Legislature(2001 - 2002)

05/07/2002 09:51 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                           May 07, 2002                                                                                       
                              9:51 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-02 # 89, Side A                                                                                                             
SFC 02 # 89, Side B                                                                                                             
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Pete  Kelly convened the meeting at approximately  9:51 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Dave Donley, Co-Chair                                                                                                   
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Loren Leman                                                                                                             
Senator Lyda Green                                                                                                              
Senator Gary Wilken                                                                                                             
Senator Alan Austerman                                                                                                          
Senator Lyman Hoffman                                                                                                           
Senator Donald Olson                                                                                                            
                                                                                                                                
Also  Attending:  SENATOR  GENE THERRIAULT;   JOE BALASH,  Staff  to                                                          
Senator  Gene Therriault;  TAMMY  KEMPTON, Regulation  of  Lobbying,                                                            
Alaska  Public Offices  Commission,  Department  of Administration;                                                             
CHIP   WAGONER,   private   citizen;    JASON   HOOLEY,   Staff   to                                                            
Representative  Fred  Dyson;  ALISON  ELGEE,  Deputy  Commissioner,                                                             
Department    of    Administration;    JOANNE    GIBBENS,    Program                                                            
Administrator, Division  of Family and Youth Services, Department of                                                            
Health  and  Social  Services;  JOHN  BITNEY, Legislative   Liaison,                                                            
Alaska Housing Finance Corporation                                                                                              
                                                                                                                                
Attending  via Teleconference:   From Anchorage:  ANTHONY  LOMBARDO,                                                          
Representative, Covenant House                                                                                                  
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB 363-CAMPAIGN COMMUNICATIONS & DISCLOSURES                                                                                    
                                                                                                                                
The Committee  heard  from the  sponsor, the  Alaska Public  Offices                                                            
Commission,  and  took  public testimony.  The  bill  reported  from                                                            
Committee.                                                                                                                      
                                                                                                                                
HB 162-ABSENCES UNDER LONGEVITY BONUS PROGRAM                                                                                   
                                                                                                                                
The  Committee  heard  from  the  sponsor   and  the  Department  of                                                            
Administration. The bill reported from Committee.                                                                               
                                                                                                                                
HB 209-PROGRAM FOR FORMER FOSTER CHILDREN                                                                                       
                                                                                                                                
The Committee heard testimony  from the Division of Family and Youth                                                            
Services,  took  public  testimony,   and  reported  the  bill  from                                                            
Committee.                                                                                                                      
                                                                                                                                
SB 268-GUARANTEED REVENUE BONDS FOR VETERANS                                                                                    
                                                                                                                                
The Committee  heard from  the Alaska Housing  Finance Corporation,                                                             
considered  but took no action on  one amendment, and held  the bill                                                            
in Committee.                                                                                                                   
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 363(STA)                                                                                            
     "An Act relating to  communications and elections, to reporting                                                            
     of contributions  and expenditures, and to campaign  misconduct                                                            
     in the second degree;  relating to disclosure by individuals of                                                            
     contributions  to candidates;  and providing  for an  effective                                                            
     date."                                                                                                                     
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
SENATOR GENE THERRIAULT  stated that this bill was  generated by the                                                            
Senate State Affairs  Committee and clarifies regulations  involving                                                            
campaign   contributions   to   candidates   and  issue-advertising                                                             
guidelines  for State  elections.  He noted  these  issues are  also                                                            
being  addressed  at  the federal  level.  He  voiced  that  citizen                                                            
concerns  about how  contributions  to candidates  and issues  could                                                            
"influence the outcomes  of campaigns" has resulted in a "compelling                                                            
interest"  to prohibit  certain  types  of issue  advertising  while                                                            
working  within the parameters  of the  United States' constitution                                                             
regarding  freedom of speech.  He mentioned  that State regulations                                                             
recognize  "express  advocacy"   as advertising   that,  instead  of                                                            
educating people  about a general  issue or public policy,  attempts                                                            
to influence  the  outcome  of the  campaign. He  communicated  that                                                            
State  regulations align  with the  US Senate  1977 McCain-Feingold                                                             
Bill, which expanded  the definition of express advocacy  to include                                                            
issue advocacy  commercials broadcast  within "30 days of  a primary                                                            
or 60 days before  a general election, as those broadcasts  could be                                                            
recognized as "trying to impact the outcome of the election."                                                                   
                                                                                                                                
