Legislature(2005 - 2006)SENATE FINANCE 532

02/01/2006 09:00 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 171 NPR-A COMMUNITY GRANT PROGRAM TELECONFERENCED
Moved CSSB 171(FIN) Out of Committee
+= HB 217 FULL & TRUE VALUE OF TAXABLE MUNI PROP. TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                         February 1, 2006                                                                                     
                             9:03 a.m.                                                                                        
                                                                                                                                
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Green convened the meeting at approximately 9:03 a.m.                                                                  
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice Chair                                                                                                   
Senator Fred Dyson                                                                                                              
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
Also Attending:   REPRESENTATIVE JOHN HARRIS; SUSAN  BURKE, Attorney                                                          
representing the North Slope Borough                                                                                            
                                                                                                                                
Attending via  Teleconference:  From  an offnet location:  STEVE VAN                                                          
SANT, State Assessor, Division  of Community Advocacy, Department of                                                            
Commerce, Community and  Economic Development; MIKE BLACK, Director,                                                            
Division of  Community Advocacy, Department  of Commerce,  Community                                                            
and Economic Development                                                                                                        
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
HB 217-FULL & TRUE VALUE OF TAXABLE MUNI PROP.                                                                                  
                                                                                                                                
The Committee  heard  from the bill  sponsor and  the Department  of                                                            
Commerce,   Community   and  Economic   Development.   A   committee                                                            
substitute was adopted and the bill was held in Committee.                                                                      
                                                                                                                                
SB 171-NPR-A COMMUNITY GRANT PROGRAM                                                                                            
                                                                                                                                
The Committee  heard from the sponsor,  the Department of  Commerce,                                                            
Community and  Economic Development, and the North  Slope Borough. A                                                            
committee substitute was  adopted and amended. The bill was reported                                                            
from Committee.                                                                                                                 
                                                                                                                                
9:09:07 AM                                                                                                                    
                                                                                                                                
                                                                                                                                
     HOUSE BILL NO. 217(title am)                                                                                               
     "An Act  relating to the determination  of full and  true value                                                            
     of  taxable  municipal  property   for  purposes  of  providing                                                            
     planning  assistance to the Department  of Education  and Early                                                            
     Development  and  the  legislature,   calculating  funding  for                                                            
     education,  calculating  school district  participating  shares                                                            
     for school  construction grants,  and calculating tax  resource                                                            
     equalization  payments  and excluding  from that determination                                                             
     the  value  of  property  in  certain  areas  detached  from  a                                                            
     municipality  and the value of  certain property involved  with                                                            
     oil and gas that is not taxed by a municipality."                                                                          
                                                                                                                                
                                                                                                                                
This  was the third  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken moved to  adopt CS HB 217, 24-LS0427\G, as a working                                                            
document.                                                                                                                       
                                                                                                                                
Co-Chair Green objected for an explanation.                                                                                     
                                                                                                                                
Co-Chair Wilken  noted the insertion of language on  page 2, lines 7                                                            
through  10 to provide  for the  ability for the  State assessor  to                                                            
make  a  determination  of  full  and  true  value  of  property  in                                                            
organized areas that do not impose property taxes.                                                                              
                                                                                                                                
9:09:46 AM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken stated that,  as with current  practice, every  two                                                            
years  the State  assessor  would  do a  modeling  of  the value  to                                                            
determine the  four-mil requirement. Every four years,  the assessor                                                            
would undertake  a thorough  assessment similar  to the assessments                                                             
done the previous  year for the Delta region and currently  underway                                                            
for the Lake and Peninsula Borough.                                                                                             
                                                                                                                                
9:10:04 AM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken remarked  that this would  assure that an  analysis                                                            
would  be done  every four  years for  "the four  boroughs and  nine                                                            
first  class  cities  that do  not  have  a mechanism  in  which  to                                                            
establish and  validate property values" in the same  manner done in                                                            
the rest  of the state by  "willing buyers  and sellers in  the free                                                            
market - that's how we  establish our property values in the rest of                                                            
the boroughs."                                                                                                                  
                                                                                                                                
9:10:40 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  directed attention to a new fiscal  note of $98,000                                                            
to assist the State assessor in those efforts.                                                                                  
                                                                                                                                
9:10:53 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman understood  Co-Chair Wilken's  intention to  "level                                                            
the playing  field  between those  school  districts that  tax  on a                                                            
property tax  base and those do otherwise,  such as payment  in lieu                                                            
of taxes."  He gave the Northwest  Arctic Borough as an example.  He                                                            
also  understood  that  these  governments   would  be  required  to                                                            
contribute an  amount equal to 50 percent of the annual  increase in                                                            
property values, with the  State providing the remaining 50 percent.                                                            
                                                                                                                                
9:11:33 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  affirmed that as  provided in existing statute,  as                                                            
the assessed value increases,  the burden is shared by the State and                                                            
the local school assessed community.                                                                                            
                                                                                                                                
