Legislature(2003 - 2004)

05/07/2003 09:01 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                           May 07, 2003                                                                                       
                              9:01 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-03 # 79,  Side A                                                                                                            
SFC 03 # 79,  Side B                                                                                                            
SFC 03 # 80,  Side A                                                                                                            
SFC 03 # 80,  Side B                                                                                                            
SFC 03 # 81,  Side A                                                                                                            
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Gary Wilken convened  the meeting at approximately 9:01 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice Chair                                                                                                   
Senator Ben  Stevens                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Donny  Olson                                                                                                            
                                                                                                                                
Also Attending:  JEFF OTTESEN, Acting Director, Statewide  Planning,                                                          
Department  of Transportation  and  Public Facilities;  PAT  WALKER,                                                            
Staff  to Senator  Lyman  Hoffman;  DAN FAUSKE,  CEO  and  Executive                                                            
Director,   Alaska  Housing  Finance   Corporation,  Department   of                                                            
Revenue; JOE DUBLER,  Chief Financial Officer and  Finance Director,                                                            
Alaska  Housing Finance  Corporation,  Department  of Revenue;  JOHN                                                            
ALCANTRA, Government Relations  Director, NEA-Alaska; BRUCE JOHNSON,                                                            
Representative,  Alaska Association of School Boards;  MARY FRANCIS,                                                            
Representative,  Alaska  School  Administrators   Association;  EDDY                                                            
JEANS,  Finance  Manager, School  Finance  and  Facilities  Section,                                                            
Education  Support  Services,  Department  of  Education  and  Early                                                            
Development;  RICHARD SCHMITZ, Staff  to Senator John Cowdery;  MARK                                                            
O'BRIEN,  Chief  Contracts  Officer,  Contracting,  Procurement  and                                                            
Appeals  Section,   Office  of  the   Commissioner,  Department   of                                                            
Transportation  and Public  Facilities; DICK  CATTANAUGH,  Executive                                                            
Director, Associated  General Contractors  of Alaska; WENDY  REDMAN,                                                            
Vice President of University  Relations, University of Alaska; LANDA                                                            
BAILY,  Auditor,  Department  of  Revenue;  JOHN  MACKINNON,  Deputy                                                            
Commissioner   of  Highways  &  Public  Facilities,   Department  of                                                            
Transportation  and  Public  Facilities;  KEVIN  JARDELL,  Assistant                                                            
Commissioner, Department of Administration                                                                                      
Attending via  Teleconference: From  an Offnet Site: DUANE  BANNOCK,                                                          
Director, Division of Motor  Vehicles, Department of Administration;                                                            
From   Anchorage:   STEVE  KALMES,   Director   of  Transportation,                                                             
Municipality  of  Anchorage  School  District;  BARBARA   SCHUHMANN,                                                            
Parent; PHYLLIS JOHNSON,  Vice President and General Council, Alaska                                                            
Railroad   Corporation,  Department   of   Community  and   Economic                                                            
Development;   From  Fairbanks:  JOHN   BINKLEY,  Chair,   Board  of                                                            
Directors, Alaska Railroad  Corporation, Department of Community and                                                            
Economic Development                                                                                                            
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB 100-APPROP: CAPITAL PROJECTS                                                                                                 
                                                                                                                                
The  Committee  heard from  the  Department  of  Transportation  and                                                            
Public Facilities,  rescinded action  on one amendment, adopted  six                                                            
amendments,  failed to adopt  one amendment,  and one amendment  was                                                            
offered  but withdrawn  from  consideration.  The bill  was held  in                                                            
Committee.                                                                                                                      
                                                                                                                                
HB 170-MOTOR VEHICLE REGISTRATION FEES                                                                                          
                                                                                                                                
The Division  of Motor  Vehicles presented  testimony, and  the bill                                                            
was reported from Committee.                                                                                                    
                                                                                                                                
HB 256-DIVIDEND PAYMENT TO STATE BY AHFC                                                                                        
                                                                                                                                
The  Committee  heard testimony  from  the  Alaska  Housing  Finance                                                            
Corporation.  One amendment was adopted  and the bill reported  from                                                            
Committee.                                                                                                                      
                                                                                                                                
SB 202-EDUCATION FUNDING &PUPIL TRANSPORTATION                                                                                  
                                                                                                                                
The  Committee heard  from  the Department  of Education  and  Early                                                            
Development  and  took  public  testimony.  The  bill  was  held  in                                                            
Committee.                                                                                                                      
                                                                                                                                
SB 125-STATE CONTRACTS                                                                                                          
                                                                                                                                
The  Committee   heard   from  the   sponsor,   the  Department   of                                                            
Transportation and Public  Facilities, the University of Alaska, and                                                            
the industry.  Two  amendments were  adopted and  the bill  reported                                                            
from Committee.                                                                                                                 
                                                                                                                                
SB 112-INCREASE MOTOR FUEL TAX                                                                                                  
                                                                                                                                
The bill heard  testimony from the  Alaska Railroad, the  Department                                                            
of Revenue, the Department  of Administration, and the Department of                                                            
Transportation and Public Facilities. The bill was held in                                                                      
Committee.                                                                                                                      
                                                                                                                                
SB 31-RAILROAD UTILITY CORRIDOR TO & IN CANADA                                                                                  
                                                                                                                                
The committee heard testimony from the bill's sponsor and the                                                                   
Alaska Railroad. The bill was held in Committee.                                                                                
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 100                                                                                                        
     "An  Act making capital  appropriations  and reappropriations;                                                             
     capitalizing a fund;  making appropriations under art. IX, sec.                                                            
     17(c),   Constitution  of  the   State  of  Alaska,   from  the                                                            
     constitutional   budget reserve  fund;  and  providing  for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This was the thirteenth hearing for this bill in the Senate Finance                                                             
Committee.                                                                                                                      
                                                                                                                                
Amendment #8:  This amendment is outlined in a memorandum  from Mike                                                            
Barton,  Commissioner,  Department   of Transportation   and  Public                                                            
Facilities  to Cheryl  Frasca, Director,  Office  of Management  and                                                            
Budget dated May 2, 2003, which reads as follows.                                                                               
                                                                                                                                
     The  Department  of Transportation   and Public  Facilities  is                                                            
     requesting  amendments to the capital budget  bills (HB 150 and                                                            
     SB 100) before the Legislature.                                                                                            
                                                                                                                                
     Rural Airport Projects                                                                                                     
     The  Department is requesting  the following  changes  to rural                                                            
     airport capital projects:                                                                                                  
                                                                                                                                
     Amend                                                                                                                      
     Chevak: Snow Removal Equipment Building                                                                                    
          Increase from $50,000 to $200,000 federal receipt                                                                     
     authority. The cost  to build this structure has increased over                                                            
     previous estimates.  This amount is needed in addition to an FY                                                            
     03  appropriation   to  bring  the  total  estimated   cost  to                                                            
     $750,000.                                                                                                                  
                                                                                                                                
     Add                                                                                                                        
     Scammon Bay: Airport Snow Removal Equipment Building                                                                       
          $100,000 federal receipts. Reflects revised Airport                                                                   
     Improvement  Program  request. This  project  will upgrade  the                                                            
     Scammon Bay Snow Removal Equipment Building.                                                                               
                                                                                                                                
     Statewide: Various Airport Snow Removal Equipment                                                                          
          $4,300,000 federal receipts. This was inadvertently                                                                   
     omitted  from the Department's  original  request. The  project                                                            
     provides federal authority  to purchase new or replacement snow                                                            
     removal equipment at several rural airports.                                                                               
                                                                                                                                
     Surface Transportation Projects                                                                                            
     The  Department's current  AMATS [Anchorage  Metropolitan  Area                                                            
     Transportation  Study] and Surface Transportation  requests are                                                            
     $68,734,000 and $416,092,600.                                                                                              
                                                                                                                                
     The  following  reductions   are  being  requested  to  various                                                            
     highway projects:                                                                                                          
                                                                                                                                
          ($39,906,000) - Over the past year there has been a                                                                   
     decrease in the amount  of federal fuel tax revenues collected,                                                            
     which  have caused  a corresponding  reduction  in the  highway                                                            
     construction  program.  A  reduction  in specific  projects  is                                                            
     being requested to  reflect delays due to the decreased federal                                                            
     funding.                                                                                                                   
          ($48,125,000) - This amendment requests project                                                                       
     reductions  where the Department  has determined that  adequate                                                            
     project  authority already exists  to continue work  through FH                                                            
     04.                                                                                                                        
          ($1,205,000) - Also being requested is a reduction in                                                                 
     TRAAK  [Trails and Recreation  Access  for Alaska] projects  to                                                            
     reflect a program allocation decrease.                                                                                     
                                                                                                                                
     The following additions are being requested:                                                                               
          $55,416,000 - New or increased federal project authority                                                              
     is  being requested  where  scope changes,  funding  breakdown,                                                            
     updated estimates or priorities have changed.                                                                              
          $21,700,000 - Project authority is needed for earmarks                                                                
     contained   within   the   recently   approved   congressional                                                             
     appropriation bill.                                                                                                        
                                                                                                                                
     Finally,  the amendment contains the elimination  of individual                                                            
     pavement and bridge  projects and combines them into regionwide                                                            
     allocations.  This  will  provide the  regions  flexibility  in                                                            
     determining  their  greater need,  pavement  or bridge  repair.                                                            
     Similar  adjustments  are  taking  place  for AMATS  and  FMATS                                                            
     [Fairbanks  Metropolitan Area  Transportation Study]  projects.                                                            
                                                                                                                                
     The  net  effect   of  these  amendments  is   a  reduction  of                                                            
     $12,220,000   to   the   AMATS   and  Surface   Transportation                                                             
     appropriation  requests.  A  spreadsheet  with the  changes  is                                                            
     attached [copy on file].                                                                                                   
                                                                                                                                
Co-Chair Wilken moved for  the adoption of Amendment #8 and objected                                                            
for discussion. He shared  that the Department of Transportation and                                                            
Public Facilities  has submitted this amendment as  the result of an                                                            
expected decrease in FY 04 federal funding.                                                                                     
                                                                                                                                
Amendment to Amendment  #8: This amendment to the amendment proposes                                                            
to alter the  funding methodology  regarding Anchorage Metropolitan                                                             
Area  Transportation   Study  (AMATS)  and  Fairbanks  Metropolitan                                                             
Transportation Study (FMATS).                                                                                                   
                                                                                                                                
Co-Chair  Wilken moved to  amend Amendment  #8. He stated that  this                                                            
motion  is  in  response   to  Committee  questions  regarding   the                                                            
amendment's affect  on AMATS and FMATS. Furthermore,  he stated that                                                            
the effective  date of  June 30,  2003, as referenced  on page  two,                                                            
line eight of  Amendment #8, should be correctly identified  as July                                                            
1, 2003. Co-Chair  Wilken objected  to the motion in order  to allow                                                            
for further explanation.                                                                                                        
                                                                                                                                
At Co-Chair Wilken's request,  Senator B. Stevens explained that the                                                            
amendment  to  the   amendment  would  address  Committee   concerns                                                            
regarding proposed funding  reductions to AMATS and FMATS. He stated                                                            
that upon  discussion  with the  Department,  the determination  was                                                            
made to combine  sections of the budget  pertaining to pavement  and                                                            
bridge refurbishment improvements  and to divvy up that combined $46                                                            
million  in funding  between the  National Highway  System and  non-                                                            
National  Highway   System  entities   also  referred  to   as  non-                                                            
Metropolitan   Planning  Organizations   (non-MPOs)  and   MPOs.  He                                                            
continued  that  due to  the uncertainty  of  the actual  amount  of                                                            
federal funding  that would available,  intent language is  included                                                            
to specify  that AMATS  would be  allocated  its historical  funding                                                            
level of 27 percent and  FMATS would be allocated 6.9 percent of the                                                            
forthcoming  federal funds.  He stated "this  is a good solution  to                                                            
the issue," and  he urged the Committee to support  the amendment to                                                            
the amendment.                                                                                                                  
                                                                                                                                
JEFF OTTESEN,  Acting Director,  Statewide  Planning, Department  of                                                            
Transportation  and Public Facilities  stated that the amendment  to                                                            
the amendment  would compress the three regional projects  breakouts                                                            
into a single  line item in the budget. Subsequently,  he continued,                                                            
the intent language  would specify that a pro-rata  system, based on                                                            
the Statewide  Transportation  Improvement  Plan (STIP) formula,  be                                                            
used to distribute  money to the MPOs. Therefore,  he concluded, the                                                            
federal funds  received by the State would be "fairly"  appropriated                                                            
to the non-MPOs and MPOs as these federal funds "rise and fall."                                                                
                                                                                                                                
Senator Hoffman  asked whether the intent language  would negatively                                                            
affect the  flexibility of  the Department  to allocate funding  and                                                            
potentially jeopardize  construction projects that  might incur cost                                                            
overruns in either Fairbanks or Anchorage.                                                                                      
                                                                                                                                
Mr. Ottesen  responded that MPOs are  allocated a specific  quantity                                                            
of money  to manage.  He stated that  were a  project to incur  cost                                                            
overruns, the MPO could  shift funding to it. However, he noted that                                                            
by doing  so, the MPO might  be required  to delay another  project.                                                            
Additionally,  he noted that historically, when large  projects have                                                            
incurred  cost  overruns, MPOs  have  submitted  additional  funding                                                            
requests to the State.  He communicated that, on occasion, the State                                                            
has awarded additional monies to the MPO.                                                                                       
                                                                                                                                
Co-Chair Wilken removed his objection to the motion.                                                                            
                                                                                                                                
There  being no further  objection,  Amendment #8,  as amended,  was                                                            
ADOPTED.                                                                                                                        
                                                                                                                                
Amendment  #10: This amendment  deletes the  "Alaska Boating  Safety                                                            
(ED [Election District]  99)" component and the $720,000 other funds                                                            
appropriation  from the Department of Natural Resources  on page 27,                                                            
lines 15 and 16.                                                                                                                
                                                                                                                                
Co-Chair  Wilken moved for  adoption of Amendment  #10 and  objected                                                            
for  purposes  of explanation.  He  stated  that when  the  original                                                            
Boating  Safety   bill  was  adopted   a  few  years  earlier,   the                                                            
Legislature  understood  that  the  program  would  be  100  percent                                                            
federally funded  and that no additional funds would  be required to                                                            
administer the program.  He communicated that, without affecting the                                                            
federal  contribution,  the State  annually  collects approximately                                                             
$120,000 in  user fees, which are  deposited into the general  fund.                                                            
                                                                                                                                
Senator Bunde asked which  boating safety programs would be impacted                                                            
by the funding reduction.                                                                                                       
                                                                                                                                
Co-Chair  Wilken clarified  that the program's  overall funding  was                                                            
decreased  from the requested  $720,000 to  $600,0000. He  mentioned                                                            
that, at the $600,000  level, the program would receive  essentially                                                            
flat funding,  as its historical funding levels were  $600,000 in FY                                                            
03 and $660,000 each for FY 02 and FY 01.                                                                                       
                                                                                                                                
Senator Hoffman  questioned the Amendment's wording  as it indicates                                                            
that the entire funding amount of $720,000 would be eliminated.                                                                 
                                                                                                                                
AT EASE 9:12 AM / 9:13 AM                                                                                                       
                                                                                                                                
Amendment  to  Amendment  #10: This  amendment  specifies  that  the                                                            
funding level for the Boating Safety Programs would be $600,000.                                                                
                                                                                                                                
Co-Chair Wilken moved to  amend Amendment #10. He concurred that the                                                            
dollar amount  specified in the amendment  is in error. He  moved to                                                            
amend the amendment  to retain the  "Alaska Boating Safety  (ed 99)"                                                            
component and  appropriate $600,000 in federal funds.  He noted that                                                            
the language  being altered  is located on  page 27, line 15  of the                                                            
bill.                                                                                                                           
                                                                                                                                
