Legislature(1997 - 1998)

03/18/1998 09:20 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE                                                       
18 March 1998                                                                  
9:20 a.m.                                                                      
SFC-98, #80, Sides A and B                                                     
CALL TO ORDER                                                                  
Senator Bert Sharp, Co-chairman, convened the meeting at                       
approximately 9:20 a.m.                                                        
In addition to Co-chairman Sharp, Senators Phillips, Donley,                   
Torgerson and Adams were present.                                              
Also Attending:  Senator Jerry Ward; Representative Eldon                      
Mulder; Clarke Gruening; Marilyn Wilson, staff to Senator                      
Bert Sharp; Jack Fargnoli, Senior Policy Analyst, Automated                    
Budget Development Project, Office of Management and Budget;                   
Jim Baldwin, Assistant Attorney General, Department of Law;                    
Richard Vitale, staff to Senator Parnell; Tam Cook,                            
Director, Legal Services, Legislative Affairs Agency;                          
Margaret Pugh, Commissioner, Department of Corrections;                        
Margo Knuth, Assistant Attorney General, Department of Law;                    
Glenn Wright, Mayor of Delta Junction; Doris Fales, Delta                      
Junction Coalition; Ray Woodruff, Executive Director, Delta                    
Junction Coalition; Col. Dave Anderson, Post Commander, Fort                   
Greely; J. Frank Prewitt, President and CEO, Allvest, Inc.;                    
Mr. Chilters; Bob LaResche; and aides to committee members                     
and other legislative members.                                                 
via Teleconference:  Pat Poland, Director, Division of                         
Municipal and Regional Assistance, Department of Community                     
and Regional Affairs from Anchorage; Steve Van Sant, State                     
Assessor, Department of Community and Regional Affairs from                    
SUMMARY INFORMATION                                                            
 SENATE BILL NO. 337                                                           
"An Act relating to the mandatory incorporation of                             
certain boroughs in the unorganized borough and to                             
certain third class boroughs; and providing for an                             
effective date."                                                               
Co-chair Sharp convened the committee meeting and reviewed                     
the agenda.  He noted that the evening meeting on SB 337 for                   
the taking of public testimony was scheduled for 6:00 p.m.                     
LIO participation at this hearing was "listen only" and                        
included Anchorage, Delta, Fairbanks, Tok, Kenai and also                      
off-net radio.  However, HB 53 would include public                            
testimony via teleconference.                                                  
Marilyn Wilson, staff to co-chair Sharp was invited to join                    
the committee.  She read a short sponsor statement to SCR 11                   
into the record.  It was noted that as Alaska's senior                         
community grew it was necessary to plan for the long-term                      
care and needs of these citizens.  The cost of providing                       
long-term care is becoming insurmountable to the State and                     
to private citizens.  SCR 11 would create a long-term care                     
task force with a mission to review the findings of the                        
working group established in 1996 and to develop an                            
equitable plan to provide a sound and affordable long-term                     
care option for all Alaska's senior citizens.  It was urged                    
the committee pass SCR 11.                                                     
Senator Torgerson MOVED amendment #1 and WITHOUT OBJECTION                     
it was ADOPTED.                                                                
Senator Adams MOVED amendment #2.  Co-chair Sharp requested                    
that some line numbers be inserted on page three line                          
fifteen and Senator Adams concurred.  (pause on record)                        
Senator Donley OBJECTED for discussion purposes.  Senator                      
Adams said rural elders were being moved into Anchorage and                    
basically the services needed to be coordinated.  He wanted                    
a review of the existing elder care services in rural Alaska                   
to make it compatible with the pioneer home system.  Senator                   
Donley voiced his concern with the setting up of a task                        
force under the Administration because he felt they grasped                    
for something that was not originally intended by the                          
Legislature or statutes.   Senator Parnell voiced his                          
concern along similar lines.  He recommended the deletion of                   
"rural" because the care should be provided all elders                         
throughout the State.                                                          
Senator Phillips MOVED amended amendment #2 to delete after                    
"demands" and insert "."  WITHOUT OBJECTION it was ADOPTED.                    
Senator Donley MOVED amended amendment #2 to delete "rural"                    
and insert "including rural Alaska".  WITHOUT OBJECTION it                     
was ADOPTED.                                                                   
Co-chair Sharp asked the committee if there was any                            
objection to amended amendment #2 and WITHOUT OBJECTION it                     
was ADOPTED.                                                                   
Senator Phillips MOVED amendment #3 and referred to page                       
two, line twenty-one.  Senator Adams requested the amendment                   
be submitted in writing.  Senator Phillips indicated that he                   
would have the drafters come up with the appropriate                           
amendment #3 to be submitted on the Senate Floor.  There                       
being no objection, Senator Phillips MOVED SCR 11(FIN) out                     
of committee and WITHOUT OBJECTION it was REPORTED OUT with                    
included conceptual amendment #3 and accompanying fiscal                       
notes:  LAA/Leg. Council, $20.7; Gov./Exec.Operation, zero;                    
and Department of Commerce and Economic Development, zero.                     
SENATE BILL NO. 76                                                             
"An Act relating to long-term plans of certain state                           
agencies and recommendations regarding elimination of                          
duplication in state agency functions."                                        
CS FOR SENATE BILL NO. 76(STA)                                                 
"An Act relating to results-based government and the                           
state budget; relating to state agency program and                             
financial plans; relating to the withholding or                                
reduction of appropriations to a state agency; and                             
relating to state agency performance and other                                 
Co-chair Sharp invited Senator Parnell to review his sponsor                   
statement for the committee.  Senator Parnell said under                       
this legislation the Legislature would establish policy by                     
issuing mission statements and desired results for each                        
State agency to achieve.  The results would be reported                        
quarterly to the Legislature for continuity and effective                      
oversight.  The bill would enable government to be more                        
responsive to the needs and priorities of Alaskans.                            
