Legislature(1995 - 1996)

02/01/1996 09:10 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
                             MINUTES                                           
                    SENATE FINANCE COMMITTEE                                   
                        February 1, 1996                                       
                            9:10 a.m.                                          
                                                                               
  TAPES                                                                        
                                                                               
  SFC-96, #17, Side 1 and 2                                                    
  SFC-96, #18, Side 1 (000-466)                                                
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Senator Rick Halford,  Co-chairman, convened the  meeting at                 
  approximately 9:10 a.m.                                                      
                                                                               
  PRESENT                                                                      
                                                                               
  All  committee members  (Co-chairmen  Halford and  Frank and                 
  Senators Donley, Phillips, Rieger,  Sharp, and Zharoff) were                 
  present.                                                                     
                                                                               
  ALSO ATTENDING:  Senator Lyda  Green; Jim Baldwin, Assistant                 
  Attorney  General, Governmental  Affairs  Section, Dept.  of                 
  Law;  Pamela LaBolle,  President,  Alaska  State Chamber  of                 
  Commerce;  Jim   Collard,  President,   Juneau  Chamber   of                 
  Commerce; Jane Angvik, Director, Division  of Land, Dept. of                 
  Natural  Resources; Nico  Bus, Acting Director,  Division of                 
  Support Services, Dept.  of Natural Resources; Mike  Greany,                 
  Director, Legislative  Finance Division; Ted Popely, aide to                 
  House Speaker Gail  Phillips; Brett  Huber, aide to  Senator                 
  Lyda Green; and aides to committee members and other members                 
  of the legislature.                                                          
                                                                               
  SUMMARY INFORMATION                                                          
                                                                               
  HJR  1 -  REPEAL OF REGULATIONS BY LEGISLATURE                               
                                                                               
            Testimony  was   presented  by  Ted   Popely,  Jim                 
            Collard,  Pam  LaBolle,  and  Jim  Baldwin.     An                 
            amendment  by  Senator  Rieger  was  proposed  and                 
            adopted.   SCS HJR  1 (Fin)  was  REPORTED OUT  of                 
            committee with a $2.2 fiscal  note from the Office                 
            of the Governor/Elections.                                         
                                                                               
  SJR 14 -  CONFIRMATION OF BD MANAGING PERM FUND                              
                                                                               
            Discussion  was   had  with  Jim  Baldwin.     The                 
            resolution   was   subsequently   placed    in   a                 
            subcommittee consisting of Co-chairman Halford and                 
            Senators Donley and Rieger.                                        
                                                                               
  SB  89 -  PERMANENT FUND BOARD MEMBERS & STAFF                               
                                                                               
            Discussion was had with Jim Baldwin.  The bill was                 
                                                                               
                                                                               
            then held in committee for further discussion.                     
                                                                               
  SB 162 -  AGRICULTURAL LAND                                                  
                                                                               
            Testimony  was presented  by  Senator Lyda  Green,                 
            Jane Angvik, and Brett Huber.  Amendments 1 and 2,                 
            by  the  sponsor,  were  noted.     The  bill  was                 
            subsequently   held   in  committee   for  further                 
            discussion.                                                        
                                                                               
                                                                               
  HOUSE JOINT RESOLUTION NO. 1                                                 
                                                                               
       Proposing an  amendment to the Constitution of the                      
       State of Alaska relating to repeal  of regulations                      
       by the legislature.                                                     
                                                                               
  Co-chairman Halford directed  that HJR 1  be brought on  for                 
  consideration.    TED  POPELY, aide  to  House  Speaker Gail                 
  Phillips, came before committee.   He referenced the sponsor                 
  statement  (copy  on  file in  the  original  Senate Finance                 
  Committee file for HJR  1) and noted that, if placed  on the                 
  ballot, the  resolution would provide voters  an opportunity                 
  to amend  the state  constitution to  allow for  legislative                 
  repeal of administrative regulations,  by joint resolution.                  
  Repeal  would  apply to  regulations  that ignore  or extend                 
  beyond  the  scope  of  enabling  legislation.   Mr.  Popely                 
  acknowledged that the measure had  been before the voters on                 
  three  previous  occasions  and  had  failed.    However,  a                 
  significantly  growing number  of regulations  which do  not                 
  fulfill the purpose and intent of legislation make it timely                 
  once more.                                                                   
                                                                               