Senator  Therriault  furthered  that  this bill  would  "place  some                                                            
restrictions  on  the source  of funding  that  is coming  into  and                                                            
backing that expression."  He noted that Section 8, subsection 14 on                                                            
page  4, line  18 of  this legislation  further  defines  components                                                            
within a  commercial or  communication that  would be recognized  as                                                            
express advocacy by the State.                                                                                                  
                                                                                                                                
Senator  Therriault  explained  that  Sections  7  and  8  primarily                                                            
address issue  advertising while Sections  1, 2, 3, 4, 5,  6, and 10                                                            
address  modifications  to  the  Alaska  Public  Offices  Commission                                                            
(APOC) report requirements  for campaign donations and expenditures,                                                            
specifically  the requirements  of the "15/5  filing report,"  which                                                            
requires  anyone who  contributes  $500 or  more to  a candidate  to                                                            
notify  APOC  of  the contribution   within  30 days  of  its  being                                                            
contributed.  He  stated that  APOC  has  determined that  the  15/5                                                            
ruling  is "meaningless"   as more  recent  law limits  the  maximum                                                            
amount a person could contribute to a candidate at $500.                                                                        
                                                                                                                                
Co-Chair Kelly  asked the penalty for failing to file  or for filing                                                            
late, under the 15/5 regulation.                                                                                                
                                                                                                                                
JOE BALASH,  Staff to Gene  Therriault, responded  that the  penalty                                                            
for  late filing  is  $50 a  day  once APOC  notification  has  been                                                            
issued.                                                                                                                         
                                                                                                                                
Co-Chair  Kelly  asked  whether  the notification   is sent  to  the                                                            
candidate receiving the contribution or to the contributor.                                                                     
                                                                                                                                
Mr. Balash  surmised  that both  the candidate  and the contributor                                                             
receive notice.                                                                                                                 
                                                                                                                                
TAMMY  KEMPTON,  Regulation  of  Lobbying,   Alaska  Public  Offices                                                            
Commission,  Department of Administration,  concurred that  both the                                                            
candidate and the contributor receive notification.                                                                             
                                                                                                                                
Co-Chair   Kelly  stated   that  the  15/5   filing  "was   somewhat                                                            
problematic  and  a  lot  of  citizens  did  not  understand"  their                                                            
obligation   to  report   contributions.   He   asked  whether   the                                                            
elimination  of the  15/5 penalty  should be  retroactive since  the                                                            
15/5 regulation  is recognized  as not being  a "a good idea  in the                                                            
first place," and some  citizens could be prosecuted or fined "under                                                            
the old law".                                                                                                                   
                                                                                                                                
Ms.  Kempton  stated  she  is "fairly  confident"  that  no  one  is                                                            
currently being  fined or prosecuted  because of a violation  of the                                                            
15/5 regulation.                                                                                                                
                                                                                                                                
Senator   Green  asked  how   the  funding   sources  of   political                                                            
advertising "published"  within 60 days of an election are reported.                                                            
                                                                                                                                
Senator  Therriault  responded  that  current  regulations   require                                                            
"source" reports  to be filed with APOC for advertising  expenditure                                                            
contributions  coordinated  with a  candidate's  campaign, and  that                                                            
independent  expenditure  reports  include  "where the  money  comes                                                            
from" and whether  the funding is  from "out-of-State" sources  or a                                                            
wealthy individual expending thousands of dollars.                                                                              
                                                                                                                                
Senator Green  commented that APOC  reporting restrictions  focus on                                                            
the funding  sources, not necessarily  what the funds are  used for.                                                            
She shared  that candidates are often  "surprised by something  that                                                            
happens out  there that you  know nothing  about either pro  or con,                                                            
where you thinkā€¦  do I have to take the hit for this  contribution."                                                            
                                                                                                                                
Co-Chair Kelly  asked for clarification  as to whether a  person who                                                            
neglects  to  file  the  15/5  report  would be  fined  $500  a  day                                                            
beginning on the thirty-first  day after the contribution is made or                                                            
beginning the day the APOC notification is received.                                                                            
                                                                                                                                
Ms.  Kempton  clarified  that  current  law  specifies  that  anyone                                                            
contributing  $500 to a  campaign must report  that contribution  to                                                            
APOC within  30 days. She continued  that if APOC finds that  a $500                                                            
contribution   has  not  been  reported,   APOC  would  notify   the                                                            
contributor, and  from that date on, the contributor  would be fined                                                            
$50 a day until the filing is completed.                                                                                        
                                                                                                                                