There being  no objection, Amendment  #10, as amended, was  ADOPTED.                                                            
                                                                                                                                
Amendment #11:  This amendment adds  a "Juneau Public Health  Center                                                            
Heating and Ventilation  Upgrades, Phase 2 (ED 3)"  component in the                                                            
Department of  Health and Social Services and appropriates  $647,191                                                            
general funds  and $142,066 federal  funds on page 24. Accompanying                                                             
explanatory language reads as follows.                                                                                          
                                                                                                                                
     The  heating  and  ventilation  systems  at the  Juneau  Public                                                            
     Health  Center are on  the edge of  failure. Restoring  funding                                                            
     for this Governor's  request will complete a phased project for                                                            
     which the legislature  has appropriated startup money in recent                                                            
     years.                                                                                                                     
                                                                                                                                
     The current systems  at the Public Health Center are inadequate                                                            
     for patient care,  staff comfort, and the air quality necessary                                                            
     at a  medical facility.  The systems are  in such dire  need of                                                            
     work that  they are out of compliance with building  codes. The                                                            
     existing  stopgap  measures are  expensive  electric  baseboard                                                            
     heaters  and opening  and closing windows.  Should the  systems                                                            
     fail  completely,  patient  care will  be compromised  and  the                                                            
     center may face closure.                                                                                                   
                                                                                                                                
     Because the heating  and ventilation systems must be completely                                                            
     replaced, further phasing of this project is not possible.                                                                 
                                                                                                                                
Senator Olson moved for adoption of Amendment #11.                                                                              
                                                                                                                                
Co-Chair Wilken objected.                                                                                                       
                                                                                                                                
Senator  Olson explained  that this  amendment  would address  local                                                            
concerns  regarding  an inadequate  and  non-compliant  air  quality                                                            
system at the medical facility.                                                                                                 
                                                                                                                                
Co-Chair  Wilken  reminded  that  the  State  has  previously  spend                                                            
approximately   $750,000  on  air   quality  improvements   at  this                                                            
facility. He voiced  concern that, were this amendment  adopted, the                                                            
total  amount  spent  on addressing  the  system  would  exceed  one                                                            
million  dollars.  He  suggested  that  perhaps  the  Center  should                                                            
consider  relocating to another  facility,  as the current  system's                                                            
expense  would be  "extraordinary."  He asked the  Committee to  not                                                            
adopt this amendment.                                                                                                           
                                                                                                                                
Senator  Hoffman  referenced  previous  comments  made  by  Co-Chair                                                            
Wilken whereby he had specified  that the State would capitalize all                                                            
federal  matching   funds.  Senator   Hoffman  continued   that  the                                                            
amendment denotes that  $142,000 in federal funds would be available                                                            
for this  funding request.  Therefore, he  asked Co-Chair Wilken  to                                                            
comment about not "capturing" these federal funds.                                                                              
                                                                                                                                
Co-Chair Wilken  stated that he was  "in error" when he voiced  that                                                            
the State would  match all federal match money. He  stated that even                                                            
capturing  $142,000 in federal  money "would  not make this  project                                                            
better."                                                                                                                        
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Hoffman and Senator Olson                                                                                     
                                                                                                                                
OPPOSED:  Senator B.  Stevens, Senator  Taylor,  Senator Bunde,  Co-                                                            
Chair Green and Co-Chair Wilken                                                                                                 
                                                                                                                                
The motion FAILED (2-5)                                                                                                         
                                                                                                                                
Amendment #11 FAILED to be adopted.                                                                                             
                                                                                                                                
Amendment  #12: This  amendment  adds a  "Division of  Sport Fish  -                                                            
Lower Kenai  River Public Use Impact  Study" component and  $100,000                                                            
Fish and Game Fund appropriation  to the Department of Fish and Game                                                            
and inserts intent language to read as follows.                                                                                 
                                                                                                                                
     It  is the intent  of the  Legislature that  the Department  of                                                            
     Fish  and Game enter  into an agreement  for services  with the                                                            
     Department  of Natural Resources  to conduct a public  analysis                                                            
     on  the impact  of overcrowding  on  the lower  Kenai River  by                                                            
     recreational user groups.                                                                                                  
                                                                                                                                
Accompanying explanatory language reads as follows.                                                                             
                                                                                                                                
     This  project  and accompanying  intent  language,  allows  the                                                            
     Department of Fish  and Game to contract with the Department of                                                            
     Natural  Resources  (Department  of Natural  Resources) for  an                                                            
     analysis  on the  impact  of overcrowding  on  the lower  Kenai                                                            
     River by recreational  user groups. The previous Administration                                                            
     imposed  a hasty guide  moratorium on  the Kenai River  and the                                                            
     current Administration  rescinded that moratorium. This project                                                            
     will  enable the Department  of Natural  Resources to  seek the                                                            
     input of  recreational users and businesses before  any further                                                            
     use restrictions are imposed.                                                                                              
                                                                                                                                
This amendment  also  adds a "Division  of Wildlife  Conservation  -                                                            
Laboratory  Remodel"  component  and  $150,000  Fish and  Game  Fund                                                            
appropriation  for the  Department  of Fish and  Game. Accompanying                                                             
explanatory language reads as follows.                                                                                          
                                                                                                                                
     This  project was  submitted by  the Office  of Management  and                                                            
     Budget  on March 24, 2003. Backup  is attached [not  provided.]                                                            
                                                                                                                                
Co-Chair  Wilken moved  to adopt  Amendment #12.  He commented  that                                                            
this amendment  would  result in a  net zero change  in the  capital                                                            
budget. He  clarified that in order  to act upon Amendment  #12, the                                                            
Committee  would  be required  to  rescind  its previous  action  on                                                            
Amendment  #6  which  specifies  that  the  fund  recipient  be  the                                                            
Department  of Natural Resources.  He explained  that Amendment  #12                                                            
correctly  specifies   that  the  recipient  of  the  funds  be  the                                                            
Department  of  Fish and  Game.  He  clarified  that the  change  is                                                            
required because State  statutes require Department of Fish and Game                                                            
funds to be tunneled through the Department of Fish and Game.                                                                   
                                                                                                                                
In  order to  act on  Amendment  #6, Co-Chair  Wilken  withdrew  his                                                            
motion to adopt Amendment #12.                                                                                                  
                                                                                                                                
Without objection, Amendment #12 was WITHDRAWN.                                                                                 
                                                                                                                                
Amendment  #6: This  amendment  adds a  "Division of  Parks -  Lower                                                            
Kenai River  Public Use  Impact Study" component  and $100,000  Fish                                                            
and Game Fund  appropriation to the Department of  Natural Resources                                                            
on page 27. Accompanying explanatory language reads as follows.                                                                 
                                                                                                                                
     This  project allows  the Department  of  Natural Resources  to                                                            
     conduct a public analysis  on the impact of overcrowding on the                                                            
     lower  Kenai River by  recreational user  groups. The  previous                                                            
     administration  imposed a hasty  guide moratorium on  the Kenai                                                            
     River   and   the   current   administration   rescinded   that                                                            
     moratorium. This CIP  [Capital Improvement Project] will enable                                                            
     the  Department to  seek the  input of  recreational users  and                                                            
     businesses before any further use restrictions are imposed.                                                                
                                                                                                                                
This amendment  also  adds a "Division  of Wildlife  Conservation  -                                                            
Laboratory  Remodel"  component  and  $150,000  Fish and  Game  Fund                                                            
appropriation  to  the  Department  of Fish  and  Game on  page  23.                                                            
Accompanying explanatory language reads as follows.                                                                             
                                                                                                                                
     This CIP request was  submitted by the Office of Management and                                                            
     Budget  on March 24, 2003. Backup  is attached [copy  on file.]                                                            
                                                                                                                                
Senator Taylor  moved to rescind Committee  action on Amendment  #6.                                                            
                                                                                                                                
There  being no  objection, the  action  to adopt  Amendment #6  was                                                            
RESCINDED.                                                                                                                      
                                                                                                                                
Amendment #12 was again before the Committee.                                                                                   
                                                                                                                                
Co-Chair  Wilken  moved  for  the  adoption  of  Amendment  #12.  He                                                            
clarified  that the language  in Amendment  #12 specifies that  that                                                            
the funds  be allocated to  the Department  of Fish and Game  rather                                                            
than the Department  of Natural Resources as incorrectly  identified                                                            
in Amendment #6.                                                                                                                
                                                                                                                                
In response  to  a question  from  Senator Taylor,  Co-Chair  Wilken                                                            
stated that  the funds in question  are Department of Fish  and Game                                                            
funds monies  and would result "in  net zero" affect on the  budget.                                                            
                                                                                                                                
There being no objection, Amendment 12 was ADOPTED.                                                                             
                                                                                                                                
Amendment   #13:  This  amendment   deletes  the  "Municipality   of                                                            
                                                   th                                                                           
Anchorage - Laurel St. Upgrade, Dowling Rd. to 64 Avenue (ED 17-                                                                
32)" component  in the Grants to Municipalities  (AS 37.05.315)  BRU                                                            
and $270,000  general fund appropriation  on page 9, lines  13 - 16.                                                            
                                                                                                                                
This  amendment   also  inserts  a  "Municipality   of  Anchorage  -                                                            
Raspberry Road Upgrade,  Minnesota Drive to Arctic Boulevard (ED 17-                                                            
32)"  component   in  the  in  the  Grants  to  Municipalities   (AS                                                            
37.05.315)  BRU on page 9, lines 13  - 16 and appropriates  $270,000                                                            
general funds.                                                                                                                  
                                                                                                                                
Accompanying explanatory language reads as follows.                                                                             
                                                                                                                                
     According  to the Municipality  of Anchorage, sufficient  local                                                            
     bond  funding  is  available  to  complete  the  Laurel  Street                                                            
     Upgrade.  This  amendment  would  utilize  $270,000  previously                                                            
     identified  for Laurel Street  Upgrade to fund the State  owned                                                            
     portion of the Raspberry Road Upgrade project.                                                                             
                                                                                                                                
Co-Chair  Wilken  moved  for  the  adoption  of  Amendment  #13  and                                                            
objected  for  explanation.  He  stated  that this  is  a  technical                                                            
amendment to redirect funding  to upgrade Raspberry Road rather than                                                            
Laurel Street in Anchorage.  He noted that the funding element would                                                            
remain constant.                                                                                                                
                                                                                                                                
Co-Chair Wilken removed his objection.                                                                                          
                                                                                                                                
There being no further objection, Amendment #13 was ADOPTED.                                                                    
                                                                                                                                
Amendment #14:  This amendment to  the Department of Transportation                                                             
and Public Facilities budget is outlined in a letter to the co-                                                                 
chairs  of  the Senate  Finance  Committee  and  the  House  Finance                                                            
Committee  from Cheryl Frasca,  Director,  Office of Management  and                                                            
Budget, dated May 6, 2003, as follows.                                                                                          
                                                                                                                                
     Amendment 1                                                                                                                
     Amends the title of the Surface Transportation Program                                                                     
     allocation                                                                                                                 
     From:                                                                                                                      
     "Anchorage Metropolitan Area Transportation System 2004                                                                    
     Preventative Maintenance on State Roads"                                                                                   
     To:                                                                                                                        
     "Anchorage Metropolitan Area Transportation System 2004                                                                    
     Preventative Maintenance State and Local Roads"                                                                            
                                                                                                                                
     Amendment 2                                                                                                                
     Amends the title of the Surface Transportation Program                                                                     
     allocation                                                                                                                 
     From:                                                                                                                      
     "Fairbanks Metropolitan Area Transportation System 2004                                                                    
     Preventative Maintenance on State Roads"                                                                                   
     To:                                                                                                                        
     "Fairbanks Metropolitan Area Transportation System 2004                                                                    
     Preventative Maintenance State and Local Roads"                                                                            
                                                                                                                                
[Note: The components are  not specified in the committee substitute                                                            
as indicated.]                                                                                                                  
                                                                                                                                
Co-Chair  Wilken  presented  Amendment  #14 on  behalf  of  Governor                                                            
Murkowski's Administration.                                                                                                     
                                                                                                                                
Co-Chair Wilken  communicated that this is a technical  amendment in                                                            
that  it  would expand  some  previously  adopted  AMATS  and  FMATS                                                            
project  titles to  include preventive  road  maintenance for  local                                                            
roads, in addition to State roads.                                                                                              
                                                                                                                                
Senator Taylor  asked for clarification that this  is a title change                                                            
rather than a reappropriation of funds.                                                                                         
                                                                                                                                
Senator  Stevens verified  that the  projects  have previously  been                                                            
approved  in the  legislation  and  that this  action  "is simply  a                                                            
technical correction."                                                                                                          
                                                                                                                                
There being no objection, Amendment #14 was ADOPTED.                                                                            
                                                                                                                                
Amendment #15: This amendment  adds a "City of Palmer - Eagle Avenue                                                            
Improvement   (ED  13-16)  component   and  $200,000  general   fund                                                            
appropriation to the Grants  to Municipalities (AS 37.05.315) BRU on                                                            
page 3, lines 21 and 22.                                                                                                        
                                                                                                                                
This amendment  also reduces the general fund appropriations  in the                                                            
following  amounts  to the  following components  in  the Grants  to                                                            
Municipalities (AS 37.05.315) BRU.                                                                                              
                                                                                                                                
     Page 5, lines 23 - 25                                                                                                      
     City of Wasilla - Gravel to Asphalt Road Program (ED 13-16)                                                                
     Reduce $250,000 to $150,000                                                                                                
                                                                                                                                
     Page 5, lines 26 - 28                                                                                                      
     City of Wasilla - Maintenance Building (ED 13-16)                                                                          
     Reduce $200,000 to $150,000                                                                                                
                                                                                                                                
     Page 5, lines 29 and 30                                                                                                    
     City of Wasilla - Sports Arena Equipment (ED 13-16)                                                                        
     Reduce $75,000 to $25,000                                                                                                  
                                                                                                                                
Accompanying explanatory language reads as follows.                                                                             
                                                                                                                                
     The net  impact of this amendment  to CS SB 100 (FIN)  is zero.                                                            
     Eagle Avenue  is a significant collector street  connecting the                                                            
     Glenn Highway  with north Palmer neighborhoods  and the Sherrod                                                            
     School  and Swanson School complex.  The street is presently  a                                                            
     gravel  street.  This project  will reconstruct  approximately                                                             
     2,000 feet of Eagle  Avenue from the Glenn Highway to the North                                                            
     Valley  Way intersection  to a paved  street with drainage  and                                                            
     sidewalk  improvements. This  project is important to  the City                                                            
     as a new  elementary school located at the end  of Eagle Avenue                                                            
     is opening in the fall of 2003.                                                                                            
                                                                                                                                
Co-Chair Green moved to adopt Amendment #15.                                                                                    
                                                                                                                                
Co-Chair Wilken objected for an explanation.                                                                                    
                                                                                                                                
Co-Chair  Green stated that  this amendment  would shift some  funds                                                            
from the City of Wasilla  to support a street project in the City of                                                            
Palmer.  She  noted   that  the  amendment  is  supported   by  both                                                            
communities and would produce a net zero affect on the budget.                                                                  
                                                                                                                                
Co-Chair Wilken removed his objection.                                                                                          
                                                                                                                                
There being no further objection, Amendment #15 was ADOPTED.                                                                    
                                                                                                                                
Amendment  #16: This amendment  adds a  "Federally Funded  Landowner                                                            
Incentive Program  - Bristol Bay/North Aleutians project"  component                                                            
and $1,642,500  federal funds to the Department of  Fish and Game on                                                            
page 23, line 21.                                                                                                               
                                                                                                                                
