Legislature(1993 - 1994)
03/21/1994 09:11 AM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE March 21, 1994 9:11 a.m. TAPES SFC-94, #45, Side 1 (120-end) SFC-94, #45, Side 2 (end-000) SFC-94, #47, Side 1 (000-end) SFC-94, #47, Side 2 (end-500) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 9:11 a.m. PRESENT In addition to Co-chair Pearce, Senators Kelly, Jacko, Sharp and Kerttula were present. Co-chair Frank and Senator Rieger joined the meeting after it was in progress. (Senator Kerttula was not present when the meeting reconvened at 5:22 p.m.) ALSO ATTENDING: David Gray, aide to Representative Jerry Mackie; Duane Guiley, Director, School Finance, Department of Education; Bruce Campbell, Commissioner, Department of Transportation & Public Facilities; Paul Fuhs, Commissioner, Department of Commerce & Economic Development; Jetta Whittaker, fiscal analyst, and Mike Greany, Director, Legislative Finance Division; aides to committee members and other members of the legislature. VIA TELECONFERENCE: Robert Hatfield, Jr., President & CEO, Alaska Railroad Corporation from Anchorage; and Frank X. Chapados, Acting Chairman, Railroad Corporation Board from Anchorage spoke to SB 148 and SB 338. When the meeting reconvened at 5:22 p.m., Phyllis C. Johnson, Vice President/General Counsel from Anchorage; John Burns, real estate representative from Anchorage; and Mark LoPatin, LoPatin & Co., Detroit, MI., joined the teleconference. SUMMARY INFORMATION CSSB 312(HES): An Act relating to school construction grants and to interscholastic school activities; and providing for an effective date. David Gray, aide to Representative Jerry Mackie, spoke in support of SB 312. Duane Guiley, Director, School Finance, Department of Education, spoke to questions regarding the bill. Extensive discussion was had by the committee regarding school bonds, grants, reimbursement, and temporary facilities. Amendments 1 and 2 FAILED to be adopted. Amendment 3, MOVED by Senator Rieger, is pending. SB 312 was HELD in committee until March 23, 1994 at 8:00 a.m., or until Senators Frank and Rieger compose an amenable amendment addressing committee issues. SB 360: An Act amending the medical assistance and community developmental disabilities grants appropriations in sec. 38, ch. 65, SLA 1993; and providing for an effective date. Co-chair Pearce spoke in support of SB 360 and explained that since only $400,000 of the $1.6M had been used in FY94, this bill would enable grantees to complete their FY94 operations having a zero-net general fund impact. SB 360, an appropriation, was REPORTED out of committee with a "do pass." CSSB 148(TRA): An Act relating to legislative approval of certain acts of the Alaska Railroad Corporation; taxation of certain property of the Alaska Railroad Corporation; members of the board and chief executive officer of the Alaska Railroad Corporation; meetings of the board of directors of the Alaska Railroad Corporation; and providing for an effective date. A teleconference was held and Robert Hatfield, Jr., President & CEO, Alaska Railroad Corporation, and Frank X. Chapados, Acting Chairman, Railroad Corporation Board, in Anchorage, were questioned by Senator Sharp regarding the Ship Creek Landings Project. Due to lack of time, the meeting was recessed and the teleconference was scheduled to continue at 5:00 p.m. today. The meeting reconvened at 5:22 p.m. and the teleconference continued. Mark LoPatin, LoPatin & Co., in Detroit, joined Mr. Hatfield, other Railroad Board members, Ms. Johnson, and Mr. Burns, at the Anchorage site. CSSB 338(L&C): An Act relating to the issuance of revenue bonds for acquisition and construction of the Northern Crossroads Discovery Center for the Ship Creek Landings Project; relating to a study of the feasibility and financial viability of the Northern Crossroads Discovery Center; relating to construction of the Northern Crossroads Discovery Center; and providing for an effective date. See summary above for SB 148. SENATE BILL 360: An Act amending the medical assistance and community developmental disabilities grants appropriations in sec. 38, ch. 65, SLA 1993; and providing for an effective date. CO-CHAIR PEARCE announced that SB 360 was before the committee. She said the House passed its companion bill last week. Co-chair Pearce said there was an April 1, 1994 deadline on SB 360. She went on to explain that the bill amended the developmentally disabilities grants appropriations. She read her sponsor statement (see Attachment A, copy on file in the committee minute book). On page 1, line 10, there was a typographical error. It should read "line 23". She said this would be taken care of as a technical amendment. SENATOR KERTTULA MOVED for passage of SB 360 from committee with individual recommendations. No objection being heard, it was REPORTED OUT of committee with a "do pass." It is an appropriation. Co-chair Pearce and Senators Sharp, Rieger, Jacko, Kelly, and Kerttula signed "do pass." CS FOR SENATE BILL NO. 312(HES): An Act relating to school construction grants and to interscholastic school activities; and providing for an effective date. Co-chair Pearce announced that SB 312 was before the committee, and had been sponsored by the Senate Finance Committee at the request of Representative Mackie. Senator Kerttula asked who had the competence to oversee school construction and what was the plan in order to initiate the bill. Co-chair Pearce remarked there was a zero fiscal note so positions would not be required. DUANE GUILEY, Director, School Finance, Department of Education, said an architect had been hired last year that had 40 years of experience and had designed over 200 school buildings. Currently, this architect was serving as staff to the Bond Reimbursement and Grant Review Committee. This Committee had an architect on the committee and was looking at different approaches toward cost effective construction in order to conserve state dollars given the backlog that continued to build. In answer to Senator Kerttula, Mr. Guiley said that one of the architects had written articles about building in arctic and perma-frost areas and had experience in this climate. Mr. Guiley went on to say that it was his belief the system was being enhanced so that in the future it would be more effective than it had been. DAVID GRAY, aide to Representative Jerry Mackie, said that Representative Mackie had spent considerable time trying to generate interest in this bill. The bill was in response to concern regarding school project prioritization, costs involved, varied needs, and the kind of review the legislature could expect. Senator Kerttula reiterated the need for a timely review. Mr. Gray said that originally school districts had to wait for the Department of Education's decision on school construction. The state then gave the school district permission to pursue their own building. SB 312 was an attempt to mesh those two processes. SENATOR JACKO MOVED amendment 1 which provided reimbursements to those communities that fell into the time span between April 1, 1990 and April 30, 1993, when the program had been suspended. Two boroughs in his district would benefit - Bristol Bay Borough and Aleutians East Borough. SENATOR RIEGER asked the fiscal effect of the amendment. Senator Jacko answered that the total reimbursement would be $4M so the fiscal effect would be the same as if the reimbursement process would have been in place. Senator Kerttula gave some history on school bonding. CO-CHAIR FRANK asked if this amendment would effect any other districts and if it would also mean an immediate cash reimbursement to the school districts. He also wanted to know the fiscal impact and the process used to reimburse. Senator Jacko reminded Co-chair Frank that it was limited to those districts that had built facilities with cash. Co- chair Pearce still wanted to know if any other districts could be included in this amendment. Senator Kelly said his concern was major rehabilitation projects that would be eligible with this amendment. Mr. Guiley said the department was not aware of how many dollars were spent during that time period because the program had been suspended and there was no need for a district to report to the Department of Education (DOE) cash expenditures for major rehabilitation, construction or modernization projects. He explained to the committee how it would work. Payments that were made by the municipality during 1992 would qualify under this program and would be effective immediately. If the