Legislature(2003 - 2004)

04/15/2004 09:06 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                            MINUTES                                                                                           
                    SENATE FINANCE COMMITTEE                                                                                  
                         April 15, 2004                                                                                       
                            9:06 AM                                                                                           
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-04 # 82, Side A                                                                                                             
SFC 04 # 82, Side B                                                                                                             
SFC 04 # 83, Side A                                                                                                             
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Gary  Wilken convened the meeting  at approximately 9:06                                                               
AM.                                                                                                                             
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Fred Dyson                                                                                                              
Senator Ben Stevens                                                                                                             
Senator Con Bunde, Vice-Chair                                                                                                   
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
Also   Attending:  MARC   ANTRIM,  Commissioner,   Department  of                                                             
Corrections; DENNIS MICHEL, Staff to Senator Gene Therriault                                                                    
                                                                                                                                
Attending  via Teleconference:  From Offnet  Sites: ALEX  FRASER,                                                             
Credit  Analyst,   Standard  &  Poor's;  GABRIEL   PETEK,  Credit                                                               
Analyst,  Standard &  Poor's; AL  STOREY, Alaska  State Troopers,                                                               
Department   of  Public   Safety;  SARA   FISHER-GOAD,  Financial                                                               
Analyst,   Alaska   Energy   Authority  and   Alaska   Industrial                                                               
Development  &  Export  Authority, Department  of  Community  and                                                               
Economic  Development;  JIM  MCMILLAN, Deputy  Director,  Credit,                                                               
Alaska Industrial  Development & Export Authority,  Department of                                                               
Community and Economic Development;  MIKE HARPER, Deputy Director                                                               
-   Rural  Energy,   Alaska  Industrial   Development  &   Export                                                               
Authority,  Department  of  Community and  Economic  Development;                                                               
From  Anchorage:  TOM  WILSON, Director,  Public  Transportation,                                                               
Municipality of Anchorage                                                                                                       
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB 65-CORRECTIONAL FACILITY EXPANSION                                                                                           
                                                                                                                                
In   conjunction  with   this   bill,  the   committee  heard   a                                                               
presentation regarding  the State's Credit Outlook  from Standard                                                               
& Poor's, a  credit rating agency. The  Department of Corrections                                                               
presented  testimony pertaining  to the  bill, and  the bill  was                                                               
held in Committee.                                                                                                              
                                                                                                                                
SB 255-ILLEGAL USE TRAFFIC PREEMPTION DEVICE                                                                                    
                                                                                                                                
The Committee heard from the  bill's sponsor, adopted a committee                                                               
substitute,  and   considered  two  amendments  with   one  being                                                               
adopted. The bill was reported from Committee.                                                                                  
                                                                                                                                
SB 337-ENERGY PROGRAMS & FUNDS                                                                                                  
                                                                                                                                
The  Committee  heard  from  the   Department  of  Community  and                                                               
Economic Development and reported the bill from Committee.                                                                      
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 65                                                                                                         
     "An Act  authorizing the Department of  Corrections to enter                                                               
     into  agreements with  municipalities  for  new or  expanded                                                               
     public correctional  facilities in the Fairbanks  North Star                                                               
     Borough,  the  Matanuska-Susitna  Borough, Bethel,  and  the                                                               
     Municipality of Anchorage."                                                                                                
                                                                                                                                
                                                                                                                                
This was the  second hearing for this bill in  the Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
     State of Alaska Credit Outlook Presentation                                                                                
     Credit Analyst, Standard and Poor's                                                                                        
                                                                                                                                
Co-Chair Green  shared with the  Committee that she  had recently                                                               
heard  a Standard  & Poor's  (S&P) report  regarding the  State's                                                               
financial condition  and funding mechanism options  that might be                                                               
available  to fund  in-State correctional  facilities. She  noted                                                               
that  numerous  municipalities  and   boroughs  have  offered  to                                                               
participate in  a "bonding process"  to further  the correctional                                                               
facility  objective; however,  she  explained,  she has  received                                                               
conflicting  reports about  how this  endeavor might  impact "the                                                               
State's  bonded-indebtedness" or  credit  rating. Therefore,  she                                                               
continued,  to  clarify the  information,  she  requested S&P  to                                                               
present  to the  Committee in  this  regard. She  noted that,  as                                                               
standard,  S&P  would  also  provide  the  members  with  general                                                               
financial information.                                                                                                          
                                                                                                                                
ALEX  FRASER,  State  and   Local  Government  Analysts  Manager,                                                               
Southwest and  Western Regions of  the United States,  Standard &                                                               
Poor's,  testified  via teleconference  from  an  offnet site  in                                                               
Dallas, Texas,  and stated  that this is  an opportunity  for the                                                               
Members to ask  questions relating to the  State's credit ratings                                                               
as  well  as  an  opportunity  for  S&P  to  follow-up  on  their                                                               
presentation to  the Conference of  Alaskans. He stated  that the                                                               
focus of that presentation was "to  stress the need for the State                                                               
to  develop, and  continue to  develop, a  long-term strategy  to                                                               
balance revenues  and expenses."  That, he  attested, "is  a very                                                               
key  credit  consideration  for any  government,  particularly  a                                                               
state like Alaska, where there is such  a need to look at some of                                                               
those long-term  events in the  revenue streams."  Continuing, he                                                               
shared that leasing and public  finance are mechanisms that "have                                                               
gained  acceptance" during  the past  twenty-five years  and have                                                               
"become  a  critical  mechanism"  for  those  states  that  "have                                                               
limited  ability  to  issue general  obligation  (GO)  debt."  He                                                               
disclosed  that  various  authorities   have  been  created  with                                                               
financing  being  "dependent  on regular,  annual  appropriations                                                               
from  the state  or other  government  to meet  the debt  service                                                               
payments."                                                                                                                      
                                                                                                                                
Mr.  Fraser  stated  that,  "it  is  critical"  that  any  lease-                                                               
financing arrangement  be supported  by both the  legislative and                                                               
executive branches,  as, he stressed,  "this adds a  large degree                                                               
of support to  the ultimate credit decision, if we  know that the                                                               
project being  contemplated" has  garnered long-term  support. He                                                               
attested that, while  it is expected that the terms  of the bonds                                                               
would  be supported  for  the  life of  the  bonds,  it has  been                                                               
experienced that a  future body questioned a  decision of earlier                                                               
bodies. He stressed that "any  disruption in the lease payment is                                                               
taken  into account,  often taken  quite harshly  on the  general                                                               
obligation credit."  Therefore, he continued, the  development of                                                               
a flaw  could negatively  impact a state's  GO rating.  He avowed                                                               
that rather  than endorsing any  particular project,  S&P usually                                                               
becomes involved "at  the point" where the financing  is about to                                                               
be undertaken.                                                                                                                  
                                                                                                                                
Senator  Dyson  asked  whether  a  state's  implementation  of  a                                                               
Constitutional spending limit might affect its credit rating.                                                                   
                                                                                                                                
Mr. Fraser "supposed" that, "having  mechanisms to enforce fiscal                                                               
discipline  would be  good;" however,  he stated  that a  balance                                                               
must be obtained  that would allow "flexibility."  He stated that                                                               
without the complete  details of the program, it  is difficult to                                                               
provide an answer.                                                                                                              
                                                                                                                                
