickelson, John Regitano, Jane Demmert, Jim Sampson, and the above-listed individuals who spoke via TELECONFERENCE FROM FAIRBANKS. The bill was subsequently HELD in a subcommittee under Senator Kelly. SB 85 - Act extending the termination date of the Alaska Tourism Marketing Council; and providing for an effective date. Testimony was presented by Bill Pedlar, Tina Lindgren, and Wendy Mulder. CSSB 85 (Finance) was REPORTED OUT of committee with a zero fiscal note from the Dept. of Commerce and Economic Development. SB 171 - Act relating to the contracting and financing authority of the Alaska Industrial Development and Export Authority, giving approval of the issuance of the authority's revenue bonds, and delaying the termination date of the authority's business assistance program; and providing for an effective date. Discussion was had with Senator Ellis, Riley Snell, and John Olson. CSSB 171 (Finance) (incorporating SB 16 as well as revised amendment no. 1 and amendment no. 2) was REPORTED OUT of committee with a zero fiscal note from the Dept. of Commerce and Economic Development. SENATE BILL NO. 16 An Act relating to the financing authority of the Alaska Industrial Development and Export Authority and giving approval of the issuance of bonds for an Anchorage airport seafood facility; and providing for an effective date. Upon convening the meeting, Co-chair Pearce announced her intention to first deal with final questions regarding SB 16. Senator Rieger inquired concerning the ownership structure of the Anchorage airport seafood facility, asking how much equity AIDEA would own. RILEY SNELL, Executive Director, Alaska Industrial Development and Export Authority (AIDEA), Dept. of Commerce and Economic Development, came before committee. He said that of the $163 million project, AIDEA would finance $50 million for the cold storage facility. Senator Rieger asked if the authority would loan 100% of that amount. Mr. Snell answered affirmatively. The Senator then asked what kind of return AIDEA would receive as the bonds are paid off. Mr. Snell said the rate of return would be negotiated. AIDEA has traditionally received approximately a 6.5% return. That is the point at which negotiations would start. [See pages 20-21 for incorporation of SB 16 within CSSB 171 (Fin).] SENATE BILL NO. 171 An Act relating to the contracting and financing authority of the Alaska Industrial Development and Export Authority, giving approval of the issuance of the authority's revenue bonds, and delaying the termination date of the authority's business assistance program; and providing for an effective date. Co-chair Pearce directed that SB 171 be brought on for discussion and pointed to a letter of support from TESORO as well as information from the Mat-Su Borough (copies on file in the original Senator Finance bill file for SB 171 at the Legislative Finance Division). DON MOORE, Manager, Matanuska-Susitna Borough, came before committee. Senator Kerttula observed that recently distributed material relating to the Midrex project indicates that the borough has already funded $2,095,000. Mr. Moore responded affirmatively. Senator Kerttula further noted that when the state provided moneys for the road to Point MacKenzie, funding was justified not only by the new lands project, but by expectation of ultimate construction of a port. With connection via causeway to Anchorage, it was expected that Pt. MacKenzie would become the industrial area of Anchorage. (Senator Kelly arrived at the meeting at this time.) Senator Sharp also noted a letter of support for the project from Mayor Jim Sampson of the Fairbanks North Star Borough (copy on file). Co-chair Pearce queried members regarding additional questions on either the fuel consortium project or continuation of the small business program contained within SB 171. No questions were raised. Co-chair Pearce directed that the meeting be briefly recessed. RECESS - 8:15 a.m. RECONVENE - 8:20 a.m. When the meeting was reconvened, Senator Rieger posed a question regarding AIDEA payment of dividends to the state similar to those paid by AHFC. Mr. Snell pointed to recent independent analysis conducted by Bartle Wells Associates on behalf of the Legislative Budget and Audit Committee. That analysis indicates that harm might occur to AIDEA's bond rating should moneys be removed from the authority. Mr. Snell acknowledged that the legislature has the ability to appropriate unrestricted surpluses from AIDEA. He reiterated that such action would have a material affect on access to capital. Mr. Snell stressed that dividends provided to the state by AIDEA are in the form of jobs and economic development. Senator Rieger advised that he had not come to the same conclusion as the analysis. He suggested that the appropriate form of a dividend would be a fraction of the annual earnings of the corporation. This is particularly true since the authority appears to be moving in the direction of equity ownership rather than merely serving as a financier. In response to a further comment by Senator Rieger, Mr. Snell acknowledged that last year AIDEA generated revenues of $40 million. He noted that a portion of the revenue is restricted by Red Dog Mine bonds, leaving approximately $21 or $22 in unrestricted revenues. Co-chair Pearce directed attention to revised amendment no. 1 which she explained would add projects and funding amounts to title language and authorize AIDEA to issue bonds to finance the Midrex project at Port MacKenzie in the amount of $50 million. Senator Kerttula MOVED for adoption. Senator Rieger OBJECTED. Senator Kelly referred to amendment no. 2 and asked if funding the Anchorage airport fueling facility via a general obligation rather than revenue bond would allow the facility to be taxed by the Municipality of Anchorage. Mr. Snell explained that development/finance projects where AIDEA retains ownership include agreements relating to payments in lieu of taxes. Under those agreements the principal users must reach agreements with local municipalities. That type of agreement would be used for this project as well. (Senator Jacko arrived at the meeting at this time.) In response to inquiries from Co-chair Frank and the above- noted objection posed by Senator Rieger, JOHN OLSON, Deputy Director, Development, AIDEA, Dept. of Commerce and Economic Development, came before committee. He pointed to a packet of information (copy on file in the original Senate Finance file for SB 171) and explained that it attempts to address three concerns, raised at the previous meeting, relating to: 1. Presentation of the projects in the early stages of development. 