bill was signed into law before June 30, 1994, it would mean a fiscal impact this fiscal year. At this time, there was no money appropriated for this purpose. Final fiscal impact would result in 1995. This amendment did not call for an approval from DOE so any project that was built during that time period would be subject to reimbursement provided it exceeded the $150,000 cap. DOE would have some discretion to approve facilities that provided excess space and were overly expensive. Senator Sharp seemed to think $150,000 was low. Senator Jacko said that he had not specified the $150,000 cap. Discussion followed by Senators Sharp and Jacko regarding rehabilitation projects. SENATOR KELLY asked how DOE defined a major rehabilitation project. Mr. Guiley said that under current statute two types of projects qualified for major maintenance. Those projects were expected to extend the life of the facility through a protection of the structure, such as a bearing wall or roof, or a major code upgrade project that brought the school into compliance with current fire marshall codes, Americans with Disabilities Act, and other access codes. They were projects that the nature of the code violation was such that the building would be subject to being closed and could no longer be used for educational purposes. In answer to Senator Kelly, Mr. Guiley said that under DOE's requested project list from school districts, there was a backlog of $72M worth of major maintenance projects, and $680M backlog of school construction projects (requested by the districts in the FY95 cycle). He did not know what amount of those would be subject to reimbursement. Senator Kerttula said he would have some concern whether a 70 percent reimbursement could be had on cash projects that may have originally been funded through state discretionary funds. He requested that it be mandatory for districts to provide information about the source of the funds for school projects. Co-chair Pearce stated that the bill would carry with it the requirement for an appropriation as it would go through that approval process. Co-chair Frank asked Mr. Guiley to restate the facts regarding the Anchorage situation. Mr. Guiley said that SB 7 had an amendment that provided for retroactive reinstatement of the school bond debt program to allow districts to come forward and claim reimbursement for bonds that had been sold during the time period the program had been suspended. During public hearings, testimony was heard by the Anchorage School District that they had sold bonds and would be eligible based on their understanding of the amendment. No other district came forward and identified bonds. DOE testified that they had no way of knowing the limit of bonds due to the fact that districts were not required to report to the department during that time period. The municipal bond bank was consulted and they said they were not aware of any bonds. After the bill passed, a letter was received from North Slope School District indicating that they had sold $20M worth of bonds in that interim, and were subject to retroactive reimbursement. Mr. Guiley asked to comment on existing statute AS 14.11.102 in paragraph a. He said it did require the district to notify DOE prior to October 15, of their desire to receive an allocation for reimbursement under AS 14.11.100. Since October 15 had already passed for FY94 and FY95, there was a possibility that no one would be eligible for reimbursement. Co-chair Pearce stated that was not Senator Jacko's intent. In answer to Co-chair Frank in reference to the North Slope reimbursement, Mr. Guiley said that reimbursement was part of the $50M allocation. He said that $200M had been authorized for new bond debt and was allocated throughout the state based on municipality size. All municipalities with less than 60,000 population, shared in the $50M. North Slope competed on a priority basis with other districts of equal size of their share of the $50M reimbursement. Mr. Guiley said it was retroactive but it had to come out of the $50M allocation. Senator Kelly voiced his opinion that it was unconscionable that DOE did not know $20M worth of bonds had been sold in the North Slope Borough. In answer to Senator Sharp, in reference to amendment 1, Mr. Guiley said that the phase "two years earlier" was based on audited projects and on the timeliness of the availability of the data. The program had historically provided reimbursement for expenses incurred two years prior. This would reinstate the program under a similar model that did exist prior to the suspension of the model. He again explained the two year reimbursement process. Co-chair Frank and Senator Kerttula gave their opinions on the reason for the prior two year expenditure reimbursement. Senator Kerttula asked what would stop a district from borrowing cash to build a school and then in two years come to the state for 70 percent reimbursement. Mr. Guiley said that was one of the problems with the two year program in that there was no prior approval through DOE if the district decided they could afford to build and would subsequently effect the cash flow of the state two years later. In answer to Senator Kerttula, Mr. Guiley said this amendment only applied to the time frame of April 1, 1990 through April 30, 1993. Mr. Guiley said that last year's bill did not provide for an opportunity for cash reimbursement. Senator Rieger stated that the package proposed last year was inequitable statewide. He said the legislature was forced to go to bonded debt reimbursement because the Governor's proposal used up all of the grant money available for a selected part of the state. Senator Kerttula said it was important to know if Bristol Bay had participated in that for equity. Senator Jacko said the amendment targeted Bristol Bay and North Slope's and it was his understanding there was an inequity. Co-chair Frank asked how those two districts had the cash to build their schools. Senator Jacko said the money was generated from raw fish taxes and the boroughs had not had the ability to sell bonds. Recess 9:55am Reconvene 10:00am Senator Jacko asked if the amendment should be tightened. Co-chair Pearce reminded the committee that there was no way to tell the fiscal impact of amendment 1. She felt the amendment did not belong on SB 312 and would rather see it taken care of in the appropriation process. End SFC-94 #54, Side 1 Begin SFC-94 #54, Side 2 Co-chair Frank asked if DOE had control over criteria for school projects including its appropriateness to the needs of the district. He wanted to know if a district wanted to build a new school twice as big as its projected population, could DOE refuse to approve the project. Mr. Guiley said that much of the authority that DOE had was listed in regulations in order to clarify existing statutes. SB 7 created a Bond Reimbursement and Grant Review Committee. One of the responsibilities of that Committee was to develop cost effective school construction criteria. This bill would provide an opportunity to implement the criteria developed by that Committee. He said that DOE had shared the funding of projects where a district had wanted to build a project greater than the approved square footage. In such a case, DOE provided funding for the square footage per the guidelines and the district funded 100 percent of the difference in excess. Co-chair Pearce said that SB 312 only related to grant review. Mr. Guiley agreed. In answer to Senator Kerttula, Senator Rieger said that the repealer in Section 2 was what DOE used to directly administer interscholastic athletics. In the mid to late 80s, Alaska Student Athletic Assoc., Inc. (ASAAINC) was set up which took over the duties of the department. Because the statute was still on the books, there was a concern that an appeal over a student's eligibility could still be appealed to DOE. Section 2 deleted the statutes that linked DOE with governance of interscholastic athletics. Mr. Guiley agreed. Co-chair Pearce reminded the committee that amendment 1 had been MOVED. Co-chair Pearce OBJECTED. The amendment FAILED to be adopted on a vote of 6 to 1 (All members were opposed except for Senator Jacko who was in favor of the amendment). Senator Rieger MOVED amendment 2. Senator Kelly OBJECTED. Senator Rieger said that amendment 2 addressed a concern that DOE might consider students who were housed in temporary facilities and portables as being housed. Amendment 2 attempted to clarify that "unhoused" includes students in portables or in