  JIM  COLLARD,  President, Juneau  Chamber of  Commerce, next                 
  came before committee and voiced support for the resolution.                 
  He  said  that regulatory  compliance  is often  one  of the                 
  biggest costs  of doing  business.   While many  regulations                 
  accurately implement both the letter and intent of law, many                 
  go far beyond or appear to  ignore intent.  Regulations have                 
  the  force  of  law  for  businesses,  and  they  are  often                 
  promulgated  without  public  input.   When  agencies  craft                 
  regulations that depart  from legislative instructions,  the                 
  agency  becomes  the lawmaker  without  having to  answer to                 
  voters.  HJR 1 provides an effective tool by which to ensure                 
  adherence to legislative intent and return the making of law                 
  to the legislature.                                                          
                                                                               
                                                                               
  PAM LaBOLLE,  President, Alaska  State Chamber of  Commerce,                 
  next spoke on behalf of  the chamber's 700 member-businesses                 
  which  provide  jobs to  70,000  employees.   She  said that                 
  mission of the chamber is to create a climate conducive to a                 
  strong private-sector economy.   Mrs. LaBolle voiced support                 
                                                                               
                                                                               
  for HJR 1,  advising that reform  of the present  regulatory                 
  system is second  in priority  to need to  close the  fiscal                 
  gap.   Referencing a  chamber resolution  in support  of the                 
  effort, she noted  that the resolution asks  the legislature                 
  and administration  to "provide  for an  effective oversight                 
  mechanism to assure that regulations are producing effective                 
  results  that  follow   legislative  intent."    She   cited                 
  complaints  regarding regulations  that ignore  or  miss the                 
  point  of  legislation.   Presently,  the  only  recourse is                 
  passage of "corrective legislation."  Since the governor can                 
  veto  that  legislation,  the  current  system  allows   the                 
  executive  branch  to usurp  the  power of  the legislature.                 
  Throughout   the   legislative  process,   the   public  has                 
  opportunity to provide input.  The regulatory process is not                 
  so open or receptive, and  regulations are sometimes adopted                 
  in spite of public sentiment.                                                
                                                                               
  Co-chairman  Frank  asked  if  the  chamber would  fund  and                 
  undertake a campaign to inform the public of the benefits of                 
  HJR 1.   He noted  that because of  lack of explanation  and                 
  understanding,  prior votes on  the issue were  viewed as "a                 
  power grab by the legislature."   Mrs. LaBolle said that the                 
  chamber is  committed to  utilization of  its resources  and                 
  network of local chambers to  educate and inform the public.                 
  Both Co-chairman  Frank and Senator  Randy Phillips stressed                 
  need for the  educational effort  to extend beyond  chambers                 
  and business  groups  to  the  public  at  large.    Further                 
  discussion  of  need  for  adequate   funding  of  a  public                 
  awareness effort followed.  Co-chairman Frank suggested that                 
  a  financial commitment from  the business community similar                 
  to the effort to  close the fiscal gap should  be devoted to                 
  changing the regulatory process.                                             
                                                                               
  JIM  BALDWIN,  Assistant   Attorney  General,   Governmental                 
  Affairs  Section, Dept.  of  Law, advised  that HJR  1 would                 
  dramatically changed  the legislative  process.  He  queried                 
  members  concerning  specific  regulations  giving  rise  to                 
  public complaint.  He suggested that, as an institution, the                 
  legislature should be concerned about  "this sort of power."                 
  As an example, he cited fish  and game regulations and noted                 
  that the board of  fish and game was created  in territorial                 
  days and continued in statehood to place regulatory power in                 
  the  hands  of  experts.    He  questioned  whether  fishing                 
  interests should come  directly to  the legislature to  undo                 
  regulations adopted by the board.                                            
                                                                               
  Mr.  Baldwin  further  cited  an   earlier  attempt  by  the                 
  legislature to annul  regulations by statute  (AS 44.62.320)                 
  and noted that the effort  was ruled unconstitutional (State                 
  v.  A.L.I.V.E Voluntary).    He  stressed  that  regulations                 
  involve more than  just businesses.  Senator  Randy Phillips                 
  noted that  the supreme court ruling was  three to two.  The                 
  question of unconstitutionality was thus not unanimous.                      
                                                                               
                                                                               
  Senator  Phillips directed attention to  page 1, lines 6 and                 
  7,  and  referenced language  calling  for repeal  via joint                 
  resolution.    He  then  noted   language  at  AS  44.62.320                 
  requiring  repeal  by concurrent  resolution  and questioned                 
  which form of  resolution should  be utilized.   Co-chairman                 
  Halford said  that provisions in  HJR 1 would  supercede the                 
  statute.  He informed members  that the effective difference                 
  is "to elevate the kind of resolution to one requiring three                 
  readings so that it does . . . get treated exactly as a bill                 
  would."                                                                      
                                                                               
