Legislature(2015 - 2016)SENATE FINANCE 532

04/11/2016 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 101(FIN) Out of Committee
Scheduled but Not Heard
Moved SB 201 Out of Committee
Moved SJR 12 Out of Committee
Moved CSSB 196(FIN) Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                      April 11, 2016                                                                                            
                         9:22 a.m.                                                                                              
9:22:14 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair MacKinnon called the Senate Finance Committee                                                                          
meeting to order at 9:22 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Peter Micciche, Vice-Chair                                                                                              
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Jane Conway, Staff, Senator Cathy Giessel; Senator Bill                                                                         
Stoltz,   Sponsor;    Alexei   Painter,    Fiscal   Analyst,                                                                    
Legislative Finance.                                                                                                            
PRESENT VIA TELECONFERENCE                                                                                                    
Ben Ellis, Director, Alaska State Parks; Dirk White,                                                                            
Pharmacist,   Sitka;   Jessica   Geary,   Finance   Manager,                                                                    
Legislative Affairs.                                                                                                            
SB 101    STATE PARKS FEES & SALES OF MERCHANDISE                                                                               
          CSSB 101(FIN)  was REPORTED out of  committee with                                                                    
          a "do  pass" recommendation and with  one new zero                                                                    
          fiscal  note   from  the  Department   of  Natural                                                                    
SB 196    POWER COST EQ FUND: RESERVE ACCT;DIVIDEND                                                                             
          SB 196  was REPORTED out  of committee with  a "do                                                                    
          pass"  recommendation  and  with  one  new  fiscal                                                                    
          impact note  by the  Senate Finance  Committee and                                                                    
          one new  zero fiscal  note from the  Department of                                                                    
          Commerce, Community and Economic Development.                                                                         
SB 200    MANDATORY PHYSICAL ACTIVITY IN SCHOOLS                                                                                
          SB 200 was SCHEDULED but not HEARD.                                                                                   
SB 201    PHARMA BD & EMPLOYEES;DRUG DIST/MANUFAC                                                                               
          SB  201 was  REPORTED  out of  committee with  "no                                                                    
          recommendation" and with  one previously published                                                                    
          fiscal note: FN1 (CED).                                                                                               
SB 210    COMM. REV. SHARING;PROP. TAX EXEMPTIONS                                                                               
          SB  210  was  HEARD  and  HELD  in  committee  for                                                                    
          further consideration.                                                                                                
SJR 12    CONST. AM: ELECTED ATTORNEY GENERAL                                                                                   
          SJR  12 was  REPORTED  out of  committee with  "no                                                                    
          recommendation" and with  two previously published                                                                    
          fiscal notes: FN1 (LEG), and FN2 (GOV).                                                                               
Co-Chair MacKinnon discussed the schedule.                                                                                      
SENATE BILL NO. 101                                                                                                           
     "An Act relating to fees for use of state park system                                                                      
     facilities; and relating to the sale of merchandise by                                                                     
     the Department of Natural Resources."                                                                                      
9:23:21 AM                                                                                                                    
Co-Chair   MacKinnon  recalled   that   the  committee   had                                                                    
previously  adopted the  committee  substitute  (CS) for  SB
101(FIN) (version  E), which had included  an amendment. She                                                                    
noted that the public hearing  had been opened and closed on                                                                    
March 17, 2016.                                                                                                                 
Vice-Chair   Micciche  discussed   the  fiscal   note,  (OMB                                                                    
component 3001),  from the Department of  Natural Resources.                                                                    
The appropriation was for Parks  and Outdoor Recreation with                                                                    
an allocation  for Parks Management and  Access. He conveyed                                                                    
that it was a zero fiscal  note with no capital and no added                                                                    
BEN    ELLIS,   DIRECTOR,    ALASKA    STATE   PARKS    (via                                                                    
teleconference), addressed  the fiscal note and  shared that                                                                    
state parks was not looking  for an appropriation to start a                                                                    
program. He thought there were  many steps needed before the                                                                    
department was able  to sell merchandise as  proposed in the                                                                    
bill.  He furthered  that  the department  had  not put  any                                                                    
funds  towards  getting  a  trademark,  but  had  done  some                                                                    
preliminary work on a business  plan. He thought the program                                                                    
would  move forward  by reallocating  funds that  would have                                                                    
been put toward park operations.  He thought it was a modest                                                                    
way to grow the concept.                                                                                                        
Co-Chair MacKinnon  pointed out that  the bill was  taking a                                                                    
