Legislature(1999 - 2000)

02/11/2000 10:11 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE                                                                                                        
February 11, 2000                                                                                                               
10:11 AM                                                                                                                        
SFC-00 # 26, Side A & B                                                                                                         
CALL TO ORDER                                                                                                                   
Co-Chair John Torgerson convened the meeting at                                                                                 
approximately 10:11 AM                                                                                                          
Co-Chair Torgerson, Senator Leman, Senator Phillips,                                                                            
Senator Wilken, Senator Adams, and Senator P. Kelly.                                                                            
Senator Donley attended via teleconference from Anchorage.                                                                      
Also Attending:                                                                                                                 
GUY BELL, Director, Retirement and Benefits, Department of                                                                      
Administration, SENATOR TAYLOR, SENATOR T. KELLY, and MARK                                                                      
Attending via Teleconference:                                                                                                   
From Anchorage: Senator Donley, BOB MANLEY, Attorney,                                                                           
Hughes, Thorsness, Powell, Huddleston & Bauman; and JIM                                                                         
LYNCH, Interim Vice President of Finance, University of                                                                         
Alaska.  From New York: ANN ALLEN, TIAA-CREF.                                                                                   
SUMMARY INFORMATION                                                                                                             
SB  85-CREDITED SERVICE FOR TEMP EMPLOYEES:PERS                                                                                 
The Division of Retirement and Benefits testified.  The                                                                         
amended bill was passed out of committee.                                                                                       
SJR 27-CONST. AM: REVISIONS OF CONSTITUTION                                                                                     
Senator Donley and Mark Regan testified.  The bill was                                                                          
passed out of committee.                                                                                                        
SB 114-IMPERSONATE POLICE/EMERGENCY VEHICLE                                                                                     
Senator Taylor testified.  The bill was passed out of                                                                           
SB 186-COLLEGE TUITION SAVINGS PLAN                                                                                             
Senator T. Kelly, Bob Manley, Jim Lynch and Ann Allen                                                                           
testified.  A Committee Substitute was adopted and amended.                                                                     
The bill was passed out of committee.                                                                                           
CS FOR SENATE BILL NO. 85(L&C)                                                                                                  
"An Act relating to credited service in the public                                                                              
employees' retirement system for temporary                                                                                      
Co-Chair Torgerson opened up the discussion by noting that                                                                      
a motion to adopt Amendment #1 was pending, which would                                                                         
combine Public Employees' Retirement System) PERS and                                                                           
Teachers' Retirement System (TRS) together.  He had                                                                             
requested a pertinent draft fiscal note and referenced the                                                                      
third paragraph from the bottom.  "There will be no                                                                             
measurable impact on employer contributions on the total                                                                        
funding of PERS and TRS.  There is a small impact, a total                                                                      
liability of $700,000."  He noted that this liability is                                                                        
not small in amount and wondered where this money would                                                                         
come from.                                                                                                                      
GUY BELL, Director, Division of Retirement and                                                                                  
Benefits, Department of Administration noted that this                                                                          
legislation affects only 22 individuals of an overall                                                                           
number of 80,000 retired employees statewide.  The                                                                              
Department has not assumed any liability for these                                                                              
individuals because they are eligible for a benefit as the                                                                      
law presently stands.  With this change, this small group                                                                       
of 22 people would be eligible for retirement benefits,                                                                         
adding a liability to the system.  Between PERS and TRS,                                                                        
the total assets are approximately $12 billion.  He added                                                                       
that this $700,000 liability, as a percentage, constitutes                                                                      
five one hundreds of one-percent of an increase in                                                                              
liabilities.  This is a very small increase in liabilities,                                                                     
which will have no affect on employer rates since this can                                                                      
effectively be absorbed in the overall asset/liability mix                                                                      
of the system.  This is why the Department states that                                                                          
there is no related fiscal impact.  The $700,000 is                                                                             
effectively the net present value of those future benefits.                                                                     
It is necessary to preserve an amount to cover the benefits                                                                     
for the expected lifetime of these 22 individuals, hence;                                                                       
the annual cost will be much less than this on a year to                                                                        
year basis.                                                                                                                     
Co-Chair Torgerson asked if this takes into account the                                                                         