GABRIEL  PETEK, Primary  Analyst for  Alaska, Standard  & Poor's,                                                               
testified  via   teleconference  from  an  offnet   site  in  San                                                               
Francisco, California, and responded  that, were a spending limit                                                               
in place, S&P  would "focus on the progress that  the State could                                                               
make  toward  achieving  structural balance,  whether  that  were                                                               
achieved" as the result of "a  change in the State's revenue base                                                               
or through  spending controls." He  acknowledged the  efforts the                                                               
State has  implemented in regards  to spending controls  over the                                                               
past several  years. He attested that  S&P does "not take  a real                                                               
pointed position  on how  it's achieved,  it's more  our interest                                                               
that" structural balance is achieved."  He stated that, "the only                                                               
caveat about a spending limit is  to the extent that the emphasis                                                               
or the priority became meeting  the policy or meeting the targets                                                               
of the spending  limit plan as opposed to focusing  on the bottom                                                               
line of  structural balance or  the fundamentals."  Sometimes, he                                                               
shared,  states  get   into  trouble  when  they,   in  order  to                                                               
demonstrate an  accomplishment in  an accounting base,  move some                                                               
payments from one  month into the next month in  order to perhaps                                                               
"move it  into the next  fiscal year in  order to adhere  to some                                                               
spending plan  that has been  put in  place." He declared  that a                                                               
policy  like that  does  not lend  to  improving the  fundamental                                                               
credit quality  of a state.  Therefore, he summarized  that S&P's                                                               
focus is  on the structural quality  of the budget in  regards to                                                               
ongoing revenue and expenditures.                                                                                               
                                                                                                                                
Senator Hoffman asked  whether the State's ability  to manage the                                                               
Permanent Fund  and the Earnings Reserve  Account (ERA) favorably                                                               
affects the State's credit rating.                                                                                              
                                                                                                                                
Mr. Petek replied "absolutely." He  shared that 92-percent of all                                                               
states' credit  ratings range  from a AA-  rating to  AAA rating,                                                               
and that  of all the  states, 34 percent, including  Alaska, have                                                               
an AA rating.  He continued that, while Alaska has  "a strong and                                                               
high credit rating," it's within  the normal range for states. He                                                               
opined that  were states  recognized as a  sector, they  would be                                                               
one of  the highest credit  quality sectors that S&P  follows. At                                                               
the  same time,  he warned,  there  are issues  that Alaska  must                                                               
address  "in the  not  too  distance future"  in  regards to  its                                                               
credit; specifically its structural  budget gap, which he pointed                                                               
out "is much larger than any  other state." He stressed that, "if                                                               
it were not  for the State's Permanent Fund  and other underlying                                                               
resources and,  more recently, the Constitutional  Budget Reserve                                                               
(CBR) … it would be unlikely  that the State's rating would be at                                                               
the  current  level."  While  noting  that  the  State's  prudent                                                               
management  of its  resources is  reflected favorably  in its  AA                                                               
credit rating,  he communicated that S&P's  two-year time horizon                                                               
on its  bond rating for  Alaska would either be  stable, positive                                                               
or negative  depending on  the current  trend. He  specified that                                                               
the  State currently  has  a  AA rating  with  a stable  outlook;                                                               
however,  he  cautioned  that  "at  the  time  when  the  CRB  is                                                               
projected  to  be depleted  within  that  two-year horizon,  that                                                               
stable  outlook" could  potentially be  downgraded to  a negative                                                               
outlook were changes not made to the budget.                                                                                    
                                                                                                                                
Senator  Hoffman  asked  why  "the   substantial  funds"  in  the                                                               
Permanent  Fund Earnings  Reserve Account  (ERA) would  not be  a                                                               
factor, as  he continued, that  account could be accessed  with a                                                               
simple majority  vote were  the State to  have a  budget deficit.                                                               
Continuing,  he  asked  whether  funds  like  the  ERA  could  be                                                               
factored into the rating scenario.                                                                                              
                                                                                                                                
Mr. Petek  responded that while  such funds are  considered, they                                                               
would  be  "treated as  a  one-time  non-recurring resource  that                                                               
could provide a buffer;" however,  he commented that S&P does not                                                               
recognize  that  "as  equating  to  structural  budget  balance."                                                               
Furthermore,  he  continued,  were  "the State  to  rely  on  the                                                               
earnings from the  Permanent Fund as an  on-going revenue source"                                                               
in  such a  manner as  proposed by  the Percent  of Market  Value                                                               
(POMV) plan's  concept of treating  it "like an  endowment fund,"                                                               
S&P  would  recognize it  as  a  reasonable  idea and  "would  be                                                               
comfortable  in analyzing  that in  the context."  He noted  that                                                               
endowment  funds are  factored into  the ratings  of universities                                                               
and  other institutions  and that  analysts are  comfortable with                                                               
including   them  in   the  process   as  procedures   have  been                                                               
established for  their inclusion. He stated,  therefore, that the                                                               
State's incorporation of  the POMV would be "one  way to approach                                                               
this;"  however, he  qualified that  while  the POMV  could be  a                                                               
"reasonable  approach"  to the  issue,  S&P  does not  desire  to                                                               
comment on  policy proposals as  it desires to  remain objection.                                                               
He continued  that, "absent a  defined plan, and just  having the                                                               
Permanent  Fund  available…  is less  desirable,"  as  S&P  would                                                               
desire some "specific approach to utilizing the earnings."                                                                      
                                                                                                                                
Mr. Fraser  commented that POMV  would be  viewed as a  stream of                                                               
payments rather than as one lump sum.                                                                                           
                                                                                                                                
Senator Hoffman  clarified that his  comments did not  pertain to                                                               
changing the  manner through  which the  Permanent Fund  might be                                                               
invested under POMV. Rather, he  attested, his comments were that                                                               
"the Permanent Fund earnings are  not a one-time account" as both                                                               
the Permanent  Fund and the earnings  are permanent. Furthermore,                                                               
he attested,  the earnings  go into  the Permanent  Fund Earnings                                                               
Reserve Account  and "the  Legislature has  not decided  to spent                                                               
those earnings on government but  has spend them on dividends and                                                               
inflation  proofing."  He  characterized  the account  as  a  re-                                                               
occurring account,  whose revenues should be  viewed accordingly,                                                               
and, he  stressed that the  State's "rating should remain  on the                                                               
positive  note  rather than  being  viewed  in a  negative  light                                                               
because the CBR is on the decline."                                                                                             
                                                                                                                                
Mr. Fraser  responded that were  the Permanent Fund to  produce a                                                               
predictable flow  of funds,  or "regular  payments based  on some                                                               
formula"  it would  be  viewed similar  to  endowments and  other                                                               
credits. He stated  that this would provide  a "relatively strong                                                               
revenue stream;  it would be very  predictable from year-to-year,                                                               
and would be a strength."                                                                                                       
                                                                                                                                
Mr.  Petek informed  the Committee  that in  recent internal  S&P                                                               
committee  reviews,  there has  been  an  interest "in  having  a                                                               
detailed  explanation about  where  this State  stands with  this                                                               
structural gap and if, there is movement on that front."                                                                        
                                                                                                                                
