Legislature(1997 - 1998)
03/21/1997 09:03 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE March 21, 1997 9:03 A.M. TAPES SFC-97, # 65, Sides 1 & 2 (000-589, 589-000) SFC-97, # 66, Side 1 (000-295) CALL TO ORDER Senator Randy Phillips, Vice-chair, Senate Finance Committee, convened the meeting at approximately 9:03 A.M. PRESENT In addition to VICE-CHAIR PHILLIPS, SENATORS TORGERSON and ADAMS were present when the meeting was convened. SENATOR PARNELL arrived at 9:06 A.M. SENATOR DONLEY arrived at 9:08 A.M. COCHAIR SHARP was excused until plane time and arrived at 10:20 A.M. COCHAIR PEARCE did not attend the meeting because of illness. Also Attending: SENATOR LYDA GREEN; SENATOR JERRY WARD; SENATOR JIM DUNCAN; TOM WILLIAMS, Staff, Senate Finance Cochair Sharp; ANNALEE MCCONNELL, Director, Office of Management and Budget; BRUCE LUDWIG, Business Manager, Alaska Public Employees Association; BILL CHURCH, Retirement Supervisor, Division of Retirement and Benefits, Department of Administration; KEN GRIFFIN, Biologist, Department of Fish and Game; NANCY SLAGLE, Director, Administrative Services, Department of Transportation and Public Facilities; JANE ANGVIK, Director, Division of Land, Department of Natural Resources (DNR); JALMAR KERTTULA, Director, Division of Agriculture; DNR; MIKE GREANY, Director, Legislative Finance Division; fiscal analysts and aides to committee members. Also Attending Via Teleconference: BILL DONALDSON, Kodiak; LARRY DEVILBISS, Assemblyman, Matanuska-Susitna Borough; JOHN BAKER, Assistant Attorney General, Natural Resources Section, Department of Law. SUMMARY INFORMATION This bill was scheduled but not heard. SB 3 was HELD, to be taken up at a future date. Testimony was heard from TOM WILLIAMS and ANNALEE MCCONNELL. SENATOR PARNELL MOVED Amendment #1. SENATOR ADAMS objected then withdrew his objection. There being no further objection, Amendment #1 was ADOPTED. Amendment #2 was not offered. Amendment #3 was held. SENATOR PARNELL MOVED Amendment #4. Without objection, Amendment #4 was ADOPTED. SB 136 was HELD for further consideration. Testimony was heard from TOM WILLIAMS, BILL DONALDSON, BRUCE LUDWIG, BILL CHURCH, KEN GRIFFIN, ANNALEE MCCONNELL and NANCY SLAGLE. SB 126 was HELD for further consideration. There were five proposed amendments in committee files. Testimony was heard from LARRY DEVILBISS, SENATOR GREEN, JANE ANGVIK, JALMAR KERTTULA and JOHN BAKER. SB 109 was HELD for further consideration. SENATOR WARD spoke in support of proposed changes regarding the make-up of the task force. SENATOR DONLEY MOVED Amendment #1. SENATOR TORGERSON objected for the purpose of discussion. SENATOR DONLEY WITHDREW Amendment #1 and MOVED Amendment #2. There was no objection and Amendment #2 was ADOPTED. SENATOR DONLEY MOVED CSSB 68(FIN) from committee with individual recommendations. Without objection, CSSB 68(FIN) was REPORTED OUT with updated fiscal notes from Legislative Affairs Agency (17.9), Office of Management and Budget (indeterminate) and Office of the Governor (indeterminate). VICE-CHAIR PHILLIPS called the meeting to order. He announced that COCHAIR SHARP was expected to arrive soon and that COCHAIR PEARCE was absent because of illness. He indicated the order of the bills to be heard, noting that SB 3, SB 136, SB 126 and SB 109 would be held over. SENATE BILL NO. 3 "An Act authorizing prosecution and trial in the district court of municipal curfew violations." VICE-CHAIR PHILLIPS announced that SB 3 would not be heard today. SENATE BILL NO. 136 "An Act relating to the state budget and to appropriation bills." TOM WILLIAMS, Staff to Senate Finance Cochair Sharp, read the Sponsor Statement relating to SB 136 (copy on file). Following is an excerpt of the first and last paragraphs: "Senate Bill 136 was introduced to clarify current law, making it explicit that the Governor is required to present all three of his necessary budget bills on December 15 of each year --an operating budget bill, a capital budget bill, and a mental health program operating/capital budget bill. This legislation also conforms the general budget submission provisions of AS 37.07.020 to the requirement in AS 37.14.003(a) for a separate mental health program bill." MR. WILLIAMS added that, according to Legislative Finance, the last time a consolidated capital and operating budget bill was submitted to the legislature was in 1983 for FY 84. The practice since then has been to separate the bills which has led to substantial delays in submitting a capital budget. The presence of Senators Parnell and Donley was noted. SENATOR PARNELL stated he had amendments he would be offering. SENATOR ADAMS pointed out that the practice of separating budgets was not new, but had been the past practice of other governors regarding whether they were Republican or Democrat. He suggested that, for SB 136 to work, the session would need to be shortened. He supported voting for a ninety-day session in addition to SB 136. VICE-CHAIR PHILLIPS brought up amendments in the files. SENATOR PARNELL explained Amendment #1. It