Co-Chair  Kelly stated  that Section  6 in this  bill specifies  the                                                            
non-filing penalty amount to be $500 a day.                                                                                     
                                                                                                                                
Senator Therriault  interjected  that the $500  fine referred  to in                                                            
line 14, Section 6 applies to a candidate or group.                                                                             
                                                                                                                                
Co-Chair  Kelly asked  if  State statute  specifies  when a  penalty                                                            
would begin to accrue.                                                                                                          
                                                                                                                                
Ms. Kempton  stated that  APOC has the authorization  to levy  lower                                                            
fines  than those  specified  in  regulation,  with $500  being  the                                                            
maximum  per day fine.  She reiterated  that a  fine would begin  to                                                            
accrue after APOC notification is given.                                                                                        
                                                                                                                                
Co-Chair Kelly stressed  that statute should clearly define at which                                                            
point  the levying  of fines  would begin  to accrue.  He asked  the                                                            
sponsor if the addition of this language would be problematic.                                                                  
                                                                                                                                
Senator Therriault  asserted the need  to continue allowing  APOC to                                                            
have the flexibility  to adjust the level of fines  according to the                                                            
circumstances.                                                                                                                  
                                                                                                                                
Co-Chair Kelly  assured that APOC's  flexibility in determining  the                                                            
amount of fines  would not be affected  by the addition of  language                                                            
such as "delinquency continues after notification by APOC."                                                                     
                                                                                                                                
Ms. Kempton spoke to the need to clarify current regulations.                                                                   
                                                                                                                                
Senator Therriault  suggested that the Senate Rules  Committee might                                                            
need to  address the addition  of this language;  however,  there is                                                            
sufficient time to do that  before the Legislative session adjourns.                                                            
                                                                                                                                
Co-Chair Kelly  recommended that penalty  clarification be  included                                                            
in this legislation.                                                                                                            
                                                                                                                                
Senator  Leman  asked whether  anyone  has  ever been  convicted  of                                                            
campaign  misconduct in  the second  degree, which  is specified  by                                                            
State statute as a class B misdemeanor.                                                                                         
                                                                                                                                
Ms. Kempton stated she is not aware of any such conviction.                                                                     
                                                                                                                                
Senator Leman  asked the penalty amount levied to  someone convicted                                                            
of this offense.                                                                                                                
                                                                                                                                
Ms. Kempton responded that  a $1,000 fine could be levied along with                                                            
jail sentencing of up to one year.                                                                                              
                                                                                                                                
Senator Leman clarified  this might be the penalty for neglecting to                                                            
include the language "paid for by" in an advertising message.                                                                   
                                                                                                                                
Ms. Kempton concurred.                                                                                                          
                                                                                                                                
Senator Leman  asked if APOC has ever pursued this  course of action                                                            
for this violation.                                                                                                             
                                                                                                                                
Ms. Kempton replied that APOC has not.                                                                                          
                                                                                                                                
Co-Chair  Kelly stated that  although APOC  has recommended  against                                                            
this  course of  action,  there have  been  instances  in which  the                                                            
Department  of Law pursued  people according  to these statutes.  He                                                            
opined  that the  penalty  for not  including  "paid for  by" in  an                                                            
advertising  message  is  "silly."  He  complimented  APOC  for  its                                                            
discretion in invoking  penalties on various APOC violations as some                                                            
of the laws "are absurd."                                                                                                       
                                                                                                                                
CHIP WAGONER  informed the  Committee that  APOC had charged  a pro-                                                            
life organization he represented  of express advocacy violations for                                                            
distributing a  postcard mailing during a local election.  He stated                                                            
that the postcard had "merely  presented information" stating that a                                                            
certain  candidate "had  as his campaign  manager,  the head  of the                                                            
Juneau  Pro-Choice  Coalition."   He  stated  the  message  did  not                                                            
recommend  nor  encourage  people  "to  vote for,  vote  against  or                                                            
support or  oppose" the candidate.   He stated that even  though the                                                            
organization  was not fined; APOC  held them to be in violation.  He                                                            
stated that he  "is not sure this bill is a vast improvement"  as "a                                                            
bright line test" to further define express advocacy.                                                                           
                                                                                                                                
Mr. Wagoner suggested  that Section 8, subsection  16 be expanded to                                                            
include language  regarding "imparting of information,  so that what                                                            
happened to his client does not happen to anyone else."                                                                         
                                                                                                                                