Senator Hoffman moved to adopt Amendment #16.                                                                                   
                                                                                                                                
Co-Chair Wilken objected.                                                                                                       
                                                                                                                                
Senator  Hoffman  spoke to  the  amendment  by specifying  that  the                                                            
amendment would  provide $1.6 million  in federal funds to  purchase                                                            
land. He informed  the Committee that  several land user  groups are                                                            
participating in this project.                                                                                                  
                                                                                                                                
Co-Chair Wilken  noted that a $500,000 [unspecified]  match would be                                                            
required  in order to  receive $1.6  million in  federal funds  with                                                            
which  to purchase  conservation easements  on private  land in  the                                                            
Dillingham/Bristol  Bay  region. He  reminded the  Committee of  its                                                            
"considerable  discussions"  regarding the  removal of private  land                                                            
from tax rolls and from  potential development. He stated that these                                                            
are the primary reasons for his objection to the amendment.                                                                     
                                                                                                                                
Senator Hoffman  understood that the  vast majority of the  affected                                                            
land would remain in private ownership.                                                                                         
                                                                                                                                
Co-Chair Wilken agreed,  but asserted that the conservation easement                                                            
might hinder future development of the land.                                                                                    
                                                                                                                                
PAT  WALKER,  Staff  to  Senator  Lyman  Hoffman,  informed  that  a                                                            
coalition comprised  of fishing guides,  local Native Corporations,                                                             
and local  community entities  has been formed  in Southwest  Alaska                                                            
with the  intent of  furthering  fishing and  sporting endeavors  to                                                            
provide future economic development opportunities in the region.                                                                
                                                                                                                                
Co-Chair Wilken  understood that a conservation easement  "would not                                                            
allow future development of the land."                                                                                          
                                                                                                                                
Ms. Walker responded that  the intent of the coalition is to open up                                                            
the region to these activities.                                                                                                 
                                                                                                                                
Senator  Taylor inquired  as  to how an  easement  would affect  the                                                            
viability  of the  land; specifically  how would  it "make  property                                                            
better or worse."                                                                                                               
                                                                                                                                
Ms. Walker  stated that the  coalition is  working to avoid  adverse                                                            
impacts on the land.                                                                                                            
                                                                                                                                
Senator  Taylor asked  for further  information  regarding  possible                                                            
adverse impacts.                                                                                                                
                                                                                                                                
Ms. Walker responded that pollution might be an adverse impact.                                                                 
                                                                                                                                
Senator  Taylor stated,  "that  development  could  only happen"  if                                                            
private owners  chose to sell the  land to developers or  develop it                                                            
themselves.                                                                                                                     
                                                                                                                                
Ms.  Walker  clarified  that  the  Southwest   Alaska  coalition  is                                                            
comprised  of a multitude  of people in the  area including  private                                                            
landowners.  She noted that a resolution  [copy on file]  in support                                                            
of the easement has been provided with the amendment.                                                                           
                                                                                                                                
Senator Hoffman  stated that,  without these  funds, the land  could                                                            
not be purchased and utilized  to enhance the economy of the region.                                                            
He asked  Ms. Walker how  the status of the  land would be  affected                                                            
were it not purchased.                                                                                                          
                                                                                                                                
Ms. Walker responded that she is unsure of the affect.                                                                          
                                                                                                                                
Co-Chair  Wilken  understood  that 10,000  acres  of land  could  be                                                            
purchased;  however,  he attested  that  the  acreage  has not  been                                                            
identified.                                                                                                                     
                                                                                                                                
Senator Bunde  commented that, "realistically  … the only  industry"                                                            
that could  be developed in this region  would be sport fishing  and                                                            
sport hunting. He voiced  that granting conservation easements would                                                            
have "little negative impact."                                                                                                  
                                                                                                                                
Co-Chair  Wilken characterized  this situation  as a "policy  call,"                                                            
since this transaction would involve mainly federal funds.                                                                      
                                                                                                                                
Senator  Taylor  asked  for  examples of  the  entities  that  would                                                            
provide the matching funds.                                                                                                     
                                                                                                                                
Ms. Walker stated  that, in addition to the $1.6 million  in federal                                                            
funds,   a  $500,000   local  match,   including   money  from   the                                                            
Conservation   Fund,  would  be  required.   She  stated   that  the                                                            
Department of  Fish and Game has been working with  the Conservation                                                            
Fund on this issue.                                                                                                             
                                                                                                                                
Senator  Taylor   asked  for  further   information  regarding   the                                                            
Conservation Fund organization.                                                                                                 
                                                                                                                                
Co-Chair Wilken  noted that he could  provide information  [copy not                                                            
provided] regarding  the Conservation Fund and the  Southwest Alaska                                                            
Coalition to Committee members.                                                                                                 
                                                                                                                                
Senator  Stevens  asked  the  current titleholder   of the  land  in                                                            
question.                                                                                                                       
                                                                                                                                
Senator Hoffman  responded that the land is private  property and he                                                            
assumed that it belonged to a Native corporation.                                                                               
                                                                                                                                
Senator Hoffman  removed his motion to adopt Amendment  #16 in order                                                            
to obtain further information to present to the Committee.                                                                      
                                                                                                                                
There being  no objection,  the motion  to adopt  Amendment #16  was                                                            
WITHDRAWN.                                                                                                                      
                                                                                                                                
Co-Chair   Wilken  stated   that  the  information   regarding   the                                                            
Conservation  Fund  and  the Southwest  Alaska  Coalition  would  be                                                            
provided to Members.                                                                                                            
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
                                                                                                                                
     HOUSE BILL NO. 170(efd fld S)                                                                                              
     "An Act increasing certain motor vehicle registration fees."                                                               
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken  noted that the House Rules Committee  presents this                                                            
legislation  at the  request of the  Governor. He  stated that  this                                                            
bill would  increase  motor vehicle  registration,  title, and  lien                                                            
filing fees.                                                                                                                    
                                                                                                                                
DUANE BANNOCK,  Director, Division of Motor Vehicles,  Department of                                                            
Administration testified  via teleconference from an offnet location                                                            
in Anchorage to  note that while the current vehicle  licensing fees                                                            
have "barely changed" in  thirty years, the expenses associated with                                                            
providing the  service have been increasing.  He explained  that one                                                            
of the  three primary  sections addressed  by the  bill pertains  to                                                            
non-commercial vehicles,  which account for approximately 70 percent                                                            
of  the  licensed  vehicles  in  the  State.  He  stated  that  this                                                            
classification  of  vehicles  would  be  assessed  a  $100  biennial                                                            
registration  fee, which  he stated  would be a  slight increase  in                                                            
fees. Furthermore,  he shared  that existing  pick-up truck  or non-                                                            
pick-up  truck   subsections  within   the  non-commercial   vehicle                                                            
classification would be eliminated.                                                                                             
                                                                                                                                
Mr. Bannock  continued  that the  second section  addressed in  this                                                            
legislation  specifies that commercial  vehicles would experience  a                                                            
ten-dollar   annual  registration   fee  increase.  He  noted   that                                                            
commercial  vehicle owners  would have  the option  of paying  their                                                            
fees on an annual or biennial basis.                                                                                            
                                                                                                                                
Mr.  Bannock noted  that  the third  section  would  provide for  an                                                            
increase in title, duplicate title, and lien fees.                                                                              
                                                                                                                                
Senator  Taylor asked  for more  information  regarding how  vehicle                                                            
weight would  affect the  registration fees  charged for  commercial                                                            
vehicles, as specified in Section 2 of the bill.                                                                                
                                                                                                                                
Mr.  Bannock   responded  that  the   State  has  established   four                                                            
commercial class fee structures,  based on vehicle weight. He stated                                                            
that the  amount of the  increase being proposed  would equate  to a                                                            
ten-dollar  across  the  board  annual  increase  of  current  fees.                                                            
Additionally, he noted  that an existing one-dollar annual reduction                                                            
incentive would be eliminated.                                                                                                  
                                                                                                                                
Senator  Bunde  moved  to  report  the  bill   from  Committee  with                                                            
individual recommendations and accompanying fiscal note.                                                                        
                                                                                                                                
Senator  Taylor  objected  to the  motion.  He voiced  concern  that                                                            
issues might develop  regarding a disproportionate  fee between some                                                            
of the various  classes of commercial vehicles such  as semi-tractor                                                            
trailers.                                                                                                                       
                                                                                                                                
Senator Taylor withdrew his objection.                                                                                          
                                                                                                                                
There being  no further objection;  HB 170(efd  fld S) was  REPORTED                                                            
from  Committee with  zero fiscal  note  #1 from  the Department  of                                                            
Administration.                                                                                                                 
                                                                                                                                
                                                                                                                                
     HOUSE BILL NO. 256                                                                                                         
     "An Act relating to a dividend payment to the state made by                                                                
     the Alaska Housing Finance Corporation each fiscal year; and                                                               
     providing for an effective date."                                                                                          
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken stated that  the House  Finance Committee  sponsors                                                            
this legislation, which  "amends and codifies the existing agreement                                                            
between  the  Alaska Housing  Finance  Corporation  (AHFC)  and  the                                                            
Legislature  regarding an annual AHFC  dividend." He continued  that                                                            
this legislation  would provide  for a  $103,000,000 dividend  while                                                            
maintaining AHFC's strong bond rating.                                                                                          
                                                                                                                                
Amendment #1:  This amendment changes  the fiscal year date  from FY                                                            
2007 to FY 2008  in Sec. 2, subsection (5)(B) on page  4, line 13 in                                                            
HB 256, Version  23-LS0838\I. This  language would read as  follows.                                                            
                                                                                                                                
          (B) minus the amount of money from the Alaska Housing                                                                 
     Finance  Corporation  used  during fiscal  year  2008 for  bond                                                            
     repayments  and other costs related  to the bonds issued  under                                                            
                                                                                                                                
Co-Chair  Wilken moved to  adopt Amendment  #1. He stated that  this                                                            
amendment addresses  a technical change  in the bill and  is offered                                                            
at the request of AHFC.                                                                                                         
                                                                                                                                
There being no objection, Amendment #1 was ADOPTED.                                                                             
                                                                                                                                
DAN  FAUSKE  CEO and  Executive  Director,  Alaska  Housing  Finance                                                            
Corporation, Department  of Revenue spoke in support of the bill. He                                                            
reviewed  that the AHFC  dividend transfer  plan was established  in                                                            
1995  as a  means of  transferring  some  of the  Corporation's  net                                                            
profits  to the  State  to support,  in  particular,  State  capital                                                            
projects. He stated that  a major concern addressed in those initial                                                            
discussions  was that the specified  transfer amount not  affect the                                                            
Corporation's  credit ratings. For numerous years,  he declared, the                                                            
total  annual transfer  amount  has been  $103 million,  based  on a                                                            
variety of factors including net income levels.                                                                                 
                                                                                                                                
Mr.  Fauske  expressed  that,  in recent  years,  the  reduction  in                                                            
lending interest  rates has  resulted in  a significant increase  in                                                            
the  Corporation's   lending  activities  as  well  as  "investment                                                             
earnings  on short-term monies."  However,  he informed that,  while                                                            
"the business  profile is  excellent, the  Corporation's net  income                                                            
has fallen."                                                                                                                    
                                                                                                                                
Mr. Fauske  explained that  in 2002, in  anticipation of  continuing                                                            
lower  net  income  levels,  AHFC  requested  that  the Legislature                                                             
readdress  the amount  of the AHFC  dividend paid  to the State.  He                                                            
informed that the Corporation's  FY 03 net income is projected to be                                                            
approximately $75.6 million;  and therefore, he asserted that a plan                                                            
must  be  developed  to  enable  the  Corporation   to  continue  to                                                            
contribute  the  $103  million  amount  "that the  State  has  grown                                                            
accustomed to."  Additionally, he stressed that the  plan must allow                                                            
the Corporation to be sustained  at a level that would not adversely                                                            
affect its  ability to conduct  its business.  He stressed  that the                                                            
level  must  also  be acceptable  to  the  financial  community  and                                                            
investors.                                                                                                                      
                                                                                                                                
Mr. Fauske noted that this  legislation would address these concerns                                                            
by proposing that "a percentage  of net program" be implemented that                                                            
would allow  a gradual  reduction  in the amount  of dividend  being                                                            
paid to the State. The  proposed plan, he explained, would allow the                                                            
total dividend  that would be paid  to the State for the  next three                                                            
fiscal years to  remain at the current $103 million  level and that,                                                            
by FY 09, the  amount of the dividend  would be calculated  at a 75-                                                            
percent of net  income level. He reminded that the  final payment on                                                            
a $50 million debt service  that AHFC assumed on behalf of the State                                                            
would be paid off in December of 2006.                                                                                          
                                                                                                                                
Mr.  Fauske  communicated   that  this  proposal  would   allow  the                                                            
Corporation to  increase its equity position; would  allow dividends                                                            
to be paid  to the State,  which is its  parental entity; and  would                                                            
provide the Corporation  with sufficient monies to  reinvest in AHFC                                                            
programs in order  to continue its viability and continue  to retain                                                            
its healthy  and  predictable profile  with financial  entities.  He                                                            
opined that  in consideration of the  Corporation's current  status,                                                            
"this is  a good  bill." He assured  that, as  the financial  market                                                            
progresses, the issue could be revisited.                                                                                       
                                                                                                                                
Senator Taylor asked whether  a separate proposal for a five-percent                                                            
of market value annual  dividend program would provide the stability                                                            
and  continuity  that AHFC  would  require.  Furthermore,  he  asked                                                            
whether a program  of this type would be more acceptable  to the New                                                            
York City Wall Street financial market than this legislation.                                                                   
                                                                                                                                
JOE DUBLER,  Chief Financial  Officer and  Finance Director,  Alaska                                                            
Housing Finance  Corporation, Department of Revenue  stated that the                                                            
amount of the  FY 04 transfer, based on this bill's  language, would                                                            
amount to  5.8 percent of  the Corporation's  total liquidity  as of                                                            
June 30, 2002. He stated  that this bill would allow the Corporation                                                            
to implement  a payout policy  based on net  income as opposed  to a                                                            
payout based  on net assets. He noted  that this predictable  payout                                                            
would be acceptable  to Wall Street investors and  would, therefore,                                                            
enable AHFC to  continue to fulfill its mission of  providing access                                                            
to housing for Alaskans.  He opined that paying a dividend "based on                                                            
percentage of net income is the appropriate approach" for AHFC.                                                                 
                                                                                                                                
Senator Taylor  acknowledged that  a dividend based on a  percent of                                                            
net income would be more  appropriate program as, he calculated that                                                            
a percent of asset  formula "would eventually, significantly  erode"                                                            
the Corporation's asset base.                                                                                                   
                                                                                                                                
                                                                                                                                
SFC 03 # 79, Side B 09:49 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator Taylor  furthered that a dividend  program that might  erode                                                            
the  Corporation's  asset  base  would  negate the  ability  of  the                                                            
Corporation to  lend money, which is the basis of  the Corporation's                                                            
mission.                                                                                                                        
                                                                                                                                
Mr. Fauske agreed.                                                                                                              
                                                                                                                                
Senator  Hoffman  stated  that  the  proposal   specifies  that  the                                                            
dividend to be  paid in fiscal years 2007 through  2009 would be 95,                                                            
85, and 75 percent of net  income, respectfully, based on the "prior                                                            
year's  income minus  debt service."  He asked  for  a recap of  the                                                            
formula specified for FY 04 through FY 06.                                                                                      
                                                                                                                                
Mr. Dubler clarified that  the annual dividend for fiscal years 2004                                                            
through 2006 would  be $103 million rather than a  percentage of net                                                            
income.                                                                                                                         
                                                                                                                                