2. Ownership by AIDEA rather than the rendering of merely financial services by the authority. 3. AIDEA's general obligation pledge versus issue of revenue bonds. Speaking to the need for authorization while the projects are in the early stages of development, Mr. Olson pointed to statutory safeguards enacted by the legislature to guide AIDEA in the conduct of its business. He noted that private development projects often reach the point where they must proceed at a time when the legislature is not in session. Mr. Olson next outlined safeguards set forth within AS 44.88.095(c and d). Directing attention to the third item above, Mr. Olson explained that "general obligation" and "revenue" are terms used to separate bonds that do or do not have the full faith and credit of the authority. Buyers view all bond issues as revenue bonds. AIDEA attempts to place as many projects as possible under "revenue" status because AIDEA's "general obligation" credit is finite. It varies depending upon AIDEA's balance sheet. This credit is used carefully and when necessary to get a project moving once all statutory safeguards have been addressed. AIDEA is compensated for use of its pledge by an interest rate markup and earnings from the project once the debt is paid off. Mr. Olson next spoke to ownership status, advising that by retaining ownership, AIDEA can obtain tax-exempt bonds for the project. The development/finance program envisioned in AS 44.88. 172 takes advantage of this provision in the IRS code for ports, airports, and various utility projects. These projects are to be operated by the private sector. Lack of ownership would require issuance of taxable bonds which would substantially diminish the advantages of AIDEA and the competitive position of the project. Under those circumstances the project may not go forward. Funding for projects is safeguarded by statutory requirements and prudent use of authority assets. Mr. Olson further spoke to reimbursement agreements, feasibility analyses, and user agreements and noted requirements associated with each. Discussion followed between Senator Rieger and Mr. Snell regarding financial consequences of the recently announced layoffs and closure of the Skagway ore terminal. Mr. Snell advised that the company remains in full compliance with all payments to the authority. AIDEA is concerned regarding the credit worthiness of the company. The company is the victim of a depressed metals market. AIDEA believes that in the long term the project will provide anticipated returns. Senator Rieger maintained his objection to adoption of revised amendment no. 1. He concurred in legislative action to demonstrate support for the project, desire to see it go forward, and intent to approve state participation upon appropriate terms, but questioned whether approval of $50 million in bonds was an appropriate expression of that support. Co-chair Frank said that as a policy matter the legislature must decide whether it has confidence in AIDEA to make a proper determination of whether or not the project is feasible. He concurred that if the proposed legislation contained a loan commitment or granted credit, action would be premature. Passage of the legislation indicates the project fits politically and conceptually, and if it meets all statutory safeguards, it should go forward. Co-chair Pearce called for additional comments. None were forthcoming. She then directed that the roll be called on revised amendment no. 1: YEA: Sharp, Kerttula, Kelly, Jacko, Frank, Pearce NAY: Rieger Revised amendment no. 1 (Midrex) was thus ADOPTED on a vote of 6 to 1. Co-chair Pearce next directed attention to amendment no. 2 which she explained would delete the word "revenue" from language relating to the Anchorage airport fueling facility project. Senator Sharp MOVED for adoption. No objection having been raised amendment no. 2 was ADOPTED. Co-chair Pearce directed that both revised amendment no. 1 and amendment no. 2 be incorporated within a Senate Finance Committee Substitute for SB 171. She then queried members regarding disposition of the bill. Senator Kerttula MOVED that CSSB 171 (Finance) pass from committee with individual recommendations. Senator Jacko OBJECTED. Co-chair Pearce directed that the roll be called on passage of CSSB 171 (Finance): YEA: Kelly, Kerttula, Rieger, Sharp, Frank, Pearce NAY: Jacko The motion for passage of CSSB 171 (Finance) CARRIED on a vote of 6 to 1, and CSSB 171 (Finance) was REPORTED OUT of committee with a zero fiscal note from the Dept. of Commerce and Economic Development. Co-chairs Pearce and Frank and Senators Kelly, Kerttula, and Sharp signed the committee report with a "do pass" recommendation. Senator Rieger signed "no recommendation." Senator Jacko signed but made no recommendation. [See pages 20-21 for further action on this bill.] SENATE BILL NO. 57 An Act relating to employment contributions and to extending the pilot project for the state training and employment program; and providing for an effective date. Co-chair Pearce directed that SB 57 be brought on for discussion and noted a TELECONFERENCE link to Fairbanks. She referenced backup in members' files, pointing specifically to fiscal notes showing other than general funds, position papers from the Dept. of Community and Regional Affairs and the Dept. of Labor, a sectional analysis, a sponsor statement, legal opinion, Fairbanks' Native Association history, and a number of overviews. JUDY KNIGHT, Director, Employment Security Division, Dept. of Labor, came before committee. She explained that the proposed bill would extend the STEP program for three years. Employment Security collects and accounts for STEP revenues along with unemployment insurance taxes from employers and employees. STEP revenues are 1/10 of one percent of the employee contributions that would have accrued to the unemployment insurance trust fund to provide unemployment benefits to Alaskan workers. The STEP program was originally enacted in 1989 for a two- year period. In 1991 it was extended for an additional two years. It is scheduled to sunset June 30, 1993. When the STEP concept was originally proposed, it recognized that the state work force was in need of additional training to remain competitive. Use of revenues from the unemployment trust fund was determined to be an appropriate source of funds, given the three purposes set forth in the original legislation (Ch 95, SLA 1989): 1. Help prevent future claims against unemployment benefits. 