  As examples of overreaching regulations, Senator Sharp cited                 
  the Forestry Practices  Act which provides  statutory review                 
  to the Dept. of  Fish and Game.  Regulations,  however, call                 
  for  both  review  and  approval.     Proposed  air  quality                 
  regulations set  standards that  are technically  impossible                 
  for coal-fired power  plants to achieve when,  after routine                 
  maintenance,  they are refired  from a cold  start.  Federal                 
  law says  that  states  are not  to  impose  more  stringent                 
  requirements.    Proposed  state  regulations  do so.    The                 
  Senator further noted  that past  governors have  overridden                 
  board of fish and board of  game decisions, and he cited the                 
  False Pass fishery  as an example, suggesting  that politics                 
  is  more  involved   at  the  administrative  than   at  the                 
  legislative   level.     Mr.   Baldwin  stressed   that  the                 
  legislature  presently  has  the power  to  correct  problem                 
  regulations   via  statute.     Senator  Sharp   noted  that                 
  corrective legislation is also subject to veto.                              
                                                                               
  Co-chairman Frank voiced his belief that  legislative repeal                 
  would provide greater opportunity for  public input into the                 
  regulatory process.   He  suggested that  such repeal  would                 
  result in only a slight rather than substantial shift in the                 
  balance of power.                                                            
                                                                               
  Senator Sharp noted  that the  legislature, rather than  the                 
  administration,  is often mistakenly  blamed for  passage of                 
  onerous regulations.                                                         
                                                                               
  Senator Rieger referenced  language at page  1, line 9,  and                 
  asked if it  would permit retroactive or  merely prospective                 
  repeal.  Mr. Baldwin informed members that the broad wording                 
  could be construed to apply retroactively.   He advised that                 
  he would have  to review the Administrative  Procedures Act.                 
  He then voiced his belief that "We're limited in regulations                 
  with retroactive effect."  Senator  Rieger stressed that the                 
  record  should  indicate  that  retroactive  repeal  is  not                 
  contemplated.  Mr. Baldwin concurred that repeal power would                 
  not apply to existing regulations.                                           
                                                                               
  Co-chairman   Halford   referenced   a  $2.2   fiscal   note                 
  accompanying the resolution  and queried members  concerning                 
  disposition of HJR 1.                                                        
                                                                               
                                                                               
  Senator Rieger indicated that conversation with staff of the                 
  sponsor evidenced no objection to clarification  of language                 
  giving rise  to concern  regarding retroactive  repeal.   He                 
  then  formally  MOVED  to  insert  the  word   "prospective"                 
  following the  word "different"  at page  1, line  9.   That                 
  would prevent  ability to backtrack  ten years and  repeal a                 
  regulation upon which businesses and individuals have relied                 
  for a substantial period of time.                                            
                                                                               
  Discussion  followed among  members  relating  to the  House                 
  majority  needed  to  approve  Senate changes  to  HJR  1.                   
  Senator Sharp voiced  reluctance to place the  resolution in                 
  jeopardy by  effecting a  change.   Co-chairmen Halford  and                 
  Frank concurred.   Co-chairman Frank also noted need to keep                 
  resolution language as  simple as  possible.  Senator  Sharp                 
  suggested that a letter of intent  might accomplish the same                 
  end as the proposed amendment.  Senator Rieger  told members                 
  that  careful reading  of the  supreme  court ruling  on the                 
  budget  reserve fund  evidences  that  regardless of  intent                 
  language or the  wording of  ballot propositions, the  court                 
  takes "the wording of  the constitution on its face."   That                 
  overrides all else.  The wording must thus be clear.                         
                                                                               
  Co-chairman  Halford  voiced   opposition  to  the  proposed                 
  amendment and called for a show of hands.  The amendment was                 
  ADOPTED on  a vote  of 4  to 3  (Senators Rieger,  Phillips,                 
  Donley, and Zharoff supported the amendment, and Co-chairmen                 
  Halford and Frank and Senator Sharp were opposed).                           
                                                                               
  End:      SFC-96, #17, Side 1                                                
  Begin:    SFC-96, #17, Side 2                                                
                                                                               
  Co-chairman   Halford  directed   that   the  amendment   be                 
  incorporated within  a Senate  Finance Committee  Substitute                 
  for HJR  1.  Senator  Sharp MOVED that  SCS HJR  1 (Finance)                 
  pass from  committee with individual recommendations and the                 
  accompanying fiscal note.  No  objection having been raised,                 
  SCS HJR 1  (Finance) was  REPORTED OUT of  committee with  a                 
  $2.2 fiscal note from the  Office of the Governor/Elections.                 
  Co-chairmen Halford and Frank and Senators Rieger, Phillips,                 
  and  Sharp signed  the  committee report  with  a "do  pass"                 
  recommendation.    Senators Donley  and  Zharoff  signed "no                 
  recommendation."                                                             
                                                                               
