Legislature(2003 - 2004)

05/19/2003 08:46 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                           May 19, 2003                                                                                       
                              8:46 AM                                                                                         
                                                                                                                              
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-03 # 104,  Side A                                                                                                           
SFC 03 # 104,  Side B                                                                                                           
SFC 03 # 105,  Side A                                                                                                           
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Gary Wilken convened  the meeting at approximately 8:46 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Lyda Green, Co-Chair                                                                                                    
Senator Con Bunde, Vice-Chair                                                                                                   
Senator Robin Taylor                                                                                                            
Senator Ben Stevens                                                                                                             
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
Also  Attending:  REPRESENTATIVE   VIC KOHRING;   WIILIAM  TANDESKE,                                                          
Commissioner,  Department   of  Public  Safety;  SARA  FISHER  GOAD,                                                            
Financial   Analyst,   Alaska  Industrial   Development   &   Export                                                            
Authority,  Department of  Community and  Economic Development;  REX                                                            
SHATTUCK,  Staff  to Representative  Nancy  Dahlstrom,  KATE  TESAR,                                                            
Representative,  Alaska  Yacht  Services   and Provisioning;   SCOTT                                                            
NORDSTRAND, Deputy  Attorney General, Civil Division,  Department of                                                            
Law; PAUL  FUHS, Representative,  Yukon  Pacific Corporation;  HEATH                                                            
HILYARD,  Staff   to  Representative  Lesil  McGuire;   RICK  URION,                                                            
Director,   Division  of  Occupational   Licensing,  Department   of                                                            
Community  and  Economic   Development;  NICO  BUS,  Administrative                                                             
Services  Manager,  Division  of  Support  Services,  Department  of                                                            
Natural Resources;  PATRICK LUBA, Legislative Representative,  AARP;                                                            
DANIEL  PATRICK  O'TIERNEY,   Senior  Assistant  Attorney   General,                                                            
Regulatory Affairs Section, Department of Law                                                                                   
                                                                                                                                
Attending  via  Teleconference:  From Offnet  Sites:  BILL  O'LEARY,                                                          
Chief Financial Officer,  Alaska Railroad Corporation, Department of                                                            
Community   and  Economic  Development;   DOUG  GRIFFIN,   Director,                                                            
Alcoholic Beverage Control Board, Department of Revenue                                                                         
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
HB 216-MUNI TAXATION OF REFINED FUEL PRODUCTS                                                                                   
                                                                                                                                
The Committee  heard testimony from the Department  of Community and                                                            
Economic Development and reported the bill from Committee.                                                                      
                                                                                                                                
HB 251-MARINE PILOT FOR FOREIGN PLEASURE CRAFT                                                                                  
                                                                                                                                
The  Committee  heard  from  the  sponsor   and  the  industry.  One                                                            
amendment was adopted, and the bill reported from Committee.                                                                    
                                                                                                                                
HB 245-SUITS & CLAIMS: MILITARY/FIRE/DEFENSE                                                                                    
                                                                                                                                
The Committee  heard testimony  from the Department  of Law  and the                                                            
Department of Public Safety.  A committee substitute was considered,                                                            
but failed to be adopted. The bill reported from Committee.                                                                     
                                                                                                                                
HB 267-AK RAILROAD BONDS FOR NAT.GAS TRANSPORT                                                                                  
                                                                                                                                
The Committee  heard testimony from  the sponsor, the industry,  and                                                            
the Alaska Railroad. The bill reported from Committee.                                                                          
                                                                                                                                
HB 234-BREWPUBS; ABC BOARD                                                                                                      
                                                                                                                                
The Committee  heard testimony from the sponsor, and  the Department                                                            
of Public Safety  and the Department of Revenue. Two  amendments and                                                            
a committee  substitute  were  considered  but were  withdrawn  from                                                            
consideration. The bill reported from Committee.                                                                                
                                                                                                                                
HB 162-FEES: BUSINESS LICENSE & NATURAL RESOURCE                                                                                
                                                                                                                                
The Committee  heard from the Department  of Community and  Economic                                                            
Development  and  the Department   of Natural  Resources.  The  bill                                                            
reported from Committee.                                                                                                        
                                                                                                                                
HB 111-RCA EXTENSION & POLICIES                                                                                                 
                                                                                                                                
The Committee  heard from  the Department of  Law and the  industry.                                                            
The bill reported from Committee.                                                                                               
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 216(FIN)                                                                                             
     "An Act relating to and limiting municipal taxation of                                                                     
     refined fuel and wholesale sales of fuel, and to the bulk                                                                  
     fuel revolving loan fund."                                                                                                 
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken explained  that this legislation  "clarifies  local                                                            
municipality's  taxing authority  for refined  fuel sold within  and                                                            
outside of the  local jurisdiction." In addition,  he noted that the                                                            
maximum amount  that could be loaned,  on an annual basis,  from the                                                            
Bulk Fuel Revolving  Loan Fund would  be increased from $200,000  to                                                            
$300,000. He informed the  Committee that, in response to a question                                                            
from Senator Hoffman  during the first hearing on  this bill, he has                                                            
provided a handout [copy  on file] titled "HB216: Municipal Taxation                                                            
of Refined Fuel Products."                                                                                                      
                                                                                                                                
Senator Hoffman and Senator  B. Stevens acknowledged the information                                                            
provided in the handout.                                                                                                        
                                                                                                                                
Senator  B.  Stevens inquired  whether  the  Revolving  Loan  Fund's                                                            
entire $6.3 million balance  would be available for loans or whether                                                            
the loan level would be limited to the earnings on the balance.                                                                 
                                                                                                                                
SARA FISHER GOAD,  Financial Analyst, Alaska Industrial  Development                                                            
&  Export   Authority,   Department   of  Community   and   Economic                                                            
Development,  responded  that  the cash  balance  of the  Bulk  Fuel                                                            
Revolving  Loan fund as  of March  31, 2003 was  $6.04 million.  She                                                            
specified that of that  amount, the uncommitted cash balance of $5.6                                                            
million would be available for loans.                                                                                           
                                                                                                                                
Senator B. Stevens observed  that only five of the twenty-four FY 03                                                            
loan applicants requested  loans at the $200,000 maximum loan level.                                                            
Therefore, he  concluded that, that five loans might  be expected at                                                            
the proposed $300,000 level.                                                                                                    
                                                                                                                                
Ms. Goad responded  that because the maximum loan  amount was raised                                                            
to $200,000  as recently as FY 03,  she is unsure how many  requests                                                            
would be at the $300,000 level.                                                                                                 
                                                                                                                                
Senator B. Stevens  stated, for the record, "that  the rapid rate of                                                            
increase" in the  maximum loan level in an eighteen-month  period is                                                            
significant.                                                                                                                    
                                                                                                                                
Co-Chair  Wilken  reminded  that  a rapid  increase  in  fuel  costs                                                            
parallels the increase  in the loan limit amounts. However, he noted                                                            
that fuel rates are currently "rapidly decreasing."                                                                             
                                                                                                                                
Senator Hoffman pointed  out "that while fuel costs might be rapidly                                                            
decreasing  in Fairbanks," they are  not decreasing in rural  areas.                                                            
                                                                                                                                
Senator B. Stevens  voiced concern that increasing  the maximum loan                                                            
level might  jeopardize the integrity  of the Fund. In addition,  he                                                            
worried that  it might have  the potential  to reduce the number  of                                                            
loans that  could be awarded. He noted  that, while he would  not be                                                            
opposing this  legislation, the Fund  should be monitored  to ensure                                                            
that its integrity is maintained.                                                                                               
                                                                                                                                
Co-Chair  Wilken agreed that  the fund should  be monitored,  as the                                                            
maximum  loan  award  levels  have,  in  a  short  period  of  time,                                                            
increased from  $100,000 in FY 02  to $200,000 in FY 03,  and would,                                                            
were this legislation adopted, increase to $300,000 in FY 04.                                                                   
                                                                                                                                
Senator Hoffman  informed  that many communities  have been  able to                                                            
increase their bulk fuel  storage capabilities and, in addition, are                                                            
considering regionalizing  storage capabilities in order to purchase                                                            
larger  quantities of  fuel. He noted  that being  able to  purchase                                                            
larger  quantities of  fuel could  enable communities  to  negotiate                                                            
lower fuel prices.                                                                                                              
                                                                                                                                
Co-Chair  Wilken  reiterated  that  the  Fund's  integrity  must  be                                                            
considered.                                                                                                                     
                                                                                                                                
Senator Taylor  suggested that in order to monitor  the integrity of                                                            
the Fund,  the Committee  Co-Chairs could  send a letter  requesting                                                            
that a Bulk  Fuel Revolving Loan Fund  financial report be  provided                                                            
to the Committee the following year.                                                                                            
                                                                                                                                
There  being  no spoken  opposition  to  this  suggestion,  Co-Chair                                                            
Wilken stated that a letter would be drafted.                                                                                   
                                                                                                                                
Co-Chair  Green  agreed  with  Senator  Hoffman's   assessment  that                                                            
increasing storage  capacities could allow communities  to negotiate                                                            
lower  fuel  prices.  She  asked  whether  different   groups  could                                                            
consolidate into one loan request.                                                                                              
                                                                                                                                
Senator Hoffman  reiterated that larger fuel volume  purchases could                                                            
provide  the communities  with lower  fuel prices.  Furthermore,  he                                                            
stated that  a larger loan  limit would be  required to enable  this                                                            
situation to occur.                                                                                                             
                                                                                                                                
Co-Chair Wilken  commented that the point was valid.  He stated that                                                            
the aforementioned  letter would result  in a report being  supplied                                                            
to the Committee.                                                                                                               
                                                                                                                                
Senator  Olson  asked whether  there  are  any delinquent  loans  or                                                            
defaults.                                                                                                                       
                                                                                                                                
Ms.  Goad responded  that  one  FY  03 loan  is  more than  90  days                                                            
delinquent  and four  FY 02 loans  are delinquent.  She assured  the                                                            
Committee that  large loan requests  are not automatically  granted,                                                            
and she stressed that were  an applicant's ability to repay the loan                                                            
a concern, collateral would be required.                                                                                        
                                                                                                                                
Senator Taylor  offered a motion to  report the bill from  Committee                                                            
with individual recommendations and accompanying fiscal note.                                                                   
                                                                                                                                
Without objection, CS HB  216 (FIN) was REPORTED from Committee with                                                            
zero fiscal  note #2  from the  Department of  Revenue, zero  fiscal                                                            
note #3  from the Division  of Community  and Business Development,                                                             
Department  of Community and Economic  Development, and zero  fiscal                                                            
note #4 from  the Alaska Energy Authority,  Department of  Community                                                            
and Economic Development.                                                                                                       
                                                                                                                                
                                                                                                                                
     SENATE CS FOR CS FOR HOUSE BILL NO. 251(TRA)                                                                               
     "An Act relating to exemption of certain foreign pleasure                                                                  
     craft from the mandatory pilotage requirement and to civil                                                                 
     fines imposed on the owner or operator of a pleasure craft                                                                 
     of foreign registry; and providing for an effective date."                                                                 
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken  explained  that  this  legislation   would  exempt                                                            
foreign pleasure craft,  measuring 65 feet or less, from the State's                                                            
mandatory marine  pilotage requirements.  In addition, he  specified                                                            
that foreign  pleasure  craft measuring  66 feet  to 175 feet  could                                                            
apply for an exemption from the requirement.                                                                                    
                                                                                                                                