Senator B. Stevens  asked whether the presenters  have taken into                                                               
consideration that "it  appears" there would not  be a structural                                                               
budget gap in FY 04.                                                                                                            
                                                                                                                                
Mr.  Petek responded  yes,  that they  had  recently received  an                                                               
updated  revenue   trends  report.  He  referenced   his  earlier                                                               
comments  regarding the  two-year  time  horizon ratings  outlook                                                               
forecast, and  commented that "that  probably won't  happen until                                                               
the CBR is projected to be  depleted within that timeframe, so to                                                               
the extent oil  prices and revenues remain strong as  they are, I                                                               
guess it  buys a little  extra time. But  the fact of  the matter                                                               
is,  its probably  temporary." He  stated that  it would  not "be                                                               
conservative fiscal planning to  assume the revenues would remain                                                               
at the current levels."                                                                                                         
                                                                                                                                
Senator B. Stevens  noted that he would "tend to  agree with that                                                               
statement." Continuing,  he asked  the presenters their  views on                                                               
recent State  discussions regarding  modifying "the  existing tax                                                               
structure  that surrounds  the  oil  industry"; specifically,  he                                                               
asked  how the  State's bond  rating might  be affected  were the                                                               
State "to restructure  the oil industry and  generate more money"                                                               
from  oil even  though,  he acknowledged,  that  the State  would                                                               
remain dependent on this one revenue source.                                                                                    
                                                                                                                                
Mr. Petek responded  that the details of the proposal  would be a                                                               
factor. He  continued that the revenues  currently being received                                                               
from that  industry, the State's  reliance on that  industry, and                                                               
future expansions in  that industry and other  industries such as                                                               
tourism and service  sectors are currently factored  into the S&P                                                               
credit  reports.   He  opined  that  restructuring   of  the  oil                                                               
industry's  tax structure  might align  with the  current report;                                                               
however, he  commented that S&P  could be more specific  once the                                                               
details of the proposal were available.                                                                                         
                                                                                                                                
Senator  B. Stevens  acknowledged the  response. He  communicated                                                               
the understanding that, from comments  he had originally heard in                                                               
Fairbanks  at the  Conference of  Alaskans and  again today,  the                                                               
CBR, which  is not a  guaranteed annual funding stream  but which                                                               
could  be   accessed  by   the  Legislature,   is  viewed   as  a                                                               
contributing  factor   to  the  State's  stable   credit  rating.                                                               
However, he voiced  being confused regarding the  S&P position of                                                               
not factoring into the credit  report, the ERA and the unrealized                                                               
gain  of  the  ERA  "which   are  statutorily  eligible  for  and                                                               
classified as  funds available for appropriation."  Therefore, he                                                               
asked  for  further  explanation  regarding why  the  ERA,  which                                                               
consists  of  the  realized  earnings  account  that  amounts  to                                                               
approximately one billion and the  unrealized earnings account of                                                               
approximately $3.5  billion are  not factored  into the  S&P bond                                                               
rating analysis.                                                                                                                
                                                                                                                                
Mr. Petek supposed that the State  could divert the money that is                                                               
specified  for  the  Permanent  Fund  Dividend  payments  to  the                                                               
general fund;  however, he  stated that S&P  "looks at  things as                                                               
they  actually  play   out"  as  opposed  to   "what  is  legally                                                               
available,"  as  it  is  recognized  "that  there  are  practical                                                               
limitations sometimes to utilizing all resources available."                                                                    
                                                                                                                                
Mr. Fraser  agreed. He noted  that were those  balances deposited                                                               
into the CBR, it might "forestall  for a few more years the point                                                               
at which the  rating could be reconsidered due  to the structural                                                               
budget imbalance."                                                                                                              
                                                                                                                                
Senator B. Stevens voiced that  it is difficult to understand why                                                               
the  CBR, which  was established  in 1990,  and whose  balance is                                                               
currently near  the average balance  of those 14 years,  "has not                                                               
evolved  into  a  funding  mechanism   instead  of  a  structural                                                               
imbalance." Although  voicing understanding  of the  S&P position                                                               
on  the ERA,  he  reiterated  that, "it  is  classified as  funds                                                               
available for appropriation."                                                                                                   
                                                                                                                                
Senator Bunde  understood that the  ERA funds are  not classified                                                               
by S&P  as part of the  State's revenue stream because  the State                                                               
has not  previously "shown  the interest  or the  willingness" to                                                               
access those funds.                                                                                                             
                                                                                                                                
Mr. Petek responded that that "would be a fair way" to state it.                                                                
                                                                                                                                
Senator Bunde  asked whether  implementing statutory  language to                                                               
provide a regular  revenue stream from those  earnings would have                                                               
a  positive impact  on the  State's bond  rating, even  though he                                                               
admitted,   statutory  language   could  be   altered  from   one                                                               
Legislature to the next.                                                                                                        
                                                                                                                                
Mr. Fraser  underscored Senator Bunde's  last comment  by stating                                                               
that S&P has  witnessed a number of policy  changes pertaining to                                                               
such things as rainy day  funds in states throughout the country.                                                               
However,  he voiced  that any  revenue stream  being reviewed  as                                                               
part  of  an overall  structural  budget  is evaluated  for  such                                                               
things as  "any concentration in one  source, its predictability,                                                               
its volatility" and other factors.                                                                                              
                                                                                                                                
Senator Bunde  surmised therefore  that, in  order to  ensure the                                                               
State's  high credit  rating,  the  State could  constitutionally                                                               
institute  such things  as the  POMV program  and dedicate  those                                                               
earnings to  State government or  it could statutory use  some of                                                               
the  excess  earnings  of  the  Permanent  Fund.  Both  of  these                                                               
avenues, he  declared, "would be  considered a revenue  stream to                                                               
government" and would assist in  ensuring the State's good credit                                                               
rating.                                                                                                                         
                                                                                                                                
Mr. Fraser  stated that  the details of  these two  options would                                                               
require review;  however, he stated  that were the end  result to                                                               
be  "structural balance,  regardless of  how we  got there,  that                                                               
would be the important thing."                                                                                                  
                                                                                                                                
Senator B.  Stevens, following-up to Senator  Bunde's questioning                                                               
voiced  the understanding  that the  State would  not be  able to                                                               
claim  the  ERA as  a  stable  funding  source unless  the  State                                                               
established a  law specifying that  a specific amount of  the ERA                                                               
would  be  used  to  create  a  sustainable  funding  stream  for                                                               
government. Continuing,  he questioned  the reasoning  behind the                                                               
credit rating  position that  the State would  have to  spend the                                                               
money  in order  for it  to be  deemed as  a sustainable  funding                                                               
source as  opposed to not  factoring that  money in, in  light of                                                               
the  Legislature's current  ability to  access the  funds in  the                                                               
event of a shortfall.                                                                                                           
                                                                                                                                
