Legislature(2001 - 2002)

05/01/2002 09:49 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SENATE FINANCE COMMITTEE                                                                                 
                           May 01, 2002                                                                                       
                              9:49 AM                                                                                         
SFC-02 # 83, Side A                                                                                                             
SFC 02 # 83, Side B                                                                                                             
CALL TO ORDER                                                                                                               
Co-Chair Pete  Kelly convened the meeting at approximately  9:49 AM.                                                            
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Dave Donley, Co-Chair                                                                                                   
Senator Jerry Ward, Vice Chair                                                                                                  
Senator Gary Wilken                                                                                                             
Senator Alan Austerman                                                                                                          
Senator Lyman Hoffman                                                                                                           
Senator Donald Olson                                                                                                            
Senator Loren Leman                                                                                                             
Also Attending:   LADDIE SHAW, Special Assistant,  Office of Veteran                                                          
Affairs,   Department  of   Military  and   Veterans  Affairs;   PAT                                                            
CAROTHERS, Chair,  Alaska Veterans Advisory Council;  NEIL SLOTNICK,                                                            
Deputy  Commissioner,  Department  of  Revenue;  JOHN  JENKS,  Chief                                                            
Investment Officer, Treasury  Division, Department of Revenue; LINDA                                                            
SYLVESTER,  Staff  to  Representative  Pete  Kott;  MARY  MARSHBURN,                                                            
Director, Division of Motor  Vehicles, Department of Administration;                                                            
Attending via  Teleconference:  Off-net:  KEN SHERWOOD, Alaska  Mill                                                          
and Feed Company;  DENNIS GREEN, Owner, Green and  Son; ROBERT THOM,                                                            
Budget  Feed and Farm  Store; HERB  SIMON; ROBERT  WELLS,  Director,                                                            
Division  of Agriculture,   Department of  Natural  Resources;  From                                                            
Delta Junction: PETER FELLMAN,  Staff to Representative John Harris;                                                            
PHIL KASPARI  Cooperative Extension  Service, University  of Alaska-                                                            
SUMMARY INFORMATION                                                                                                         
SB 353-AGRICULT. PROG.COORDINATOR/ANIMAL FEED                                                                                   
The Committee  heard testimony  from industry  representatives,  the                                                            
Department  of Natural Resources  and the  University of Alaska.  An                                                            
amendment was adopted and the bill was held in Committee.                                                                       
SB  54-ALASKA VETERANS ADVISORY COUNCIL                                                                                         
The Committee  heard testimony from  the Department of Military  and                                                            
Veterans  Affairs  and the  Alaska Veterans  Advisory  Council.  Two                                                            
amendments were adopted and the bill moved from Committee.                                                                      
SB 267-ALASKA VETERANS' MEM.ENDOWMENT FUND                                                                                      
The Committee  heard from  the Department  of Military and  Veterans                                                            
Affairs  and  the  Department  of  Revenue.  The bill  was  held  in                                                            
HB 344-INCREASE DRIVER'S LICENSE/PERMIT FEES                                                                                    
The  Committee  heard  from  the  sponsor   and  the  Department  of                                                            
Administration. The bill moved from Committee.                                                                                  
SB 311-STATE TRUST FUND MONIES                                                                                                  
This bill was scheduled but not heard.                                                                                          
     CS FOR SENATE BILL NO. 353(RES)                                                                                            
     "An Act relating to the labeling of animal and poultry feeds                                                               
     and to the agriculture program coordinator; and providing for                                                              
     an effective date."                                                                                                        
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Senator  Ward noted  Senator Olson's  intent to  change the  funding                                                            
source for this legislation  from general funds to receipt supported                                                            
services funds.                                                                                                                 
Senator Olson informed  he has spoken to industry representatives to                                                            
get their input on this  bill, as the legislation would impact them.                                                            
KEN  SHERWOOD,   Alaska  Mill  and   Feed  Company,  testified   via                                                            
teleconference  from  off-net  site that  he  does not  oppose  this                                                            
legislation because  the company complies with the  labeling laws of                                                            
the  State   of  Washington.   He  expressed   he  would  like   the                                                            
requirements  to  be  identical  to  federal   regulations.  He  was                                                            
concerned that the language in the bill is "vague".                                                                             
DENNIS GREEN,  Owner, Green  and Son, testified  via teleconference                                                             
from an off-net  site in Delta Junction about the  activities of the                                                            
company. He  stated he would prefer  the legislation not  be enacted                                                            
at this  time, as it would  place a "strain"  on those affected.  He                                                            
understood  a  statute  would   be necessary   at  some  point,  but                                                            
requested a delay.                                                                                                              
ROBERT   THOM,  Budget   Feed   and   Farm  Store,   testified   via                                                            
teleconference  from an off-net site in Palmer that  the company has                                                            
been producing feed in  Alaska for 25 years. He stressed the need to                                                            
regulate  feed  imported  into  the  State.  He  spoke  of  chemical                                                            
additives used to "boost"  the protein content of feed, which Alaska                                                            
manufacturers  are currently unable to produce but  this legislation                                                            
would allow.                                                                                                                    
Senator  Olson  asked for  clarification  of  whether  the  previous                                                            
witness favored or opposed the legislation.                                                                                     
Mr. Thom indicated he supports the legislation.                                                                                 