                                                                               
  SPONSOR SUBSTITUTE FOR SENATE JOINT RESOLUTION NO. 14                        
                                                                               
       Proposing amendments  to the  Constitution of  the                      
       State  of  Alaska  relating  to  confirmation   of                      
       appointments of  public  members who  serve  on  a                      
       board  or  commission involved  with  managing the                      
       assets of the Alaska permanent fund.                                    
                                                                               
                                                                               
  [Tape malfunction.  The following portion of the meeting was                 
  not  recorded.  Minutes  reflect transcription  of shorthand                 
  notes.]                                                                      
                                                                               
  Co-chairman Halford directed that SSSJR 14 be brought on for                 
  discussion  and explained that while the original resolution                 
  applied  to  a number  of  public corporations,  the sponsor                 
  substitute deals  only with the  permanent fund  board.   He                 
  noted  the inherent irony  in the fact  that the legislature                 
  confirms   appointments  to   the  board   of  barbers   and                 
  hairdressers but does  not confirm appointment of  those who                 
  oversee  management  of  the  state's  $15  billion  savings                 
  account.                                                                     
                                                                               
  Senator Donley voiced  his belief that the  broader reach of                 
  the  original  resolution  was  worth  consideration.     He                 
  expressed need for a legal opinion covering all corporations                 
  that  manage  state  assets.    He  also noted  need  for  a                 
  definition of  "state asset" and recommended  first defining                 
  the term and then passing the resolution.  He suggested that                 
  a state assets consists  of tangible property or a  block of                 
  money under a particular agency's control.                                   
                                                                               
  Senator Rieger advised he was  comfortable with the original                 
  version  of  the  resolution  but   concurred  in  need  for                 
  statutory definition of "state asset."                                       
                                                                               
  JIM  BALDWIN,  Assistant   Attorney  General,   Governmental                 
  Relations  Section,   Dept.  of   Law,  again  came   before                 
  committee.  He confirmed that the sponsor substitute narrows                 
  the scope of the original resolution and stressed that  some                 
  public corporations have corporate rather than state assets.                 
  The power of  appointment is  an executive branch  function.                 
  The  resolution goes  beyond the constitutional  division of                 
  powers between the branches.                                                 
                                                                               
                                                                               
  Referencing legislation relating  to a similar issue  (SB 89                 
  PERMANENT FUND BOARD MEMBERS &  STAFF) Mr. Baldwin expressed                 
  concern over "removal for cause" provisions.                                 
                                                                               
  [The tape  recording problem  was corrected  at this  point.                 
  Minutes reflect transcription of the tape.]                                  
                                                                               
  Mr. Baldwin explained  that under present SB 89 language, it                 
  is unclear  whether "removal  for cause"  would involve  due                 
  process and require a hearing and trial-like procedures.  He                 
  further questioned language indicating that:                                 
                                                                               
       The governor shall base the decision to appoint or                      
       remove a board member solely on the financial best                      
       interest of the fund.                                                   
                                                                               
                                                                               
  He then asked what  would occur if a board  member committed                 
  an  offense  involving  moral  turpitude  but  unrelated  to                 
  finances of the fund.  Under present language it appears the                 
  individual could not be removed, even though he or she might                 
  be undesirable as  well as charged  with and convicted of  a                 
  criminal act.  There are  real problems associated with both                 
  the   "cause"   requirement   and   implementation  of   the                 
  requirement.  The process is not simple.                                     
                                                                               
  Senator Rieger told  members that  the purpose of  staggered                 
  terms was to prevent the "wholesale  sacking of the board of                 
  trustees   which    has   occurred    in   the    last   two                 
  administrations."  Co-chairman Halford  added that staggered                 
  terms are meaningless  if members are removed  without cause                 
  during a change  in administration.  Mr.  Baldwin reiterated                 
  concern that present  language might  involve a lengthy  due                 
  process  procedure.   The  bill is  vague and  ambiguous and                 
  requires work in that area.                                                  
                                                                               