different  direction from  the  previous  committee. The  CS                                                                    
would  allow more  flexibility for  the  department to  sell                                                                    
products to benefit the parks,  which she thought some might                                                                    
view as competition with private companies.                                                                                     
Vice-Chair  Micciche MOVED  to report  CSSB 101(FIN)  out of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
CSSB  101(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation and with one  new zero fiscal note from                                                                    
the Department of Natural Resources.                                                                                            
9:26:47 AM                                                                                                                    
AT EASE                                                                                                                         
9:28:58 AM                                                                                                                    
SENATE BILL NO. 201                                                                                                           
     "An Act relating to the  Board of Pharmacy; relating to                                                                    
     the  licensing  and  inspection of  certain  facilities                                                                    
     located  outside the  state;  relating  to drug  supply                                                                    
     chain security;  and creating  a position  of executive                                                                    
     administrator for the Board of Pharmacy."                                                                                  
9:29:03 AM                                                                                                                    
Co-Chair  MacKinnon  referred  to a  document  from  Senator                                                                    
Cathy Giessel dated April 9,  2016, in response to questions                                                                    
from the committee (copy on file).                                                                                              
JANE  CONWAY, STAFF,  SENATOR CATHY  GIESSEL, addressed  the                                                                    
document that  answered the  questions that  had come  up at                                                                    
the previous hearing of the bill:                                                                                               
     1. Would  SB 201  apply to regulation  of international                                                                    
     wholesalers? (sub  question.....do our AK  licensees do                                                                    
     business  with  wholesalers  in  Mexico  or  Canada  or                                                                    
     similar?) But even so, we  can't regulate a business in                                                                    
     another country could we?                                                                                                  
     Alaskan pharmacies do not  do business with wholesalers                                                                    
     in Mexico  or Canada  since they presumably  don't sell                                                                    
     US  FDA approved  drugs and  as such  the FDA  does not                                                                    
     allow import of said drugs.                                                                                                
Ms.  Conway specified  that drugs  must be  licensed in  the                                                                    
United States and  be approved by the  United States Federal                                                                    
Drug Administration (FDA).                                                                                                      
Co-Chair MacKinnon  restated that  her question had  been if                                                                    
an international  or foreign  country could  market directly                                                                    
to Alaskans, and somehow bypass the FDA.                                                                                        
Co-Chair  MacKinnon  referred  to the  first  question,  and                                                                    
asked for professional feedback on the matter.                                                                                  
DIRK WHITE, PHARMACIST,  SITKA (via teleconference), relayed                                                                    
that  he recently  finished  his term  as  president of  the                                                                    
Board  of  Pharmacy.  He  stated   there  had  been  ongoing                                                                    
conversation  regarding importation  of  drugs from  foreign                                                                    
countries.  He  recounted  that  in  the  Clinton  era,  the                                                                    
importation of  pharmaceuticals was going to  be allowed but                                                                    
was  later  quashed  by  the  U.S.  Justice  Department.  He                                                                    
discussed  the   Drug  Quality  Security  Act   (DQSA),  and                                                                    
informed  that  there  was  a  practice  called  "track  and                                                                    
trace,"  under  which pharmacists  were  ensured  as to  the                                                                    
provenance and pedigree of the  items that had been ordered.                                                                    
He noted that  he received an electronic file  every time he                                                                    
placed  an order  from a  wholesaler, which  would show  the                                                                    
pedigree  of  each  item  that  was  ordered.  He  discussed                                                                    
prevention efforts by  the Board of Pharmacy  to ensure that                                                                    
wholesalers were following DQSA  regulations. He pointed out                                                                    
that  the  board  had  no  jurisdiction  over  international                                                                    
pharmacies  or  wholesalers,  and   added  that  there  were                                                                    
9:34:01 AM                                                                                                                    
Co-Chair MacKinnon  was unclear  as to Mr.  White's response                                                                    
on the matter of  directly accepting drugs from wholesalers.                                                                    
She  wondered if  the bill  should endeavor  to prevent  the                                                                    
ability to  purchase drugs from  a wholesaler  that marketed                                                                    
internationally. She wondered if  the committee should amend                                                                    