HERB SIMON  testified  via teleconference  from an  off-net site  in                                                            
Nelchina  that he has  been manufacturing  and selling  feed  for 25                                                            
years. He opposed  the bill because it requires "manpower  increases                                                            
in   the  overall   State   structure",   which   he   asserted   is                                                            
"diametrically  opposed" to an appropriate  legislative mandate.  He                                                            
was unfamiliar  with the organic farming  and weed control  portions                                                            
of the bill. He asserted  the feed manufacturing industries would be                                                            
unable  to  comply  with the  new  statutes  because  of a  lack  of                                                            
infrastructure  and the time involved  to obtain laboratory  results                                                            
on the  exact protein  content. He  continued that  Alaska has  been                                                            
known  as a  "dumping  ground" for  outdated  feed products  and  he                                                            
surmised  the protein  content  listed on  product  labels would  be                                                            
considerably  less  because  the  protein   level  reduces  quickly,                                                            
especially  if the product  is not properly  stored. He opposed  the                                                            
imposition of mandated standards that are impossible to achieve.                                                                
PETER FELLMAN,  Staff to Representative  John Harris, testified  via                                                            
teleconference  from  Delta  Junction  that although  Alaska  has  a                                                            
"truth  in labeling"  law,  there is  insufficient  manpower in  the                                                            
Division  of  Agriculture  to  enforce   it.  This  legislation,  he                                                            
stressed,  would provide  staff to  implement the  existing law.  He                                                            
informed  of  the  laboratories   available  to  perform   nutrition                                                            
testing.  He remarked if  feed is properly  stored as instructed  on                                                            
the package, the  nutrition level should be maintained.  He spoke to                                                            
the lack  of labeling  requirements  in Alaska that  are present  in                                                            
every other state.  He surmised that if a manufacturer  is producing                                                            
nutritional  feed, there should  be no problem  with complying  with                                                            
these  provisions.  He asserted  that those  feeding  pets and  farm                                                            
animals have a right to  know that the feed purchased is nutritious.                                                            
Senator Leman asked if  the witness agreed with the fiscal note that                                                            
a full  time position  is  necessary to  implement  this statute  or                                                            
whether the  duties could  be shared with  existing staff or  a part                                                            
time staff.                                                                                                                     
Mr. Fellman told  of the three duties this legislation  would create                                                            
and  agreed that  one full-time  position  is unnecessary  for  each                                                            
duty. However,  he noted the combination of the duties  would amount                                                            
to the necessity of a full-time position.                                                                                       
Senator Leman  asked if one person  could be found who is  qualified                                                            
to perform all three duties.                                                                                                    
Mr. Fellman replied this  is possible and emphasized that successful                                                            
performance  of  the duties  would  require  good  organization  and                                                            
attention to  detail. He qualified  some training would be  required                                                            
to educate the  employee about testing feed samples  and to become a                                                            
organic certifier. He informed this training is not difficult.                                                                  
Co-Chair Kelly  referred to Section 5 of the bill  relating to civil                                                            
liability that  increases the amount  of the fines levied.  He asked                                                            
the  purpose   of  changing  this   provision  from  regulatory   to                                                            
Mr. Fellman was  unprepared to respond to this issue  and offered to                                                            
research the matter.                                                                                                            
PHIL KASPARI  Cooperative Extension  Service, University  of Alaska-                                                            
Fairbanks, testified via  teleconference from Delta Junction that he                                                            
is available to address questions relating to noxious weeds.                                                                    
Co-Chair Kelly  suggested Senator Leman and Senator  Olson work with                                                            
Senator Green on revising the fiscal note.                                                                                      
Senator Leman  expressed his  intent to review  the workload  of the                                                            
proposed  position,  as  it did  not  appear  to require  full  time                                                            
Co-Chair  Kelly  indicated  hesitation  to change  the  fiscal  note                                                            
without  input  from the  bill's  sponsor,  Senator Green,  who  was                                                            
absent from this meeting due to illness.                                                                                        
Senator Leman  addressed the amendment  he had offered at  the prior                                                            
hearing  for this  bill, which  was adopted  and  which changed  the                                                            
effective date  of the new position. He pointed out  the adoption of                                                            
regulations  does not conform to this  change and that a  correction                                                            
is necessary.                                                                                                                   
AT EASE 10:12 AM / 10:14 AM                                                                                                     
Amendment  #1:  This  amendment  provides  that Section  7  of  this                                                            
committee substitute,  which stipulates  that this legislation  does                                                            
not apply to meat,  fish or poultry, take effect July  1, 2002. This                                                            
amendment also  inserts a new Section 14 to provide  that Section 8,                                                            
AS 03.60.006.  Agriculture  program  coordinator,  of the  committee                                                            
substitute take effect January 1, 2003.                                                                                         
Senator Leman moved to  rescind action taken at the previous hearing                                                            
to adopt this amendment.                                                                                                        
There was no  objection and the action  adopting this amendment  was                                                            
Senator Leman offered a motion to withdraw this amendment.                                                                      
The amendment was WITHDRAWN without objection.                                                                                  