temporary housing. In answer to Co-chair Frank, Mr. Guiley said that on some occasions districts receive reimbursement from DOE to purchase classroom space or to construct portable classroom space, or sometimes finance them through available fund balance, excess earnings, etc. Again, in answer to Co-chair Frank, Mr. Guiley said that historically, the cost of relocatables averaged from $12,000 to $400,000. Co-chair Frank remarked at the wide range. Mr. Guiley said the type of construction, utilities housed, self-contained heating systems, intercoms, etc., caused the difference. DOE was attempting to come up with an adequate definition of a relocatable, and was attempting to ignore all students housed in temporary facilities for future purposes. He would not have any problem with the amendment. In answer to Senator Jacko, Mr. Guiley felt this amendment would not overlook districts that had helped themselves in an overcrowding situation and would not leave them out of the priority sequence. Senator Jacko felt the effect of amendment 2 was the same as amendment 1. Mr. Guiley said this was an eligibility question and not a appropriation question. Currently, there were about 260 portable classroom units that were being used. Under the old process, if a district housed a child in a relocatable classroom, that classroom was counted in the gross square footage available to the school district and therefore made the district ineligible to receive a new school construction grant. Senator Jacko said the end result was the same. Co- chair Pearce disagreed with him and explained the effect of the amendment again. In answer to Co-chair Frank, Mr. Guiley said last year in SB 60 there were three grants that provided funds for relocatable or portable classroom spaces. In one case, the legislature provided an amount $690,000 for two portable classroom facilities in western Alaska. The bid that had just come in on those two were over $800,000. Co-chair Frank asked if these relocatables would be considered permanent. Mr. Guiley said that most states use relocatable units that were pre-manufactured, installed on a axle assembly, and it allowed them to be moved to another location. Co-chair Frank felt there should be some consistency when building relocatables and portables. Mr. Guiley said the most expensive relocatables were built on site and the district chose to call them relocatables even though DOE did not define them as such. In answer to Co-chair Frank, Mr. Guiley believed that DOE was focusing on "temporary" facilities (pre-manufactured, etc.) rather than those built on site with post and pad construction. In answer to Senator Jacko, Mr. Guiley said that sometimes in the past, the state had given grants to provide cash to districts to build temporary classroom facilities, or, at least, to what districts referred to as portable classrooms. What DOE was attempting to do was come up with a definition of a temporary classroom facility that would be excluded from the available gross square footage therefore not disadvantaging a district that helped themselves. Mr. Guiley said that the issue of a district building with cash was separate from this relocatable issue. In answer to Senator Frank, Mr. Guiley said that relocatables were eligible for reimbursement. Senator Kelly stated that temporary housing was not such a bad solution since student population sometimes shifted between districts. Co-chair Pearce invited him to Sandlake School which had 165 percent population for the original school and the rest were housed in relocatables. Those relocatables had become permanent and would remain with that school until a new school was built. Senator Kelly asked if a bond issue had taken care of that situation. Co-chair Pearce said it might be solved but she felt that all districts in the state should have their projects looked at with the same discretion by DOE for grants. Senator Kelly said that it did not make any difference to a student if he/she was in a temporary building. He went to a school that had temporary classrooms and forty years later they were still there. To everyone's amusement, he said he was not a good example, but there were some good students to come out of that school. Senator Kerttula said he went to school in a freight car in Palmer, Alaska. Co-chair Frank said he spent seventh grade in a portable. Senator Rieger said that the amendment he had offered with Senator Kerttula spoke to AS 14.11.013, and that was the only place in the statutes he could find any criteria for prioritizing. He wanted to know if it would apply to debt reimbursement and the grant program equally. Mr. Guiley said it did not apply to the bond reimbursement program but only to the grant program. Senator Rieger asked where identical language could be added for bond reimbursement. Mr. Guiley turned Senator Rieger's attention to AS 14.11.100 (j) 4. which currently dealt with adequate housing of students for the bond debt reimbursement program. In answer to Senator Rieger, Mr. Guiley agreed that parallel language would be needed to give DOE authority to treat them both the same. Senator Rieger asked for an at ease so he could draft an amendment. Recess 10:13am Reconvene 10:23am Senator Rieger WITHDREW amendment 2. Senator Rieger MOVED amendment 3. Senator Kelly OBJECTED. Senator Rieger explained the amendment. Co-chair Frank spoke to substandard housing for students. He objected to the idea that a $200,000-400,000 facility would be paid for by the state and then later another facility would be built. He knew it was hard to draft legislation in order to avoid this situation. Senator Rieger said that districts chose the word temporary instead of portable because a portable could become permanent. This legislation was just asking DOE to consider the fact that portables exist. A problem arose because an earlier interpretation kept DOE from considering these situations. This would not mandate that every temporary or portable facility be replaced. Senator Kelly estimated that this could cost the state up to $300M. He felt the definition of temporary facilities applied only to those that were found to be substandard. He MOVED that after the words "temporary facility" the words "found to be substandard by the department" be added to amendment 3. Co-chair Frank agreed with this change to amendment 3. He wanted to know if the word "substandard" had been defined by DOE or another more appropriate word could be used. Mr. Guiley said that DOE had not defined "substandard." He said that code violations and other violations made a facility substandard. He also pointed out the temporary housing issue also went beyond the facility, and took into consideration the core areas of the main facility. There was a problem when core areas, like the gym or cafeteria, were stressed with overpopulation. Co-chair Frank stated that good language should be drafted to achieve the real purpose and that was not to rebuild temporary facilities when they were adequate. He was frustrated that the committee was attempting with these amendments to solve several problems. Co-chair Frank asked that SB 312 be held. Senator Rieger did not object to holding the bill. Senator Kerttula mentioned that temporaries were sometimes moved around in bigger districts. Co-chair Frank felt there should be a policy that handled temporaries well, since they were an effective tool. Co-chair Pearce announced that SB 312 would be HELD in committee. She ask DOE to find out the fiscal impact relating to amendment 1. Senator Sharp asked the report be listed in individual amounts in order to place a cap, if necessary, on the amendment. Co-chair Pearce asked Co-chair Frank and Senator Rieger to draft new language for SB 312. Senator Sharp asked Mr. Guiley if any new bonds were floating around in order to finance new schools carrying a rate of 9 percent or over, tax free. Since the bonds were being sold at $115 premium, in effect, a $10M issue was a $1.5 free money paid back in the form of the 9 percent interest over a four year period. He asked if the state paid that percent and, if it did, he had a problem with it. Mr. Guiley said that once a project was improved for bond reimbursement, districts were only required to present ballot language to DOE for approval. Once the ballot language was approved, the district was free to sell the bonds whichever time period the district felt was most appropriate for their cash flow needs. The state reimbursed those bonds, some outstanding at 100, 90 and 80 percent, none at 70 