Legislature(1999 - 2000)

04/21/1999 08:07 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE                                                                                                        
April 21, 1999                                                                                                                  
8:07 AM                                                                                                                         
SFC-99 SS1 # 102, Side A and Side B                                                                                             
CALL TO ORDER                                                                                                                   
Co-Chair Torgerson convened the meeting at approximately                                                                        
8:07 AM.                                                                                                                        
PRESENT Senator John Torgerson, Senator Al Adams, Senator                                                                       
Dave Donley, Senator Lyda Green, Senator Pete Kelly,                                                                            
Senator Loren Leman, Senator Randy Phillips and Senator                                                                         
Gary Wilken.                                                                                                                    
Also Attending:                                                                                                                 
CATHERINE REARDON, Director, Division of Occupational                                                                           
Licensing, Department of Commerce and Economic Development;                                                                     
DAN EASTON, Director, Facilities Construction, Department                                                                       
of Environmental Conservation; GREG CAPITO, Program                                                                             
Manager, Village Safe Water Section, Division of Facility                                                                       
Construction and Operation, Department of Environmental                                                                         
Conservation; KEVIN BROOKS, Director, Division of                                                                               
Administrative Services, Department of Fish and Game;                                                                           
DWIGHT PERKINS, Deputy Commissioner, Department of Labor;                                                                       
JIM BALDWIN, Assistant Attorney General, Governmental                                                                           
Affairs Section, Department of Law; CURT PARKINS, Deputy                                                                        
Commissioner, Department of Transportation and Public                                                                           
Facilities; DAVID TEAL, Director, Division of Legislative                                                                       
Finance; MARY MCDOWELL, Commercial Fisheries Limited Entry                                                                      
Commission; DON ETHERIDGE, Union Local #71; KIM ROSS,                                                                           
Executive Director, Alaska Air Carriers Association.                                                                            
Attending via Teleconference: From Anchorage: TOM COLLIDGE,                                                                     
Indian Health Service, Alaska Area Native Health Service,                                                                       
and Director, Office of Environmental Health and                                                                                
Engineering; TINA LONG, Coordinator, Rural Alaska                                                                               
Sanitation Coalition, Member, Alaska Native Health Board;                                                                       
SHEILA SELKREGG, Director for Rural Development, US                                                                             
Department of Agriculture; STEVE PARISH (incorrect last                                                                         
name provided by teleconference operator); BUTCH HALLFORD,                                                                      
Vice President, Northern Air Cargo; JOHN STEINER, Assistant                                                                     
Attorney General, Transportation Section, Civil Division,                                                                       
Department of Law From Metlakatla: TIM GILMARTIN, Mayor,                                                                        
City of Metlakatla; From Thorne Bay: GINNEY TIERNEY, City                                                                       
Administrator, City of Thorne Bay and Community Member,                                                                         
Governor's Rural Sanitation Council; From Tanana: PAUL                                                                          
ERHART; From McGrath: BRENT URSEL, Mayor, City of McGrath;                                                                      
From Koyikuk: LORETTA LOLNITZ, Mayor, City of Koyikuk,                                                                          
Member, Governor's Council on Rural Sanitation, and Member,                                                                     
Rural Alaska Sanitation Coalition; From Eagle Village:                                                                          
JOANNE BECK, Second Chief, Eagle Village Council; From                                                                          
Chalkyitsik: JAMES NATHANIEL, Environmental Coordinator for                                                                     
EPA/GAP Program.                                                                                                                
SUMMARY INFORMATION                                                                                                             
SB 146-COM. FISH LICENSE/FISHERMEN'S FUND                                                                                       
The committee heard from the Department of Fish and Game,                                                                       
the Department of Law and the Commercial Fisheries Limited                                                                      
Entry Commission. Two amendments were adopted and the bill                                                                      
was reported from committee.                                                                                                    
SB 147-VILLAGE SAFE WATER ACT                                                                                                   
The committee heard from the Department of Environmental                                                                        
Conservation and took public testimony. The bill was held                                                                       
in committee.                                                                                                                   
SB 148-AIRPORT LANDING FEES                                                                                                     
The committee heard from the Department of Transportation                                                                       
and Public Utilities and took public testimony. The bill                                                                        
was reported from committee.                                                                                                    
CS FOR SENATE BILL NO. 146(FIN)                                                                                                 
"An Act relating to the amount and disposition of the                                                                           
commercial fishing license fee and to the fishermen's                                                                           
fund; and providing for an effective date."                                                                                     
This was the first hearing for this bill.                                                                                       
Co-Chair John Torgerson explained that this bill would                                                                          
increase the commercial fisheries crewmember license fees                                                                       
from $30 for residents to $60 and $90 for nonresidents to                                                                       
$125.  It would also change the percent of money that was                                                                       
deposited into the fisherman's fund from 60 percent to 36                                                                       
percent and require that all funds be deposited into the                                                                        
fish and game fund.                                                                                                             
Co-Chair John Torgerson spoke to his proposed Amendment #1.                                                                     
This would clarify that the legislation would apply only to                                                                     
crewmember licenses rather than all commercial fishing                                                                          
Senator Al Adams moved to adopt Amendment #1. It was                                                                            
adopted without objection.                                                                                                      
KEVIN BROOKS, Director, Division of Administrative                                                                              
Services, Department of Fish and Game testified.  The                                                                           
department worked with the co-chair on this bill and                                                                            
appreciated the efforts to assist with the budget                                                                               
There were a couple items on the bill he wished to work                                                                         
with staff to fix. Co-Chair John Torgerson informed him the                                                                     
bill would be reported out of committee this meeting.                                                                           
Kevin Brooks voiced the department's concerns shared with                                                                       
the Department of Labor, who administered the fisherman's                                                                       
fund. They did not want to jeopardize the dedication of the                                                                     
fund. He realized it was stated in the language of the                                                                          
bill. The Department of Law warned that the change in the                                                                       
percentage allocation would need to be addressed to ensure                                                                      
the fund was not compromised.                                                                                                   
Co-Chair John Torgerson had the same conversation with the                                                                      
Department of Law and had done research himself and he did                                                                      
not believe there was a problem with the dedicated funds.                                                                       
He had researched the minutes of the Constitutional                                                                             
Convention, which stated that a change in the rate was not                                                                      
supposed to change the properties that set it up as a                                                                           
dedicated fund. He was aware there were attorney general                                                                        
opinions that found in favor of both sides of the issue.                                                                        
The most recent opinion stated that the change in rate did                                                                      
not affect the constitutional dedication.                                                                                       
Kevin Brooks then brought up the second concern. The                                                                            