Mr. Petek responded  that the difference in the  two scenarios is                                                               
that  one would  be viewed  as a  savings account  that would  be                                                               
considered as a  one-time funding source as opposed  to one being                                                               
treated as an ongoing portion of  the revenue base for the State.                                                               
He  exampled that  were "the  ongoing revenue  base short  of the                                                               
ongoing expenditures, and the reliance  is on an existing reserve                                                               
fund, then it's viewed more like  sort of plugging the gap verses                                                               
having  a  predictable,  projected,   and  forecasted  stream  of                                                               
revenue from the earnings that would  be built into the budget as                                                               
an  on-going source."  Therefore, he  stated that  the rating  is                                                               
calculated on how the reserve would be treated.                                                                                 
                                                                                                                                
Co-Chair Green concurred with  Senator B. Stevens's understanding                                                               
that the State would be required to  spend out of a fund in order                                                               
for it to be classified as revenue.                                                                                             
                                                                                                                                
[Note:  With   the  exception  of  the   following  excerpt,  the                                                               
remainder of the discussion with  Standard & Poor's addressed the                                                               
State's prison situation. Those minutes are forthcoming.]                                                                       
                                                                                                                                
Senator  Bunde  inquired  as  to  whether  the  presenters  could                                                               
comment on  how Governor Frank  Murkowski's recent  POMV proposal                                                               
might address the State's credit rating concern.                                                                                
                                                                                                                                
Mr.  Petek  stated  that  S&P   is  aware  of  the  proposal.  He                                                               
reiterated,  "that the  POMV  concept is  something  that we  are                                                               
accustomed   to  seeing   with  institutions   that  have   large                                                               
endowments." Therefore, he continued,  "it could actually provide                                                               
an ongoing source of revenue  that could help address this budget                                                               
gap." However,  he stressed that  rather than voicing  a position                                                               
on public policy issues, S&P would "focus on the bottom line."                                                                  
                                                                                                                                
Senator  Bunde  stated  that  the  Governor's  proposal  includes                                                               
dedicating  a portion  of the  POMV funds  to the  Permanent Fund                                                               
dividend, thus making them  inaccessible for government spending.                                                               
He asked whether  this would positively or  negatively affect the                                                               
State's credit rating.                                                                                                          
                                                                                                                                
Mr.  Petek   responded  that  the  POMV   concept  would  provide                                                               
predictability,  as it  would  not  "fluctuate dramatically  with                                                               
market  returns  from  one  year  to  the  next."  Therefore,  he                                                               
continued  it would  be a  "credit enhancer."  He stated  that he                                                               
could not comment on the proposal's dividend component.                                                                         
                                                                                                                                
Senator Bunde asked whether dedicating  half of the POMV funds to                                                               
a dividend would  negatively affect the credit  rating as opposed                                                               
to the POMV funds being fully utilized to fund State government.                                                                
                                                                                                                                
Mr. Petek  remarked that due to  the fact that none  of the funds                                                               
have ever  been utilized  to fund State  government, it  would be                                                               
positive.                                                                                                                       
                                                                                                                                
Senator Bunde concurred.                                                                                                        
                                                                                                                                
Senator  Dyson  understood  that  the State's  credit  rating  is                                                               
affected by  "the lack of  economic diversity"  in that it  is so                                                               
dependent  on oil  revenue. Following  up on  Senator B.  Stevens                                                               
earlier  questioning  in  this   regard,  he  asked  for  further                                                               
clarification as  to whether the  State's credit rating  could be                                                               
positively impacted  were changes made  to make the  oil industry                                                               
more viable with a longer-term future.                                                                                          
                                                                                                                                
Mr. Petek  responded that  it might;  however, he  expressed that                                                               
the concept  is "too general"  and that the particulars  would be                                                               
required.                                                                                                                       
                                                                                                                                
Mr. Fraser interjected that "on  the corporate side," Exxon Mobil                                                               
Corporation, which is  "a very strong company  and very dependent                                                               
on  oil revenues,"  has a  credit  rating of  AAA. Therefore,  he                                                               
stated that the particulars of the proposal would be important.                                                                 
                                                                                                                                
Senator  Dyson  voiced  the  understanding  that,  regardless  of                                                               
whether larger  oil reserves became available  for exploration or                                                               
development  and   transportation  route  developed   that  would                                                               
guarantee a  longer life span  and improved delivery  methods, it                                                               
would not  enhance the State's  credit rating as the  State would                                                               
continue to be a "single factor economy."                                                                                       
                                                                                                                                
Mr.  Fraser responded  that "were  the  returns to  the State  so                                                               
massive  that it  really outweighed  everything  else then  there                                                               
really wouldn't be any constraint there on the rating."                                                                         
                                                                                                                                
The bill was HELD in Committee.                                                                                                 
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 255(STA)                                                                                            
     "An Act relating to traffic preemption devices."                                                                           
                                                                                                                                
                                                                                                                                
This was the  second hearing for this bill in  the Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken  stated that this legislation  would "reserve the                                                               
use  of  traffic  preemption devices  for  legitimate  authorized                                                               
users" such as emergency response  providers and road maintenance                                                               
and public  transit vehicles. He  specified that CS  SB 255(STA),                                                               
Version  23-LS1397\Q was  before the  Committee, and  he reminded                                                               
that previous concerns  regarded whether to use the  word "or" or                                                               
"and" on  lines six and  seven of  Section 16, subsection  (a) on                                                               
page one of the bill that reads as follows.                                                                                     
                                                                                                                                
     (a) A  person commits  the crime  of unlawful  possession or                                                               
     use of a  traffic preemption device if  the person possesses                                                               
     or uses a  traffic preemption device and that  person is not                                                               
     at the time of the  possession or use operating an emergency                                                               
     vehicle.                                                                                                                   
                                                                                                                                
Co-Chair Wilken  also noted that  another concern was  whether to                                                               
include public  transit vehicles  in the exemption,  as specified                                                               
in  Section 1,  subsection (b)(2)  on page  one, line  13 through                                                               
page two, line one that reads as follows.                                                                                       
                                                                                                                                
     (2) a person  operating a motor vehicle  involved in highway                                                               
     maintenance or  public transit that  has been  authorized by                                                               
     the Department of Transportation  and Public Facilities or a                                                               
     municipality to possess or use a traffic preemption device.                                                                
                                                                                                                                
Co-Chair Wilken  noted that the  Department of Health  and Social                                                               
Services supports this legislation.                                                                                             
                                                                                                                                
DENNIS  MICHEL,  Staff to  Senator  Gene  Therriault, the  bill's                                                               
sponsor, noted that he had  worked with Co-Chair Green's staff to                                                               
address the concern regarding the  language "possession or use of                                                               
a  traffic  preemption  device" as  specified  in  Section  1(a).                                                               
Continuing, he  noted that changing this  language to "possession                                                               
and  use  of  a  traffic  preemption  device"  would  present  "a                                                               
loophole in  prosecuting people caught  using these  devices." He                                                               
pointed  out  that "these  devices  have  no  other use  than  to                                                               
preempt traffic."                                                                                                               
                                                                                                                                
Co-Chair  Green acknowledged  that  she is  comfortable with  the                                                               
bill's existing language.                                                                                                       
                                                                                                                                