9:11:50 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman  characterized  this  as  "the next  step"  to  the                                                            
process established  by legislation  passed in 2001 in distributing                                                             
the  property   value  increases   between   the  State  and   local                                                            
governments.   This   committee    substitute   would   expand   the                                                            
distribution  to those school districts  that receive local  funding                                                            
through payment  in lieu of taxes. He therefore asked  if the intent                                                            
would be to further  extend this practice to the payment  in lieu of                                                            
taxes received by the State for federal lands.                                                                                  
                                                                                                                                
9:13:12 AM                                                                                                                    
                                                                                                                                
Co-Chair   Wilken  responded   that   this  legislation   does   not                                                            
"contemplate  anything having to do  with federal land."  The impact                                                            
funds received by the federal  government are distributed across the                                                            
state.  Some consider  these  funds as  the local  contribution  for                                                            
unorganized areas of the  state. This perception is untrue, although                                                            
the  discussion   is  irrelevant  to  the  legislation   before  the                                                            
Committee.                                                                                                                      
                                                                                                                                
9:13:58 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman argued  that the  federal funding  is a payment  in                                                            
lieu of  taxes, similar  to agreement between  the Northwest  Arctic                                                            
Borough and the  Red Dog Mine in which the company  provides funding                                                            
in lieu of  taxes to be used for education.  He did not recognize  a                                                            
difference  between privately  owned  property  and federally  owned                                                            
property in this context.                                                                                                       
                                                                                                                                
9:15:15 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  reiterated that federal  lands is not part  of this                                                            
bill                                                                                                                            
                                                                                                                                
9:15:24 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman agreed  but asked  if the intention  is to  address                                                            
this in  the future  with separate  legislation  to ensure that  all                                                            
areas of the state are treated equally.                                                                                         
                                                                                                                                
9:15:36 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  was not interested  in dealing with federal  lands.                                                            
                                                                                                                                
9:15:39 AM                                                                                                                    
                                                                                                                                
STEVE  VAN SANT,  State Assessor,  Division of  Community  Advocacy,                                                            
Department   of  Commerce,  Community   and  Economic  Development,                                                             
testified via teleconference  from an offnet location that federally                                                            
owned lands are  not included in the formula used  to determine fair                                                            
value.                                                                                                                          
                                                                                                                                
Mr. Van Sant  informed that existing  statute requires the  Division                                                            
to  visit  each  school  district  annually   and  make  fair  value                                                            
determinations. However,  funding provided for this function has not                                                            
been sufficient  to allow this to  occur. This committee  substitute                                                            
would  establish a  "cycle"  in which  to undertake  these  efforts,                                                            
while only  requiring an  on-site visit once  every four years,  and                                                            
would provide funding assistance to make this possible.                                                                         
                                                                                                                                
9:16:47 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman  asked if  the intention  of  the co-chair  was  to                                                            
report this bill from Committee at this hearing.                                                                                
                                                                                                                                
9:16:54 AM                                                                                                                    
                                                                                                                                
Co-Chair  Green announced the  bill would be  held in the  Committee                                                            
for one day.                                                                                                                    
                                                                                                                                
9:16:59 AM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken explained  that Senator  Olson  had approached  him                                                            
prior to  this meeting and  requested an  opportunity to review  the                                                            
committee   substitute,   as  an  area   of  the   state  could   be                                                            
unintentionally affected.                                                                                                       
                                                                                                                                
9:17:18 AM                                                                                                                    
                                                                                                                                
Senator Olson  furthered that the  inserted language could  possibly                                                            
adversely impact the payment  in lieu of taxes agreement between the                                                            
Northwest Arctic  Borough and Cominco,  regarding the Red  Dog Mine.                                                            
He intended to secure advice from Cominco officials.                                                                            
                                                                                                                                
9:18:05 AM                                                                                                                    
                                                                                                                                
Co-Chair  Green  withdrew  her  objection  to the  adoption  of  the                                                            
committee  substitute and CS  HB 217, 24-LS0427\G  was ADOPTED  as a                                                            
working document.                                                                                                               
                                                                                                                                
Co-Chair Green ordered  the bill HELD in Committee. She then invited                                                            
the bill sponsor to speak.                                                                                                      
                                                                                                                                
9:18:26 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHN  HARRIS,  sponsor  of the  bill  supported  the                                                            
committee  substitute  and  Co-Chair  Wilken's  attempt  to  enforce                                                            
current  law.  True  value of  property  should  be  maintained  and                                                            
adjusted on an annual basis.                                                                                                    
                                                                                                                                
9:19:58 AM                                                                                                                    
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 171                                                                                                        
     "An  Act  amending  the National  Petroleum  Reserve  -  Alaska                                                            
     special revenue fund;  and establishing the Special Legislative                                                            
     Oil  and Gas  NPR-A  Development  Impact Review  Committee  and                                                            
     defining its powers and duties."                                                                                           
                                                                                                                                