REX SHATTUCK,  Staff to Representative  Nancy Dahlstrom,  the bill's                                                            
sponsor,  explained  that  this  legislation  would  allow  for  the                                                            
imposition of civil fines  for violation of the Marine Pilotage Act;                                                            
would exempt  foreign  pleasure craft  of 65 feet  or less from  the                                                            
pilotage requirements;  would institute an application fee structure                                                            
for  vessels measuring  between  66  and 175  feet applying  for  an                                                            
exemption from  the pilotage requirements; would mandate  the use of                                                            
an Alaskan licensed  marine pilot for yachts exceeding  125 feet but                                                            
less than  175 feet  in overall  length on their  initial voyage  in                                                            
State  waters;  and  would  establish  a  process   whereby  foreign                                                            
pleasure craft  vessels measuring between 66 feet  to 125 feet could                                                            
hire  a  licensed  Alaskan  agent.   In addition,   he  stated  that                                                            
provisions are included  that specifically address the definition of                                                            
"for hire"  and "pleasure  craft." He stated  that this legislation                                                             
was prompted  by a recommendation  from the  Legislative Budget  and                                                            
Audit  Committee  audit (#08-20015-02  November  1,  2002)[copy  not                                                            
provided].                                                                                                                      
                                                                                                                                
Senator Taylor  asked for clarification  that existing law  is based                                                            
on gross tonnage  as opposed to overall  vessel length as  specified                                                            
in this legislation.                                                                                                            
                                                                                                                                
Mr. Shattuck  concurred  that  the change  "is a  shift" from  gross                                                            
tonnage  to  overall length  "as  length  is  an easier  measure  to                                                            
understand."                                                                                                                    
                                                                                                                                
Co-Chair  Wilken  clarified  that  the  version of  the  bill  being                                                            
considered  by the  Committee  is SCS CS  HB 251(TRA),  Version  23-                                                            
LS0865\Z.                                                                                                                       
                                                                                                                                
Senator Taylor  understood that a  foreign vessel measuring  65 feet                                                            
or less  would be  exempt from the  requirement  to have a  licensed                                                            
Alaska marine pilot onboard in Alaskan waters.                                                                                  
                                                                                                                                
Mr. Shattuck concurred.                                                                                                         
                                                                                                                                
Senator Taylor  asked for details pertaining to the  vessel pilotage                                                            
waiver application for vessels exceeding 65 feet.                                                                               
                                                                                                                                
Mr. Shattuck explained  that vessels exceeding 65 feet but measuring                                                            
less than 125 feet in overall  length could apply for a waiver to be                                                            
exempted from  the marine pilot requirement. He specified  that were                                                            
an  exemption granted,  the  vessel  would be  required  to hire  an                                                            
Alaskan licensed  agent to provide information as  determined by the                                                            
Board of Marine Pilots.  He continued that, in addition to acquiring                                                            
a waiver and hiring  an agent, vessels exceeding 125  feet but being                                                            
less than 175  feet in overall length  would be required  to hire an                                                            
Alaskan licensed marine pilot to initially enter Alaskan waters.                                                                
                                                                                                                                
Senator Hoffman asked for  an explanation regarding the inclusion of                                                            
language in  Sec. 4, on page 3, lines  17 - 21. This language  reads                                                            
as follows.                                                                                                                     
                                                                                                                                
                                                                                                                                
     The exemption must  remain on the vessel while the vessel is in                                                            
     state  water. An exemption  issued under  this subsection  does                                                            
     not  exempt a  vessel for  the requirement  to  employ a  pilot                                                            
     licensed  under this  chapter while the  vessel is in  Wrangell                                                            
     Narrows  or in the water between  Chatham Strait and  Sitka via                                                            
     Peril Strait.                                                                                                              
                                                                                                                                
Mr. Shattuck replied that  these areas have been identified as areas                                                            
wherein a marine  pilot would still  be required, regardless  of any                                                            
provisions that might be implemented in the bill.                                                                               
                                                                                                                                
Co-Chair Wilken clarified  that vessels larger than 65 feet would be                                                            
required to hire a Marine  pilot to transverse those specific areas.                                                            
                                                                                                                                
Mr. Shattuck concurred.                                                                                                         
                                                                                                                                
Senator  B. Stevens  stated  that, were  this  legislation  adopted,                                                            
transitional   language  would  be  necessary  to  provide   vessels                                                            
sufficient  time to  apply for the  waiver this  year. He  specified                                                            
that  an amendment  would be  required  to address  the timeline  as                                                            
specified in Section  4 on page 3, lines 7 through  12 that reads as                                                            
follows.                                                                                                                        
                                                                                                                                
                                                                                                                                
     The  application  for an  exemption must  be  submitted to  the                                                            
     board at least 30  days before the vessel enters the state. The                                                            
     Board  shall approve or deny  an application for the  exemption                                                            
     within  10 working days  after the application  is received  by                                                            
     the Board.                                                                                                                 
                                                                                                                                
                                                                                                                                
Mr. Shattuck  stated  that he must  confer with  the bill's  sponsor                                                            
before  he   could  not  comment   on  an  amendment.  However,   he                                                            
acknowledged Senator  B. Stevens' concern that implementation  might                                                            
be problematic this year.                                                                                                       
                                                                                                                                
Senator Taylor  asked how  existing law would  be affected  were the                                                            
effective date of the legislation postponed.                                                                                    
                                                                                                                                
Senator  B.  Stevens clarified  that  existing  law  specifies  that                                                            
vessels exceeding  300 gross tons,  or approximately 65 feet,  would                                                            
be required to have a marine  pilot onboard while in Alaskan waters.                                                            
                                                                                                                                
Senator Taylor understood  that a pilot would be required until this                                                            
legislation went into affect.                                                                                                   
                                                                                                                                
Senator  B. Stevens  argued  that, were  transitional  language  not                                                            
provided in this legislation,  vessels would be required to abide by                                                            
status quo regulations for the entire summer season of 2003.                                                                    
                                                                                                                                
Senator Taylor  asked the  entities that would  be affected  by this                                                            
legislation.                                                                                                                    
                                                                                                                                
Senator B. Stevens  stated that in addition to large  yachts, vessel                                                            
provision suppliers would be affected.                                                                                          
                                                                                                                                
Senator  Taylor declared  that  pilots are  required  on vessels  to                                                            
ensure that vessel transit  is safe. He assumed that the majority of                                                            
these vessels  are private pleasure craft and are  not for hire, and                                                            
therefore,  he questioned the necessity  of this legislation,  as he                                                            
noted, separate  legislation has been  adopted that exempts  private                                                            
vessels from  liability for its passengers.  He asserted  therefore,                                                            
that this legislation is not necessary.                                                                                         
                                                                                                                                
Co-Chair  Wilken asked  regarding  the United  States Coast  Guard's                                                            
(USCG) position on this legislation.                                                                                            
                                                                                                                                
Mr. Shattuck stated that  currently the USCG is issuing "no opinion"                                                            
regarding this legislation.                                                                                                     
                                                                                                                                
Co-Chair  Wilken mentioned  that the  legislation  is modeled  after                                                            
current State of Washington regulations.                                                                                        
                                                                                                                                
Mr. Shattuck  concurred, although  he mentioned that one  difference                                                            
is that  the State  of Washington  has a traffic  control system  in                                                            
place  in  the  Puget  Sound  area,  whereas,   none  are  currently                                                            
specified  for  Alaskan waterways.  He  continued  that  an area  of                                                            
concern  that  has  been  discussed  but is  not  addressed  in  the                                                            
legislation  is how  the State  would  monitor vessel  location  and                                                            
determine the  number of vessels that  might be in State  waters. He                                                            
stated that  estimates in  the legislation  regarding the number  of                                                            
vessels  that  might transit  Alaskan  waters  are based  on  vessel                                                            
numbers  in the State  of Washington  as well  as on inquiries  from                                                            
vessels that the State has received.                                                                                            
                                                                                                                                
Co-Chair  Wilken   asked  for  further  information   regarding  the                                                            
requirement that a vessel  measuring between 65 feet and 125 feet or                                                            
175 feet  must have  a marine  pilot on  board from  its entry  into                                                            
Alaskan waters to its first port of call.                                                                                       
                                                                                                                                
Mr. Shattuck  clarified  that vessels  ranging from  65 feet  to 125                                                            
feet in  overall length must  hire an Alaskan  agent to arrange  the                                                            
particulars  of their trip and that  a vessel measuring 126  feet to                                                            
175 feet must hire a marine pilot.                                                                                              
                                                                                                                                
Co-Chair Wilken  asked the marine  pilotage requirement for  vessels                                                            
ranging from 65 feet to 125 feet.                                                                                               
                                                                                                                                
Mr. Shattuck  responded that  rather than being  required to  hire a                                                            
marine pilot,  those vessels  would be required  to hire an  Alaskan                                                            
agent  who  would  arrange for  obtaining  their  waiver  and  would                                                            
provide  the vessel  with  information  established  for entry  into                                                            
Alaskan waters.                                                                                                                 
                                                                                                                                
Co-Chair Wilken asked whether  the agent would be retained until the                                                            
vessel's first port of call.                                                                                                    
                                                                                                                                
Mr. Shattuck  clarified  that the  agent would be  retained for  the                                                            
vessel's complete journey.                                                                                                      
                                                                                                                                
Amendment #1: This amendment  inserts a new section into the bill on                                                            
page 4, line 11 as follows.                                                                                                     
                                                                                                                                
                                                                                                                                
     The  requirement in AS  08.62.180(b),  enacted in Section  4 of                                                            
     this Act,  that an application for exemption  be filed at least                                                            
     30 days before the  vessel enters the state does not apply to a                                                            
     vessel  entering   the  state  less  than  30  days  after  the                                                            
     effective date of this Act.                                                                                                
                                                                                                                                
                                                                                                                                
Senator B. Stevens moved  to adopt Amendment #1. He stated that this                                                            
transitional language would be identified as Section 5.                                                                         
                                                                                                                                
Co-Chair Wilken objected for discussion.                                                                                        
                                                                                                                                
Senator B.  Stevens explained that,  were this legislation  adopted,                                                            
this language  would  provide a  30-day transition  period to  allow                                                            
vessels that are traveling  to or in Alaska for the summer season to                                                            
apply for the waiver.                                                                                                           
                                                                                                                                
Co-Chair Wilken  expressed that this  amendment would be  limited to                                                            
the initial stage of the legislation.                                                                                           
                                                                                                                                
Senator B.  Stevens concurred.  He reminded  the Committee  that the                                                            
original  marine pilotage  legislation  was enacted  numerous  years                                                            
earlier to  specifically require  a marine  pilot to be onboard  the                                                            
Greenpeace  vessel,  the  Rainbow  Warrior, during  its  transit  in                                                            
Alaskan waters. He noted  that in response to the increase in large,                                                            
private yacht  traffic in the State, this legislation  is an attempt                                                            
to update the  original requirements. He stated that  this is a good                                                            
"compromise"  to address the concerns  of the pilots, the  USCG, and                                                            
other affected  parties. He urged members to support  his amendment.                                                            
                                                                                                                                
Senator Taylor asked whether  the amendment would require vessels to                                                            
abide  by existing  regulations  or would  exempt  vessels from  all                                                            
requirements during the 30-day transition period.                                                                               
                                                                                                                                
KATE TESAR, Representative,  Alaska Yacht Services and Provisioning,                                                            
commented that  the amendment would  allow those vessels  in transit                                                            
at the time the  legislation takes effect to be exempt  from the 30-                                                            
day prior-to-trip  waiver application  requirement. She stated  that                                                            
the inclusion  of language in the  bill that specifies that  vessels                                                            
transiting  certain waterways,  such as the  Wrangell Narrows,  must                                                            
have  a licensed  marine  pilot onboard,  addresses  marine  pilots'                                                            
concerns regarding the easing of pilotage requirements.                                                                         
                                                                                                                                