amount paid in and accumulated over the years.                                                                                  
Mr. Bell confirmed that these individuals have paid into                                                                        
the system over the years, along with the employers.  The                                                                       
system has also earned interest on this money too, so the                                                                       
funds are effectively available for use.  The proposed                                                                          
amendment to this legislation states that if there is a                                                                         
difference for any one individual, this person is                                                                               
responsible for paying the acturarial cost.  This makes it                                                                      
a net zero fiscal impact for the system.  A person is                                                                           
entitled, once they leave employment, to take out their own                                                                     
contributions.  Once this money is pulled from the system                                                                       
and an employee decides to rejoin the workforce, they must                                                                      
repay the money taken out for an accumulated retirement                                                                         
benefit.  This type of situation does not apply to the                                                                          
present 22 individuals that this legislation affects.                                                                           
Co-Chair Torgerson, hearing no objection Amendment #1 was                                                                       
Senator Wilken made a motion to move SB 85, version 1-                                                                          
LS0373\H from committee with individual recommendations and                                                                     
attached fiscal notes.  Hearing no objection SB 85 was                                                                          
MOVED FROM COMMITTEE with a forthcoming fiscal note from                                                                        
the Administration.                                                                                                             
SENATE JOINT RESOLUTION NO. 27                                                                                                  
Proposing amendments to the Constitution of the State                                                                           
of Alaska relating to revisions of the state                                                                                    
constitution and providing that a court may not change                                                                          
language of a proposed constitutional amendment or                                                                              
SENATOR DONLEY, as sponsor to this legislation testified by                                                                     
teleconference from Anchorage.  He noted that SJR 27 would                                                                      
amend the Alaska State Constitution to make it possible for                                                                     
the Legislature to place constitutional revisions, as well                                                                      
as amendments before Alaskans for a vote.  He added that                                                                        
this legislation would also add a new section to the                                                                            
constitution prohibiting a court from changing the wording                                                                      
of constitutional amendments or revisions proposed by the                                                                       
legislature or by a constitutional convention.                                                                                  
Senator Donley noted that SJR 27 has become necessary                                                                           
because of the Alaska's Supreme Court decision in Best vs.                                                                      
Ulmer.  He offered that in this case, the right of Alaskans                                                                     
to amend the constitution was severely weakened.  He stated                                                                     
that in the Best case, the members of the court, for the                                                                        
first time in our history, removed a legislatively                                                                              
sponsored constitutional amendment from the ballot, which                                                                       
was the prisoner's rights limitation amendment.  Senator                                                                        
Donley noted that the court also modified the language of                                                                       
another proposed amendment, which was the definition of                                                                         
marriage amendment.  He remarked that this decision badly                                                                       
unbalances the constitutional separation of powers in                                                                           
Alaska and destroys a fundamental element of the success of                                                                     
America's democracy, which is the right of the people to                                                                        
amend their own constitution.  Senator Donley specified                                                                         
that this precedence sets up the Supreme Court as a                                                                             
gatekeeper or oligarchy of lawyers that can dictate to the                                                                      
public what constitutional issues they can and cannot vote                                                                      
Senator Donley continued that the Best decision, for the                                                                        
very first time, created a distinction between amendments                                                                       
and revisions to the state constitution.  He noted that                                                                         
there are two ways to amend the state constitution, as                                                                          
outlined in a handout to the Committee.  He offered that                                                                        
the first is by a proposed amendment to the people of                                                                           
Alaska by the legislature through a two-thirds vote, and                                                                        
the second is by a constitutional convention.                                                                                   
Senator Donley pointed out that the word "revision" appears                                                                     
in the section of the constitution that addresses                                                                               
constitutional conventions, "A convention can propose                                                                           
revisions and amendments."  However, this word is not found                                                                     
anywhere else in the constitution.  He also noted that the                                                                      
distinction between revisions and amendments was never made                                                                     
clear during the constitutional convention.  As a result,                                                                       
he surmised the court concentrated on "revision" when                                                                           