                                                                                                                                
This  was the third  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
9:20:07 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  moved for adoption of CS SB 171,  24-LS0785/N, as a                                                            
working document.                                                                                                               
                                                                                                                                
Co-Chair Green objected for an explanation.                                                                                     
                                                                                                                                
9:20:26 AM                                                                                                                    
                                                                                                                                
Co-Chair   Wilken  indicated   he   would  first   outline   deleted                                                            
provisions.                                                                                                                     
                                                                                                                                
9:20:46 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  recalled the discussion the previous  hearing about                                                            
the use  of "appropriation"  versus "grant"  in the language  of the                                                            
bill. The Division  of Legal and Research  Services had advised  him                                                            
that  the  verbiage  is  "transparent"   in either   form.  However,                                                            
"appropriation"  has  been  replaced  with "grant"  with  regard  to                                                            
expenditure  of  revenues  received   from  the National   Petroleum                                                            
Reserve-Alaska   (NPR-A)  wherever  it  appears  in   the  committee                                                            
substitute.                                                                                                                     
                                                                                                                                
9:21:14 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  next relayed concerns  expressed by the  Department                                                            
of Commerce,  Community and Economic  Development that the  proposed                                                            
legislative  committee would duplicate  the Department's  efforts in                                                            
reviewing   and  making  recommendations   on  NPR-A  impact   grant                                                            
applications.  The director  of the Division  of Community  Advocacy                                                            
had suggested transferring  the burden of analysis to the committee,                                                            
since  its  members   would  have  recently  visited   the  affected                                                            
communities.  The Department would  simply ensure proper  receipt of                                                            
the applications.  This suggestion  has been  incorporated  into the                                                            
committee substitute.                                                                                                           
                                                                                                                                
9:22:45 AM                                                                                                                    
                                                                                                                                
Senator  Bunde asked  the extent  of the evaluation  the  Department                                                            
would  be expected  to provide;  whether each  application would  be                                                            
directly  forwarded  to the committee,  or  if they  would be  first                                                            
reviewed to ensure they meet basic qualifications.                                                                              
                                                                                                                                
9:23:21 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  replied that the Division would conduct  an initial                                                            
review.  The Department  currently  has  a  process in  which  staff                                                            
visits   the  affected   communities   and  discusses   the   proper                                                            
application process with applicants.                                                                                            
                                                                                                                                
9:23:53 AM                                                                                                                    
                                                                                                                                
Senator  Bunde  clarified  that  the  Division  would  provide  some                                                            
analysis, but would not rank the proposed projects.                                                                             
                                                                                                                                
9:24:05 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken affirmed.                                                                                                       
                                                                                                                                
Co-Chair Wilken  then addressed a concern raised by  the North Slope                                                            
Borough  that   the  language  of   the  bill  would  provide   that                                                            
applications  could not  be accepted  unless all  "paperwork was  in                                                            
order". Co-Chair  Wilken acknowledged  this issue and the  committee                                                            
substitute  would instead  provide  that the  applications could  be                                                            
accepted, although  grant funds could be withheld  until the details                                                            
of the application were in order.                                                                                               
                                                                                                                                
9:24:40 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  stated that the committee  substitute would  remove                                                            
all reference  to a one-year lapse date of grant funding  since each                                                            
appropriation would have a specified lapse date.                                                                                
                                                                                                                                
9:24:59 AM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken   spoke  to  Senator  Olson's  argument   that  the                                                            
Committee  should include at  least one member  with "roots"  in the                                                            
affected  area. Co-Chair Wilken  struggled  with this and agreed  to                                                            
the benefits of such representation  on the committee. The committee                                                            
substitute  stipulates   a  legislator  representing   the  affected                                                            
election district would  hold one seat on the committee. He detailed                                                            
the assignment  of this seat. First  priority would be given  to the                                                            
legislator from  the area who is also a member of  either the Senate                                                            
or House  finance  committee. If  both committees  include a  member                                                            
from the area,  a decision would be  made to select one.  If neither                                                            
finance committee included  a member from the region, the leadership                                                            
of both bodies would select  a qualifying member of the legislature.                                                            
                                                                                                                                
9:27:04 AM                                                                                                                    
                                                                                                                                
Senator   Olson   expressed   that   both  the   Senator   and   the                                                            
Representative elected  from the affected district should hold seats                                                            
on the  proposed committee  because the decisions  of the  committee                                                            
would impact the region they represent.                                                                                         
                                                                                                                                
Co-Chair Green  remarked upon the  compromise made to designate  one                                                            
seat whereas none had been designated originally.                                                                               
                                                                                                                                
9:28:37 AM                                                                                                                    
                                                                                                                                
Senator Olson  countered that two seats on the six-member  committee                                                            
would not constitute an overwhelming majority.                                                                                  
                                                                                                                                
