Legislature(2009 - 2010)SENATE FINANCE 532

04/08/2010 09:00 AM FINANCE

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Heard & Held
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                 SENATE FINANCE COMMITTEE                                                                                       
                       April 8, 2010                                                                                            
                         9:10 a.m.                                                                                              
9:10:27 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair  Stedman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 9:10 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Charlie Huggins, Vice-Chair                                                                                             
Senator Johnny Ellis                                                                                                            
Senator Dennis Egan                                                                                                             
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Mike  Pawlowski, Staff,  Senator Lesil  McGuire; Charles  O.                                                                    
Swanton,  Director, Division  of Sport  Fish, Department  of                                                                    
Fish  and  Game;  Ted Leonard,  Executive  Director,  Alaska                                                                    
Industrial   Development  and   Export  Authority   (AIDEA),                                                                    
Department of  Commerce, Community, &  Economic Development;                                                                    
Mark  Davis,   Alaska  Industrial  Development   and  Export                                                                    
Authority  (AIDEA),  Department  of Commerce,  Community,  &                                                                    
Economic   Development;    Greg,   Winegar,    Director   of                                                                    
Investment,   Alaska  Industrial   Development  and   Export                                                                    
Authority  (AIDEA),  Department  of Commerce,  Community,  &                                                                    
Economic  Development; George  Ascott,  Staff, Senator  Bill                                                                    
Wielechowski;  Eddy  Jeans,  Director, School  Finances  and                                                                    
Facilities, Department of Education and Early Development                                                                       
PRESENT VIA TELECONFERENCE                                                                                                    
Melvin Grove, Big Lake; Robin  Stilwell, Director, Food Bank                                                                    
of Alaska, Anchorage; Dean  Hamburg, Alaska School Nutrition                                                                    
Association, Soldotna                                                                                                           
SB 213    FUNDING FOR SCHOOL MEALS                                                                                              
          SB 213 was heard and HELD in Committee for                                                                            
          further consideration.                                                                                                
SB 294    SPORT FISH GUIDE LICENSES                                                                                             
          SB 294 was heard and HELD in Committee for                                                                            
          further consideration.                                                                                                
SB 300    AIDEA LOANS                                                                                                           
          SB 300 was heard and HELD in Committee for                                                                            
          further consideration.                                                                                                
9:10:50 AM                                                                                                                    
SENATE BILL NO. 294                                                                                                           
     "An Act repealing the termination date of the                                                                              
     licensing of sport fishing operators and sport fishing                                                                     
     guides; and providing for an effective date."                                                                              
MIKE  PAWLOWSKI,  STAFF,  SENATOR LESIL  MCGUIRE,  explained                                                                    
that SB  294 is a  repeal of the  sunset for the  sport fish                                                                    
guide licensing  program. He referred to  the original bill,                                                                    
HB 452,  enacted in  2004, a  copy of  which is  in members'                                                                    
packets (copy on file).                                                                                                         
Mr. Pawlowski continued to explain  that the program created                                                                    
basic standards for sport fish  guide operators, a licensing                                                                    
system  for  sport  fish  guide  operators  and  sport  fish                                                                    
guides,  and created  a  log book  program  that has  proved                                                                    
important in the collection of  data to manage the resource.                                                                    
The program  was extended  for one  year last  session. This                                                                    
bill would repeal  the sunset date and allow  the program to                                                                    
remain in place.                                                                                                                
9:12:44 AM                                                                                                                    
Senator Olson asked for an  explanation of the justification                                                                    
of  the  sunset repeal.  Mr.  Pawlowski  clarified that  the                                                                    
licensing program  does not have an  accompanying board, but                                                                    
is a license  within the statute itself. That  is the reason                                                                    
it  was  viewed  differently  than a  traditional  board  or                                                                    
commission. Senator Olson inquired  how the effectiveness of                                                                    
the  program  will be  evaluated.  Mr.  Pawlowski said  that                                                                    
there is  regular reporting on  the program and  the regular                                                                    
budget process  provides for an evaluating  process. Senator                                                                    
Olson  asked  if  the  number  of  licenses  has  increased,                                                                    
decreased, or  remained the same.  Mr. Pawlowski  offered to                                                                    