considering the Best case.  He told the Committee that the                                                                      
court adopted a vague test called a "hybrid test," based on                                                                     
a California Supreme Court case.  He concurred with the                                                                         
dissent opinion in Best that argued that this standard is                                                                       
confusing and is not a hybrid test at all.  In Senator                                                                          
Donley's opinion, the ruling decision stated that "we know                                                                      
revisions when we see them.  We can't really tell you what                                                                      
they are, but we're going to look at them from a                                                                                
qualitative and a quantitative point of view."                                                                                  
Senator Donley continued that in terms of quantitative,                                                                         
this should be based on how many separate articles of a                                                                         
constitution a proposal may amend or affect.  He stressed                                                                       
that the impact of this is very dramatic.  He added that                                                                        
the ambiguous nature of these definitions, allow the                                                                            
members of the court tremendous latitude as to what                                                                             
constitutional issues Alaskans can and cannot vote on.                                                                          
Senator Donley offered that by usurping the elected                                                                             
legislators constitutionally granted authority to decide an                                                                     
amendment, which is appropriate to place before the people,                                                                     
the court could and now have removed amendments from the                                                                        
ballot.  He remarked that this takes the power away from                                                                        
the people to amend their own constitution.                                                                                     
Senator Donley continued that since statehood Alaskans have                                                                     
been reluctant to call constitutional conventions due to                                                                        
the uncertainty of what would result at such a forum.  He                                                                       
informed that Alaskans have voted 24 times to amend their                                                                       
state constitution.  He cited that several of these                                                                             
amendments, especially the right to privacy and the limited                                                                     
entry amendment arguably do not meet the vague test the                                                                         
court adopted in Best vs. Ulmer.  He noted that as a                                                                            
result, to force Alaskans to call constitutional                                                                                
conventions to make even single subject changes to their                                                                        
constitution is really poor public policy and could result                                                                      
in bad government.  He also pointed out that the Best vs.                                                                       
Ulmer case was really strange in how the court handled it.                                                                      
Attorney Clarkson's analysis to this case is also included                                                                      
in the Committee's packet.                                                                                                      
Senator Donley noted that the court adopted a simultaneous                                                                      
briefing procedure so that issues were not before both                                                                          
parties in order for them to respond accordingly.  He                                                                           
suggested that the Committee review the analysis of the                                                                         
attorney who represented the Legislature in this case.  He                                                                      
pointed out that most of these issues, which the court                                                                          
finally decided, were not briefed, considered in the lower                                                                      
court and were not on the points of appeal.  He noted that                                                                      
the court did not have the benefit of appropriate briefing                                                                      
or information to make the decision it finally did,                                                                             
according to the analysis of Senator Donley.  He added that                                                                     
the California case, which the court heavily relied upon,                                                                       
is very distinguishable from the situation before the court                                                                     
in Alaska.  He reported that in California, this state is                                                                       
allowed to conduct constitutional amendments by initiative.                                                                     
He noted that this was an initiative to change the                                                                              
California constitution that affected many sections of the                                                                      
same and it was very extensive.  Senator Donley added that                                                                      
this specific proposition 115 was in the Committee's                                                                            
packet.  As a comparison, he pointed out that this                                                                              
proposition, which was removed from the ballot was very                                                                         
extensive.  He pointed out that this could arguably be an                                                                       
example of a revision, whereas the Alaska amendment is very                                                                     
simple and deals with a single subject.  He stressed that                                                                       
for the Alaska court to rely on this California case was                                                                        
really mistaken and causes a serious concern.                                                                                   
Senator Donley summed up for the Committee that this                                                                            
situation creates great constitutional uncertainty, the                                                                         
separation of powers has been dramatically altered.  He                                                                         
affirmed that every amendment that the public wishes were                                                                       
subject to incredible uncertainty and could be subject to                                                                       