                                                                               
  Co-chairman Halford  explained that  he simplified SSSJR  14                 
  because   of  difficulties  and   questions  raised  by  the                 
  original.  A  super majority is needed  to achieve consensus                 
  for a  constitutional amendment.   He  then queried  members                 
  regarding  whether the  resolution should  address only  the                 
  permanent fund board or other major corporations that handle                 
  "billions of dollars  in state  assets" and operate  totally                 
  outside  the appointment  and  confirmation  process.    Co-                 
  chairman Frank  voiced support  for the  original.   Senator                 
  Donley reiterated  need for  a legal  opinion defining  what                 
  constitutes  a state  asset versus  a corporate asset.   Co-                 
  chairman Frank suggested that it would be difficult to infer                 
  that a state-owned  corporation does  not consist of  state-                 
  owned assets.  Senator Donley concurred but noted that there                 
  may be  instances where  provisions within  the articles  of                 
  incorporation insulate the state from lawsuits  or liability                 
  for actions of the public corporation.                                       
                                                                               
  Senator Zharoff inquired  concerning the current  definition                 
  of "cause."  Mr.  Baldwin informed members that removal  for                 
  cause  generally  involves the  offense  of  moral turpitude                 
  unless removal for  incompetence or  inattention to duty  is                 
  expressly stated.  Application differs  from board to board.                 
  The  permanent  fund statute  states  that the  governor may                 
  remove  a trustee by merely  stating his reasons in writing.                 
  That is, in essence, an at-pleasure appointment.                             
                                                                               
  In the course  of further  discussion of for-cause  removal,                 
  Mr. Baldwin referenced a past  conflict between 39.05.080 (a                 
  general right to remove at pleasure) and appointments to the                 
  board of  fisheries.   The legislature  subsequently removed                 
  the ambiguity.   Mr. Baldwin  concurred that if  the statute                 
  for a  particular board  is silent, everyone  serves at  the                 
                                                                               
                                                                               
  pleasure of the governor.                                                    
                                                                               
  When again queried by the  Co-chairman regarding whether the                 
  resolution should  be restricted  to the  permanent fund  or                 
  cover  a  number  of   public  corporations,  Senator  Randy                 
  Phillips voiced support for broad application.  Both Senator                 
  Zharoff and Senator Donley reiterated need for definition of                 
  "state asset."   Co-chairman  Halford acknowledged that  the                 
  definition   is  inherent  in   expanded  coverage   of  the                 
  resolution.    He then  directed  that SSSJR  14  be further                 
  reviewed  by himself,  Senator  Donley, and  Senator Rieger.                 
  SSSJR 14 was thus held in subcommittee.                                      
                                                                               
                                                                               
  SENATE BILL NO. 89                                                           
                                                                               
       An  Act relating to  the members of  the board and                      
       staff of the Alaska Permanent Fund Corporation.                         
                                                                               
  In  directing  that  a  brief  introduction  to   SB  89  be                 
  presented, Co-chairman  Halford noted  need for  consistency                 
  between the bill and SSSJR 14.   Senator Rieger advised of a                 
  100% turn  over in  top management  of the  Alaska Permanent                 
  Fund Corporation over the last two years.  That includes the                 
  executive director,  chief investment  officer, and  all six                 
  trustees.    The purpose  of  SB  89 is  to  provide greater                 
  continuity in management of the fund.  Provisions make clear                 
  that  removal  of a  trustee  must  be for  cause.   Further                 
  provisions  reduce the  number of  cabinet-member appointees                 
  from two to  one and increase  the number of public  members                 
  from four to six.  Public members also have staggered terms.                 
  The  aggregate board  would thus  be seven  rather than  six                 
  members.                                                                     
                                                                               
  SB 89 also  clarifies that investment policies  and staffing                 
  decisions must be  made solely in  the best interest of  the                 
  fund.  The over  $18 billion fund is  more than seven  times                 
  the  amount of general  funds used  in annual  operating and                 
  capital budgets.                                                             
                                                                               
  CSSB 89  (STA) clarifies  that at  least two  of the  public                 
  members must  have recognized competence and wide experience                 
  in   investment  portfolio   management.     The   committee                 
  substitute  further  defines   "cause"  and  clarifies  what                 
  removal for cause would entail.                                              
                                                                               
  Co-chairman  Halford  voiced   his  understanding  that  the                 
  limitation on contracts applies to  permanent fund employees                 
  rather than management contracts.  Senator Rieger concurred.                 
                                                                               
                                                                               
  JIM  BALDWIN,  Assistant   Attorney  General,   Governmental                 
  Relations Section, Dept. of  Law, remained before committee.                 
                                                                               
                                                                               
  He initially spoke to possible conflicts between contractual                 
  hire terms and an executive director  who might serve at the                 
  pleasure of the board.  He later advised that he had not yet                 
  reviewed CSSB  89 (STA)  and would  reserve further  comment                 
  until he had done so.  In his closing remarks, he reiterated                 
  concern  that  imposition of  removal  for cause  provisions                 
  would be bad for the permanent fund board.                                   
                                                                               