the bill to ban the ability to purchase internationally.                                                                        
Mr. White  clarified that the prohibition  she described was                                                                    
essentially  what  pharmacists  had  been  operating  under.                                                                    
According to regulations, he should  not be able to purchase                                                                    
from  an international  pharmacy or  wholesaler, but  he was                                                                    
sure there  was a way around  the rule, which is  why he had                                                                    
mentioned  a loophole.  He referred  to  copious amounts  of                                                                    
packages  that  were  being  sent from  out  of  state,  and                                                                    
thought the FDA was unable  to inspect them all. He asserted                                                                    
that   he  would   always  order   from  a   major  national                                                                    
wholesaler. There were also  small regional businesses which                                                                    
were licensed and certified and  inspected, and were able to                                                                    
ship  into   other  states.   He  did   not  see   that  the                                                                    
international concern was a priority.                                                                                           
Ms. Conway spoke to the  regulation of internet sales on the                                                                    
first page of the document:                                                                                                     
     2. Are internet sales regulated? Sub question - would                                                                      
     AK licensees purchase off the internet? Are they even                                                                      
     allowed to do that?                                                                                                        
     Alaskan Pharmacies may purchase off the internet from                                                                      
     Wholesalers licensed in the  United States and purchase                                                                    
     FDA   approved  drugs.   Alaskan  pharmacies   may  not                                                                    
     purchase  and  then  dispense  drugs  from  wholesalers                                                                    
     (presumably  out  of  the country)  that  are  NOT  FDA                                                                    
Ms.   Conway   stated   that  individuals   could   purchase                                                                    
medications  over the  internet.  She noted  that there  had                                                                    
been  discussion about  an internet  corporation forming  to                                                                    
address  the dot-com  pharmacy industry;  so  that a  person                                                                    
could  look  up  an  internet  pharmacy to  see  if  it  was                                                                    
certified as handling FDA-approved drugs.                                                                                       
Co-Chair MacKinnon related that  the committee had addressed                                                                    
the  fiscal note  on April  9, 2016.  She noted  that public                                                                    
testimony had opened and closed on the same date.                                                                               
Vice-Chair Micciche MOVED to report  SB 201 out of Committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
SB   201   was   REPORTED   out  of   committee   with   "no                                                                    
recommendation"  and with  one  previously published  fiscal                                                                    
note: FN1 (CED).                                                                                                                
9:38:36 AM                                                                                                                    
AT EASE                                                                                                                         
9:42:06 AM                                                                                                                    
SENATE JOINT RESOLUTION NO. 12                                                                                                
     Proposing amendments to the Constitution of the State                                                                      
     of Alaska relating to the office of attorney general.                                                                      
9:42:10 AM                                                                                                                    
Vice-Chair Micciche discussed FN  1, (OMB component 0) which                                                                    
had  no department  appropriation  or allocation  and was  a                                                                    
zero fiscal note.                                                                                                               
Vice-Chair Micciche  discussed FN 2 (OMB  component 21), for                                                                    
the Office  of the Governor,  with an appropriation  for the                                                                    
Division of  Elections. He  specified that FN  2 was  a zero                                                                    
fiscal note from  FY 17 through FY 22. The  note assumed the                                                                    
election would  be an  addition to  the regular  election on                                                                    
the governor's cycle.                                                                                                           
Co-Chair  MacKinnon asked  for explanation  as to  why there                                                                    
was an OMB component number of  zero, and a fiscal note from                                                                    
the Legislative Affairs Agency.                                                                                                 
JESSICA  GEARY, FINANCE  MANAGER,  LEGISLATIVE AFFAIRS  (via                                                                    
teleconference), relayed  that she was asked  by the sponsor                                                                    
of  the  legislation  to  prepare a  fiscal  note.  She  had                                                                    
prepared  a  zero fiscal  note  because  the bill  had  zero                                                                    
fiscal impact on the agency.                                                                                                    
SENATOR  BILL  STOLTZ,  SPONSOR,   discussed  the  bill.  He                                                                    
specified  that  the  bill  was  based  on  the  premise  of                                                                    
providing  a "people's  lawyer,"  and that  43 other  states                                                                    
elected  the attorney  general. He  stated that  the primary                                                                    
motivation was  not to adhere  to the practices of  the rest                                                                    