department wished to maintain the cost differential between                                                                     
the two licenses. Currently, it was sixty-dollar                                                                                
Co-Chair John Torgerson informed the committee that there                                                                       
was a test that dictated what differential could be charged                                                                     
to nonresidents.  It was his understanding that the fee of                                                                      
$125 did not exceed that and was suggested by the Division                                                                      
of Legislative Finance after they applied the formula.                                                                          
Senator Al Adams noted that this bill would double the fee                                                                      
for Alaskan fishermen but did not do the same for out-of-                                                                       
state crewmembers. He felt if the rates were to be raised                                                                       
for in-state crewmembers, it should be raised for out of                                                                        
state crewmembers at the same rate as well. His reason was                                                                      
because Alaskans paid for state services such as water and                                                                      
sewer facilities while out-of-state crewmembers did not.                                                                        
Co-Chair John Torgerson said that was his original intent.                                                                      
However, after discussions with the Division of Legislative                                                                     
Finance and the Division Legal Services, he learned that                                                                        
even the current differential did not fit the formula. If                                                                       
the bill raised the nonresident fee higher than $125 then                                                                       
they would be in violation of the Interstate Commerce                                                                           
Senator Dave Donley pointed out similar formulas that went                                                                      
as high as a four-to-one ratio on the East Coast had                                                                            
survived challenges in the US Supreme Court. He understood                                                                      
that there was another side to that test regarding the                                                                          
actual cost relationship.                                                                                                       
Co-Chair John Torgerson detailed the formula was the total                                                                      
amount of money spent on commercial fisheries divided by                                                                        
all the residents. That number could not be three times                                                                         
higher that what was charged residents. He stated that was                                                                      
a federal law.                                                                                                                  
Senator Dave Donley argued that it was not a federal law,                                                                       
it was a court interpretation of the US Constitution.  He                                                                       
did not feel it was an absolute rule. He suggested the                                                                          
Division of Legal Services testify to why they advised as                                                                       
they did. He suggested it was one thing to design a law                                                                         
that would never lose and another to design a law to where                                                                      
it should be when there was a gray area.                                                                                        
Senator Dave Donley agreed with Senator Al Adams and noted                                                                      
the other benefits that the out of state crewmembers had                                                                        
besides the cost of running the specific fishery.  The                                                                          
state provided basic infrastructure, roads, etc.                                                                                
Co-Chair John Torgerson read into the record the legal                                                                          
opinion given by the Division of Legal Services based on                                                                        
the Alaska Supreme Court ruling in Carlson vs. the State Of                                                                     
Alaska. "The court had determined that the fees paid by                                                                         
nonresident commercial fishermen may not exceed the total                                                                       
of the fee paid by a resident plus the per capita amount of                                                                     
in state taxes used by the state to support fish management                                                                     
and commercial fisheries. The Carlson case interpreted the                                                                      
privileges and immunity clause of Article 9 Section 2 of                                                                        
the federal constitution. The privileges and immunities                                                                         
clause allows the person to pursue a livelihood in any                                                                          
state without unjust discrimination based on the person's                                                                       
state of residence." "The per capita cost to the state                                                                          
commercial fisheries program is determined by dividing the                                                                      
total amount of state expenditures for commercial fisheries                                                                     
programs by the number of residents of the state." He                                                                           
offered to share the entire opinion with the committee.                                                                         
Senator Dave Donley stated it was his opinion that the                                                                          
Supreme Court decision interpreted the US Constitution. If                                                                      
that was the state court's decision, it was not the final                                                                       
ruling. He believed that ruling was wrong in that it did                                                                        
not consider the other state expenditures that supported                                                                        
the industry. He gave more examples of municipal revenue                                                                        
sharing and other infrastructure costs. He felt there was a                                                                     
legitimate public policy argument. It was a gray area and                                                                       
he admitted he could be wrong.  But he agreed with Senator                                                                      
Al Adams that under a fairness issue, the state had a                                                                           
stronger argument.                                                                                                              
Co-Chair John Torgerson did not disagree.  However, he did                                                                      
not want to have the bill subject to challenge.                                                                                 
Kevin Brooks shared his discussions with the Department of                                                                      
Law. It was explained to him that all commercial fishing                                                                        
licenses were considered not just the crewmembers licenses.                                                                     
The test was applied to the total nonresident licenses.                                                                         
Other licenses had a greater discrepancy and were subject                                                                       
to court challenge.  He guessed that the state would end up                                                                     
reimbursing some crewmembers.                                                                                                   
Senator Al Adams asked what was the maximum amount that                                                                         
could be charged to stay within the court decision. Kevin                                                                       
Brooks answered that the formula was more complex than the                                                                      
co-chair alluded to. He detailed the commercial fisheries                                                                       
census and the use of oil revenue figures. Therefore it was                                                                     
difficult to give an exact figure.                                                                                              
Senator Al Adams noted a conflict of interest due to his                                                                        
holding of a limited entry permit. Senator Loren Leman                                                                          
noted the same. He didn't feel this was the same as the                                                                         
crewmember license provision in this bill. Co-Chair John                                                                        
Torgerson objected to both members' motions to be allowed                                                                       
to abstain from voting.                                                                                                         
Senator Gary Wilken wanted to know if there was an age                                                                          
limit that required an eight-year old to buy a license.                                                                         
Kevin Brooks said there was no age limit. Anyone who fished                                                                     
on a commercial fishing vessel was required to hold a                                                                           
crewmember license. However, many felt it was a form of                                                                         
insurance since the permit covered the cost of medical                                                                          
services through the fisherman's fund.                                                                                          
Senator Gary Wilken asked if they did not purchase the                                                                          
license if they were excluded from use of the medical                                                                           
services and facilities.  Kevin Brooks was not definite,                                                                        
but believed that was true.  Senator Gary Wilken requested                                                                      
that information provided to him in the future.                                                                                 
Kevin Brooks added that when looking at the upper amount                                                                        
that might be charged an unintended result could be that                                                                        
the crewmember license could be higher than the limited                                                                         