2. Foster new jobs by encouraging businesses to locate in Alaska due to the availability of a skilled labor force. 3. Increase training opportunities to workers severely impacted by fluctuations in the state economy or technological changes in the work- place. Ms. Knight acknowledged a commitment to employers who bear the majority of the cost of unemployment insurance and want to see this cost reduced. Employment and training programs have thus been targeted and evaluated based on trust fund savings. In accordance with Sec. 7 of the STEP Act, last spring the department solicited comments, recommendations, and priorities from agencies, groups, and individuals. Regulations were then promulgated to ensure that training funded with STEP revenues would result in a savings to the UI trust fund. Included in target groups to be served are individuals presently claiming unemployment insurance benefits (including women and minorities), persons enrolled in the unemployed parent program (JOBS program under AFDC), persons responsible for court-ordered child support payments, and those who lack skills or whose skills have been outdated. Ms. Knight made reference to amendments to the legislation, advised that the administration does not support the amendments, and urged the committee to pass the original bill. Co-chair Pearce said that amendments had not been presented to the committee. Ms. Knight advised that a packet of amendments had earlier been provided to the department. Co-chair Pearce said they were not included within members' files since they had not been offered by anyone. Senator Kelly voiced need to hear from the department if the amendments are offered. Ms. Knight stressed need for Alaskan workers to obtain better skills. Thousands of unemployed Alaskans do not have the wherewithal to return to work. Human resources are an important factor in economic development. End, SFC-93, #51, Side 1 Begin, SFC-93, #51, Side 2 In response to a question from Co-chair Frank asking how STEP moneys are expended, Ms. Knight explained that the Dept. of Labor collects STEP revenues from unemployment insurance payments. The department then contracts or enters into a reimbursable services agreement with the Dept. of Community and Regional Affairs which is responsible for delivery of services and training. Funding is divided among the three service delivery areas established under the Job Training Partnership Act. The mechanism for JTPA was utilized in an attempt to minimize overhead administrative costs. MARK MICKELSON, JTPA/SDA Program Manager, Dept. of Community and Regional Affairs, next came before committee. He explained that the federal JTPA is administered by the department and passed along to three entities: 1. The Anchorage/Mat-Su private industry council. 2. Fairbanks private industry council. 3. The statewide private industry council, located within the department, that serves the balance of the state. The intent with the STEP program was to piggyback administrative functions with JTPA which was already in place. The STEP program fills an important niche in overall program strategy in that it does not generally focus on people with multiple barrier, severe dysfunction in terms of the labor force. That focus is subsidized by Title 2A and 2B of JTPA. In response to further inquiries from Co-chair Frank, Judy Knight explained that the job training council, a 21-member board appointed by the Governor, determines how funding will be apportioned. Mr. Mickelson voiced support for the STEP program, describing it as an important contributor to the overall effort of work force preparation. Senator Rieger asked if the above-listed councils contract with other entities to provide direct training. Mr. Mickelson said that the state merely administers the program. Training is provided by non-state private-sector businesses, nonprofits, the Alaska Vocational Technical Center in Seward, joint apprenticeship programs, etc. These direct service providers are more familiar with industry requirements and the skills that need to be developed. Grant award is through competitive procurement. Representatives of private industry councils sit on the proposal review committee that makes final selections. Further discussion followed regarding paper handling and reporting responsibilities at various levels within the program. In response to comments by Co-chair Frank, Mr. Mickelson said that the private industry council provides planning, oversight, and guidance to administrative staff. JANE DEMMERT and JOHN REGITANO next came before committee on behalf of the Fairbanks Native Association. Mrs. Demmert noted that the Fairbanks Native Association is unique in its 30-year history of service in Fairbanks. While it was originally established to serve the Native community, many services have been extended and expanded to serve all ethnicities in Fairbanks. Services include education, social services, services to elders, alcohol and addiction prevention and treatment to adults and adolescents, and employment counseling, training, and placement. The employment services component was established during the pipeline construction days and has provided services with public funds since that time. Mrs. Demmert noted that the Association is not a tribal entity. It is not eligible for tribal job training funding as are some regional nonprofits. The Association focus is upon provision of services to residents of the Fairbanks North Star Borough. One becomes eligible for services after residing in the Fairbanks area 30 days. Mrs. Demmert next spoke to allegations that the Fairbanks Native Association prefers not to go through the competitive process to apply for funding. That is not the case. The purpose of this appearance before committee is to suggest that a competitive process which would enable organizations such as the Fairbanks Native Association to be a part of the STEP program would serve the state very well. Mrs. Demmert directed attention to the Association's position paper on SB 57. Mr. Regitano spoke to needed adjustments in the bill to better serve the large demand for employment assistance among minority populations in the Fairbanks North Star Borough. The timing of awards is now sporadic and does not allow FNA and other organizations seeking employment assistance money to apply for and obtain funding on a year- round basis to provide a continuum of service to clients. A further problem is the screening process for STEP applicants. That process is long and so detailed that it discourages many from seeking employment assistance. The requirement that STEP