of  the  country,  but  rather to  provide  for  a  people's                                                                    
lawyer. He  wanted to put  the matter before voters  so they                                                                    
could make the final decision.                                                                                                  
Senator  Olson  referred  to the  formation  of  the  Alaska                                                                    
Constitution and  pondered the discussion of  the framers on                                                                    
the topic of an elected  attorney general. He recounted that                                                                    
there had  been strong proponents  of not having  an elected                                                                    
attorney  general,  and  the   framers  had  considered  the                                                                    
Missouri  Plan. He  mentioned  the  Judiciary Committee  and                                                                    
Ralph Rivers  [former territorial  legislator and  member of                                                                    
the   constitutional   convention];    and   wondered   what                                                                    
disagreement  the sponsor  had with  the original  rationale                                                                    
and arguments of the Judiciary Committee.                                                                                       
Senator Stoltz  agreed that  the constitutional  framers had                                                                    
been  the prevailing  voice  on the  matter  of choosing  an                                                                    
attorney  general. He  recalled  that  former Governor  Bill                                                                    
Egan, the chairman of the  constitutional convention, had an                                                                    
opposing view  but had  been in  the minority.  He continued                                                                    
that the Missouri Plan applied  to the selection of judicial                                                                    
9:46:34 AM                                                                                                                    
Senator  Olson  thought  the Missouri  Plan  had  considered                                                                    
matters  in the  Judiciary Committee,  which had  decided to                                                                    
have  the prevailing  vote and  have  an appointed  attorney                                                                    
Senator Stoltz  thought that  there had  been a  decision to                                                                    
have  a  governor's appointment  of  the  judiciary, with  a                                                                    
voter  retention  plan.  The judiciary  committee  had  also                                                                    
dealt with  the attorney  general, and appointment  had been                                                                    
the majority view in the years of 1955 and 1956.                                                                                
Senator Hoffman asked  if the sponsor had  any concerns that                                                                    
there would be  a qualified individual outside  of the major                                                                    
population centers. He thought  everyone was well aware that                                                                    
it  would   be  difficult   for  people  outside   of  major                                                                    
metropolitan areas to get elected statewide.                                                                                    
Senator Stoltz  mentioned former Governor Bill  Egan, former                                                                    
Governor Jay  Hammond, as  well as  Governor Bill  Walker as                                                                    
examples  of major  elected  officials  from smaller  cities                                                                    
within the state.  He thought the system had  worked well in                                                                    
spite of the geography of the state.                                                                                            
Senator Olson  discussed historical  gubernatorial elections                                                                    
in  which  unique  circumstances   had  contributed  to  the                                                                    
victory. He remembered  that there had been a  split vote in                                                                    
1974, and Jay Hammond had won.                                                                                                  
Senator Stoltz  recalled that Governor Hammond,  when he won                                                                    
the  election in  1874, had  beat every  former Governor  of                                                                    
Alaska both through the primary and general election.                                                                           
Vice-Chair Micciche MOVED to report  SJR 12 out of Committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
SJR   12   was   REPORTED   out  of   committee   with   "no                                                                    
recommendation"  and with  two  previously published  fiscal                                                                    
notes: FN1 (LEG), and FN2 (GOV).                                                                                                
9:50:06 AM                                                                                                                    
AT EASE                                                                                                                         
9:52:38 AM                                                                                                                    
Co-Chair  MacKinnon noted  that  SB 200  [scheduled but  not                                                                    
heard],  pertaining   to  mandatory  physical   activity  in                                                                    
schools, would  be addressed in  the afternoon  meeting. She                                                                    
detailed  that  the committee  was  waiting  for a  CS,  and                                                                    
wanted  to share  it  with  the sponsor  prior  to the  bill                                                                    
hearing.  She  recalled  discussion from  the  previous  day                                                                    
regarding an exception  if there was inclement  weather or a                                                                    
safety issue.  The CS would  address the exception,  and the                                                                    
committee  was  waiting  for  the   sponsor  to  review  the                                                                    
language to see if it was acceptable.                                                                                           
SENATE BILL NO. 196                                                                                                           
     "An  Act  relating to  the  use  of certain  unexpended                                                                    
     earnings  from the  power  cost equalization  endowment                                                                    