Mr. Shattuck  opined that  the amendment  would address the  concern                                                            
regarding the effective date of the bill.                                                                                       
                                                                                                                                
Co-Chair Wilken removed his objection.                                                                                          
                                                                                                                                
There being no further objection, Amendment #1 was ADOPTED.                                                                     
                                                                                                                                
Co-Chair  Green   asked  whether  the  committee  substitute   being                                                            
considered would  reduce the revenue estimates in  the Department of                                                            
Revenue's accompanying fiscal note.                                                                                             
                                                                                                                                
Mr. Shattuck  responded  that the  Department's  revenue  estimation                                                            
would  not be significantly  impacted  because the  exact number  of                                                            
vessels that  would be affected by  this legislation is unknown.  He                                                            
communicated that more  reliable numbers would be provided following                                                            
the bill's first year of enactment.                                                                                             
                                                                                                                                
Co-Chair Wilken  noted that numerous  communities have expressed  an                                                            
interest in this  legislation. He stated that, provided  the outcome                                                            
of this legislation proves  to be safe and environmentally sound, it                                                            
would  be interesting  to receive  feedback from  communities  as to                                                            
whether this  legislation provided  a benefit to them as  opposed to                                                            
the  State "taking  this risk  with  no benefit."  Additionally,  he                                                            
noted that  ship provisioners should  benefit from the legislation.                                                             
He encouraged  the bill's sponsor to develop methodology  to monitor                                                            
the outcome of the legislation.                                                                                                 
                                                                                                                                
Mr.  Shattuck   communicated  that   Representative  Dahlstrom   has                                                            
expressed  an  interest  in  developing  methodology  to  study  the                                                            
affects of  the legislation. He attested  that a major goal  of this                                                            
legislation would be to  provide economic benefits to communities in                                                            
Southeast Alaska.                                                                                                               
                                                                                                                                
Senator Taylor moved to  report the bill, as amended, from Committee                                                            
with individual recommendations and accompanying fiscal note.                                                                   
                                                                                                                                
There  being no  objection, SCS  CS HB  251(FIN)  was REPORTED  from                                                            
Committee with  a new zero fiscal note, dated May  19, 2003 from the                                                            
Department of Community and Economic Development.                                                                               
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 245(JUD)(efd fld)                                                                                    
     "An Act relating to  certain suits and claims by members of the                                                            
     military  services;   relating  to  certain  suits  and  claims                                                            
     regarding acts or  omissions of the organized militia; relating                                                            
     to workers' compensation  and death benefits for members of the                                                            
     organized  militia;   relating  to  liability  arising  out  of                                                            
     certain search and  rescue, civil defense, fire management, and                                                            
     fire fighting activities."                                                                                                 
                                                                                                                                
                                                                                                                                
AT EASE 9:15 AM / 9:15 AM                                                                                                       
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken  stated that  this  legislation would  limit  civil                                                            
action  of suits and  claims filed  against the  State by  military,                                                            
search  and rescue,  and firefighter  personnel.  He reviewed  that,                                                            
during the previous  hearing on this bill, Committee  Members raised                                                            
questions regarding  the State's immunity  from suits and  claims as                                                            
well as to  how a few provisions of  the bill would apply.  He noted                                                            
that one  area of concern  regards proposed  language in Section  2,                                                            
located  on page  2,  lines 16  - 20  of  CS HB  245(JUD)(efd  fld),                                                            
Version 23-GH1025\H.A  that Senator  Taylor interprets would  exempt                                                            
State  employees  from  liability  due  to  their  negligence.  This                                                            
language reads as follows.                                                                                                      
                                                                                                                                
     Sec. 2.  AS 18.60 is amended  by adding a new section  to read:                                                            
          Sec. 18.60.125. Civil immunity. A person may not bring a                                                              
     civil  action  for  damages  against  the  state,  a  political                                                            
     subdivision   of  the  state,  or  the  officers,   agents,  or                                                            
     employees of the state  or a political subdivision of the state                                                            
     for a death,  personal injury, or property damage  that results                                                            
     from  an act or omission  in performing  or failing to  perform                                                            
     activities  or duties authorized under AS 18.60.120-18.60.175.                                                             
                                                                                                                                
SCOTT  NORDSTRAND,   Deputy   Attorney  General,   Civil   Division,                                                            
Department  of Law, stated that this  section of the bill  addresses                                                            
search and rescue  matters and simply restates "what  Alaska law was                                                            
two-years ago"  by re-clarifying that  the State and its  search and                                                            
rescue employees "would  not be civilly liable for their actions" in                                                            
a similar fashion as that  of the Alaska Supreme Court upholding the                                                            
decision that police investigations  are immune. He pointed out that                                                            
"this is  a matter of [the  State] taking  scare resources  that are                                                            
engaged  in  the practice  of  search  and  rescue"  activities  and                                                            
attempting  to use  them  in the  "best"  manner possible  with  the                                                            
recognition that  the State has a moral and statutory  obligation to                                                            
assist people  who require these efforts.  He stated "that  all four                                                            
issues" in this  bill are "turning back the clock  to the year 2000,                                                            
before the  Alaska Supreme  Court, in several  different  decisions,                                                            
changed  Alaska law."  He  declared that  this  is the  goal of  the                                                            
legislation,  and  he stressed  that,  "if we  don't  turn back  the                                                            
clock,  the  State  faces  potentially  calamitous   liability  with                                                            
limited ability to fund those expenses."                                                                                        
                                                                                                                                
Co-Chair Wilken stated  that the bill's language mirrors what was in                                                            
effect three years prior.                                                                                                       
                                                                                                                                
Mr.  Nordstrand clarified  that  the language  has  been updated  to                                                            
reflect  today's   search  and  rescue  scenarios,   and  with  that                                                            
consideration,  he  asserted,   that  the  bill  would  reflect  the                                                            
approach  to  immunity  that had  previously  been  commonplace  and                                                            
reasonable under that previous mode of operation.                                                                               
                                                                                                                                
WIILIAM TANDESKE, Commissioner,  Department of Public Safety, stated                                                            
that search  and rescue missions are  conducted "on the totality  of                                                            
the  circumstance."  He  stated  that  initial   search  and  rescue                                                            
information  is often  times  secondhand or  encrypted  in that  the                                                            
individuals  being searched for either  do not follow the  plan they                                                            
told people or  neglect to file a flight plan. He  shared details of                                                            
some  situations  to which  the Department  recently  responded.  He                                                            
continued that a recurring  situation in Rural Alaska is that people                                                            
are routinely overdue and  decisions must be made as to how and when                                                            
to  respond. He  stated  that  the Department  routinely  relies  on                                                            
volunteers  and residents of the area  to address these situations,                                                             
and he communicated  that these people  "do an outstanding  job" for                                                            
the Department.                                                                                                                 
                                                                                                                                
Commissioner    Tandeske   exampled   a   situation    wherein   ten                                                            
snowmachiners  might   be  lost  and  eventually  nine  of  the  ten                                                            
reappear. He stated that  the area to be searched might be large and                                                            
"a measured  response" might be appropriate,  as consideration  must                                                            
be given to  things such as how much  danger to expose the  response                                                            
team  to. He stated  that  these are  difficult  decisions to  make.                                                            
Oftentimes, he  shared, response decisions are misunderstood  by the                                                            
public who are unaware of the complexity of a situation.                                                                        
                                                                                                                                
Commissioner  Tandeske  stressed  that the  public  perception  that                                                            
action is not  being taken in some cases "is inaccurate."  He stated                                                            
that the  question of  whether the  State should  be civilly  liable                                                            
when people put themselves  in harms way and "it doesn't turn out as                                                            
everyone would like" is an important issue.                                                                                     
                                                                                                                                
Co-Chair  Wilken  asked  Senator  Taylor  to  restate  his  concerns                                                            
regarding  the aforementioned  Sections  2,  and Section  11 of  the                                                            
bill. Section 11 reads as follows.                                                                                              
                                                                                                                                
     Sec. 11.  AS 41.15 is amended by adding a new  section to read:                                                            
          Sec.41.15.045. Civil immunity. Notwithstanding other                                                                  
     provisions  of law, a person  may not bring a civil  action for                                                            
     damages  for death,  personal injury,  or property damage  that                                                            
     results  from an act  or omission in  performing or failing  to                                                            
     perform  activities   or duties   arising  out  of prevention,                                                             
     monitoring,  control, or suppression of fires  authorized to be                                                            
     performed under AS 41.15.010-41.15.170 against                                                                             
                1) the state or its officers, agents, and employees;                                                            
                2) a political subdivision of the state or its                                                                  
     officers, agents, and employees;                                                                                           
                3) any organization authorized to prevent, control,                                                             
     or suppress fires;                                                                                                         
     or                                                                                                                         
                4) others assisting in the control or suppression                                                               
     of fires at the request of an officer or employee of the                                                                   
     United States or the state.                                                                                                
                                                                                                                                
Senator  Taylor stated that  his concern  regards the determination                                                             
that this  legislation would  provide "total  blanket immunity"  and                                                            
that  "no civil  remedy would  be  allowed," regardless  of  whether                                                            
gross negligence  or recklessness  or intentional misconduct  on the                                                            
part of  dispatchers or the  people in charge  of the rescue  was an                                                            
issue. He asserted  that this is the  basis for his questioning  the                                                            
legislation.  He  understood  that  a recent  State  Superior  Court                                                            
decision  that found  the State  liable  for fire  damages is  being                                                            
appealed  before the State  Supreme Court.  He mentioned a  separate                                                            
fire case wherein  the State had to defend itself  and was found not                                                            
liable;  however, he  attested  that it  might be  possible for  the                                                            
State  to  be  found  liable  were  gross  conduct   or intentional                                                             
negligence proven. He continued  that the State has recently settled                                                            
a case  out-of-court rather  than go to court  and "probably  lose a                                                            
larger  amount." He  voiced that  recent court  cases have  prompted                                                            
this legislation, and he  is concerned about the State being granted                                                            
blanket immunity.                                                                                                               
                                                                                                                                
Co-Chair  Wilken   referred  the   Committee  to  a  new   committee                                                            
substitute, Version  23-GH1025\I that has been presented  by Senator                                                            
Taylor. He  stated that  the single difference  between Version  23-                                                            
GH1025\H.A and  Version "I" is that a new subsection  is inserted in                                                            
at  least four  different  locations  in  Version I.  That  proposed                                                            
language reads as follows.                                                                                                      
                                                                                                                                
     This section does not apply to a civil action for damages as a                                                             
     result of gross negligence or reckless or intentional                                                                      
     misconduct.                                                                                                                
                                                                                                                                
Senator  Taylor concurred.  He  stated that  the  language would  be                                                            
inserted  in sections  of the bill  in which the  safeguard  has not                                                            
already been provided.                                                                                                          
                                                                                                                                
Co-Chair Wilken  characterized the  language as an amendment  to the                                                            
bill.                                                                                                                           
                                                                                                                                
Mr. Nordstrand  voiced  that the  inclusion of  this language  would                                                            
"recreate   the  standard  of  gross   negligence  or  reckless   or                                                            
intentional  misconduct   as  a  basis"  for  a  lawsuit   in  these                                                            
circumstances.  He  stated  that  "the  distinction   between  gross                                                            
negligence  and negligence is something  only a lawyer could  love."                                                            
He assured  the  Committee  that the  adoption of  Senator  Taylor's                                                            
language  would  not prevent  "a lawyer  from  suing  the State  for                                                            
anything" that  could be sued in court  currently. He declared  that                                                            
this  language "would  change  nothing  in the  effect  of the  law"                                                            
except that  the State would be forced  to defend itself  at a great                                                            
deal of expense.  He furthered that  the Court's instruction  to the                                                            
jury  regarding   the  difference   between  negligence   and  gross                                                            
negligence  "would be meaningless  at that point" because  the State                                                            
would have spent  a large amount of money to defend  itself, and the                                                            
jury "operates just as  much from emotion as facts…." He stated that                                                            
"from a  trial lawyer's  point of  view," the  proposed language  in                                                            
Version  I would "ratify  what the  Alaska Supreme  Court has  done"                                                            
that the State "is trying to undo."                                                                                             
                                                                                                                                