would change the due date for the governor's budget amendments from the 60th legislative day to the 45th day. It was a recommendation of the Legislative Finance Division and something he agreed with because in recent years, the first finance committee to move its budget has been ready to close out before the governor's amendments were provided. If the process could be moved up a little, the first house would be able to close out with all the budget amendments in hand rather than getting them up to the last moment. He MOVED the amendment, then WITHDREW his motion. SENATOR PARNELL continued by explaining Amendment #3. Currently, the Executive Budget Act requires the agencies to submit performance reports to the Office of Management and Budget. The amendment would say the performance reports would be available to the legislature. It would not be the budget numbers, simply the performance reports which cover how the agencies are accomplishing their mission and goals. SENATOR PARNELL next described Amendment #4, which specified January 10 that the summary of performance reports would be due. SENATOR ADAMS asked to hear the position of the administration. ANNALEE MCCONNELL, Director, Office of Management and Budget, testified that there were tremendous numbers of improvements that could be made in the budget process both on the executive and legislative sides. She was supportive of many of the things SB 136 would achieve. She was in the process of making major changes to the mechanics of the budget system which will allow more timely production of amendments and updates. In addition to automation, she was working toward drawing in other information not currently provided. She referred to past conferences with Senator Parnell, noting that areas such as performance measures and future trend information would be incorporated. MS. MCCONNELL claimed that difficulties exist because the budget system is poor from a mechanical standpoint. It is highly manual, diffuse, and has no ability to roll things up centrally. MS. MCCONNELL continued her testimony by pointing out that an updated six-year plan was recently delivered that would be helpful in the arena of capital budget timing. She suggested it would be a good focus for discussion over the interim. A six-year plan will make it possible to do each year's capital budget more easily because there will be a better overall sense of where the state is headed. MS. MCCONNELL had concerns with some provisions of the bill. One was that there had to be an identical bill between what was submitted on December 15 and January 15. Her reasoning was that life doesn't stop still just because there are deadlines and statutes. There were very few differences this year in the operating budget, but technical errors do occur. Another issue was that bringing the budget out in December gives the public notice, not just the legislature. If they were not allowed to make any changes between December and January, it would give a message that "we don't care what the public tells us about what's in the budget proposal." She didn't anticipate lots of changes, but minor adjustments may be needed and it wasn't a good idea to preclude those from being made. She acknowledged the governor had opportunity to provide amendments to the budget proposal. MS. MCCONNELL believed there were things that they could work out that would deal with the technical concerns and timing issues the Legislative Finance Division may have with preparation of their books. It was also her hope that if there was going to be a requirement that anytime something was presented that full back-up material be there, it would also apply to the court system and the legislature. She noted there were currently projects from the legislative branch that had no back-up and it has created problems trying to see whether things have met appropriation requirements. MS. MCCONNELL summarized her remarks by noting there were improvements that could be made in addition to other changes in the executive branch that would be warranted. She was willing to work with the committee to improve the budget process. VICE-CHAIR PHILLIPS asked if there was further testimony on SB 136. There being none, he stated the bill would be held. SENATOR PARNELL asked to take up the amendments he described earlier. SENATOR PARNELL MOVED Amendment #1. SENATOR ADAMS stated for clarification that it was a simple change from the current 60 days to 45 days. SENATOR PARNELL affirmed that was correct. He added that, according to his understanding from the Legislative Finance Division, when the session deadline was established at 120 days, the budget amendment deadlines were not changed. There was no objection, and so Amendment #1 was ADOPTED. VICE-CHAIR PHILLIPS inquired about Amendment #2. SENATOR PARNELL stated it had been withdrawn, and that he wanted to hold Amendment #3 until the next meeting. SENATOR PARNELL MOVED Amendment #4, regarding the date of the performance report summary. There being no objection, Amendment #4 was ADOPTED. VICE-CHAIR PHILLIPS