Amendment  #2: This amendment  inserts a new  Section 14 to  provide                                                            
that  Section 1  and  Section 8  of the  committee  substitute  take                                                            
effect  January 1,  2003. Section  1 relates  to AS 03.05.010(a)(7)                                                             
establishing  requirements  for the  labeling of  animal an  poultry                                                            
feeds, and Section  8 adds a new section to AS 03.60:  AS 03.60.006.                                                            
Agriculture program coordinator.                                                                                                
Senator Leman announced he would NOT OFFER this amendment.                                                                      
Amendment  #3: This amendment  provides that  Sections 1 and  8 take                                                            
effect January 1, 2003.                                                                                                         
Senator Leman moved for adoption.                                                                                               
The amendment was ADOPTED without objection.                                                                                    
Senator Wilken  referenced page 1, line 12 of the  bill and asked if                                                            
farmed shellfish  would qualify  as a raw  or processed aquiculture                                                             
product   under  the  organic   certification   provision  of   this                                                            
Mr. Kaspari  understood that  aquatic products  are not included  in                                                            
the provisions  of this legislation  and deferred  to Mr. Wells  for                                                            
ROBERT  WELLS,  Director, Division  of  Agriculture,  Department  of                                                            
Natural Resources,  testified via  teleconference from off-net  site                                                            
in Palmer  that the  Department  of Environmental  Conservation  has                                                            
responsibility over the  inspection of meat and seafood products. He                                                            
stressed  this legislation  only addresses  land-based, terrestrial                                                             
products, i.e. vegetables, etc.                                                                                                 
Co-Chair Kelly ordered the bill HELD in Committee.                                                                              
AT EASE 10:18 AM / 10:18 AM                                                                                                     
     SENATE BILL NO. 54                                                                                                         
     "An Act establishing the Alaska Veterans Advisory Council; and                                                             
     providing for an effective date."                                                                                          
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
LADDIE  SHAW,   Special  Assistant,   Office  of  Veteran   Affairs,                                                            
Department  of Military and  Veterans Affairs,  testified this  bill                                                            
establishes  in statute, the Alaska  Veterans' Advisory Council.  He                                                            
noted this organization  was created under Administrative Order #164                                                            
in 1996.                                                                                                                        
Mr.  Shaw explained  this  organization  assists the  Department  in                                                            
identifying  the needs  and concerns  of  veterans in  the State  of                                                            
Alaska,  their dependants  and  survivors,  as well  as identifying                                                             
methods to  better address  those needs.  He detailed the  Council's                                                            
duties  including   making  recommendations   concerning   veterans'                                                            
priority service, needs,  developing public and private partnerships                                                            
to  meet those  needs  and providing  coordination  and information                                                             
regarding veterans' benefits and services in the State.                                                                         
Mr. Shaw stated  that the Council  consists of 20 members  appointed                                                            
by the governor.  He listed that one or more members  are affiliated                                                            
with  a veterans'  organization;  one or  more members  represent  a                                                            
State agency  that manages programs  affecting veterans;  and one or                                                            
more  members  of  the  general  public  "familiar   with  veterans'                                                            
issues".   He emphasized  that  members serve  without compensation                                                             
beyond per diem and travel expenses.                                                                                            
PAT  CAROTHERS,   Chair,  Alaska  Veterans  Advisory   Council,  and                                                            
Lieutenant Colonel,  US Marine Corps, Retired, testified  in support                                                            
of establishing  the Council in statue.  He cautioned that  a future                                                            
governor could  "abolish" this Council  and that the efforts  of the                                                            
past seven years undertaken  on behalf of Alaska's veterans would be                                                            
"just  about  down  the tube"  with  the  exception  of legislation                                                             
already adopted.                                                                                                                
Lt. Col.  Carothers  remarked the  Council operates  on a  statewide                                                            
basis  and he described  the process  whereby  "problems within  the                                                            
veterans'  community" are  brought  before service  officers of  the                                                            
veterans'  organizations  and handled  on  an individual  basis.  He                                                            
noted the Council  has representation  in each veteran organization                                                             
and  that  each  veteran  organization  has  representation  on  the                                                            
Council. Therefore,  he informed that  many issues are presented  to                                                            
the Council,  and if it  is determined that  a problem affects  more                                                            
than the individual, the  Council addresses the matter. He explained                                                            
the  Council makes  recommendations  and pointed  out  that most  of                                                            
these  recommendations  have  been implemented  by  the appropriate                                                             
State  agencies.  He  characterized  this  process  as  the  Council                                                            
serving as "the eyes and  ears of the Administration" as well as the                                                            
Lt. Col. Carothers  asserted the $3,500 cost of this  legislation is                                                            
minimal.  He  informed   that  the  Council  holds  three   meetings                                                            
annually: one each in Anchorage  and Juneau, plus one teleconference                                                            
Lt.  Col.  Carothers  stressed   the  importance  of  an  entity  to                                                            
coordinate veteran service  organizations to receive suggestions for                                                            
improvement.  He remarked,  "A healthy veteran  community is  a good                                                            
asset for any legislator to have in his constituency."                                                                          
Lt. Col. Carothers  stressed that  the members of the Council  would                                                            
be  "very very  disappointed"  if this  bill  did not  pass and  the                                                            