  Senator  Donley  acknowledged  a possible  conflict  between                 
  employment contract  provisions and service at  the pleasure                 
  of the  board and suggested  that the bill  contain language                 
  specifying  that  the  contractual  employee  serve  at  the                 
  pleasure of the board.  Senator Rieger acknowledged that the                 
  suggestion  was  reasonable and  requested  time  to explore                 
  proper   language  to   ensure  consistency   with  existing                 
  statutes.                                                                    
                                                                               
  Co-chairman Halford directed that SB 89 be held in committee                 
  for further discussion.                                                      
                                                                               
                                                                               
  SENATE BILL NO. 162                                                          
                                                                               
       An Act relating to land  used for agricultural purposes                 
       and to state land  classified for agricultural purposes                 
       or subject to  the restriction of use  for agricultural                 
       purposes   only;   and   annulling    certain   program                 
       regulations of the Department of Natural Resources that                 
       are inconsistent with the amendments made by this Act.                  
                                                                               
  Co-chairman Halford directed that  SB 162 be brought on  for                 
  hearing  and  directed  attention  to  CSSB  162  (Res)  and                 
  Amendments 1 and 2,  proposed by the sponsor.   SENATOR LYDA                 
  GREEN came  before committee.  She explained  that the  bill                 
  responds to numerous requests  for improvements from  owners                 
  of agricultural  land to  make ownership  of farm land  more                 
  attractive.  The legislation expands state ability to convey                 
  interest in lands classified for  agriculture purposes.  The                 
  state presently  conveys agriculture interest only,  and the                 
  state retains all other  interest.  Passage of SB  162 would                 
  authorize state conveyance  of fee simple title,  subject to                 
  certain restrictive covenants that maintain  use of the land                 
  for  agriculture.    This  change   would  allow  owners  of                 
  agricultural parcels  to obtain financing  from institutions                 
  other than the state.                                                        
                                                                               
  Senator Sharp inquired  concerning the size of  parcels that                 
  may  be subdivided  and sold.   Senator Green  described the                 
  process by which  a parcel may  be divided "by fours"  every                 
  four  years.   Resulting  parcels may  not  be less  than 40                 
  acres.                                                                       
                                                                               
  Senator Zharoff voiced concern  that agricultural land might                 
                                                                               
                                                                               
  be  used  for  non-agricultural purposes  and  asked  if the                 
  proposed  bill would  allow for  other use.   Senator  Green                 
  stressed  that  the  bill maintains  covenants  for  use for                 
  agricultural  purposes  only.     Instead  of   agricultural                 
  designation being a departmental decision, it would become a                 
  judicial decision.  The reversionary  clause that allows the                 
  commissioner to decide  if land is  being used according  to                 
  plan would no longer remain in  place.  The landholder would                 
  pay the  cost of  survey, subdivision, and  title.   Senator                 
  Green  referenced Amendment No. 2  and noted that the change                 
  from agricultural  rights to  fee simple  title would  be an                 
  applicant-driven  process.    The  department  will  not  go                 
  through  its  files   and  issue  a   new  deed  for   every                 
  agricultural parcel.                                                         
                                                                               
  Discussion followed regarding whether  a 40-acre subdivision                 
  would be of  productive size  and whether subdivision  might                 
  eventually  result in  agricultural  land being  devoted  to                 
  other use.   Senator Green noted  that ability to  subdivide                 
  down to 40 acres  is presently in statute.  It  is not a new                 
  provision  within  CSSB  162  (Res).    Co-chairman  Halford                 
  informed members that  under existing  law a landholder  may                 
  separate off  a 40-acre parcel,  but no improvements  may be                 
  made  to  the parcel.   The  proposed  bill would  allow for                 
  improvements.   Senator Green  concurred and reiterated that                 
  the  change  from agricultural  rights  to fee  simple title                 
  would allow for financing of  improvements on the subdivided                 
  property  through  entities other  than  the  existing state                 
  agricultural  loan  program.     She  explained  that   some                 
  agricultural endeavors do not require large parcels of land.                 
                                                                               
                                                                               
  In response to a question  from Senator Donley, BRETT HUBER,                 
  aide to Senator Green, advised that local property taxes are                 
  presently set by boroughs and  municipalities.  The breakout                 
  for agricultural  purposes is  based on  utilization of  the                 
  land rather  than the  size of  the parcel or  improvements.                 
  Under the proposed bill, utilization  would not change.  Co-                 
  chairman Halford  added that landholders  pay property taxes                 
  on  "the  portion of  the  value  that is  contained  in the                 
  agricultural rights."  That  is much less than the  value of                 
  the whole land  eligible for  unlimited subdivision or  use.                 
  Since  the state  initially sold  only  agricultural rights,                 
  local  governments could  only  tax those  rights.   If  the                 
  ability  to  subdivide  increases the  value,  it  will also                 
  increase potential taxation of the property.                                 
                                                                               