9:28:51 AM                                                                                                                    
                                                                                                                                
Senator Bunde  opined that the proposed committee  should consist of                                                            
"outsiders" to provide objectivity.                                                                                             
                                                                                                                                
9:29:05 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken continued explaining the committee substitute.                                                                  
                                                                                                                                
9:29:16 AM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken referenced  Senator Stedman's  suggestion to  carry                                                            
forward any  shortfalls in  the Alaska Permanent  Fund. He  reminded                                                            
that the impact  grants receive first  priority of the revenues  the                                                            
State receives from NPR-A  oil development activities. The amount to                                                            
be deposited  to  the Permanent  Fund is  then calculated  from  the                                                            
gross revenue  amount. Senator Stedman  had recommended that  in the                                                            
event that  a full  25 percent of  gross revenues  is not  remaining                                                            
after payment  of the grants,  the shortfall  should be included  in                                                            
the calculations  for future years  until the amount has  been paid.                                                            
                                                                                                                                
Co-Chair Wilken noted that  this provision inserted to the committee                                                            
substitute  would  be  effective  on  the  effective  date  of  this                                                            
legislation.  The  shortfalls  of previous  years,  including  2004,                                                            
would not be included.                                                                                                          
                                                                                                                                
9:30:45 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman commented  this practice  would  be similar to  the                                                            
accounting  of  funds  withdrawn  from  the  Constitutional   Budget                                                            
Reserve (CBR) Fund.                                                                                                             
                                                                                                                                
9:31:02 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  relayed the North Slope Borough had  questioned the                                                            
listing  of the  grant recipients  and  individual  projects in  the                                                            
annual capital  appropriation legislation, as occurred  in the FY 06                                                            
capital   budget  legislation.   The  committee   substitute   would                                                            
establish that this continue to occur.                                                                                          
                                                                                                                                
9:31:38 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  stated the committee substitute would  provide that                                                            
future grants could be  withheld if the recipient failed to meet the                                                            
requirements of accountability for previous grants.                                                                             
                                                                                                                                
9:32:07 AM                                                                                                                    
                                                                                                                                
Co-Chair  Green listed  Mike  Black,  Director, Joan  Grove,  Grants                                                            
Manager, and  Melanie Green, Grants  Supervisor, of the Division  of                                                            
Community Advocacy,  Department of Commerce, Community  and Economic                                                            
Development, were available to respond to questions.                                                                            
                                                                                                                                
Senator  Olson  asked the  Department's  input  on the  proposal  to                                                            
remove its powers to administer  the application process of the NPR-                                                            
A impact  grant program,  while it  retains this  ability for  other                                                            
grant programs.  He asked why the Administration is  so agreeable to                                                            
allowing  politicians  to  undertake  these  duties  when  staff  is                                                            
available and dedicated to these functions.                                                                                     
                                                                                                                                
9:33:27 AM                                                                                                                    
                                                                                                                                
MIKE BLACK, Director, Division  of Community Advocacy, Department of                                                            
Commerce,   Community  and  Economic   Development,  testified   via                                                            
teleconference  from an offnet location that the NPR-A  impact grant                                                            
program  is  unique  to the  other  grant  programs  the  Department                                                            
oversees.  Current statute  requires the Department  to analyze  and                                                            
make determinations  on impact in addition to the  qualifications of                                                            
the grant.  Grant programs are normally  "clear cut" in stipulating                                                             
applicable  projects  and guidelines  to  be followed,  unlike  this                                                            
program.                                                                                                                        
                                                                                                                                
9:34:51 AM                                                                                                                    
                                                                                                                                
Senator Olson  questioned why the  Department, as an administrator,                                                             
would be willing to transfer those duties to a committee of part-                                                               
time legislators  with other  legislation and  matters that  must be                                                            
addressed and who could  be unable to devote as much time and effort                                                            
as Department staff could devote.                                                                                               
                                                                                                                                
9:35:31 AM                                                                                                                    
                                                                                                                                
Mr. Black understood  the concern  of the legislature regarding  how                                                            
the  grant applications  have  been  evaluated. The  Department  has                                                            
determined it preferable  for the legislature to express its intent,                                                            
rather  than  the  current  review  committee   and  the  Department                                                            
attempting to justify its analysis.                                                                                             
                                                                                                                                
9:36:55 AM                                                                                                                    
                                                                                                                                
Senator Dyson reiterated  his question posed at the previous hearing                                                            
on this  bill regarding  the appropriateness  or  legality of  NPR-A                                                            
revenues   appropriated  to   address  impacts   from  Prudhoe   Bay                                                            
development activities.                                                                                                         
                                                                                                                                
9:37:23 AM                                                                                                                    
                                                                                                                                
Mr. Black responded that,  as expressed by Susan Burke, the legality                                                            
is not necessarily  an issue. However,  the program was established                                                             
with the intent  that the NPR-A funds  would be utilized  to address                                                            
impacts caused by NPR-A activities.                                                                                             
                                                                                                                                