Senator Dyson stated that, while  he appreciates the logic of the                                                               
discussion, he  "fundamentally disapproves" of  criminalizing the                                                               
action of  possessing "a piece  of hardware" as it  furthers "our                                                               
culture's"  tendency to  penalize  people who  have done  nothing                                                               
wrong.  He  likened  this situation  to  anti-gun  activists  who                                                               
claim, "that owning  a weapon, that is only  designed for defense                                                               
as  in shooting  people, ought  to be  outlawed." In  summary, he                                                               
voiced being  uneasy about "the  slippery slope  of criminalizing                                                               
something when no negative behavior has ever been demonstrated."                                                                
                                                                                                                                
Senator Olson voiced similar concerns  in that a person who might                                                               
possess but not  be able to operate such a  device "would be held                                                               
outside of the standard of being innocent until proven guilty."                                                                 
                                                                                                                                
There  being  no further  discussion  regarding  the language  in                                                               
Section 1(a), Co-Chair Wilken directed  the discussion to Section                                                               
1(b)(2).                                                                                                                        
                                                                                                                                
Mr.  Michel   communicated  that  utilizing   traffic  preemptive                                                               
devices for public  transit needs is not uncommon  and "does have                                                               
some merit"  as these devices  are currently utilized  to address                                                               
traffic  problems  in such  cities  as  Portland Oregon,  Seattle                                                               
Washington, and Chicago Illinois.                                                                                               
                                                                                                                                
Co-Chair  Wilken  noted  that the  bill's  sponsor  has  provided                                                               
Members   with  "An   Overview   of   Transit  Signal   Priority"                                                               
publication [copy on  file] that reviews these  and other cities'                                                               
experiences with the traffic exemption devices.                                                                                 
                                                                                                                                
TOM  WILSON,  Director,  Public Transportation,  Municipality  of                                                               
Anchorage,  testified  via  teleconference  from  Anchorage,  and                                                               
explained that  the Municipality's transit system  has identified                                                               
the  implementation of  traffic preemptive  devices as  something                                                               
they would like to pursue at  some point. He stated that a common                                                               
complaint  of  most transit  systems  is  "that buses  don't  run                                                               
frequently  enough  and that  there  is  too much  time"  between                                                               
scheduled  runs.  He  stated that  implementation  of  developing                                                               
technology  such as  traffic preemptive  devices could  assist in                                                               
addressing  these concerns.  He stated  that although  "long-term                                                               
field  studies" have  been not  conducted in  the United  States,                                                               
information  does  indicate   that  "significant  advantages  and                                                               
efficiencies"  could   result  by  the  implementation   of  "low                                                               
priority"  traffic   preemptive  devices  as  opposed   to  "high                                                               
priority devices, which would be reserved for police and fire."                                                                 
                                                                                                                                
Mr. Wilson  explained that the  low priority systems  utilized in                                                               
some  cities  are automated  and  have  resulted in  "significant                                                               
reductions  in  trip  times."  Continuing,   he  noted  that  the                                                               
benefits  derived from  trip time  reductions would  include such                                                               
things  as  an  increased  use  of  the  public  transit  system;                                                               
decreased  use  of single  occupancy  vehicles  on the  roadways;                                                               
decreased  road maintenance;  and  reduced  emissions. He  stated                                                               
that  because of  these  benefits, "it  would  be an  unfortunate                                                               
oversight to preclude" public transit  system from the ability to                                                               
utilize  these  devices. He  stated  that  the Anchorage  transit                                                               
system would  coordinate use  of these devices  with a  number of                                                               
municipality ad  hoc committees to include  the traffic engineer,                                                               
the traffic department, and the police and fire agencies.                                                                       
                                                                                                                                
Senator Dyson voiced concern that  allowing the transit system to                                                               
utilize  these devices  might result  in a  scenario wherein  two                                                               
lanes of private citizen traffic might  be backed up while a city                                                               
bus, going another direction, preempts  the traffic signal in its                                                               
favor. Therefore, he  asked how the program  could be implemented                                                               
to address the competing needs of private citizens.                                                                             
                                                                                                                                
Mr. Wilson  responded that this  "is a commonly  raised concern,"                                                               
and he  noted that existing  studies indicate when the  system is                                                               
"adequately  designed"  there is  "little  or  no impact  on  the                                                               
travel times  of other motorists." Continuing,  he explained that                                                               
rather than being  a manual system operated  by individual buses,                                                               
the  device could  be tailored  to  specific areas  and would  be                                                               
operated   by   a    centralized   traffic   management   center.                                                               
Furthermore, he  stated that  once the  parameters of  the system                                                               
are established  and entered into a  traffic management computer,                                                               
activation  rules  would  limit  its  use  to  those  times,  for                                                               
instance, when a bus was  running ten minutes behind schedule. In                                                               
conclusion, he stressed that studies  indicate there to be little                                                               
impact on other  traffic and that motorists in the  vicinity of a                                                               
bus might benefit by taking advantage of the situation.                                                                         
                                                                                                                                
Senator  Dyson voiced  disappointment that  the response  did not                                                               
include  utilization  of  the  device in  low  traffic  times  to                                                               
provide a  bus with a green  light as opposed to  requiring it to                                                               
wait  at  an  "arbitrary"  red  light when  there  was  no  cross                                                               
traffic. Therefore,  he surmised  that routinely the  devices are                                                               
limited to high traffic times.  In conclusion, he stated that the                                                               
response  did not  assure him  that  the device's  impact on  the                                                               
motorists would be minimal.                                                                                                     
                                                                                                                                
Mr. Wilson voiced  the understanding that the  system would allow                                                               
for  protocols   to  be  established  in   the  computer  system.                                                               
Therefore,  he  continued,  Senator Dyson's  concerns  "could  be                                                               
addressed  in that  fashion." He  stressed that  "the predominant                                                               
application"  of  the  devices  has been  to  address  congestion                                                               
rather than  wait times. He  informed the Committee  that transit                                                               
vehicles normally spend 15-percent of  their trip time waiting at                                                               
traffic signals,  and therefore, he noted,  studies indicate that                                                               
this device would "significantly reduce"  that wait time by up to                                                               
40-percent on average. This, he  stated, would reduce a 60-minute                                                               
round-trip  to  55-minutes  and   therefore,  providing  "a  more                                                               
competitive service."                                                                                                           
                                                                                                                                
Senator Dyson  disclosed that he  would be more  comfortable with                                                               
the implementation of traffic devices  were they approved through                                                               
a local  citizen or  local assembly vote  process. He  noted that                                                               
the  residents   of  Anchorage   have  not,   historically,  been                                                               
supportive of the  local transit authority. He  asked whether the                                                               
communities that  have implemented the  device did so  upon voter                                                               
consideration.                                                                                                                  
                                                                                                                                
Mr. Wilson responded  that everything he had  seen indicated that                                                               
the device  was "implemented through  local ordinances  and local                                                               
processes, but not necessarily subject to a vote."                                                                              
                                                                                                                                
Mr. Michel noted that language in  Section 1(b)(2) on page one of                                                               
the bill  specifies that implementation of  the preemptive device                                                               
must  be authorized  by the  local municipality.  He opined  that                                                               
this  language, which  reads as  follows, should  address Senator                                                               
Dyson's concern.                                                                                                                
                                                                                                                                