  Discussion followed regarding  impact of the  legislation on                 
  Delta and Point  MacKenzie agricultural  projects.   Senator                 
  Green  advised  that   there  would  be  no   difference  in                 
  application in  any region of  the state aside  from parcels                 
  involved in mental  health trust lands.   She stressed  that                 
  the major impact  of the  bill would allow  those with  high                 
  interest loans to refinance at a  lower rate.  There are  no                 
                                                                               
                                                                               
  private loans on  agricultural rights  at the present  time.                 
  Conversion to fee simple title  would provide the collateral                 
  needed  to  obtain financing  from  entities other  than the                 
  state.                                                                       
                                                                               
  Further discussion ensued  concerning the Delta  project and                 
  the  size of the  parcels as well  as the  current status of                 
  Point MacKenzie farms.                                                       
                                                                               
  JANE ANGVIK, Director,  Division of  Land, Dept. of  Natural                 
  Resources,  next  came  before committee.    She  voiced her                 
  understanding that the bill would:                                           
                                                                               
       1.   Allow  individuals  with  agricultural  rights  to                 
  exchange       those rights  for fee simple title to enhance                 
                 ability to  secure financing  in the  private                 
                 sector.                                                       
                                                                               
  End:      SFC-96, #17, Side 2                                                
  Begin:    SFC-96, #18, Side 1                                                
                                                                               
       2.   Allow for  subdivision down to 40-acre parcels and                 
            improvements on subdivided parcels.                                
                                                                               
       3.   Allow landholders to secure a lower interest  rate                 
  on        state  repayment  schedules  if  they  apply   for                 
            refinancing.                                                       
                                                                               
  Ms. Angvik voiced  support for  proposed amendments to  make                 
  the process applicant-driven.   Individual landholders would                 
  be  responsible  for  appraisal,  title  search,  and  other                 
  conversion costs.                                                            
                                                                               
  Referencing the  second  portion  of  the  legislation,  Ms.                 
  Angvik  raised   policy  questions   regarding  ability   to                 
  subdivide.  The question is:                                                 
                                                                               
       If by the act of subdividing we have . . . created                      
       a  substantial  increase  in  the  value  of   the                      
       property, should the state be compensated for that                      
       increased value?                                                        
                                                                               
  Provisions  allow for  subdivision into  only  four parcels,                 
  once  every four years.                                                      
                                                                               
  Further comments by Ms. Angvik followed regarding  testimony                 
  before the  Senate Resources  Committee to  the effect  that                 
  subdivision provisions were designed to allow individuals to                 
  convey land to heirs.  She said  it was not the intention to                 
  allow individuals  to speculate  and increase  the value  of                 
  land  obtained  at  a low  price  because  purchase involved                 
  agricultural rights only.                                                    
                                                                               
  Ms. Angvik suggested that policy concerns could be mitigated                 
                                                                               
                                                                               
  by either:                                                                   
                                                                               
       1.   Appraising the land at  subdivision and making the                 
            difference in value due to the state.                              
                                                                               
       2.   Allowing subdivision every  generation (30  years)                 
  to                                                                           
            convey lands to heirs.                                             
                                                                               
  If the foregoing issues can be addressed, the administration                 
  feels it  is in the best  interest of the public  to provide                 
  greater access to financing for farmers.                                     
                                                                               
  Discussion  followed  regarding  criteria  used  to   obtain                 
  refinancing through the  state.   Ms. Angvik explained  that                 
  the  division  has  no  ability  to screen  individuals  for                 
  ability  to pay.  The division  would merely apply statutory                 
  interest  rate   provisions  (not  to   exceed  "nine  point                 
  something")  to  applications  for   refinancing.    Further                 
  discussion of the  process ensued.  Co-chairman  Frank noted                 
  that it is  unusual for  legislation to be  worded to  imply                 
  discretion when discretion  is not expected to  be utilized.                 
  Ms. Angvik  voiced  her understanding  that the  legislation                 
  would  provide   impetus  to  utilize  federal   moneys  for                 
  agricultural endeavors.  Federal rates  are lower than those                 
  of the  state.  The  average rate  of existing  agricultural                 
  loans is 11.8 percent.                                                       
                                                                               
  Co-chairman Halford asked  if landholders  would have to  be                 
  current  in  their loan  payments  to refinance  through the                 
  state.  Ms. Angvik responded affirmatively.                                  
                                                                               