Senator Adams referred to page one, lines nine and ten,                        
lines eleven and twelve of CSSB 76(STA).  He said one should                   
take a look at what other States are doing and noted that                      
this type of performance does not work.  He felt this was                      
premature and felt the executive budget accomplished what                      
was trying to be set out in missions and measures.  He                         
further felt it would not work for all agencies.                               
Senator Parnell responded and said they have done far more                     
with the budget discussions and mission statements and found                   
them to be very useful.                                                        
Senator Adams referred to page three, line thirty-one and                      
quoted:  "The copies shall be accompanied by a statement of                    
"Truth in Budgeting prepared under (e) of this section.".                      
He felt the public should be informed of what this meant.                      
He said the Administration should put a fair budget before                     
the public.  The Legislature, who has the appropriation                        
powers, should also be included in "truth and budgeting".                      
Senator Phillips responded to Senator Phillips and explained                   
how public policy is measured.                                                 
Jack Fargnoli, Senior Policy Analyst, Automated Budget                         
Development Project, Office of Management and Budget was                       
invited to join the committee.  He noted the importance of                     
this bill to Ms. McConnell, Director, Office of Management                     
and Budget and Governor Knowles.  He noted much effort spent                   
working on this piece of legislation and also with Senator                     
Parnell.  He said they agreed basically with everything in                     
the bill and the intent of the sponsor.  The only difference                   
was with respect to the timing of it.  Mr. Fargnoli said                       
they wanted to work out a few operational concerns with the                    
bill so there would be no disruption to anyone.  He told the                   
committee that Mr. Jim Baldwin was present to answer any                       
legal questions.                                                               
Senator Adams referring to page five, line fifteen asked who                   
would pay to gather opinions?  Mr. Fargnoli said that                          
information may not be available and it was rather expensive                   
to search for information.  Senator Parnell advised the                        
committee that departments already do customer surveys and                     
there would be no additional costs.                                            
Jim Baldwin, assistant Attorney General, Department of Law                     
was invited to join the committee.  He explained how they                      
would advise the Governor regarding this bill if it were                       
presented.  He noted some issues raised in the last                            
committee of referral.  He concurred with Mr. Fargnoli and                     
said the main question was how this bill was going to be                       
implemented.  Mr. Baldwin described a present litigation                       
with the Legislature regarding proper responses to the                         
Legislature with respect to intent language inserted in the                    
budget. His main concern was the Legislature's intent with                     
respect to SB 76 to include the framework for the results-                     
based government into the budget itself.  He felt this was a                   
legal issued the committee should directly consider and                        
explained that it was exactly what was being raised in the                     
present litigation he had referred to.  What kind of                           
operative effect can intent language have as far as binding                    
agencies to a particular action?  Many jurisdictions                           
implementing the results-based budgeting do not have the                       
kind of provisions in their constitutions that Alaska has.                     
Therefore, the ability of the Legislature is limited to do                     
certain things within budget bills.  He referred                               
specifically to the "Confinement Provision, Article II".  It                   
read:  "Appropriation bills shall be confined to                               
appropriations."  He continued to explain the Governor's                       
counterclaim.  He said he feared the very worthwhile effort                    
of the Legislature to implement results-based budgeting                        
would get bound up in a long running legal dispute.                            
Therefore, goals would not be achieved.                                        
(Tape #80 switched to side B at log 591.)                                      
Mr. Baldwin, in continuing, said money could be moved                          
between allocations, and felt the bill was merely a                            
guideline.  However, he said it was somewhat ambiguous and                     
should be meant to have flexibility as a guideline or                          
allocation, which may be acceptable and not violate some of                    
the provisions he previously alluded to.  But he thought the                   
legislative intent was that the agency shall follow the                        
goals to the maximum extent possible.  Without intending any                   
offense to the committee and its jurisdiction, formulation                     
of a budget is assigned in the Constitution to the Governor.                   
There are certain things, however, the Legislature can do,                     
i.e., specify the time the budget is to be submitted.  They                    
cannot tell the Governor how he is to prepare his budget.                      
In another litigation case in the State, the Court did                         
decide the Legislature could properly specify when certain                     
budget documents were open to the public.  He did not read                     
that case that the Legislature had the power to tell the                       
Governor how to exercise his constitutionally assigned power                   
to form the budget.  He continued to voice his concern that                    
the truth in budgeting provision may go beyond what is                         
necessary pointed that out for the committee.                                  
Senator Parnell noted there were several options open to the                   
Legislature.  He felt they could work with the Governor and                    
the executive branch in what the missions were, what the                       
desired results were and what was trying to be achieved with                   
the dollars spent.  He said it should not be a problem for                     
the Governor to use the law as a guideline for action.  If                     
there was intent language not vetoed by the Governor then                      
that intent language could be used as a guideline.  With                       
reference to truth in budgeting he did not feel they were                      
telling the Governor what to do.                                               
Senator Adams asked for a time line on the settlement of the                   
mentioned litigation.  Mr. Baldwin said they recently                          
entered into a stipulation with the attorneys and the case                     
was ripe for presentation to the Superior Court by early                       
summer.  However, he expected one side or the other would                      
appeal the decision for what it involves.  That decision,                      
appealed to the Supreme Court, could be a year away.                           
Senator Parnell MOVED amendment #1.  Senator Adams OBJECTED                    
for purpose of discussion.                                                     
Richard Vitale, staff to Senator Parnell was invited to join                   
the committee.  He said the amendment would clarify the                        
original intent of the legislation in that the reporting of                    
quarterly reports would only be on the results and the                         
measurements that were done, including the results of that                     
measurement, and not on the lines that followed after that.                    