the political whims of the five members of the State                                                                            
Supreme Court.  He added that the resolution would simply                                                                       
clarify that the legislature also has the ability to place                                                                      
revisions "so that the court could no longer use that as a                                                                      
hook to exclude specific proposals."  He pointed that it                                                                        
would also clarify that the court should no longer modify                                                                       
the language of propositions issued by the legislature to                                                                       
the people, before the latter is allowed to vote on them.                                                                       
He concluded that the constitution clearly gives the power                                                                      
of amendment to the legislature.                                                                                                
Senator Adams stated that he opposed this joint resolution.                                                                     
This legislation tries to change the process by which                                                                           
revisions to the constitution are instituted.  He added                                                                         
that he did not think that the system was broken to date,                                                                       
in order to do something like this.  He noted that the                                                                          
framers of the Alaska Constitution allowed for                                                                                  
constitutional conventions every ten years or the issuance                                                                      
of amendments.  He offered that the system might not be                                                                         
perfect but it works for Alaskans.  He referred to section                                                                      
two of this resolution, page two, line one, which bars the                                                                      
court from altering the language of a propose                                                                                   
constitutional amendment.  He wondered how many times that                                                                      
the Supreme Court makes language changes to constitutional                                                                      
amendments.  He stated that he knew of only one other,                                                                          
which was the same sex marriage issue.  In regards to                                                                           
section two, he stated, "what we might be doing is throwing                                                                     
out the baby with the water."  He referred to AS01.00.30                                                                        
regarding severibility, which allows that if the court                                                                          
finds one part of a bill invalid, it does make the rest of                                                                      
the bill invalid.  He believed that the courts should be                                                                        
allowed to correct mistakes by the legislature.  He also                                                                        
noted the retroactive clause of this legislation, to                                                                            
January 3, 1959, on page two, line six and noted that we've                                                                     
got to ask ourselves, "what does it mean, what measures                                                                         
that we have taken up since then that we would have to look                                                                     
at.  I would like the sponsor to name some of those.  He                                                                        
hasn't named one of that, and that's Best vs. Ulmer, and                                                                        
that has to do with the Alaska marriage amendment that we                                                                       
worked on.  But we need to know, what are these, I think                                                                        
that this proposed amendment is so broad that it would                                                                          
constitute a revision and therefore not be allowed on the                                                                       
Senator Donley responded that the retroactive clause is to                                                                      
preserve the status quo of the state's constitution.  He                                                                        
added that it would protect the existing limited entry                                                                          
amendment that was approved by the people.  He stated that                                                                      
it would protect the peoples right to privacy, which was                                                                        
originally approved by the people.  He noted that it would                                                                      
protect the creation of the Judicial Counsel to review the                                                                      
performance of judges; it would protect the Commission on                                                                       
Judicial Conduct, which was created by the people to                                                                            
enforce proper conduct among Alaska's judges.  Senator                                                                          
Donley continued that it would also protect the other 18 to                                                                     
20 amendments to our state constitution that the people                                                                         
have approved since statehood.  He noted that these might                                                                       
no longer be defensible due to Best vs. Ulmer, not to                                                                           
mention the related hybrid test.  He then outlined specific                                                                     
amendments to the constitution that could be affected.                                                                          
Senator Leman responded to Senator Adams question regarding                                                                     
how often the court modifies the language in constitutional                                                                     
amendments.  He recollected that this had happened only one                                                                     
time, but he thought this was one time too many.  He felt                                                                       
as though this was the high-water mark of arrogance by the                                                                      
court in deciding what is necessary and what is not                                                                             
necessary in a constitutional amendment.  He felt as though                                                                     
they need to draw the line and added that he thought this                                                                       
language in section two was absolutely necessary.                                                                               
Senator Adams disagreed with this and noted that the court                                                                      
tries to interpret the legislature's intent as it is                                                                            
codified in statute or regulation.  He noted the "one time"                                                                     