stated SB 136 would be HELD to the next meeting. He brought up SB 126 next. SENATE BILL NO. 126 "An Act relating to the retirement incentive program for state employees; and providing for an effective date." TOM WILLIAMS, Staff to Senate Finance Cochair Sharp, read the Sponsor Statement relating to SB 126 (copy on file). Following is an excerpt: "SB 126 leaves the basic elements of current Retirement Incentive Program in place. However, it adds two principal provisions. It  limits a qualified employee's participation to the first RIP application period for which they qualify (section 3); and  requires state agencies to offer a RIP plan to all qualified classified state employees during three two month application periods (section 1). This legislation will not only increase RIP participation, it will accelerate when employees are required to retire under this program. Both elements should increase savings to the state, the principal impetus to passing the RIP legislation last year." SENATOR ADAMS asked about showing a greater savings over a longer average, instead of three years to possibly four or five so more people could participate. MR. WILLIAMS responded that the purpose of SB 126 was simply to address the two items mentioned. The primary impetus was to insure that people jump at their first opportunity rather than wait for a later time, and to make it available. SENATOR ADAMS suggested there were other areas that needed to be looked at besides the two in the bill. He had no objection to the bill. SENATOR TORGERSON brought up a proposed amendment in the committee files. MR. WILLIAMS responded that it was drafted in discussion with the Division of Retirement and Benefits. They noted a technical reference that needed to be made that insures that the provisions in the bill for the mandated openings are the same rules that are required by the current program. It specifically says that if an employee is offered RIP, they have to go forward with it within six months, which is consistent with the current provision of the discretionary plan. SENATOR ADAMS asked to hear from the administration regarding the technical amendment. VICE-CHAIR PHILLIPS stated his intent to hear from people testifying on teleconference first. BILL DONALDSON, testifying via teleconference from Kodiak, stated that if the point of SB 126 was to reduce the operating budget through personnel reduction, why wasn't the RIP offered to people who showed a cost savings based on a three-year time period and replacement at a B step. He pointed out that within the Department of Fish and Game a narrow focus was chosen. He didn't believe SB 126 went far enough and that offering the RIP to those who qualified and showed a cost savings should be mandatory. MR. WILLIAMS responded that the impetus to passing the RIP legislation last year was for downsizing and to provide cost-savings. SB 126 does go a long way toward encouraging a more active offering of the RIP. A substantial additional number of individuals could take advantage of it as a result. He acknowledged there were other provisions that might be added that would extend the RIP further, but could not say whether it was advisable. SENATOR TORGERSON asked what impact SB 126 would have on local governments tied to the Department of Education, such as AVTECH or Mt. Edgecumbe. MR. WILLIAMS responded that SB 126 would apply only to state government. BRUCE LUDWIG, Business Manager, Alaska Public Employees Association, Alaska Federation of Teachers, and Secretary- Treasurer of the state AFL-CIO, testified next. He was appreciative of the bill and wanted to offer improvements to the concept. There have been complaints from union members throughout the state in the way the RIP has been implemented. Some employees partially funded by the federal government are being denied the opportunity because they are told the federal government won't participate. With a powerful congressional delegation, it was his belief that pressure could be brought to bear that would help save state and federal dollars. He supported an earlier suggestion by Senator Adams to extend the three years to five years in the cost-savings portion. He gave an example of up-front training costs for hiring new employees in the Departments of Corrections and Public Safety. Those jobs are 20-year retirement system jobs that retain people for a long period of time. In a normal situation it is amortized over the life of the employee. Here, the department is required to come up with savings within three years to pay for that training. By going to five years, it is easier to qualify people for the RIP. There is an eight-year cost savings when a correctional officer in longevity is replaced, but the cost has to be recouped in three years. By moving it to five years, there would still be three more years of savings that wouldn't be accounted for in the RIP. MR. LUDWIG proposed draft language (copy on file). He explained that a significant part of savings that is not being accounted for by the administration, is that employees hired