Legislature(1993 - 1994)
03/23/1994 08:06 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 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 original 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.