percent. Typically, there must be at least a 1 percent spread in the new interest versus the old interest rate for it to be feasible for the district to refund those bonds. Districts can use the interest received off the principle of those bonds invested to pay for cost overruns or reduce the amount of bond reimbursement received from the state. So, if the district made money off the bonds, in theory, they could ask for less from the state for reimbursement towards the bond principle. Senator Sharp wanted to know if the state analyzed the rate of interest carried on the face of the bonds where it was obvious that the interest rate subsidized the premium on the bonds. Mr. Guiley said that DOE had no opportunity to analyze the interest rates on the face of the bonds. Once they were approved, the interest rates were determined at the time of sale. Senator Sharp said that the state could pay up to 200 percent of the tax free bond rate or more. Mr. Guiley said, based on the current program, the state could find itself in that situation. Senator Kelly said DOE should know where those bonds were. In answer to Co-chair Frank, Mr. Guiley said the only opportunity for DOE to review the actual elements of a bond sale was in the ballot issue that went to the voters. He went on to say that the district was required to notify their voters of the total cost of the project including interest over life of the bonds in the ballot language, and that was an estimate at the time it went to the voters. The actual interest was unknown until the bonds were sold. Senator Rieger was surprised DOE interpreted it that way. It seemed to him that statutes were filled with references to school construction and he thought it spoke to eligible costs of school construction. For an example, if a bond was floated for a $100M, and cost of school construction which was approved by DOE was $80M, there was statutory authority to reduce the amount of your reimbursement to only pay for the amount that the issue was used to pay the $80M. Mr. Guiley agreed to this point. Senator Rieger went on to say that if a bond was floated to raise $115M and of that $115M that was raised, only $80M was used to pay the eligible cost of school construction and the rest went to something else, the state would reimburse whatever that fraction was - $80M over $115M or whatever the prorated reimbursement each period figured out to be. Mr. Guiley agreed again with this statement. He went on to say that if the district did not use the extra proceeds on that project and did not receive DOE approval for an additional project, the state would not reimburse for those extra costs. Senator Rieger then asked Mr. Guiley to comment on a project submitted to DOE in the context that it would cost $80M, but there were overruns which took the total cost to $90M. Mr. Guiley said under the old program, it would have been reimbursed $90M over $115M. Under the current program it would be reimbursed $80M over $115M because the district must receive an allocation request in advance. In answer to Senator Rieger, Mr. Guiley said that actual proceeds were tracked. In answer to several members, Mr. Guiley said the department prorated the interest as well as the principle. He went on to say that the state paid 70 percent of financing costs including the actual interest premium paid by the district. If the district was paying a higher premium than market and was not aware of that, currently the state would be paying 70 percent of the debt service that the district had indebted itself to. In answer to Co-chair Frank, Mr. Guiley agreed that the state could be taken advantage of in this example. Discussion continued with Senators Rieger, Sharp, Kerttula, and Co-chair Frank regarding the interest rate and premiums on bonds. Co-chair Pearce said this subject should be addressed in the subcommittee and again announced that SB 312 would be HELD. End SFC-94 #45, Side 2 Begin SFC-94 #47, Side 1 CS FOR SENATE BILL NO. 338(L&C): An Act relating to the issuance of revenue bonds for acquisition and construction of the Northern Crossroads Discovery Center for the Ship Creek Landings Project; relating to a study of the feasibility and financial viability of the Northern Crossroads Discovery Center; relating to construction of the Northern Crossroads Discovery Center; and providing for an effective date. Co-chair Pearce announced that SB 148 and SB 338 were before the committee. She welcomed Robert Hatfield, Jr., President & CEO, Director Frank Chapodos (acting Chairman), and Director Michael Olson, Alaska Railroad Corporation, to the meeting via teleconference from Anchorage. She invited Commissioner Campbell and Commissioner Paul Fuhs to join the members at the table. Co-chair Pearce asked Senator Sharp to proceed with his questions. Senator Sharp said his main concern was support for the bond authorization and he wanted to hear comments on the timing of the authorization. ROBERT HATFIELD said that the Board had allowed Mr. Lopatin to attempt to get legislative approval for the bonds. It seemed appropriate, especially due to prior experience with the hotel venture, to receive legislative approval before going to the bonding agencies, and spending a considerable amount of money in preparation of that, only to find that the legislature disapproved of the bond authorization. In answer to Senator Sharp, Mr. Chapodos said that discussion had been had at previous board meetings regarding this project. There were concerns expressed regarding liabilities, and after that was cleared, it was decided to go to the legislature for approval. Again, in answer to Senator Sharp, Mr. Hatfield said the Lopatin & Co. lease was for five years (until 1997) in order to produce the first phase of the project. Legislative approval would be needed now if the other aspect of the timing in regard to the feasibility study, bonds, and construction was to happen in 1995. If legislative approval was not received this session, construction would have to be delayed until 1996. Senator Sharp asked Mr. Hatfield what the $55M would be spent on, and if it would include a hotel or other facility. Mr. Hatfield said the $55M was only for the Discovery Center and no hotel or office building would be included in that amount. Co-chair Frank objected to the fact that the legislature was being asked to approve a project without more details and then, today, the committee was informed that the railroad only had a five year lease with Lopatin & Co. Mr. Hatfield said the lease had options for renewal up to 105 years. He went on to say that financing would not be given to any project that did not have a long term lease, and this would give the Railroad Board the opportunity to review and approve the project for the longer term. Secondly, if Lopatin & Co. did not perform, it would give the Railroad Board an opportunity to cancel or end the lease without litigation. Co-chair Frank insisted the legislature needed more information. Mr. Hatfield said that Mr. Lopatin was the best person to answer those questions. Mr. Hatfield went on to assure Co-chair Frank that the Railroad would have no equity in the project. He would be glad to give the details of the current lease and said the Railroad would just extend the five year lease. He said the lease for the public amenity would be a non-compensatory lease. Co-chair Frank said that Mr. Lopatin had told the committee the Railroad would be paid fair market value for the land lease. Mr. Hatfield agreed with that statement but would get more information. Recess 11:05am Reconvene 5:22pm Co-chair Pearce reconvened the meeting. She said that Robert Hatfield, Jr., President & CEO, Alaska Railroad Corporation, was on line via teleconference from Anchorage, and Mr. Lopatin, via teleconference from Detroit. She also invited Commissioner Fuhs and Commissioner Campbell to return to the table. Co-chair Frank voiced his concerns regarding the feasibility of the project and latent concerns of government sponsorship of private business. He had doubt about getting real answers. He also voiced concern over curing a default in this type of situation. Discussion was had by Co-chairs Frank, Pearce, Senators Kelly and Jacko, Commissioner Fuhs regarding the Red Dog and other projects, bonds, and the state's equity position and liability. Commissioner Fuhs said the legislature needed to give approval before the feasibility study could be ordered. Mr. Hatfield said that a fair market value lease was being paid to the Railroad and would remain at fair