Senator Hoffman asked how  $103 million would equate to a percentage                                                            
of net income basis.                                                                                                            
                                                                                                                                
Mr. Dubler  explained that the annual  dividend determination  would                                                            
be calculated  as a  percent of the  net income  of the base  fiscal                                                            
year, which  is the fiscal year ending  two years before  the end of                                                            
the current fiscal year.  In response to Senator Hoffman's question,                                                            
he calculated  that the $103 million dividend in FY  04 would equate                                                            
to 147 percent of the FY  02 net income; the FY 05 dividend would be                                                            
150  percent of  the  projected  FY 03  net income,  and  the FY  06                                                            
dividend  would equate  to 147 percent  of the  projected FY  04 net                                                            
income.                                                                                                                         
                                                                                                                                
Senator Hoffman  asked how these dividend  levels, which  are higher                                                            
than 100 percent of net  income, would affect the Corporation's bond                                                            
ratings with  consideration  given that, as  of FY 07; the  dividend                                                            
would be determined at a lower percentage of net income rate.                                                                   
                                                                                                                                
Mr. Fauske qualified  that the Corporation has been  paying out more                                                            
than it  has been earning  for several years.  He asserted  that the                                                            
dividend program specified  in this legislation recognizes that AHFC                                                            
is a strong financial institution  and that, while the FY 04, FY 05,                                                            
and FY  06 dividends  would  exceed net  income,  "relief" would  be                                                            
forthcoming in later years.                                                                                                     
                                                                                                                                
Mr. Fauske relayed that  "there has always been apprehension" in the                                                            
Stock Market  that the State  would request  dividends in excess  of                                                            
$103  million.   He  communicated   that  "the  strength"   in  this                                                            
legislation  is that it "would  place in  statute a predictable  and                                                            
sustainable  payout to the  State." He communicated  that while  the                                                            
investment  market  is  unpredictable,  expectations  are  that,  in                                                            
contrast to the  current refinancing trend, the next  market "cycle"                                                            
would  allow  the  Corporation  to experience  an  increase  in  net                                                            
profits due to an increase  in conventional loans to first-time home                                                            
buyers  and   an  increase   in  the  interest   levels  earned   on                                                            
Corporation's  investments. He stated  that during discussions  with                                                            
the rating  agencies, it is recognized  that AHFC must begin  making                                                            
contributions into its "equity positions" over time.                                                                            
                                                                                                                                
Mr.  Dubler commented  that  this  legislation  is based  on  AHFC's                                                            
historical   financial  projection   methodology  that  takes   into                                                            
consideration  such things as the Corporation's long-term  bonds. He                                                            
noted that  while AHFC's longer-range  financial projection  mode is                                                            
atypical to  the normal State financial  projection methodology,  it                                                            
"has worked very well" for the Corporation.                                                                                     
                                                                                                                                
Co-Chair  Wilken asked the  Corporation to  distribute to  Committee                                                            
members a pro  forma document titled  "Summary of Projected  Amounts                                                            
Available  for Appropriation"   [copy on  file] that  was  developed                                                            
during  initial  discussions  on  this  bill. He  stated  that  this                                                            
document  would  provide Members  with  projected  dividend  amounts                                                            
based on a percent of net income formula.                                                                                       
                                                                                                                                
Co-Chair  Wilken pointed  out that  other material  in the  Members'                                                            
packet includes  a Moody's Investors  Service report [copy  on file]                                                            
dated  March 2003  that  specifies that,  of  the 15  states with  a                                                            
Housing  Finance  Corporation  (HFC),  Alaska's  program  is  ranked                                                            
number two "in its contribution  back to the State." Furthermore, he                                                            
noted  that  the report  highlights  the  concern  that  states  are                                                            
demanding higher  levels of contribution from their  HFCs. He called                                                            
to  the Committee's  attention  the  fact  that AHFC  contributes  a                                                            
"significantly"  higher amount per  capita than other HFC  programs.                                                            
                                                                                                                                
Co-Chair Green  voiced that the sponsor's  statement "implies"  that                                                            
the AHFC  dividend would  fund debt  service for  certain bonds  and                                                            
capital projects.  However,  she noted that  language in Section  1,                                                            
page 1, beginning  on line 7, specifies  that, "the legislature  may                                                            
appropriate  the  dividend  for capital  projects."  She  questioned                                                            
whether this language  should be changed to include  the phrase debt                                                            
service.                                                                                                                        
                                                                                                                                
Mr. Dubler  responded that debt service  is addressed in  Section 1,                                                            
subsection (2) that reads as follows.                                                                                           
                                                                                                                                
     (2) minus the amount of money from the corporation used during                                                             
     that current fiscal year for bond repayment and other costs                                                                
     related to the bonds issued under                                                                                          
        (A) ch.26, SLA 1996, up to a maximum of $1,000,000;                                                                     
          (B) sec. 10(b), ch. 130, SLA 2000;                                                                                    
          (C) sec. 1, ch. 1, SSSLA 2002; and                                                                                    
                                                                                                                                
Co-Chair Green surmised,  therefore, that this language provides for                                                            
the inclusion of the debt service in the calculation.                                                                           
                                                                                                                                
Mr. Dubler concurred.                                                                                                           
                                                                                                                                
Co-Chair Green noted that  separate legislation being entertained by                                                            
the  Committee contains  a  different definition  of  the term  "net                                                            
income." Therefore,  she questioned  "the appropriateness"  of there                                                            
being multiple definitions of this term in State regulations.                                                                   
                                                                                                                                
Mr. Dubler  explained that  the difficulty  in arriving at  a single                                                            
definition  of the term net  income arises  from ongoing changes  in                                                            
the nationally  recognized General  Accounting Standards.  He stated                                                            
that programs have been  formulated using whatever definition was in                                                            
effect at  the time. Therefore,  he attested  that to adjust  to one                                                            
terminology  would   be  tedious;  and  therefore,  each   situation                                                            
involving net income is defined accordingly.                                                                                    
                                                                                                                                
Co-Chair  Green  continued  to voice  concern  that  State  statutes                                                            
incorporate  numerous definitions  of net income. She asked  whether                                                            
crafting one definition would be possible.                                                                                      
                                                                                                                                
Mr.  Dubler  stated that  a  goal  of financial  accountants  is  to                                                            
develop one definition.  Unfortunately, he stated, the process might                                                            
be lengthy due  to the multitude of entities and terminologies  that                                                            
would be affected.                                                                                                              
                                                                                                                                
Co-Chair  Green voiced frustration  at being  required to  determine                                                            
which  net   income  definition  is   specific  to  each   piece  of                                                            
legislation being addressed.                                                                                                    
                                                                                                                                
Senator Hoffman  asked the present AHFC financial  rating as well as                                                            
what bond rating  projections the  Corporation expects after  FY 04.                                                            
Furthermore, he  asked what type of housing loans  would be expected                                                            
based on State population growth forecasts.                                                                                     
                                                                                                                                
Mr. Fauske stated  that currently the Corporation  has an AA and AA+                                                            
rating by two  major rating agencies;  however, he voiced  that were                                                            
the ratings determined  by statistical analysis, AHFC would be rated                                                            
AAA as it is one of the  strongest performing HFAs in the nation. He                                                            
voiced that the  official rating is affected by subjective  criteria                                                            
based on  such things  as the  State's economy,  the State's  fiscal                                                            
gap,  the activity  in  Prudhoe Bay,  and  the fishing  industry  in                                                            
Bristol Bay.  He credited  the Legislature  for honoring the  intent                                                            
language specified  in every AHFC  appropriation bill, as  he stated                                                            
that  that action  has  allowed AHFC  to  maintain its  high  credit                                                            
rating.                                                                                                                         
                                                                                                                                
Mr. Fauske  predicted  that were  this legislation  adopted,  AHFC's                                                            
credit rating  would further improve and that the  Corporation would                                                            
be able  to contribute more  to the State  without jeopardizing  its                                                            
ability to carry out its  mission or negatively affecting its credit                                                            
rating.                                                                                                                         
                                                                                                                                
Mr. Fauske continued  that AHFC tracks the economy  closely in order                                                            
to  effectively   anticipate  future   business  opportunities.   He                                                            
attested that such things  as unemployment and demographics changes,                                                            
including an aging  population, are monitored. He  stressed that the                                                            
job market is  critical to a healthy economy, as jobs  are necessary                                                            
to attract  younger  people  who might  purchase  homes and  require                                                            
loans. He avowed  that because AHFC  is a strong entity with  a good                                                            
market share,  financial programs such as Fanny Mae  and Freddie Mac                                                            
and other major lenders  are able to operate in the State. He voiced                                                            
confidence  that  the  Legislature  would   adequately  address  the                                                            
State's  fiscal situation,  as  he qualified  that  a healthy  State                                                            
fiscal plan  is important to the State  and to the success  of AHFC.                                                            
                                                                                                                                
Mr. Fauske  stressed that the housing  market must be sustained,  as                                                            
it is a "big player" in  the State's economy in that it "occupies 25                                                            
percent of the State's domestic product."                                                                                       
                                                                                                                                
Senator Hoffman  concluded therefore, that AHFC does  not anticipate                                                            
a drop in their bond ratings through FY 09.                                                                                     
                                                                                                                                
Mr. Fauske affirmed.                                                                                                            
                                                                                                                                
Senator Taylor  voiced that this legislation would  establish policy                                                            
regarding AHFC  dividends today and for the future.  He allowed that                                                            
while  the proposed  formula  could be  changed in  the future,  the                                                            
proposal  currently  "gives an  illusion to  the market  and to  the                                                            
people of Alaska"  that the State "would not get so  desperate as to                                                            
liquidate an asset"  that provides funds to the State.  "As a fiscal                                                            
conservative,"  he argued that the legislation should  be altered to                                                            
eliminate the  requirement of a $103 million dividend  in FY 04, and                                                            
immediately  set in  motion the  proposed percentage  of net  income                                                            
payout as, he declared,  that continuing the status quo dividend for                                                            
three years would be an invasion of the Corporation's corpus.                                                                   
                                                                                                                                
Co-Chair Green  asked regarding the recurring phrase  "unrestricted,                                                            
unencumbered money  of the corporation" in Sec. 2  subsection (2)(C)                                                            
located  on page 3,  lines 1 -3  and Sec. 2,  subsection (3)  (C) on                                                            
page 3, lines 25-27 that reads as follows                                                                                       
                                                                                                                                
          (2)(C) minus any appropriation of unrestricted,                                                                       
     unencumbered money  of the corporation during fiscal year 2005,                                                            
     other  than an appropriation  for the  corporation's  operating                                                            
     budget;                                                                                                                    
                                                                                                                                
          (3)(C) minus any appropriation of unrestricted,                                                                       
     unencumbered money of the corporation during fiscal year 2006,                                                             
     other than an appropriation for the corporation's operating                                                                
     budget;                                                                                                                    
                                                                                                                                
Mr. Dubler responded  that this language is included  "in an attempt                                                            
to make an all  encompassing reference" to all funds  transferred to                                                            
the State  by the Corporation  in order to  prevent the Legislature                                                             
from classifying  some of those funds  as non-dividends,  and saying                                                            
that "they don't count."                                                                                                        
                                                                                                                                
Co-Chair  Green asked  whether this  language is  a change from  the                                                            
historical recognition  of transferred funds, and  she asked whether                                                            
it would allow funds to be "manipulated."                                                                                       
                                                                                                                                
Mr. Dubler responded that  the concept of this language is to define                                                            
which  funds being  transferred  from AHFC  to the  State should  be                                                            
recognized as "a dividend."                                                                                                     
                                                                                                                                
Senator Taylor  ascertained, therefore,  that other funds  the State                                                            
might  receive   from  AHFC  would   be  classified  as   "operating                                                            
expenses."                                                                                                                      
                                                                                                                                
Mr. Dubler reiterated that  the intent of the language is to clarify                                                            
which  of  the  funds  being  transferred  to  the  State  would  be                                                            
considered  dividends.  He  communicated  that  the  bill  could  be                                                            
amended to provide further clarification.                                                                                       
                                                                                                                                
Senator  Taylor  moved  to  report  the  bill  from  Committee  with                                                            
individual recommendations and accompanying fiscal note.                                                                        
                                                                                                                                
There  being  no objection,  SCS  HB  256 (FIN)  was  REPORTED  from                                                            
Committee with  zero fiscal note #1 from the Department  of Revenue.                                                            
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 202                                                                                                        
     "An Act relating to school transportation; relating to the                                                                 
     base student allocation used in the formula for state funding                                                              
     of public education; and providing for an effective date."                                                                 
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken  stated that the Senate  Finance Committee  sponsors                                                            
this legislation.  He shared that this legislation  would change the                                                            
methodology  of  the  grant  program  that  the State  has  used  to                                                            
reimburse  K-12 public education  school districts  for local  pupil                                                            
transportation expenses.  In addition, he stated that the bill would                                                            
increase  the per  student  base allocation  funding  to $4,169,  an                                                            
increase  of $159  per student,  by absorbing  Learning Opportunity                                                             
Grants  that   total  $2.2  million   into  the  student   education                                                            
foundation  formula. Co-chair  Wilken suggested  that the  Committee                                                            
address these two bill components separately.                                                                                   
                                                                                                                                
JOHN ALCANTRA,  Government  Relations Director,  National  Education                                                            
Association  of Alaska (NEA-Alaska)  stated that the State's  12,700                                                            
public school  employees who belong  to NEA-Alaska realize  that the                                                            
Committee's recently adopted  operating budget bill is contingent on                                                            
the two issues  addressed in this  bill. He voiced appreciation  for                                                            
the Committee's  efforts  toward increasing  the  level of the  base                                                            
student allocation  funding which  he declared would provide  school                                                            
districts  "stability of  funding and  help them  reach some  of the                                                            
requirements of the State (Education) Standards."                                                                               
                                                                                                                                
Mr. Alcantra voiced appreciation  for the $159 per student increase,                                                            
but announced  that NEA-Alaska's "ultimate" base student  allocation                                                            
goal  is $4,280  per  student.  He communicated  that  according  to                                                            
nationally recognized  business research [not provided],  the $4,280                                                            
funding level would assist  school districts in addressing projected                                                            
"one-year  inflationary  costs and just  one year  of unmet  needs."                                                            
Continuing, he informed  the Committee that this research recommends                                                            
a five-year phased in increase  of $365 per student, plus additional                                                            
funds to address  the inflationary  erosion of funding. However,  he                                                            
stated, that  in recognition of the  State's fiscal situation,  NEA-                                                            
Alaska is  limiting their  funding request  to the one-year  funding                                                            
request of  $4,280 per student.  He stated  that this request  would                                                            
cost the State  an additional $23 million in FY 04  and would assist                                                            
in accomplishing the State's  constitutionally mandated provision to                                                            
provide quality public education.                                                                                               
                                                                                                                                
Mr. Alcantra  reminded Committee members  that the FY 03  budget was                                                            
based on a  specific crude oil barrel  price along with a  specified                                                            
draw on the  Constitutional Budget  Reserve (CBR). He attested  that                                                            
because the average  price per barrel for the initial  ten months of                                                            
the fiscal year exceeded  the specified price, the amount drawn from                                                            
the CBR account  was reduced. Therefore,  he suggested that  some of                                                            
those CBR savings could  be used to support the proposed $23 million                                                            
FY 04 funding  increase that would  be needed to adequately  support                                                            
student education funding.                                                                                                      
                                                                                                                                
[NOTE: At  this point,  a brief and indiscernible  dialogue  between                                                            
Senator Bunde and the testifier transpired.]                                                                                    
                                                                                                                                