Senator Therriault  stated APOC has  acknowledged that the  proposed                                                            
language  in this  legislation  would  assist in  establishing  some                                                            
definite "bright  lines" in determining whether express  advocacy or                                                            
the influencing  of an election  is occurring.  He stated that  both                                                            
APOC and  the Alaska Court  System support  the establishment  of "a                                                            
definite line."                                                                                                                 
                                                                                                                                
Senator Wilken moved "to  report Senate Bill 363 from Committee with                                                            
individual recommendations and attached fiscal notes."                                                                          
                                                                                                                                
There being no  objections, CS SB 363 (STA) reported  from Committee                                                            
with a new  fiscal note dated  May 6, 2002  in the amount  of $5,000                                                            
from the Department  of Administration,  and a previous zero  fiscal                                                            
note dated April 22, 2002  from the Division of Elections, Office of                                                            
the Lieutenant Governor.                                                                                                        
                                                                                                                                
                                                                                                                                
     SENATE CS FOR HOUSE BILL NO. 162(STA)                                                                                      
     "An Act relating to absences from the state under the                                                                      
     longevity bonus program."                                                                                                  
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
JASON  HOOLEY, Staff  of  Representative  Fred Dyson,  informed  the                                                            
Committee  that this legislation  would extend  a longevity  program                                                            
participant's allowable  absence from the State from the current 30-                                                            
consecutive  days to 60 consecutive  days, in addition to  extending                                                            
the allowable  unpaid sabbatical term  from 90 days to three  years.                                                            
He stated that  the extension of these two program  components would                                                            
lower the overall cost of the longevity program to the State.                                                                   
                                                                                                                                
ALISON ELGEE,  Deputy Commissioner,  Department  of Administration,                                                             
stated  that  the   Department's  fiscal  note  addresses   the  two                                                            
extensions  separately.  She  explained  that  extending   allowable                                                            
absences from  30 days to 60 days would cost the program  additional                                                            
money; however,  extending the allowable  unpaid sabbatical  term to                                                            
three  years  would  save money.  She  stated  that  the  three-year                                                            
sabbatical   would  be   applicable  to   such  eligible   longevity                                                            
participants  as those  who move  to Arizona  and realize  it was  a                                                            
"mistake"  and move back,  or those participants  who wish  to spend                                                            
extended time  with family out of  State. She stated this  provision                                                            
would allow  those individuals  to  return to the  State and  resume                                                            
their  residency   without   jeopardizing   their  longevity   bonus                                                            
eligibility.  She stated that the  three-year deadline provides  the                                                            
Department with a "necessary end-point."                                                                                        
                                                                                                                                
Ms. Elgee  stated the  Department  projects that  if ten percent  of                                                            
current  longevity  bonus  participants  were out  of  the State  an                                                            
additional  month, as  would be  allowed under  the extended  unpaid                                                            
sabbatical  plan, the  State would  save up to  $435,000. She  noted                                                            
significant  interest has been expressed  favoring this legislation                                                             
and she  predicted  that participants  would take  advantage of  the                                                            
extensions.                                                                                                                     
                                                                                                                                
Co-Chair  Donley asked for  clarification that,  "people do  not get                                                            
paid if they are out of State for any given month."                                                                             
                                                                                                                                
Ms. Elgee responded that  currently, individuals would not receive a                                                            
monthly longevity check  if they were out of the State for more than                                                            
30 days.  She stated  that this  bill would  increase the  allowable                                                            
absence time from 30 days to 60 days.                                                                                           
                                                                                                                                
Co-Chair  Donley   summarized  that  if  this  legislation   becomes                                                            
effective,  a participant  who is out  of the  State for two  months                                                            
would receive  benefits for those two months, but  would not receive                                                            
benefits during  any time spent out of the State beyond  two months.                                                            
                                                                                                                                
Ms. Elgee agreed  and clarified that their eligibility  status would                                                            
be suspended after the initial 60 days.                                                                                         
                                                                                                                                
Senator Austerman  asked how long a person could be  absent from the                                                            
State without losing their eligibility status.                                                                                  
                                                                                                                                
Ms.  Elgee responded  that  a person  is  currently  allowed "to  be                                                            
consecutively  absent for  up to 90  days at which  point you  would                                                            
need to  return to the State  for a least  ten days" to retain  your                                                            
eligibility.   She  continued  that   another  90  consecutive   day                                                            
absenteeism  period could  occur; however,  there is an absenteeism                                                             
limit of  180 days in a  12-month period.  She explained that  other                                                            
allowable absences  could occur as  a result of an approved  medical                                                            
leave or sabbatical  leave which would  allow a person to  be absent                                                            
from the State for up to a year within a given five-year period.                                                                
                                                                                                                                