market or be frozen for five years at this particular rate. He introduced Phyllis Johnson, legal counsel, via teleconference from Anchorage. PHYLLIS JOHNSON said the lease was a circuitous approach dependent upon a project coming on-line that required a long term lease. The specific lease that Lopatin & Co. had was a five-year term with two five-year extensions. There was a specific provision in it for an individual project to come on-line, at which time a regular long term lease would be executed. Whether it was between Lopatin & Co. or another leasee, and the Railroad. If the project came on-line as a non-profit entity, then the rent would continue at the rate set at the on-set of the lease at fair market value which had been decided by an appraiser two years ago. If Mr. Lopatin negotiated a higher rate with another company, it would trigger a fair market rate to the Railroad. If a for- profit organization took over the new portion of the project, the lease would revert to project rent which would be reappraised to current fair market value when the project started. The lease left a small window for a percentage of gross receipts, but if the parties could not come to an agreement, fair market value would govern. Co-chair Frank asked Ms. Johnson to fax the lease to the committee. Ms. Johnson agreed to fax the first nine or ten pages of the 40 page document which contained the meat of the lease. Senator Sharp said he continued to have concerns about the amount of money that Lopatin & Co. would have to invest. He wondered if there was a way to offer this project to other companies. Co-chair Pearce and Senator Kelly remarked that the Railroad had already put out a bid and that was how Lopatin & Co. had come into the picture in the first place. In answer to Co-chair Frank, Ms. Johnson said that rent was accruing at $1000 per acre per year to the Railroad Corp. for 120 acres less a certain number of acres of wetlands that were not usable. Mr. Hatfield said that was the fair market value of that industrial land. To everyone's amusement, Senator Kelly said it was the going rate for mud flats in Anchorage. Mr. Lopatin corrected the word "accruing" and said rent was being "paid" on a yearly basis. He went on to say that the Discovery Center was a "for-profit" project, the lease would be appraised at the fair market value, and would be of significant economic benefit to the Railroad Corporation. He felt the surrounding land the Railroad owned would also come to benefit the Railroad. Co-chair Pearce asked who would put in private dollars to finance the Discovery Center. Senator Kelly was adamant that the tax free bonds would be "private" money. Co-chair Pearce went on to voice her concern over the numbers used in justifying the Discovery Center visitor estimates. Mr. Lopatin defended the feasibility study for the Discovery Center by the McDowell Group. He went on to reassure the committee that the project would not be totally financed by bonds and 20-30 percent of equity dollars would be invested by Lopatin & Co. through cash or grants. In answer to Senator Kelly, Mr. Lopatin said that equity would be required to sell the bonds. He went on to speak to the market and equity required. He assured Senator Kelly that the equity would not come from the Railroad or the state of Alaska. End SFC-94 #47, Side 1 Begin SFC-94 #47, Side 2 In answer to Senator Sharp, Mr. Lopatin said his company was not a public traded company but assured him that the company's money would go in first or the bonds could not be sold. Commissioner Fuhs pointed out the Red Dog project had been a great success. The Discovery Center would not only help the company that owned it but would provide a wider economic benefit over the state and that would justify the public financing of the bonds. He said Lopatin & Co. could save 2- 3 points on the bond sale and in the end it would benefit the state of Alaska. Senator Kelly commented that instead of $55M the project would require about $47M in bonds. Mr. Lopatin agreed with that statement if all the numbers held true. The request for $55M would give some flexibility to the project. CS FOR SENATE BILL NO. 148(TRA): An Act relating to legislative approval of certain acts of the Alaska Railroad Corporation; taxation of certain property of the Alaska Railroad Corporation; members of the board and chief executive officer of the Alaska Railroad Corporation; meetings of the board of directors of the Alaska Railroad Corporation; and providing for an effective date. In answer to Co-chair Pearce, Mr. Hatfield said the Board position on SB 148 was that Board rule by 17, mimics many of the more equity participation prohibition that was currently in this legislation. The Board felt it was an improved document but pointed out it was always subject to interpretation. The Board would prefer not having the legislation, and felt it had acted responsibly with the assets of the Corporation, acted in concert with the current legislation that existed, and felt the Railroad had been managed responsibly as far as its public response and willingness to work with the general public. He offered to answer questions on these issues. Co-chair Frank asked if the Railroad had developed a policy on this bonding ability that Congress provided. Mr. Hatfield said this was the first time such a bonding issue had come up and the Railroad was asking for approval in order to get a sense of how the legislature felt about it. Co-chair Frank spoke to the broad policy of this bonding issue. Senator Sharp asked for the rate of return to the Railroad in the Comfort Inn project. JOHN BURNS, real estate representative, said it would not be a rate of return since there was no investment but the market it was tied to was if it was on a straight land lease. The income had nearly doubled if it would have been received on an ordinary land lease. He went on to clarify that no cash or utilities were invested by the Railroad. He said the Railroad was a 40 percent owner of a 100 percent financed improvement without a cash investment. The only thing he could compare it to would be an ordinary land lease. Again, in answer to Senator Sharp, Mr. Burns said the debt service was being***FIN080AM 0AASFIN 0321940911 MINUTES SENATE FINANCE COMMITTEE March 23, 1994 8:06 a.m. TAPES SFC-94, #49, Side 1 (000-end) SFC-94, #49, Side 2 (end-000) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 8:06 a.m. PRESENT In addition to Co-chair Pearce, Senators Rieger, Sharp and Kerttula were present. Co-chair Frank, Senators Jacko and Kelly joined the meeting after it was in progress. ALSO ATTENDING: Senator Fred Zharoff, sponsor of SB 92; Represen-tative Jerry Mackie; Duane Guiley, Director, School Finance, Department of Education; Nancy Bear Usera, Commissioner, Department of Administration; Connie Sipe, Executive Director, Older Alaskans Commission, Department of Administration; Reed Stoops, Alaska Air Carriers Association; and Mike Greany, Director, Legislative Finance Division; aides to committee members and other members of the legislature. SUMMARY INFORMATION CSSB 92(CRA): An Act relating to an advisory vote during regional educational attendance area school board elections; and providing for an effective date. Senator Zharoff, sponsor of SB 92, spoke in support of the bill. CSSB 92(CRA) was REPORTED out of committee with a "do pass," with a zero fiscal note for the Department of Education, and a fiscal note for the Office of Governor in the amount of $0.7. CSSB 248(STA): An Act relating to services for and protection of vulnerable adults; and providing for an effective date. Nancy Bear Usera, Commissioner, Department of Administration, spoke in support of SB 248. Senator Rieger MOVED amendment 1. Co-chair Pearce OBJECTED for discussion purposes. Ms. Usera said the department was neutral on amendment 1. No further objections being heard, amendment 1 was ADOPTED for incorporation into a Senate Finance Substitute for the bill. CSSB 248(FIN) was REPORTED OUT of committee with a "do pass," with zero fiscal notes for the Department of Public Safety and Department of Administration (Pioneer Homes), and fiscal notes for the Department of Administration- $559.6, and the Department of Health & Social Services-Adult Services-$(364.5), Northern- $(68.0), and South Central-$(127.1). CSSB 250(STA): An Act relating to the Older Alaskans Commission and staff of the commission; changing the name of the Older Alaskans Commission to the Alaska Commission on Aging and extending the termination date