Mr. Black qualified that  separating the impacts caused from Prudhoe                                                            
Bay  from those  caused  by NPR-A  can  be difficult.  The  proposed                                                            
legislative committee would need to make this determination.                                                                    
                                                                                                                                
9:39:01 AM                                                                                                                    
                                                                                                                                
Senator  Dyson asked  whether the  earnings brought  to a  community                                                            
within  the NPR-A  by residents  employed  at Prudhoe  Bay would  be                                                            
construed as NPR-A impacts.                                                                                                     
                                                                                                                                
9:39:28 AM                                                                                                                    
                                                                                                                                
Mr. Black responded  that employment outside the NPR-A  has impacted                                                            
the economies  of communities  located within  the NPR-A. He  had no                                                            
knowledge  of an  application  citing  this as  a major  impact.  An                                                            
argument  has  been  expressed  that  population  and environmental                                                             
changes  resulting  from  oil  and  gas  development   are  impacts.                                                            
Distinction between population  changes and environmental impacts is                                                            
often difficult to determine.                                                                                                   
                                                                                                                                
9:40:59 AM                                                                                                                    
                                                                                                                                
Senator Dyson  asked if impacts from a contractor  based in an NPR-A                                                            
community  that performs  work at  Prudhoe Bay would  qualify  as an                                                            
impact to NPR-A.                                                                                                                
                                                                                                                                
9:42:05 AM                                                                                                                    
                                                                                                                                
Mr. Black,  upon  clarifying  the scenario  did not  recall such  an                                                            
argument ever being presented.  Arguments have been made in relation                                                            
to impacts  on the economy,  but not necessarily  as to whether  the                                                            
income is generated from sources other than the NPR-A.                                                                          
                                                                                                                                
9:43:13 AM                                                                                                                    
                                                                                                                                
Senator Bunde  asked if a  resident employed  outside the NPR-A  who                                                            
expends earnings within  NPR-A would raise the standard of living of                                                            
the community  and subsequently  the community  would qualify  for a                                                            
grant on the basis that the cost of living increased.                                                                           
                                                                                                                                
9:44:09 AM                                                                                                                    
                                                                                                                                
Mr.  Black  knew of  no  application  that  specified  positive  and                                                            
negative  impacts.   Only  the  presence  of  an  impact   has  been                                                            
expressed. No attempt has  been made to mitigate positive impacts to                                                            
a community  receiving  additional  income  from employment  of  its                                                            
residents.  The increased costs of  certain goods and services  as a                                                            
result of higher  paying oil and gas  development related  jobs have                                                            
been  discussed. The  impacts  most commonly  cited  are social  and                                                            
environmental.                                                                                                                  
                                                                                                                                
9:45:42 AM                                                                                                                    
                                                                                                                                
Senator  Bunde  remarked that  the  stipulation  should  be made  to                                                            
provide that only  negative impacts from NPR-A development  could be                                                            
considered.  He opposed grant  qualification  based on impacts  to a                                                            
community  because its residents  have higher  incomes. It  would be                                                            
counterintuitive.                                                                                                               
                                                                                                                                
9:46:22 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  asked if the North  Slope Borough was permitted  to                                                            
include  1,000 or 2,000  oil and  gas development  employees  in the                                                            
population  calculations to  determine funding  for revenue  sharing                                                            
and other distribution programs.                                                                                                
                                                                                                                                
9:47:11 AM                                                                                                                    
                                                                                                                                
Mr. Black was  unsure how populations were calculated  for the North                                                            
Slope Borough and requested time to research the matter.                                                                        
                                                                                                                                
9:47:36 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  indicated he would  investigate the issue  as well.                                                            
                                                                                                                                
9:47:48 AM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken then  pointed out that  this is  the first  year in                                                            
which the grant  awards were not announced  by the time legislative                                                             
budget   considerations    were  underway.    He   understood   that                                                            
approximately $5.5 million  in NPR-A revenues is available and asked                                                            
the schedule for  announcing the amount that would  remain after the                                                            
grants were awarded.                                                                                                            
                                                                                                                                
9:48:19 AM                                                                                                                    
                                                                                                                                
Mr. Black  responded  that the awards  had been  determined and  the                                                            
applicants were  in the process of being notified.  The awards would                                                            
be announced  to the Committee after  the applicants were  informed.                                                            
He expected this would occur by 5:00 p.m. the following day.                                                                    
                                                                                                                                
9:49:51 AM                                                                                                                    
                                                                                                                                
SUSAN  BURKE,  Attorney   representing  the  North  Slope   Borough,                                                            
testified that the Borough's  position remains that this legislation                                                            
is unnecessary.                                                                                                                 
                                                                                                                                