Senator Hoffman voiced  appreciation for Senator Taylor's efforts in                                                            
addressing  this concern. He stated  that the Department  appears to                                                            
be  focusing on  preventing  lawsuits  in order  to  save the  State                                                            
money.  He voiced  concern regarding  this position  as he  attested                                                            
that some lawsuits might have merit.                                                                                            
                                                                                                                                
Mr. Nordstrand  responded that,  "right and  wrong is a function  of                                                            
the policies … we choose."   He stated that part of the choice today                                                            
"is whether we  are going to buy fire trucks or pay  lawyers" to sue                                                            
the  State.  He  informed   that  federal  firefighters,   municipal                                                            
firefighters   and  municipalities   have  complete  immunity   from                                                            
lawsuits such as the recent  fire-related lawsuit, Millers Reach vs.                                                            
State  of  Alaska.  He continued   that were  the  State  to  retain                                                            
municipal  firefighters,   they  would  be  immune.  Continuing,  he                                                            
declared, "the only" ones  not immune are State firefighters and the                                                            
State. He noted that while  the Legislature "has no power" to change                                                            
the immunity  status of federal firefighters,  it could address  the                                                            
municipality  immunity  status.  However,  he  declared  "those  two                                                            
policies reflect  sound policy thinking." He listed  numerous states                                                            
that have  adopted  immunity policies,  and he  suggested that  this                                                            
policy  stance reflects  the reality  of limited  resources and  the                                                            
limited  number of  firefighters.  He  declared that  these  limited                                                            
resources  are an issue  that the  State, with  its vast size,  must                                                            
consider. He  noted that the Millers  Reach lawsuit argued  that the                                                            
State should  have used  its resources differently.  He stated  that                                                            
the  adoption of  the Version  I committee  substitute  would  allow                                                            
lawyers to continue to argue this point.                                                                                        
                                                                                                                                
                                                                                                                                
SFC 03 # 104, Side B 09:34 AM                                                                                                   
                                                                                                                                
                                                                                                                                
Mr. Nordstrand  specified  that the policy  being addressed  in this                                                            
legislation is how the  State should be spending its money. He urged                                                            
the Committee  to spend it on firefighters  rather than lawyers  and                                                            
lawsuits.                                                                                                                       
                                                                                                                                
Senator  Hoffman  asked  whether   Mr. Nordstrand   would  view  the                                                            
Department  of Public  Safety's search  and rescue  missions in  the                                                            
same manner.                                                                                                                    
                                                                                                                                
Mr. Nordstrand  responded that  it would be  "the same premise."  He                                                            
continued that were a state  the size of Alaska to invest heavily in                                                            
its  search  and  rescue  efforts  by strategically   placing  teams                                                            
throughout  the State,  and guarantee  that its  response "would  be                                                            
absolutely  perfect every  time, it  would serve  "to eliminate  the                                                            
liability."  He theorized that were  the State a private  contractor                                                            
who was  hired  to prevent,  but did  not prevent,  a building  from                                                            
burning down, there would  be liability. However, he argued that the                                                            
State is not a private  contractor, but "is charged with this duty."                                                            
He stressed  that the State would  "always fight fires" and  conduct                                                            
search  and rescue  missions  even though  it is  not an  obligation                                                            
mandated by State statute.                                                                                                      
                                                                                                                                
Senator  Hoffman commented  that while  the State  has won  lawsuits                                                            
involving  firefighting  efforts,  it  lost the  search  and  rescue                                                            
lawsuit  of Nancy  Kiokun  and Cynthia  Olrun  vs. State  of  Alaska                                                            
Department  of  Public Safety  (S09044,  April  5, 1999).  He  asked                                                            
whether  the law should  be changed  in order  to reverse  judgments                                                            
such as this one and prevent such lawsuits from being presented.                                                                
                                                                                                                                
Mr. Nordstrand  responded that he  is unaware of the particulars  of                                                            
that case;  however,  he mentioned  that its  Alaska Superior  Court                                                            
decision is currently  under review by the Alaska  Supreme Court. He                                                            
stated  that  it  would be  inappropriate   to judge  the  State  of                                                            
Alaska's laws on the basis on one lawsuit.                                                                                      
                                                                                                                                
Senator Hoffman  asked whether action  on this legislation  could be                                                            
delayed  until  the Supreme  Court  has  made  its decision  on  the                                                            
aforementioned  case, as he expressed  that, were the Supreme  Court                                                            
to rule in favor of the  State, action on this legislation might "be                                                            
irrelevant."                                                                                                                    
                                                                                                                                
Mr. Nordstrand opined,  "that it is the Legislature's role to define                                                            
the policy  of sovereign immunity."  Furthermore, he stated,  "it is                                                            
the Legislature's  role rather than the Alaska Supreme  Court's role                                                            
to say what the State could and could not be sued for.                                                                          
                                                                                                                                
Senator Hoffman  pointed out  that it is  the Legislature's  role to                                                            
decide how  far the State  should go "in trying  to protect  some of                                                            
our citizens."                                                                                                                  
                                                                                                                                
Mr. Nordstrand agreed.                                                                                                          
                                                                                                                                
Senator Taylor  asserted that, "we're  all aware of the distinction                                                             
and  the need  for  sovereign  immunity."  Otherwise,  he  declared,                                                            
Legislators  "could  be sued  for  decisions that  are  made in  the                                                            
Legislature."  However, he avowed that "historically,  this has been                                                            
reserved for  discretionary decisions"  such as how a highway  would                                                            
be designed.  Furthermore,  he continued  that once  the highway  is                                                            
built, the  State is responsible for  maintaining it and  keeping it                                                            
safe for travel  when road conditions  are treacherous. He  declared                                                            
that, were individuals  harmed because of State employee negligence,                                                            
"there is a right of suit today."                                                                                               
                                                                                                                                
Mr. Nordstrand  concurred and stated  that his Division is  handling                                                            
"a number of cases just like that."                                                                                             
                                                                                                                                
Senator  Taylor commented  that  a former  Legislator  brought  suit                                                            
against the  State and won the case  after his wife was killed  on a                                                            
poorly-maintained-for-conditions   State road. He argued  that while                                                            
the State  road system is  a very valuable  resource, the State  has                                                            
limited highway  maintenance resources.  Therefore, he argued  that,                                                            
"every State highway should  be immune from suit." He declared that,                                                            
"the public would  react terribly" to this decision.  He stated that                                                            
the public  has a  right to  sue the  State as well  as the  federal                                                            
government  for the negligence  of their  employees. He opined  that                                                            
were  State  employees  to  act with  gross  negligence  in  a  fire                                                            
fighting  scenario or a search  and rescue  mission due to  being on                                                            
drugs or being  despondent about a  personal matter, then  the State                                                            
should  be held liable.  He noted  that even  "good Samaritans"  are                                                            
held to  standards that  they conduct themselves  in a non-reckless                                                             
manner. Therefore,  he questioned "the legal justification"  for not                                                            
holding the State to that same standard.                                                                                        
                                                                                                                                
Mr. Nordstrand voiced that  these unique activities are wrought with                                                            
danger   and  "with  enormous   consequences."   He  stressed   that                                                            
individuals participating  in fire fighting, search  and rescue, and                                                            
civil defense  activities must be  committed to the activity  rather                                                            
than being concerned  that their action or involvement  might result                                                            
in  a lawsuit.  He stated  that  were this  the case,  people  might                                                            
choose  not to  respond to  these  "very dangerous  activities  that                                                            
involve  enormous judgment,"  and  "enormous allocation  of  limited                                                            
resources." He asserted  that, "in these particular areas, the State                                                            
should not  absorb the liability because  the risks to the  treasury                                                            
as opposed to  the risks of not, are too great." He  reiterated that                                                            
in response  to the question of whether  someone could commit  gross                                                            
negligence, he reiterated  that it would be difficult to distinguish                                                            
the difference  between being negligent  or grossly negligent  would                                                            
accomplish  as  a State  policy  matter because,  he  declared,  the                                                            
question is  whether it would be good  State policy to fund  lawsuit                                                            
defense rather than to provide such things as equipment.                                                                        
                                                                                                                                
Senator  Taylor  commented  that he  would  prefer to  maintain  the                                                            
standard of simple negligence;  however, he determined that it would                                                            
be too difficult  for the State to  avoid damages caused  by summary                                                            
judgment  actions. He  characterized  this legislation  "as a  sales                                                            
pitch on  the utilization  of State resources,"  rather than  having                                                            
anything  to do with  the State's  liability for  injury, death,  or                                                            
property damage that might  occur as the result of "someone's stupid                                                            
mistake."  He asked  what  monitoring  system is  in  place to  hold                                                            
employees accountable  for their actions. Continuing,  he questioned                                                            
the  reasoning  for   labeling  the  activities  addressed   in  the                                                            
legislation  as "so precious"  that  they could not  be held  to any                                                            
standard at all.                                                                                                                
                                                                                                                                
Senator Taylor asked what  would be unique about a situation wherein                                                            
a pilot committed  an act of gross negligence that  caused people to                                                            
die. He voiced  that the State has approximately 50  aircraft in its                                                            
fleet and  that, were something  to happen  to an employee  involved                                                            
with those aircraft,  they would be covered by the  State's worker's                                                            
compensation schedule;  however, he noted that, currently, the State                                                            
would be liable  were a non-State  employee injured while  traveling                                                            
with a State  pilot who might commit  pilot error or negligence.  He                                                            
declared that  the reason that this  legislation is addressing  this                                                            
issue now is  because the State "got  sued," and he asserted  that a                                                            
standard should be established  to address a situation wherein gross                                                            
negligence  is an  issue. He  concluded  that no  argument has  been                                                            
presented   to  satisfy  his  concern   regarding  "this   level  of                                                            
immunity."                                                                                                                      
                                                                                                                                
Co-Chair Wilken commented  that the language included in Version "I"                                                            
of the bill  as opposed to that of  Version "A" addresses  the point                                                            
that Senator Taylor is making.                                                                                                  
                                                                                                                                
Senator Olson voiced concern  regarding State efforts to ensure that                                                            
adequate  oversight   in  search   and  rescue  operations   exists.                                                            
Furthermore,  he  asked whether  search  and rescue  operations,  in                                                            
light  of  resource  shortages,  should   be  transferred  from  the                                                            
Department of Public Safety to another authority.                                                                               
                                                                                                                                
Mr. Nordstrand  responded that the Department is not  advocating for                                                            
search and  rescue operations to be  moved to another authority.  He                                                            
stated that  the Civil Air Patrol  and the National Guard  conduct a                                                            
large  amount  of  these  operations.  Furthermore,  he  noted  that                                                            
although Department aircraft  might be involved in a search, limited                                                            
manpower resources  are provided to  the endeavor, particularly,  he                                                            
noted,  in rural areas.  He stressed  that the  primary role  of the                                                            
Department is to coordinate activities.                                                                                         
                                                                                                                                
Senator  Olson opined that  contrary to  Mr. Nordstrand's  comments,                                                            
non-Department  aircraft  are primarily  used in  search and  rescue                                                            
operations in his district.                                                                                                     
                                                                                                                                