of the commission; relating to the Alaska Pioneers' Homes Advisory Board; relating to services and programs for older Alaskans; and providing for an effective date. Nancy Bear Usera, Commissioner, Department of Administration, spoke in support of SB 250. Connie Sipe, Executive Director, Older Alaskans Commission, Department of Administration, spoke to questions regarding grants and matching monies for pilot projects. Senator Kelly MOVED amendment 1, page 7, line 1, removing the words "program or" and adding the word "pilot." No objections being heard, amendment 1 was ADOPTED for incorporation into a Senate Finance Substitute for the bill. CSSB 250(FIN) was REPORTED OUT of committee with a "do pass," and a zero fiscal note for the Department of Administration. CSSB 256(TRA): An Act relating to the tax on transfers and consumption of aviation fuel; and providing for an effective date. Senator Sharp spoke in support of SB 256. Discussion was had by Co-chair Pearce, Senators Rieger, Kelly, and Sharp, regarding rural landing fees and fuel taxes. Co-chair Pearce announced that CSSB 256(TRA) would be HELD in committee until more information was obtained comparing jet fuel prices in Alaska with the lower 48 states. (The bill was heard again on Friday, March 25, 1994.) CSSB 312(HES): An Act relating to school construction grants and to interscholastic school activities; and providing for an effective date. Amendment 3 pending from a prior Senate Finance meeting was withdrawn. Senator Rieger MOVED amendments 4 and 5. Discussion was had between Senators Rieger, Kerttula, Sharp, Co-chairs Frank, Pearce, and Duane Guiley, Director, School Finance, Department of Education, regarding reimbursement to schools for school construction debt, portable and temporary housing, and interest rate ramifications on bonds. Amendment 5 was amended on page 4, line 2, after "bond sells..." and before the words "...premium to par value", the words "an original issue" were added. In answer to information requested by Senator Jacko, Mr. Guiley provided Attachment A, dated April 15, 1994. Discussion followed. CSSB 312(FIN) was HELD in committee until March 24, 1994. CS FOR SENATE BILL NO. 312(HES): An Act relating to school construction grants and to interscholastic school activities; and providing for an effective date. CO-CHAIR PEARCE announced that SB 312 was before the committee. She said amendments 4 and 5 were proposed by Senator Rieger. She also noted that an April 1991 report from the Department listed portable units used in Alaska (see Attachment A, copy on file in the committee minute book). At that time, 16 of the 54 school districts reported having portable units in use. Anchorage had 98, 50 of which were over 20 years old. Matsu had 54. Fairbanks had 28, 17 of which were over 20 years. Kenai had 22, Craig and Unalaska, only one. Her objection to bringing in so many portable units was that it overpopulated a school, and the children did not have access to adequate library facilities, restrooms, etc. Schools would still be eligible for bonding even if portables met the per student square footage requirement. She asked Senator Rieger to move amendment 4. Senator Rieger MOVED amendment 4. He went on to explain the amendment. He called attention to the language "materially substandard," and said he would be comfortable with or without this in the amendment. Some examples of "materially substandard" could be an uncovered walkway from the portables to the rest of the school, inadequate plumbing, or inadequate heating. Senator Kerttula agreed that the department would need some leeway in judging this area. DUANE GUILEY, Director, School Finance, Department of Education, said that the amendments proposed were in-line with the bond reimbursement and grant review committee who had discussed the future. It also was in line with a request from the Department of Education Anchorage caucus suggesting that in all situations regarding portables, the population of students enrolled at the facility should not exceed 110 percent of the design capacity of the core area of the building. Senator Kerttula voiced his opinion that, with a rare exception, all new construction paid for by the state would be rural or in the bush because there were no existing basements in churches to house students. When a large number of students begin to be housed in portables, the Department of Education (DOE) should look at the reasons. He felt there had been a rapid shift in population in some districts and too large a percentage of students were being housed in portables. He wanted to solve and prioritize the problem. Co-chair Pearce reminded the committee that there was a motion on the floor to ADOPT amendment 4. No objection being heard, amendment 4 was ADOPTED for incorporation into CSSB 312(FIN). Senator Rieger said there had been concern about bonds issued that sold at a premium. He said amendment 5 would put a penalty on payback. He believed that there should be some kind of general dis-incentive for a district to issue bonds at premium. Senator Rieger MOVED amendment 5. Mr. Guiley understood the amendment to say that bonds might be available at 115 percent as compared to par, and would require the department to reduce the eligible reimbursement to the District by 200 percent of that 15 percent increase over par which would be a 30 percent reduction in the 70 percent reimbursement rate. That would provide a penalty for selling the bonds over par keeping in mind that the state reimbursed 70 percent of the principle amount as well as 70 percent of the interest amount. If the interest amount was higher than necessary, the district would be making themselves eligible for a greater level of reimbursement by the state. That would deter this from happening. Senator Rieger confirmed that the new higher debt service was what would be reduced by the additional 30 percent. Mr. Guiley said that was correct under the current statutory definition of cost of school construction. In answer to Senator Sharp, Mr. Guiley said he read the amendment to mean it would apply to all of the eligible reimbursement which would include the reimbursement of the principle amount as well. Everyone was amused when Senator Sharp said he felt that was a little severe. Senator Rieger MOVED an amendment to amendment 5 changing the wording on page 4, line 2, to read "by which a bond sells at an original issue premium to par value". No objection being heard, it was ADOPTED. At the request of Senator Sharp, Mr. Guiley turned the committee's attention to page 3, Section 3 (o). He read that section to mean that the total reimbursement to the district would be reduced by that fraction. Under current statutes, districts were eligible to receive 70 percent reimbursement of principle and associated financing costs. He would read this to mean the department would calculate the fraction. For example, a 30 percent reduction to the 70 percent reimbursement would result in a 21 percent reduction of the 70 percent, if he was reading it correctly. As stated earlier, the reimbursement amount of the principle would remain unchanged. The state's obligation on the interest for bonds that carry a higher interest rate than market value would place a greater obligation on the state at the point to which there would be a break even. Discussion continued by Senators Rieger, Kerttula and Sharp regarding reimbursement, school districts and bonding. Co-chair Pearce reminded the committee that there was a motion on the floor to ADOPT amendment 5. No objection being heard, amendment 5 was ADOPTED for incorporation into CSSB 312(FIN). In answer to Senator Rieger, Mr. Guiley said, to his knowledge, none of the old programs (2, 5, 7 year old bonds) had been sold with no material premium at all. Co-chair Pearce commented that amendment 3 had been pending and it was replaced with amendment 4 (which was adopted). Co-chair Pearce asked if Mr. Guiley had the answer to a question raised by Senator Jacko. Senator Jacko had wanted to know the dollar amount expended for local capital improvement projects by districts throughout the state. Mr. Guiley said he researched the most recent school district audits to determine how many dollars were recorded in school district audits for local cash expenditures of capital projects in fiscal year 1993. Based upon that analysis, there was a recording of $9,908,651 of local school construction projects not currently being reimbursed by the state through either a bond reimbursement or grant process. That was