9:53:34 AM                                                                                                                    
Co-Chair  MacKinnon discussed  SB  196. She  noted that  the                                                                    
public  hearing had  been  opened and  closed  on March  16,                                                                    
Vice-Chair   Micciche  discussed   the   fiscal  note   (OMB                                                                    
component 2602)  from the Department of  Commerce, Community                                                                    
and Economic  Development (DCCED). He  stated that it  was a                                                                    
zero fiscal note with no added capital or added employees.                                                                      
Vice-Chair   Micciche  discussed   the   fiscal  note   (OMB                                                                    
component  0)  for  various   departments  from  the  Senate                                                                    
Finance  Committee.  He  informed  that  the  note  was  for                                                                    
informational  purposes  only,  and   had  to  do  with  the                                                                    
dividend funds  from the  PCE Endowment  Fund. He  read from                                                                    
the bottom of the fiscal note:                                                                                                  
    Why this fiscal note differs from previous version:                                                                         
     Initial  version.  This  fiscal  note  for  information                                                                    
     purposes  only. Beginning  in FY16,  it  assumes a  six                                                                    
     percent earnings  rate and  two percent  program growth                                                                    
     rate for each fiscal year.  In FY18 through FY22, Power                                                                    
     Cost  Equalization  Endowment   funds  (DGF)  would  be                                                                    
     available to   replace   Unrestricted   General   Funds                                                                    
     (UGF)   expenditures  for   Community  Assistance   and                                                                    
     Rural   Energy  Programs. Depending  on actual earnings                                                                    
     in a  fiscal year the  amount available to  replace UGF                                                                    
     will vary from zero to $55 million.                                                                                        
Vice-Chair Micciche specified that  the fiscal note showed a                                                                    
$17 million displacement in FY 18,  with no impact in FY 17.                                                                    
He continued that there was  a $17.2 million displacement in                                                                    
FY 19, a $17.5 million displacement  in FY 20, a $17 million                                                                    
displacement in FY  21, and a $16.6  million displacement in                                                                    
FY 22.                                                                                                                          
Co-Chair  MacKinnon asked  if Vice-Chair  Micciche had  been                                                                    
referring  to the  dividend coming  from  the PCE  Endowment                                                                    
Vice-Chair Micciche answered in the affirmative.                                                                                
Senator   Hoffman  stated   that  he   had  introduced   the                                                                    
legislation  primarily to  reflect  the  original intent  of                                                                    
funding  the PCE  program. He  clarified that  the endowment                                                                    
was  never meant  to  have additional  funds  for any  other                                                                    
purpose.  He explained  that the  bill would  stipulate that                                                                    
any  additional  earnings  would  be used  for  other  state                                                                    
Senator  Dunleavy   commented  on  the  $4   billion  budget                                                                    
deficit, and wondered  why the state would not  use the fund                                                                    
to  backfill some  of the  deficit. He  understood that  the                                                                    
fund gave assistance to some  Alaskan communities, and asked                                                                    
if anyone wanted to comment on the matter.                                                                                      
9:57:15 AM                                                                                                                    
Senator  Hoffman  thought  that   the  purpose  of  the  PCE                                                                    
Endowment  Fund  was discussed  and  brokered  prior to  his                                                                    
tenure in  the legislature. He  recounted that the  fund had                                                                    
been in existence for well  over 30 years. He mentioned that                                                                    
the  funds  were   split  when  the  Four   Dam  Pool  [four                                                                    
hydroelectric facilities (dams and  lake tap projects) built                                                                    
by the State of Alaska in  the early 1980s] was being built.                                                                    
The fund was intended to  address the high electricity costs                                                                    
(for  heating)  in  rural  Alaska, and  was  an  attempt  to                                                                    
equalize  the  power  throughout  the state  of  Alaska.  He                                                                    
thought by keeping  the funds in the endowment it  was not a                                                                    
drain on the GF, but  rather a long-term solution to address                                                                    
higher costs throughout the state.  Conversely, if the funds                                                                    
were taken it  would be a one-time use, and  people in rural                                                                    
Alaska would end up paying  substantially more in electrical                                                                    
costs. He  noted that the  PCE program only gave  credit for                                                                    
the first 500  kilowatt hours (kWhs) of  electricity use per                                                                    
month.  He  discussed electricity  use  in  rural and  urban                                                                    
areas  of the  state. He  saw the  bill as  a commitment  to                                                                    
lower costs  and make the  state a more affordable  place to                                                                    