Senator Adams WITHDREW his objection.  Therefore, WITHOUT                      
OBJECTION, amendment #1 was ADOPTED.                                           
(pause on record)                                                              
Co-chair Sharp asked Senator Parnell to comment on the                         
fiscal note from the Department of Health and Social                           
Services, which proposed to add two individuals to the                         
department.  Senator Parnell said the fiscal notes related                     
to the prior version of the bill and not the one now before                    
the committee.  He asked the Senate Finance Committee to                       
issue a zero fiscal note.  There were no additional duties                     
placed on the agency.                                                          
Co-chair Sharp asked about the fiscal note from OMB and if                     
it should be the only one attached to the bill.  Mr. Vitale,                   
advised the Co-chair that all the fiscal notes should read                     
(at ease - return)                                                             
Mr. Fargnoli was recalled to join the committee.  He                           
explained the fiscal note submitted by OMB and said that the                   
work cannot be done without impact.                                            
Senator Parnell said agencies participate in the budget                        
process each year and it is built into the base of their                       
budget.  Results-based budgeting was being implemented in                      
the committee and it does take time.  He continued to argue                    
the fiscal notes should be zero as stated by Mr. Vitale.                       
The original bill had a long-range planning component to it,                   
which required the agencies to do five years of planning.                      
The present form of the bill indicates that the Legislature                    
will establish the missions and desired results for the                        
agencies and issue them guidelines.  There would be no                         
additional cost doing that at this time, based upon the                        
already ongoing process.  There is cost to doing it and                        
already the work is being done as part of the budget                           
Senator Adams, in referring to section one, that mission                       
statements and desired results should represent the                            
priorities of the majority of Alaska residents, and some way                   
that information needs to be gathered.  He felt that in                        
gathering this information there was a cost involved outside                   
the agencies.                                                                  
Mr. Fargnoli concurred with Senator Adams.  He noted there                     
were external costs needed to implement the missions and                       
measures.  Also the internal costs as related to information                   
system and what kinds of information were to be gathered                       
generally have had to have substantial retellings.  And that                   
is not in any agencies' base at this time.  This is the                        
largest hidden cost in the results-based government.                           
Otherwise one runs the risk of using proxy information.  It                    
cannot be represented to be cost free in anyone's budget.                      
Senator Parnell MOVED that a zero fiscal note be attached to                   
the current bill.  Senator Adams OBJECTED.  A roll call was                    
taken and by a vote of 4 yeas and 1 nay (Adams) the motion                     
Co-chair Sharp said a zero fiscal note would be attached to                    
the bill as passed out of committee.                                           
Senator Parnell MOVED CSSB 76(FIN) with attached zero fiscal                   
notes and individual recommendations.  Senator Adams                           
OBJECTED.  By a roll call vote of 4 yeas and 1 nay (Adams)                     
CSSB 76(FIN) was REPORTED OUT with zero fiscal notes and                       
individual recommendations.                                                    
SENATE BILL NO. 337                                                            
"An Act relating to the mandatory incorporation of                             
certain boroughs in the unorganized borough and to                             
certain third class boroughs; and providing for an                             
effective date."                                                               
Co-chair Sharp recalled SB 337 before the committee.  He                       
noted the section summary in the file provided by Tam Cook                     
from Legislative Legal.                                                        
Senator Adams voiced concern over the propriety of the bill                    
before this committee.  He said it should properly be before                   
Community and Regional Affairs committee with like bill, SB
30.  The debate regarding mandatory boroughs was already                       
before this committee.                                                         
Co-chair Sharp noted the concern of Senator Adams and also                     
that objection was voiced on the Senate Floor.                                 
Tam Cook, Director, Legal Services, Legislative Affairs                        
Agency was invited to join the committee.  She briefly                         
walked the committee through the section summary.  She noted                   
that there have been mandatory borough proposals before the                    
Legislature since the Fourteenth Legislative Session.  She                     
explained that the bill required the incorporation of areas                    
currently in the unorganized borough into third class                          
boroughs, but it would treat the third class borough                           
differently with respect to providing education.  She said                     
as far as she was aware the Legislature had never considered                   
a  bill such as this.  Essentially, the bill required                          
incorporation of third class boroughs along the lines that                     
the local boundary commission has recommended for borough                      
incorporation but would preserve home rule cities and first                    
class cities within the new third class boroughs the power                     
to continue to be independent school districts.  The bill                      
contemplated the creation of a type of third class borough                     
such as Haines.  It would not allow the borough, however, to                   
take over the education responsibility that is now being                       
provided by home rule and first class cities in the                            
unorganized boroughs.  She noted the cities would be part of                   
the borough but would continue to operate the school                           
districts same as presently.  Technical changes were made in                   
this bill to treat these particular types of cities in the                     
new boroughs as though they were not in a borough for the                      
purpose of exercising their own local taxing ability.  The                     
obvious dilemma posed by the bill is the fact that in a                        
third class borough the borough assembly serves as the                         
school board for that type of municipality.  Under this                        
bill, the cities, which would be operating independent                         
school districts, will none the less be part of the borough,                   
and those individuals would presumably be voting for the                       
borough assembly members.  She said there was no proposed                      
solution for that result at this time.  However, this was                      
the most interesting legal and practical problem the bill                      
raised at this time.                                                           
Senator Adams asked that the bill be reviewed section by                       
section.  He said he had further problem with the assembly                     
acting as a school board.                                                      
Ms. Cook said the findings and purpose was self-explanatory.                   