applicants must have contributed to the unemployment insurance fund within the last three years is prohibitive and eliminates any people. During the past year, two out of three individuals "who came through the door" were not eligible and had to be denied service. Mr. Regitano stressed need for flexibility and adjustment of eligibility criteria to cover a broader range of people. Some mechanism should be built into SB 57 to directly tie funding cycles to the state fiscal year. Mr. Regitano acknowledged that the current unscheduled cycle serves some programs but not FNA. He again voiced need for adjustments providing FNA equal access to funding. Mr. Regitano noted that FNA competition for funding would not interrupt the flow of moneys to PIC (private industry council). Dept. of Community and Regional Affairs figures for FY 92 indicate $552.0 in unused STEP moneys. Co-chair Frank inquired concerning the success rate for FNA programs. He asked that representatives elaborate on other federal funds for the FNA employment program and indicate how a competitive mechanism could be implemented in the legislation. Mr. Regitano proposed a competitive process at the Dept. of Community and Regional Affairs similar to that utilized by the Dept. of Health and Social Services where RFPs issue in April or May for funding to be made available July 1. Following application, review, and award by June 30, organizations would then know what amounts they would be receiving. In further discussion with Co-chair Frank, Mr. Regitano expressed a preference for award to be made at the 21-member state JTPA council level. Speaking to the success rate of FNA programs, Jane Demmert advised that long-term follow-up of clients placed in jobs indicates 69% have remained in permanent employment. That is a significant turn around. Those individuals are no longer on state welfare rolls, and they are contributing to the state economy. Addressing the question of alternative funding, Mrs. Demmert explained that FNA is not eligible for categorical funds provided to Indian tribes. FNA is thus not eligible for specific JTPA funding. Co-chair Frank asked if FNA programs duplicate similar programs offered by the private industry council or other entities. Mrs. Demmert said that 75% of the clients served by FNA are Native and other minorities. The reverse is true of the Fairbanks private industry council. Approximately 30% of those clients are Native or other minorities. Need, demand, and response is such that the two programs serve different client groups and hopefully meet the employment needs of the entire community of Fairbanks. Senator Kerttula inquired concerning FNA overhead. Mr. Regitano answered that the currently approved rate is 19.3%. Delivery is thus at 81%. The STEP program, however, is capped at 15%. Discussion followed between Mr. Regitano and Senator Kerttula regarding the cross referencing of services. Senator Kelly inquired concerning FNA's annual budget. Mr. Regitano advised that the most recent audit evidenced $5.1 million. The STEP program is merely one piece of a total service system. It is an important piece in that FNA works on a multiple department basis, offering community service, family intervention, education, and the largest (80%) drug and alcohol prevention and rehabilitation programs. Employment is a key component of these services. Mr. Regitano observed that clients who receive assistance through other FNA services but who are subsequently unable to find work, are often readmitted to assistance programs. Senator Kelly voiced his understanding that the STEP program is currently successful. FNA is requesting a change in funding source, criteria, screening, etc. He then asked why that should be done when the program is working well. Mr. Regitano acknowledged that the program is working for "a certain group." He then voiced his opinion that it is "missing a large group of people." Further, there is available funding that could be used to serve those individuals. FNA is only asking for changes in order to be able to compete. In response to an additional question by Senator Kelly, Co- chair Frank noted that FNA seeks to serve the long-term unemployed as well as short-term. Senator Kelly suggested that STEP is not designed to do that. Mr. Regitano advised that those who have been out of work for a longer period are not being served. He noted that minority population unemployment in Fairbanks is double that of the majority. Co-chairman Frank acknowledged a teleconference link to Fairbanks and directed that testimony from the teleconference site commence. NEAL PLATEAU, (683-2698) Alascan, Inc., first testified. He voiced support for the STEP program, saying that it has been of great benefit in enabling the company to employ new techniques that allow Alascan to lower the cost of its product. Without STEP, Alascan would not be able to keep its employees working full time. The program is working well as it is. It should not be changed. Alaska needs manufacturing and other industry. Under STEP, more businesses can utilize funds for special training than if certain amounts of funding are dedicated to a particular group. BOB SWOPE next spoke in support of continued funding through FY 96. He explained that as a non-Native client of Fairbanks Native Association services he benefited from FNA's job referral program. End, SFC-93, #51, Side 2 Begin, SFC-93, #53, Side 1 It represents a proactive rather than reactive response to problems associated with getting a younger generation of Native men and women trained and employed in the work force. There is an overwhelming savings from reduction of the number of individuals on unemployment rolls and social service programs that far outweighs the cost of the STEP program. Mr. Swope asked that regardless of whether funding issues through grants or competitive proposals, the committee ensure that the level remains the same or increases. NELLIE HENSLEY, Program Director, Fairbanks Native Association employment program, next testified. She explained that over the past two years the program has served over 1,000 clients. That number reflects the FNA STEP program, a federal program, and a small JTPA project. If these clients had not been served, they would qualify for AFDC or other welfare programs for economically disadvantaged individuals. Of the 1,000, FNA placed 301 individuals in jobs, and 69% have retained their employment and are contributing to the unemployment insurance system. The FNA program is needed. It provides services to a population that is not being served through present