Legislature(1997 - 1998)
05/01/1997 09:10 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE 1 May 1997 9:10 a.m. TAPES SFC-97, #135, Side 1 (000 - 590) Side 2 (590 - 137) CALL TO ORDER Senator Bert Sharp, Co-chairman, convened the meeting at approximately 9:10 a.m. PRESENT In addition to Co-chairman Sharp, Senators Phillips, Parnell and Adams were present when the meeting convened. Senators Torgerson, Pearce and Donley arrived shortly thereafter. ALSO ATTENDING: Senator Gary Wilken; James Baldwin, Assistant Attorney General, Governmental Affairs Section, Civil Division, Department of Law; Randy Welker, Legislative Auditor, Division of Legislative Audit; Diane Barrans, Executive Director, Post Secondary Education, Department of Education; Cliff Stone, staff to Representative Alan Austerman; Paul Fuhs, Alaska ARDOR Association; aides to committee members and other legislators. via teleconference: John Binkley, board member, Alaska Railroad Corporation, Fairbanks; Bill Hupperich, associate general counsel, AKRR, Anchorage SUMMARY INFORMATION CS FOR SENATE BILL NO. 42(STA) "An Act relating to the fiscal operations of the Alaska Railroad Corporation; and providing for an effective date." Senator Randy Phillips spoke on behalf of the bill. He noted that work draft (O-LS0182\K, Utermohle, 4/26/97) had previously been adopted for working purposes. He moved amendment #1, page 1, line 2, and without objection it was adopted. He further moved amendment #2, page 2, line 21; page 3, line 12 and without objection it was adopted. James Baldwin, Assistant Attorney General was invited to join the committee. Senator Parnell said there were problems with debt service and said he had asked for an opinion from house counsel for the Alaska Railroad. Mr. Baldwin said he had spoken with AKRR counsel. He explained the debt service and that it could be under operating expenses of the railroad. The railroad felt there was a cost to what was happening. He said subsection (6), page 4 explained the inclusion of the debt service. It was suggested that an amendment be made on page 4, line 10 to insert: "...but only for expenditures to satisfy debt service of the corporation...". Senator Parnell moved this as amendment #3 and without objection it was adopted. John Binkley, Board Member, Alaska Railroad testified before the committee via teleconference from Fairbanks. Co-chair Sharp explained amendments #1, #2 and #3. In response, Mr. Binkley felt the amendments complimented the bill. Senator Phillips said as far as he was concerned matters concerning the bill were now taken care of by the amendments but that Alaska Railroad would always testify against the bill anyway. Mr. Binkley said that debt issue aside, there were structural problems with the bill. The railroad operated as a business entity but was under a constraint to operate efficiently. It would cause problems to have their business year end the same as the fiscal year. That would mean ending in the peak of the season when they are doing 70% of their business. A closeout in December would be better because it would not hinder business operations at that time. It was extremely burdensome to make changes during peak time and the corporation always tried to make decisions based on sound principles. He did note for the committee that up until now there had been dozens of lawsuits against the corporation but the State had never been made a party. Under the bill liability would transfer from the Alaska Railroad to the State and they would have to assume the railroad liability. Because AKRR had it's own board the operation has run more like a private business. It should not become another State entity. Mr. Randy Welker, Legislative Auditor, was invited to join the committee. He said under the Executive Budget Act there should be no concern for AKRR. The proposed budget appropriated everything to AKRR. Senator Phillips posed the liability question. Mr. Welker said he would have to defer to the involved attorneys. Mr. Baldwin commented on general liability. He said it would be a possibility the State would be held liable in any suits. However, he felt it would be up to the Court to consider how separate the corporation is from the State. Bill Hupperich, associate general counsel, AKRR testified before the committee via teleconference from Anchorage. He said he concurred with Mr. Binkley's testimony. He said under this bill the railroad would lose status as an enterprise and no longer be separate from the State. Senator Phillips said the railroad could be handled the same as AHFC and AIDEA. He noted they were doing just fine under the State. Mr. Hupperich explained the different tax