Legislature(1995 - 1996)
03/28/1995 09:15 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE March 28, 1995 9:15 a.m. TAPES SFC-95, #22, Side 1 (000-575) SFC-95, #22, Side 2 (575-end) SFC-95, #24, Side 1 (000-575) CALL TO ORDER Senator Rick Halford, Co-chair, convened the meeting at approximately 9:15 a.m. PRESENT Co-chairs Halford and Frank, Senators Donley, Phillips, Rieger and Zharoff were present. Senator Sharp arrived shortly after the meeting began. Also Attending: Representative Jerry Mackie; Patrick Pourchot, Legislative Director, Office of the Governor; Wendy Redman, Vice President, University of Alaska; Del Smith, Deputy Commissioner, Public Safety; Mike Greany, Director, Legislative Finance; Andy Pekovick, Dept. of Natural Resources; Leo B. Rasmussen, City of Nome, Official Checker; and Bryce Edgmon, Aide to Senator Foster. SUMMARY INFORMATION SB 79 ADJUSTMENTS FOR DEFECTIVE SURVEY Discussion was had with Representative Mackie and Andy Pekovich. Amendments 1B and 1C plus a 3rd amendment by Co-chair Halford were ADOPTED for incorporation within a Senate Finance CS. SCSCSHB 79 (FIN) was REPORTED OUT of committee with a "do pass" recommendation and zero fiscal notes from Dept. of Natural Resources and Community & Regional Affairs. HB 146 SLED DOG RACE CLASSIC Testimony was heard from Leo B. Rasmussen. An Amendment by Senator Rieger and an Amendment adding 4-year sunset provisions were ADOPTED. SCSCSHB 146 (FIN) w a s REPORTED OUT of committee "without recommendation" with a $25.0 fiscal note from the Dept. of Revenue. SB 121 APPROP: U OF A DEFERRED MAINTENANCE Discussion was had with Wendy Redman and Patrick Pourchot. SB 121 REPORTED OUT of committee "without recommendation". SB 80 MUNICIPAL POLICE SERVICES Del Smith spoke to SB 80. Amendment was ADOPTED to be incorporated into CSSB 80 (FIN) and brought back to be discussed at the next meeting. HOUSE BILL NO. 79 "An Act allowing the Department of Natural Resources to quitclaim land or interests in land, including submerged or shore land, to a municipality to correct errors or omissions of the municipality when inequitable detriment would result to a person due to that person's reliance upon the errors or omissions of the municipality." Co-chair Halford invited Representative Mackie to join the committee. Rep. Mackie distributed 3 possible amendments drafted by Legal Services, explaining that in all three cases, a title change is not necessary. Co-Chair Halford stated that the errors being addressed were created decades prior. The language of the bill creates an 18-month window, which would allow a municipality to make an error next month, and still come back to the state to correct that error. He asked Rep. Mackie's approval to add, on page 3, line 29, "January 1, 1993." He invited Andy Pekovich to join the committee. Mr. Pekovich stated that he was in agreement with the added language. Senator Sharp joined the committee. Senator Sharp MOVED for passage of AMENDMENT 1B. No objection being heard Amendment 1B was ADOPTED. There was further extensive discussion regarding language. Senator Zharoff asked if Skagway does have entitlement lands left? Mr. Pekovich stated that Skagway does have a substantial entitlement. Rep. Mackie noted that because Skagway does have substantial entitlement, it allows for a zero fiscal note. He assured Senator Sharp that the drafters of the amendments have assured him that his concerns have been taken care in the language. Senator Sharp MOVED for passage of AMENDMENT 1C. No objection having been heard, Amendment 1C was ADOPTED. Senator Phillips MOVED for passage of a clause on page 3, line 27, after the word "municipality", "made before January 1, 1993". No objection having been heard, the third amendment was ADOPTED. Senator Phillips MOVED for passage of SCSCSHB 79 (FIN) with individual recommendations. No objection having been raised, SCSCSHB 79 (FIN) was REPORTED OUT with two zero fiscal notes from Dept. of Natural Resources and Dept. of Community and Regional Affairs. Co-chairs Halford and Frank along with Senators Phillips, Rieger, Donley, Zharoff, and Sharp recommended a "do pass". Co-chair Halford stated that the Cambridge Energy Contract required ratification by the committee as the interpretations of the total amount of the two components exceeds the amount that can be approved without formal committee action. The contract is in the amount of $15,750. This is a continuation at a lower cost of an on-going effort which provides oil watch market information. Senator Phillips inquired to the previous costs. The response was $40.0. Senator Frank MOVED to approve the Cambridge Energy Contract. No objection having been raised, the Contract was ADOPTED. HOUSE BILL NO. 146 "An Act relating to sled dog race classics." Co-chair Halford invited Leo Rasmussen to join the committee. Mr. Rasmussen spoke to the words "mushing classics". He expressed that within five years this would potentially provide a revenue stream for Iditarod. He