find out.                                                                                                                       
Co-Chair Stedman  noted one fiscal note  from the Department                                                                    
of Fish and Game reflecting  the on-going cost of continuing                                                                    
the licensing program at  $437,600. Funding currently exists                                                                    
in the FY 11 budget.                                                                                                            
9:14:28 AM                                                                                                                    
CHARLES  O.  SWANTON,  DIRECTOR,  DIVISION  OF  SPORT  FISH,                                                                    
DEPARTMENT OF FISH  AND GAME, thanked the  committee and the                                                                    
sponsor.  He  related  that  the  legislation  sets  guides,                                                                    
standards, and  data collection  for management.  There have                                                                    
been changes  to the program in  the last year, such  as the                                                                    
addition  of  scanning  technology  that  will  improve  the                                                                    
timeliness of data collection.  He addressed Senator Olson's                                                                    
question and  stated that there  has been a  slight decrease                                                                    
in the last two years in the number of licenses.                                                                                
Senator  Thomas asked  if there  were any  specific concerns                                                                    
about the  reporting requirements.  He wondered if  the fish                                                                    
logs could be simplified.                                                                                                       
Co-Chair  Stedman requested  information  about the  current                                                                    
structure and where the department  wants to go with it. Mr.                                                                    
Swanton  reported   that  in  the  saltwater   program,  the                                                                    
department reduced the  size of the log  book and simplified                                                                    
the  data requirements.  The department  also implemented  a                                                                    
scanning program for the saltwater  log book and plans to do                                                                    
so for the freshwater log book.                                                                                                 
9:18:20 AM                                                                                                                    
Senator  Thomas asked  if the  same  would be  done for  the                                                                    
freshwater requirements. Mr. Swanton concurred.                                                                                 
Senator Olson asked how the  repeal of the sunset date would                                                                    
affect the  other fisheries. Mr.  Swanton believed  that the                                                                    
collection  of good  quality fisheries  data, regardless  of                                                                    
the  use  of  it,  was a  cornerstone  of  the  department's                                                                    
Senator Olson  asked if  there was  opposition by  the other                                                                    
two  fisheries  against  repealing   the  sunset  date.  Mr.                                                                    
Swanton said he was not aware of any opposition.                                                                                
9:20:00 AM                                                                                                                    
MELVIN GROVE,  BIG LAKE  (via teleconference),  testified in                                                                    
opposition to  the bill, primarily  due to the cost.  He had                                                                    
no problems  with the  data collection,  but was  opposed to                                                                    
the $100 fee  for the reporting program.  He maintained that                                                                    
the program  was too expensive. He  suggested implementing a                                                                    
simple scanning  program in  order to  save money.  He urged                                                                    
the committee to retain the sunset in the original bill.                                                                        
9:24:10 AM                                                                                                                    
Co-Chair Stedman set the bill aside.                                                                                            
SB  294  was  heard  and   HELD  in  Committee  for  further                                                                    
SENATE BILL NO. 300                                                                                                           
     "An   Act   relating   to   loan   participations   and                                                                    
     development finance projects of the Alaska Industrial                                                                      
     Development and Export Authority; and relating to                                                                          
     loans from the rural development initiative fund."                                                                         
9:25:02 AM                                                                                                                    
TED   LEONARD,   EXECUTIVE   DIRECTOR,   ALASKA   INDUSTRIAL                                                                    
DEVELOPMENT  AND  EXPORT  AUTHORITY (AIDEA),  DEPARTMENT  OF                                                                    
COMMERCE,  COMMUNITY, &  ECONOMIC  DEVELOPMENT, thanked  the                                                                    
committee for hearing  the bill. He reported  that AIDEA has                                                                    
been going through a strategic  process for the last year to                                                                    
improve and increase its effectiveness  and add new tools to                                                                    
the   organization   that    can   help   promote   economic                                                                    
development. The  changes requested in this  statute are the                                                                    
first  steps  for AIDEA  to  improve  its programs  and  add                                                                    
another assisting tool for economic development.                                                                                
Mr. Leonard reported  that the first section of  the bill is                                                                    
intended  to modernize  the way  that AIDEA  sets rates  for                                                                    
loans that  are funded  through internal  funds. One  of the                                                                    
main  ways  that  AIDEA  promotes  economic  development  is                                                                    