     (2) a person  operating a motor vehicle  involved in highway                                                               
     maintenance or  public transit that  has been  authorized by                                                               
     the Department of Transportation  and Public Facilities or a                                                               
     municipality to possess or use a traffic preemption device.                                                                
                                                                                                                                
Co-Chair  Wilken observed  that  the language  includes the  word                                                               
"or" and  could therefore allow  for authorization either  by the                                                               
Department of  Transportation and Public Facilities  (DOT) or the                                                               
municipality.                                                                                                                   
                                                                                                                                
Mr. Michel  concurred but stated  that due  to the fact  that DOT                                                               
does not  have a bus  system, the  authorization would be  by the                                                               
municipality.                                                                                                                   
                                                                                                                                
Senator Bunde commented  that this language would  "not allow for                                                               
a vote of the people."                                                                                                          
                                                                                                                                
Senator Bunde  understood that the Anchorage  transit system does                                                               
not currently own any traffic preemptive devices.                                                                               
                                                                                                                                
Mr. Wilson  responded that  is correct. He  noted that  a limited                                                               
number  of intersections  in the  Municipality are  equipped with                                                               
the devices of which only  the fire department could activate. He                                                               
was unsure as to whether  the police department was equipped with                                                               
the devices.                                                                                                                    
                                                                                                                                
Senator Bunde  asked for a  cost estimate for outfitting  the bus                                                               
transit system.                                                                                                                 
                                                                                                                                
Mr. Wilson  responded that an  initial cost study  indicates that                                                               
the  transit system's  portion of  the total  cost of  purchasing                                                               
transmitters,  receivers, and  computers  would  amount to  three                                                               
million  dollars.  He noted  that  the  majority of  the  transit                                                               
system's   expenses  would   be  eligible   to  receive   federal                                                               
"intelligent  transportation  system" funding  "which  frequently                                                               
requires no local match."                                                                                                       
                                                                                                                                
Senator  Olson asked  how the  Municipality of  Anchorage with  a                                                               
population of less than 300,000  could compare its transportation                                                               
needs to those of "much larger cosmopolitan areas."                                                                             
                                                                                                                                
Mr.  Wilson responded  that rather  than  comparing Anchorage  to                                                               
those larger  cities that have  these devices, the intent  was to                                                               
provide  examples  of  the  affects  of  the  traffic  preemption                                                               
devices. He  pointed out that  this is an emerging  technology of                                                               
which, currently, only larger areas have implemented.                                                                           
                                                                                                                                
AL STOREY,  Alaska State Troopers,  Department of  Public Safety,                                                               
testified via teleconference from an  offnet site to comment that                                                               
the  Department is  in support  of restricting  the use  of these                                                               
devices to  emergency vehicles  in order  to address  the concern                                                               
that unrestricted use could corrupt  an entire traffic management                                                               
system and result  in chaotic and dangerous  situations. He noted                                                               
that while the  fire and police department  devices have priority                                                               
status  with  the  signaling  system,  a  situation  could  arise                                                               
wherein an  individual could trigger  a device prior to  a police                                                               
officers approach to a signal and create confusion.                                                                             
                                                                                                                                
Co-Chair Wilken  noted that, in  addition to these  devices being                                                               
used  in Anchorage,  the  city of  Fairbanks  has utilized  these                                                               
traffic devices effectively for more than ten years.                                                                            
                                                                                                                                
Senator  Dyson   asked  whether  the  bill's   definition  of  an                                                               
emergency vehicle is sufficient  as he questioned whether someone                                                               
such as  a supervising  officer in  a non-official  vehicle might                                                               
require use of the device in an emergency.                                                                                      
                                                                                                                                
Mr. Storey explained  that there is a  very restrictive criterion                                                               
regarding  the  use of  the  device.  He  allowed that  while  an                                                               
extreme "aggravated" situation such  as a hostage situation might                                                               
support expanding the  authorized use of the device,  he would be                                                               
surprised were, as a matter  of routine business, the restrictive                                                               
criteria and usage guidelines expanded.                                                                                         
                                                                                                                                
Senator Dyson  questioned whether  the definition of  a emergency                                                               
vehicle  should be  broadened to  include  a person  such as  the                                                               
volunteer  fire  department chief,  in  addition  to the  current                                                               
definition that limits use to  fire, police, or medical emergency                                                               
vehicles.                                                                                                                       
                                                                                                                                
Mr.  Storey  replied  that although  volunteer  firefighters  and                                                               
others who  must respond to  emergency situations  are important,                                                               
the  decision to  broaden the  definition should  be a  Committee                                                               
decision.                                                                                                                       
                                                                                                                                
Senator  Bunde  asked how  the  system  would function  were  two                                                               
emergency  vehicles approaching  an  intersection from  different                                                               
directions.                                                                                                                     
                                                                                                                                
Mr.  Storey remarked  that fire  and  police vehicle  transmitter                                                               
devices  could  be programmed  to  supercede  signals from  lower                                                               
priority devices utilized in transit  system buses or maintenance                                                               
vehicles. He  voiced the hope  that the priority  vehicle devices                                                               
would  also supercede  illegal devices.  In  response to  Senator                                                               
Bunde's question,  he stated that  were two priority  vehicles to                                                               
approach a common intersection there  might be conflict; however,                                                               
he  noted that  the  emergency vehicle  drivers could  coordinate                                                               
their  positions  via  their  communication  radios  and  use  of                                                               
professional courtesy.                                                                                                          
                                                                                                                                
Senator Bunde, noting  that he is unfamiliar  with these devices,                                                               
asked whether the ones available  on the market emit low priority                                                               
signals.   Furthermore,  he   questioned   the   need  for   this                                                               
legislation  were   the  high   priority  emergency   devices  to                                                               
supercede low priority devices.                                                                                                 
                                                                                                                                
Mr. Storey responded  that the purpose of this  legislation is to                                                               
offset criminal acts  of those who possess these  devices and who                                                               
might use them, for instance,  to "corrupt the traffic management                                                               
system" in order to  get to work on time. He  noted that there is                                                               
also  the possibility  that priority  emergency vehicles  signals                                                               
might  be interfered  with,  as  he was  unsure  of the  priority                                                               
configuration of "bootlegged" devices.                                                                                          
                                                                                                                                
Mr.  Michel informed  the Committee  that volunteer  firefighters                                                               
utilize a  blue light  system on  their vehicles.  Continuing, he                                                               
noted that while  these volunteers are trained  and authorized to                                                               
use these lights, they are  not authorized to exceed posted speed                                                               
limits.  He  recommended  against  broadening the  scope  of  the                                                               
definition to include persons such as volunteers.                                                                               
                                                                                                                                
Mr. Michel further  explained that a tier  system is incorporated                                                               
into the traffic  preemption device system that  would disallow a                                                               
low  priority vehicle  such as  a  snowplow or  transit bus  from                                                               
interfering  with  an  emergency   vehicle  signal.  However,  he                                                               
stressed, that without  this legislation, it would  be unclear as                                                               
to  whether bootlegged  devices  could  interfere with  emergency                                                               
vehicle  devices.  He  clarified  that  when  two  high  priority                                                               
vehicles approach a  signaled intersection, "it is  a first come,                                                               
first served basis."                                                                                                            
                                                                                                                                