Council  were eliminated.  He  stated  the Council  is bi-partisan,                                                             
assuring that  he is "not in the Administration's  club" and that he                                                            
serves the veterans of Alaska, as do the other Council members.                                                                 
Senator  Wilken  was  concerned  with the  assertion  that  the  new                                                            
governor  would choose to  eliminate the Council  as it has  been in                                                            
place  since 1996.  He asked  why the  witness surmised  this  would                                                            
Lt.  Col.  Carothers   informed  that  Governor  Wally   Hickel  had                                                            
abolished the Council when he took office.                                                                                      
Senator  Wilken commented  that a 20-member  Council appears  large,                                                            
although he did not object  if the Council is able to operate with a                                                            
budget of  $3,500. He commented  that the  Council could reduce  its                                                            
membership  to  ten seats  and  hold more  efficient  meetings  more                                                            
Co-Chair  Kelly  suggested  that the  governor  should  appoint  ten                                                            
members with the remaining ten appointed by the legislature.                                                                    
Senator Olson commended  Lt. Col. Carothers and other members of the                                                            
Council  for their  involvement.  He wanted  to know  the number  of                                                            
veterans in Alaska.                                                                                                             
Lt. Col. Carothers  replied that 68,000  veterans reside  in Alaska,                                                            
which is more per capita than in any other state.                                                                               
Senator  Olson asked the  geographical distribution  of veterans  in                                                            
the State.                                                                                                                      
Mr. Shaw answered  that approximately 43 percent of  the veterans in                                                            
Alaska  reside  in  Anchorage  and the  Mat-Su  Valley;  the  second                                                            
largest concentration  is in Fairbanks, with the remaining  25 to 27                                                            
percent living elsewhere in the State.                                                                                          
Senator  Olson commented,  "It  sounds  like a  very  good bill  Mr.                                                            
Co-Chair Kelly  asked if the witnesses would object  to amending the                                                            
legislation  to provide that five  Council members are appointed  by                                                            
the President  of the Senate, five  by the Speaker of the  House and                                                            
ten by the governor.                                                                                                            
Amendment #1:  This conceptual amendment  provides that appointment                                                             
of the  20 Council  members  shall be  determined  by the  following                                                            
entities: governor, ten  seats; Senate leadership, five seats; House                                                            
of  Representatives  leadership,  five seats.  This  amendment  also                                                            
provides this  change takes effect  as the Council members'  current                                                            
terms expire.                                                                                                                   
Senator Leman moved for adoption.                                                                                               
Senator Ward clarified this would not impact current Council                                                                    
The amendment was ADOPTED without objection.                                                                                    
Senator Hoffman  asked the  percentage of  rural members serving  on                                                            
the Council.                                                                                                                    
Mr.  Carothers  responded   that  approximately  one-third   of  the                                                            
membership reside in Bethel, and other small communities.                                                                       
Co-Chair  Kelly  thanked the  witnesses  and  those members  of  the                                                            
public for their service in combat.                                                                                             
Senator Hoffman  asked how the appointment of the  Council positions                                                            
would be rotated.                                                                                                               
Co-Chair  Kelly suggested  the next  vacancy could  be filled  by an                                                            
appointee of the governor,  the second vacancy by the Senate and the                                                            
third  vacancy by  the House of  Representatives,  with the  process                                                            
repeating in this manner for subsequent vacancies.                                                                              
Senator Leman agreed to this process.                                                                                           
Mr.  Shaw stated  this  method  is  possible.  He pointed  out  that                                                            
currently  appointments  are made  based on the  recommendations  of                                                            
local  veterans   organizations.  He  assumed  this   process  could                                                            
continue regardless of the appointing authority.                                                                                
Co-Chair Kelly  surmised that the  rotation of appointing  authority                                                            
would  assure  fair  consideration  of  the veteran  organizations'                                                             
Co-Chair  Kelly suggested  the  amendment  should be  conceptual  to                                                            
allow  the drafter  to conform  the language  to the  intent of  the                                                            
Amendment  #2: This  conceptual amendment  provides  that the  first                                                            
vacant  seat would be  filled by  appointment of  the governor,  the                                                            
second  vacant seat  would be filled  by appointment  of the  Senate                                                            
leadership, the third vacant  seat would be filled by appointment of                                                            
the House of  Representatives leadership,  and subsequent  vacancies                                                            
would be filled in this rotating order.                                                                                         
Senator Leman  moved for  adoption of this  conceptual amendment  to                                                            
accommodate the  Committee's intent to provide fair  distribution of                                                            
Council membership.                                                                                                             
There was no objection and the amendment was ADOPTED.                                                                           
Senator  Ward  offered  a motion  to  "move Senate  Bill  number  54                                                            
amended  out of Committee  with individual  recommendations  and the                                                            
accompanying note."                                                                                                             
Without objection,  CS SB 54 (FIN)  with accompanying $3,500  fiscal                                                            
note #2 from the  Department of Military and Veterans  Affairs dated                                                            
2/9/02, MOVED from Committee.                                                                                                   