Senator Taylor stated that,  in light of the fact "that the State is                                                            
not constitutionally mandated  to" provide these services, the State                                                            
could  contract  with  the private  sector  to  conduct  search  and                                                            
rescue, firefighting, and  air transportation efforts. He questioned                                                            
whether these  entities could therefore be "granted  total, absolute                                                            
immunity no matter what they did or how they did it."                                                                           
                                                                                                                                
Mr. Nordstrand  responded  that he is  unsure of  how this would  be                                                            
addressed,  although he noted  that this  legislation would  provide                                                            
immunity  to agents of the  State as well  as volunteers engaged  in                                                            
search  and rescue  efforts. Furthermore,  he  noted that  liability                                                            
language would  be specified in the  contract between the  State and                                                            
the contractor.                                                                                                                 
                                                                                                                                
Senator  Taylor stated  that "of course,"  the State  would write  a                                                            
contract  specifying   that  the  for-profit  contractor   would  be                                                            
responsible  for the  entirety of  their actions.  The contract,  he                                                            
attested, along  with legislation providing the State  with absolute                                                            
immunity, would  guarantee that the State could not  be held liable.                                                            
Therefore,  he continued,  rather than the  issue being whether  the                                                            
State  would be  protected from  legal  action, the  issue would  be                                                            
whether  the State  would grant  the for-profit  private  contractor                                                            
total immunity  from lawsuit for actions conducted  on behalf of the                                                            
State.  Continuing,  he pointed  out that  he knows  a private  fire                                                            
service contractor  who operated in Ketchikan for  twenty-five years                                                            
"who knew full  well" that he would be held liable  for his actions.                                                            
                                                                                                                                
Senator Olson  asked regarding the  liability of the contracted-for                                                             
search and rescue operations  that are conducted in the Norton Sound                                                            
Borough.                                                                                                                        
                                                                                                                                
Senator Taylor interjected  that the question is whether the private                                                            
contractor  operating  on behalf  of the State  would  be held  to a                                                            
quality standard or would be granted, "total blanket immunity."                                                                 
                                                                                                                                
Mr. Nordstrand replied  that, regardless of the means being used for                                                            
fire  suppression,  search  and  rescue  operations,  or  for  civil                                                            
defense,  "the policy  at issue  would be  the same:  that with  the                                                            
absence of complete  resources" to have "all the ability  to pay" or                                                            
"to be everywhere  with unlimited  resources" and "to be  absolutely                                                            
positively certain" that  no mistakes would be made, there should be                                                            
limits on liability to the entity providing these services.                                                                     
                                                                                                                                
Senator Taylor  moved to adopt the Version "I" committee  substitute                                                            
as the working document.                                                                                                        
                                                                                                                                
Co-Chair Wilken and Co-Chair Green objected.                                                                                    
                                                                                                                                
Co-Chair Wilken  stated that the aforementioned  language  regarding                                                            
gross  negligence  or  misconduct   is  included  in  at  least  six                                                            
different places  in the Version "I" committee substitute.  He asked                                                            
for confirmation  that the  addition of this  language would  be the                                                            
only change from Version "A" of the bill.                                                                                       
                                                                                                                                
Senator Taylor confirmed.                                                                                                       
                                                                                                                                
Co-Chair  Green  commented  that  were  the  Version  "I"  committee                                                            
substitute adopted, she  would be "very interested" in de-activating                                                            
fire fighting  service,  search and  rescue service,  and any  other                                                            
service that is offered  in the State wherein the State is "the only                                                            
entity that is  liable." She stated that the federal  government and                                                            
municipalities  would   not  be liable   in these   situations;  and                                                            
therefore, she stressed  that it would be unacceptable for the State                                                            
to be liable.                                                                                                                   
                                                                                                                                
Senator  Taylor declared  therefore,  that the State  should not  be                                                            
held liable for  any of the functions provided by  the State such as                                                            
the road system. He asserted  that the State has the right to exempt                                                            
itself  from  liability  for  its road  system  as  well as  to  any                                                            
negligence   committed   by   employees   of   the   Department   of                                                            
Transportation and Public Facilities.                                                                                           
                                                                                                                                
Co-Chair Green  asserted that granting  total immunity to  the State                                                            
for the entirety  of its services is not the issue,  as she declared                                                            
that the routine  operations of the  State are "a totally  different                                                            
forum of  decision making"  than the  ones being  addressed in  this                                                            
legislation.                                                                                                                    
                                                                                                                                
A  roll call  was taken  on  the motion  to  adopt the  Version  "I"                                                            
committee substitute.                                                                                                           
                                                                                                                                
IN FAVOR: Senator Hoffman, Senator Olson, and Senator Taylor                                                                    
                                                                                                                                
OPPOSED: Senator B. Stevens, Senator Bunde, Co-Chair Green, and                                                                 
Co-Chair Wilken                                                                                                                 
                                                                                                                                
The motion FAILED (3-4)                                                                                                         
                                                                                                                                
The committee substitute Version "I" failed to be adopted.                                                                      
                                                                                                                                
Senator Taylor moved to report the bill from Committee.                                                                         
                                                                                                                                
Senator  Taylor  objected  to  his  motion.  He stated  that  it  is                                                            
"ludicrous"  for the State to resolve  litigation against  the State                                                            
by addressing  it with yet another  immunity bill. He declared  that                                                            
some  of  these  bills   "are  introduced  in  the   middle  of  the                                                            
litigation" process. He  voiced discomfort with telling the citizens                                                            
of the State that the State  has awarded itself blanket immunity for                                                            
its actions.                                                                                                                    
                                                                                                                                
Senator   Olson  shared   that  in   his  personal   experience   of                                                            
participation  on search  and  rescue missions,  while  some of  the                                                            
operations  have been directed  "very well,"  others "certainly  had                                                            
room for improvement."                                                                                                          
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR:  Senator B. Stevens,  Senator Bunde,  Co-Chair Green,  and                                                            
Co-Chair Wilken                                                                                                                 
                                                                                                                                
OPPOSED: Senator Hoffman, Senator Olson, and Senator Taylor                                                                     
                                                                                                                                
The motion PASSED (4-3).                                                                                                        
                                                                                                                                
CS HB  245 (JUD)(efd  fld)  was REPORTED  from Committee  with  zero                                                            
fiscal note #1 from the  Department of Law, zero fiscal note #2 from                                                            
the Department  of Natural Resources, and indeterminate  fiscal note                                                            
#3 from the Department of Administration.                                                                                       
                                                                                                                                
AT EASE 10:00 AM / 10:00 AM                                                                                                     
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 267(FIN)                                                                                             
     "An Act authorizing  the Alaska Railroad Corporation to provide                                                            
     financing  for  the  acquisition,  construction,  improvement,                                                             
     maintenance,   equipping,  and  operation   of  a  natural  gas                                                            
     pipeline  and  related  facilities  for the  transportation  of                                                            
     natural  gas recovered  from  the North  Slope  of this  state;                                                            
     authorizing  the Alaska Railroad Corporation  to issue bonds to                                                            
     finance  those  facilities;  and  providing  for  an  effective                                                            
     date."                                                                                                                     
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken stated that  this legislation  would authorize  the                                                            
Alaska  Railroad  Corporation  to  issue  bonds not  to  exceed  $17                                                            
billion for the construction of an Alaska natural gas pipeline.                                                                 
                                                                                                                                
REPRESENTATIVE  VIC KOHRING, the bill's sponsor, informed  that this                                                            
bill  would  authorize  the  Railroad  to  issue  bonds  to  provide                                                            
financing for the construction  of a natural gas pipeline. He stated                                                            
that in  addition  to this bill,  additional  pieces of legislation                                                             
such as  the Stranded Gas  Act bill and  bills to streamline  State-                                                            
permitting  regulations are  being addressed  by the Legislature  to                                                            
enable this project to proceed.                                                                                                 
                                                                                                                                
Representative  Kohring stated  that this bill  would allow  for the                                                            
issuance  of up to  $17 billion  in tax-exempt  bonds, and he  noted                                                            
that  the low  interest rates  that  are currently  available  would                                                            
benefit  the State.  He communicated  that the sale  of these  bonds                                                            
would generate capital  that the State would then use to provide low                                                            
interest rate  loans to private developers.  He informed  that these                                                            
private  developers,  rather  than the  State  of Alaska,  would  be                                                            
responsible  for building  the pipeline.  Furthermore, he  specified                                                            
that  these  bonds  would  be classified   as "non-recourse   debt,"                                                            
meaning  that the developers  rather  than the State  or the  Alaska                                                            
Railroad would  be responsible for  the bond debt. Additionally,  he                                                            
clarified  that this type  of bond program  specifies that  no liens                                                            
could be placed  upon State or Railroad  assets. He shared  that the                                                            
cost of  building the  pipeline is  estimated to  range between  $12                                                            
billion and $30 billion.                                                                                                        
                                                                                                                                
Representative Kohring  furthered that the bonds would not be issued                                                            
without guarantees  that the  contractor could  pay back the  money,                                                            
and he  specified that  the legislation  would additionally  require                                                            
that reserves  must be maintained  for the payments on those  bonds.                                                            
                                                                                                                                
Representative  Kohring  referenced a  letter from  a Seattle-based                                                             
bonding   company,   George  K   Baum   &  Company,   addressed   to                                                            
Representative  John  Harris,  the  Co-Chair  of the  House  Finance                                                            
Committee,  dated January 30, 2003  (copy on file) that determined,                                                             
upon  evaluation,  that  the  viability  of  these  bonds  could  be                                                            
maintained.  Furthermore, he  stated that a  letter he had  received                                                            
from Conoco  Phillips Alaska,  dated May 6,  2003 (copy on  file) is                                                            
indicative of  industry support for this mode of funding  option for                                                            
the pipeline project.                                                                                                           
                                                                                                                                
Representative Kohring  reminded the Committee that the authority to                                                            
issue  tax-exempt bonds  was granted  by the  federal government  in                                                            
1983 when  it transferred  the ownership of  the Alaska Railroad  to                                                            
the State. He declared  that this legislation would incur no cost to                                                            
the State,  although he  noted that the  accompanying Department  of                                                            
Community and Economic  Development fiscal note specifies that in FY                                                            
06  there  would  be an  expense  of  $163  million.  He  specified,                                                            
however, that  this would not be an  expense to the State  as, "this                                                            
amount  would  be rolled  into  the entire  financing  package."  He                                                            
reiterated  that   this  non-recourse  debt  would   not  incur  any                                                            
liability on the State.                                                                                                         
                                                                                                                                
Representative  Kohring  informed  the  Committee  that  the  Alaska                                                            
Railroad Corporation supports this bill.                                                                                        
                                                                                                                                
Senator  Bunde asked for  further information  regarding the  bill's                                                            
fiscal note,  as he stated that it  is unusual that no liability  or                                                            
financial  obligation would  be incurred  by the  State or, in  this                                                            
situation, the Railroad.                                                                                                        
                                                                                                                                
BILL O'LEARY, Chief Financial  Officer, Alaska Railroad Corporation,                                                            
Department  of Community  and Economic  Development,  testified  via                                                            
teleconference  from an offnet site in Anchorage and  explained that                                                            
although  the  Railroad would  be  the issuer  of  the non-recourse                                                             
revenue  bond  financing,   or  what  he  referred   to  as  conduit                                                            
financing, the  underlying credit for the transaction  would be that                                                            
of  the producers  or  pipeline  investors.  He specified  that  the                                                            
investors would  purchase the bonds after reviewing  the project and                                                            
determining that it would support the repayment of the debt.                                                                    
                                                                                                                                
Senator Bunde  asked how allowing the Railroad to  issue these bonds                                                            
would  benefit the  bond purchasers;  specifically  whether a  lower                                                            
interest rate could be offered to the purchasers.                                                                               
                                                                                                                                