Senator Austerman asked whether there are any other exemptions.                                                                 
                                                                                                                                
Ms. Elgee voiced  there are not; however,  she would verify  this as                                                            
the exemptions  are identified  in State  regulations.  She  stated,                                                            
"that medical absences are the most common."                                                                                    
                                                                                                                                
Senator  Green  affirmed  that  the  sabbatical  component  of  this                                                            
legislation  provides significant  savings  for the longevity  bonus                                                            
program;  however,  she mentioned  that  as the  longevity  "program                                                            
begins to  wane," the overall  expenses of  the program lessen.  She                                                            
referred  the Committee to  the saving projections  detailed  in the                                                            
Department's fiscal note.                                                                                                       
                                                                                                                                
Co-Chair Kelly  asked the testifier the amount of  the current total                                                            
program "payout."                                                                                                               
                                                                                                                                
Ms. Elgee responded that  this year's program expenses amount to $50                                                            
million;  however, expenses  are being  reduced $3  to $4 million  a                                                            
year as the number of eligible participants decrease.                                                                           
                                                                                                                                
Senator  Austerman asked  whether the Department  would be  tracking                                                            
the  two  components  of  this bill,  if  enacted,  to  ensure  that                                                            
projected savings are occurring.                                                                                                
                                                                                                                                
Ms. Elgee responded that  the Department tracks absences, therefore,                                                            
this information would be available.                                                                                            
                                                                                                                                
Co-Chair Donley  asked if the Department of Administration  supports                                                            
this legislation.                                                                                                               
                                                                                                                                
Ms.  Elgee  replied that  the  Department  has  not taken  a  formal                                                            
position on the legislation;  however, she noted that the Department                                                            
"does  not oppose  it." She  mentioned  that all  current  longevity                                                            
bonus  recipients are  over 70  years old,  so "we  think that  as a                                                            
policy call,  if the Legislature chooses  to pass this legislation,                                                             
we think it's fine."                                                                                                            
                                                                                                                                
Senator Green  offered a motion to move "House Bill  162, Version L,                                                            
from  Committee with  individual  recommendations  and accompanying                                                             
fiscal notes."                                                                                                                  
                                                                                                                                
There being  no objections,  SCS for HB 162(STA)  was REPORTED  from                                                            
Committee with a new Department  of Administration fiscal note dated                                                            
April 24, 2002 with a net savings of $146,700.                                                                                  
                                                                                                                                
                                                                                                                                
     SENATE CS FOR CS FOR HOUSE BILL NO. 209(HES)                                                                               
     "An Act directing the Department of Health and Social Services                                                             
     to establish a foster care transition program; relating to                                                                 
     that program; and providing for an effective date."                                                                        
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Mr. Hooley informed the  Committee that this legislation would allow                                                            
the  Division  of  Family  and  Youth  Services   (DFYS)  to  access                                                            
available federal  funds to provide  a variety of services  to youth                                                            
ages  16 to  21 "who  are  aging out"  of  the State's  Foster  Care                                                            
Program.                                                                                                                        
                                                                                                                                
JOANNE GIBBENS, Program  Administrator, Division of Family and Youth                                                            
Services,  Department of  Health and Social  Services, informed  the                                                            
Committee  that the  federal Foster  Care Independence  Act of  1999                                                            
includes a foster  care program to assist in developing  independent                                                            
living services  for children  "who are in  State custody who  would                                                            
probably  not be finding  a permanent home  in terms of adoption  or                                                            
guardianship,"  and who would likely  be emancipated from  care. She                                                            
stated that statutory  authority would allow the State  of Alaska to                                                            
expend a  portion of $500,000  federal funds  to provide  additional                                                            
support for individuals  over the age of 18 who had  previously been                                                            
in the foster care system.                                                                                                      
                                                                                                                                
Senator  Austerman asked  the testifier whether  matching funds  are                                                            
required to receive these federal funds.                                                                                        
                                                                                                                                
Ms.  Gibbens responded  that  the 20  percent match  requirement  is                                                            
currently funded by the  "grantees who are providing some of the in-                                                            
kind services" to the program.                                                                                                  
                                                                                                                                