     SENATE BILL NO. 267                                                                                                        
     "An Act  establishing the Alaska  veterans' memorial  endowment                                                            
     fund  and  providing  for credits  against  certain  taxes  for                                                            
     contributions  to that fund; relating to other  tax credits for                                                            
     certain  contributions; and providing  for an effective  date."                                                            
This was the first hearing for this bill in the Senate Finance                                                                  
LADDIE SHAW, Special Assistant, Office of Veteran Affairs,                                                                      
Department of Military and Veterans Affairs read a statement into                                                               
the record as follows.                                                                                                          
     SB 267 sets up an  endowment fund to support the maintenance of                                                            
     existing and construction  of new memorials, to Alaska veterans                                                            
     and  the military. Today  Alaska has over  70 memorials  to our                                                            
     veterans. These tributes  range from small plaques to memorials                                                            
     like  Byers Lake. Funds  to maintain  these existing  memorials                                                            
     are few.                                                                                                                   
     The  bill before the  Committee would  allow the Department  of                                                            
     Revenue  to  accept  donations   from  the  private  sector  of                                                            
     legislative appropriations,  to invest the funds to earn a real                                                            
     rate of return  of at least 5%, and identify  amounts available                                                            
     for appropriation each year.                                                                                               
     The  Department  of Military  and  Veterans Affairs,  with  the                                                            
     assistance  of appropriate veterans' organizations  would grant                                                            
     the  appropriated funds  to organizations  that would  maintain                                                            
     the  monuments  or  memorials.  If funds  were  available,  new                                                            
     memorials or monuments  could be constructed. Regulations would                                                            
     be promulgated to describe this process.                                                                                   
     In addition,  the bill  allows a tax  credit to taxpayers  that                                                            
     choose to donate money  to the endowment fund. Credits would be                                                            
     limited  to 50% of the  first $100,000  and 100% of the  second                                                            
     $100,000. The tax  credit mirrors the structure of the existing                                                            
     education  tax credit. A taxpayer's total credit  under both of                                                            
     these credits would be limited to $150,000.                                                                                
     By  providing  a  mechanism   to  take  care  of  the  existing                                                            
     veterans'  memorials in  Alaska and to  building additional  in                                                            
     the  future,   this  bill  recognizes  the  contribution   that                                                            
     veterans and the military have made to our state.                                                                          
Co-Chair Kelly referenced language in Sec. 4 on page 3, lines 21                                                                
through 25, which reads as follows.                                                                                             
                Article 8. Alaska Veterans' Memorial Endowment Fund.                                                            
          Sec. 37.14.730. Use of the fund. (a) As soon as                                                                       
     practicable  after  July 1 of  each year,  the commissioner  of                                                            
     revenue shall  determine the average month-end  market value of                                                            
     the fund for the immediately  preceding three fiscal years. The                                                            
     commissioner  shall  identify five  percent of  that amount  as                                                            
     available  for  appropriation   by  the  legislature  for  uses                                                            
     described in (b) of this section…                                                                                          
Co-Chair  Kelly asked if  this would essentially  create a  "sinking                                                            
fund" in the event  of a period of poor earnings on  the investment,                                                            
noting the requirement that five-percent must be appropriated.                                                                  
SFC 02 # 83, Side B 10:38 AM                                                                                                    
NEIL SLOTNICK, Deputy Commissioner,  Department of Revenue, deferred                                                            
to Mr. Jenks to explain how this would be avoided.                                                                              
JOHN JENKS, Chief Investment  Officer, Treasury Division, Department                                                            
of  Revenue,  assured   that  the  "investment  features"   of  this                                                            
endowment  are  designed to  ensure  a "stable  payout"  over  time,                                                            
despite  fund  performance.   He noted   the  amount  available  for                                                            
appropriation  is limited  even  in those  years in  which the  fund                                                            
earnings are high.  He furthered that this legislation  also directs                                                            
the Department  of Revenue to manage the endowment  in a manner that                                                            
provides  a five-percent  "real  or inflation-adjusted  return  over                                                            
Co-Chair Kelly  posed a scenario whereby  earnings in the  first two                                                            
years  of the  fund's  existence  are  less than  five  percent  and                                                            
surmised  that the  corpus  of the  fund would  immediately  "erode"                                                            
under the provisions of this legislation.                                                                                       
Mr. Jenks agreed the value of the fund would decline.                                                                           
Co-Chair  Kelly suggested  amending  the bill to  stipulate that  an                                                            
appropriation  would not  be made  using funds  from this  endowment                                                            
before a  year in which  the endowment has  realized a five-percent                                                             
rate of return.                                                                                                                 
Mr. Jenks replied  that such a provision is possible,  but cautioned                                                            
it would  defeat  the purpose  of establishing  a  link between  the                                                            
long-term investment  policy i.e., the long-term expected  earnings,                                                            
and  the payout  of the  fund.  He acknowledged  the  corpus of  the                                                            
endowment could be reduced  in the first two years, but assured that                                                            
long-term performance is the higher priority.                                                                                   