change to an amendment as previously referred to, which                                                                         
dealt with same sex marriage, and noted that Senator Leman                                                                      
was too close to this issue perhaps.  He felt as though                                                                         
this resolution was so broad, it would not hold muster                                                                          
because of the number of issues as stated previously by the                                                                     
sponsor of the bill.                                                                                                            
Co-Chair Torgerson agreed with leaving the referred                                                                             
language as it stands.  He added that the Supreme Court's                                                                       
duty in regards to the constitutional amendment is to                                                                           
either rule on constitutionality or strike it down, because                                                                     
it is not, or let it stand as written.  He stressed that                                                                        
the court should not take the liberty of changing language                                                                      
to meet what they think is the test of constitutionality.                                                                       
He felt as though this was a separation of power issue.                                                                         
Senator Donley responded to the point made about the                                                                            
general severability clause, which presently exists in                                                                          
statute.  He felt as though this clause was typically                                                                           
appropriate for legislation.  "We can always buy specific                                                                       
provision legislation exempt it from that severibility                                                                          
clause."  But, he added that it is not appropriate when the                                                                     
legislature places something before the people for a vote                                                                       
on a constitutional amendment.  He noted that this is a                                                                         
very different question regarding legislation, which can                                                                        
simply be remodified by legislative act and a                                                                                   
constitutional amendment, which requires a vote of the                                                                          
people for ratification.  He stated that he did not believe                                                                     
that the severability clause was appropriate in regards to                                                                      
constitutional amendments.  He noted that the court would                                                                       
also retain its fundamental authority to put something on                                                                       
the ballot based on whether it conflicts with our federal                                                                       
Senator Adams stated that he had not heard from any of his                                                                      
constituents that this change was necessary.                                                                                    
MARK REGAN testified on behalf of himself, although he is                                                                       
the Supervising Attorney, for Alaska Legal Services.  He                                                                        
testified in favor of SJR 27 for different reasons.  He                                                                         
stated that the problem, which the Best vs. Ulmer decision                                                                      
created is not so much the wrong idea completely, but                                                                           
rather the constitutional test that the Alaska Supreme                                                                          
Court is supposed to apply as a result, which does not make                                                                     
any sense.  He noted that the Alaska Supreme Court set up a                                                                     
test that is impossible to predict how a case will result                                                                       
and puts proponents of constitutional amendments in a                                                                           
terrible position.   He pointed out that the distinction                                                                        
between an amendment and revisions is something, which the                                                                      
constitutional convention discussed.  It is an issue that                                                                       
potentially has some value.  He commented that the                                                                              
California cases illustrate this.  Mr. Regan remarked that                                                                      
one of these centered on a comprehensive rewrite of their                                                                       
constitution.  He added that there was no deliberation                                                                          
about this in a constitutional convention, but rather it                                                                        
was a separate document they wished to add in.  He remarked                                                                     
that there was some value in "saying well you should go                                                                         
through a revision process rather than an amendment."  He                                                                       
added that the other California case had to do with a                                                                           
prisoner's right restriction and here there was fundamental                                                                     
reallocation of powers from the judicial branch to the                                                                          
federal judiciary to decide an individual's rights.  He                                                                         
remarked that what the Alaska Supreme Court did in Best vs.                                                                     
Ulmer was to make it impossible to predict how these kinds                                                                      
of cases should be decided and made it impossible for                                                                           
legislators to conduct business during a constitutional                                                                         
convention.  He referred to the hybrid test, which means                                                                        
that if there are a whole lot of words without much                                                                             
substance to their meaning, and then there are few words                                                                        
that might affect something important, it is impossible to                                                                      
tell what should stand.                                                                                                         
Mr. Regan stated that eliminating the distinction between                                                                       
amendments and revisions, while giving the legislature the                                                                      
power to propose [indiscernible.]  He affirmed that this                                                                        