exemptions and said the railroad could not issue more than $10 million debt per year if under the State. Senator Phillips moved CSSB 42(FIN) with individual recommendations and accompanying fiscal notes and without objection it was reported out. (The committee took a brief at ease.) SENATE BILL NO. 189 "An Act relating to eligibility for and default, collection, and repayment of student loans; relating to nonrenewal of certain occupational licenses for default on a student loan; and providing for an effective date." Co-chair Sharp called the meeting back to order and introduced SB 189. Senator Gary Wilken, sponsor of the bill was invited to join the committee. He referred briefly to the sectional analysis and sponsor statement. Senator Pearce said Alaska had a successful student loan program but they were very unsuccessful in their collection and management. She said specifically that Post Secondary had not been able to figure out the direct deposit system. Senator Wilken said the Commission was aware of this problem and they were trying to correct it. Diane Barrans, Executive Director, Post Secondary Education was invited to join the committee. She described the Commission's position on SB 189. The current loss of $2.7 million was a significant decrease over last year. Co-chair Sharp indicated that money had been expended for computer update and wanted to know the present status of this. Ms. Barrans said the new computers were brought on line in November and that it was a successful conversion. Co-chair Sharp asked the amount of new loans that entered into default status. Ms. Barrans explained the default system. She said that between FY '95 and FY '96 there was $18 million in default. Senator Pearce asked if a co-signature on the loan would help correct the default situation and how would the Commission consider this suggestion. Ms. Barrans said it would be agreeable to the Commission but noted the average age of borrowers was 28 years of age. Senator Pearce said there was still some problems with the direct deposit system. The debit was being made but the credit was not being entered to the student's account. Ms. Barrans acknowledged this problem but said they were trying to work this out through the Department of Revenue. Senator Pearce noted the problem lay therein and suggested the Commission should be working through private enterprise. Ms. Barrans also felt that the Commission must relay more precisely to borrower's how the system worked. This was a timing issue and not a software problem. Senator Pearce suggested perhaps automatic debit could be set up to meet the proper time frame of the borrower. Senator Phillips moved amendment #1 and asked the Commission's comments regarding full-time students outside paying back half-time loan used in-state. Ms. Barrans indicated that had been an oversight and amendment #1 would correct this. Without objection amendment #1 was adopted. Senator Torgerson asked about doctors and attorneys being left out of the bill. Ms. Barrans said attorneys were not included but doctors were. Senator Torgerson referred to page 4 and page 7 line 7. Ms. Barrans at this point noted a technical amendment should be made on page 14, line 24; the section should correctly read "20". Senator Torgerson moved amendment #3, page 9, line 21 to read all language necessary to include attorneys. He moved to remove the motion pending clarification of amendment #2 and without objection his motion was removed. Senator Phillips advised the committee that amendment #2 as proposed by Ms. Barrans had not been moved. He therefore moved amendment #2, page 14, line 24 and without objection it was adopted. Senator Torgerson then moved his amendment #3, page 9, line 21 and without objection it was adopted. He moved CSSB 189 with individual recommendations and accompanying fiscal notes and without objection it was reported out. HOUSE BILL NO. 35 "An Act extending the termination date of the Alaska regional economic assistance program; and providing for an effective date." Co-chair Sharp introduced HB 35. Cliff Stone, staff to Representative Alan Austerman was invited to join the committee. He explained the sunset date on behalf of the sponsor. Paul Fuhs, Alaska ARDOR Association was invited to join the committee. He referred to the ARDOR annual report. They had expected an LB&A audit. He said this was an outreach program for AIDEA and that $620,000 had been included in the House and Senate budget. Senator Torgerson moved HB 35 with individual recommendations and updated fiscal note of 1 May 1997. Without objection it was reported out. ADJOURNMENT Co-chair Sharp adjourned the meeting until 9:00 a.m. tomorrow.