9:50:56 AM                                                                                                                    
                                                                                                                                
Ms. Burke commented  to the announcement  that the Department  would                                                            
be willing  to relinquish its ability  to submit recommendations  to                                                            
the  legislature  on  the  grant  applications.  She  stressed  that                                                            
although  the Murkowski  Administration has  indicated willingness,                                                             
other  gubernatorial  administrations  could decide  otherwise.  The                                                            
Alaska Constitution  stipulates that the governor  has the authority                                                            
to give any  recommendations to the  legislature he or she  chooses.                                                            
                                                                                                                                
9:52:23 AM                                                                                                                    
                                                                                                                                
Ms. Burke next pointed  to a language discrepancy between references                                                            
to applications  allowed  for "an  activity or service"  on page  4,                                                            
line  15 and "facility  or  services" on  line 20.  She recommended                                                             
identical  verbiage in both  locations. The  court, in interpreting                                                             
statute, assumes  that the legislature intends two  different things                                                            
in such  instances. She  suggested "activity,  facility or  service"                                                            
replace the language in both subparagraphs.                                                                                     
                                                                                                                                
9:54:09 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman  asked  the  procedure  in the  event  a  community                                                            
decided  to  not  pursue  a  grant  that  was  withheld  because  of                                                            
technicalities.                                                                                                                 
                                                                                                                                
9:55:04 AM                                                                                                                    
                                                                                                                                
Ms.  Burke  hoped   this  would  not  occur,  she  doubted   that  a                                                            
municipality  would decide to not  continue with the grant  process,                                                            
once the application were  awarded unless it was determined that the                                                            
impact to be  addressed in the proposed  project no longer  existed.                                                            
In this  event, she expected  that the State  would not insist  that                                                            
the grant funds be expended.  A grant award could be closed out upon                                                            
completion  of a project if all the  funds were not required  and no                                                            
penalty should be levied.                                                                                                       
                                                                                                                                
9:56:20 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman asked  if Ms. Burke  had concern  that chances  for                                                            
denial  of  grant  applications  could   increase  if  the  proposed                                                            
committee determined that  the State required funding for a specific                                                            
purpose, such as the Permanent Fund.                                                                                            
                                                                                                                                
9:56:52 AM                                                                                                                    
                                                                                                                                
Ms.  Burke  responded  this  is  a  "huge  concern".   The  existing                                                            
situation is difficult.  The U.S. Congress has stipulated  mandatory                                                            
conditions  for acceptance  of a share of  NPR-A revenues.  However,                                                            
the NPR-A  is not a state  resource, but  rather a federal  resource                                                            
and the federal  government has agreed to share the  revenues on the                                                            
condition  that the  State expend  a portion  of  those revenues  on                                                            
affected  areas.  Other  needs  exist in  the  state,  although  the                                                            
requirement  to  give  priority  to  the  local  municipalities   is                                                            
serious.                                                                                                                        
                                                                                                                                
Ms.  Burke acknowledged  that  since  the  lawsuit was  decided  and                                                            
subsequently  the  grant  program  was established,  the  State  has                                                            
fulfilled  its  obligations  satisfactorily.   This  would  be  more                                                            
difficult  for a  legislative committee  to accomplish  because  the                                                            
members  are elected  to represent  different  areas  of the  state.                                                            
Ultimately, the decisions would be made in court.                                                                               
                                                                                                                                
Ms. Burke pointed  out however, that the legislator's  obligation is                                                            
as  "sacred"   as  the   Department's.  When   sworn  into   office,                                                            
legislators   took  an   oath  to   not  only   uphold  the   Alaska                                                            
Constitution, but the U.S. Constitution as well.                                                                                
                                                                                                                                
9:59:57 AM                                                                                                                    
                                                                                                                                
Senator Hoffman  next referenced language on page  3, line 14 of the                                                            
committee  substitute,  which  was  also included  in  the  previous                                                            
version  of the  bill  providing that  "a  member" of  the  proposed                                                            
committee  would  be required  to visit  the  affected communities.                                                             
During the  previous hearing, Senator  Bunde had questioned  whether                                                            
this should read "each member".                                                                                                 
                                                                                                                                
10:01:14 AM                                                                                                                   
                                                                                                                                
Senator Olson  remarked upon the drastic  change of how millions  of                                                            
dollars  would be  allocated if  this legislation  were enacted.  He                                                            
asked if Ms. Burke  anticipated problems would arise  with decisions                                                            
made  by elected  officials  with "different  agendas"  rather  than                                                            
State employees.                                                                                                                
                                                                                                                                
10:01:55 AM                                                                                                                   
                                                                                                                                
Ms.  Burke reiterated  her  response  to Senator  Hoffman's  similar                                                            
question. State employees  do not represent specific constituencies.                                                            
Legislators  could  attempt to  retain funding  to  expend in  their                                                            
election districts.                                                                                                             
                                                                                                                                
10:02:38 AM                                                                                                                   
                                                                                                                                
Ms. Burke  added that  the current  system in  which the  Department                                                            
makes initial determinations  could ameliorate the tension regarding                                                            
this  program  because  a third  party,  the  Department,  could  be                                                            
blamed.                                                                                                                         
                                                                                                                                