Senator Bunde  asked whether  a "guarantee  of results" such  as the                                                            
majority  of high school  students passing  the State's High  School                                                            
Graduation  Qualifying Examination  (HSGQE), could be provided  were                                                            
this funding request approved.                                                                                                  
                                                                                                                                
Mr.  Alcantra  remarked that  education  standard  requirements  are                                                            
important. He stated that  no guarantees could be provided to ensure                                                            
that all students,  including those  identified by measures  such as                                                            
the federal  No Child Left  Behind Act, would  pass the high  school                                                            
exit exam; however, he  avowed that an appropriate education funding                                                            
level would assist districts  in providing the most important aspect                                                            
of  an  education  which  is providing   quality  teachers,  quality                                                            
support professionals and other necessary resources.                                                                            
                                                                                                                                
Co-Chair Wilken  mentioned that Senator  Bunde was one of  the prime                                                            
sponsors of the HSGQE legislation.                                                                                              
                                                                                                                                
BRUCE  JOHNSON, Representative,  the  Alaska Association  of  School                                                            
Boards,  thanked  the  Committee  for  consolidating   the  Learning                                                            
Opportunity  Grants into  the total  funding allocated  to the  base                                                            
student  allocation  formula  as it  would  assist  school  district                                                            
funding. He testified that  while the issue of flat funding remains,                                                            
it could be addressed at another time.                                                                                          
                                                                                                                                
Senator  Hoffman voiced  concern regarding  "the  eroding floor"  of                                                            
unmet funding  needs, as referenced in the "Change  to Floor" column                                                            
in the  Department's  fiscal note  #1 analysis.  He noted that  were                                                            
this legislation  adopted,  $1.4 million would  be allocated  toward                                                            
that eroding floor; however,  he asked the Department to provide the                                                            
Committee  with the remaining  "unmet" funding  need level  for each                                                            
school district.                                                                                                                
                                                                                                                                
Co-chair Wilken  stated that the Department  of Education  and Early                                                            
Development  would  address  Senator Hoffman's  concern  during  its                                                            
forthcoming testimony.                                                                                                          
                                                                                                                                
MARY   FRANCIS,   Representative,   Alaska   School  Administrators                                                             
Association, testified  that the administrators "add  their voice to                                                            
those who support  the increase in  the base student allocation"  as                                                            
it assists in addressing  the funding "erosion" that has been taking                                                            
place.  She avowed that,  "this is  a more  protected mechanism  for                                                            
raising the student allocation."                                                                                                
                                                                                                                                
Co-Chair Wilken  stated that this concludes the testimony  regarding                                                            
the  base  student   allocation  funding.  He  specified   that  the                                                            
transportation component of the bill would now be addressed.                                                                    
                                                                                                                                
EDDY JEANS,  School  Finance Manager,  Department  of Education  and                                                            
Early Development,  responded to Senator  Hoffman's "eroding  floor"                                                            
question  by   stating  that  the   Department  would  develop   and                                                            
distribute to  Members a schedule that would reflect  "the remaining                                                            
balance of  the supplemental funding  floor" were this bill  to take                                                            
effect.   He  estimated   that,  were  this   legislation   adopted,                                                            
approximately  $1.5 million could be allocated toward  the remaining                                                            
supplemental  funding floor balance  of approximately $9.5  million.                                                            
                                                                                                                                
Co-Chair  Wilken read  from a  school transportation  cost  schedule                                                            
[not provided]  that denoted  the increase  in pupil transportation                                                             
expenses from  FY 97 to FY 03. He  stated that transportation  costs                                                            
in FY 97 amounted  to $32.8 million in general funds  and a total of                                                            
$53.9  million  in general  funds  in FY  03.  He stated  that  this                                                            
equates  to an  eleven-percent  increase per  year.  He stated  that                                                            
numerous options, such  as awarding contracts, are being proposed to                                                            
address this expense.                                                                                                           
                                                                                                                                
Mr. Jeans explained  that currently  the State reimburses  districts                                                            
for  transportation  expenses  according   to specified   percentage                                                            
levels  that are  determined  by such things  as  whether the  route                                                            
meets  the minimum  distance  from  a school  or meets  the  minimum                                                            
number  of students  per route  requirements.  He  pointed out  that                                                            
exceptions  are  currently  in  place  to  allow  reimbursement  for                                                            
situations wherein a local  school board might authorize a bus route                                                            
in an area that  does not meet the minimum distance  requirement but                                                            
is deemed to have hazardous conditions.                                                                                         
                                                                                                                                
Mr.  Jeans stated  that,  in  an effort  to  contain transportation                                                             
expenses,  this proposal  would  provide a  grant  to each  district                                                            
based on  the total amount  of the district's  FY 03 transportation                                                             
expenses divided  by the number of  students enrolled that  year. He                                                            
continued that the resulting  number would be identified as the base                                                            
per student  dollar. This  base dollar amount,  he continued,  would                                                            
then be  multiplied by  the current year's  enrollment to  determine                                                            
the grant total,  specific to that district. He mentioned  that were                                                            
the district  to lower  its transportation  costs by, for  instance,                                                            
consolidating  routes, the  resulting savings  could be used  by the                                                            
district for other purposes.                                                                                                    
                                                                                                                                
Mr.  Jeans  pointed  out  that,  even  though   the  Department  has                                                            
encouraged  districts  to seek  transportation  efficiencies,  costs                                                            
have  continued   to  increase.  He   noted  that  in  addition   to                                                            
reimbursing  districts   for  their  transportation   expenses,  the                                                            
current  program  includes  a provision  that  provides  a  built-in                                                            
inflation factor allowance.                                                                                                     
                                                                                                                                
Mr. Jeans attested,  that, in his  experience, these transportation                                                             
contracts  have  not provided  savings  because  "there  was  little                                                            
incentive"  to the school  district  to negotiate  the price  of the                                                            
contract  with the  transportation  provider.  He stated  that  this                                                            
grant program  would provide the district with "the  flexibility" to                                                            
negotiate with the provider.                                                                                                    
                                                                                                                                
Co-Chair  Wilken  referred   the Committee   to  the  Department  of                                                            
Education  and Early Development  fiscal note  #2 which denotes  the                                                            
impact of the grant program on each school district.                                                                            
                                                                                                                                
Co-chair  Wilken asked  Mr. Jeans  to explain  the  "$1,200 cap  per                                                            
student" as noted in the fiscal note #2 spreadsheet.                                                                            
                                                                                                                                
Mr.  Jeans  responded  that  the  Department  is  making  a  "policy                                                            
statement"  by specifying  $1,200  as the  maximum  limit the  State                                                            
would pay per  student for transportation expenses.  He communicated                                                            
that five districts currently  exceed this limit: the Alaska Gateway                                                            
District  with  a  rate of  $1,464  per  student;  the  Bristol  Bay                                                            
District  with a rate of  $1,322; the Copper  River District  with a                                                            
rate of  $1,300; the Delta/Greely  District  with a rate of  $1,351;                                                            
and the Southeast Island  District with a rate of $1,234. He pointed                                                            
out that private  entities are under contract in these  districts to                                                            
provide   student  transportation.   He  commented   that,   "it  is                                                            
conceivable"  that districts  could reduce  transportation costs  by                                                            
conducting that service "in-house."                                                                                             
                                                                                                                                
Mr. Jeans allowed  that costs would  be more difficult to  negotiate                                                            
in areas where there is a single bidder or limited competition.                                                                 
                                                                                                                                
Senator  Taylor   summarized  that  this  legislation   would  allow                                                            
individual school  districts to receive transportation  funding, but                                                            
at a level based upon their FY 03 funding.                                                                                      
                                                                                                                                
Mr. Jeans affirmed  that the determination would be  based on the FY                                                            
03  per student  transportation  funding  amount  as it  relates  to                                                            
current student  enrollment. He voiced that were student  enrollment                                                            
to lower or increase, the amount allocated would follow suit.                                                                   
                                                                                                                                
Co-Chair  Wilken opined  that this  methodology,  if adopted,  would                                                            
continue until such time as the Legislature changes it.                                                                         
                                                                                                                                
Mr. Jeans concurred.  He forecast  that the Legislature might  alter                                                            
the amount as a result  of school district lobbying for a percentage                                                            
increase that would be allocated across the board.                                                                              
                                                                                                                                
Senator  Taylor asked  whether  this legislation  could  "lock in  a                                                            
number" on a statewide basis.                                                                                                   
                                                                                                                                
Mr. Jeans  stated that  rather than designating  a specific  amount,                                                            
the grant level  would fluctuate according  to a district's  student                                                            
enrollment each  year. He stated that this proposal  is projected to                                                            
cost the State $54 million in FY 04.                                                                                            
                                                                                                                                
Senator Taylor  surmised that were the number of students  to remain                                                            
the same, the grant total would remain constant.                                                                                
                                                                                                                                
Mr. Jeans concurred.                                                                                                            
                                                                                                                                
Senator Taylor  argued, therefore,  that this proposal would  reward                                                            
districts  with  increasing  enrollment   and  "punish"  those  with                                                            
lowering enrollment.                                                                                                            
                                                                                                                                
Mr.  Jeans  countered that  the  current  reimbursement  program  is                                                            
viewed by school districts  as a punishment "because their contracts                                                            
have inflationary adjustments  built into them." He stated that this                                                            
"vested interest" proposal  would provide districts with the ability                                                            
to negotiate contracts  and to revisit their current  transportation                                                            
system in order to reduce  costs or generate savings. These savings,                                                            
he attested, could then  be used for other purposes in the district.                                                            
                                                                                                                                
Mr.  Jeans  expressed  that,  under the  current  system,  were  the                                                            
Municipality  of Anchorage  to lower its  transportation costs,  the                                                            
savings generated  at the State level  would then be distributed  to                                                            
other areas of the State  as opposed to being allocated toward other                                                            
Anchorage expenses.  He stated that  were this legislation  adopted,                                                            
in this  scenario, Anchorage  would retain  those savings and  could                                                            
use them as determined by the district.                                                                                         
                                                                                                                                
                                                                                                                                
SFC 03 # 80, Side A 10:37 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator Taylor  agreed that  this would be  beneficial to  districts                                                            
that  have  this  ability;  however,  he  expressed  that  districts                                                            
experiencing  a declining  enrollment would  suffer. He argued  that                                                            
the proposal does not address  the fact the districts with declining                                                            
enrollment would  still be required "to pick up students  at the end                                                            
of the  road." Districts  with  declining enrollment,  he  attested,                                                            
would  receive   "a  double   hit"  as  they   would  receive   less                                                            
transportation   money  and  less   money  from  the  base   student                                                            
allocation  factor. He stated  that this  proposal should include  a                                                            
hold harmless clause for districts with decreasing enrollment.                                                                  
                                                                                                                                
Senator Hoffman acknowledged  Senator Taylor's concern regarding the                                                            
expenses  and  requirements  that  face  districts   with  declining                                                            
enrollment.  Furthermore, he  voiced concern  that this legislation                                                             
would punish  rather than reward those  districts that have  already                                                            
lowered  their transportation  expenses,  by receiving  a lower  per                                                            
student amount  than awarded  to those districts  that have  exerted                                                            
little effort  toward addressing the  issue. He commented  that this                                                            
raises a question of fairness.                                                                                                  
                                                                                                                                
Mr. Jeans verified  that the proposal  is based on current  district                                                            
expenditures.  He  acknowledged  that  some  districts  with  single                                                            
transportation  bidders have  experienced  substantial increases  in                                                            
expenses  as opposed to  districts with  competitive situations.  He                                                            
continued  that,   by  providing  their  own  transportation,   some                                                            
districts might experience "cheaper transportation."                                                                            
                                                                                                                                
Mr. Jeans remarked  that the Administration's  position is  that the                                                            
current reimbursable  system does not promote cost  containment, and                                                            
he commented that this  proposal would allow local districts to make                                                            
independent  decisions  regarding  transportation.  Furthermore,  he                                                            
stated  that current  regulations  allow  districts  to charge  user                                                            
fees,  but he remarked  that because  districts  are reimbursed  for                                                            
their expenses,  this option  is not utilized.  He stated that  this                                                            
option would continue to be available under the new system.                                                                     
                                                                                                                                
Senator Hoffman  reiterated that districts  whose expenses  approach                                                            
the $1,200  per student limit could  realize "substantial  savings;"                                                            
however, he contested that  the districts "that are well below" that                                                            
limit would not have similar  options. He suggested that a flat rate                                                            
per student be  provided to all districts as he attested  this might                                                            
address the inherent problem with this proposal.                                                                                
                                                                                                                                
STEVE KALMES, Director  of Transportation, Anchorage School District                                                            
testified via  teleconference from Anchorage to voice  that contrary                                                            
to the  Department's testimony,  he does  not contribute the  rising                                                            
costs  of  student  transportation  to  the  current  reimbursement                                                             
program, as he  contended, such things as the cost  of buses, wages,                                                            
driver training,  fuel, and insurance drive expenses.  He noted that                                                            
adherence  to the Department  of Education  and Early Development's                                                             
mandate  that transportation  must  be  provided for  special  needs                                                            
students incurs enormous expense to the District.                                                                               
                                                                                                                                
Mr. Kalmes disclosed  that, in order to contain costs,  the District                                                            
has actively  sought  bidders and,  with five  bidders, "the  prices                                                            
were what  they were." He  communicated that  one of the  District's                                                            
largest concerns  regarding  this grant proposal  is how to  address                                                            
the high cost  of transporting special needs students.  He disclosed                                                            
that the costs  associated with transporting special  needs students                                                            
amount  to  approximately   42  percent  of  the  District's   total                                                            
transportation  expenses  and  equates  to  ten times  the  cost  of                                                            
transporting  a regular program  child. He  exampled that "the  most                                                            
expensive route in the  district" is the one that transports special                                                            
needs students  from the  Mat-Su valley to  the Alaska State  School                                                            
for  the Deaf  that  the District  operates  for the  Department  of                                                            
Education and Early Development.                                                                                                
                                                                                                                                
Mr.  Kalmes understood  that  the  grant  amount would  increase  as                                                            
enrollment climbed;  however, he voiced surprise that  funding would                                                            
decrease were  the opposite to occur.  He stated that as  enrollment                                                            
increases,  those  students  are absorbed  within  an  existing  bus                                                            
route. However,  he contended that were the number  of students on a                                                            
particular route  to decline, that route would still  be required to                                                            
operate. He suggested that,  were the grant program implemented, the                                                            
FY 03 base level  be used as the level that funding  not drop below.                                                            
                                                                                                                                
Co-Chair Green communicated  that she had served on a committee that                                                            
addressed the needs of  special education programs in the State. She                                                            
noted that  the Anchorage  School District  met with that  committee                                                            
regarding the  numerous education  programs the District  conducted.                                                            
She identified  that  many of those  programs  were optional  rather                                                            
than mandatory  programs. Therefore, she asked whether  the District                                                            
was mandated to operate the Alaska School for the Deaf (ASD).                                                                   
                                                                                                                                
Mr. Kalmes  responded that the District  is under contract  with the                                                            
Department  of Education and Early  Development to operate  the ASD.                                                            
He could not  verify whether the program  was mandated or  optional.                                                            
                                                                                                                                
Co-Chair Green identified  ASD as being an optional program, and she                                                            
asserted  that  the costs  associated  with  running  that  program,                                                            
including  transportation costs,  are included  in the base  student                                                            
allocation  calculation.   She  stated  that  the  District   should                                                            
identify which  programs are conducted  on an optional, contractual                                                             
basis verses those that are mandated.                                                                                           
                                                                                                                                
Senator Olson asked whether  the special needs bus transportation is                                                            
provided by the District.                                                                                                       
                                                                                                                                
Mr.  Kalmes responded  that  the transportation  is  comprised of  a                                                            
combination of District and contracted routes.                                                                                  
                                                                                                                                