entry license itself.  The law stated that a crewmember                                                                         
license was not required for a holder of a limited entry                                                                        
license. Therefore, there was a possibility that some would                                                                     
chose to purchase the lower cost, limited entry license                                                                         
Co-Chair John Torgerson had researched that earlier. He                                                                         
asked if the limited entry license applied to only one                                                                          
person on the vessel. Kevin Brooks said that was correct,                                                                       
as the skipper would usually have the limited entry permit.                                                                     
However, the crew could have license for different                                                                              
fisheries such as for a herring fishery, etc.                                                                                   
MARY MCDOWELL, Commercial Fisheries Limited Entry                                                                               
Commission, testified that limited entry permits ranged in                                                                      
renewal prices from $50 to $150 for residents. Anyone could                                                                     
purchase the lower priced permits, which were for unlimited                                                                     
fisheries. Therefore, there could be some motivation to buy                                                                     
a $50 permit rather than the $60 crewmember license.                                                                            
Co-Chair John Torgerson so the $50 fee was available to                                                                         
anyone regardless of what they were fishing.  Mary McDowell                                                                     
answered that the unlimited fishery permit could be used to                                                                     
crew in any fishery.                                                                                                            
Co-Chair John Torgerson asked if vendors sold both                                                                              
licenses.  Mary McDowell replied they only sold the                                                                             
crewmember licenses.  Co-Chair John Torgerson wanted to                                                                         
know how would someone purchase the less expensive permit.                                                                      
Mary McDowell said that would have to be purchased by mail.                                                                     
Co-Chair John Torgerson than wanted to know if there were                                                                       
any plans to sell the permits by vendors. Mary McDowell                                                                         
answered no. Kevin Brooks noted the reason for raising the                                                                      
issue was because there were no estimates on how many                                                                           
licenses could be affected.                                                                                                     
Kevin Brooks added another concern relating to the                                                                              
dedication of the revenues to the fish and game fund. The                                                                       
Department of Law suggested changing the word in Section 4                                                                      
from "deposit" to "appropriated". He felt that language                                                                         
would be more appropriate. Co-Chair John Torgerson had                                                                          
heard that argument but if the funds would then go to the                                                                       
general fund and it was not his intent to do that. Kevin                                                                        
Brooks said it was his understanding that the funds would                                                                       
be appropriated from the general fund to the fish and game                                                                      
Senator Al Adams suggested making the change on page 2 line                                                                     
24 to read, "shall be appropriated into the general fund to                                                                     
the fish and game fund." which should solve the budget                                                                          
concerns. He understood the relationship to the operating                                                                       
Co-Chair John Torgerson asked it the Legislature                                                                                
appropriated or deposited the current forty-percent that                                                                        
went into the fund. He determined that went into the                                                                            
general fund and was appropriated. Kevin Brooks believed                                                                        
the remaining sixty-percent was deposited.                                                                                      
Co-Chair John Torgerson wanted to know why the department                                                                       
wanted to change this.                                                                                                          
JIM BALDWIN, Assistant Attorney General, Governmental                                                                           
Affairs Section, Department of Law, answered that the part                                                                      
that was dedicated did not have to be appropriated. The                                                                         
part that went to the general fund went there                                                                                   
automatically.  He was unsure if that would change the                                                                          
general funds appropriation level.  It would be similar to                                                                      
oil and hazardous substance surcharge fees. They were not                                                                       
considered general fund receipts, but were anticipated in                                                                       
the front section of the budget that once they were                                                                             
received, they were appropriated. It would take another                                                                         
appropriation at a later date for expenditure.                                                                                  
Co-Chair John Torgerson said he would ask the Legal                                                                             
Services Division and the Division of Legislative Finance                                                                       
for an opinion on this matter.                                                                                                  
Kevin Brooks noted another item was with the fifteen-                                                                           
percent vender surcharge. He did not know if the intent of                                                                      
this legislation was to adjust that amount since it                                                                             
concerned a much higher dollar amount. Co-Chair John                                                                            
Torgerson noted the surcharge was a regulation not a                                                                            
statute.  Kevin Brooks said he would have to check.  Co-                                                                        
Chair John Torgerson suggested lowering the percentage.                                                                         
AT EASE 8:34 AM / 8:37 AM                                                                                                       
Co-Chair John Torgerson noted a call was being made to the                                                                      
Division of Legislative Finance for advice on the                                                                               
appropriation vs. deposit issue.                                                                                                
Jim Baldwin testified. For the record, he stated that he                                                                        
had worked with the co-chair before this meeting. He felt                                                                       
some of the concerns raised by the department were worth                                                                        
There had been some confusion over the years, in the                                                                            
department's opinion, on the dedicated funds issue. In                                                                          
particular, changes in the rate of dedication on the pre-                                                                       
existing dedicated funds-those funds that pre-dated                                                                             
statehood and were continued under Article 9 of the Alaska                                                                      
Most recently, the department dealt with this in connection                                                                     
with tobacco tax. Part of the tax was dedicated. When                                                                           
addressed in this committee during the last Legislature,                                                                        
the Division of Legal Services took the position that there                                                                     
was evidence in the minutes of the constitutional                                                                               
convention to support an interpretation that a rate of                                                                          
dedication could be changed. That was done in this bill                                                                         
with the rise of the fee and the lowering of the rate. The                                                                      
intent was that no more was being dedicated than what was                                                                       
in existing law. Therefore, there was not a change in the                                                                       
rate of dedication. The Department of Law opinion regarding                                                                     
the tobacco settlement at the time was that a change in                                                                         
rate would threaten a continuance of the dedicated funds.                                                                       
They advised installing back-up provisions in the bill to                                                                       
remove incentive to litigate and make it clear where the                                                                        
funds would go in the case of successful litigation.                                                                            
Another approach that had been used successfully in the                                                                         
area of tobacco tax was to send money to another place                                                                          
rather then dedicate. This would really impose an                                                                               
additional fee in a separate area and leave the dedication                                                                      
as is. He suggested doing this for the fish and game fund,                                                                      
which would avoid the issue altogether.  He understood the                                                                      
committee might want to be consistent with the tobacco tax                                                                      