Co-Chair  Kelly clarified there  is therefore  no need to "find  new                                                            
money" to meet the match requirement.                                                                                           
                                                                                                                                
Ms. Gibbens concurred.                                                                                                          
                                                                                                                                
Senator Austerman  asked how  much of the  current $500,000  federal                                                            
funding would be allocated to this program.                                                                                     
                                                                                                                                
Ms. Gibbens replied that  the amount would be determined by how many                                                            
eligible individuals would request this transitional assistance.                                                                
                                                                                                                                
Senator Austerman  stated that language in the Department  of Health                                                            
and  Social Services  fiscal  note specifies  that  the State  shall                                                            
receive  "no  less  than  $500,000"  from  the federal  government;                                                             
therefore, he asked how  much federal funding is currently allocated                                                            
to the Foster Care program.                                                                                                     
                                                                                                                                
Ms.  Gibbens clarified  that  the  State  is receiving  $500,000  in                                                            
federal funds.                                                                                                                  
                                                                                                                                
Senator  Austerman clarified  that the  Foster Care  program is  not                                                            
currently  able to use these  federal money  to provide services  to                                                            
individuals who have transitioned out of the program.                                                                           
                                                                                                                                
Ms. Gibbens confirmed that is correct.                                                                                          
                                                                                                                                
Senator  Austerman  offered  a  motion  to  report "HB  209  out  of                                                            
Committee with  individual recommendations  and accompanying  fiscal                                                            
note."                                                                                                                          
                                                                                                                                
ANTHONY LOMBARDO,  representative  of Covenant House, testified  via                                                            
teleconference  from Anchorage,  in support of  this bill, as  it is                                                            
"excellent for Alaska's youth."                                                                                                 
                                                                                                                                
There  being no  objections,  SCS  HB 209  (HES) was  REPORTED  from                                                            
Committee with zero fiscal  note #2, dated February 8, 2002 from the                                                            
Department of Health and Social Services.                                                                                       
                                                                                                                                
AT EASE 10:35 AM / 11:02 AM                                                                                                     
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 268                                                                                                        
     "An Act  relating to the issuance  of state-guaranteed  revenue                                                            
     bonds  by the  Alaska Housing  Finance Corporation  to  finance                                                            
     mortgages  for  qualifying   veterans;  and  providing  for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
JOHN   BITNEY,   Legislative   Liaison,   Alaska   Housing   Finance                                                            
Corporation  (AHFC), Department of  Revenue, stated that  passage of                                                            
this bill would  authorize an AHFC bond measure to  be placed on the                                                            
next  State general  election ballot  for  a vote of  the people  to                                                            
authorize  $500 million  in  veterans'  mortgage revenue  bonds.  He                                                            
informed  the Committee  that  Alaska is  one of  five states  whose                                                            
veteran loan  programs was granted  a federal tax-exemption  because                                                            
the  program  was established  prior  to  a change  in  federal  law                                                            
disallowing  the  exemption.  He explained  that  the  federal  tax-                                                            
exemption  status "requires  that the bonds  have a State  guarantee                                                            
behind them;"  and furthermore,  Alaska's  Constitution "requires  a                                                            
vote of  the people in order  to have that  State guarantee  on that                                                            
debt."                                                                                                                          
                                                                                                                                
Mr. Bitney  assured the Committee  that the bonds are structured  in                                                            
such a manner  "that revenues from the mortgages that  they fund, go                                                            
to pay those bonds."  He stressed that this program  "has never cost                                                            
the State anything  nor is it intended  to;" however, getting  voter                                                            
approval  is "a formality  required under the  tax code to  get that                                                            
tax-exemption on the bond."                                                                                                     
                                                                                                                                
Mr. Bitney  informed the Committee  that voters previously  approved                                                            
AHFC veterans'  bond propositions  in 1982, 1983, 1984 and  1986 and                                                            
that  the program  provides  funds for  low-interest  home loans  to                                                            
qualified  veterans.  He  stated that  the  federal  veterans'  loan                                                            
program defines  qualified veterans  as those "individuals  who must                                                            
have entered  active service prior  to January 1, 1977 and  not have                                                            
been discharged  more than 30 years prior to the date  of their loan                                                            
application,"  He stated that the number of individuals  who qualify                                                            
for the veterans'  loan program is  diminishing as time progresses,                                                             
and that  the program "should  almost be  non-existent" by  the year                                                            
2006 or 2007, therefore,  "this, in essence, would be the last time"                                                            
that  AHFC would  be requesting  this  kind of  bond authorization,                                                             
pending  any  federal  changes  to the  definition  of  a  qualified                                                            
veteran.                                                                                                                        
                                                                                                                                