is convinced that it would take away the financing problems that have plagued Iditarod in the past. Iditarod is responsible for making Alaska an internationally known race. It has become a premiere event in Alaska which will increase tourism. Mr. Rasmussen testified that he has been an official checker for Iditarod. He retired from the Board in 1991 after 19 years, but is still actively involved in trail mail. Senator Rieger asked if he thought the increasing competitiveness of the race has improved the character of the race. He testified as to the negativity of the race back in 1973 as compared to now. Mr. Rasmussen said that there is much to be proud of in spite of what the humane society is saying. Co-chair Halford agreed to obtaining and maintaining the volunteer support as much as possible. The flavor of the race has changed. It is now able to pay its bills, it does a better job economically, but along the way it has lost the earlier attitudes of the 70's. Mr. Rasmussen indicated that it takes 10,000-20,000 volunteers to make the race work. He estimates that perhaps a third receives some compensation. He noted that there were people all over the world who took place in the race this year. This allows the locals to take a break and come back at another time fresh and new. The turnover has happened this year and is an on-going trend every three to four years. Co-chair Halford asked what could be done to safeguard this race from abuse? Mr. Rasmussen supported regulation. He stated that there is history with the All-Alaska Sweepstakes. There was extensive discussion regarding prior abuses in the race along with possible solutions. Co-chair Halford stated that this legislation has been slowed down to find a way to safeguard this game. He stated that there must be a mechanism between the department and the committee that guarantees the ability to safeguard. Various methods of protection were discussed to keep a black mark from occurring on the Iditarod. Mr. Rasmussen assured that he did not have an answer, but does support the reasoning. Senator Frank interjected that it is important to keep it from becoming a game of chance, but to keep the game interesting. He does not want it to become a lottery, he likes the idea of trying to guess when the musher is going to cross the line. He supports placing sanctions on the musher or any other person attempting to defraud the situation. He suggests language that says, "mushers can't bet or be involved in the betting, nor is it legal for anyone to ensnare or entangle a musher in a betting situation." He elaborated on the language and said that when sanctions are placed on the mushers the abuse will be limited. Co-chair Halford suggested placing bets on the combined time of the top three or four finishers, maintaining a historical perspective of past races. He suggested that the committee wanted to respond to this bill, the legislature wants to help the Iditarod, but that safeguards are needed and that the sponsors and the trail committee need to come back to the committee with something that gives a level of confidence needed on how it will happen. Co-chair Halford invited Mr. Edgmon to join the committee. He stated that he did not have any solutions to safeguarding against abuse, but that his office would be glad to research it and come back with language which could be amended into the bill. Co-chair Halford stressed that the participants are also the volunteers and supporters of the Iditarod. Therefore, he advocated not eliminating them from betting. He indicated that the direct participants and family members of mushers on the trail, as well as race officials and staff, should not be betting on the race. Senator Donley reiterated all the variables and does not know how to attack the problem. He suggested deferring it to someone who has the level of expertise to deal with it. He felt that deferring the problem to the division would require a fiscal note. Co-chair Halford suggested adding a sunset of 4 years to the bill and with a fiscal note of $25.0 along with a letter of intent that provides criteria to protect the integrity of this lottery. Co-chair Frank suggested a fiscal note from program receipts. Senator Zharoff raised his concern over the term "mushing sweepstakes" and that soon there will be other activities around the state like the Beaver Roundup, Yukon Quest, etc. that want to participate too. The definition that is in the bill is rather narrow. Mr. Edgmon stated the intention of the Division of Gaming, is that there is statutory authority for the race organizations to conduct the game activity. Some of the interior race organizations do conduct lottery game activity. The intent of this bill is to put this language specifically in the statute that entitles the Iditarod Trail Committee to sell tickets. The sponsor of the bill, after speaking to legislative legal council, the Gaming Division, and the Department of Law, has specific questions as to the