an estimate of what existed on the actual school district audits in one year of the three year suggestion for cash reimbursement process. The list included all 54 school districts under current statute. The ARA school districts would not be eligible for such reimbursement. He took three specific school districts and looked at three fiscal years. Of those three districts, the total was $1,061,863. He said he provided brief descriptions of the projects. Mr. Guiley went on to say that the old cash reimbursement program ended with projects that had to be approved prior to July 1, 1990. Therefore, there was a potential of double payment for projects incurred during the time period of April 30, 1990 through June 30, 1990. The issues he brought forth previously related to the two year lag process whereby expenses incurred by the district in 1990 under current programs would have been eligible for reimbursement in 1992. That fiscal year was currently closed out. Based on the wording under current statute, excluding the proposed amendment, the only expenses eligible for reimbursement would be those incurred in FY93 prior to April 1993. This would exclude any capital projects that were recorded on the city or borough books. He had requested the information but did not have access to those books. Co-chair Pearce asked if $10M in unreimbursed cash expenditures was a good estimate for 1993. Mr. Guiley said that was a conservative number in that the cities and boroughs were not required to actually record capital projects related to schools on the school audit. They were allowed to record them on their own audit because under state statute, they had responsibility for the buildings. This number would be understated by the amount of projects recorded in city and borough audits, and overstated in relation to the projects incurred by the REAAs. In answer to Senator Jacko, Mr. Guiley said that he had included all projects of all dollar amounts recorded in local capital projects. Discussion was had by Co-chairs Pearce, Frank and Mr. Guiley regarding projects in his report and different cities and boroughs relating to school districts. In answer to Co-chair Frank, Mr. Guiley said that this legislation could have an immediate impact on the general fund. Co-chair Frank remarked that more information was needed. Co-chair Pearce agreed with Senator Rieger to HOLD CSSB 312(FIN) for at least another day. CS FOR SENATE BILL NO. 248(STA): An Act relating to services for and protection of vulnerable adults; and providing for an effective date. Co-chair Pearce announced that SB 248 would be taken up next. She invited Nancy Bear Usera, Commissioner, Department of Administration, to join the members at the table. COMMISSIONER NANCY BEAR USERA said the bill had been heard in two committees and was strongly supported by the senior's community. She saw it was an excellent step toward a central focal point for delivery of senior services in the state. The fiscal notes were transfers or a net zero impact. The bill defined elder abuse, response needed and responsibilities for various senior programs, and did a better job of protecting seniors in a vulnerable position. She strongly supported the passage of SB 248. In answer to Senator Kelly, Commissioner Usera said that the Department of Administration had housed a majority of the senior's programs. Through an administrative order, a new Division of Senior Services was created which merged the Division of Pioneer Benefits and the Older Alaskans' Commission. An accompanying bill, SB 250, contained the organizational framework for the Division of Senior Services. It transferred all the major senior services into one division. In the past, Department of Health & Social Services dealt with vulnerable adults as they would with vulnerable children. Upon analysis, the needs of children were very different from adults. The determination was made that a better job of serving this constituency would be done if it was put in a like framework. The common thread being seniors rather than vulnerability. Consequently, the Division of Senior Services would be under the Department of Administration because it was the right thing to do. Senator Rieger MOVED amendment 1. Co-chair Pearce OBJECTED for discussion purposes. Senator Rieger said he read this bill in HESS and the language that referred to the state, police officer or VPO taking immediate action to protect, etc. reminded him of the Busby decision in Anchorage. Because of that, he requested amendment 1 be drafted. Commissioner Usera said that she did not have strong feelings one way or the other but had supported the language in the bill prior to HESS removing it. End SFC-94 #49, Side 1 Begin SFC-94 #49, Side 2 Co-chair Pearce called for a show of hands and amendment 1 was ADOPTED unanimously. Senator Rieger MOVED for passage of CSSB 248(FIN) from committee with individual recommendations. No objection being heard, it was REPORTED OUT of committee with a "do pass," zero fiscal notes from the Department of Public Safety and Department of Administration (Pioneer Homes), and fiscal notes for the Department of Administration-$559.6, and the Department of Health & Social Services-Adult Services-$(364.5), Northern-$(68.0), and South Central- $(127.1). Co-chair Pearce, and Senators Rieger, Sharp and Kerttula signed "do pass." Senator Kelly signed "no recommendation." CS FOR SENATE BILL NO. 250(STA): An Act relating to the Older Alaskans Commission and staff of the commission; changing the name of the Older Alaskans Commission to the Alaska Commission on Aging and extending the termination date of the commission; relating to the Alaska Pioneers' Homes Advisory Board; relating to services and programs for older Alaskans; and providing for an effective date. Co-chair Pearce announced that SB 250 would be heard next and asked Commissioner Usera to remain at the table. Commissioner Usera said that SB 250 was the administrative piece that went along with the senior's initiative that had been put forward this session. In order to have a division that effectively and efficiently housed the programs, it was felt that some realignment of the old divisions should be done which were served by two advisory boards, the Older Alaskans Commission and Pioneer Home Advisory Board. This bill maintained both of those commissions separately but housed them in the same division aligning them more closely. The chairperson of one board was now a member of the other board. Secondly, it changed the name of the Older Alaskans Commission to the Alaska Commission on Aging which was more consistent with the national model. This was important since a large number of matching federal funds were received for the administration of these programs. She went on to say that one change made in the State Affairs Committee was that instead of the Governor appointing chairpersons of the Board, seniors would appoint them. She said that the administration had no problem with that. Senator Kelly asked for an explanation of Section 16 on page 6, line 19. Ms. Usera said it was a technical amendment to do with the grant process and whether the match could be in- kind versus cash. Senator Kelly asked for more of an explanation. Ms. Usera went on to say that this section allowed the Commission the flexibility to reduce or waive the local match requirements for grantees when waiver was in the public interest. Currently, the non-profits that received some grants had to have match requirements and because of the nature of some of the local senior service programs, they do not necessarily have a cash match but labor match. It provided flexibility to the non-profit group. She said this section provided regulator authority to establish regulations which would define when a waiver of the match could happen and under what circumstances. Co-chair Pearce pointed out that this was a portion of the orignial Governor's bill. Ms. Usera said the genesis of the bill was a review by a task force on senior services that was established with both the Older Alaskans Commission and the administrative representatives of a number of senior's programs. This was their recommendation. At that time, Connie Sipe, Executive Director, Older Alaskans Commission, Department of Administration, arrived and Co-chair Pearce posed the question to her regarding the waiver for grants. CONNIE SIPE explained that in some circumstances where start-up grants for certain organizations, such as the World Delivery of In-Home Respite Care, did not reside in the