The second section was the heart of the mechanism that would                   
be used to form the new borough.  It placed the duty upon                      
Community and Regional Affairs to prepare incorporation                        
proposals for each of the model boroughs that have already                     
been identified by the local boundary commission.  During                      
this process there is a public hearing requirement.  The                       
proposal would outline the specifics that would apply to                       
each individual borough.  The State Assessor was required to                   
make an estimate of the true and full value of taxable                         
property in each of these boroughs within a fairly short                       
time period, by 1 January 1999.  However, the actual                           
boroughs would be phased in by Community and Regional                          
Affairs, depending on the size of the borough, over a four-                    
year period.  Receiving all the proposals at the same time                     
overwhelms neither the department nor the local boundary                       
commission.    The Constitution requires there be standards                    
for borough incorporation and those standards are actually                     
set out in statute.  If the local boundary commission                          
determines that a particular proposal does meet the                            
standards then the borough is set for incorporation.  They                     
can request changes to a proposal and send it back to                          
Community and Regional Affairs.   Once a proposal is                           
accepted by the local boundary commission then there is an                     
election of initial officers and there are time periods                        
within which the election must be held.  The borough                           
essentially will be incorporated once those initial officers                   
have been elected.                                                             
Senator Adams asked what would happen if no one ran for any                    
of the elected seats, there were no officers and they did                      
not want to be a borough.  Ms. Cook indicated there was no                     
mechanism to address that possibility in the bill.                             
Senator Phillips asked about a write-in possibility.  Ms.                      
Cook reiterated that possibility was not addressed.  She                       
noted that section five contained technical changes to                         
existing law, which included a change to the chapter dealing                   
with education.  She noted the different treatment for home                    
rule and first class cities in the new boroughs and the fact                   
that they would continue to be independent municipal school                    
districts.  The new third class boroughs would also be                         
school districts.  Section six was a technical amendment to                    
define the term "non-area wide".  Section seven was cleanup                    
language.  Section eight referred to property tax and the                      
taxing powers of cities located within boroughs.  She                          
removed the application of this section to third class                         
boroughs organized after a certain date.  Section nine was a                   
new amendment noting the assessment of taxes.                                  
Senator Adams, with reference to section eight, asked if                       
cities within a borough under present law would remain the                     
same if the bill were to pass?  Ms. Cook said only those                       
types of cities within the new boroughs would be affected.                     
It would not change existing situations with respect to                        
boroughs and cities currently in existence.  That was                          
achieved by saying the provisions only applied to third                        
class boroughs incorporated after a certain point in time,                     
i.e. 1 January 1999.  Therefore the present bill did not                       
alter the relationship in Haines between its city and its                      
borough.  She explained that existing law did not allow the                    
formation of any new third class boroughs.  Haines was the                     
only one being preserved with a slightly different                             
relationship as between the cities and the boroughs.                           
Section ten was the sales and use tax provision.  She                          
explained that it had been attempted in this section to keep                   
the home rule and first class cities independent of the                        
borough with respect to their power to collect sales and use                   
Senator Adams referring to home rule and first class cities                    
that collected the levy on sales and use tax, asked if it                      
went directly to them?  Ms. Cook concurred.  In further                        
response to Senator Adams she indicated that under existing                    
law a borough that imposes a tax on an area wide basis was                     
required to use that tax for an area wide service.  One that                   
collects a tax on a non-area wide basis was required to use                    
that tax for a non-area wide service.  Senator Adams further                   
inquired if a third class was area wide if there was only                      
one power and that was education?  Ms. Cook concurred.                         
Co-chair Sharp asked if establishing enclaves of present                       
cities, for school purposes, out of the new borough that                       
would be formed, what powers would that particular borough                     
have that the cities would participate in other than                           
schools?  Was not the only purpose of those boroughs going                     
to be schools?  Ms. Cook responded that essentially that was                   
correct.  Third class boroughs do have the power to                            
establish service areas.  A service area could include a                       
city or a portion or a city.  She explained this was with                      
respect to existing law having to do with third class                          
boroughs.  They had a very limited governmental authority,                     
the most limited of all the municipalities in the State.                       
They can only exercise the power of taxation and the power                     
of education on an area wide basis.  They do, however, have                    
the power to exercise other municipal functions on a service                   
area basis.                                                                    
Ms. Cook continued to section twelve, which made the act                       
conditional upon the passage of SB 36, which is now                            
presently in the House, and would change the formula                           
funding.  If a version of SB 36 did not pass in conjunction                    
with the way this bill was drafted, it would not take                          
effect.  Section thirteen noted an effective date of 1 July                    
Senator Adams asked if the version of SB 36 referred to by                     
Ms. Cook was the same version, which passed the Senate?  Ms.                   
Cook indicated that it was not.  However, she said that the                    
way the present bill was drafted it stated that if any                         
version of SB 36 passed.  She said the committee may want to                   
alter this provision.                                                          
Co-chair Sharp thanked Ms. Cook for her time and assistance                    
to the committee.                                                              
Senator Adams asked if someone was available from the                          
Department of Community and Regional Affairs to testify on                     
the bill.                                                                      
Co-chair Sharp indicated that Pat Poland was present.                          
Pat Poland, Director, Division of Municipal and Regional                       
Assistance, Department of Community and Regional Affairs                       
testified before the committee via teleconference from                         
Anchorage.  He noted that Steve Van Sant, State Assessor was                   
also present via teleconference.                                               
He said the department had many major policy concerns                          
regarding the mechanisms proposed by this legislation.                         