law. However, he warned there may be risks. The department                                                                      
would defend the actions, he assured.                                                                                           
Senator Randy Phillips wanted to know how effectively the                                                                       
Department of Law would defend the Legislature's actions.                                                                       
Co-Chair John Torgerson said the reason he had worked with                                                                      
the Department of Law earlier was to avoid the perception                                                                       
of "smoke and mirrors".  He had considered a surcharge but                                                                      
preferred this method He intended for the fees to offset                                                                        
the cost of commercial fishing in the state. It would be                                                                        
cleaner if the fees went through the fish and game funds                                                                        
and came out again in commercial fisheries expenditures.                                                                        
He referred to page 7 of the legal opinion issued by George                                                                     
Utermohle of the Legal Services Division, which addressed                                                                       
the dedicated rate in the form of gasoline taxes. The                                                                           
Chairman of the Finance Committee of the Constitutional                                                                         
Convention stated the intent did not have any reference to                                                                      
rates. The convention finance committee intended that this                                                                      
applied to the allocation of particular taxes to a                                                                              
particular purpose.                                                                                                             
Senator Dave Donley wanted to know if the Department of Law                                                                     
argued the Carlson case.  Jim Baldwin said it had although                                                                      
he had not handled it personally. Senator Dave Donley                                                                           
wanted a copy of the brief to the Supreme Court.                                                                                
Kevin Brooks made a follow-up comment on the fifteen-                                                                           
percent surcharge. This was governed by statute AS                                                                              
16.05.470(a). He recommended setting the figure at ten                                                                          
Co-Chair John Torgerson had asked for a breakdown of                                                                            
tickets sold by month to determine the best effective date                                                                      
of the bill.  Kevin Brooks had provided that information to                                                                     
staff and detailed that most revenues were generated during                                                                     
January and February.  Therefore, an effective date of                                                                          
January 1, 2000 would capture revenues.                                                                                         
Co-Chair John Torgerson wanted to know why the department                                                                       
recommended against an effective date of June this year.                                                                        
Kevin Brooks responded that because many permits were                                                                           
already issued and the vendors were distributed the current                                                                     
forms and information, there would be hardship in                                                                               
retrieving the permits to replace with the new.  Co-Chair                                                                       
John Torgerson understood the argument and agreed.                                                                              
Senator Loren Leman noted Mary McDowell talked about the                                                                        
possibility of crewmembers choosing to purchase a limited                                                                       
entry license rather than a crewmember license.  There was                                                                      
a benefit of an insurance fund to those who did not have                                                                        
other insurance.  Was that fund also available to those who                                                                     
purchased the limited entry permit? Kevin Brooks said it                                                                        
was. Senator Loren Leman wanted an incentive to keep people                                                                     
from purchasing the permit instead.                                                                                             
At Ease 8:50 AM / 9:00 AM                                                                                                       
Co-Chair John Torgerson said discussions showed that                                                                            
changing the word "deposit" to "appropriated" would not                                                                         
make that much difference.  David Teal, Director, Division                                                                      
of Legislative Finance was present to answer specific                                                                           
Senator Loren Leman moved conceptual Amendment #2. This                                                                         
would apply to AS 16.05.470(a) and change the vendor                                                                            
surcharge from fifteen-percent to ten-percent. It would                                                                         
also change page 2 line 24 to delete "deposited" and insert                                                                     
"appropriated." Without objection, it was adopted.                                                                              
Senator Dave Donley made a motion to move from committee SB
146 (FIN). Co-Chair John Torgerson noted the department                                                                         
would have fiscal notes later in the day that would show an                                                                     
increase in the revenue component to reflect the changes                                                                        
from Amendment #2. There was no objection and the bill                                                                          
moved from committee.                                                                                                           
SENATE BILL NO. 147                                                                                                             
"An Act relating to local contributions under the                                                                               
village safe water program; and providing for an                                                                                
effective date."                                                                                                                
Senator Dave Donley spoke to the bill. This was a Senate                                                                        
Finance Committee bill that applied the same guidelines for                                                                     
the Municipal Matching Grants program to the Village Safe                                                                       
Water program.                                                                                                                  
Co-Chair John Torgerson referred to the text in Section 2                                                                       
that determined the local municipality asking if that was                                                                       
currently in statute. Senator Dave Donley answered that                                                                         
used the same standards as were used in the Municipal                                                                           
Matching Grants program.                                                                                                        
Co-Chair John Torgerson noted the committee did receive a                                                                       
$304,000 fiscal note from the department to implement the                                                                       
legislation. The costs would mainly cover the tests                                                                             
dictated in the bill on how to determine the required local                                                                     
DAN EASTON, Director, Facilities Construction, Department                                                                       
of Environmental Conservation testified in opposition to                                                                        
the bill. He had seven concerns to bring before the                                                                             
He began with saying there was nothing wrong with the idea                                                                      
of local communities contributing to the projects.  That                                                                        
was done currently in that they were asked to contribute                                                                        
based on what they had. This bill would create a "one size                                                                      
fits all," criteria and not all communities would be able                                                                       
to meet the requirement. The department was particularly                                                                        
concerned that some of the communities with more severe                                                                         
health and sanitation problems would be the ones that would                                                                     
have the most trouble meeting the standard match                                                                                
He stated the program would lose federal fund if this bill                                                                      
were implemented.                                                                                                               
Tape: SFC - 99 #102, Side B 9:07 AM                                                                                             
Of the 71 projects waiting to begin on July 1 if the                                                                            
funding was approved. Of those, 44 projects could be                                                                            
considered new projects and would be subject to the match                                                                       
requirement. The communities did not currently have any                                                                         
idea that they would have to meet a match requirement.                                                                          
While the Environmental Protection Agency funding could                                                                         
wait for communities to collect match funding, the US                                                                           
Department of Agriculture funding could not wait. Alaska                                                                        
was in competition with other states for those funds.                                                                           
Senator Dave Donley wondered if the simple fix would be to                                                                      
change the effective date to July 1, 2000.  Dan Easton                                                                          