employment and training programs available in Fairbanks. There is need for both the STEP program and changes to enhance the program. HOLLY BURNS voiced support for the program. (Unclear transmission and noises in the committee room make Ms. Burns' brief teleconference testimony difficult to understand.) TED WICKEN next spoke in support of the program. He explained that it made a great difference in his life. After having worked construction for many years, he is now undergoing training through STEP so he can continue to support his family. JAMES WRIGHT next spoke via teleconference from Fairbanks. He advised that he is an Alaska Native, originally from Ruby, who is presently undergoing FNA training in cadastral surveying. Mr. Wright urged continued support for the program. MADELINE WILLIAMS advised that she is a Native from Huslia and a client at FNA. She voiced support for FNA training and urged that support continue. LINDA PEARSON, Counselor, Hutchinson Career Center, Fairbanks North Star Borough School District, next testified. She explained that the career center has traditionally prepared students for the job market. Ms. Pearson attested to the fact that a number of adult minority clients have taken classes and thereafter secured jobs. She voiced support for FNA's employment program. It provides a one-stop-shopping type service to a unique clientele (75% minority), with a personal touch. In addition to job development, education, work experience, and day-labor placement, counselors teach clients how to get and keep a job. Clients explore their interests and assets. They work on application and resume development and practice interviewing in order to improve interview skills. It is the personal touch that reaches discouraged individuals who might not otherwise seek help from job service or the private industry council. It is valuable in that it puts to work individuals who might not otherwise have an opportunity. Speaking from a national perspective, Ms. Pearson said that job readiness skills are as important as actual job training. KENNY HOKE, member, Fairbanks Private Industry Council, next spoke to committee. He voiced private-sector support as well as support for FNA's competitive bid approach. He suggested that that approach could be more readily addressed through regulatory rather than statutory change. He urged support of SB 57 without the amendments. In response to a question from Co-chairman Frank, Mr. Hoke suggested that proposed changes should address funds that lapsed to the general fund. Unused unemployment insurance funds from the previous year should be held in a special account and issued via competitive bid. DAVID DEAN, executive director, Fairbanks Private Industry Council, next testified. He referred to earlier comments by Mr. Regitano that two out of three individuals coming to FNA are not eligible for the STEP program. That analysis is based upon a designated grant to FNA. It does not represent the statistics of the Fairbanks Private Industry Council. Council statistics indicate that far more are eligible for the program. Addressing comments regarding STEP funding cycles, Mr. Dean said funding is based upon actual allocation arrival at private industry councils. There is no delay in advertising for proposals or award of contracts. Mr. Dean noted that the long-term unemployed are served under Title 2 of JTPA. Councils administer those programs. Long-term unemployed individuals would certainly meet the economically disadvantaged criteria. The council is currently serving approximately 30% minority clients in a city with a minority population of less than 20%. The Fairbanks Private Industry Council has cooperative agreements with the Fairbanks Native Association and the Tanana Chiefs Conference, and clients are referred by both agencies. Mr. Dean next read a letter of support for SB 57, without amendments, from the chairman of the Fairbanks Private Industry Council. In response to an inquiry from Senator Kelly, Mr. Dean advised that a copy of the March 31, 1993, correspondence was faxed to each Senator's office. CHRISTINA HILL, member, FNA, next spoke in support of the bill. She explained that she is a public employee who employs approximately 23 Native staff members. She urged continuation of funding for FNA services and requested that the legislature consider expansion of funding sources, noting that agencies that directly serve the Native community and other minority communities should be able to compete for funding. EDNA MATTHEW, employment specialist, Fairbanks Native Association, next testified, requesting continued funding of FNA STEP programs. There are presently 262 clients being served by three counselors at FNA. Each client is provided orientation regarding the association's programs and services. They then progress through intake and work skill assessment. Clients are provided a job readiness class and learn resume skills prior to referral to jobs or additional training. FNA services are not duplicating similar programs. Although minorities may only be 20% of the Fairbanks population, they are disproportionately represented in the unemployed sector. FNA's employment program serves a need that must be met in Fairbanks. HARRY FIELDS next voiced support for the STEP program on behalf of the private industry council. (Teleconference testimony is unclear and difficult to discern.) JULIE WILSON next testified. She explained that she is an instructor at the Fairbanks Native Association. She then voiced support for continued funding of the FNA employment program through STEP moneys. Ms. Wilson said that she works specifically with adult basic education, academic assessment of clients, and job readiness workshops. FNA services do not duplicate other programs in the Fairbanks area. Co-chair Pearce called for additional testimony on the bill. None was forthcoming. Upon conclusion of the teleconference, Co-chair Pearce directed that SB 57 be HELD in committee pending arrival of Mayor Jim Sampson from Fairbanks. [See page 22 for further comments on this legislation.] SENATE BILL NO. 85 An Act extending the termination date of the Alaska Tourism Marketing Council; and providing for an effective date. Co-chair Pearce directed that SB 85 be brought on for discussion and further directed attention to amendments for the bill. She recalled prior committee discussion relating to need to shorten the time of sunset and place a task force on tourism into temporary law. The task force is to work during the interim and make recommendations next January for new methods of funding