These included equal protection issues, incompatibility with                   
the concept of borough government in Alaska, fiscal impacts                    
on first class and home rule cities in the unorganized                         
borough.  He noted that while the bill may enhance the                         
fundamental right of equal protection in some regards, it                      
would significantly diminish it in other respects.  For                        
example, he noted that the bill stipulated that each home                      
rule and first class city within a third class borough                         
incorporated after 1 January 1999 must operate a city school                   
district.  The same duty or authority was denied to home                       
rule and first class cities in third class boroughs formed                     
prior to 2 January 1999.  It also was denied to all other                      
organized boroughs.  The department is unaware of any                          
rational basis for treating home rule and third class cities                   
in third class boroughs formed after 1 January 1999                            
differently.  Another significant concern regarding equal                      
protection exists with respect to the election and operation                   
of the assemblies of those boroughs created under this                         
legislation that would include home rule and first class                       
cities.  Those assemblies would be comprised of residents of                   
the entire borough, including individuals living in home                       
rule and first class cities within the borough.  Yet, those                    
assemblies would be almost exclusively governing matters                       
with respect to education and taxation.  In a number of                        
instances, home rule and first class cities in the boroughs                    
to be formed under this legislation would comprise of                          
substantial or even majority population of the borough; this                   
circumstance being the result of a grossly inappropriate                       
form of local representation.  As written, the bill leaves                     
in place the provision of AS 29.20.300(b), which stipulates                    
the assembly of a third class borough was also the school                      
board for the borough.  Residents of the borough created                       
under this bill, who live inside home rule or first class                      
cities would seem to be unqualified or at least                                
inappropriate for the borough school board, since they would                   
be residents of a separate school district.  The department                    
further believed that this present bill was incompatible                       
with the traditional concept of borough government in                          
Alaska.  He said the intent of the legislation was to                          
provide for the uniform requirement of local contributions                     
and support of schools in all regions of the State.  The                       
legislation accomplishes that end by abandoning the borough                    
government concept in at least ten prospective boroughs,                       
which would include sixteen separate home rule or first                        
class cities.                                                                  
(Tape #81, Side B switched to Tape #82, Side A.)                               
Mr. Poland continued circumstances appeared to conflict with                   
the intent of Article 10, Section 7 of the Constitution,                       
which provides in relevant part that, "City shall be a part                    
of the borough in which they are located."  He noted that                      
borough governments were intended to provide essential                         
services on a regional basis and to use regional resources;                    
to serve both urban and rural areas.  He said SB 337                           
disregarded these fundamental principles.  The department                      
believed that third-class boroughs were not viable                             
institutions.  He referred to Haines and said they were the                    
only third class borough formed between 1968 - 1985.  Due to                   
inadequacies the Legislature repealed the law allowing the                     
incorporation of third-class boroughs thirteen years ago.                      
Some inadequacies were lack of area-wide planning, platting                    
and land use regulations, inability of third-class boroughs                    
to provide any area-wide service or function other than                        
education and taxation.  Further limitations on the third-                     
class borough have resulted in proliferation of service                        
areas to meet the needs of residents; conflicts within the                     
City of Haines which has effectively been forced to provide                    
certain services with benefit the entire Haines Borough,                       
specifically tourism activities.  Due to these conflicts,                      
both the City of Haines and the Haines Borough are                             
developing a petition to dissolve both local governments and                   
consolidate under home rule borough.  It was felt that if a                    
third-class borough could not function adequately under such                   
small circumstances, then it cannot be expected to function                    
adequately in a region encompassing vast areas with diverse                    
populations.  In referring to first class borough and home                     
rule cities the fiscal impact would be significant.  Certain                   
State and Federal funds would be eliminated.  The obligation                   
to provide education would continue, however, the funding                      
loss by the cities and gained by the new boroughs would be                     
required to be used to provide education services in areas                     
outside the cities only.  Unorganized areas would feel these                   
impacts most strongly.  Some impacts that could be                             
experienced were illustrated as follows:  Wrangell-                            
Petersburg would lose fifty percent of raw fish tax revenues                   
now being received based on fish processing occurring within                   
respective city boundaries.  Based on a five year average                      
Petersburg would lose $385,000 and Wrangell about $35,000.                     
These cities would no longer be eligible for Federal                           
payments under the National Forest Receipts Program or the                     
Federal Payment in Lieu of Taxes Program.  The combined                        
annual loss to these cities would be $700,000 for Petersburg                   
and $500,000 for Wrangell.  He further noted that the                          
Aleutians West Borough would annually lose $1.4 million in                     
fish tax.  Unalaska would lose $1.5 million; Cordova and                       
Valdez would lose their fish tax and also their Federal                        
National Forest Receipts Program; Craig, Klawock and                           
Hydaburg would suffer similar losses.  The creation of                         
boroughs would cause much resentment and animosity.  In                        
wrapping up, Mr. Poland said provisions penalizing the                         
formation of boroughs should be removed.                                       
Co-chair Sharp thanked Mr. Poland for reading his testimony                    
into the record and asked that a written copy be submitted                     
to the committee.  He asked how it could be justified                          
mandatory borough formations stifled economic development                      
when noting that borough formation was mandated back in the                    
'70's, even after public votes of two and three times                          
against it.                                                                    
Senator Phillips referred to a public outcry against paying                    
of local taxes a couple of weeks ago.  The answer was                          
definitely "no" in unorganized areas for education purposes.                   
(It is noted a malfunction in Senator Phillips' microphone.)                   
...at least this way they have local control how and where                     
money was being spent with regards to education.                               
Co-chair Sharp noted that there would be public testimony                      
this evening from 6:00 p.m. - 8:30 p.m.                                        
Senator Adams noted that the State Assessor was present and                    
asked regarding page two, line eighteen wherein the State                      
Assessor shall estimate the full and true value of the                         
property tax.  He said that in the past a mixture of                           
communities had been taken in order to try to get the full                     
and true value.  Specifically, he asked how would the                          
department get the true value of communities down in Lower                     
Steve Van Sant, State Assessor, Department of Community and                    
Regional Affairs testified via teleconference from                             
Anchorage.  He explained the Lower Kuskokwim would be                          
difficult.  The assessment would be more formula generated                     
as opposed to specific property evaluation.                                    