BARBARA  SCHUHMANN,   Parent,  testified  via  teleconference   from                                                            
Fairbanks  to suggest  that the  Department of  Education and  Early                                                            
Development  leave the  current program  in place.  She opined  that                                                            
other cost containment  options such as a route analyses, exist. She                                                            
continued that  this legislation contains  assumptions such  as that                                                            
the same percentage  of students rides  buses in every district  and                                                            
that  all costs  are  equal in  all districts.  She  specified  that                                                            
parents  rely on  school bus  service,  and she  expressed that  the                                                            
service  should be  viewed  as a transportation   and public  safety                                                            
service rather  than being  viewed as an  education system  service.                                                            
She stressed  that the risks involved  in reducing routes  should be                                                            
investigated.                                                                                                                   
                                                                                                                                
Senator  Bunde  asked whether  school  districts,  particularly  the                                                            
Anchorage  School District,  have considered  charging user  fees to                                                            
assist in offsetting the cost of school transportation.                                                                         
                                                                                                                                
Mr.  Kalmes  responded  that  an  Anchorage   citizen  review  panel                                                            
recently  asked the Department  of Education  and Early Development                                                             
how  a user  fee  program would  affect  the  current reimbursement                                                             
system.  He  commented  that  the  current  policy  tends  to  be  a                                                            
disincentive  to this  approach  because the  Department  determined                                                            
that the reimbursement  amount would  be lowered by the same  amount                                                            
collected from the user fees.                                                                                                   
                                                                                                                                
Mr.  Jeans verified  that  other  districts  have not  pursued  this                                                            
option for that very reason.                                                                                                    
                                                                                                                                
Senator Bunde asked whether  this option would be possible under the                                                            
grant program system being proposed.                                                                                            
                                                                                                                                
Mr. Jeans responded  that a rider fee could be collected  without an                                                            
impact on the proposed grant system.                                                                                            
                                                                                                                                
Senator Taylor  countered that there is no language  in the proposed                                                            
grant  system  that would  require  a transportation   system to  be                                                            
operated;  therefore, he  declared that a  District could  eliminate                                                            
transportation and keep the money.                                                                                              
                                                                                                                                
Co-Chair Wilken  stated that this  scenario would be a local  issue.                                                            
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
RECESS 10:56 AM / 5:38 PM                                                                                                       
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 125(TRA)                                                                                            
     "An  Act relating  to  protests of  state contract  awards,  to                                                            
     claims on state contracts,  to the arbitration of certain state                                                            
     construction  contract  claims,  and  to hearings  and  appeals                                                            
     under the State Procurement  Code; making conforming amendments                                                            
     in the State  Procurement Code; and providing  for an effective                                                            
     date."                                                                                                                     
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken informed  that this  legislation  would reform  the                                                            
method  through which  construction  claims  against  the State  are                                                            
addressed. He  relayed that, approximately a year  prior at a Senate                                                            
Transportation  committee meeting in Anchorage, the  committee heard                                                            
testimony regarding the  construction industry's frustration on this                                                            
issue.   He  continued   that,  as   a  result   of  that   meeting,                                                            
representatives  from the  Department of  Transportation and  Public                                                            
Facilities  and the Associated General  Contractors of Alaska  (AGC)                                                            
worked  together to  develop  a consensus  on how  the construction                                                             
claims process against the State could be revised.                                                                              
                                                                                                                                
RICHARD SCHMIDZ, Staff  to Senator John Cowdery, the bill's sponsor,                                                            
informed  the Committee that  the Department  of Transportation  and                                                            
Public Facilities and the AGC would present this legislation.                                                                   
                                                                                                                                
MARK  O'BRIEN, Chief  Contracts  Officer, Division  of Contracting,                                                             
Procurement and  Appeals, Office of the Commissioner,  Department of                                                            
Transportation  and Public Facilities,  informed the Committee  that                                                            
the  Department   has  been   working  with   AGC  to  improve   the                                                            
construction   claims  process.  He   stated  that  AGC   originally                                                            
presented  three  suggestions   toward  making  the  claims  process                                                            
"faster,  fairer, and less  expensive," and  he contended that  this                                                            
legislation  would adequately address  their concerns. He  explained                                                            
that in  order to quicken  the claims process,  specific  timeframes                                                            
"where none  existed and shortened  timelines where ones  did exist"                                                            
as well as  implementation of an arbitration  process as  opposed to                                                            
the current hearing officer  process have been incorporated into the                                                            
proposal. He stated that  specific timelines for resolution would be                                                            
identified  in the arbitration process.  These timelines,  he noted,                                                            
"would serve to  speed up the process and reduce costs"  as compared                                                            
to the  costs resulting  from attorney  and consultant  fees  in the                                                            
current litigation process.                                                                                                     
                                                                                                                                
Mr. O'Brien specified that  the arbitration decision would be final.                                                            
He noted  that with  the exception  of appeals  based on charges  of                                                            
fraud, misapplication  of the  law, and a  few other narrow  issues,                                                            
there would be no lengthy court appeal process.                                                                                 
                                                                                                                                
Mr. O'Brien communicated  that the arbitration process would include                                                            
regulations  regarding the selection  of an arbitrator who  would be                                                            
acceptable and  fair to both parties. He stated that  implementation                                                            
of an arbitration system  would reduce costs as it would shorten the                                                            
process and limit appeals.                                                                                                      
                                                                                                                                
Mr. O'Brien  acknowledged that  the award of  costs and fees  is the                                                            
lone point of  dissention remaining between the Department  and AGC.                                                            
He noted  that Rules 79  and 82, as referenced  in the Department's                                                             
fiscal note #1,  require payment of attorney fees  and claims costs.                                                            
He commented that these  provisions would incur costs at "a baseline                                                            
average"  of $145,000 per  year based on  an eleven-year average  in                                                            
which expenses  ranged from a high  of $340,000 to a low  of $7,000.                                                            
He explained that  this expense would be subject to  such factors as                                                            
the  complexity   of  the  case  and   the  length  of  litigation.                                                             
Furthermore,  he explained that in  addition to these expenses,  the                                                            
cost of additional  attorney fees  associated with litigating  these                                                            
awards is estimated to  be approximately $6,000 per year or 20 hours                                                            
per  claim.  He  specified  that  another  factor  is  the  Rule  68                                                            
provision  that allows for  an "offer of  judgment." He stated  that                                                            
this factor is considered to be "a driver" in settling a claim.                                                                 
                                                                                                                                
Mr.  O'Brien  informed  that  while  most  construction  claims  are                                                            
associated  with  federally  funded  projects,  no  federal  funding                                                            
support  exists  for  expenses  associated  with  Rules 79  and  82.                                                            
Therefore, he  stated that an award of costs and fees  would require                                                            
general fund dollars.                                                                                                           
                                                                                                                                
Senator Hoffman  asked the dollar  amount of claims currently  being                                                            
processed.                                                                                                                      
                                                                                                                                
Mr. O'Brien responded  that he is unsure of the current  outstanding                                                            
claims amount.                                                                                                                  
                                                                                                                                
DICK CATTANACH,  Executive Director, Associated General  Contractors                                                            
of Alaska,  spoke in support  of this "fair  and balanced"  bill. He                                                            
stated  that  while   he  appreciates  the  concern  regarding   the                                                            
potential level  of the fiscal note,  he asserted that the  proposed                                                            
process would speed things  up and would be less expensive. He noted                                                            
that AGC  worked diligently  with the Department  of Transportation                                                             
and Public  Facilities, the  Department of  Law, and other  affected                                                            
parties to address this issue.                                                                                                  
                                                                                                                                
Co-Chair  Wilken asked whether  the industry  is satisfied  with the                                                            
results of those discussions.                                                                                                   
                                                                                                                                
Mr. Cattanach confirmed.                                                                                                        
                                                                                                                                
Amendment  #1: This  amendment  inserts  a new  section  on page  1,                                                            
following line 5 as follows.                                                                                                    
                                                                                                                                
     Section 1. AS 36.30.005 is amended by adding a new subsection                                                              
     to read:                                                                                                                   
          (d) Notwithstanding the provisions of AS 36.30.627, the                                                               
     University of Alaska is not required to arbitrate construction                                                             
     contract claims unless the university specifically agrees to                                                               
     the arbitration.                                                                                                           
                                                                                                                                
Co-Chair Wilken  offered Amendment #1 and objected  for explanation.                                                            
                                                                                                                                
Co-chair  Wilken  explained that  this  amendment would  exempt  the                                                            
University  of Alaska from the binding  arbitration requirement  for                                                            
claims valued  at less than $250,000  unless the claim was  mutually                                                            
approved by  both the University and  the contractor. He  noted that                                                            
no other provisions  of the bill would be affected  by this proposed                                                            
change.                                                                                                                         
                                                                                                                                
WENDY REDMAN, Vice President  of University Relations, University of                                                            
Alaska  stated   that  the  University  was  not  involved   in  the                                                            
aforementioned  discussions   due  to  the  understanding  that  the                                                            
University  would not be impacted  by the legislation. However,  she                                                            
advised that the  University is seeking the exemption  for the small                                                            
claims section,  and she noted that  there is no opposition  to this                                                            
exemption request.  In addition, she  expressed that the  University                                                            
has a  good working relationship  with AGC.  Continuing, she  stated                                                            
that  the University  would  be involved  in the  implementation  of                                                            
procedures pertaining to this legislation.                                                                                      
                                                                                                                                
Co-Chair Wilken removed his objection.                                                                                          
                                                                                                                                
Senator B.  Stevens asked  whether the University  utilizes  a State                                                            
procurement officer.                                                                                                            
                                                                                                                                
Ms.  Redman   responded   that  the  University   has  an   in-house                                                            
procurement officer.                                                                                                            
                                                                                                                                
Senator B. Stevens asked  the University's total annual construction                                                            
budget.                                                                                                                         
                                                                                                                                
Ms  Redman  specified that  the  amendment  addresses  small  claims                                                            
valued  at $250,000  or less. She  continued  that the University's                                                             
construction  budget  ranges  between  $20 million  to  $40  million                                                            
annually.                                                                                                                       
                                                                                                                                
Senator B. Stevens  asked the importance of excluding  this level of                                                            
contractor claims.                                                                                                              
                                                                                                                                
Ms.  Redman explained  that  the  bill specifies  that  small  claim                                                            
arbitration  could be  initiated "solely  at the  discretion of  the                                                            
contractor,"  without the  approval  of the University.  She  stated                                                            
that because the  majority of University construction  projects fall                                                            
into the small  claim category, its  attorneys have determined  that                                                            
the  bill's  current  language  is  not  in  the  University's  best                                                            
interest.                                                                                                                       
                                                                                                                                
Senator  B. Stevens  ascertained therefore,  that  the basis of  the                                                            
amendment would be to address  the concern that the University would                                                            
be  negatively   impacted   because  of  the   multitude  of   small                                                            
contractors it deals with.                                                                                                      
                                                                                                                                
Ms. Redman affirmed  that the majority of University  projects would                                                            
be  classified   as  small   projects.  She   reiterated  that   the                                                            
University's  legal  council has  determined  that  this bill  might                                                            
influence small contractors to pursue arbitration measures.                                                                     
                                                                                                                                
Senator  B.  Stevens asked  what  the  University's  alternative  to                                                            
arbitration would be.                                                                                                           
                                                                                                                                
Ms.  Redman responded  that  the alternative  would  be the  current                                                            
settlement process  through which hearings are conducted.  She noted                                                            
that the University's  attorneys have  determined that the  proposed                                                            
arbitration process might remove the incentive to settle.                                                                       
                                                                                                                                
Senator  Hoffman  surmised  therefore, that  contrary  to  testimony                                                            
stating  that  the  arbitration  process   would  shorten  the  time                                                            
involved in settling claims,  the University has determined that the                                                            
arbitration  process  would lengthen  its  time required  to  settle                                                            
disputes.                                                                                                                       
                                                                                                                                
Ms. Redman clarified  that this legislation would  introduce binding                                                            
arbitration  as a method  to settle small  contractor disputes.  She                                                            
stated  that while the  State has  experience with  this issue,  the                                                            
University  has  not. She  acknowledged  that  University  attorneys                                                            
might  eventually   conclude   that  it  might   be  an   acceptable                                                            
alternative.  However, she  stated that because  the University  was                                                            
not involved in the aforementioned  discussions, the concern is that                                                            
the small  claim arbitration  mandate might  increase its number  of                                                            
arbitrations and litigations.                                                                                                   
                                                                                                                                
Senator  Bunde  voiced being  nervous  "that  a State  agency  would                                                            
escape the  full impact of  this law." He  attested that this  would                                                            
set  a  poor  precedent   unless  the  University   already  has  an                                                            
arbitration  process  in place  that  would  be duplicated  by  this                                                            
mandate. He  asked whether the University  currently has  in place a                                                            
system to adjudicate these small claims.                                                                                        
                                                                                                                                
Ms. Redman replied  that the University must adhere  to and abide by                                                            
the  State   procurement  code  that   has  established   provisions                                                            
pertaining to hearings and the appeal process.                                                                                  
                                                                                                                                
Senator Bunde stated everything "except for this exemption."                                                                    
                                                                                                                                
Ms. Redman concurred.                                                                                                           
                                                                                                                                
Senator Olson agreed with Senator Bunde's comments.                                                                             
                                                                                                                                
Senator Olson asked AGC's position on the amendment.                                                                            
                                                                                                                                
Mr. Cattanach  commented  that the  $250,000  small claims  category                                                            
limit was  agreed upon after  six months  of discussion between  the                                                            
AGC and the Department  of Transportation and Public Facilities that                                                            
determined that a binding  arbitration determination would be a fair                                                            
method of addressing  a claim. He asserted that arbitration  is very                                                            
expensive  and that it  would not  unusual to spend  a quarter  of a                                                            
million dollars  when prosecuting  a claim.  He shared that  after a                                                            
hearing  is  conducted,   a  contractor  might  determine   that  an                                                            
independent arbitrator  could levy a fair opinion  without incurring                                                            
further  expense. He  stated  that claims  below  $250,000 could  be                                                            
handled  quicker  and  cheaper  via  the  arbitration   process.  He                                                            
specified  that claims  in excess  of that  amount  would be  better                                                            
managed through the routine claims process.                                                                                     
                                                                                                                                
Mr. Cattanach stated that  AGC agrees with the University's position                                                            
on this  amendment because  the University  was not involved  in the                                                            
process.  Additionally,   he  commented  that  the  University   has                                                            
committed  to  work  with  AGC  to  determine  whether  the  binding                                                            
arbitration process  would work with University projects.  He voiced                                                            
confidence  that it  would work.  Therefore,  Mr. Cattanach  replied                                                            
that AGC supports the amendment.                                                                                                
                                                                                                                                
Co-chair Wilken removed his objection to the amendment.                                                                         
                                                                                                                                
There being no further objection, Amendment #1 was ADOPTED.                                                                     
                                                                                                                                
Amendment #2: This conceptual  amendment addresses a technical error                                                            
in the  bill  whereby Sections  1  and 15  of the  bill specify  two                                                            
differing  effective dates  pertaining to  the applicability  of the                                                            
bill. The clarifying language  being inserted into the bill reads as                                                            
follows.                                                                                                                        
                                                                                                                                
     Sec. 16. The uncodified law of the State of Alaska is amended                                                              
     by adding a new section to read:                                                                                           
          APPLICABILITY. Sections 1-16 and 18 of this Act apply to                                                              
     a contract if the contract is entered into on or after the                                                                 
     effective dates of secs. 1-16 and 18 of this Act.                                                                          
                                                                                                                                
Co-Chair Wilken moved for the adoption of Amendment #2.                                                                         
                                                                                                                                