Senator  Dunleavy  acknowledged  the   history  of  the  PCE                                                                    
program  and  supported the  concept  of  helping people  in                                                                    
rural  Alaska with  energy costs.  He hoped  that the  state                                                                    
would  be able  to  drive  down the  overall  cost of  state                                                                    
government so that  it could continue to have  funds such as                                                                    
the PCE endowment  fund. He referred to proposed  use of the                                                                    
permanent fund and potential new  taxes, and thought that it                                                                    
was  important  to  have  discussions  about  all  potential                                                                    
sources of funding.  He thought the issues  were complex and                                                                    
was not sure  the legislature would be able to  come up with                                                                    
a complete financial  package to address the  deficit by the                                                                    
end  of session.  He wanted  to  use care  in examining  all                                                                    
funds  to  see how  each  might  help  with the  $4  billion                                                                    
deficit. He  had lived in  rural Alaska and  experienced the                                                                    
cost differential.  He thought the legislature  needed to be                                                                    
prepared to answer  questions about the PCE Fund  as well as                                                                    
the Higher Education Fund.                                                                                                      
10:01:02 AM                                                                                                                   
Senator Olson stated  that the PCE Fund was  put together at                                                                    
a time when natural gas  and hydro-electric power were being                                                                    
developed in  the state. In  order for rural Alaska  to reap                                                                    
benefits  of the  natural gas  investments  and pricing,  as                                                                    
well as the  Four Dam Pool; the compromise  was the creation                                                                    
of the PCE  Endowment Fund. He discussed the  idea of adding                                                                    
a surcharge on  natural gas coming out of  Cook Inlet, which                                                                    
was  semi-subsidized  by the  state,  to  help pay  for  the                                                                    
budget deficit.  He discussed the  difference in  power cost                                                                    
between his residences in Anchorage and Golovin.                                                                                
Senator  Dunleavy did  not disagree.  He thought  there were                                                                    
people in the state who did  not benefit from Cook Inlet gas                                                                    
subsidization (through tax credits)  by the state; and there                                                                    
were people  in the state who  did not benefit from  PCE. He                                                                    
believed  the  points  being  addressed  were  important  to                                                                    
feature in ongoing conversations.                                                                                               
Vice-Chair Micciche pointed  out that it was  the first time                                                                    
the state  had asked the  PCE Fund  to help offset  costs in                                                                    
other areas.  For the purposes  of the legislation,  the aid                                                                    
would  be   for  community   assistance  and   rural  energy                                                                    
programs.  He noted  that there  were discussions  about the                                                                    
level  of   subsidy  in  Cook   Inlet.  He   was  relatively                                                                    
supportive of the bill.                                                                                                         
10:05:10 AM                                                                                                                   
Senator  Bishop stated  that if  there was  a PCE  Endowment                                                                    
Fund dividend,  the excess earnings  would be  split between                                                                    
the   community  assistance   program   (50  percent),   the                                                                    
renewable  energy  grant  fund  (30 percent),  and  the  PCE                                                                    
Endowment Fund  (20 percent). He recalled  that the previous                                                                    
year the  committee had strengthened  the PCE Fund  by using                                                                    
the  prudent investor  rule. He  thought  the committee  was                                                                    
doing its  job working  towards maximizing state  assets. He                                                                    
agreed with  Senator Dunleavy that  it would  take continued                                                                    
work to solve the budget problem.                                                                                               
Co-Chair  MacKinnon recalled  a PCE  bill from  the previous                                                                    
year, in which more  prudent investment was implemented. She                                                                    
thought the  bill went  an additional  step in  reducing the                                                                    
draw from 7  percent to 5 percent, in aid  of trying to keep                                                                    
the corpus of  the fund whole. She  recalled priorities that                                                                    
were articulated in a Senate  Majority press conference that                                                                    
included how  to positively  impact the  bottom line  of the                                                                    
state budget,  which she thought the  bill accomplished. She                                                                    
pointed  out  that  the  bill  left  all  of  the  PCE  Fund                                                                    
available for  appropriation in a future  year. She asserted                                                                    
that  the House  had  proposed accessing  the  fund for  the                                                                    
University,  and  she did  not  concur  with the  idea.  She                                                                    