Senator Adams further asked if the formation of third-class                    
boroughs would cause the State of Alaska to lose any money                     
to new boroughs that would be formed; i.e. any pipeline tax?                   
Mr. Van Sant said the possibility certainly existed along                      
the pipeline corridor if more communities decided to levy a                    
property tax.  One recommendation by the department would be                   
that if the third-class boroughs are required to have a four                   
mill equivalency for local contribution for education, that                    
the evaluation of the pipeline corridor be excluded from                       
that full value.  Otherwise, it would force them to levy a                     
property tax, which would take the money out of the State's                    
general fund and put it into a local tax base.                                 
Senator Adams said the way the legislation was presently                       
written it provided for people throughout Alaska more                          
government and more taxes.  He asked if this would stifle                      
economic development; i.e. a mine in his district or Delta                     
Junction, by having to put taxes on the project or its                         
workers?    Mr. Van Sant said he could not answer this                         
Co-chair Sharp set aside this bill in and said it would be                     
taken up again this evening at 6:00 p.m. in order to hear                      
the public testimony scheduled at that time.  He called HB
 HOUSE BILL NO. 53                                                             
"An Act relating to the authority of the Department of                         
Corrections to contract for facilities for the                                 
confinement and care of prisoners, and annulling a                             
regulation of the Department of Corrections that limits                        
the purposes for which an agreement with a private                             
agency may be entered into; authorizing an agreement by                        
which the Department of Corrections may, for the                               
benefit of the state, enter into one lease of, or                              
similar agreement to use, space within a correctional                          
facility that is operated by a private contractor, and                         
setting conditions on the operation of the correctional                        
facility affected by the lease or use agreement; and                           
giving notice of and approving a lease-purchase                                
agreement or similar use-purchase agreement for the                            
design, construction, and operation of a correctional                          
facility, and setting conditions and limitations on the                        
facility's design, construction, and operation."                               
 CS FOR HOUSE BILL NO. 53(RLS)(title am)                                       
"An Act expressing legislative intent without the force                        
of law concerning correctional facility space and the                          
Cleary v. Smith case; adding, as a general power of                            
municipalities, the power to provide for, and enter                            
into agreements concerning the confinement and care of                         
prisoners; relating to authorizing the Department of                           
Corrections to enter into agreements to lease                                  
facilities for the confinement and care of prisoners                           
with the City of Delta Junction and with the                                   
Municipality of Anchorage; and providing for an                                
effective date."                                                               
Representative Elder Mulder was invited to join the                            
committee.  He read his sponsor statement into the record.                     
He said this bill would accomplish three things.  First, in                    
the intent section, it gave the Court express Legislative                      
intent that they would work with the Commissioner of                           
Corrections to relieve overcrowding conditions.  Second, the                   
department would be authorized to contract with the                            
communities of Delta Junction/Ft. Greely re-use authority                      
for the conversion of Ft. Greely to a private prison.                          
Third, the Commissioner of Corrections would be authorized                     
to contract with the Municipality of Anchorage for the                         
replacement of the Sixth Avenue Jail.  Representative Mulder                   
noted several good reasons for this bill, including:  jobs                     
for Alaskans, inmates would be held in Alaska and there were                   
no other reasonable proposals on the table at this time.  He                   
specifically noted that by the end of FY '99, Alaska would                     
have over 850 inmates being held in a private prison in                        
Arizona, costing the State well in excess of $14 - $15                         
million.  That kind of expenditure could be utilized to help                   
fund Alaska payroll to pay for Alaskans.                                       
(Tape malfunction at this point.)                                              
Representative Mulder told the committee that this bill                        
would go along way to ensure the security of the future of                     
Delta Junction and providing for a healthy re-use of the                       
facility and an expansion of the economy in Delta Junction.                    
Margaret Pugh, Commissioner, Department of Corrections was                     
invited to join the committee.  She introduced Margot Knuth,                   
Assistant Attorney General, Department of Law.  Ms. Knuth                      
said that creation of beds would not solve the overcrowding                    
in Alaska.  (Further tape malfunction.)  She noted that the                    
Bethel jail had been grossly overcrowded for years and that                    
in general, overcrowding in Alaska was at an intolerable                       
level.  She drew the committee's attention to several other                    
proposals that could be considered regarding the                               
overcrowding issues, such as expansion of the Palmer                           
facility and ownership of the facility at Delta Junction.                      
She noted that the re-use proposal would be helpful to Delta                   
Junction.  However, with reference to the expansion of the                     
Palmer facility, there would be little to no transportation                    
costs to keep the inmates in-State.  However, all issues                       
must be clarified including the cost effectiveness of the                      
facility in Delta Junction and if services could be provided                   
reasonably elsewhere in the State.  She explained a small                      
technical issue with the title of the bill.  In response to                    
a question from Senator Adams regarding BRAC law she said                      
she could not explain it but would contact Department of                       
Community and Regional Affairs for him.                                        
Senator Donley asked about the title change.  Ms. Knuth said                   
it was necessary because Delta Junction was a second class                     
borough and Fort Greely was outside the city boundary.  With                   
regards to sections two and three of the bill extra                            
territorial powers applied and if not included in the title                    
it would create a technical problem.  Senator Donley said he                   
did not see any existing conflict, however.  Ms. Knuth said                    
that a second-class city did not have the power to house                       
criminals, and therefore without the title change the                          
sections would not be effective.                                               
(Tape #82, Side A switched to Side B at approximately 11:40                    
Senator Donley felt it was inclusive in the title where it                     
was provided in the title where it said "...enter into                         
agreements to lease facilities for the confinement and                         
care...".  This could give notice they were included and was                   
all that was required.  Ms. Knuth further stated that if the                   
title were amended it would probably avoid litigation at                       
some further point.  This was a preventative suggestion.                       