gets rid of what could be a valuable distinction.  He added                                                                     
that he did not see how the Alaska Supreme Court could back                                                                     
out of the position it has taken and make this                                                                                  
comprehensible for the legislature.  He stated that for                                                                         
this reason, eliminating the distinction and the                                                                                
uncertainty involved is better than trying to preserve it,                                                                      
while hoping for test cases.  He remarked that one of the                                                                       
areas, of which this might come up, if this distinction is                                                                      
preserved, is that of a subsistence constitutional                                                                              
amendment.  Mr. Regan commented that it is certainly                                                                            
possible to argue that such an amendment could fail this                                                                        
hybrid test, prompted by a decision by the Alaska Supreme                                                                       
Court, unable to be enacted by the legislature and needed                                                                       
to be considered in a constitutional convention.  He stated                                                                     
that he did not know if this was right or not, but a                                                                            
distinction argument does not have much to do with the                                                                          
merits of the issue.                                                                                                            
Mr. Regan noted that what the Alaska Supreme Court did in                                                                       
Best vs. Ulmer, by taking the second section out of the                                                                         
same sex marriage amendment, is that it did not make sense.                                                                     
They took this authority upon themselves.  He felt as                                                                           
though the power of a constitutional amendment should be                                                                        
sufficient enough that the courts should not be able to                                                                         
then craft their own version.  He asked the committee to                                                                        
consider an issue he had with the retroactive clause.  He                                                                       
cautioned that the danger of this is that an amendment                                                                          
could potentially be considered by the Supreme Court before                                                                     
making it on the ballot.  He stated that if the Alaska                                                                          
Supreme Court sees a retroactive clause all the way back to                                                                     
statehood it may well think "this looks more like a                                                                             
revision under the hybrid test than it does a                                                                                   
constitutional amendment to us, it has to be done by a                                                                          
revision so we're going to knock that off the ballot.  Now,                                                                     
aside from giving you all a good reason to be sitting                                                                           
around here in 2001, debating the same issue, that seems                                                                        
pointless to me.  And I would suggest that if there is one                                                                      
point where this was a problem, then a retroactive clause                                                                       
is not necessary."                                                                                                              
Senator Adams stated that the Committee did not want to fix                                                                     
this, and if the Committee left it as it, including the                                                                         
retroactive clause the court might find it                                                                                      
unconstitutional.  He noted that he liked the bill as it                                                                        
is, but that he did not support it.                                                                                             
Senator Donley noted that retroactive clause was suggested                                                                      
by former Attorney General Cole.  He added that this clause                                                                     
would only be a problem if the court goes back and                                                                              
reconsiders some existing constitutional amendments, he                                                                         
Senator Leman made a motion to move the Finance version of                                                                      
SJR 27, version 1-LS0087\K from the Committee with                                                                              
individual recommendations and attached $1,500 fiscal note                                                                      
from the Alaska Court System.                                                                                                   
Senator Adams objected.  A roll call was taken on the                                                                           
IN FAVOR: Senator Wilken, Senator P. Kelly, Senator                                                                             
Phillips, Senator Leman, Co-Chair Torgerson.                                                                                    
OPPOSED:  Senator Adams.                                                                                                        
The MOTION PASSED: (5-1)                                                                                                        
Co-Chair Torgerson stated that SJR 27 was MOVED FROM                                                                            
CS FOR SENATE BILL NO. 114(JUD)                                                                                                 
"An Act relating to public officials and to                                                                                     
impersonating a public servant."                                                                                                
SENATOR TAYLOR testified as sponsor to this legislation.                                                                        
The Juneau Police Department came to him a year ago about a                                                                     
person driving around town, on the verge of impersonating                                                                       
an officer.  He noted that there is nothing in law that                                                                         
provides for punishment of impersonating a police officer.                                                                      
As his office researched this situation it was determined                                                                       
that historically there had been other such complaints                                                                          
about the misuse by people in the public sector of state                                                                        