Senator  Dyson  stated  that  he would  accept  the  language  in                                                               
Section 1(a).  However, he suggested language  in Section 1(b)(2)                                                               
be altered.                                                                                                                     
                                                                                                                                
Conceptual  Amendment   #1:  This  amendment  deletes   the  word                                                               
"municipality"  in Section  1, subsection  (b) (2)  on page  one,                                                               
line 15, and  replaces it with "municipal or  city assembly." The                                                               
amended language would read as follows.                                                                                         
                                                                                                                                
     (2) a person  operating a motor vehicle  involved in highway                                                               
     maintenance or  public transit that  has been  authorized by                                                               
     the Department of Transportation  and Public Facilities or a                                                               
     municipal  or city  assembly  to possess  or  use a  traffic                                                               
     preemptive device.                                                                                                         
                                                                                                                                
Senator  Dyson  moved  for  the  adoption  of  Amendment  #1.  He                                                               
informed that  this amendment would  provide local  citizenry the                                                               
ability to  have a public  process through  which to weigh  in on                                                               
whether  to  allow  their  local transit  system  to  have  these                                                               
devices.                                                                                                                        
                                                                                                                                
Senator Bunde objected  to inform that he would  be presenting an                                                               
amendment that  would remove the  entire public  transit language                                                               
from the legislation.  He recalled that Mr.  Wilson had testified                                                               
that  the transit  system  "has no  present  plans" to  implement                                                               
these devices. Continuing, he noted that  he would be open to the                                                               
idea in the  future, were the citizens of  Anchorage provided the                                                               
opportunity  to  participate in  the  decision  were the  transit                                                               
system to advance this effort.                                                                                                  
                                                                                                                                
Senator Bunde removed his objection.                                                                                            
                                                                                                                                
There being no further objection, Amendment #1 was ADOPTED.                                                                     
                                                                                                                                
Conceptual Amendment #2: This amendment  deletes the language "or                                                               
public  transit",  and  "or  a municipal  or  city  assembly"  as                                                               
amended by Amendment #1, in  Section 1, subsection (b)(2) on page                                                               
one, lines 14 and 15. The language would read as follows.                                                                       
                                                                                                                                
      (2) a person operating a  motor vehicle involved in highway                                                               
     maintenance that  has been authorized  by the  Department of                                                               
     Transportation  and Public  Facilities to  possess or  use a                                                               
     traffic preemptive device.                                                                                                 
                                                                                                                                
Senator Bunde moved for the adoption of Amendment #2.                                                                           
                                                                                                                                
Senator Wilken objected.                                                                                                        
                                                                                                                                
Senator  Bunde  stated  that  this  amendment  would  remove  the                                                               
transit system  from the legislation  due to the fact  that there                                                               
is  currently no  plan  underway to  institute  these devices  in                                                               
Anchorage's transit  system and, therefore, authorization  is not                                                               
currently required.  Continuing, he  noted that this  issue could                                                               
be readdressed in the future. He  declared that he does not agree                                                               
that  these  transit  devices  would  not  "inconvenience"  other                                                               
motorists.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken maintained  his objection,  as he  stated he  is                                                               
comfortable with  allowing the  transit system  to remain  in the                                                               
bill; especially in light of the language added by Amendment #1.                                                                
                                                                                                                                
Senator Olson commented that, as  a physician, it is difficult to                                                               
discuss  emergency  vehicles  and   transit  buses  in  the  same                                                               
conversation.                                                                                                                   
                                                                                                                                
                                                                                                                                
SFC 04 # 83, Side A 10:42 AM                                                                                                    
                                                                                                                                
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Olson and Senator Bunde                                                                                       
                                                                                                                                
OPPOSED: Senator Hoffman, Senator B. Stevens, Senator Dyson, Co-                                                                
Chair Green, and Co-Chair Wilken                                                                                                
                                                                                                                                
The motion FAILED (2-5)                                                                                                         
                                                                                                                                
Amendment #2 FAILED to be adopted.                                                                                              
                                                                                                                                
Co-Chair  Green  moved  to  report the  bill,  as  amended,  from                                                               
Committee  with   individual  recommendations   and  accompanying                                                               
fiscal notes.                                                                                                                   
                                                                                                                                
Co-Chair Wilken  objected in order  to request that  Members read                                                               
the analysis  included with the  new fiscal note provided  by the                                                               
Public Defenders Office of the Department of Administration.                                                                    
                                                                                                                                
Co-Chair Wilken removed his objection.                                                                                          
                                                                                                                                
There being  no further objection,  CS SB 255 (FIN)  was REPORTED                                                               
from Committee with  zero fiscal note #1, dated  February 9, 2004                                                               
and  zero  fiscal  note  #2,  dated February  6,  2004  from  the                                                               
Department of Public Safety; zero  fiscal note #3, dated February                                                               
10,  2004 from  the Department  of Law;  and a  new indeterminate                                                               
fiscal  note,  dated  April  6,   2004  from  the  Department  of                                                               
Administration.                                                                                                                 
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 337(L&C)                                                                                            
     "An  Act  relating  to  the  powers  of  the  Alaska  Energy                                                               
     Authority  to   make  grants  and   loans,  to   enter  into                                                               
     contracts,  and to  improve,  equip,  operate, and  maintain                                                               
     bulk  fuel,   waste  energy,  energy   conservation,  energy                                                               
     efficiency,   and   alternative    energy   facilities   and                                                               
     equipment; relating  to the bulk  fuel revolving  loan fund;                                                               
     relating to the Alaska  Energy Authority's liability for the                                                               
     provision  of  technical   assistance  to  rural  utilities;                                                               
     relating to the Alaska  Energy Authority's investment of the                                                               
     power  development fund;  repealing  the electrical  service                                                               
     extension fund; and providing for an effective date."                                                                      
                                                                                                                                
                                                                                                                                
This was  the first hearing for  this bill in the  Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken, noted that this  legislation, which is sponsored                                                               
by Senate Rules  by the Request of the Governor,  pertains to the                                                               
powers of the  Alaska Energy Authority and  would amend statutory                                                               
provisions of the Authority's Energy Loan Program (ELP).                                                                        
                                                                                                                                
SARA   FISHER-GOAD,   Financial    Analyst,   Alaska   Industrial                                                               
Development  &   Export  Authority  (AIDEA)  and   Alaska  Energy                                                               
Authority   (AEA),   Department   of   Community   and   Economic                                                               
Development, testified  via teleconference  from an  offnet site,                                                               
and stated  that this legislation  would allow the  Power Project                                                               
Fund  (PPF)  to  authorize  loans for  waste  energy  and  energy                                                               
conservation,   energy   efficiency,   and   alternative   energy                                                               
facilities and equipment.                                                                                                       
                                                                                                                                
Co-Chair Wilken noted that Members'  packets contain an AIDEA/AEA                                                               
letter [copy on  file] dated March 16, 2004 and  addressed to the                                                               
Committee co-chairs, that outlines  the projects affected by this                                                               
legislation.                                                                                                                    
                                                                                                                                