prior to 1986 cost around 14 percent to the employer. Changes made in 1986 and last year brought the figure down to between 7.5 and 8 percent. There would be substantial cost savings by replacing a pre-1986 employee with someone hired after July 1, 1996. None of that is being counted as savings. He suggested the bill be amended to include savings from different retirement tiers. Division budgets wouldn't be directly impacted, but the state as a whole would be impacted because an actuary looks at the actual work force in determining what the employer contribution will be in the future. Another suggestion offered by MR. LUDWIG related to Section 3 which requires the employee to leave the first time they were eligible. He believed it could create some real problems. A number of programs were added to government with the increase of oil money. Entire programs or divisions came on at once, including the hiring of employees, and there was concern that an entire hierarchy within a certain program could be lost. If allowed to phase in over a three-year period that impact could be alleviated. BILL CHURCH, Retirement Supervisor, Division of Retirement and Benefits, Department of Administration, stated his availability to speak to the technical amendment or any questions the committee had. SENATOR ADAMS asked him to speak to the technical amendment. MR. CHURCH said he did not represent the administration and deferred to Ms. McConnell to speak of their position. SENATOR TORGERSON asked if there was another area of concern. MR. CHURCH confirmed that his concern was with Section 3, line 12, which references application of the retirement incentive credit under 22(f) of the enabling legislation. That section outlines how the three years will be applied. It is first applied to allow someone to meet eligibility for normal retirement, it allows someone to be eligible for early retirement, then allows someone who is under the age eligibility for early retirement to meet that eligibility. SB 126 only allows individuals who meet eligibility for normal retirement. He suggested that line 12 only include (f)(1), which would allow eligibility for normal retirement only. It ties everything together. KEN GRIFFIN, Biologist, Department of Fish and Game, expressed that his concern with the present RIP was similar to that of Mr. Donaldson. He stated he was one of the federally funded employees, but only for the last four years. Prior to that, he spent seventeen years in a state funded position. He asked whether the Department of Fish and Game, under the present RIP, could pick and choose, through the process of downgrade or elimination of positions only, the people that got to participate in the RIP. He didn't believe that was the intent, but that was what happened in his department. There were many that would like to retire, but there was no incentive in the present program. VICE-CHAIR PHILLIPS asked Ms. McConnell to address the committee. ANNALEE MCCONNELL, Director, Office of Management and Budget, testified that as they considered the RIP proposals over the last two years, it was clear that the direction of the legislature was not to have an across-the-board RIP as had been offered in the past. It was consistent with the governor's strategic RIPs. She acknowledged legislative concern and difference of opinion regarding whether the savings were as large, and followed legislative direction. An area of concern was the issue of federal funded positions, a particularly large problem in DOT&PF from a financial standpoint. They were not being allowed by the Federal Highway Administration to use federal funds to pay for the RIP, which meant they had to use general funds. She noted that Nancy Slagle (DOT&PF) had run some numbers on the impact (copy on file). MS. MCCONNELL agreed with the idea of not having the "take it or leave it" provision apply only to classified employees. She questioned the intent regarding efforts to downsize. If RIP were offered to all employees, there was no way to responsibly say they would have a large percentage of vacancies in those areas. They would need to deal with that issue. In addition, the legislative expectation about how many positions would be refilled would have to change considerably. MS. MCCONNELL handed out an update of all RIP plans approved to date (copy on file) and explained. 221 have applied to date, but they may not all retire. 