replied that the department would consider that a vast                                                                          
Senator Randy Phillips asked if the department would still                                                                      
oppose the bill.                                                                                                                
Dan Easton listed the third concern was that the match                                                                          
calculations were complex. He recommended that an engineer                                                                      
reviews and simplifies the calculations.  He said the                                                                           
department oversaw other match programs that were more                                                                          
straightforward. The Municipal Water, Sewer and Solid Waste                                                                     
Matching Grant (AS 46.03.) program in statute was one of                                                                        
those simpler match programs.  This program was for larger                                                                      
Co-Chair John Torgerson asked if the recommendation was to                                                                      
adopt the criteria for that program into this bill. Dan                                                                         
Easton suggested looking at those statutes and regulations                                                                      
as a guide for a simpler way to calculate matching                                                                              
The fourth concern was the proposed thirty-percent cap                                                                          
would actually exceed the match requirement in the                                                                              
Municipal Water, Sewer and Solid Waste Matching Grant                                                                           
program. The smaller communities served by this program                                                                         
could actually be required to provide a larger match than                                                                       
larger communities. Co-Chair John Torgerson assured him the                                                                     
committee would look at the formula.                                                                                            
The fifth concern was that the proposed method for which                                                                        
the match requirements were calculated required an                                                                              
evaluation assessment for first and second class cities.                                                                        
Those assessments were not available from any communities,                                                                      
according to the state assessor, and they would have to be                                                                      
done. It was not a matter of compiling data at hand.  There                                                                     
was more to it than that.                                                                                                       
He continued with the sixth concern. The legislation would                                                                      
increase operating costs for the program. He noted the                                                                          
fiscal note.  The changes would complicate the accounting                                                                       
process. Not only would the department have to track state                                                                      
and federal funds, it would also have to track local funds.                                                                     
The department would also have to place values on the in-                                                                       
kind contributions. He felt it was a good thing that the                                                                        
state allowed such contributions done as part of the local                                                                      
match. However, the worth would have to be determined.                                                                          
Finally, this would require the department to do an audit                                                                       
of every project to track local funds.  This was not                                                                            
normally done.                                                                                                                  
Co-Chair John Torgerson asked how would this effect the                                                                         
next phases of ongoing projects.  Dan Easton interpreted                                                                        
the bill, as those projects under current construction                                                                          
would be exempt. However, that was a broad stipulation. If                                                                      
the original project was to build a road to a dump, what                                                                        
happens to the status of the project when the dump needed                                                                       
to be constructed? Would that be the same project?                                                                              
Co-Chair John Torgerson repeated the question and wanted to                                                                     
know if those projects would proceed with no match. He                                                                          
asked how many current projects there were. Dan Easton                                                                          
answered 140. Co-Chair John Torgerson asked what percent                                                                        
would be as described as road/dump type projects. Dan                                                                           
Easton responded fifty percent.                                                                                                 
Dan Easton gave another example of a project to put water                                                                       
pipe into a certain area of a town. Phase two would put the                                                                     
pipes into another area.                                                                                                        
Co-Chair John Torgerson stated that the committee then                                                                          
needed to better define the on-going projects.                                                                                  
Senator Al Adams referred to the formula on page two and                                                                        
wanted to know if the state assessor was going to testify                                                                       
on the assessment. He noted that many of the affected                                                                           
communities were in his district that had never been                                                                            
assessed. He wanted someone to walk through the process and                                                                     
explain it to the committee.                                                                                                    
Co-Chair John Torgerson stated his intent was to have a                                                                         
simpler formula.  He didn't oppose a match requirement but                                                                      
did not want it to incur further expenses to calculate.                                                                         
He also understood there were some areas of the state that                                                                      
could not afford any match.  The bill would have to apply a                                                                     
grant similar to that for the underground storage tank                                                                          
Senator Loren Leman suggested simplifying the formula to a                                                                      
five-percent match requirement. He supported community                                                                          
investment into projects.  He felt the facilities would be                                                                      
better cared for.  However, he knew there were some that                                                                        
could not afford it and he wanted better flexibility. He                                                                        
talked about in-kind services.                                                                                                  
He spoke to the stated need for audits. He wanted to know                                                                       
where that information came from.  If an audit were not                                                                         
required for every project under state and federal funding,                                                                     
why would it be required for a municipal match? Dan Easton                                                                      
said that was a good point. Internal audits would ensure                                                                        
the matches were made.  He felt it was a policy call.                                                                           
Senator Loren Leman suggested the department engineer could                                                                     
place a value and make a reasonable assumption of in-kind                                                                       
Senator Dave Donley understood this was the same formula                                                                        
used by Department of Community and Regional Affairs for                                                                        
community matching grants.  How difficult could it be?  He                                                                      
did support the co-chair's efforts to simplify.  He felt                                                                        
there were strong incentives in the bill.  He was in favor                                                                      
of volunteer labor and material and donated land, etc.                                                                          
Co-Chair John Torgerson noted that the Department of                                                                            
Community and Regional Affairs did not have a formula for                                                                       
unincorporated communities. That was were the difficulties                                                                      
would arise.                                                                                                                    
Senator Al Adams added that those formulas did not go up to                                                                     
the thirty-percent necessary for this program. Until all                                                                        
communities were assessed, the formula won't work.                                                                              
Senator Loren Leman asked what first class cities were                                                                          
eligible. Dan Easton answered that first class city with a                                                                      
population less than 600. Seldovia was one example. All                                                                         
second class cities were eligible.                                                                                              
GREG CAPITO, Program Manager, Village Safe Water Section,                                                                       
Division of Facility Construction and Operation, Department                                                                     
of Environmental Conservation came to the table to say that                                                                     
Galena and St. Mary were two eligible first class cities.                                                                       