providing Alaska businesses  long-term capital at affordable                                                                    
rates  for commercial  development expansion.  Current rates                                                                    
are  set by  analyzing  the current  market environment.  He                                                                    
related  that the  bond market  has been  unstable over  the                                                                    
last two years, resulting in  a fluctuation of AIDEA's rates                                                                    
between 6  percent and  10 percent.  Banks have  been fairly                                                                    
stable. This  mechanism has  taken AIDEA  out of  the market                                                                    
several  times  when it  should  have  been helping  Alaskan                                                                    
9:27:39 AM                                                                                                                    
Mr. Leonard  explained that the  second section of  the bill                                                                    
adds an  interest rebate  program, which  would allow  for a                                                                    
rebate  on certain  loan  participations  based on  specific                                                                    
criteria set through regulations.  It would allow businesses                                                                    
that  are investing  in difficult  environments a  chance to                                                                    
have  some relief  on their  cash  flow for  the first  five                                                                    
Mr.  Leonard reported  that the  third section  clarifies in                                                                    
statute  that AIDEA  has the  ability to  own a  part of  an                                                                    
infrastructure investment  instead of the  whole. Clarifying                                                                    
the statute  will help  AIDEA in  the development  of larger                                                                    
infrastructure projects such as a port addition.                                                                                
Mr. Leonard  explained that Sections  4 and 5 relate  to the                                                                    
rural  development  initiative  fund and  are  to  encourage                                                                    
better use of the program in rural areas.                                                                                       
9:29:34 AM                                                                                                                    
MARK  DAVIS,   ALASKA  INDUSTRIAL  DEVELOPMENT   AND  EXPORT                                                                    
AUTHORITY  (AIDEA),  DEPARTMENT  OF COMMERCE,  COMMUNITY,  &                                                                    
ECONOMIC DEVELOPMENT,  explained that  the first  section of                                                                    
the  bill would  change  the  way in  which  AIDEA sets  its                                                                    
minimum interest rate under  the commercial finance program,                                                                    
which  in previous  years was  tied to  the bond  market. In                                                                    
2008 the  market changed  and AIDEA's  rates began  to rise,                                                                    
making  it  non-competitive.  The  bill proposes  to  use  a                                                                    
comparable  financial security.  The  minimum  rate for  the                                                                    
program  would  be  set by  looking  at  transparent  public                                                                    
indexes that  track the cost  of money. Those  would include                                                                    
indexes such as  the Federal Home Loan Bank  of Seattle, the                                                                    
Federal Farm  Credit Banks Funding Corporation  Funding Cost                                                                    
Index,  London Interbank  Offered  Rate  (LIBOR), and  Fanny                                                                    
May. He  emphasized that  the bond market  is not  where the                                                                    
state wants to be.                                                                                                              
9:31:55 AM                                                                                                                    
Co-Chair  Stedman requested  a clarification  of terms.  Mr.                                                                    
Davis elaborated  on the definition  of "points";  one point                                                                    
is one percent.  Co-Chair Stedman asked what  LIBOR was. Mr.                                                                    
Davis said  it was  the London  Interbank Offered  Rate, the                                                                    
cost of funds  used by the European  markets. Currently, the                                                                    
yield  on treasury  T  bills is  being  tracked against  the                                                                    
LIBOR to get a feel for  the economy. Mr. Davis continued to                                                                    
say that  the first  section proposes to  allow AIDEA  to be                                                                    
more competitive.  He emphasized  the good qualities  of the                                                                    
program and the numerous commercial loans and jobs funded.                                                                      
9:33:11 AM                                                                                                                    
Mr. Davis explained the second part  of the bill, which is a                                                                    
rebate program under the  same loan participation. Incentive                                                                    
programs  at other  institutions  were examined  and it  was                                                                    
determined  that   incentive  programs  worked   to  further                                                                    
economic  development.   The  bill  proposes   an  up-to-one                                                                    
percent rebate for  the first five years of the  loan with a                                                                    
cap  of 5  percent  of  the portfolio,  which  is very  safe                                                                    
lending. The rebate could be  given if it would create jobs,                                                                    
for  rural   development,  or  to  achieve   other  economic                                                                    
criteria  set forth  in regulation.  Examples  would be  for                                                                    
development  in  distressed areas  or  the  creation of  new                                                                    
technologies or  for alternative  energy. He  predicted that                                                                    
the rebates would bring in new and novel types of lending.                                                                      
