Legislature(1997 - 1998)

05/01/1997 09:10 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    SENATE FINANCE COMMITTEE                                   
                           1 May 1997                                          
                            9:10 a.m.                                          
  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.                                                      
  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                 
  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                 
  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.                                       
  Co-chair  Sharp   adjourned  the  meeting  until  9:00  a.m.                 

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