6,200 of the total number of employees were eligible from all departments. MS. MCCONNELL next spoke about why Tier 3 was not used. One reason was because many of the people who filled the positions had prior experience before state government. Another was because of non-Tier 3 people within a department who fill the position. SENATOR ADAMS asked if Ms. McConnell had seen a proposed technical amendment. MS. MCCONNELL did not see a problem with it. SENATOR TORGERSON asked her to speak to Mr. Church's proposal to go to 22(f)(1) instead of 22(f)(2). MS. MCCONNELL said there would need to be a technical correction there. She did not object to that, as it was separate from the overall policy question. End SFC-97 #65, Side 1 Begin SFC-97 #65, Side 2 In response to a question posed by SENATOR TORGERSON, MS. MCCONNELL stated there had not been a consistent policy from federal agencies. Some have allowed their grantees, including the state, to use federal funds for RIP. The same issue was faced when local governments asked the state if they were allowed to use state money to pay RIP costs. The state believed if they were asking the feds to do that, they needed to apply it to local governments. An exception was that sometimes federal money was restricted, so that if it were passed on to the state, the restriction could not be lifted. DOT&PF had the largest negative impact by the feds. SENATOR TORGERSON asked that Nancy Slagle address the committee. NANCY SLAGLE, Director, Administrative Services, Department of Transportation and Public Facilities, informed the committee that she had run some numbers to figure out where they were on federal funded positions. She explained that they offered the RIP to employees, but to qualify for participation, there needed to be a non-federal savings for them. The Federal Highways Administration, citing Title 23, the guiding laws for state funding, would not participate in the RIP. So all RIP costs would have to be absorbed by the department's general fund. Discussions are continuing with the FHA. For FY 97, there were 96 people who could potentially qualify with a savings of about $1 million, but the state would have to absorb $2.9 million in RIP costs, taking into account that only a portion of the savings are general fund based on the 90/10 split of federal and general funds. MS. SLAGLE estimated that about 30 percent of those 96 people would participate, but they could not absorb such a substantial cost in their budget. VICE-CHAIR PHILLIPS called for further testimony or questions regarding SB 126. There being none, he announced SB 126 would be HELD for further consideration. SENATOR ADAMS directed staff to provide the technical amendment regarding 22(f)(1). VICE-CHAIR PHILLIPS brought up SB 109 next. SENATE BILL NO. 109 "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." LARRY DEVILBISS, Assemblyman, Matanuska-Susitna Borough, spoke via teleconference. He was a second generation farmer in the Mat-Su Valley, the largest carrot producer, and also farmed beets, hay and garlic. He farmed both fee-simple land and "ag-right" (ph) land. He referenced written testimony that he would fax to the committee. MR. DEVILBISS brought up Section 10 on page 6 regarding municipality selection and transfer of land. He read from the bill and cautioned that the agricultural use and intent be protected either by covenant or code on the part of the municipality receiving the land so it wasn't sold out for subdivisions, a trend nearly impossible to buck in the borough. He next referred to line 4, page 6, related to the subdivision details. He wanted it to be clear that the legislation was talking about the entire farm and not tax parcels or aliquot parts. He gave an example of taking each parcel of a 1,600 acre farm and subdividing it down to 40 acres, stating that it virtually destroys the farm character. He wanted to insure the subdivision process is allowed only once per farm and not per aliquot part. He supported the concept of fee- simple. It would be easier for the farmer to work with if the covenant process was attached to it. MR. DEVILBISS continued by saying that to pretend that value is not being passed along is something that is not real in the Mat-Su Borough. He recently applied for borough land adjacent to his farm and the assessed value for fee-simple came back at $1,300 per acre, while the ag-rights assessment was $600 an acre. Value was an issue he felt was pertinent to the committee. He had a concern that retroactively giving value to people who bought the land under a different set of rules was not fiscally prudent. He recalled the Department of Natural Resources citing there was not enough difference in value to bother with. But he assured the committee that there wouldn't be so many people clamoring for it who had ag-right property now if there wasn't a value attached to it. He suggested changing Sections 12 and 13 relating to municipal and private disposals by adding a clause that says the person receiving the new title will give the state a check reflecting the difference in the value of the new title versus the old title. He felt changes were necessary for the bill to be defensible. MR. DEVILBISS summarized by stating he knew of no one who supported SB 109 as it currently appears. SENATOR LYDA GREEN, Sponsor of SB 109, addressed the committee next. She referred to recent correspondence from the Department of Natural Resources (copy of 3-19-97 letter on file) that outlines their areas of concern, many of which were just addressed by Mr. Devilbiss. One was the choice between conservation easement, perpetual covenant, enforceable covenant or no covenant at all. There was a liability issue concerning the window