Mr. Davis turned  to the third part of the  bill which deals                                                                    
with  the  development  finance program  under  which  AIDEA                                                                    
builds large projects. Currently,  the statutes are at odds.                                                                    
One part, AS  44.88.05, says the authority has  the power to                                                                    
"acquire  an   interest  in  a   project  as   necessary  or                                                                    
appropriate".  Another   part  of   the  same   statute,  AS                                                                    
44.88.010a says  AIDEA can  "incur debt  to own  and operate                                                                    
facilities".  The  decision  had   been  made  by  means  of                                                                    
Department  of Law  interpretations, that  AIDEA could  only                                                                    
own a  complete portion of  a project.  He used the  Red Dog                                                                    
Mine   as   an   example,   where  AIDEA   only   owns   the                                                                    
transportation  system,   but  not  the  mine.   In  current                                                                    
markets,  most  development   corporations  like  AIDEA  are                                                                    
investing  in  percentages  of   projects  and  looking  for                                                                    
private  partnerships.   The  proposal  would   clarify  the                                                                    
statute and allow AIDEA to  acquire an interest and become a                                                                    
partner with other investors and partners.                                                                                      
9:36:12 AM                                                                                                                    
Senator Huggins voiced concern  about the governments owning                                                                    
a part of a project. He  asked how the state would limit its                                                                    
liability  if it  was only  a part  owner. Mr.  Davis opined                                                                    
that legal  documentation would have  to provide  AIDEA with                                                                    
an exit strategy in all cases.                                                                                                  
Senator Thomas asked if  the clarification of participation,                                                                    
ownership,  and  management   of  the  economic  development                                                                    
account was  found on  page 3, lines  10-17. Mr.  Davis said                                                                    
that was correct.                                                                                                               
9:38:03 AM                                                                                                                    
Co-Chair Stedman referred to page  3, lines 25-27, and asked                                                                    
why it  was important that a  person could not get  a second                                                                    
loan  until  a  previous  loan   was  paid  off.  Mr.  Davis                                                                    
suggested Mr. Winegar answer.                                                                                                   
GREG,  WINEGAR, DIRECTOR  OF  INVESTMENT, ALASKA  INDUSTRIAL                                                                    
DEVELOPMENT  AND  EXPORT  AUTHORITY (AIDEA),  DEPARTMENT  OF                                                                    
COMMERCE, COMMUNITY, &  ECONOMIC DEVELOPMENT, explained that                                                                    
AIDEA is attempting  to tie the maximum to  a dollar amount,                                                                    
as opposed  to the number  of loans because  some businesses                                                                    
will take out a small loan  to get started and then may need                                                                    
an additional loan. The current  statute allows for only one                                                                    
loan. The  intention is to  provide the flexibility  to loan                                                                    
up to the full dollar amount.                                                                                                   
9:39:31 AM                                                                                                                    
Senator  Olson asked  why people  in rural  areas could  not                                                                    
spread  the  risk,  as  well as  the  benefits,  under  this                                                                    
program. Mr.  Davis explained that  is the intention  of the                                                                    
section to  allow for more  partnerships and  allow everyone                                                                    
to  have  "skin in  the  game".  Senator Olson  assumed  the                                                                    
transportation system  in the Red  Dog area would  have some                                                                    
input from  the borough or  from the local entity.  He asked                                                                    
if AIDEA  would support that  idea. Mr. Davis said  he would                                                                    
have to  see the amendment first.  If it is a  good business                                                                    
decision, AIDEA would tend to support it.                                                                                       
SB  300  was  heard  and   HELD  in  Committee  for  further                                                                    
9:42:58 AM                                                                                                                    
SENATE BILL NO. 213                                                                                                           
     "An Act providing for funding for school lunch and                                                                         
GEORGE  ESCOTT, STAFF,  SENATOR  BILL WIELECHOWSKI,  thanked                                                                    
the committee and the sponsors  for bringing the legislation                                                                    
to Senator  Wielechowski's attention.  He explained  that SB
213 will provide a state  match for schools participating in                                                                    
the  federal Free  and Reduced  Price  School Breakfast  and                                                                    
Lunch  Program. It  will encourage  more schools  to provide                                                                    
nutritious  meals  for  underprivileged children  and  allow                                                                    
schools that  already do so  to improve their  programs. For                                                                    
every free  and reduced-price breakfast the  federal program                                                                    
funds,  the state  will provide  a  match of  35 cents.  For                                                                    
every  free  and  reduced-price lunch  the  federal  program                                                                    