He had a list to hand out to the committee.                                                                                     
Senator Loren Leman felt this matter would be an easy fix.                                                                      
He then referred to page one lines 13 and 14 addressing                                                                         
local contributions required for each draw of monies. He                                                                        
thought that could be cumbersome and suggested that the                                                                         
match be required before the project was completed rather                                                                       
than for each draw.                                                                                                             
Co-Chair John Torgerson requested Dan Easton draft language                                                                     
to incorporate the formula used for the other water and                                                                         
sewer program. He asked if the department would oppose any                                                                      
local contribution requirement or if they wanted the                                                                            
program to work right. Dan Easton felt the current system                                                                       
worked well and a more complicated formula would not                                                                            
Co-Chair John Torgerson requested match information for                                                                         
current projects for comparison.                                                                                                
TOM COLLIDGE, Indian Health Service, Alaska Area Native                                                                         
Health Service, and Director, Office of Environmental                                                                           
Health and Engineering, testified via teleconference from                                                                       
Anchorage. He worked with the Village Safe Water program.                                                                       
He did not think the proposed changes would achieve the                                                                         
goal of the safe water projects for the following reasons.                                                                      
It would eliminate grants for some communities that could                                                                       
not afford the five-percent match. It would be hardest on                                                                       
small communities that the needed the sanitation                                                                                
improvements the most. The short timeframe for                                                                                  
implementation could delay existing and new projects. It                                                                        
would result in a loss of federal funds. It was unlikely to                                                                     
result in new additional federal funds. Likely no new local                                                                     
resources would be generated by this effort. It would                                                                           
increase the administrative hurdles on existing sanitation                                                                      
It was already the practice of the Indian Health Service to                                                                     
require in-kind contributions from communities.  He saw                                                                         
little benefit of spending resources determine the value of                                                                     
in-kind contributions in detail.                                                                                                
He saw no gain for the state at the expense of slowing                                                                          
rural health.  He suggested there could be higher costs in                                                                      
other areas.                                                                                                                    
TINA LONG, Coordinator, Rural Alaska Sanitation Coalition,                                                                      
Member, Alaska Native Health Board testified via                                                                                
teleconference from Anchorage.  Speaking for the two groups                                                                     
and as an individual, she opposed the bill.  She detailed                                                                       
the missions and efforts of the organizations. She felt                                                                         
this would disenfranchise rural communities.                                                                                    
SHEILA SELKREGG, Director for Rural Development, US                                                                             
Department of Agriculture, testified from Anchorage. She                                                                        
spoke to the federal funding available.  She worked to                                                                          
coordinate federal and state funding.  She warned of the                                                                        
risk of the funds being sent to other states. She stressed                                                                      
the contributions already made by the communities.                                                                              
TIM GILMARTIN, Mayor, City of Metlakatla, testified via                                                                         
teleconference from Metlakatla. He spoke of the pending                                                                         
projects in his community and the state of the economy in                                                                       
Southeast Alaska that would prohibit them from coming up                                                                        
with matching funds.                                                                                                            
GINNEY TIERNEY, City Administrator, City of Thorne Bay and                                                                      
Community Member, Governor's Rural Sanitation Council,                                                                          
testified via teleconference from Thorne Bay in opposition                                                                      
to the bill. She would hold the remainder of her comments                                                                       
until the revised version was release and she could review                                                                      
Co-Chair John Torgerson noted there would be a committee                                                                        
substitute for the bill.                                                                                                        
PAUL ERHART testified via teleconference from Tanana.  He                                                                       
spoke of a sewage plant under construction. This bill would                                                                     
delay the project. He spoke about the slow economy in                                                                           
Interior Alaska due to a poor commercial fishing season.                                                                        
BRENT URSEL, Mayor, City of McGrath, testified via                                                                              
teleconference from McGrath in opposition to the bill. The                                                                      
average family in the community paid $100 a month for water                                                                     
service. With cuts proposed to the Power Cost Equalization                                                                      
program and other services, they could not afford any other                                                                     
costs. He pointed out the efforts of the community in                                                                           
providing maintenance and operation of the facilities.                                                                          
LORETTA LOLNITZ, Mayor, City of Koyikuk, Member, Governor's                                                                     
Council on Rural Sanitation, and Member, Rural Alaska                                                                           
Sanitation Coalition, testified via teleconference from                                                                         
Koyikuk. She opposed the bill. She told the committee about                                                                     
the current water facility and the need for improvements                                                                        
She also told about the hazards of honey buckets.                                                                               
[Teleconference interrupted at the request of the co-                                                                           
JOANNE BECK, Second Chief, Eagle Village Council, testified                                                                     
via teleconference from Eagle Village. She opposed the                                                                          
bill. She didn't believe her community could meet the match                                                                     
requirements. She told of the difficulty for residents to                                                                       
earn a living.                                                                                                                  
JAMES NATHANIEL, Environmental Coordinator for EPA/GAP                                                                          
Program, testified via teleconference from Chalkyitsik, in                                                                      
opposition of the bill. He told of problems with current                                                                        
water and sewer systems and the hazards of these.                                                                               
Co-Chair John Torgerson said the bill would be worked on                                                                        
and some of the concerns voiced by the witnesses would be                                                                       
addressed.  He ordered the bill held in committee.                                                                              
SENATE BILL NO. 148                                                                                                             
"An Act imposing landing fees at state owned and                                                                                
operated airports; and providing for an effective                                                                               
CURT PARKINS, Deputy Commissioner, Department of                                                                                
Transportation and Public Facilities testified. The                                                                             
department appreciated the committee's concern with the                                                                         
cost of operating the rural airports.  This would be an                                                                         
additional revenue source that could help close the gap. He                                                                     
advised that other impact should be looked at.                                                                                  
Tape: SFC - 99 #103, Side A  9:54 AM                                                                                            
A past effort to impose landing fees in 1993 failed. The                                                                        
court had ruled that the department inappropriately imposed                                                                     
those fees. This was because policy rather than regulation                                                                      
instituted them. Under this bill, the department would have                                                                     
the ability to impose the fees through regulation and thus                                                                      