of time between when a parcel owner brings the deed of conveyance to be changed from ag-rights to the new status. The state requested a limited liability report and she felt that was acceptable. It would be something the owner would provide when they make the conveyance. SENATOR GREEN acknowledged concerns about survey language and stated that language referring to aliquot parts would be deleted. Another issue concerned method of payment and how to evaluate the increased value of a dwelling site. She said she was looking at how to reassess the value that accrues to the property for the addition of a dwelling site. Another issue being worked on has to do with deferring payment until the land is sold. Many people have no intention of subdividing or selling, but choose to change to a new type of deed so they may obtain financing from an entity other than the state. SENATOR GREEN had five proposed amendments for the committee to consider which addressed the major portion of concerns, including increased valuation, limited liability, the survey, and perpetual covenant versus conservation easement. She had some concern with the easement language because it still keeps the state in the title and most farmers want the state off the title. The state's concern was once they provide a perpetual covenant, the landowner could dispose of the land and no money would ever accrue to the state. She contended there was language that could be placed on a title that could prevent that occurrence. She recommended Amendments #1, #2, #3 and #5. VICE-CHAIR PHILLIPS called on JOHN BAKER, Assistant Attorney General, available via teleconference. MR. BAKER indicated he was available for testimony if necessary. SENATOR PARNELL was interested in hearing testimony regarding the Department of Law fiscal note. VICE-CHAIR PHILLIPS wanted to complete testimony before taking up fiscal notes. JANE ANGVIK, Director, Division of Land, Department of Natural Resources (DNR), stated she had been working with the sponsor on SB 109 and was pleased with the progress being made. She outlined the department's baseline issues regarding the protection of agriculture lands. Their first premise was that agriculture land should be retained as agricultural land. They had a concern that in the conversion of a form of ownership, individuals may accrue a significant windfall profit by increased value as a result of being able to subdivide land and by placing a house on each piece. They agreed with efforts to capture the increased value on the ability to put more houses on the land. They wanted to make sure the state retained the capacity to secure fair market value because when people purchased agricultural lands they bought them at a low price relative to the increased value if they could add more houses, so there needed to be a method to do that. They favored a conservation easement, a tool used in agricultural communities in other states, and one which is familiar to the federal agriculture loan programs. There was some concern as to whether the state should retain a position in the land title, but they believed it was the most secure way of making sure that, should land be subdivided and more houses developed, the state would be able to capture the increased value. They have the most concern with the ability to enforce the retention of agricultural lands either under a covenant or conservation easement. They have worked to ensure that not only the state would be able to bring people to court but that other individuals could also, so that neighbors could become an enforcement arm to make sure the agricultural character of the land was retained. They were in agreement on the aspect of requiring a survey as part of any land disposal for agricultural purposes. MS. ANGVIK summarized that the gist of her remarks was that with some of the proposed changes they were working towards a bill that could be agreed on. The most important issue was that if value increased, the state be able to participate in the value. The second was that the state do everything in its power to retain the agricultural character of land and not promote subdivision of the land for other purposes. SENATOR GREEN discussed the land value issue and invited the committee to help address it, whether by formula, incentive, et cetera. She suggested "the state doesn't have any business being in the land business anyway and it should be in the hands of individuals to do with and improve." She did not want to encourage smaller subdivisions. The presence of COCHAIR SHARP was noted. MS. ANGVIK reiterated that the biggest issue for the committee was to make sure it didn't create tremendous accidental windfall profits to individuals, and that the fair market value of the land and its improvements accrues back to the state. Since the state sold it at a low price and there is the capacity to increase the value, the state should remain in the loop. There was additional discussion regarding valuation. SENATOR TORGERSON questioned for clarification whether the valuation was being done because "we're actually wanting the ag-right owner to buy the property" and for taxation from local government. SENATOR GREEN explained that it had to do with someone selling the land. They recommended for convenience that there be a $6,000-per-transaction fee or the agricultural land owner would have the right to have a comparison appraisal done and if it's less than $6,000 they would take the appraisal, or if the appraisal is more than $6,000, they would pay the $6,000. She felt it would be a generous payment to the state for increased value. The state requested an appraisal and she wanted to "work in the either/or." JALMAR KERTTULA, Director, Division of Agriculture, DNR, testified next. He distributed additional back-up related to SB 109 (copy on file) to point out efforts to provide housing loan opportunities. He gave historical background regarding development of the agriculture rights program, subdivisions and farming activity. The program allowed the farmers in borough areas to keep reasonable farm values rather than subdivision values for tax programs. He noted the federal government was in a position of buying back development rights in urban areas so agriculture can continue in those areas and referenced a New York Times article in his packet. MR. KERTTULA brought up a constitutional question related to Section 8 and the issue of providing a way for the state to recapture some of the funds if there was subdivision and a change from ag-rights. In rewriting debt structure, there was an IRS interest in differentials being tax liability. He believed there would be a windfall profits tax interest by IRS if a mechanism was not provided for some of the recapture of the differential by the state. He saw it as a serious question for anyone who converted. He stated there were many people from his area that were opposed to the change, other farmers want the change, and he acknowledged that the sponsor and the administration were trying to accommodate both points of view to the best extent possible. He had been requested to speak to the committee by the governor to "work out some accommodation, if not, [the governor] would feel inclined to have to veto it again." MR. KERTTULA stated his belief that DNR and the sponsor had gone a long way toward accommodating the governor's and attorney general's concerns. SENATOR PARNELL renewed his request for an explanation of a fiscal note from the Department of Law. JOHN BAKER, Assistant Attorney General, Natural Resources Section, Department of Law, referred to the fiscal note analysis. He mentioned that, by oversight, there was no fiscal note prepared last year for SB 162 (an identical bill). He testified that in its current form, the bill would likely lead to an increase in the number of parcels in circulation and a corresponding increase in the need to monitor those parcels for violations of covenants. There was also concern that the remedy available to the state was less of a threat, and could result in increased litigation. The fiscal note was based on the cost of one attorney position. There is currently one full-time attorney in the attorney general's office that represents the Division of Agriculture and it is funded through a reimbursable services agreement by the division using Agricultural Revolving Loan Fund money. It was his understanding that it would be inappropriate to use those funds for additional agency advise or litigation. It was determined that funding should come from general funds through the Department of Law. SENATOR PARNELL questioned why it would not be better to give DNR the $138,000 in their agriculture general fund budget and allow them to pay it across as needed instead of hiring another person in the Department of Law to do something that would be speculative in terms of what might happen. MR. BAKER responded that DNR did not have independent authority to retain counsel outside of the attorney general's office, so the only way they could receive representation would be through an RSA or directly through a general fund position through the Department of Law. SENATOR PARNELL stated he was trying to get more general fund dollars to save the Agricultural Revolving Loan Fund. If the money was not needed in the Department of Law because of the speculative nature of the fiscal note, he'd rather the Division of Agriculture have the funds so the loan fund would not be depleted. VICE-CHAIR PHILLIPS asked if there were additional testimony or questions regarding SB 109. There being none, he HELD SB 109 for further consideration and turned the gavel over to COCHAIR SHARP. End SFC-97 #65, Side 2 Begin SFC-97 #66, Side 1 SENATE BILL NO. 68 "An Act relating to the Task Force on Privatization; and providing for an effective date." COCHAIR SHARP announced that SB 68 would be taken up next. He noted there were two proposed amendments and asked for comment from the bill sponsor. SENATOR JERRY WARD, Sponsor, testified that he had worked with SENATOR DONLEY and felt the concept of the legislation was improved. The concept originally was taken from