Co-Chair  Kelly qualified  his expertise on  the matter is  limited,                                                            
but wanted to  ensure that the principal of the endowment  would not                                                            
be  compromised.   He  informed   this  has   occurred  with   other                                                            
Mr. Jenks  reiterated that  such action would  be inconsistent  with                                                            
the intended management of the fund.                                                                                            
Mr. Slotnick  clarified  that the  language in  the bill  stipulates                                                            
that  the  funds   would  be  identified  and  made  available   for                                                            
appropriation.  However, he stressed  the language does not  require                                                            
that an appropriation  actually be  made. He foresaw the  Department                                                            
issuing  an annual  report on  the condition  of the  fund, and  the                                                            
legislature making the  determination as to whether an appropriation                                                            
is appropriate in a given year.                                                                                                 
Co-Chair Kelly indicated this is satisfactory.                                                                                  
Senator Ward agreed.                                                                                                            
Senator Wilken referenced  Sections 1, 2 and 3 of the bill and asked                                                            
if the tax  credits proposed in this  legislation are comparable  to                                                            
donations made to the University of Alaska.                                                                                     
Mr.  Slotnick  affirmed  this  legislation   is  modeled  after  the                                                            
University of Alaska endowment program.                                                                                         
Co-Chair  Kelly noted  the presence  of students  from Floyd  Dryden                                                            
Middle School  in Juneau who were  attending the meeting  as part of                                                            
the Close Up Program. He directed them to introduce themselves.                                                                 
Senator Wilken asked about other tax credit programs.                                                                           
Mr. Slotnick responded  two programs are in existence, both relating                                                            
to the University of Alaska and postsecondary education.                                                                        
Senator Wilken  noted this legislation  would establish a  third tax                                                            
credit program.                                                                                                                 
Co-Chair Kelly  directed attention to multiple statutory  references                                                            
in the  bill relating to  "credits taken  during the taxpayer's  tax                                                            
year". He asked for elaboration.                                                                                                
Mr. Slotnick  noted  the "seven  different  tax types"  for which  a                                                            
contribution   credit   would  be   eligible,   pointing  out   that                                                            
"overlapping"  credits  is disallowed.  He exampled  an oil and  gas                                                            
company providing  a contribution and explained the  credit could be                                                            
taken against  the company's oil and  gas property tax, oil  and gas                                                            
severance tax, or oil and  gas corporate income tax in an amount not                                                            
to  exceed  the  maximum  allowed  $150,000.   He listed   fisheries                                                            
business tax, fisheries  landing tax, license tax, insurance premium                                                            
tax, and  the three aforementioned  oil and  gas taxes as the  seven                                                            
tax types.  He qualified  that other  tax types  are ineligible  for                                                            
this tax credit  program including  motor fuel tax and tobacco  tax.                                                            
Co-Chair Donley  questioned the 100  percent tax credit allowed  for                                                            
the second $100,000 contribution  and asked who made the decision to                                                            
include this provision.                                                                                                         
Mr. Slotnick  answered  this legislation  was drafted  to model  the                                                            
University of Alaska endowment tax credit program.                                                                              
Co-Chair  Donley  wanted to  know  the "human  being"  who made  the                                                            
public policy decision to provide the 100 percent tax credit.                                                                   
Mr. Slotnick  was unaware  of who made the  decision. He  emphasized                                                            
the  intent  is  to provide  an  incentive  for  a  second  $100,000                                                            
Co-Chair  Donley pointed  out this  would result  in a "100  percent                                                            
loss to the treasury" of those funds.                                                                                           
Mr.  Slotnick  explained   the  rational  that  the  fist   $100,000                                                            
contribution is only available for 50 percent tax credit.                                                                       
Co-Chair Donley  recalled the extensive debate on  this issue at the                                                            
time the University of  Alaska endowment program was established. He                                                            
expressed  he did not support  this structure  in the University  of                                                            
Alaska endowment  program and  does not support  it as proposed  for                                                            
the veterans' memorial  fund. He stated this method does not benefit                                                            
the State's treasury  and predicted that rather than  the government                                                            
determining  the best use of funds,  companies would make  donations                                                            
in lieu of paying taxes.                                                                                                        
Co-Chair  Donley  disagreed  with  using the  University  of  Alaska                                                            
endowment  program as  a model  for this legislation.  He  cautioned                                                            
against  "just blindly  be  copying mistakes  of  the past"  without                                                            
debating the issue.                                                                                                             
Senator Wilken  suggested the fiscal  note must be corrected,  as it                                                            
does not reflect the subsequent  reduction of the credited donations                                                            
from the general fund.                                                                                                          
Senator  Ward requested  the  Department  of Military  and  Veterans                                                            
Affairs speak to the 100  percent tax credit for the second $100,000                                                            
Mr.  Shaw qualified  his limited  understanding  of  the tax  credit                                                            
system.  He predicted  that actual  donation amounts  would be  less                                                            
than  $100,000,  citing  information  indicating   actual  donations                                                            
average  less than  $5,000. He  stated this  legislation includes  a                                                            
$125,000  legislative  appropriation   to  match  the  $125,000  the                                                            