trooper positions and the like, such as mayors or other                                                                         
public servants.                                                                                                                
Senator Phillips asked about car hobbyists and enthusiasts                                                                      
that have legitimate interest in restoring a police car or                                                                      
a fire truck for historical purposes.                                                                                           
Senator Taylor stated that he did not think this would be a                                                                     
problem, but would be happy to rework the language of this                                                                      
legislation to include these exceptions.                                                                                        
Senator Adams voiced his concern about not hindering                                                                            
volunteers responding to an emergency.                                                                                          
Senator Leman noted that he was trying to figure out the                                                                        
intent of restricting public servants.  He asked who                                                                            
qualified as a public servant and wanted to make sure that                                                                      
this legislation did not restrict an individual within the                                                                      
political process.                                                                                                              
Senator Taylor used the specific example of campaign                                                                            
literature with a picture of a state trooper in their                                                                           
official capacity.  He offered that this gives the                                                                              
implication that the State Troopers themselves are either                                                                       
supporting or opposing a candidate.  He added that these                                                                        
are not normally put out by the state troopers, but rather                                                                      
by an affiliate organization.  He noted that this was                                                                           
inappropriate use of this public office and badge.                                                                              
Senator Leman continued to note that partisan political                                                                         
purpose means more than what he would initially interpret                                                                       
this to mean.  He noted that partisan would be related to                                                                       
political parties, but there are elections in this state                                                                        
that are non-partisan with contested elections.  He asked                                                                       
if this legislation applied to elections such as these.                                                                         
Senator Taylor responded affirmatively.                                                                                         
Senator Wilken made a motion to move SB 114, (Judiciary)                                                                        
version 1-LS0690\M with individual recommendations along                                                                        
with an indeterminate fiscal note.                                                                                              
Co-Chair Torgerson hearing no objection MOVED FROM                                                                              
COMMITTEE SB 114.                                                                                                               
CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 186(HES)                                                                          
"An Act relating to a University of Alaska post-                                                                                
secondary education savings program, to the Alaska                                                                              
Higher Education Savings Trust, and to the Alaska                                                                               
advance college tuition savings fund; and providing                                                                             
for an effective date."                                                                                                         
SENATOR T. KELLY as prime sponsor came forward to testify                                                                       
on SB 186.  He stated that because of recent tax                                                                                
legislation passed by Congress, which was a new IRS rule                                                                        
designed to encourage individual savings for higher                                                                             
education, over 40 states have enacted or are in the                                                                            
process of establishing tax deferred savings programs.  He                                                                      
added that this legislation continues a long Alaska                                                                             
tradition of supporting higher education by making timely                                                                       
improvements to its current advanced college tuition                                                                            
payment program and establishing a second tool called the                                                                       
Alaska Education Savings Trust.  He explained that the                                                                          
program would continue to be administered by the University                                                                     
of Alaska and would require no new general fund                                                                                 
expenditures.  He pointed out that there was a proposed                                                                         
Committee Substitute before the Finance Committee of which                                                                      
he recommended the adoption.  He noted a small technical                                                                        
change to the CS that would not allow someone who is in                                                                         
arrears in child support payments to establish a trust                                                                          
until they have paid this debt.                                                                                                 
Co-Chair Torgerson stated that he would not be offering                                                                         
amendment number one, which was suggested by the sponsor                                                                        
since it is included in the CS on page two, line two.  He                                                                       
added that the other clarification on the exemption from                                                                        
child support payments is on page four, line 16.                                                                                
Tape: SFC - 99 #26, Side B, 10:55 am.                                                                                           
ANN ALLEN, TIAA-CREF, [organization's full name not given]                                                                      
testified via teleconference from New York, supported this                                                                      
legislation.  She stated that her organization manages                                                                          