same location where they were setting up and arranging for respite care, were not able to raise a total match the first year. Many of the organizations receiving the grant may ask the client for contributions, much of which may be in-kind such as rent, but found it hard in the start-up year to come up with the 10 percent match even with client contributions. She noted, in contrast, the grants for home care services for people with developmental disabilities had no match requirement. The 10 percent match had become a barrier in starting up some home care providers especially in rural areas. The Department of Law had recommended handling this in regulations rather than in statute. Senator Kelly maintained that it should be defined in statute. Ms. Sipe said the statutes already define a "pilot project" and she would support an amendment to that effect for SB 250. Senator Kelly MOVED amendment 1 changing the words "program or" to the word "pilot" on page 7, line 1. No objection being heard, it was ADOPTED for incorporation into CSSB 250(FIN). In answer to Senator Sharp regarding the length of pilot projects, Ms. Sipe explained that the pilot project grant section had been used rarely in the past. The regulations said that the Commission made the determination of the length of time but, at present, were on a 2-year grant cycle. The pilot project language talked about the fact that to get approved as a pilot project there had to be an estimated projected cost of operations for the next 3 succeeding years but did not say that it would be in a pilot project status that long. That was part of the planning for approval. Senator Sharp felt, with this incentive, the pilot project might become more popular. He wanted the record to read that a pilot project should have a maximum of three years. In answer to Senator Rieger regarding AS 47.65.040 (a), Ms. Sipe agreed that (a) contradicted (b). She said that (b) set a percentage and then (a) capped it at 10 percent. Most cities and towns larger than Petersburg would have percentages larger than 10 percent if the percentage formula was used in Section (b) but then (a) capped it. This statute was first adopted in 1980. She pointed out that grant matches of 20 or 30 percent would be difficult for groups to meet. She said the 10 percent was significant enough. Community mental health centers had 25 percent match requirements but were allowed to charge fees. The federal programs only allowed the organizations to ask for suggested donations for nutrition, transportation, and support services which limited how much cash could be generated from client fees. The more intensive client services like adult day care could ask for fees since they were supported with state funds rather than federal. She felt the 10 percent match was reasonable but it was an old statute. Senator Rieger asked if Section (b) should be repealed. Ms. Sipe said that Section (b) could be repealed but not Section (c). Senator Rieger left it up to Co-chair Pearce on whether to take any action on this issue. Co-chair Pearce said she would let it go. Senator Kerttula MOVED for passage of CSSB 250(FIN) from committee with individual recommendations. No objection being heard, it was REPORTED OUT with a "do pass," and a zero fiscal note for the Department of Administration. Co- chair Pearce, Senators Rieger, Kelly, Kerttula and Sharp signed "do pass." CS FOR SENATE BILL NO. 92(CRA): An Act relating to an advisory vote during regional educational attendance area school board elections; and providing for an effective date. Co-chair Pearce asked the committee to turn their attention to SB 92. She invited Senator Zharoff to join the members at the table. SENATOR ZHAROFF, sponsor of SB 92, said the bill allowed the Division of Elections to include on an REAA ballot an advisory question if it was adopted by the regional school board in the area. At present, statutes allowed the Division of Elections to deal with the school board, and there was an instance when one REAA had wanted a question on the ballot and there was no method to achieve that. He said both the Department of Education and Division of Elections supported this version of SB 92. Senator Kerttula MOVED for passage of CSSB 92(CRA) from committee with individual recommendations. No objection being heard, it was REPORTED OUT with a "do pass," a zero fiscal note for the Department of Education, and a fiscal note for the Office of the Governor in the amount of $0.7. Co-chairs Pearce and Frank, Senators Kelly, Rieger, Kerttula, and Sharp signed "do pass." CS FOR SENATE BILL NO. 256(TRA): An Act relating to the tax on transfers and consumption of aviation fuel; and providing for an effective date. Co-chair Pearce announced that SB 256 was before the committee. Senator Sharp said the bill was introduced by the Transportation Committee and it addressed the statement in last year's operations budget where the situation was noted that rural landing fees in rural airports should not be considered. They were difficult and expensive to collect. This bill was another option to landing fees for rural airports. Some organizations did support it. Without this bill, rural landing fees would have to be reinstated. He said SB 256 would sunset in the year 2000. It prohibited charging rural landing fees while this tax was in effect. Co-chair Pearce commented that Northern Air Cargo supported the bill. An unidentified man in the audience also said that Alaska Air Carriers supported the bill. Senator Sharp said he thought Alaska Airlines supported the bill. REED STOOP, Alaska Air Carriers Association, said he believed that Alaska Airlines would be beneficiaries under this bill. They would pay less in fuel taxes than they would in landing fees if landing fees were the alternative. There had been some mixed correspondence but Kim Daniels, Alaska Airlines, had told him that they did not object to the bill. Mr. Stoop said his organization was very appreciative of Commissioner Campbell's efforts last year to suspend the landing fee program which none of the carriers liked. Most agreed with the Commissioner when he made the decision not to reinstate the landing fees. At that time, the air carries agreed that they would not object to a fuel tax increase that would raise an equivalent amount of money. They felt it would be a fair tax and a better alternative. If the money was not raised, the department would be forced to make cuts to its operation in rural airports and that would hurt the air carriers. Co-chair Pearce felt that all members of ATA that opposed the bill in some way had to benefit from having the feeder lines going into Anchorage and going back out to provide other passenger and cargo service throughout the state because so many towns and villages were not on the road system and relied on air travel. She agreed that lack of upkeep at rural airports would cut down on service for these carriers. Mr. Stoop agreed with Co-chair Pearce's statement. He said that an earlier recommendation by Commissioner Turpin to raise the tax 2 to 2.5 cents was unacceptable and would have raised 3 or four times what was being collected in rural landing fees. He said SB 256 was a more modest contribution of $1.5M and he knew the Department of Transportation's budget cuts were beginning to effect the rural airport maintenance support. Co-chair Pearce asked for a jet fuel comparison between Alaska's large cities like Anchorage and Fairbanks, and other major airports in the lower 48. An unidentified man in the audience said that it was his understanding that fuel costs were more reasonable in Alaska than in the lower 48. Senator Sharp said he would have that information for the committee in a few days. Discussion was had between Senator Kelly and Co-chair Pearce regarding the new Albuquerque airport and how it was financed. Co-chair Pearce noted that it was an old military base and some funding was paid for or such things as fencing had already been installed by the federal government. Senator Rieger asked why the year 2000 had been chosen as the sunset date. Senator Sharp said he did not know anything special about the year 2000 but the Transportation Committee had wanted a sunset in the bill. Co-chair Pearce announced that SB 256 would be HELD in committee until Senator Sharp requested that it back before the committee. Discussion followed by Co-chair Pearce, Senators Sharp and Kelly regarding the report regarding jet fuel costs in other states. ADJOURNMENT The meeting was adjourned at approximately 9:40 a.m.