tourism marketing on a public/private basis. The legislature is interested in a greater private- sector infusion into the ATMC program. That is reflected in the budget. Both the Governor's and the Senate budgets increase the private portion to 20%. The House budget shows an increase to 22.5%. Directing attention to page 2, lines 21 and 22, of the Senate Labor and Commerce version of the bill, Co-chair Pearce noted that, at the request of the department, bill language removes the director of tourism as the presiding officer of the board. Senate Finance received a request from the Governor's office through boards and commissions that the Governor be allowed to appoint the presiding officer from among board members. BILL PEDLAR, Princess Tours, came before committee. He advised that all Alaskan businesses in the tourism industry benefit greatly from cooperative marketing. As a destination, Alaska competes with Canada, Europe, and other locations where millions are spent at the federal level to promote those destinations. Travel to Alaska often ranks as a foreign vacation rather than travel to another state. Mr. Pedlar took exception to the perception that certain members of the industry--most notably, cruise ship operators--have disproportionately benefitted from cooperative marketing. From 1986 through 1993, the cruise industry in Alaska has grown from 201,000 beds to 320,000 beds. That represents over a 60% increase. During that time, pleasure vacations and visits to friends and relatives grew only 43%. The cruise market outsupplied growth in the vacation pleasure/visitor market. That was accomplished by two things: marketing and supply. The cruise industry is a supply based segment of the industry. It will find a price that will clear the supply in the marketplace. If inherent demand is not there for the destination, the industry will find a way of liquidating its product at a price that will fill its assets. From 1986 to 1993, Princess Cruises increased its marketing budget from $6.1 million to $13 million to market $383 million worth of assets deployed in the trade. That represents $63 million worth of assets in the State of Alaska, including hotels, motor coaches, rail cars, and an equivalent investment of $320 million worth of ships. Alaska is the only trade in which Princess Cruises markets the destination first and the mode of transportation second. During the time that Princess Cruises increased its marketing budget 113%, funding for cooperative marketing increased from $4.5 million to $6.2 million. The industry contribution increased from $1.2 million to $1.4 million. The Division of Tourism budget increased from $2 million to $3.2 million in that same period. Mr. Pedlar voiced his contention that the cruise industry has not disproportionately benefitted from cooperative marketing. It has benefitted from application of its own resources to an expanding market. He noted that in 1993, Alaska has no more market share of the world cruise deployment than it had in 1986. The cruise growth in Alaska has maintained its position since that time. The council does an excellent job with the funds it is given. While the 21 members have not always worked harmoniously, eleven of the 21 must agree upon how to spend state funds and the private industry match. It is the best check and balance the state has to ensure that funds are spent in an intelligent manner. No one person or one entity on the council can expend funds. There is no subterfuged control. In his closing remarks, Mr. Pedlar voiced support for continuation of the council, reiterating that there is no disproportionate benefit to any one entity from generic marketing. He again attested to the effectiveness of existing checks and balances associated with council expenditures. Mr. Pedlar urged committee support for continued and increased funding for the council. Co-chair Pearce asked if the marketing increase from $6.1 to $13 million represents Princess Cruise marketing for Alaska or for the entire company. Mr. Pedlar answered that marketing is tracked by trade. The Alaska trade has grown. Marketing the Alaska destination in light of worldwide global competition has required additional funds. In response to a question from Co-chair Frank, Mr. Pedlar acknowledged that he was in favor of expanding year round television at the expense of "some of the travel planners." The last 100,000 distribution of travel planners may not be the most cost effective advertising. Mr. Pedlar voice his belief that "One of the things that . . . has hurt the growth in other segments is the overall, generic appearance of Alaska in the marketplace." When Princess Cruises markets Alaska, it has a vested corporate interest in the minds of consumers. When the state produces generic television ads featuring the beauty of Alaska, there is great credibility that builds consumer interest and awareness. That part of the budget has constantly been eroded since 1981. When faced with impending budget cuts, the council reassessed its efforts and felt there was greater need for consumer awareness of Alaska as a destination, via increased television advertisements. That meant sacrificing, in the short term, "a couple of distributions of travel planners." That was done with the hope that the planner could again go forward once consumer awareness was built. Responding to comments by Senator Kerttula, Mr. Pedlar said that the general fund allocation to the Alaska Tourism Marketing Council was approximately $6.2 million for 1993. Advertising and distribution associated with the travel planner comprises $4.5 million of that total. The remainder is for public relations, fam trips, administration, etc. What is left over is utilized for network or cable television. Market place rating points for 1993 are not even close to those of 1983 and 1984. Co-chair Pearce directed attention to packet information (copy on file in the original SFC bill file at the Legislative Finance Division) demonstrating distribution of funds since 1989. Co-chair Frank asked if domestic marketing includes the Alaska Highway. Mr. Pedlar answered affirmatively. He explained that the Division of Tourism has commenced the Tourism North project. It funds a strategic market focused on highway travel. Co-chair Frank spoke to criticism that marketing does not focus on Alaskan-owned businesses and is dominated by the cruise ship industry. He then suggested that it would be worthwhile for generic advertising to include various methods of getting to Alaska. Mr. Pedlar said that generic marketing, through distribution of the