                                                                                                                                
SFC 02 # 89, Side B 11:07 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator  Austerman  asked  for  clarification   that  previous  bond                                                            
packages  amounts exceeded  $2  billion, and  this  bond is  seeking                                                            
authorization for an additional $500 million.                                                                                   
                                                                                                                                
Mr. Bitney  stated  that is  correct, and  he detailed  the  amounts                                                            
distributed  in the previous  four voter  authorizations. He  stated                                                            
that the  approximately  $47 million  currently  remaining from  the                                                            
1986 authorization  is projected to  be completely allocated  by the                                                            
end of  this year.  He stated  that  the new bonds,  if authorized,                                                             
would be allocated on an "as-needed basis."                                                                                     
                                                                                                                                
Senator  Austerman asked  if the  tax-exempt status  of these  bonds                                                            
reduces  AHFC's  bonding  costs, and  he  asked  how the  bonds  are                                                            
repaid.                                                                                                                         
                                                                                                                                
Mr.  Bitney explained  that  there is  approximately  a one-percent                                                             
difference  in the  taxable and  tax-exempt rate;  and he  explained                                                            
that the rate for the veterans  mortgage program is the same as that                                                            
of the tax-exempt rate  for first-time homebuyer program as both are                                                            
tax-exempt  interest rates. He stated  that "the qualifier"  for the                                                            
veterans  program is  the person's  military  service whereas  other                                                            
tax-exempt  programs  instill   qualifiers  such  things  as  income                                                            
limits.                                                                                                                         
                                                                                                                                
Senator Austerman asked  if the bonds "are actually paid back by the                                                            
veterans."                                                                                                                      
                                                                                                                                
Mr. Bitney  stated that is  correct as the  mortgages funded  by the                                                            
bonds are structured  in a manner where the loans  are repaid to the                                                            
bonds.                                                                                                                          
                                                                                                                                
Senator  Austerman  asked if  these  bonds have  any  effect on  the                                                            
dividend that AHFC pays  the State each year, which then funds other                                                            
State programs.                                                                                                                 
                                                                                                                                
Mr. Bitney  responded that this bond  program would not affect  that                                                            
dividend.                                                                                                                       
                                                                                                                                
Senator  Austerman  stated   that  the annual   dividend  the  State                                                            
receives  from AHFC  is the result  of interest  earnings  generated                                                            
from various AHFC  bond packages and loan programs.  He asked if any                                                            
of  the  interest   earned  from   the  veterans  loan  program   is                                                            
contributed to the State.                                                                                                       
                                                                                                                                
Mr. Bitney  stated that  the veterans loan  program enhances  AHFC's                                                            
"bottom line" by offering a program that attracts borrowers.                                                                    
                                                                                                                                
Senator Austerman  asked if the veterans  loan program "is  a break-                                                            
even  program on  the pay-back  of  the bonds"  or  is there  excess                                                            
interest earnings generated  which could be contributed to the State                                                            
in the annual dividend.                                                                                                         
                                                                                                                                
Mr. Bitney  stated that the veterans  loan program is structured  in                                                            
such a manner that the  veterans' mortgages are paid directly to the                                                            
bond fund,  and there  are no "excess  earnings,  as the program  is                                                            
prohibited  from doing that." He stated,  "all cost savings  have to                                                            
be passed through to the borrower."                                                                                             
                                                                                                                                
Co-Chair Kelly  asked if the federal government contributes  funding                                                            
assistance toward program administration expenses.                                                                              
                                                                                                                                
Mr. Bitney stated that  AHFC does not receive federal administrative                                                            
assistance  and that the  program is administered  along with  other                                                            
AHFC programs "as a benefit to those who have served."                                                                          
                                                                                                                                
Senator Wilken  commented that the State has "floated  $2.2 billion"                                                            
in the past and  is now being asked, "to float another  $500 million                                                            
in what amounts to collateral  against the federal loans." He stated                                                            
that  the State's  involvement  is limited  to providing  "the  full                                                            
faith  and credit  of Alaskans  to back  those bonds"  if  something                                                            
happens at the federal level.                                                                                                   
                                                                                                                                