activity of wagering on the arrival, check-point and finish line, and that it may not be allowed. Co-chair Halford suggested a fiscal note of $25.0 in program receipts, and pass the bill out with a 4-year sunset. This gives the trail committee 4 years to work with the department. If approved now, they will have it next year. Senator Sharp expressed his agreement. He said it would behoove the Iditarod Committee to maintain the highest integrity in the checks. Mr. Rasmussen agreed that with time the race is going to have to be handled much more professional than in the past. Co-chair Halford asked for a motion to add a program receipt fiscal note of $25.0, recognizing that it will be reviewed when the budget is closed out and the information is provided by the department. Discussion was had on the amount of the fiscal note. Senator Donley reiterated that gambling makes people behave differently. There have been few things in the statutes that have encouraged and encountered as much litigation over the precise meaning of them as gambling. The lawsuits come rapid fire. When there is money involved there is a pecuniary interest to file law-suits. An activity such as this, paying 1% tax on gross, has the potential for immense profits. Careful thinking and well-thought out planning is urged. He associated the complexity of this race with the intricate regulations for parimutuel horse betting. Senator Rieger said that the concern over human interference can cause potential abuse to the race. He suggested that the more elements of uncertainty introduced into the race, the harder it is for someone to control. He introduced an amendment that would indicate that the sweepstakes must include at least three variables. For example, in submitting a guess, it might include the names of the top ten teams that finish, the winning time and perhaps the time between the arrival of the first and second teams. It would be impossible to rig that sort of complexity of guessing. This might take away Senator Donley's concern. Co-chair Halford said that Senator Rieger's language leaves a lot up to the trail committee. The existing language says that the only thing they can bet on is the winning finish time. He stated that with Mr. Rasmussen supporting a concern, it validates the need to address the problem now. He also supports making the betting easy as stated by Co- chair Frank, and likes the language introduced by Senator Rieger. Senator Rieger asked Mr. Edgmon if he as in agreement with the intent of the amendment? Mr. Edgmon indicated that he didn't think the sponsor of the bill would be opposed to the amendment. The bill did pass the House 30 to 5. Senator Rieger moved to adopt the Amendment. Senator Frank OBJECTED to the amendment. He withdrew his debate but not his objection. Co-chair Halford asked, "Shall the Rieger Amendment be adopted?" The Rieger Amendment passed 5 to 2 and was ADOPTED. Senator Donley MOVED for passage of a $25.0 fiscal note to the department of program receipts with a 4 yr sunset provision. No objection having being raised, it was ADOPTED. Senator Sharp MOVED for passage of SCSCSHB 146 (FIN) out of committee with individual recommendations with accompanying fiscal note. No objection having been raised, SCSCSHB 146 (FIN) was REPORTED OUT of committee with the accompanying $25.0 program receipt fiscal note from the Department of Revenue. SENATE BILL NO. 121 "An Act making an appropriation for deferred maintenance for the University of Alaska; and providing for an effective date." Co-chair Halford stated that SB 121 would appropriate $135 million from AHFC after the Board transferred it to the general fund to the university for major maintenance. He referred to the resolutions and the statement by the university regarding major maintenance. Senator Phillips asked how much money was being removed from AHFC. Co-chair Halford responded that the capital budget utilizes $70 million of AHFC money. The governor's proposal on major maintenance uses another $30 million, which requires AHFC to sell bonds and carry the debt service on the bonds. In the governor's cash flow projection, it is showing $450 million from the constitutional budget reserve and $70 million from AHFC. He stated that deferred maintenance has to be addressed. Wendy Redman, University of Alaska, stated the need for the maintenance. She pointed out that nearly 80% of the buildings are 30 years or older, and that the university is contained in 50% of the buildings owned by the state. This puts a hardship on the state, with an investment of thousands of dollars in buildings that are beginning to fall apart. Ms. Redman spoke to the concern of the mismanagement over the years to allow the buildings to deteriorate. She stated that this is not true. There was no money moved from maintenance accounts into administration or academics. In 1986 when there was a 20% budget reduction, there was $1 million at the Fairbanks campus that was taken from maintenance to keep