travel planner, features different methods of traveling to the state. The other impression attempted to convey through ads is the myriad of interesting things in Alaska. He conceded that perhaps a picture of an R.V. should be worked into advertising. Mr. Pedlar next spoke to problems associated with attempting to target marketing for a specific region or type of travel under a generic banner, indicating that such an approach means that there is usually not enough money "to do anything really well." End, SFC-92, #53, Side 1 Begin, SFC-92, #53, Side 2 Mr. Pedlar acknowledged that cruise ship marketing sometimes supplants state marketing in the minds of potential travelers. He further acknowledged that pricing calculated to fill ships often makes highway travel appear less economical. Co-chair Frank voiced his belief that many potential visitors do not even know that it is possible to drive to Alaska. He noted that the recent Alaska Highway 50th anniversary celebration would have provided a good opportunity to focus on that type of travel. Senator Sharp suggested that most state advertising moneys have been channelled to benefit those who can most afford to advertise, at the expense of others. There should be opportunity to channel funding toward a broad scope of advertisement that benefits many. Senator Kerttula spoke to the value of the vacation planner, advising of support from constituents. He voiced concern over reduced distribution and attested to need to promote rural wilderness experiences. Increases in the budget should be dedicated to destination tourism. Senator Jacko questioned support for expenditure of general fund moneys for tourism in light of resistance to expenditure of general funds for seafood marketing. Co-chair Pearce directed attention to Amendment No. 1, requested by the Governor's Office, and explained that it would add the following language at page 2, lines 21 through 23: the governor shall appoint a presiding officer from among board members; Senator Kelly MOVED for adoption. Senator Kerttula OBJECTED, inquiring concerning the reasoning behind the change. Co-chair Pearce explained that the director of the division of tourism currently serves as chairman. The director did not feel it appropriate that he automatically be designated. The board consists of 21 members (10 appointed by the Governor, 10 appointed by AVA, and the director of tourism). The Senate Labor and Commerce Committee included language requiring that the board elect the chairman. The Governor's Office indicated that since the state is funding 77.5% of the marketing effort, the administration should select the chairman from among board members. Senator Kelly noted that the director of the division of tourism would continue to sign all contracts, regardless of whether he serves as chairman. That provides additional protection. Co-chair Frank voiced his preference for retention of the director of tourism as chairman. That arrangement provides integration between domestic and international marketing efforts. He also attested to the benefits of having an individual working full time in tourism do necessary background work and form the agenda. To expect a lay person to fill that role is unrealistic. TINA LINDGREN, Executive Director, Alaska Tourism Marketing Council, and WENDY MULDER, Special Assistant, Dept. of Commerce and Economic Development, next came before committee. Ms. Lindgren concurred in foregoing comments that the director of tourism asked that he be removed as presiding officer of the council. She explained that at times he has been put in an awkward position when the Governor's viewpoint is in conflict with the council's position. Senator Sharp raised questions concerning the following explanation associated with Amendment No. 1: This board approves millions of dollars each year for state funded tourism promotion. It would certainly injure the public perception of the ATMC to have the AVA-dominated board selecting their own chair. At the least, the chair should be accountable to the public, not just one private organization. Allowing the governor to appoint the chair will accomplish this. He noted that the governor could appoint a representative of a strong private organization as chairman. He then suggested that Amendment No. 1 would not preclude the situation warned of in the above language and advised that he could not support the amendment. Co-chair Frank concurred in lack of support. Co-chair Pearce called for a show of hands on adoption of Amendment No. 1. The motion carried on a vote of 4 to 3, and AMENDMENT NO. 1 was ADOPTED. Co-chair Pearce directed attention to Amendment No. 2 and explained that it would establish, in temporary law, a task force on tourism. She attested to concern regarding long- term funding for generic marketing and past utilization of those moneys. Senator Kerttula asked if Senate Labor and Commerce could undertake the effort if provided the necessary funding. Senator Kelly said that as chairman of Senate Labor and Commerce Committee, he was not interested in performing the work. He then suggested that there should not be great expense associated with the task force. Co- chair Pearce concurred, advising that no staff would be involved. Travel would be paid from leadership funds in both houses of the legislature. Senator Kelly MOVED for adoption of Amendment No. 2. No objection having been raised, AMENDMENT NO. 2 was ADOPTED. Co-chair Pearce directed attention to Amendment No. 3. She explained that the bill currently has a sunset date of 1997. Because of concerns surrounding ATMC and the task force, the proposed amendment would replace June 20, 1997, with December 30, 1994. That date was chosen since the council markets on a seasonal bases rather than the state fiscal year. The task force could thus return to the legislature with recommendations prior to sunset. Senator Kerttula voiced support and MOVED for adoption of AMENDMENT No. 3. Senator Kelly OBJECTED. He said he saw no reason for the one-year extension. While voicing support for the task force, he advised that the council "does a fine job." There is no need to hold the extension over council members' heads. Co-chair Pearce spoke to concern that extension may not be forthcoming from the House. It is hoped that the shortened time frame and interim task force would aid passage and avoid impending sunset of the Council. Co-chair Pearce called for a show of hands on adoption of Amendment No. 3. The motion carried on a vote of 5 to 1, and AMENDMENT NO. 3 was ADOPTED. Co-chair Frank suggested that the following