There being no objection, Amendment #2 was ADOPTED.                                                                             
                                                                                                                                
Senator Taylor asked whether  this legislation would alleviate other                                                            
[unspecified] issues that have been discussed over the years.                                                                   
                                                                                                                                
Mr. Cattanach  responded  that by  implementing a  fair and  quicker                                                            
process, the legislation  would address other [unspecified]  issues.                                                            
                                                                                                                                
Senator Taylor voiced support  of the legislation if it would result                                                            
in improving  "the  Department's reluctance  to adjust  claims  in a                                                            
good faith  and meaningful  manner  that has  literally bankrupted"                                                             
numerous  businesses.  In addition,  he  noted that  a contractor's                                                             
bonding ability  is jeopardized when  a timely determination  is not                                                            
forthcoming.                                                                                                                    
                                                                                                                                
Senator Taylor moved to  report the bill, as amended, from Committee                                                            
with individual recommendations and accompanying fiscal note.                                                                   
                                                                                                                                
There  being  no  objection,  CS SB  125  (FIN)  was  REPORTED  from                                                            
Committee with  indeterminate fiscal note #1 from  the Department of                                                            
Transportation and Public Facilities.                                                                                           
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 112(TRA)                                                                                            
     "An Act  increasing the motor  fuel tax; repealing the  special                                                            
     tax  rates  on  blended  fuels; removing  the  motor  fuel  tax                                                            
     exemption  of the Alaska Railroad; relating to  tax refunds for                                                            
     government  agency  purchases  of fuel;  and providing  for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken informed  that the Department  of Revenue  would be                                                            
presenting testimony on  this legislation on behalf of the Governor.                                                            
He communicated  that this  legislation would  increase the  State's                                                            
highway motor  fuel tax from eight cents a gallon  to twenty cents a                                                            
gallon and would eliminate  the motor fuel tax currently charged for                                                            
gasohol. He explained  that the version before the  Committee, CS SB                                                            
112 (TRA),  Version 23-GS1118\, contains  the language submitted  by                                                            
the  Governor  as well  as additional  language  pertaining  to  the                                                            
Alaska Railroad.                                                                                                                
                                                                                                                                
LANDA BAILY,  Special Assistant and  Legislative Liaison,  Office of                                                            
the Commissioner,  Department of Revenue  verified that Version  "U"                                                            
includes  language that would  exempt the  Alaska Railroad  from the                                                            
motor fuel tax.  She communicated that Governor Frank  Murkowski and                                                            
Commissioner Bill  Corbus of the Department of Revenue  support this                                                            
legislation.                                                                                                                    
                                                                                                                                
                                                                                                                                
SFC 03 # 80, Side B 06:08 PM                                                                                                    
                                                                                                                                
                                                                                                                                
Ms. Baily explained  that this legislation would increase  the motor                                                            
fuel tax  from the current  eight cents per  gallon to 20-cents  per                                                            
gallon. She  continued that, even  with this increase, Alaska  would                                                            
rank below the national  average of 23-cents for excise tax rates on                                                            
highway  motor fuel.  She  stated that  twenty-two  states have  tax                                                            
rates  exceeding  this  amount  and  that  thirty-five  states  have                                                            
combined  state and  local tax  rates that  range from  21 to  38.70                                                            
cents per gallon.  She shared that the Governor urges  the Committee                                                            
"to  agree with  him" that  this  tax increase  "would  be a  viable                                                            
method of generating  critically needed, re-occurring  revenue." She                                                            
commented  that  the  Department  of  Revenue  estimates  that  this                                                            
legislation  would  provide  $41.16   million  in  additional  State                                                            
revenue  per fiscal  year.  She clarified  that rather  than  $41.16                                                            
million, it  is estimated that the  additional revenue collected  in                                                            
FY 04 would be  approximately $37.7 million "because  taxes are paid                                                            
one month after sales."  She further explained that although the tax                                                            
might be  effective as of  July 1, 2003, the  tax collected  in July                                                            
would be for the status quo tax rate on June 2003 sales.                                                                        
                                                                                                                                
Ms.  Baily continued  that  the  off-highway  motor fuel  tax  would                                                            
increase  from six-cents to  18-cents per  gallon. She reminded  the                                                            
Committee that  this is the first adjustment to this  tax rate since                                                            
it was enacted in 1970.  She stressed that the Department of Revenue                                                            
could  efficiently  administer  the  increased  motor fuel  tax.  On                                                            
behalf of the Governor  and the Department of Revenue, she urged the                                                            
Committee to adopt this legislation.                                                                                            
                                                                                                                                
Senator  Bunde stated  that there  has been  discussion regarding  a                                                            
phased implementation  of this  tax. Other  than a reduction  in the                                                            
estimated level  of additional revenue, he asked what  ramifications                                                            
a phased-in tax increase might incur.                                                                                           
                                                                                                                                
Ms. Baily replied  that a phased in  program would create  a problem                                                            
in  that  the   Governor  has  requested   the  enactment   of  this                                                            
legislation  in order to assist the  State in addressing  its fiscal                                                            
gap.                                                                                                                            
                                                                                                                                
Senator Hoffman asked when  the aviation fuel tax was last adjusted.                                                            
                                                                                                                                
Ms. Baily  stated that  this information  would  be supplied  to the                                                            
Committee.                                                                                                                      
                                                                                                                                
JOHN   MACKINNON,  Deputy   Commissioner   of   Highways  &   Public                                                            
Facilities,  Department  of  Transportation  and  Public  Facilities                                                            
conveyed  that   the  Department  "is  in  full  support"   of  this                                                            
legislation.  He  shared  that,  currently,  the  Department  spends                                                            
approximately  $60 million  in general  funds  to address  statewide                                                            
highway  and  airport  maintenance  needs.  He  specified  that  the                                                            
current   tax  generates   $28  million   annually  toward   highway                                                            
maintenance  and  that  the  12-cents  per  gallon   increase  would                                                            
generate an  additional $41 million  annually. He noted that,  while                                                            
the total exceeds  the current maintenance expenditures,  the amount                                                            
in excess  of current  expenditures  would be used  to address  "the                                                            
long list of deferred  maintenance projects" that  currently amounts                                                            
to $50 million.                                                                                                                 
                                                                                                                                
Senator Bunde  asked the amount of funds that would  be specifically                                                            
designated  for highway maintenance  needs  as opposed to the  total                                                            
projected   amount   that   includes  both   highway   and   airport                                                            
maintenance.                                                                                                                    
                                                                                                                                
Mr. MacKinnon  specified  that  the amount  that would  be spent  on                                                            
airport maintenance  would be: four million dollars  in the Northern                                                            
Region;   three  million   dollars  in  the   Central  Region;   and                                                            
approximately one million  dollars in the Southeast Region. He noted                                                            
that these amounts do not include international airport funding.                                                                
                                                                                                                                
Co-Chair  Wilken noted that  the Alaska Railroad  taxation  issue is                                                            
addressed in  Sec. 4, subsection (a)  on page 4, lines 19-21  and in                                                            
Sec 7, subsection  (G) on page 5,  lines 25 and 26. He referred  the                                                            
Committee  to  accompanying  information   provided  by  the  Alaska                                                            
Railroad Corporation  titled "Reasons Against Taxing  Alaska's State                                                            
Railroad," [copy on file]  as well as a Memorandum dated May 6, 2003                                                            
from Kathryn  Kurtz,  Legislative  Counsel to  Senator John  Cowdery                                                            
[copy on file].                                                                                                                 
                                                                                                                                
JOHN BINKLEY,  Chairman of the Board,  Alaska Railroad Corporation,                                                             
Department  of Community  and Economic  Development,  testified  via                                                            
teleconference  from an offnet site  in Fairbanks, to voice  concern                                                            
regarding  a  provision  in  the  Senate  Transportation   Committee                                                            
committee substitute  that would include  "the Alaska Railroad  into                                                            
the same category  as the highway motor fuel users"  by implementing                                                            
the twenty cent per gallon  fuel tax "on all of the rolling stock of                                                            
the Alaska  Railroad." He voiced concern  about the resulting  legal                                                            
and policy issues that might result.                                                                                            
                                                                                                                                
Mr. Binkley stated  that language in this bill could  invoke a legal                                                            
challenge  by  violating the  federal  Railroad  Revitalization  and                                                            
Regulatory  Reform  Act,  referred  to  as  the  4-R  Act  that  was                                                            
established  in 1976. He explained  that this Act prohibits  a state                                                            
from  imposing  a  tax relating  to  competitive  fuel  taxes  "that                                                            
discriminates  against a railroad."  In addition,  he stated  that a                                                            
federal  provision in  the Alaska  Railroad Transfer  Act, that  was                                                            
enacted when  the federally  owned railroad  was transferred  to the                                                            
State,  mandates   that  the  State   maintain  a  viable   railroad                                                            
transportation  system  to ensure  that it  would  be available  for                                                            
military  and other uses.  He stated that  this provision  prohibits                                                            
the State  from taking money  away from the  railroad as opposed  to                                                            
allowing  the  railroad   to  utilize  its  revenues   for  railroad                                                            
operations.                                                                                                                     
                                                                                                                                
Mr. Binkley  furthered  that "on  the policy  standpoint, the  State                                                            
should not tax itself,"  as he attested the railroad is owned by the                                                            
people of  the State. He  voiced that "the  lifeblood of the  Alaska                                                            
Railroad"  is to utilize  railroad capital  to expand its lines.  He                                                            
stated  that  the  source  of the  railroad's  capital  is  its  net                                                            
earnings,  and he advised,  "if you don't  invest capital back  into                                                            
the asset, you don't exist."                                                                                                    
                                                                                                                                
Mr. Binkley referred  to separate legislation being  considered that                                                            
would  provide for  expansion  of the  railroad.  He attested  that,                                                            
while the Alaska  Railroad supports expansion of its  service areas,                                                            
it would be  "extremely costly." He  asserted that, were  the Alaska                                                            
Railroad's net earnings  to lower, the railroad would not be able to                                                            
expand. He noted  that the Fairbanks North Star Borough  Assembly is                                                            
on  record  in opposition  to  the  taxation  language in  the  bill                                                            
regarding the Alaska Railroad.                                                                                                  
                                                                                                                                
Senator Bunde  voiced understanding of the Railroad's  concern about                                                            
taxation  on its rolling  stock.  He asked for  further information                                                             
regarding the  Alaska Railroad's motor  fleet, specifically  whether                                                            
the motor  fleet  fuel is  purchased from  a private  entity and  is                                                            
subject to the highway motor fuel tax.                                                                                          
                                                                                                                                
Mr. Binkley  replied  that the Alaska  Railroad  does pay the  motor                                                            
fuel  tax  for  its  vehicles  using  the  State's  highway  system.                                                            
Furthermore, he  noted that while the Alaska Railroad  could request                                                            
a refund  of that current  highway motor fuel  tax that it  pays, it                                                            
has declined to do so.                                                                                                          
                                                                                                                                
Co-Chair  Wilken voiced  the intent  to hold this  bill in order  to                                                            
entertain  a committee substitute  that would  exclude the  Railroad                                                            
from taxation.  However, he voiced support for the  establishment of                                                            
a dividend  program  whereby the  Alaska Railroad  would  contribute                                                            
funding to the  State to support its expansion plans.  He voiced the                                                            
belief that  this could be implemented  without damaging  the Alaska                                                            
Railroad. He suggested  that implementation of a ten-dollar user fee                                                            
could fund  the contribution,  which he calculated  could amount  to                                                            
approximately  four  million  dollars  based  on  current  ridership                                                            
numbers. He encouraged  the Alaska Railroad to address instituting a                                                            
dividend program,  as he asserted, "it is the right  thing to do and                                                            
it could be done without damaging our Railroad."                                                                                
                                                                                                                                
Mr. Binkley  voiced that this is a  legitimate public policy  issue,                                                            
and he  asked that the  legislature provide  the Railroad "with  the                                                            
forum" to address the Dividend issue.                                                                                           
                                                                                                                                
Co-Chair Green asked whether  the original bill, SB 112, Version 23-                                                            
GS1118\A, would  adequately address  some of the concerns  raised by                                                            
the Version 23-GS1118\U committee substitute.                                                                                   
                                                                                                                                
KEVIN    JARDELL,    Assistant    Commissioner,     Department    of                                                            
Administration,  communicated that,  in addition to eliminating  the                                                            
motor fuel  tax exemption for the  Alaska Railroad, the Version  "U"                                                            
committee  substitute  would  authorize  the "recoupement  of  fees"                                                            
through the use of a State credit card system.                                                                                  
                                                                                                                                
Senator Taylor  asked whether use of the State credit  card would be                                                            
limited to the  Department of Transportation and Public  Facilities.                                                            
                                                                                                                                
Mr.   Jardell   clarified   that   primarily   the   Department   of                                                            
Transportation and Public  Facilities employees would use the credit                                                            
card for  fuel purchases.  He explained that  the credit card  would                                                            
enable a State  employee to purchase fuel, including  the motor fuel                                                            
tax, from  a retailer.  He continued  that the  credit card  company                                                            
would compute  the amount paid toward fuel tax fees  and request the                                                            
State to reimburse them that amount.                                                                                            
                                                                                                                                
Mr. Jardell qualified that  currently a fuel retailer is required to                                                            
pay the motor  fuel tax to the wholesaler  at the time of  purchase,                                                            
and in turn,  the wholesaler pays  the State. He continued  that one                                                            
of  two  things  currently  occurs  at the  time  a  State  employee                                                            
purchases fuel  from the retailer: one, they can pay  the motor fuel                                                            
tax; or, two,  if a contract is in effect with the  retailer, no tax                                                            
is collected.  In that latter case, he explained,  the retailer must                                                            
submit a statement to the  Department of Revenue asking that the tax                                                            
paid to the wholesaler  be returned. He stated that  current statute                                                            
designates  that  a retailer  could  only recoup  the  paid tax.  He                                                            
stated  that the  amendment  adopted  in the  Senate Transportation                                                             
committee  substitute,  Version  "U"  would allow  the  credit  card                                                            
company to  be able to recoup the  sales tax paid for the  fuel, but                                                            
for which the State would not pay them.                                                                                         
                                                                                                                                
Senator Taylor  stated therefore that the amendment  would allow the                                                            
State to reimburse either  a retailer or the credit card company for                                                            
the motor fuel tax paid.                                                                                                        
                                                                                                                                
Mr. Jardell concurred.  He stated that the credit card could be used                                                            
at any retailer.                                                                                                                
                                                                                                                                
Co-chair Wilken ordered the bill to be HELD in Committee.                                                                       
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 31(RES)                                                                                             
     "An Act relating to  a transportation corridor for extension of                                                            
     the Alaska  Railroad to Canada  and to extension of  the Alaska                                                            
     Railroad  to connect with the North American  railroad system."                                                            
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken informed  that this legislation "would authorize the                                                            
Alaska  Railroad  Corporation  to  delineate  a  transportation  and                                                            
utility corridor  from the Eielson Air Force Base  near Fairbanks to                                                            
the Alaska/Canada border."  In addition, he noted that authorization                                                            
would  be  provided  to  the  Alaska  Railroad   to  investigate  an                                                            
extension of the Railroad  from the border to connect with the North                                                            
American railway  system. He specified that CS SB  31 (RES), Version                                                            
23-LS0336\U is before the Committee.                                                                                            
                                                                                                                                
RICHARD SCHMITZ, Staff  to the bill's sponsor, Senator John Cowdery,                                                            
reviewed the history of  the Railroad and professed that "the dream"                                                            
of connecting the Alaska  Railroad to the rest of the North American                                                            
rail system has  existed since the 1870s. He stated  that, while the                                                            
majority of the  bill addresses the extension of the  railway system                                                            
to  the Canadian  border,  the  bill would  additionally  allow  the                                                            
Alaska Railroad  to investigate a rail connection  to, for instance,                                                            
Fort  Nelson in  British Columbia,  Canada  which  would enable  the                                                            
Railroad to connect  to the rest to the North American  rail system.                                                            
                                                                                                                                