similar programs in nine other states.  She added that her                                                                      
organization's core business is pension plans for higher                                                                        
education and managing tuition savings account plans.                                                                           
BOB MANLEY, Estate Planning and Tax Attorney, with Hughes,                                                                      
Thorsness, Powell, Huddleston & Bauman, LLC testified via                                                                       
teleconference from Anchorage, stated that he has practiced                                                                     
in this related field for 25 years.  He noted that he is                                                                        
part of an informal group of estate and tax attorneys who                                                                       
work pro bono by assisting with technical aspects of                                                                            
legislation.  He pointed out that he was not testifying on                                                                      
behalf of any organization and he voiced his support of                                                                         
this legislation.  He added that it has significant income                                                                      
tax, estate tax and money management advantages to                                                                              
JIM LYNCH, Interim Vice President of Finance, University of                                                                     
Alaska testified via teleconference from Anchorage, stated                                                                      
that he serves on the Executive Board for the college                                                                           
savings programs and he is the principal drafter of the                                                                         
Advances College Tuition Program for the University.  He                                                                        
offered that as part of his role on the Executive Board, he                                                                     
did participate in the drafting of section 529 and he                                                                           
argued the exempt status of the University's program before                                                                     
the national office of the Internal Revenue Service.  He                                                                        
noted that he supports this bill.                                                                                               
Senator Wilken referred to page three, line 24 of version                                                                       
"V" of the committee substitute and suggested that the                                                                          
Committee insert the word "all" before the word                                                                                 
administrative.  He thought that the Committee envisioned                                                                       
this program to be self-supporting.  He pointed out by                                                                          
inserting this word; the Committee clearly defines for the                                                                      
future, that the Committee expects the participants to pay                                                                      
all administrative fees.                                                                                                        
Senator Wilken made a motion to adopt version "V" of SB                                                                         
186.  Hearing no objection, it was so moved.  He then made                                                                      
a motion to move amendment number two as proposed.  Hearing                                                                     
no objection, amendment number two was so moved.                                                                                
Senator Wilken referred to page four, line four, he                                                                             
clarified this section that spoke to the funds on deposit                                                                       
not being considered by the University in regards to                                                                            
eligibility of state funded scholarships.  He pointed out                                                                       
that if this was a needs based scholarship, he thought that                                                                     
they should take into account funds on deposit.  He thought                                                                     
this section was in need of clarification in how this part                                                                      
of the bill relates to needs based scholarships.                                                                                
Mr. Lynch responded that the intent of this section was not                                                                     
to affect need based scholarships.  He added that they                                                                          
could include the language "the state may not limit                                                                             
eligibility for state funded need based scholarships."  He                                                                      
added that right now the state has no funded programs for                                                                       
this type of scholarships.  Co-Chair Torgerson clarified                                                                        
that they should insert "need based" between funding and                                                                        
scholarship on page four, line five.                                                                                            
Senator Wilken made a motion to move amendment number three                                                                     
allowing for on page four, line five, "except for needs-                                                                        
based scholarships" at the beginning of section (e).                                                                            
Hearing no objection it was so moved.                                                                                           
Senator Wilken made a motion to move SB 186, version 1-                                                                         
LS1084\V with individual recommendations and attached                                                                           
fiscal note from the Department of Revenue.                                                                                     
Senator P. Kelly added that the Department of Revenue                                                                           
fiscal note was dropped after the first Committee                                                                               
Substitute was drafted.  He stated that there was no fiscal                                                                     
impact through the Department of Revenue.  He continued                                                                         
that at one time they administrated the college pre-paid                                                                        
tuition program and they no longer do this.                                                                                     
Co-Chair Torgerson, hearing no objection to the motion as                                                                       
stated, SB 186 was MOVED FROM COMMITTEE.  He adjourned the                                                                      
meeting at 11:05 a.m.                                                                                                           
SFC-00 SS1 (1) 02/11/00                                                                                                         

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