Co-chair Sharp said he could only continue the hearing on                      
this matter until noon and did want to hear from the Delta                     
contingent that had travelled to Juneau to give testimony.                     
Further hearings on this bill could not be before 27 March.                    
In response to Senator Donley, Co-chair Sharp said the bill                    
would not be moved today.  Co-chair Pearce had several                         
questions she wanted to ask and he wanted to give everyone a                   
chance to testify on this bill who wanted to.  After short                     
discussion with Senator Donley regarding rescheduling of                       
this matter, Co-chair Sharp said he would try to work it in                    
earlier, including Saturday or Sunday hearings.  He then                       
invited the Delta contingent to join the committee.                            
Glen Wright, Mayor of Delta Junction testified before the                      
committee.  He said this bill would help the community help                    
itself by bringing about three hundred jobs and allowing a                     
quality of life for the area.                                                  
Doris Fales, Delta Junction Coalition testified before the                     
committee.  She said this bill would help create jobs.  She                    
said the Coalition had worked with the community in order to                   
promote economic growth.                                                       
Ray Woodruff, Executive Director, Delta Junction Coalition                     
testified before the committee.  He told the committee that                    
turning the post into a prison was one of the first and only                   
major proposals received.  Letters were written to                             
approximately 118 Federal and State agencies asking for any                    
interest in Ft. Greely.  No interest or answer was received                    
from them.  The Army also went through the same procedure,                     
receiving no interest.  The community had an interest,                         
however and brought the matter to a vote.  He said the vote                    
on this proposal brought out the most voters in two years.                     
The majority of the community supported the bill.                              
Co. Dave Anderson, Post Commander, Ft. Greely testified                        
before the committee.  He described the BRAC process and                       
realignment program as currently planned for the committee.                    
He noted that the Army had supported the community of Delta                    
Junction and its re-use efforts.  These efforts included the                   
surplusing of approximately 1-1/2 million square feet of                       
facilities on the installation and 18 hundred acres                            
property.  The Army would retain all training areas and                        
ranges for continuing training and testing missions in                         
Alaska as used by the Army and Air Force throughout the                        
year.  The approved realignment plan was to reduce fifty                       
percent of employees in FY 2000 and fifty percent in FY                        
2001.  Re-use of the facility would negate all requirements                    
for demolition of the property currently programmed at                         
approximately $48 million.  He voiced his concern with the                     
process, including taking care of the employees of Ft.                         
Greely during the transition.                                                  
Senator Phillips asked about the city election in mid-                         
January.  Mr. Woodruff said the election was conducted as                      
close to a complete election as possible.  It was an opinion                   
poll and no one was turned away who was a registered voter                     
or had registered to vote.  This was conducted on an area-                     
wide basis rather than just the City.  Senator Phillips                        
asked if it was a special election.  Mr. Woodruff indicated                    
that it was not an official, special election.                                 
Senator Adams asked for an explanation of the BRAC law.  It                    
was his understanding the Governor set up the coalition to                     
finding re-use of the facility.  He also asked for an                          
explanation on the conveyance organization agreement which                     
had to take place and asked where it was in the process with                   
the Governor.                                                                  
Mr. Woodruff said a letter had been provided the Governor                      
requesting the final stages of the process be implemented                      
through the LRA.  It has not been responded to as of yet and                   
the Department of Community and Regional Affairs has been                      
contacted.  He noted for the committee that this was a                         
change in the way the Federal government did business.   It                    
only went into effect last year, and they became aware of it                   
sometime in December last year.                                                
Senator Adams asked that if there is no signature on the                       
conveyance what would happen?  Colonel Anderson said he did                    
not fully understand the question.  Senator Adams further                      
explained that due to costs, what would happen if the                          
Governor did not sign the conveyance.  Colonel Anderson said                   
the local Re-use Authority had been recognized by both the                     
Governor and the Federal government.  Ft. Greely reservation                   
qualifies for rural economic development conveyance with no                    
cost to a community.  He felt this was the main drive since                    
the property could be obtained at no cost by the local Re-                     
use Authority.                                                                 
Senator Torgerson asked if this was for a particular plan.                     