programs going. The money was replaced that fall, into the maintenance account, which has been audited. The problem has developed over time because there hasn't been enough money appropriated to fix the buildings. She stated that last year the university received zero capital dollars. She stated that this has been a 10-year accumulation which has accelerated. It continues to be the Board's highest priority. There are major health and safety issues that the campuses are facing with deteriorating facilities that are dangerous for students to be occupying. The Anchorage campus will cost $40 million in deferred maintenance, with Fairbanks needing even more attention. Senator Rieger asked who determines the needs of the various campuses? Ms. Redman responded that the Board of Regents and the university use a formula system of prioritizing deferred maintenance programs, which is also used by DOT. The formula is updated several times a year as needed. The Office of Management and Budget (OM&B) has the complete backup list of all the projects, starting with the most need. OM&B is not involved in making individual project decisions. The university makes the decisions. Senator Donley stated that in his opinion the maintenance should not be a capital item, but rather an operational item in the budget. Ms. Redman said she agreed with this logic. Three years ago, the Board of Regents did mandate that the university would not be dependent on "hoping that the legislature funded the operating maintenance requests". In building new buildings there has been requests for operating maintenance to go along with those facilities. It is rarely, if ever, funded. The university's general fund operating budget is exactly where it was 10 years ago. There has been an increasing enrollment of 22% over the past 10 years, but the general fund has remained flat. The tuition money has been utilized to meet the need in student growth. The Board of Regents agree with what you are indicating. The Board has said to the university, "don't expect any money from the state to build up the operating deficit in maintenance" which is at this time guessed to be $11 million. The Board has reallocated existing resources over a 3-year period of time to bring the maintenance budgets up to where they need to be, based on a formula. The Fairbanks campus will have to reallocate from current funds this year $4 million. Senator Donley asked about future maintenance issues. Ms. Redman responded that it is the Board's intention to have the maintenance costs rolled into the operating budget. The campuses have to cut programs, restrict enrollments, and essentially do whatever they have to do, to bring the maintenance budgets up. Pat Pourchot, Legislative Director for Governor Knowles, stated the administration's concerns with the direct draw against the reserves. In this case, $35 million versus putting a number into the on-going annual capital projects of the AHFC. AHFC would issue and be responsible for servicing bonds. That is the case in the governor's bill for the $30 million allocated from the governor's bill for student housing maintenance. The allocation is limited to student housing maintenance which the governor feels is more in line with the on-going work and purposes and mission of AHFC. This bill does not distinguish between major, or deferred, maintenance for housing as opposed to other items. The governor's approach is to address the other key non- housing maintenance needs in the capital budget. There is about $7 million in the capital budget that the governor has submitted for non-housing goals. The difference within AHFC, due to its special tax situation, is its ability to borrow money at low interest rates. In turn, AHFC can invest its reserves at higher interest rates. By having AHFC servicing their bonds over a length of time, the real cost of that money is significantly reduced. So, there are very real and clear reasons for having AHFC finance and amortize the costs of the bonds, opposed to a straight draw in cash off the reserves. The reserves work for AHFC in its on-going projects and missions, one of which, can be legitimate student housing maintenance. Co-chair Halford stated he has the same goals, expressing concern with last years approach to revenue bonding or borrowing. He emphasized that with the huge maintenance backlog, this method borrowed into the future to pay for the mistake of the past. He supports allocating the funds to where they are needed, to catch up from real dollars, instead of borrowing from the future. AHFC internally does not gain or loose very much from the difference. Mr. Pourchot stated that in terms of revenue bonds and university or housing maintenance, there is no cash flow going towards those bonds. Ideally, capital budget cash would be the best way of addressing the problem. He stated that now, the state is faced with an incredible backlog of maintenance and even with a 5-year plan, it would be a stretch for capital