the Alaska State Chamber of Commerce. He believed amendments made in the State Affairs Committee as well the currently proposed amendments would improve the legislation, and he was in concurrence. His intent with the legislation was not to hurt public service by taking a hatchet approach to privatization, but to look at it in a businesslike and professional manner. SENATOR DONLEY MOVED Amendment #1 which placed a fiscal note on the bill for one staff person in FY 98 and a half- position in FY 99. He believed the task force would have a major undertaking and there was no provision for how it would be staffed. He believed the legislative budget had been dramatically reduced over the last several years to the extent that existing staff levels could not handle the workload of the task force. SENATOR TORGERSON objected for the purpose of discussion. He called attention to another fiscal note from Legislative Affairs Agency (LAA) for $28,000 and asked if Amendment #1 would replace that fiscal note. SENATOR DONLEY responded that it would be in addition to the LAA fiscal note. SENATOR TORGERSON summarized that the cost would now be $120,000 and suggested the staff position be privatized. SENATOR WARD agreed and stated his original intent was to use existing staff as much as possible. He also agreed with SENATOR DONLEY that it was a major undertaking because there are many parts of government, and none of the other states he researched had tried to do it with existing staff. SENATOR PARNELL stated he would not support Amendment #1 because he believed the sponsor was clear in prior testimony that it would not require additional staff. Also, based on his experience with the Long-Range Financial Planning Commission, OMB would bring whatever resources to bear that needed to be brought, and the legislature could do the same, although they could not match OMB's resources. Also, the chair would typically have full and exclusive use of the staff person. He reiterated that he opposed the amendment. SENATOR DONLEY asked if a full-time position had been funded for the commission. SENATOR PARNELL confirmed and cited that experience as reason for opposition to Amendment #1. SENATOR DONLEY continued discussion about staff workload. SENATOR TORGERSON stated his position that full-time staff would not be needed, but felt a fiscal adjustment would be needed if the next amendment was adopted, and he would be supportive of that. SENATOR DONLEY WITHDREW his motion to adopt Amendment #1 and stated his hope that leadership would devote sufficient resources to the task force. He didn't believe Legislative Finance had the capability to coordinate the task force and if someone was not designated, it wouldn't get done right. SENATOR DONLEY MOVED Amendment #2. COCHAIR SHARP objected for the purpose of an explanation. SENATOR DONLEY stated there was extensive discussion at the last meeting about the make up of the task force and previous experience with the Long Range Fiscal Planning Commission led them to feel under-represented at the table. Just having one majority member from both the House and Senate would continue the same problem. Amendment #2 would add an additional majority member from both the House and Senate and an additional person that the governor could appoint. Two of the three positions the governor would be appointing would be from workers and one of those would be white collar and one would be blue collar. That would be defined as somebody who was active in trades, representing trade type work. He ran the language by several groups of people and no one could come up with anything better so far, so it seemed to be acceptable to most people out there. The amendment increased the task force to thirteen. COCHAIR SHARP removed his objection. SENATOR PARNELL stated his earlier concern that they were guaranteeing a place at the table for people with financial interests in the outcome. They weren't guaranteeing any private sector seats, but labor and legislative membership was guaranteed. His understanding was that by increasing the number of labor representatives the governor would be appointing, it would free up the president and speaker from having that pressure exerted on them and they could appoint some public members with interest on the other side. He reiterated his main concern that there was no guarantee for private sector involvement even though the task force was to look at privatization. COCHAIR SHARP asked if there was additional discussion or objection to adopting Amendment #2. There being none, Amendment #2 was ADOPTED. COCHAIR SHARP asked that the LAA fiscal note be updated according to the amendment. SENATOR DONLEY MOVED CSSB 68(FIN) from committee with individual recommendations. Without objection, CSSB 68(FIN) was REPORTED OUT with updated fiscal notes from Legislative Affairs Agency (17.9), Office of Management and Budget (indeterminate) and Office of the Governor (indeterminate). COCHAIR SHARP announced future committee meetings. ADJOURNMENT The meeting was adjourned at approximately 10:57 A.M.