10:02:59 AM                                                                                                                   
                                                                                                                                
Senator  Olson contended  that NPR-A  development  would impact  the                                                            
communities  and asked if the situation  could be made worse  if the                                                            
legislature was in charge of "doling out the money".                                                                            
                                                                                                                                
10:03:27 AM                                                                                                                   
                                                                                                                                
Ms.  Burke could  not predict  the  outcome, although  the  "danger"                                                            
exists that real impacts  would be overlooked. The legislature would                                                            
have  difficulty  fulfilling  the  duties  imposed  by  the  federal                                                            
government.                                                                                                                     
                                                                                                                                
10:04:15 AM                                                                                                                   
                                                                                                                                
Without objection, CS SB  171, 24-LS0785/N, was ADOPTED as a working                                                            
document.                                                                                                                       
                                                                                                                                
Amendment  #1: This  amendment  deletes "A"  and  inserts "Each"  in                                                            
subparagraph  (f) of  Article 4A.  Special Legislative  Oil and  Gas                                                            
NPR-A Development Impact  Review Committee, of AS 24.20.580. Special                                                            
Legislative Oil and Gas  NPR-A Development Impact Review Committee.,                                                            
added to AS 24.20  by Section 2 on page 3, line 14  of the committee                                                            
substitute. The amended language reads as follows.                                                                              
                                                                                                                                
          (f) Each member of the committee shall visit each                                                                     
     community within the National Petroleum Reserve - Alaska …"                                                                
                                                                                                                                
Senator Hoffman moved for adoption.                                                                                             
                                                                                                                                
The amendment was ADOPTED without objection.                                                                                    
                                                                                                                                
10:04:49 AM                                                                                                                   
                                                                                                                                
Amendment  #2:  This  amendment   inserts  "facilities",   following                                                            
"activity"  in subparagraph  (2)  of  AS 37.05.530(c)  repealed  and                                                            
reenacted  by Section  4 on page  4, line 15.  The amended  language                                                            
reads as follows.                                                                                                               
                                                                                                                                
                (2) shall conduct a preliminary evaluation of each                                                              
     application;  in  conducting  the preliminary  evaluation,  the                                                            
     department  shall  determine  if  the  application  is  for  an                                                            
     activity,   facilities  or  service  that  involves   planning;                                                            
     construction,  maintenance, and  operation of essential  public                                                            
     facilities  by the municipality; and necessary  public services                                                            
     provided by the municipality;                                                                                              
                                                                                                                                
This amendment  also inserts "activities" following  "qualifying" in                                                            
subparagraph  (3)(A) of AS  37.05.530(c) repealed  and reenacted  by                                                            
Section  4  on page  4,  line  20. The  amended  language  reads  as                                                            
follows.                                                                                                                        
                                                                                                                                
                     (A) all qualifying activities, facilities or                                                               
          services based on the department's preliminary evaluation                                                             
          made under (2) of this subsection;…"                                                                                  
                                                                                                                                
Co-Chair Wilken moved for adoption.                                                                                             
                                                                                                                                
The amendment was ADOPTED without objection.                                                                                    
                                                                                                                                
10:05:40 AM                                                                                                                   
                                                                                                                                
Co-Chair Wilken  offered a motion to report CS SB  171, 24-LS0785\N,                                                            
as amended  from Committee with individual  recommendations  and new                                                            
fiscal notes.                                                                                                                   
                                                                                                                                
10:05:56 AM                                                                                                                   
                                                                                                                                
Senator  Olson objected  and  commented  that the  proposed  process                                                            
changes  would divert  attention from  the impacts  for which  these                                                            
grants were intended.                                                                                                           
                                                                                                                                
Senator   Olson  stressed   that   although  he   represents   these                                                            
communities  and is likely the best  equipped sitting legislator  to                                                            
travel to these communities,  he has been unable to visit each area.                                                            
In addition the audit would cause a burden.                                                                                     
                                                                                                                                
10:07:14 AM                                                                                                                   
                                                                                                                                
Co-Chair Wilken responded as follows.                                                                                           
                                                                                                                                
     I wouldn't want anybody  to miss how important this legislation                                                            
     is.  This is  the only  place we can  find in  our whole  State                                                            
     government  that anything jumps in front of the  deposit to the                                                            
     Permanent Fund.                                                                                                            
                                                                                                                                
     So to  suggest that just the  Department or we're going  to set                                                            
     up  some rules  that  the Department  will follow  to  evaluate                                                            
     something  called "impact", which to date has  not been able to                                                            
     have  been defined,  misses the  point that  each of these  six                                                            
     people  on this Committee are  going to be asked sometime  in a                                                            
     campaign  or sometime  in a meeting or  sometime "How  does one                                                            
     place  in our state, get in front  of our Constitution?"  We'll                                                            
     answer  that by talking about  the federal law that  was handed                                                            
     to us  in 1980, and  how we take great  time and effort  with a                                                            
      special committee to evaluate something called impact.                                                                    
                                                                                                                                