dollars. That is what has led to the governor's proposal. The disadvantage again of the straight draw off the reserves is that by keeping the reserves of AHFC, it can provide valuable programs into the future with the ability to make money or at least narrow the real rate of borrowing within their own agency to minimal levels. Co-chair Halford asked what the governor's approach is for next year when the answer this year is $30.0 for housing? If it means borrowing continuously for each and every step, then what is created is a passing debt. Mr. Pourchot said that is why the "back stop" legislation was introduced. It was granting the university authority to issue its' own revenue bonds that would be repaid through a general fund budget category, if the administration and legislature did not act on some other plan prior to June, 1. Co-chair Halford stated that it does not apply to maintenance. It would work on a new dormitory with new receipts, but asked how that works on past maintenance on a common building. Mr. Pourchot stated that it work only in the sense that there is no revenue stream to repay the bonds. The repayment comes into the front section of the budget along with $10-$11 million. It's just another operating budget item for debt service. The reason for that was to meet pressing needs. The development that Co-Chair Halford was referring to is the project in the next several months, in the development of the whole budgeting process for next year. There is no concrete plan for the mechanism of addressing the balance of the backlog of maintenance. The governor's pledge is to work on this and develop a plan. No options have been selected beyond this year. Co-chair Halford stated his concerned that if revenue bonds are passed, and becomes a state appropriation, it is in violation of the state constitution. When using a revenue bond to build a dormitory, with new receipts, it is different than using a revenue bond to pay for major maintenance held over from the past. Mr. Pourchot stated that it was authorized under law. Co-chair Halford recognized that it would never be found illegal in Alaska because it was first done by the Court System to build the court building in Juneau. Other buildings were subsequently built for the court system. Co-chair Frank moved for passage of SB 121 with individual recommendations. Senator Phillips OBJECTED without having a plan for the full-scale funding. Co-chair Halford stated the question is not decided regarding AHFC. He said that SB 121 is legitimate start, tho it will probably sit in the Rules Committee, while other parts are discussed. He recommended moving it. Senator Phillips withdrew his objection. With no further objection, SB 121 REPORTED OUT of committee with "other recommendations" by Senators Rieger, Phillips, Donley and Zharoff. Co-chair Halford and Frank and Senator Sharp recommended "do pass". SENATE BILL NO. 80 "An Act relating to police protection service areas in unified municipalities; and to police protection provided by the state in certain municipal areas." Senator Rieger stated the purpose of this measure will increase local self-determination and provide relief to the state's operating budget. It allows for the citizenry who have the desire and willingness to pay for public safety protection and sets forth a mechanism by which that payment is delivered to the state. The purpose of the bill is to create a permissive situation where a unified municipality can set up a service area and pay for trooper protection. He offered an amendment in response to a fiscal note by the Dept. of Public Safety, which spoke to the desire to have an extended gearing up time and winding down time compared to the original bill. This bill is good government at its best. Co-chair Halford invited Del Smith to join the committee. Mr. Smith stated that the administration opposes this bill because they are not interested in contracting. He stated that if the law does pass, the Dept. of Public Safety will do their best to implement the contracting. Senator Rieger stated that he has had good cooperation in working with the Dept. of Public Safety in discussing the issues. The opposition has come from the governor's office. Senator Rieger MOVED Amendment #1. No objection having been raised, Amendment #1 was ADOPTED and will be incorporated in the Finance CS. This bill will be taken up at the next committee meeting. Senator Zharoff asked how many municipalities could participate in this activity? He inquired as to the department's fiscal note. Senator Rieger stated that you could make an argument that the department benefits. The wording of the actual costing out is, direct cost plus markup. The department is the recipient, meaning more money is available for the delivery of services throughout the rest of the state. Co-chair Halford noted they had run out of time, and would take up SB 80 first thing at the next meeting. ADJOURNMENT The meeting was adjourned at approximately 11:00 a.m.