funds, the state will provide a match of 15 cents.                                                                              
Mr. Escott  reported that  a large  majority of  states make                                                                    
some contribution  to school lunches and  breakfasts. Alaska                                                                    
is  one of  the few  that does  not. Under  this legislation                                                                    
most schools will receive some  assistance through a funding                                                                    
formula  based  on  the   applicable  school  district  cost                                                                    
factor.  Numerous studies  have documented  that eliminating                                                                    
hunger in  children increases school  performance, increases                                                                    
school  attendance, decreases  school violence,  and combats                                                                    
obesity. By dealing with these  programs now, the state will                                                                    
prevent more  costly future problems. Mr.  Escott added that                                                                    
there   were   numerous   letters  of   support   for   this                                                                    
9:45:41 AM                                                                                                                    
Co-Chair Stedman  noted one fiscal note  from the Department                                                                    
of Education  and Early Development  reflecting the  cost of                                                                    
establishing the program for $1,671,30  in general funds for                                                                    
FY 11.                                                                                                                          
9:46:07 AM                                                                                                                    
ROBIN  STILWELL, DIRECTOR,  FOOD BANK  OF ALASKA,  ANCHORAGE                                                                    
(via  teleconference), spoke  of the  advantages of  funding                                                                    
breakfasts and  lunches at school.  She related the  cuts in                                                                    
federal  funds and  how some  schools are  run under  a fund                                                                    
deficit.  She used  Haines as  an example  of a  school that                                                                    
does provide  meals, but  that does  not participate  in the                                                                    
National  School  Lunch  Program. In  some  communities  the                                                                    
schools do  not receive a  federal match because  they don't                                                                    
have  the  staff  to administer  the  federal  program.  She                                                                    
estimated  that over  10,000 meals  are missed  each day  by                                                                    
Alaskan students  that eligible  for reduced  meal programs.                                                                    
She testified in support of SB 213.                                                                                             
9:48:42 AM                                                                                                                    
DEAN HAMBURG, ALASKA  SCHOOL NUTRITION ASSOCIATION, SOLDOTNA                                                                    
(via teleconference), spoke  in favor of SB  213. He related                                                                    
facts about USDA support to  schools for meals. He said that                                                                    
40 percent of Alaskan families  qualify for school meals. He                                                                    
called SB 213  a meaningful and effective  support to assist                                                                    
with school meal programs.                                                                                                      
9:50:57 AM                                                                                                                    
Senator  Huggins noted  that he  and others  support quality                                                                    
nutrition  programs  in  the   schools.  He  voiced  concern                                                                    
whether the  increase in funding would  increase the quality                                                                    
of  the meals.  He  referred  to an  example  of  a meal  he                                                                    
thought was  unhealthy. He wondered what  controls were used                                                                    
to ensure quality meals.                                                                                                        
Mr.  Hamburg reported  that USDA  school  meal programs  are                                                                    
current with nutrition requirements  and are closely aligned                                                                    
with standards. He stated that  his program is an example of                                                                    
good nutrition.                                                                                                                 
9:55:28 AM                                                                                                                    
Co-Chair  Stedman questioned  the inequities  in the  fiscal                                                                    
EDDY  JEANS,  DIRECTOR,   SCHOOL  FINANCES  AND  FACILITIES,                                                                    
DEPARTMENT  OF EDUCATION  AND EARLY  DEVELOPMENT, could  not                                                                    
answer why  there was  a wide discrepancy  in the  number of                                                                    
school   lunches  from   each  district.   Co-Chair  Stedman                                                                    
commented  on how  important school  meals are.  He noted  a                                                                    
higher incidence of meals served in rural areas.                                                                                
The meeting was adjourned at 9:58 AM.                                                                                           

Document Name Date/Time Subjects
SB 294 Sponsor Statement on Letterhead.PDF SFIN 4/8/2010 9:00:00 AM
SB 294
SB 294 Sportfish program Summary.pdf SFIN 4/8/2010 9:00:00 AM
SB 294
SB 294 LICENSING REAUTH BRIEF March102010final (2).doc SFIN 4/8/2010 9:00:00 AM
SB 294
SB 294 2010 HB 452 Enrolled.pdf SFIN 4/8/2010 9:00:00 AM
HB 452
SB 294
SB 294 2007Summary.pdf SFIN 4/8/2010 9:00:00 AM
SB 294
SB294-DFG-SFD-03-10-10.pdf SFIN 4/8/2010 9:00:00 AM
SB 294
SB0294A.pdf SFIN 4/8/2010 9:00:00 AM
SB 294
SB300SupplementalBackup.pdf SFIN 4/8/2010 9:00:00 AM
SB 300
SB300SectionalAnalysis.pdf SFIN 4/8/2010 9:00:00 AM
SB 300
SB 213 Sponsor Statement.pdf SFIN 4/8/2010 9:00:00 AM
SB 213
SB 213 Research Report.pdf SFIN 4/8/2010 9:00:00 AM
SB 213
SB213 Letters of Support.pdf SFIN 4/8/2010 9:00:00 AM
SB 213
SB213 Fiscal Note.pdf SFIN 4/8/2010 9:00:00 AM
SB 213
SB213 Fact Sheets.pdf SFIN 4/8/2010 9:00:00 AM
SB 213
SB213.pdf SFIN 4/8/2010 9:00:00 AM
SB 213
How SB 213 Works.pdf SFIN 4/8/2010 9:00:00 AM
SB 213
CSSB213 (ED).pdf SFIN 4/8/2010 9:00:00 AM
SB 213