Mr. O'Leary noted that  the Railroad's issuance of these bonds would                                                            
provide  tax-exempt financing  for  the project.  He continued  that                                                            
this type of  funding "has historically  been significantly  cheaper                                                            
financing than  going out in the taxable debt market."  Furthermore,                                                            
he stated that furthering  the gas pipeline endeavor meshes with the                                                            
Railroad's mission of furthering  economic development in the State.                                                            
                                                                                                                                
Senator Bunde asked whether  this conduit financing would impact the                                                            
Railroad's ability to fund future projects.                                                                                     
                                                                                                                                
Mr.  O'Leary  specified  that  this process  would  not  impact  the                                                            
railroad's  ability to borrow money  as it is considered  a project-                                                            
based, stand-alone  situation, and  as such, he continued,  it would                                                            
not negatively  impact the Railroad's  funding of other projects  or                                                            
other stand-alone projects.                                                                                                     
                                                                                                                                
Senator Bunde surmised  that this endeavor would generate additional                                                            
work for the Railroad.                                                                                                          
                                                                                                                                
Mr. O'Leary  voiced that  the Railroad "hopes  to see a significant                                                             
portion  of  benefit"  from  the  project   in  terms  of  increased                                                            
workloads  such as freight  hauls. Furthermore,  he stated  that the                                                            
Railroad  would benefit  from being  required to  upgrade rails  and                                                            
existing  infrastructure  in  order  to  accommodate  the  project's                                                            
needs.  He stated that  transporting  the heavy  pipe that would  be                                                            
used for  the pipeline  would place  extra demands  on the  existing                                                            
railroad.                                                                                                                       
                                                                                                                                
Senator Bunde  puzzled as  to how the expense  of being required  to                                                            
upgrade  the railroad  would be  a benefit.  He stated  that he  has                                                            
never felt comfortable with "a free lunch."                                                                                     
                                                                                                                                
Senator Taylor  interjected that he  does not belief this  is a free                                                            
lunch scenario.  He asked whether  the railroad would be  allowed to                                                            
charge  a fee  for the  service  of issuing  these  unique  tax-free                                                            
bonds.                                                                                                                          
                                                                                                                                
Mr. O'Leary responded that  the Railroad considers it appropriate to                                                            
charge an administrative  fee. He  furthered that the proceeds  from                                                            
this fee would  be used to help finance the upgrades  to the system.                                                            
                                                                                                                                
Senator  Taylor acknowledged.  He declared  that this should  negate                                                            
the earlier concern  regarding the cost of upgrading  the system. He                                                            
suggested that  one-half or three-quarters  of one percent  on a $17                                                            
billion issue  would generate significant  income. He asserted  that                                                            
the railroad  should  be well paid  for financing  this project  and                                                            
that this would  be "a wonderful income stream for  the railroad" to                                                            
use to upgrade  and extend its system which would  provide the State                                                            
with further development opportunities.                                                                                         
                                                                                                                                
Co-Chair Green  clarified that the  Railroad did not originate  this                                                            
legislation,  but "was  told to do  this." She  noted that a  recent                                                            
report in the Alaska Oil  and Gas Reporter (copy not provided) noted                                                            
that the  Railroad  has never used  its tax-exempt  bond  authority.                                                            
Furthermore,  she  shared  that  the  Reported  specified,  "that  a                                                            
favorable  ruling from the  US IRS (United  States Internal  Revenue                                                            
Service)  would be required"  in order for  the bonds to be  granted                                                            
the tax-exempt status.                                                                                                          
                                                                                                                                
Representative Kohring  concurred and responded that the letter from                                                            
the IRS has not yet arrived.                                                                                                    
                                                                                                                                
Co-Chair Green asked whether the letter has been requested.                                                                     
                                                                                                                                
PAUL FUHS, Representative,  Yukon Pacific Corporation,  explained to                                                            
the Committee  that the tax-exempt  bond authority language  in this                                                            
legislation  is  purposefully  "very  specific  to the  natural  gas                                                            
pipeline project."  He explained that the letter to  the IRS has not                                                            
yet been submitted, because  he attested "that you really don't want                                                            
to trigger that discussion until you apply to do it."                                                                           
                                                                                                                                
Co-Chair Green  understood, therefore  that were a favorable  ruling                                                            
not  forthcoming,  the tax-exempt  bond  authority  status would  be                                                            
limited to approximately a quarter of the full loan amount.                                                                     
                                                                                                                                
Mr. Fuhs  confirmed. However,  he shared  that after discussing  the                                                            
issue with Alaska's  Congressional delegation and  other individuals                                                            
"who wrote the  law," this proposal would be viewed  as a legal tax-                                                            
exempt situation.  He shared  that the Bonneville  Dam Authority  is                                                            
the only  other entity in  the nation that  has "this very  rare tax                                                            
provision."  He stated therefore,  that when the provision  is used,                                                            
it is  imperative that  it be used  for a  substantial project  that                                                            
would  not garner  attention  and  prompt "someone  to  come in  and                                                            
change the law."                                                                                                                
                                                                                                                                
Co-Chair  Green  asked  whether there  is  contingency  language  or                                                            
whether the  project would  be stopped were  a favorable IRS  ruling                                                            
not forthcoming.                                                                                                                
                                                                                                                                
Mr. Fuhs responded that, "it's all or nothing."                                                                                 
                                                                                                                                
Co-Chair Green  asked whether, in  addition to the Alaska  Railroad,                                                            
the Alaska Pipeline Authority has the power to issue bonds.                                                                     
                                                                                                                                
Mr.  Fuhs responded  that  the  Alaska Pipeline  Authority  has  the                                                            
ability  to issue  non-recourse bonds;  however,  he clarified  that                                                            
"they do not have  the federal tax loophole that the  Railroad has."                                                            
He stressed that the Railroad has "a very rare provision."                                                                      
                                                                                                                                
Mr.  Fuhs  pointed  out that  the  Railroad  has  "the  federal  tax                                                            
loophole,  but it does not  have the authority  in statute  to issue                                                            
these  bonds."  Providing  that authority,  he  stated,  is  another                                                            
important provision in this bill.                                                                                               
                                                                                                                                
Senator  Bunde stated  that testimony  specifying,  "that this  is a                                                            
one-shot  deal," appears  to contradict earlier  testimony  that the                                                            
Railroad  could issue these  types of bonds  for other projects.  He                                                            
asserted that  were this to be a one-time  opportunity, it  could be                                                            
argued that it  would negatively "impact the Railroad's  ability" to                                                            
fund other large projects in the future.                                                                                        
                                                                                                                                
Co-Chair   Green  understood   that  were   another  large   project                                                            
identified,  the Railroad could  again seek  US IRS approval  to use                                                            
these types of bonds for that project.                                                                                          
                                                                                                                                
Mr.  Fuhs  clarified  that rather  than  being  a  one-time  bonding                                                            
opportunity,  this  legislation  specifically  identifies  that  the                                                            
bonds being requested would  be used to fund a gas pipeline project.                                                            
He  continued  that  were the  Legislature  to  determine  that  the                                                            
Railroad's  unique bonding  ability  could be used  to fund  another                                                            
project,  that project  could be authorized,  and  the IRS could  be                                                            
petitioned to grant approval specific to that project.                                                                          
                                                                                                                                
Senator  Bunde  surmised  that while  the  Legislature  could  grant                                                            
authority to  the Railroad for a future  project, the IRS  might not                                                            
approve it.                                                                                                                     
                                                                                                                                
Senator  Taylor asked for  clarification that  the Legislature  must                                                            
grant  specific authority  before  the  Railroad could  issue  these                                                            
bonds.                                                                                                                          
                                                                                                                                
Mr.  Fuhs  clarified   that  "very  specific  authority"   from  the                                                            
Legislature  must be  granted  in order  for the  Railroad to  issue                                                            
these bonds.                                                                                                                    
                                                                                                                                
Senator Taylor pointed  out that were this funding mechanism desired                                                            
to fund another  project, specific authority would  again have to be                                                            
granted by the Legislature for that unique project.                                                                             
                                                                                                                                
Mr.  Fuhs  confirmed  that  Legislative  authority  would  again  be                                                            
required.                                                                                                                       
                                                                                                                                
Mr. O'Leary concurred.  He specified that the Railroad  must acquire                                                            
Legislative approval before it could issue any bonds.                                                                           
                                                                                                                                
Senator Taylor stated that  in addition to Legislative approval, the                                                            
IRS  must agree  that this  bonding  authority is  the "appropriate                                                             
mechanism" with which to fund the project.                                                                                      
                                                                                                                                
Representative  Kohring pointed out  that the availability  of these                                                            
tax-exempt  low interest bonds  would serve  as an incentive  to the                                                            
industry  to build  the pipeline,  as it  is projected  to save  the                                                            
industry one billion dollars.                                                                                                   
                                                                                                                                
Senator  Taylor  asked whether  a  specific  gas pipeline  route  is                                                            
identified in the legislation.                                                                                                  
                                                                                                                                
Representative Kohring communicated that the routing is open.                                                                   
                                                                                                                                
Senator  Bunde  asked  whether  the one  billion  dollars  that  the                                                            
industry  is projected to  save from the  availability of these  low                                                            
interest,  tax-exempt   bonds  is  factored  into  the  fiscal  note                                                            
analysis.                                                                                                                       
                                                                                                                                
Mr. Fuhs  informed  that the administrative  fee  is not  specified;                                                            
however, he stated that  the savings to the project, as estimated in                                                            
the  aforementioned   George  K.   Baum  financial  analysis,   "are                                                            
projected to be approximately  two percent overall" on the return on                                                            
investment.  He continued  that,  whereas Senator  Taylor  suggested                                                            
that a one-half or three-quarters  percent interest be imposed as an                                                            
administrative  fee, the Railroad  estimates that an administrative                                                             
fee of one-tenth  of a percent would generate sufficient  funding to                                                            
conduct the "legitimate"  system upgrades the project would require.                                                            
                                                                                                                                
Senator Bunde  opined that were the total cost to  upgrade the rails                                                            
a known  number, it  should be reflected  in the  bill. He  asserted                                                            
that  the  Railroad  should  be "upfront"   on the  amount,  and  he                                                            
suggested  that the  administrative  fee should  be  just below  the                                                            
maximum taxable bond level allowed.                                                                                             
                                                                                                                                
Senator  Taylor  moved  to  report  the  bill  from  Committee  with                                                            
individual recommendations and accompanying fiscal note.                                                                        
                                                                                                                                
There  being  no  objection,  CS HB  267  (FIN)  was  REPORTED  from                                                            
Committee with zero fiscal  note #1 from the Department of Community                                                            
and Economic Development.                                                                                                       
                                                                                                                                
                                                                                                                                
     SENATE CS FOR CS FOR HOUSE BILL NO. 234(L&C)                                                                               
     "An Act  relocating the Alcoholic  Beverage Control  Board from                                                            
     the Department  of Revenue to the Department  of Public Safety;                                                            
     extending  the  termination  date  of  the  Alcoholic  Beverage                                                            
     Control Board; relating to the sale of beer manufactured at a                                                              
     brewpub; and providing for an effective date."                                                                             
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken informed  that Representative Lesil McGuire sponsors                                                            
this legislation. He noted  that the Committee would be entertaining                                                            
a committee substitute  that would allow brewpubs to brew their beer                                                            
off-site and to sell their  beer in quantities of not more than five                                                            
gallons  a day.  In  addition,  he specified  that  the forthcoming                                                             
committee  substitute would  extend the  Alcoholic Beverage  Control                                                            
(ABC) Board for  one year, and would address other  issues raised in                                                            
the "Department  of Revenue Alcoholic Beverage Control  Board Sunset                                                            
Review"  audit (copy  on file),  dated  November 29,  2002 that  was                                                            
conducted by the Division of Legislative Audit.                                                                                 
                                                                                                                                