     Now  some seem to  think that  the pressures  of the budget  or                                                            
     time of day  or the weather of the day would  determine whether                                                            
     a  grant is appropriate  or  not. In the  presentation  there's                                                            
     three laws  that we have to follow. The committee  will have to                                                            
     follow  the federal law,  the Alaska State  law and the  Alaska                                                            
     regulations.  That's  shown on  slide 25  of our presentation.                                                             
     That's what we've sworn to do and that's what we will do.                                                                  
                                                                                                                                
     Will there  be shades of grey?  Absolutely, there'll  be shades                                                            
     of grey.  And the cut will be  "Are we doing what was  told the                                                            
     people  of Alaska to do?" That  is: accept that before  you get                                                            
     money in  your Permanent Fund you have to allocate  monies to a                                                            
     certain  part  of  the  State  for  something  called  "impacts                                                            
     reasonably  attributable to oil and gas development  in NPR-A."                                                            
     That's  what this  committee  will do  and it will  do it  time                                                            
     after  time after time. It'll  do it for 40 years. And  it will                                                            
     do it because [of] how important this is.                                                                                  
                                                                                                                                
     The  difficulty  here, [what]  we're  struggling  with and  the                                                            
     reason  this  legislation  has to  be put  in place  today,  is                                                            
     because  we have  allowed over  the last 20  years, through  no                                                            
     fault  on anybody, a system that  has been porous as  best. The                                                            
     money will now flow  from NPR-A and we need as a legislature to                                                            
     set  the path for  the next  generation on  how we're going  to                                                            
     one,  align ourselves  with our  constitution  and the  federal                                                            
     law, and  tell the people who  put us here why we let  one part                                                            
     of the state jump in front our Permanent Fund.                                                                             
                                                                                                                                
     That's the reason  for this legislation and the difficulties we                                                            
     face  today aren't  what  we're trying  to do,  it's trying  to                                                            
     reconcile  ourselves with what's been done in  the past. Better                                                            
     to  swallow this  medicine today  than set  the course for  the                                                            
     future  and continue to let a  system that's surely  broken, as                                                            
     any objective person  would look at the past record, would have                                                            
     to agree it's broken.                                                                                                      
                                                                                                                                
     With  that Madam Chair,  I have great  confidence in these  six                                                            
     people.  It won't be an easy  committee, but it's probably  one                                                            
     of   the  most   important  committees   we'll   have  in   our                                                            
     legislature.                                                                                                               
                                                                                                                                
10:11:26 AM                                                                                                                   
                                                                                                                                
Co-Chair Green  thanked Co-Chair Wilken  for work done on  this. She                                                            
sympathized with anyone  charged with justifying the existing system                                                            
given its shortcomings.                                                                                                         
                                                                                                                                
10:11:48 AM                                                                                                                   
                                                                                                                                
A  roll call  was  taken  on the  motion  to  report the  bill  from                                                            
Committee.                                                                                                                      
                                                                                                                                
IN FAVOR:  Senator  Dyson, Senator  Bunde, Co-Chair  Wilken and  Co-                                                            
Chair Green                                                                                                                     
                                                                                                                                
OPPOSED: Senator Hoffman and Senator Olson                                                                                      
                                                                                                                                
ABSENT: Senator Stedman                                                                                                         
                                                                                                                                
The motion PASSED (4-2-1)                                                                                                       
                                                                                                                                
CS SB 171  (FIN) was MOVED  from Committee  with a zero fiscal  note                                                            
dated  1/25/06  from  the  Department  of  Commerce,  Community  and                                                            
Economic Development,  and a fiscal  note dated 1/25/06 for  $20,000                                                            
from the Legislative Affairs Agency.                                                                                            
10:12:33 AM                                                                                                                   
                                                                                                                                
Senator  Dyson spoke in  response to the  "consternation"  expressed                                                            
during  the  Committee   meeting  on  SB  232,  FY   06  Fast  Track                                                            
Supplemental  Appropriation for Energy-related  expenses,  regarding                                                            
the extent of the situation  and the "clumsy" efforts to "bail folks                                                            
out of difficult  situations". As a result, he has  been considering                                                            
intent  or qualifying  language to  define a mission  for one  State                                                            
agency to integrate  all affected programs and to  rationalize them.                                                            
He offered to  provide this to be introduced by himself  as personal                                                            
legislation,  or introduced as legislation  sponsored by  the Senate                                                            
Finance Committee.  He requested input from members  on this effort.                                                            
                                                                                                                                
10:13:57 AM                                                                                                                   
                                                                                                                                
Senator  Bunde  noted  receipt  of information  on  the  per  capita                                                            
distribution  of funding  to municipalities  for  energy  assistance                                                            
expenses that he had requested at the previous meeting.                                                                         
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Green adjourned the meeting at 10:14:40 AM                                                                           

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