His understanding was that Delta would take ownership of the                   
facility.  Colonel Anderson concurred.  Senator Torgerson                      
voiced further concern that the Governor may not sign the                      
conveyance if he found that prison beds could be supplied                      
cheaper at another location.  Colonel Anderson said if that                    
happened the facility would be open for bid again or                           
In further response to Senator Torgerson's question                            
regarding an agreement, Mr. Wright explained that the only                     
agreement made was between the Re-use Authority and all                        
this.  The City does not enter into any agreement until the                    
bill is passed and the Governor signs it.  The City will                       
work with the Department of Corrections.  Senator Torgerson                    
said it was his understanding there were provisions in the                     
bill that said it should be competitively bid, however, it                     
looked like that had been ignored and an agreement signed                      
anyway.  Mr. Woodruff explained the lease document that was                    
worked out.  This was in order to get started on the lease                     
request.  There was no intention to shortcut any provision                     
of AS 36.30.  He said even by pushing everything hard it                       
would take approximately fourteen months to complete the                       
project.  Therefore, a lease document was signed.  However                     
it would not be valid if the Legislature did not pass the                      
bill, the Governor did not sign it, if the Department of                       
Corrections refused to get a contract with Delta Junction,                     
or if Delta Junction did not get their proper contract the                     
lease would then be invalid.  He said ample exclusionary                       
clauses had been included also.                                                
Co-chair Sharp thanked the Delta contingent and continued                      
the taking of testimony.                                                       
J. Frank Prewitt, President and Chief Executive Officer of                     
Allvest, Inc. was invited to join the committee.  He                           
explained the site photography and site plan for the                           
committee.  He said that the reutilization of Fort Greely                      
was good public policy in terms of returning dollars to the                    
State of Alaska and helping out Delta Junction.  He noted                      
that the Greely proposal was the best in the past eight                        
years.  He said the issue of centralization and                                
regionalization was not an either-or proposition.  Each                        
State needs long-term felon sentence beds that have                            
sufficient economies of scale to accommodate those offenders                   
through the period of their incarceration.  Jail space is                      
also needed.  Therefore, use of the Greely proposal would                      
alleviate overcrowding in a cost-effective fashion.  He felt                   
the argument was a philosophical disagreement between                          
privatization and a government delivery of correctional                        
services.  The private sector has filled in to accommodate                     
the void left by the government's inability to respond                         
quickly enough to overcrowding concerns or by the cost of                      
government delivery of correctional services, which in some                    
states such as Alaska is extreme.  Many alternatives to                        
incarceration have been explored.  As an example he said                       
that during the Hickel administration the Department of                        
Corrections did nothing more than sort through their                           
offender population moving low-risk offenders out into less                    
costly alternative facilities, such as halfway houses and                      
treatment programs.  He felt this was a correct process as                     
these low-risk offenders needed to be moved out of long-                       
term, costly hard beds.  He referred to the Bethel facility                    
and said alternatives were available to the overcrowding at                    
that facility.  Further, he said that they believed the                        
Greely proposal provided relief in a cost-effective fashion                    
and said both the debt service and the operating cost of the                   
facility on a daily bed rate would be under $70/day/inmate                     
as compared to the State's present costs.  Services at                         
Greely were also anticipated to meet the highest standards                     
of the industry, both structurally, operating and hiring and                   
training standards.  The direct impact of the Greely                           
proposal would be relief in the present prison population.                     
There would be no loss of State jobs, an augmentation of                       
correctional services, State-operated facilities to be safer                   
because over-crowding would be relieved, cost containment                      
for the Department of Corrections and economic development                     
for Delta Junction.                                                            
Mr. Chilters, Delta Junction was invited to join the                           
committee.  He referred to an aerial photograph which was                      
passed out to committee members only of the Ft. Greely site.                   
He noted that the facility must meet all ACA, ADA and codes                    
for re-use.  He explained the reutilization of the existing                    
facility included revitalization of the facility's                             
infrastructure, security, access for the handicapped,                          
medical, secured entrances and it's relationship with the                      
Mr. LaResche, Delta Junction was invited to join the                           
committee.   He explained to the committee how the contract                    
would work and how it complied traditionally with states                       
using this method.  He said it was a fairly simple chain of                    
contracts and financing whereby the State would contract                       
with the City of Delta Junction to provide prison beds, the                    
facilities and operations for twenty years.  Then, Delta                       
Junction would contract with the lessee/owner of the                           
facilities to provide the capital facilities themselves.  He                   
said that this lessee/owner policy and procurement process                     
went out with competitive solicitation.  Allvest won the                       
procurement process.  The facility owner who would be                          
leasing the facility to the City renovates the buildings for                   
use as a prison and finances the whole thing with private                      
financing.  At this point, he noted that the State was used                    
to financing and owning things with State money, i.e. the                      
Anchorage facility.  In this case, however, financing and                      
security would be for Allvest.  If Allvest were to default                     
on the bond or the prison to fall or not meet its criteria,                    
the State would not be liable for paying for it.  Delta                        
Junction, again, would contract with someone else to operate                   
the facility.  As stated in the bill, the Department of                        
Corrections may require that Delta Junction use a process                      
similar to the procurement code to pick the private                            
operator.  He believed this process was simple and highly                      
effective and would allow the State to procure complete                        
services for under $70.  For the record, Mr. LaResche noted                    
that the State previously had three years to respond to an                     
RFP in order to own the facility and they showed no interest                   
Co-chair Sharp thanked the testifiers for appearing before                     
the committee.                                                                 
Senator Donley notified the co-chair that he could cancel                      
his 4:30 p.m. meeting on the Aleyeska Central School so the                    
Senate Finance Committee could meet earlier on this matter.                    
He noted the Anchorage Chief of Police and others from out                     
of town were present and wanted to testify.                                    
Co-chair Sharp said it would be a possibility for those who                    
were in town.   However, the committee could not get                           
teleconference participation for those out of town.  Also,                     
the co-chair and Senator Torgerson had a Senate Resources                      
Committee meeting from 3:30 p.m. to 5:00 p.m.                                  
There proceeded discussion amongst committee members as to                     
possible times to continue the hearing to.                                     
(Tape #81, Side B switched to Tape #82, Side A.)                               
Co-chair Sharp said the committee would further consider a                     
possible time for continuation of this matter and he would                     
make an announcement from the Senate Floor.  He appreciated                    
the offers from Senator Donley and also from Senator                           
Phillips who is vice-chair and could run the meeting,                          
however, the committee room and teleconference were not                        
available.  He said advised those on teleconference and                        
present at the meeting he would get word back as soon as                       
possible as to when this bill would be rescheduled for                         
public hearing to include public testimony.                                    
Co-chair Sharp adjourned the committee at approximately                        
12:40 p.m. until tomorrow at 10:00 a.m.                                        
SFC-98 -21- 3/18/98                                                            

Document Name Date/Time Subjects