Co-Chair Green  moved to adopt the committee substitute  for HB 234,                                                            
Version 23-LS0862\E as the working document.                                                                                    
                                                                                                                                
Senator Taylor objected for explanation.                                                                                        
                                                                                                                                
HEATH HILYARD,  Staff to  Representative Lesil  McGuire, the  bill's                                                            
sponsor, explained  that the Version "E" committee  substitute would                                                            
transfer  the  ABC Board  from  the  Department  of Revenue  to  the                                                            
Department of Public Safety.                                                                                                    
                                                                                                                                
                                                                                                                                
SFC 03 # 105, Side A 10:23 AM                                                                                                   
                                                                                                                                
                                                                                                                                
Mr. Hiyard furthered that,  in addition to shifting the ABC Board to                                                            
the  Department  of  Public  Safety,  Version  "E"  also  eliminates                                                            
accompanying  language  beginning on  line eight  of Section 1.  The                                                            
revised language in Version "E" reads as follows.                                                                               
                                                                                                                                
     Section 1. AS04.06.010 is amended to read:                                                                                 
     Sec. 04.06.010.  Establishment  of board. There is established                                                           
     in  the  Department  of  Public  Safety   the  [THE]  Alcoholic                                                          
     Beverage  Control Board  [IS ESTABLISHED]  as a regulatory  and                                                            
     quasi-judicial  agency.  The  Board  is  in the  Department  of                                                            
     Public Safety [REVENUE,  BUT FOR ADMINISTRATIVW PURPOSES ONLY].                                                          
                                                                                                                                
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
Mr.  Hiyard stated  that  "but for  Administrative  purposes  only."                                                            
would  be deleted  in  order to  provide  the Commissioner  and  the                                                            
Department  with  expanded   discretionary  ability   regarding  the                                                            
oversight of the activities  and investigations of the ABC Board. He                                                            
noted that [unspecified]  changes in Section 2 of the bill have been                                                            
discussed  in other  committee hearings  and are  acceptable to  the                                                            
sponsor.  He expressed that  Representative  McGuire would  defer to                                                            
the  judgment  of  the Committee,  her  position  on  the  committee                                                            
substitute and  any proposed amendments. He stated  that the sponsor                                                            
supports  the reauthorization  of the ABC  Board and correcting  the                                                            
disparities between brewpubs.                                                                                                   
                                                                                                                                
Co-Chair Wilken  understood that, with the exception  of one item in                                                            
the bill  that  "is not important  at  this time,"  the Version  "E"                                                            
committee substitute would  return the bill's language regarding the                                                            
ABC  Board  to  that  as  originally  proposed   by  Governor  Frank                                                            
Murkowski.                                                                                                                      
                                                                                                                                
WILLIAM TANDESKE, Commissioner,  Department of Public Safety, stated                                                            
that  this  is correct.   He noted  that  the  Commissioner  of  the                                                            
Department  of Revenue  initiated the  proposal by  inquiring  as to                                                            
whether the Department  of Public Safety could assume responsibility                                                            
of the  ABC Board as part  of the new  Administration's endeavor  to                                                            
realign functions  within State departments.  He stated that  he had                                                            
responded  affirmatively to  the request as,  he stated, in  his 26-                                                            
years of experience  as an Alaska  State Trooper, he understood  the                                                            
Department  of Public Safety's involvement  in alcohol and  Title IV                                                            
issues. He stated that  during discussions regarding how to make the                                                            
transfer  of  the ABC  Board  to his  Department  as  productive  as                                                            
possible, concerns arose regarding language in Title IV.                                                                        
                                                                                                                                
Mr. Tandeske referenced  concerns and recommendations  of the Alaska                                                            
Criminal  Justice Assessment  Commission in  a May 2000 report  [not                                                            
provided] are  identified on page  22 of the Audit. The Commission,                                                             
he noted, recommended  that the criminal  investigation function  of                                                            
the Board be transferred  to the Department of Public Safety and, in                                                            
addition,  suggested that  the Board  membership  be increased  from                                                            
five members to  seven as a result of the Commission's  concern that                                                            
"historically …. at least  one other member of the board has created                                                            
a  majority   for  alcohol  dispenser   interest  because   of  past                                                            
experience  in the industry" as the  result of two industry  members                                                            
sitting on  the Board as required  by the AS 04.06.020 mandate  that                                                            
two  board  members  must  be  actively  engaged  in  the  alcoholic                                                            
beverage industry. He stated  that the Commission suggested that the                                                            
two  new  members  be non-industry  members:  one  of  which  should                                                            
represent the  public health or medical  community and the  other to                                                            
represent the law enforcement  community in order to "better protect                                                            
the public interest."                                                                                                           
                                                                                                                                
Commissioner Tandeske communicated  that it is the "Administration's                                                            
desire  to  instill  two  State cabinet  members  on  the  Board  by                                                            
specifying  that  the Commissioners   of the  Department  of  Public                                                            
Safety and  the Department  of Revenue be  members of the Board  "as                                                            
well."                                                                                                                          
                                                                                                                                
Commissioner  Tandeske  agreed  with  findings  on  pages  nine  and                                                            
nineteen of the  Audit, that criminal investigations  regarding such                                                            
things  as prostitution  and gambling,  are best  served by the  law                                                            
enforcement  agency rather than "a  four-person team of alcohol  law                                                            
investigators."                                                                                                                 
                                                                                                                                
Commissioner  Tandeske continued that  the third issue addressed  in                                                            
this legislation  pertains  to the nine  State classified  employees                                                            
who support the  ABC Board. He stated that by clarifying  that these                                                            
employees, who  would be members of the Department  of Public Safety                                                            
and thereby  obligated  to adhere  to Department  policy  standards,                                                            
would enhance  these employees' ability to properly  function within                                                            
the Department  and assure  that they would  be able to access  such                                                            
things as  important and  pertinent Department  case management  and                                                            
tracking records.                                                                                                               
                                                                                                                                
Co-Chair  Wilken asked  regarding the  omission of  language in  the                                                            
committee  substitute  specifying  that  the  Commissioners  of  the                                                            
Department  of Public  Safety and  the Department  of Revenue  could                                                            
appoint a designee to represent them on the ABC Board.                                                                          
                                                                                                                                
Commissioner Tandeske  voiced that incorporating language  regarding                                                            
the  ability  to appoint  a  designee would  be  "a good  idea."  He                                                            
informed  that  the  Commissioner   of the  Department   of  Revenue                                                            
requested this language.                                                                                                        
                                                                                                                                
Co-Chair  Wilken  clarified  however,  that  this  language  is  not                                                            
included in Version E.                                                                                                          
                                                                                                                                
Amendment   #1:   This  conceptual   amendment   inserts   "or   the                                                            
Commissioner's designee"  into Section 2, line 13 of the Version "E"                                                            
committee substitute.  The revised  language would read as  follows.                                                            
                                                                                                                                
     Sec. 2. AS 04.06.020 is amended to read:                                                                                   
          Sec. 04.06.020. Appointment and qualifications. The board                                                             
     consists of seven [FIVE] members. Five members shall be                                                                
     appointed by the governor, one member shall be the                                                                       
     commissioner of public safety or commissioner's designee, and                                                            
     one member shall be the commissioner of revenue or                                                                       
     commissioner's designee…                                                                                                 
                                                                                                                                
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
Co-Chair Wilken moved for the adoption of Amendment #1.                                                                         
                                                                                                                                
Senator  Taylor  objected.  He voiced  that  while he  supports  the                                                            
concept of  transferring the ABC Board  to the Department  of Public                                                            
Safety and addressing  the issue of brewpubs, he disagreed  with the                                                            
language  specifying that  the two  members being  added to the  ABC                                                            
Board would be the Commissioners  of the Department of Public Safety                                                            
and the  Department  of Revenue.  He declared  that  this is not  an                                                            
Audit recommendation  and "appears to be just a takeover  by the two                                                            
Commissioners or their  designees of the five-member Board"…and then                                                            
shifting it to a four-member  majority and "totaling changing policy                                                            
and regulation."                                                                                                                
                                                                                                                                
Co-Chair  Wilken  moved  and asked  unanimous  consent  to  withdraw                                                            
Amendment  #1  in order  to  further  discuss  the point  raised  by                                                            
Senator Taylor  regarding the ABC Board. He noted  that the proposed                                                            
changes to  the Board are  included in Sections  2 through 5  of the                                                            
Version "E" committee substitute.                                                                                               
                                                                                                                                
There being no objection, Amendment #1 was WITHDRAWN.                                                                           
                                                                                                                                
Commissioner  Tandeske declared that  this is not an attempt  by the                                                            
Commissioners  to  "take  over the  Board  any  more than  having  a                                                            
mandatory  two-industry members  self-regulating  their industry  is                                                            
any more  of an option for  a takeover of  policy and industry."  He                                                            
continued  that rather  it "could  be characterized  as a check  and                                                            
balance" measure.                                                                                                               
                                                                                                                                
Senator Taylor  asked whether this proposal has been  discussed with                                                            
the industry or organizations that are being regulated.                                                                         
                                                                                                                                
DOUG   GRIFFIN,  Director,   Alcoholic   Beverage   Control   Board,                                                            
Department of  Revenue, testified via teleconference  from an offnet                                                            
site  and   informed  the  Committee   that  the  addition   of  the                                                            
Commissioners  of  Department of  Public  Safety and  Department  of                                                            
Revenue has not been discussed with the Board.                                                                                  
                                                                                                                                
Senator  Taylor reiterated  his concern.  He argued  that a bill  of                                                            
this nature,  being  presented toward  the end  of this Legislative                                                             
session, is disconcerting.                                                                                                      
                                                                                                                                
Amendment  #2: This amendment  deletes Sections  2 through 5  of the                                                            
Version "E" committee  substitute, beginning on page  1, line 10 and                                                            
continuing through page  2, line 27. This language reads as follows.                                                            
                                                                                                                                
     Sec. 2. AS 04.06.020 is amended to read:                                                                                   
          Sec. 04.06.020. Appointment and qualifications. The board                                                             
     consists  of  seven  [FIVE]  members.  Five  members  shall  be                                                        
     appointed   by  the   governor,   one  member   shall  be   the                                                          
     commissioner  of public  safety,  and one member  shall be  the                                                          
     commissioner   of   revenue.  All   members   except  for   the                                                          
     commissioner  of public safety and the commissioner  of revenue                                                          
     shall  be [AND] confirmed by  a majority of the members  of the                                                          
     legislature  in joint session.  Except for the commissioner  of                                                          
     public safety and  the commissioner of revenue, a [A] member of                                                          
     the  board may  not hold  any other  state  or federal  office,                                                            
     either elective  or appointive. Two members of  the board shall                                                            
     be  persons   actively  engaged   in  the  alcoholic   beverage                                                            
     industry,  except that no member  may hold a wholesale  license                                                            
     or be an  officer, agent, or employee of a wholesale  alcoholic                                                            
     beverage  enterprise.  No three  members  of the  board may  be                                                            
     engaged  in the same  business, occupation,  or profession.  At                                                            
     least  three members of the board  shall represent the  general                                                            
     public.  A board member representing  the general public  or an                                                            
     immediate  family  member of  a board member  representing  the                                                            
     general  public  may not  have any  financial  interest in  the                                                            
     alcoholic  beverage   industry.  In this  section,   "immediate                                                            
     family member" means a spouse, child, or parent.                                                                           
     Sec. 3. AS 04.06.030(a) is amended to read:                                                                                
                (a) Except for the commissioners of public safety                                                             
     and revenue, members  [MEMBERS] of the board shall be appointed                                                          
     for overlapping terms of three years.                                                                                      
     Sec. 4. AS 04.06.040 is amended to read:                                                                                   
          Sec. 04.06.040. Per diem and expenses. Members of the                                                                 
     board  do not receive  a salary, but  are entitled to  per diem                                                            
     and  travel expenses  authorized  by law for  other boards  and                                                            
     commissions.  This section  does not apply  to a member  of the                                                          
     board  who  is  the  commissioner   of  public  safety  or  the                                                          
     commissioner of revenue.                                                                                                 
     Sec. 5. AS 04.06.060 is amended to read:                                                                                   
          Sec.04.06.060. Quorum and majority. Four [THREE] members                                                            
     of the board  constitute a quorum for the conduct  of business,                                                            
     except  that a majority  of the whole  membership of the  board                                                            
     must  approve  all  applications  for  new  licenses,  and  all                                                            
     renewals,  transfers, suspensions, and revocations  of existing                                                            
     licenses.  If a majority of the  board is present, and  voting,                                                            
     the  director, with  the consent  of the  members present,  may                                                            
     cast a tie-breaking vote.                                                                                                  
                                                                                                                                