Mr.  Schmitz informed  that,  as  the bill  progressed  through  the                                                            
various legislative  committees, language  "was added to  strengthen                                                            
and qualify  the bill to make certain  that no natural gas  pipeline                                                            
or other  use"  of the  delineated  corridor would  impact  "Senator                                                            
Cowdery's vision" of the  bill. He specified that the transportation                                                            
of materials on the extended  rail line would allow the proposed gas                                                            
pipeline  to be more  easily and  less expensively  constructed.  He                                                            
stated  that  the   Alaska  Railroad,  the  Department   of  Natural                                                            
Resources,   representatives   of   the   oil  and   gas   industry,                                                            
representatives of Governor  Murkowski's Administration, and Senator                                                            
Cowdery have  worked together  to develop  bill language that  would                                                            
accomplish  the goal of  the bill.  He referred  the Committee  to a                                                            
Sectional  Analysis of  CS SB  31 (RES)  that has  been provided  by                                                            
Senator Cowdery [copy on file] that further defines the bill.                                                                   
                                                                                                                                
Co-Chair  Wilken concluded  that the bill would  provide for  a 500-                                                            
foot corridor would be  identified to run from the Eielson Air Force                                                            
Base to the Canadian  border. This corridor, he clarified,  would be                                                            
controlled  by the Department of Natural  Resources until  such time                                                            
as the Railroad  begins to construct  a railbed on a dedicated  200-                                                            
foot  swath  within  the  500-foot  corridor.  He  stated  that  the                                                            
question is whether  the Alaska Railroad should be  granted title to                                                            
that 200-foot swath.                                                                                                            
                                                                                                                                
Mr. Schmitz concurred.                                                                                                          
                                                                                                                                
Co-chair  Wilken  reiterated  that  the  primary  issue  before  the                                                            
Committee is  whether or not to grant  the Alaska Railroad  title to                                                            
the  200-foot  corridor.  He  asked the  Committee  to  voice  other                                                            
concerns that might result from the legislation.                                                                                
                                                                                                                                
Senator Taylor stated that  the legislation contains numerous issues                                                            
such as the railroad funding  mechanisms and Railroad sales to third                                                            
parties. He asked  that the term "railroad land" be  further defined                                                            
as the "language  is very genetic."  He furthered that, in  addition                                                            
to the  200-foot  swath in  the corridor,  a  200-foot right-of-way                                                             
might  be required  for  areas  around all  selected  railroad  land                                                            
including terminals,  stations, maintenance yards,  and switchyards.                                                            
He specified  that the railroad land  issue is his biggest  concern.                                                            
He  continued that  the  question  is whether  the State  wishes  to                                                            
control access  to the  500-foot right-of-way  in order to  consider                                                            
its  usage for  such things  as  a fiber  optic cable  corridor.  He                                                            
voiced opposition to awarding a fee-simple title.                                                                               
                                                                                                                                
Senator Bunde  stated that while numerous separate  discussions have                                                            
addressed the  issue of selling State land, this legislation  "gives                                                            
away" State  land, albeit to the Alaska  Railroad. He characterized                                                             
the Railroad as  "a quasi-State agency," rather than  a State agency                                                            
because he  asserted that the State  does not receive any  dividends                                                            
from  it.   He  pointed  out  that   "unless  things  have   changed                                                            
substantially  recently,"  the money  that the  Alaska Railroad  has                                                            
made from its land holdings  has allowed the Railroad to loose money                                                            
in its "rolling  stock operations by running lost  leaders" in order                                                            
to unfairly compete with private enterprise.                                                                                    
                                                                                                                                
Co-chair Wilken stated that this concern would be addressed.                                                                    
                                                                                                                                
PHYLLIS  JOHNSON,   Vice  President  and  General  Counsel,   Alaska                                                            
Railroad   Corporation,  Department   of   Community  and   Economic                                                            
Development,  testified via  teleconference from  an offnet  site in                                                            
Anchorage to address Senator Taylor's concerns.                                                                                 
                                                                                                                                
Co-Chair  Wilken  interjected  to  inform that  Senator  Taylor  has                                                            
suggested changes  to Version "U" to address his concerns.  He asked                                                            
that Ms.  Johnson provide  an opinion to those  changes as  they are                                                            
presented.                                                                                                                      
                                                                                                                                
Ms.  Johnson agreed.  However,  she  reiterated  that  the bill  was                                                            
cooperatively developed by the aforementioned entities.                                                                         
                                                                                                                                
Co-chair  Wilken  pointed  out  that  discussions  with  the  bill's                                                            
sponsor  would   occur  prior  to   changing  the  legislation   and                                                            
developing a new committee substitute.                                                                                          
                                                                                                                                
Senator Taylor  communicated that while he "very strongly  supports"                                                            
the extension  of the Railroad,  regrettably,  he has concerns  that                                                            
the Alaska Railroad's "push"  is to get land on which to construct a                                                            
railway but in  order to also control "its use for  other purposes."                                                            
He  stated  that  during  other  committees'   discussions  on  this                                                            
legislation,  numerous  questions  arose about  future  uses of  the                                                            
corridor, such as who would  control the land were "a pipeline to go                                                            
down it,  are fiber optics  a concern," and  who would control  such                                                            
things  as  subsurface  mineral   rights  to  the  land  were  other                                                            
considerations  beyond building a  railroad on the land identified.                                                             
Other concerns, he voiced  include whether to grant the Railroad the                                                            
right of way to the land for free.                                                                                              
                                                                                                                                
Senator Taylor  opined that were the Alaska Railroad  a State agency                                                            
and thereby  abiding by such things  as the State procurement  code,                                                            
his concern would  be limited. However, he declared  that, "they are                                                            
not  a State  agency,"  and  their independent  actions  "shock  and                                                            
surprise [the  Legislature] by discovering  that railroad  terminals                                                            
and tracks  are being built places."  Furthermore, he attested  that                                                            
"the  only profit"  the  Alaska Railroad  is  making  "is off  their                                                            
land." He  stated that the  Railroad "should  operate as a  railroad                                                            
rather than a real estate operation."                                                                                           
                                                                                                                                
Senator Taylor reviewed  that his drafting changes to the bill [copy                                                            
on file]  include; foremost,  language specifying  that rather  than                                                            
granting the Alaska Railroad  right-of-way to the land, the language                                                            
should specify that the  Department of Natural Resources would lease                                                            
the  land  to  the Alaska  Railroad  Corporation.   Furthermore,  he                                                            
specified that  land selection and  obligation provisions  should be                                                            
included, as  well as language specifying  that were a gas  pipeline                                                            
to  use the  corridor,  "it  would be  within  the province  of  the                                                            
Department and the State of Alaska."                                                                                            
                                                                                                                                
Senator  Taylor   continued  that  clarifying  language   should  be                                                            
inserted  in Section  1,  subsection (c)(2)  on  page 3,  line 1  to                                                            
specify  that the  Department  of Natural  Resources  shall  "retain                                                            
unfettered  discretion  regarding the  use of  these lands,"  rather                                                            
than being "subservient  to the railroad on all land  use within the                                                            
corridor"  as "the  land is  developed  and conveyance  sought."  He                                                            
stated that these changes  "would be a plus to the State's interest"                                                            
as opposed to  being "the only State interest remaining."  He stated                                                            
that the proposed language would read as follows.                                                                               
                                                                                                                                
               (2) the department shall continue to manage the land                                                             
     reserved  under (1)  if this subsection;  the department  shall                                                            
     retain unfettered  discretion regarding the use of these lands,                                                            
     but will  consult with the corporation  before disposing  of an                                                            
     interest  in  land  within  the  transportation   corridor  and                                                            
     associated   rail   land;   the   department    may   condition                                                            
     authorization for  activities on the reserved land to encourage                                                            
     the  corporation to  construct the railroad  or other  specific                                                            
     railroad uses identified for the land;                                                                                     
                                                                                                                                
Co-Chair Wilken  clarified that Senator  Taylor's suggestions  apply                                                            
to the Version "U" committee substitute.                                                                                        
                                                                                                                                
Senator Taylor reiterated  that all references to the word "land" in                                                            
Version "U"  beginning with Section  1, subsection (e)(2)  on page 4                                                            
should be changed  to read "right-of-way  or easements" in  order to                                                            
retain the State's interest  in the land as opposed to conveying the                                                            
land to  the Alaska Railroad  Corporation.  Furthermore, he  advised                                                            
that  Section 1,  subsections  (e)(3),  (4), and  (5)  that read  as                                                            
follows, should be deleted.                                                                                                     
                                                                                                                                
               (3) the Department of Natural Resources shall assign                                                             
     any   existing   contracts   within   that   segment   of   the                                                            
     transportation   corridor  and  associated  rail  land  to  the                                                            
     corporation; the corporation  may thereafter retain the revenue                                                            
     from the  conveyed land; the  department shall prorate  revenue                                                            
     from contracts  affecting both  conveyed and un-conveyed  land;                                                            
               (4) the remaining state land in a segment of the                                                                 
     transportation  corridor in which the corporation  has received                                                            
     a  conveyance  under  this  section  shall be  managed  by  the                                                            
     Department  of Natural Resources  as a transportation  corridor                                                            
     unless the  department determines the land is  no longer needed                                                            
     for that purpose; and                                                                                                      
               (5) the remaining segments of the transportation                                                                 
     corridor   in  which   the   corporation   has  not   completed                                                            
     construction  and any associated state land designated  as rail                                                            
     land shall continue  to be managed by the Department of Natural                                                            
     Resources  as a  transportation  corridor  and associated  rail                                                            
     land under (c) and (d) of this section.                                                                                    
                                                                                                                                
Furthermore,  Senator Taylor  advised  that language  in Section  1,                                                            
subsection (g)  beginning on line 12, page 5 be omitted  as "this is                                                            
a totally different standard  than is currently in effect" on any of                                                            
the  State's  highways.  He  stated  that  "the  inclusion  of  this                                                            
language has no  purpose in this legislation whatsoever"  as actions                                                            
by  the  Railroad   for  such  things  as  a  spill  are   currently                                                            
categorized as "negligence." This language reads as follows.                                                                    
                                                                                                                                
     Neither  the corporation  nor the  state is  liable for  claims                                                            
     arising  from  pubic use  of the  transportation  corridor  and                                                            
     associated  rail land,  except to the  extent the claims  arise                                                            
     from the gross negligence  of the state, the corporation, their                                                            
     employees, or their contractors, respectively.                                                                             
                                                                                                                                
In addition,  Senator Taylor  suggested that  Section 1,  subsection                                                            
(j)  on page  6, beginning  on  line  5 should  be deleted  as  this                                                            
language  is not required  "if the Department  has already  retained                                                            
the land"  and is only  granting easements  or right-of-ways  in the                                                            
corridor. This language reads as follows.                                                                                       
                                                                                                                                
          (j) The Department of Natural Resources shall retain the                                                              
     classifications and  reservations of land identified for use as                                                            
     a proposed  utility  corridor and railroad  right-of-way  under                                                            
     former   AS  19.02.122  until   the  corporation  informs   the                                                            
     department  in  writing  that the  land is  not  needed by  the                                                            
     corporation  for  a utility  corridor.  If, under  (a) of  this                                                            
     section, the corporation  includes land identified under former                                                            
     AS 19.05.122  as part of the proposed transportation  corridor,                                                            
     the department shall  manage that land under provisions of this                                                            
     section.                                                                                                                   
                                                                                                                                
Senator Taylor  voiced the desire  to assist the Alaska Railroad  in                                                            
its endeavor  to extend the rail line;  and he attested that  he has                                                            
personally  met with Canadians to  further that end. He opined  that                                                            
the Canadians  also support this effort. However,  he professed that                                                            
he could  not support  a fee simple  conveyance of  the land  to the                                                            
Alaska  Railroad, as  it could  be detrimental  to furthering  other                                                            
State projects in the corridor.                                                                                                 
                                                                                                                                
Co-Chair  Wilken  asked  Ms.  Johnson  to  review  Senator  Taylor's                                                            
suggestions.  Additionally,  he  voiced  that the  proposed  changes                                                            
should be discussed  with the bill's sponsor. Furthermore,  he asked                                                            
Railroad's  representative   whether  a  delay  in  action  on  this                                                            
legislation would be acceptable.                                                                                                
                                                                                                                                
JOHN BINKLEY,  Chairman of the Board,  Alaska Railroad Corporation,                                                             
Department  of Community  and Economic  Development  responded  that                                                            
addressing the issue further  would be acceptable. He commented that                                                            
Senator   Taylor    presents   "some   compelling   arguments    and                                                            
observations."  Furthermore,  he  suggested  that because  the  land                                                            
belongs to  the State,  the Department of  Natural Resources  rather                                                            
than  the  Railroad  should  conduct the  delineation  work  on  the                                                            
transportation  corridor in order  to avoid a perceived conflict  of                                                            
interest.                                                                                                                       
                                                                                                                                
Senator Taylor  opined that the Alaska Railroad has  "a monopoly" on                                                            
the knowledge  regarding how  to lie out  a transportation  corridor                                                            
for  a  rail  line  because  of  the  longevity  and  institutional                                                             
knowledge of the  Alaska Railroad leadership. Therefore,  he favored                                                            
the Alaska Railroad maintaining  the lead authority in the endeavor.                                                            
                                                                                                                                
Mr. Binkley  informed  the Committee  that the  prior year's  Alaska                                                            
Railroad  net income  was nine  million dollars,  with five  million                                                            
dollars  resulting  from real  estate  operations and  four  million                                                            
resulting  from  railroad   operations.  He  stated  that  it  is  a                                                            
misconception to say that  Railroad operations are unprofitable, and                                                            
he stated that  every year, with the exception of  one, the Railroad                                                            
operations "have made money."                                                                                                   
                                                                                                                                
Senator  Taylor clarified  that he  is "not totally  married  to the                                                            
idea that the  Alaska Railroad should receive no land  out of this,"                                                            
but rather that the arrangement  should be less extensive. He stated                                                            
that the focus  of the discussion should address how  to further the                                                            
building  of the railroad  as opposed to dwelling  on how much  land                                                            
would be divvied out to various entities.                                                                                       
                                                                                                                                
Ms. Johnson voiced support  of Mr. Binkley's comments. Additionally,                                                            
she agreed that  further clarifying language would  be beneficial as                                                            
she noted that  it is understood that the remaining  land within the                                                            
500-foot corridor  could be used for  other purposes. She  corrected                                                            
that the  200-foot Alaska  Railroad corridor  would not require  any                                                            
additional  buffer  zone;  however,  she  verified  that  additional                                                            
terminal and maintenance land would be required.                                                                                
                                                                                                                                
Co-Chair Wilken  voiced that Senator  Taylor's suggestions  would be                                                            
used to develop another committee substitute.                                                                                   
                                                                                                                                
Senator B.  Stevens asked  the reason that  Senator Taylor  suggests                                                            
deleting  language in  Sec. 1,  subsection  (j) on page  six of  the                                                            
bill.                                                                                                                           
                                                                                                                                
Senator  Taylor stated  that the suggestion  was  made based  on the                                                            
termination  that the  State  would be  retaining the  right to  the                                                            
land.  He stated  that  he would  provide  further analysis  to  the                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken ordered  the  bill HELD  in Committee  in order  to                                                            
develop a new committee substitute.                                                                                             
                                                                                                                                
                                                                                                                                
SFC 03 # 81, Side A 06:56 PM                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 06:57 PM.                                                                         

Document Name Date/Time Subjects