meet the court requirement.                                                                                                     
Another effort was made by the Legislature in the increase                                                                      
the aviation fuel tax to an amount that approximated what                                                                       
had been collected in landing fees at the time. The 1994                                                                        
legislation raising that tax stipulated the department                                                                          
could not impose landing fees and the fuel tax could not                                                                        
increase more than what was previously generated with the                                                                       
landing fees.  That provision would expire in January 1,                                                                        
The benefit to the department would be that the fees                                                                            
generated could be used to operate the rural airports.                                                                          
He noted potential weakness in that it did not give the                                                                         
department flexibility to adjust fees over time or to                                                                           
modify for the weight of equipment. There was a potential                                                                       
disadvantage in an inequality occurring with commercial                                                                         
aircraft weighing less than 6000 lbs. He noted smaller                                                                          
aircraft weighing under 6000 lbs. would not be charged the                                                                      
landing fee.  Two carriers servicing a community would be                                                                       
charged differently according to the size of their                                                                              
Another concern was with the ability to monitor the                                                                             
activity reports to ensure compliance.  He recommended                                                                          
additional staff to audit.  He also suggested a penalty fee                                                                     
to impose on violators.                                                                                                         
Senator Randy Phillips wanted to know if the department                                                                         
charged a passenger fee for rural airports.  Curt Parkins                                                                       
replied that there was no passenger fee. The department                                                                         
generated most of its fees through space rental. Some                                                                           
funding came from the US Air Force for the Galena and Cold                                                                      
Bay airports. Other funding came from the Federal Aviation                                                                      
Senator Randy Phillips asked what the department collected                                                                      
versus the cost of operations. The airports generated $2.8                                                                      
million in general funds statewide. He wanted to know how                                                                       
much was then spent on rural airports alone. Curt Parkins                                                                       
estimated the cost of operating rural airports including                                                                        
the cost of leasing projects, at about $20 million. That                                                                        
was about ten-percent. Senator Randy Phillips suggested the                                                                     
department consider a passenger fee. Curt Parkins replied                                                                       
that the department had chosen to pursue passenger charges                                                                      
first at the international airports to access the public                                                                        
Senator Al Adams suggested imposing the landing fee in                                                                          
Anchorage since that was were most of the landings                                                                              
occurred. He knew the legislation applied to state-owned                                                                        
airports. He wanted to know if the legislation considered                                                                       
state-owned and leased airports and municipal-owned                                                                             
airports that were maintained by the state. Curt Parkins                                                                        
said it was his understanding this would apply to airports                                                                      
state-owned and operated.  The airport in Ketchikan was                                                                         
state-owned but was operated by the municipality and had                                                                        
its own fee schedule that was considerably higher than what                                                                     
was proposed here. Airports that were owned and operated by                                                                     
the municipalities, such as Juneau and Kenai would remain                                                                       
the same using their own fee schedules. The legislation                                                                         
would apply to 25 certificated airports that the state                                                                          
owned and operated.                                                                                                             
Senator Al Adams asked if this legislation would impose the                                                                     
fee based on weight rather than on the number of                                                                                
passengers. Curt Parkins affirmed and detailed the fees                                                                         
imposed on the different types of aircraft. A Cessna 206                                                                        
and 207 would not pay any landing fee. A Navaho weighing                                                                        
7000 lbs. would pay $3.50 each time it landed. A DC-6,                                                                          
often used for cargo shipments would pay $50.                                                                                   
Senator Al Adams was concerned how this would affect Prudoe                                                                     
Bay and the impact on the economy. Curt Parkins said the                                                                        
fee would not be based on the number of passengers but on                                                                       
the gross weight of the aircraft. He had done some figures                                                                      
on what the cost per passenger would be and would give that                                                                     
information to the committee it the members were                                                                                
Senator Al Adams then asked about mail, noting that the                                                                         
carriers were subsidized by the US Postal Service.  How                                                                         
would that be affected? Curt Parkins was unsure.  Co-Chair                                                                      
John Torgerson said it was his intention that if the mail                                                                       
was handled by a private carrier they would be charged the                                                                      
Senator Gary Wilken asked what was the take-off weight of a                                                                     
Cessna 206 and a 207. Curt Parkins answered the 206 was                                                                         
3600 lbs. and the 207 was slightly larger.  Senator Gary                                                                        
Wilken then wanted to know why floatplanes were exempted.                                                                       
Curt Parkins understood this was similar to what was                                                                            
proposed in the earlier landing fee in 1991-93. He deferred                                                                     
to Steve Pabish (?) to give more information.                                                                                   
STEVE PARISH (incorrect last name provided by                                                                                   
teleconference operator) testified via teleconference from                                                                      
Anchorage.  He explained that the float plane operation                                                                         
cost the rural airports nothing. This was discovered during                                                                     
the public testimony process of the earlier attempt. There                                                                      
were relatively few floatplanes that exceeded the 6000 lb.                                                                      
Co-Chair John Torgerson asked why the 1992 regulations were                                                                     
not written to include all commercial aircraft rather than                                                                      
just charging by weight. Curt Parkins was unsure but said                                                                       
they did not want to push the airlines into using smaller                                                                       
aircraft to avoid the fees.  He noted it was a potential                                                                        
safety concern.                                                                                                                 
There was discussion between the co-chair and Curt Parkins                                                                      
about the use of the different aircraft.                                                                                        
Senator Loren Leman asked how the Ketchikan airport landing                                                                     
fees compared. Curt Parkins responded it was a different                                                                        
mechanism in that a flat fee was charged up to a certain                                                                        
weight. The fee was $1.62 per thousand pounds. An aircraft                                                                      
weighing over 12,000 lbs. was charged $8.50 per landing.                                                                        
Co-Chair John Torgerson asked if 50-cent charge was                                                                             
reasonable. Curt Parkins said it was and compared it to the                                                                     
Anchorage airport.                                                                                                              
Co-Chair John Torgerson asked about the size of aircraft                                                                        
using the rural airports. The fees charged various aircraft                                                                     
were again discussed.                                                                                                           
Senator Gary Wilken asked if a city-owned airport would be                                                                      
exempt.  Co-Chair John Torgerson said they would along with                                                                     