Ms.  Goad stated  that  the  changes proposed  to  the PPF  would                                                               
expand the  definition of eligible energy  efficiency projects in                                                               
order to  include projects such  as lighting retrofits.  She also                                                               
noted  that  the  bill  would  repeal  the  Loan  Committee  that                                                               
approves  the  PPP  loans and  incorporate  the  credit  approval                                                               
process  that  includes  an  appeal   process  to  the  Board  of                                                               
Directors, as currently utilized by AIDEA.                                                                                      
                                                                                                                                
Ms. Goad stated that another  program affected by the legislation                                                               
would be the Bulk Fuel  Revolving Loan Fund (BFRLF) that provides                                                               
"short-term   loans  to   assist  small   rural  communities   in                                                               
purchasing annual  bulk fuel supplies." She  qualified that while                                                               
the  Department of  Law recently  interpreted  the definition  of                                                               
eligible  borrowers to  be communities  and private  individuals,                                                               
the bill would allow funds to  be provided to other entities such                                                               
as   corporations,  cooperatives,   and   joint  ventures.   This                                                               
expansion,  she  attested would  "not  expand  the definition  of                                                               
eligible  borrower beyond  the  long-standing interpretation  and                                                               
practice that included other entities such as corporations."                                                                    
                                                                                                                                
Ms.  Goad noted  that  while  AEA has  been  investing the  Power                                                               
Development Fund since  1993, this bill would  affirm its ability                                                               
to do so  by, with the concurrence of the  Department of Revenue,                                                               
providing  AEA  with  the   necessary  statutory  authority.  She                                                               
pointed out  that all earnings  of the  Fund are remitted  to the                                                               
State's general fund.                                                                                                           
                                                                                                                                
Ms. Goad noted  that this bill would clarify  AEA's general power                                                               
of authority  to issue grants  and contracts in that,  "as acting                                                               
as an  agent for rural  communities, AEA manages  power projects,                                                               
bulk  fuel projects  and alternate  energy  projects." She  noted                                                               
that AEA  receives and expends  federal funds from  entities such                                                               
as  the Denali  Commission and  the US  Department of  the Energy                                                               
through the State's appropriation process.                                                                                      
                                                                                                                                
Ms.  Goad  also  stated  that  the  bill  "clarifies  that  AEA's                                                               
statutory  mandate to  provide technical  assistance  may not  be                                                               
used as  an independent  basis for  tort liability  against AEA."                                                               
However, she  noted that,  "AEA would continue  to be  liable for                                                               
negligence if  it fails to  use reasonable care in  the providing                                                               
the technical assistance."                                                                                                      
                                                                                                                                
Ms.  Goad stated  that the  bill would  also repeal  the inactive                                                               
Electrical  Service Extension  Fund. She  urged the  Committee to                                                               
act favorably in regard to this bill.                                                                                           
                                                                                                                                
Co-Chair Wilken  noted that the repealing  language regarding the                                                               
Electrical  Service  Extension Fund  is  located  on page  seven,                                                               
Section  12, of  the bill.  Furthermore, he  noted that  the Fund                                                               
money, amounting  to approximately $85,000, would  be transferred                                                               
to the general fund.                                                                                                            
                                                                                                                                
Senator  Dyson asked  whether "changing  lighting systems"  would                                                               
qualify as an energy efficiency project.                                                                                        
                                                                                                                                
JIM MCMILLAN,  Deputy Director, Credit and  Business Development,                                                               
Alaska  Energy Authority,  Department of  Community and  Economic                                                               
Development, testified  via teleconference  from an  offnet site,                                                               
and  responded that,  while  projects of  this  nature have  been                                                               
denied in  the past,  this bill would  allow for  retrofitting of                                                               
lighting to save energy costs to qualify for the PPF program.                                                                   
                                                                                                                                
Senator  Dyson  understood  therefore  that  transitioning  "from                                                               
incandescent lighting  to something  with a better  power factor"                                                               
would be allowed.                                                                                                               
                                                                                                                                
Senator  Olson  asked  for   further  information  regarding  the                                                               
repealing of  the Bulk Fuel  Revolving Fund,  AS 42.45.250(l)(1),                                                               
as specified in the bill in  Section 11, on page seven, line ten;                                                               
specifically as  this might affect  bulk fuel  storage facilities                                                               
that store in excess of 10,000 gallons of fuel.                                                                                 
                                                                                                                                
Mr. McMillan  responded that  the intent of  this language  is to                                                               
"clean  up"  State  statutes  as the  definition  of  "bulk  fuel                                                               
storage facility" is not included  anywhere in State statutes. He                                                               
stressed that repealing the section  would not have any affect on                                                               
the program's operation.                                                                                                        
                                                                                                                                
Senator Olson asked  whether a minimum of 10,000  gallons of fuel                                                               
must be purchased in order to quality for the Loan program.                                                                     
                                                                                                                                
Mr. McMillan responded in the negative.                                                                                         
                                                                                                                                
MIKE HARPER,  Deputy Director -  Rural Energy,  Alaska Industrial                                                               
Development  &  Export  Authority, Department  of  Community  and                                                               
Economic  Development,  testified   via  teleconference  from  an                                                               
offset site  to state that  this legislation "is  fairly straight                                                               
forward" and  would provide  the Authority  "with the  ability to                                                               
move forward  and to  carry out" the  Loan Program's  mission for                                                               
"building projects in rural Alaska."                                                                                            
                                                                                                                                
Senator  Bunde shared  that  he  had heard  from  a fuel  storage                                                               
constituent who  operates in  Western Alaska  and who  had shared                                                               
that there  is a strong business  interconnection between Western                                                               
Alaska and  Central Alaska. He  stated that these fuel  sales are                                                               
important and  are a priority in  that, due to weather  and being                                                               
required to ship  via barge, the fuel must be  shipped before the                                                               
onset  of winter.  On  another note,  he  mentioned that  another                                                               
person, who  was having  difficulty in paying  for fuel,  wrote a                                                               
letter  saying that  paying  for his  fuel  would jeopardize  his                                                               
cable, as it would be shut off if he did not pay that bill.                                                                     
                                                                                                                                
Senator Dyson  noted that, in  the past, he had  conducted waste-                                                               
heat  recovery  studies  in  approximately  fifteen  villages  in                                                               
Western Alaska, and  he concluded that efforts  to improve energy                                                               
situations by  utilizing such things  as power plants  waste heat                                                               
to heat  schools, is a  "win-win situation." Therefore,  he spoke                                                               
to his  conflict of  interest and  stated that he  has "a  lot of                                                               
enthusiasm for what's being done."                                                                                              
                                                                                                                                
Senator  Dyson  moved to  report  the  bill from  Committee  with                                                               
individual recommendations and accompanying fiscal notes.                                                                       
                                                                                                                                
There  being  no objection,  CS  SB  337(L&C) was  REPORTED  from                                                               
Committee with zero fiscal note  #1, dated December 18, 2003 from                                                               
the  Department  of  Revenue,  and zero  fiscal  note  #2,  dated                                                               
February 3, 2004,  from the Department of  Community and Economic                                                               
Development.                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 10:55 AM.                                                                         
                                                                                                                                

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