language be added at page 2, following Line 17: including the promotion of Alaska as a destination and all form of travel to Alaska, including travel by air, highway, water Co-chair Pearce designated the foregoing as Amendment No. 4. She then directed that action on the amendment be held in abeyance pending formal presentation of the language in written form. Senator Kelly referenced title language at page 1, line 12, and spoke to need to remove the word "substantial" therefrom. He explained that Senate Labor and Commerce Committee action deleted a requirement that certain ATMC board members be substantially involved in a visitor or recreation industry business. Such language should also be removed from the title. Co-chair Pearce directed that discussion of SB 85 be HELD IN ABEYANCE pending formal presentation of Amendment No. 4. [See pages 22-23 for continued discussion of SB 85.] SENATE BILL NO. 171 An Act relating to the contracting and financing authority of the Alaska Industrial Development and Export Authority, giving approval of the issuance of the authority's revenue bonds, and delaying the termination date of the authority's business assistance program; and providing for an effective date. Senator Kerttula MOVED to rescind committee action passing CSSB 171 (Finance) from committee. No objection having been raised, IT WAS SO ORDERED. CSSB 171 (Finance) was again before committee. SENATOR JOHNNY ELLIS came before committee, asking that the substance of SB 16 (AIDEA BONDS: ANCHORAGE SEAFOOD FACILITY) be incorporated within CSSB 171 (Finance). He then offered an amendment to that effect. (Recording problem. Minutes relating to action on CSSB 171 (Finance) and testimony on SB 57 reflect transcription of shorthand notes. There is no recording.) Co-chair Pearce directed that the amendment be designated Amendment No. 3 and called for objections. She also advised of her preference for inclusion of all three projects contained in CSSB 171 (Finance) within title language. Senator Kerttula MOVED for adoption of Amendment No. 3 and a listing of the projects within title language. Senator Kelly initially OBJECTED and then WITHDREW his OBJECTION. Senator Rieger reiterated his earlier expressed concern regarding lack of information associated with projects within the bill. Co-chair Pearce called for a show of hands on the motion. The motion CARRIED on a vote of 5 to 1, and AMENDMENT NO. 3 and the TITLE CHANGE were ADOPTED. Senator Kerttula then MOVED for passage of CSSB 171 (Finance) with individual recommendations. No objection having been raised, CSSB 171 (Finance) was REPORTED OUT of committee with a zero fiscal noted from the Dept. of Commerce and Economic Development. Co-chair Pearce and Senators Kelly, Kerttula, and Sharp signed the committee report with a "do pass" recommendation. Senator Rieger signed "no recommendation." Senator Jacko signed without making a recommendation. SENATE BILL NO. 57 An Act relating to employment contributions and to extending the pilot project for the state training and employment program; and providing for an effective date. JIM SAMPSON, Mayor, Fairbanks North Star Borough, came before committee in support of SB 57. He said that a good public policy argument could be made for investment in long- term programs allowing unemployed individuals to develop skills needed in the current job market. He voiced his belief that FNA should be allowed to compete for funding and stressed need for earlier receipt of STEP moneys. The mayor concurred in previous testimony regarding need to provide programs for the long-term unemployed. Co-chair Pearce directed that SB 57 be placed in a subcommittee under Senator Kelly. SENATE BILL NO. 85 An Act extending the termination date of the Alaska Tourism Marketing Council; and providing for an effective date. (Remaining minutes reflect tape transcription.) Co-chair Pearce directed that discussion revert to SB 85. Co-chair Frank distributed Amendment No. 4 and explained that the intent is to place in statute, under ATMC duties, direction that the council promote Alaska as a destination in all forms of travel, including air, highway, and water. He suggested that the new directive would send a signal that the legislature is concerned about all aspects of the tourism market. TINA LINDGREN, Executive Director, Alaska Tourism Marketing Council, again came before committee. She advised that the council is attempting to accomplish the intent embodied within the proposed amendment, noting that the vacation planner contains information on different modes of travel. Ms. Lindgren voiced concern that the amendment might restrict the marketing of highway travel per se since it might preclude the council from conducting a specific promotion. Co-chair Frank advised that he did not foresee that becoming a problem. Senator Kelly reiterated earlier comments (see page 20 of these minutes) regarding need to delete the word "substantially" from title language. He then MOVED for adoption of that technical amendment. No objection having been raised, IT WAS SO ORDERED. [NOTE the drafter subsequently determined that since the legislation would delete the requirement that certain members of the council be substantially involved in a visitor or recreation business, it was necessary to retain "substantially" within title language. That retention was cleared with Senator Kelly's office, and "substantially" remained within the title of CSS 85 (Finance).] Co-chair Frank MOVED for adoption of Amendment No. 4. Co- chair Pearce initially OBJECTED to allow time for review of specific wording by members. Following review of amendment language, Tina Lindgren advised that she did not foresee a problem. Wendy Mulder voiced support for the amendment on behalf of the Dept. of Commerce and Economic Development. Co-chair Pearce REMOVED her OBJECTION to adoption of Amendment No. 4. She then called for further objections. None were forthcoming, and Amendment No. 4 was ADOPTED. Senator Jacko MOVED that CSSB 85 (Finance) pass from committee with individual recommendations. Senator Sharp OBJECTED. Co-chair Pearce called for a show of hands. The motion CARRIED on a vote of 5 to 1, and CSSB 85 (Finance) was REPORTED OUT of committee with a zero fiscal note from the Dept. of Commerce and Economic Development. Co-chairs Pearce and Frank and Senators Jacko, Kelly, and Rieger signed the committee report with a "do pass" recommendation. Senator Sharp signed "Do not pass." Senator Kerttula had left the meeting and did not sign. ADJOURNMENT The meeting was adjourned at approximately 11:15 a.m.