explained that there were excess  earnings above the funding                                                                    
to the PCE program, after which  the funds would roll off to                                                                    
different areas and  reduce the call on cash to  the GF. The                                                                    
bill would reduce GF spending,  and she thought it was worth                                                                    
consideration by  both bodies. She  thought if the  bill was                                                                    
not passed, the  PCE Fund would be at risk.  She discussed a                                                                    
reduction in  tax credits that  would result in  an increase                                                                    
in gas bills.                                                                                                                   
10:09:26 AM                                                                                                                   
AT EASE                                                                                                                         
10:16:34 AM                                                                                                                   
Vice-Chair  Micciche MOVED  to report  CSSB 196(FIN)  out of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
CSSB  196(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation  with one  new fiscal impact  note from                                                                    
the Senate Finance  Committee, and one new  zero fiscal note                                                                    
from   Department  of   Commerce,  Community   and  Economic                                                                    
10:17:15 AM                                                                                                                   
AT EASE                                                                                                                         
10:21:30 AM                                                                                                                   
SENATE BILL NO. 210                                                                                                           
     "An  Act  relating  to the  community  revenue  sharing                                                                    
     program;  changing the  name of  the community  revenue                                                                    
     sharing  program to  the community  assistance program;                                                                    
     and relating  to the  municipal property  tax exemption                                                                    
     on the residence  of a senior, a  disabled veteran, and                                                                    
     a widow or widower of a senior or disabled veteran."                                                                       
10:21:43 AM                                                                                                                   
Co-Chair MacKinnon  discussed the CS  for SB 210,  which had                                                                    
been adopted on  April 6, 2016. Public  testimony had opened                                                                    
on  closed  on  the  same   date.  She  clarified  that  the                                                                    
committee was considering bill version H.                                                                                       
10:22:11 AM                                                                                                                   
AT EASE                                                                                                                         
10:23:06 AM                                                                                                                   
Vice-Chair Micciche  discussed the  fiscal note,  from DCCED                                                                    
(OMB component  2879); with appropriation and  allocation to                                                                    
Community  and Regional  Affairs.  He shared  that the  note                                                                    
showed  $6.1 thousand  of fiscal  impact  in FY  17 with  no                                                                    
additional  costs, positions,  or capital.  He relayed  that                                                                    
the committee believed that the  department could handle the                                                                    
minor  amount  of  work  resultant from  the  bill,  and  it                                                                    
intended to zero out the fiscal note.                                                                                           
Co-Chair MacKinnon  asked for the  support of  the committee                                                                    
to zero out the fiscal note.  The fiscal note was amended to                                                                    
zero.  She informed  that the  committee  would request  the                                                                    
Legislative Finance Division (LFD)  to provide a forthcoming                                                                    
zero fiscal note.                                                                                                               
Vice-Chair Micciche relayed a  concern from his district and                                                                    
mentioned  a   spreadsheet  that   showed  an   increase  in                                                                    
community revenue sharing in some  communities, and a larger                                                                    
proportion  of  decrease  of community  revenue  sharing  in                                                                    
other  communities. He  asked  if  Co-Chair MacKinnon  could                                                                    
explicate  and  confirm that  no  communities  in the  state                                                                    
would receive an increase.                                                                                                      
Co-Chair MacKinnon asked LFD staff  to explain the breakdown                                                                    
of how the state would assist communities under the bill.                                                                       
ALEXEI   PAINTER,  FISCAL   ANALYST,  LEGISLATIVE   FINANCE,                                                                    
discussed the  spreadsheet "FY 17 Community  Revenue Sharing                                                                    
Estimates,"  (copy on  file). He  explained  that under  the                                                                    
status quo  distribution of $60 million  versus the proposed                                                                    
distribution  of SB  210 (under  any  amount), no  community                                                                    
would  receive  more  funding  under   the  formula  in  the                                                                    
Community  Revenue Sharing  Program. The  bill would  change                                                                    
the way that pro-rating worked, so  if one were to compare a                                                                    
pro-rated  base in  the status  quo program  to a  pro-rated                                                                    
base in the  new program, it was true  that some communities                                                                    