Department has already collected.                                                                                               
Co-Chair Kelly ordered the bill HELD in Committee.                                                                              
     CS FOR HOUSE BILL NO. 344(STA)                                                                                             
     "An Act increasing fees for driver's licenses, instruction                                                                 
     permits, and identification cards; and providing for an                                                                    
     effective date."                                                                                                           
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
LINDA SYLVESTER,  Staff to  Representative  Pete Kott, Chair  of the                                                            
House Rules  Committee, testified  this bill  was introduced  at the                                                            
request  of  the Division  of  Motor  Vehicles.  She  informed  this                                                            
legislation  would increase fees for  noncommercial driver  licenses                                                            
from $15 to $20,  and learner's permits by $10, as  well as increase                                                            
the fees for  identification cards.  She stated the bill  would also                                                            
enable the Division  of Motor Vehicles to implement  a conversion to                                                            
a digital license  system, noting the Division requests  $500,000 to                                                            
implement  the  IT component  to  support  the digital  system.  She                                                            
assured this appropriation  would be offset by fee  increases, which                                                            
would generate between $750,000 and $900,000 per year.                                                                          
Ms. Sylvester  pointed out an inaccuracy in Section  1(a) on page 1,                                                            
lines 11 and 12, which reads as follows.                                                                                        
                (3) Alaska is one of four remaining states that has                                                             
     yet to convert from 1950s era technology to digital driver                                                                 
     licenses and personal identification cards.                                                                                
Ms. Sylvester  informed  that since  this bill  was introduced,  the                                                            
other three states  have made the conversion and Alaska  remains the                                                            
only state still operating with the outdated technology.                                                                        
Ms. Sylvester  stressed that the current Polaroid  system, which has                                                            
remained virtually  unchanged since  1954, operates manually  and is                                                            
"uniquely susceptible"  to fraud.  She assured that by updating  the                                                            
technology,  the integrity of the  nation's personal identification                                                             
system  would  be  improved.  She  spoke  of discussions   occurring                                                            
following the  terrorism incidents of September 11,  2001, regarding                                                            
the security  of the identification  system.  She stated that  these                                                            
discussions  have  resulted  in an  emphasis  in  strengthening  the                                                            
states' systems.  She emphasized that  states have a responsibility                                                             
for the integrity of identification systems.                                                                                    
Ms. Sylvester  stressed that  obtaining a  driver license  signifies                                                            
more than passage  of a driving examination,  given the reliance  on                                                            
these  documents  for  identification  for  security  and  financial                                                            
reasons.   She   characterized   Alaska's    driver   licenses   and                                                            
identification  chards as "breeder documents", explaining  that once                                                            
in hand,  airline  tickets, passports,  checking  accounts,  firearm                                                            
permits, credit  cards, etc., could  be parlayed. She remarked  that                                                            
driver  licenses   are  a  key  component  of  the  theft   identity                                                            
"phenomenon,"  which resulted in a  loss of $7 billion the  previous                                                            
year. She furthered that  fraudulent manufacturing and use of Alaska                                                            
identification  cards for  certain  purchases by  underage users  is                                                            
another problem.                                                                                                                
Ms. Sylvester  detailed  the  simple way  to obtain  a duplicate  or                                                            
fraudulent  driver  license,  and  shared  anecdotal  stories.  This                                                            
included a  college student with an  enlarged "picture" of  a driver                                                            
license in  which a person could pose  for a photograph standing  in                                                            
front of a yellow  curtain covering the photo section  of the driver                                                            
license;  the  photograph  of the  person  and  the picture  of  the                                                            
license would  then be  laminated, thus producing  a realistic,  but                                                            
fraudulent driver license.                                                                                                      
Ms. Sylvester  also  spoke to difficulties  of  Alaska residents  in                                                            
utilizing their  Alaska identification  while traveling outside  the                                                            
State, explaining that  the identification is sometimes not accepted                                                            
because it  "looks too hokey."  She furthered  that the Division  is                                                            
unable to  issue replacement  photo driver  licenses to Alaskans  in                                                            
the  event their  identification  is lost  or stolen  during  travel                                                            
because the  Division does not maintain  photographs. She  qualified                                                            
that identification  that  does not  include a  photo is  available,                                                            
however,  airline  security and  other  venues often  require  photo                                                            
Ms. Sylvester  noted that the State's current identification  system                                                            
relies on Polaroid for  equipment and supplies and informed that the                                                            
company filed  for Chapter 11 bankruptcy protection  in October 2001                                                            
and that Chapter  7 bankruptcy protection  is likely to follow.  She                                                            
stated that the company's  identification system has since been sold                                                            
to  a company  that  serves  37  other  states  with identification                                                             
systems. She stated that  replacement cameras for the current system                                                            
are no longer  available and that  film would be unavailable  at the                                                            
end of the calendar year as well.                                                                                               
Senator  Ward  asked   if  any  states  currently  utilize   private                                                            
contractors   to   fully   operate    their   driver   license   and                                                            
identification programs using privately owned equipment.                                                                        