the City of Ketchikan, which leased from the state.                                                                             
Senator Al Adams compared the tax rates on air carriers to                                                                      
other businesses across the state such as mining and                                                                            
tourism.  Curt Parkins was unable to respond but noted that                                                                     
the aviation industry was crucial to development across the                                                                     
state. He referred to his earlier statement that the impact                                                                     
this would have in other areas should be considered.                                                                            
Senator Al Adams commented that this could impact rural                                                                         
development and asked for the department's position on the                                                                      
bill. Curt Parkins answered that the department supported                                                                       
finding mechanisms to close the funding gap for rural                                                                           
airport maintenance and operation costs. This was one                                                                           
mechanism and there could be other ways to meet the need.                                                                       
He was not in a position to say whether the department                                                                          
fully supported or opposed the legislation and that it                                                                          
could be improved.                                                                                                              
DON ETHERIDGE, Union Local #71, testified in opposition to                                                                      
the bill. This affected members of the union.                                                                                   
KIM ROSS, Executive Director, Alaska Air Carriers                                                                               
Association testified in opposition to the bill. She told                                                                       
about her organization. The association wanted the                                                                              
Legislature to cut the budget. However, caution and common                                                                      
sense must prevail, she stressed. Any tax policy decision                                                                       
should be based on accurate facts and sound analysis. She                                                                       
gave a history of the prior attempt to impose a landing                                                                         
fee. She then told of other carrier's attempt to comply                                                                         
with FAA criteria. She gave an analogy of a carrier                                                                             
operated by "Charlie". To avoid paying landing fees,                                                                            
"Charlie" would choose to fly a smaller, less safe aircraft                                                                     
to transport a high school basketball team. Landing fees                                                                        
were discriminatory and created an additional                                                                                   
administrative burden.                                                                                                          
Senator Gary Wilken wanted clarification of "Charlie's"                                                                         
problem. Kim Ross had a breakdown of the amounts the                                                                            
different aircraft would pay. Senator Gary Wilken wanted to                                                                     
understand why "Charlie" would send the basketball team on                                                                      
an unsafe aircraft in order to save $3.50. Kim Ross gave                                                                        
totals of daily amounts the aircraft would pay based on the                                                                     
number of flights they would have.                                                                                              
BUTCH HALLFORD, Vice President, Northern Air Cargo,                                                                             
testified via teleconference from Anchorage in opposition                                                                       
to the bill. He felt the administrative cost would cut into                                                                     
the revenue generated. He believed this legislation placed                                                                      
an unfair expectation on rural communities to make up                                                                           
budget shortfalls.                                                                                                              
Co-Chair John Torgerson commented that the financial load                                                                       
was distributed across the state by the many bills                                                                              
sponsored by the committee.                                                                                                     
Senator Loren Leman noted there was an overall net gain to                                                                      
the rural operating budget.                                                                                                     
Butch Hallford said he had not considered that valid                                                                            
because the Village Safe Water projects would be done in a                                                                      
couple years and the airport fees would continue                                                                                
indefinitely. He noted that the burden would fall on nine                                                                       
carriers.  He also pointed out that there would be a need                                                                       
for more administrators to oversee the program.                                                                                 
Co-Chair John Torgerson clarified *.                                                                                            
Senator Randy Phillips asked if the witness advocated an                                                                        
increase in aviation tax in lieu of this bill. Butch                                                                            
Hallford chose the aviation tax.                                                                                                
Senator Pete Kelly pointed out that the money would have                                                                        
gone away under the current structure.  Therefore that tax                                                                      
structure did not work.                                                                                                         
JOHN STEINER, Assistant Attorney General, Transportation                                                                        
Section, Civil Division, Department of Law, representing                                                                        
the airports, testified via teleconference from Anchorage.                                                                      
He noted the department was already allowed to impose                                                                           
landing fees, as they felt appropriate. They had the                                                                            
flexibility to give considerations                                                                                              
CORBY HUNT, Alaska Airlines testified via teleconference                                                                        
from off net out of state. He felt the legislation was                                                                          
discriminatory and should be imposed on all commercial                                                                          
carriers. He also suggested the fees should be accessed on                                                                      
an airport by airport basis.  He noted the last time the                                                                        
landing fees were imposed, they were ruled by the court.                                                                        
Co-Chair John Torgerson said he felt there should be a cost                                                                     
analysis for each airport anyway.                                                                                               
Tape: SFC - 99 #103, Side B  10:42AM                                                                                            
Senator Al Adams recommended the bill be left in committee.                                                                     
Senator Loren Leman thought there was merit to the argument                                                                     
that some commercial carriers would be charged because of                                                                       
their larger aircraft.  He did not have an amendment                                                                            
prepared to address that.                                                                                                       
Co-Chair John Torgerson agreed but did not think the fee                                                                        
was sufficient. He felt that to impose the fee to smaller                                                                       
aircraft would entail more expenses.                                                                                            
Senator Randy Phillips suggested the committee consider an                                                                      
aviation fuel tax over the landing fee.                                                                                         
Co-Chair John Torgerson asked Corby Hunt if Alaska Airlines                                                                     
would prefer the aviation fuel tax over the landing fee.                                                                        
Corby Hunt noted the accounting of the landing fee was done                                                                     
with no oversight.  As far as the aviation fuel tax, he                                                                         
said he would need to confer with his boss.                                                                                     
Senator Lyda Green was reluctant to put the Department of                                                                       
Transportation and Public Facilities into the regulation                                                                        
process because of the difficulties with airport leasing                                                                        
Senator Gary Wilken asked what revenues this fee would                                                                          
generate.  Co-Chair John Torgerson noted the fiscal note                                                                        
had not yet been prepared but the department estimated                                                                          
Senator Gary Wilken offered a motion to move SB 148 from                                                                        
committee.  Senator Al Adams objected. By a vote of 6-1-2,                                                                      
the motion passed.  Senator Al Adams cast the nay vote.                                                                         
Senator Pete Kelly and Senator Sean Parnell were absent.                                                                        
Senator Torgerson adjourned the meeting at 10:50 AM.                                                                            
SFC-99  (23) 4/21/99                                                                                                            

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