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
Senator Taylor moved Amendment #2. He objected to his motion for                                                                
purposes of discussion                                                                                                          
                                                                                                                                
Co-Chair Wilken also objected.                                                                                                  
                                                                                                                                
Senator Taylor avowed that  the Version "E" committee substitute "is                                                            
a major  policy change."  He opined that  increasing the Board  from                                                            
five to  seven members  and changing  the quorum  requirements  from                                                            
three members  to four members would serve to "stack  the Board." He                                                            
noted that the ABC Board  has served the State well for 42-years. He                                                            
questioned whether  this "major policy shift" was  the intent of the                                                            
sponsor,  as he asserted  that, were it the  intent, an "extensive"                                                             
discussion would have transpired.  Continuing, he declared that were                                                            
the Commissioners  appointed to the  Board as non-voting  members he                                                            
could accept  the language;  however, he  continued that  appointing                                                            
the Commissioners to the  Board as voting members whose terms do not                                                            
expire  as opposed  to the  three-year  rotation  required of  other                                                            
members,  is  "a  big policy  call"  to  which,  he  continued,  the                                                            
industry should  be able to respond.  He suggested that the  bill be                                                            
held  for   further  consideration   during  the  following   year's                                                            
Legislative  session,  rather   than  being  addressed  during  this                                                            
Legislative session, "at the last minute."                                                                                      
                                                                                                                                
Mr. Griffin  commented  that, in addition  to the  issues that  have                                                            
been discussed,  the bill would provide a one-year  extension of the                                                            
Board. This, he noted,  would allow the Board to "get back to work,"                                                            
and "address  some of  the issues  raised in the  Audit" as  well as                                                            
providing  "a short window"  of time for the  Board to adjust  being                                                            
transitioned  from the Department  of Revenue  to the Department  of                                                            
Public Safety.  He qualified  that the Board  would prefer  a longer                                                            
extension period;  however, he noted  that the Board would  abide by                                                            
the   will   of   the    Legislature   and   Governor   Murkowski's                                                             
Administration.                                                                                                                 
                                                                                                                                
Co-Chair  Wilken noted  that an Amendment  is on  the table,  and he                                                            
ordered the bill SET ASIDE.                                                                                                     
                                                                                                                                
[Note: This bill was heard again later in the meeting.]                                                                         
                                                                                                                                
RECESS TO THE CALL OF THE CHAIR: 10:39 AM / 12:45 PM                                                                            
                                                                                                                                
                                                                                                                                
     SENATE CS FOR CS FOR HOUSE BILL NO. 234(L&C)                                                                               
     "An Act  relocating the Alcoholic  Beverage Control  Board from                                                            
     the Department  of Revenue to the Department  of Public Safety;                                                            
     extending  the  termination  date  of  the  Alcoholic  Beverage                                                            
     Control Board;  relating to the sale of beer  manufactured at a                                                            
     brewpub; and providing for an effective date."                                                                             
                                                                                                                                
                                                                                                                                
The bill was again before the Committee.                                                                                        
                                                                                                                                
Co-Chair Wilken  moved to withdraw  the motion to adopt the  Version                                                            
"E" committee substitute.                                                                                                       
                                                                                                                                
There being no objection, the motion was withdrawn.                                                                             
                                                                                                                                
Senator  Bunde  moved  to  report  the  Senate  Labor  and  Commerce                                                            
committee substitute for  HB 234, Version 23-LS0862\C from Committee                                                            
with individual recommendations and accompanying fiscal notes.                                                                  
                                                                                                                                
There  being no  objection, SCS  CS HB  234(L&C)  was REPORTED  from                                                            
Committee with  zero fiscal note #1  from the Department  of Revenue                                                            
and  indeterminate  fiscal note  #2 from  the Department  of  Public                                                            
Safety.                                                                                                                         
                                                                                                                                
RECESS TO THE CALL OF THE CHAIR: 12:47 PM / 7:49 PM                                                                             
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 162(RLS) am                                                                                          
     "An Act relating to fees adopted by the Department of Natural                                                              
     Resources under AS 44.37.025 or 44.37.027 and to business                                                                  
     license fees; and providing for an effective date."                                                                        
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken explained  that the  House Rules  Committee at  the                                                            
request of the Governor  presents this bill. He stated that the bill                                                            
would  establish  a  $100  annual  license   fee  for  all  business                                                            
categories  and a $50  annual license  fee for  business whose  sole                                                            
proprietor  is 65  years of  age or  older  within one  year of  the                                                            
license  application. In  addition,  he stated that  the bill  would                                                            
allow the Recorder's  Office in the Department of  Natural Resources                                                            
to charge fees in excess of the average cost of operation.                                                                      
                                                                                                                                
RICK   URION,  Director,   Division   of   Occupational   Licensing,                                                            
Department  of  Community  and  Economic  Development  informed  the                                                            
Committee that  the annual business  license fee has been  $25 since                                                            
1949. He communicated  that the Administration  has determined  that                                                            
this legislation is a legitimate  means of raising State revenue and                                                            
would be  easier to administer  than basing  a fee on the number  of                                                            
employees or  the type of business.  He noted that consideration  is                                                            
provided for  sole proprietor businesses  owned by senior  citizens,                                                            
aged 65 or  older. He stated that  the bill is "reasonable,"  and he                                                            
urged passage of the legislation.                                                                                               
                                                                                                                                
Senator Bunde  asked for further information  regarding language  in                                                            
Section  1 pertaining  to the Recorders  fees in  the Department  of                                                            
Natural Resources.                                                                                                              
                                                                                                                                
NICO  BUS, Administrative   Services Manager,  Division  of  Support                                                            
Services, Department  of Natural Resources communicated  that during                                                            
the past  several years,  the Recorder's  Office has experienced  an                                                            
increase  in the number of  documents being  received as well  as an                                                            
increase in  the size of documents  being requested. He shared  that                                                            
this  has  resulted  in  a  "significant"  increase   in  Department                                                            
expenses. He  stated that this proposal  would allow the  Department                                                            
to  apply  fees in  excess  of  the cost,  and  thereby  enable  the                                                            
Department  to study the situation  and further align fees  with the                                                            
cost of the  service as well as establishing  a fee structure  would                                                            
encourage entities to address document size.                                                                                    
                                                                                                                                
Senator  Bunde  pointed  out  that   the  Senate  Labor  &  Commerce                                                            
Committee version  of the bill would  have generated more  money for                                                            
the State.  In addition,  he questioned  the  provision that  allows                                                            
senior  citizens  to  pay  a  lower  business  license  fee,  as  he                                                            
understands  that there are a lot  of "wealthy" Alaskan seniors  who                                                            
buy business licenses.                                                                                                          
                                                                                                                                
Senator  Taylor  moved  to  report  the  bill  from  Committee  with                                                            
individual recommendations and accompanying fiscal notes.                                                                       
                                                                                                                                
There  being no  objection,  CS HB  162(RLS)  am was  REPORTED  from                                                            
Committee with  zero fiscal note #2  from the Department  of Natural                                                            
Resources  and fiscal  note #4 in  the amount  of $193,400 from  the                                                            
Department of Community and Economic Development.                                                                               
                                                                                                                                
                                                                                                                                
     CSHB 111(JUD) AM                                                                                                           
     "An Act relating to policies in telecommunications                                                                         
     regulations; extending the termination date of the Regulatory                                                              
     Commission of Alaska; and providing for an effective date."                                                                
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken  stated  that this  legislation  would  extend  the                                                            
Regulatory Commission  of Alaska (RCA) to June 30,  2007 and require                                                            
the  RCA to  review  regulations  pertaining  to telecommunications                                                             
regulations and present  proposed regulations on the matter no later                                                            
than November  15, 2003.  In addition, he  removed himself  from the                                                            
discussion on this bill  due to the fact that there is a conflict of                                                            
interest because he is  "a minority shareholder in a utility that is                                                            
regulated by the RCA."                                                                                                          
                                                                                                                                
AT EASE 7:54 PM / 7:54 PM                                                                                                       
                                                                                                                                
[NOTE: Vice-Chair Bunde chaired this portion of the meeting.]                                                                   
                                                                                                                                
Senator  Taylor  moved  to  report  the  bill  from  Committee  with                                                            
individual  recommendations and attached  fiscal notes. He  objected                                                            
to allow for testimony.                                                                                                         
                                                                                                                                
PATRICK LUBA, Legislative  Representative, AARP, testified that AARP                                                            
supports the  four-year extension  of the RCA. He asserted  that the                                                            
RCA is  an "essential"  entity because  it is  the only place  where                                                            
consumers could  go to present concerns regarding  a public utility.                                                            
He asserted that the consumers need the Commission.                                                                             
                                                                                                                                
Senator  Bunde  voiced the  understanding  that  the Administration                                                             
supports the original  version of this bill as opposed  to the House                                                            
Judiciary  committee   substitute.  He  asked  for  an  explanation                                                             
regarding the Administration's preference.                                                                                      
                                                                                                                                
DANIEL  PATRICK  O'TIERNEY,   Senior  Assistant  Attorney   General,                                                            
Regulatory  Affairs  Section,  Department  of  Law stated  that  the                                                            
original bill  "simply sought a four-year extension  of the RCA." He                                                            
noted   that  the   committee   substitute  before   the   Committee                                                            
additionally  "tasks the RCA  with other  interim duties."  He noted                                                            
that  the Administration  objects  because  these other  duties  are                                                            
perceived  to be "one-sided  and  over-reaching"  in that they  give                                                            
"one  of the  market  players  an  advantage."  He stated  that  the                                                            
Administration considers this to be "problematic."                                                                              
                                                                                                                                
Senator  Bunde clarified  that  a new  fiscal note  accompanies  the                                                            
bill.                                                                                                                           
                                                                                                                                
Senator Taylor  removed his objection. He clarified  that his motion                                                            
to move the bill specified, "attached fiscal notes."                                                                            
                                                                                                                                
There being  no further objection,  CS HS  111(JUD) am was  REPORTED                                                            
from Committee  with  a new $6,039,200  fiscal note,  dated May  19,                                                            
2003, from the Department of Community and Economic Development.                                                                
                                                                                                                                
AT EASE 7:59 PM / 7:59 PM                                                                                                       
                                                                                                                                
[Co-Chair Wilken resumed chairmanship of the meeting.]                                                                          
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 08:00 PM.                                                                         

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