Legislature(1997 - 1998)

03/21/1997 09:03 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    SENATE FINANCE COMMITTEE                                   
                         March 21, 1997                                        
                            9:03 A.M.                                          
  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.                   
  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:                                                              
  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                 
       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                 
  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                 
  SENATE BILL NO. 136                                                          
  "An Act  relating to the  state budget and  to appropriation                 
  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                 
  The  presence  of  Senators Parnell  and  Donley  was noted.                 
  SENATOR  PARNELL  stated  he  had  amendments  he  would  be                 
  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                 
  SENATOR   ADAMS   asked  to   hear   the  position   of  the                 
  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                 
  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                 
  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                 
  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                 
  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  [1]  limits  a  qualified                 
       employee's participation  to the first  RIP application                 
       period  for  which they  qualify  (section 3);  and [2]                 
       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                 
  VICE-CHAIR  PHILLIPS asked  Ms.  McConnell  to  address  the                 
  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                 
  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                 
  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                 
  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                 
  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.                           
  The meeting was adjourned at approximately 10:57 A.M.                        

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