  Discussion  followed  regarding  an adjustable  rather  than                 
  fixed  interest  rate  for state  agricultural  loans.   Ms.                 
  Angvik voiced  concern over additional  paperwork associated                 
  with application of  adjustable rates.  She  further advised                 
  of Commissioner Shively's goal that:                                         
                                                                               
       We  basically get  out  of the  banking  business.                      
       That we  do everything that we can  possibly do to                      
       no longer be the financing source for the purchase                      
       of state lands.                                                         
                                                                               
  Ms. Angvik advised  that in  other legislation containing  a                 
  rewrite of Title  38, the department is suggesting  that the                 
  interest  rate  for   sale  of  all  lands  be  the  current                 
  prevailing rate plus  a percentage.  That  would then become                 
  the statutory  methodology rather  than  a specific  number.                 
  Interest  would then  become fixed at  the time  of contract                 
  negotiation rather than revised on an  annual basis.  It was                 
  suggested that CSSB 162 (Res)  mirror that approach, but the                 
  sponsor chose another route.                                                 
                                                                               
  In  response to a question from Senator Sharp concerning the                 
                                                                               
                                                                               
  traditional size of an agricultural parcel, Ms. Angvik noted                 
  that  of the existing 475  parcels, the majority are between                 
  40 and  320  acres with  the  bulk at  160.   Senator  Randy                 
  Phillips questioned the  number of  acres that are  actually                 
  farmed.   One of the  remaining dairy farmers  has indicated                 
  that "You can't farm and make it economically feasible on 40                 
  acres."    The  Senator  then  suggested  that  the  minimum                 
  subdivision  be 160  acres.     Senator Green  stressed that                 
  several hundred existing  parcels are already smaller.   Ms.                 
  Angvik advised of over 600,000 acres of agricultural land in                 
  private hands.   The department  assumes that those  holding                 
  the lands operate within the covenants and use the land only                 
  for agricultural purposes.                                                   
                                                                               
  Co-chairman Frank suggested that rather than the legislature                 
  dictating what size a farm should be, the market should make                 
  that decision.   He indicated that  farmers may wish to  use                 
  different 40-acre parcels for different types of farming and                 
  improvements and obtain separate  financing for each parcel.                 
  There  may  be  valid reasons  for  subdivision,  other than                 
  conveyance.    Ms.  Angvik  reiterated the  policy  question                 
  associated  with  whether the  state,  as the  owner  of the                 
  agricultural land, should be compensated for increased value                 
  created  by   ability  to  subdivide.     Co-chairman  Frank                 
  suggested  that  there  might  be  valid public  purpose  in                 
  encouraging development  of farm  land by  providing greater                 
  financing opportunities via subdivision.                                     
                                                                               
  In response to  a question  from Co-chairman Frank,  Senator                 
  Green  explained  that  the purpose  behind  CSSB  162 (Res)                 
  "never  addressed that right to pass the land on to heirs in                 
  subdivision."  That was one of the issues raised as the bill                 
  was discussed,  but it was  not a  primary goal.   The basic                 
  purpose is to  allow an  agricultural landholder fee  simple                 
  title so the farmer may develop the land and  make a living.                 
  One  cannot  necessarily do  that  with  a  large parcel  in                 
  Alaska.  There  is great demand  for smaller parcels.   When                 
  land is returned to  the state, the state has the ability to                 
  subdivide and sell 40-acre parcels.  The proposed bill would                 
  allow landholders to do the same.                                            
                                                                               
  Senator   Donley   voiced   his  understanding   that,   per                 
  constitutional provisions, the state must be compensated for                 
  conveyance of a state  asset or resource.  He  then directed                 
  attention  to enforcement provisions at page 7, line 17, and                 
  asked if civil action would be consistent with existing law.                 
  Co-chairman  Halford  voiced  his  understanding  that   the                 
  language relates to "the old reversionary clause."                           
                                                                               
  Speaking  to  concern  that   agricultural  land  might   be                 
  subdivided by speculators  and used for other  purposes, Co-                 
  chairman Frank suggested that no financial institution would                 
  provide  financing  for  such  development  under   existing                 
  agricultural covenants.   He  then voiced  his believe  that                 
                                                                               
                                                                               
  provisions for subdivision contained in CSSB 162 (Res) would                 
  not greatly change the  market value of the land  because of                 
  lack of demand for farm land in Alaska.  He further  noted a                 
  valid  public purpose  associated  with making  farming more                 
  economically viable.                                                         
                                                                               
  Co-chairman Halford directed  that the bill  be held on  the                 
  calendar for further discussion.                                             
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting was adjourned at approximately 11:25 a.m.                        
                                                                               

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