MARY MARSHBURN, Director,  Division of Motor Vehicles, Department of                                                            
Administration  was unaware  of any states  that contract for  these                                                            
services. She  told of "turnkey" systems  available, but  emphasized                                                            
these are primarily used for private security systems.                                                                          
Senator  Ward  understood  the  state of  Vermont  might  utilize  a                                                            
private contractor.                                                                                                             
Ms. Marshburn was unsure.                                                                                                       
Senator Ward wanted to  research the matter of operations in Vermont                                                            
before making a decision to support this legislation.                                                                           
Senator Hoffman asked if  the Division could acquire and install the                                                            
new equipment  to be operational by the July 1, 2002  effective date                                                            
of this bill.                                                                                                                   
Ms. Marshburn answered  no, and explained the effective date applies                                                            
to  the  date  the fees  would  be  increased  fees  to  garner  the                                                            
necessary funding  to begin process to begin the conversion  process                                                            
to  a digital  system.  She informed  18  months would  be  required                                                            
before the new system is operational.                                                                                           
Senator Hoffman  asked if licenses would continue  to be valid until                                                            
the printed expiration date.                                                                                                    
Ms.  Marshburn affirmed.  She  anticipated  that many  people  would                                                            
choose  to  renew  before the  expiration  date  given  the  greater                                                            
protection against fraud.                                                                                                       
Senator  Hoffman asked  if an additional  fee would  be imposed  for                                                            
early renewal.                                                                                                                  
Ms.  Marshburn  replied  that   the  current  fee  for  obtaining  a                                                            
duplicate of an unexpired license would be levied.                                                                              
Senator Olson asked that amount.                                                                                                
Ms. Marshburn answered $10.                                                                                                     
Ms. Marshburn  then explained the current Polaroid  system, which is                                                            
somewhat  difficult to alter  or replicate,  although significantly                                                             
easier than  a digital system. She  pointed out for Senator  Leman's                                                            
benefit that  engineering students  tend to be the most inspired  to                                                            
attempt to alter or create fraudulent identification.                                                                           
Ms. Marshburn  described the digital  license technology  that would                                                            
be used  for production of  licenses and  identification as  well as                                                            
for data storage. She informed  the new licenses and identifications                                                            
would not require  subtraction of birth dates from  the current year                                                            
to determine the age of  the holder. She furthered that licenses for                                                            
holders under  the age of 21 would  be oriented horizontally  rather                                                            
than vertically to allow for ready recognition.                                                                                 
Senator Olson  asked about the process to obtain a  duplicate driver                                                            
license if the original is lost while traveling out of State.                                                                   
Ms. Marshburn  responded it is not  possible to produce a  duplicate                                                            
license  if the  holder is  not present.  She detailed  the  current                                                            
system of two photographs  taken, with one placed on the face of the                                                            
license or identification  and the other forwarded to the Department                                                            
of Public Safety.  She stated that in the event of  a lost or stolen                                                            
license,  the Division  could research  the driving  history of  the                                                            
holder and  verify that a valid driver  license does exist  for that                                                            
holder then fax  that information to the holder. However,  she noted                                                            
this does not verify that  the holder of this document is the person                                                            
claimed, as no photograph is included.                                                                                          
Senator Hoffman  asked if  it is possible  to hold two licenses.  He                                                            
was told that possessing  more than one is punishable with a $25,000                                                            
Ms. Marshburn  was unaware of the  fine system. She shared  that she                                                            
obtained  a State  of Alaska identification  card  to utilize  while                                                            
traveling. She therefore  is less likely to lose her driver license.                                                            
Senator Hoffman  commented that $25,000 was a large  amount for such                                                            
an offense.                                                                                                                     
Senator Leman  supported the conversion to digital  licenses. He was                                                            
concerned about  the ease of altering current licenses.  He was also                                                            
concerned about  the cost involved with such a conversion.  However,                                                            
he agreed  the funding  mechanism  proposed in  this legislation  is                                                            
Senator Leman  noted the Division had indicated to  him a request to                                                            
amend language contained in the intent section of the bill.                                                                     
Ms. Marshburn remarked that the change should not be made.                                                                      
Senator Leman "moved to report committee substitution House Bill                                                                
344 from Committee with individual recommendations and the                                                                      
accompanying fiscal notes."                                                                                                     
Co-Chair Donley requested a "definitive written answer" to Senator                                                              
Hoffman's question about the possession of more than one driver                                                                 
Without objection CS HB 344 (STA) MOVED from Committee with                                                                     
accompanying $500,000 fiscal note #1 from the Department of                                                                     
Administration, dated 2/20/02.                                                                                                  
Co-Chair Pete Kelly adjourned the meeting at 11:14 AM                                                                           

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