Mr.  Bitney  concurred   with  Senator  Wilken'  remarks;   however,                                                            
clarified  that AHFC makes  the loans  and the  State would  need to                                                            
"back the bonds if AHFC falters."                                                                                               
                                                                                                                                
Senator Wilken  voiced concern that  this bond package might  be one                                                            
of several bonding issues  listed on the general election ballot. He                                                            
asked what would occur if this bond-vote were delayed.                                                                          
                                                                                                                                
Mr. Bitney responded that  there would be no funds available for the                                                            
veterans' home  loan program and therefore,  the program  would need                                                            
to be suspended.                                                                                                                
                                                                                                                                
Senator Leman  asked if the  printing costs  of including this  bond                                                            
measure on the general  election ballot would be absorbed by AHFC or                                                            
whether they  would be an eligible  to be covered as administration                                                             
expenses under federal guidelines.                                                                                              
                                                                                                                                
Mr. Bitney clarified that  the $22,000 printing expense specified in                                                            
the  Division  of  Elections  fiscal  note  would  be  the  cost  of                                                            
conducting the vote in conjunction with the general election.                                                                   
                                                                                                                                
Senator  Leman stated  that the fiscal  note should  specify  who is                                                            
responsible for the printing costs of the ballot.                                                                               
                                                                                                                                
Mr. Bitney clarified that  historically, if the bond measure is part                                                            
of  the general  election  ballot,  the  costs  are assumed  by  the                                                            
Division  of Elections.   He informed  the Committee  that one  bond                                                            
authorization was voted  on in a "stand-alone" special election, and                                                            
that AHFC assisted with the cost of conducting that election.                                                                   
                                                                                                                                
Amendment  #1:  This  amendment  deletes  "the  first  general"  and                                                            
inserts  "a special election  to be  held on the  date of the  first                                                            
primary" in  Section 4, page 2, on  line 24, and on line  25 of that                                                            
same  section, deletes  "and"  and inserts,  "The  special  election                                                            
shall be held  in substantial compliance  with the election  laws of                                                            
the state, including  absentee voting and preparation,  publication,                                                            
and mailing  of an election  pamphlet under  AS 15.58. The  election                                                            
pamphlet  must comply  with  AS 15.58.020(7).  The  question  placed                                                            
before the qualified  voters of the state at the special  election".                                                            
The ballot language would read as follows.                                                                                      
                                                                                                                                
     BALLOT QUESTION.  The question of the state guarantee  of bonds                                                            
     referred  to in this  Act shall be submitted  to the  qualified                                                            
     voters  of the state  at a special election  to be held  on the                                                            
     date  of the first  primary after  the effective  date of  this                                                            
     Act.  The  special  election   shall  be  held  in substantial                                                             
     compliance  with  the election  laws  of the  state,  including                                                            
     absentee  voting and preparation,  publication, and  mailing of                                                            
     an  election pamphlet  under  AS 15.58.  The election  pamphlet                                                            
     must comply  with AS 15.58.020(7).  The question placed  before                                                            
     the  qualified voters  of the  state at  the special  election"                                                            
     shall read substantially as follows:                                                                                       
                                                                                                                                
Senator Leman moved for adoption of Amendment #1                                                                                
                                                                                                                                
Co-Chair Kelly objected for discussion.                                                                                         
                                                                                                                                
Senator  Leman  explained  that  this  amendment  would  remove  the                                                            
veterans  bond authorization  ballot question  from the November  5,                                                            
2002 general  election,  and instead,  have it  correspond with  the                                                            
next primary election.                                                                                                          
                                                                                                                                
Co-Chair  Kelly  informed  the Committee  that  this  election  date                                                            
change is suggested in  a letter [copy on file] dated May 1, 2002 to                                                            
Dan Fauske, CEO/Executive  Director of AHFC from Wohlforth,  Vassar,                                                            
Johnson & Vrecht, Attorneys at Law.                                                                                             
                                                                                                                                
Senator Wilken  stated that  the letter appears  to suggest  that if                                                            
the election date  were changed, "extraordinary precautions"  should                                                            
be taken because  it would affect general voter interest  as opposed                                                            
to the interest generated by a general election.                                                                                
                                                                                                                                
Co-Chair  Kelly stated that  the amendment  would be TABLED  and the                                                            
bill would be HELD in Committee.                                                                                                
                                                                                                                                
RECESS TO CALL OF CHAIR 11:21 AM / 6:19 PM                                                                                      
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Pete Kelly adjourned the meeting at 06:19 PM.                                                                          

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