would  be  better or  worse  off.  He reiterated  that  when                                                                    
compared to  the original $60 million  program, no community                                                                    
would receive more funding under SB 210.                                                                                        
Vice-Chair  Micciche  thought  that  when  some  people  had                                                                    
initially  looked  at the  calculations;  it  had showed  an                                                                    
actual  increase for  Aleutians East,  False Pass,  and some                                                                    
other  areas. He  asked  if Mr.  Painter  could explain  the                                                                    
logic of the bill and its relationship to the PCE program.                                                                      
Co-Chair MacKinnon stated that  there was a policy decision,                                                                    
and  referred to  the SB  196,  which had  just passed  from                                                                    
committee. She explained  that SB 196 had  proposed a change                                                                    
to the  PCE Fund structure,  in which excess  earnings would                                                                    
be  diverted   to  the  revenue  sharing   program.  It  was                                                                    
estimated to be in the amount  of $17 million for FY 17. She                                                                    
considered the two bills to be interrelated.                                                                                    
10:27:36 AM                                                                                                                   
Vice-Chair Micciche  stated that  the bill  being considered                                                                    
(SB  210)  would  change  the   name  of  the  program  from                                                                    
Community  Revenue  Sharing   to  Community  Assistance.  He                                                                    
continued  that the  program funding  had been  reduced from                                                                    
$60 million to $38.2 million,  half of which was expected to                                                                    
come from PCE Endowment Fund earnings.                                                                                          
Co-Chair MacKinnon  stated that for  FY 17, if the  fund was                                                                    
not re-charged,  there would be $38,200,000  available under                                                                    
the current  stepdown in statute.  She continued  that under                                                                    
SB 210, the  pro-rated share would be changed.  If there was                                                                    
expected  earnings  on the  PCE  Fund,  there would  be  $17                                                                    
million to go to the Community Revenue Sharing Program.                                                                         
Senator Hoffman  stated that the governor's  proposal was to                                                                    
spend  $50 million  on the  revenue sharing  program in  the                                                                    
current  year, and  increase the  amount to  $60 million  in                                                                    
subsequent years.  The committee  was evaluating  whether or                                                                    
not  the state  could continue  to fund  the program  at the                                                                    
same  high level.  Since  the state  no  longer had  surplus                                                                    
revenue  to  share,  he  thought the  title  change  to  the                                                                    
Community  Assistance  Program   was  more  appropriate.  He                                                                    
thought by  changing it to  a $30 million program,  it would                                                                    
not  necessitate funding  an additional  $35 million  in the                                                                    
current year. He  noted that the fund had  $115 million, and                                                                    
in order to get a three-year  average the fund would have to                                                                    
contain  $150   million.  Subsequently,  the   governor  had                                                                    
requested  the additional  $35 million.  If the  legislature                                                                    
moved forward and  reduced the program, the  state would not                                                                    
have to come up with $35  million, and there would be enough                                                                    
funding already to  cover a $30 million program.  He did not                                                                    
believe the state  could continue on the path it  was on. He                                                                    
thought it  was more likely  that the program  could survive                                                                    
at the lower  funding level. He noted  that each legislature                                                                    
would  have  to consider  the  financial  conditions of  the                                                                    
state at the time.                                                                                                              
10:31:00 AM                                                                                                                   
Vice-Chair  Micciche thought  it was  unjustified to  simply                                                                    
end the  program, and  thought the  bill was  an appropriate                                                                    
action.   He  referred   to   other   bills  that   impacted                                                                    
municipalities, and thought  that SB 210 had  a much smaller                                                                    
impact. He thought that the bill was a healthy compromise.                                                                      
Co-Chair MacKinnon stated that the  bill was from the Senate                                                                    
Finance Committee, and  asked that any input  be directed to                                                                    
her  office.  She  referred   to  discussion  regarding  the                                                                    
definition of  "community" and how large  a community should                                                                    
be.  She recounted  the same  discussion  pertaining to  the                                                                    
size   of  schools.   She  had   heard  conversation   about                                                                    
considering  50  residents  to constitute  a  community,  or                                                                    
whether  11  members  in a  geographic  area  qualified  for                                                                    
community  assistance of  $96,000.  She  clarified that  the                                                                    
bill did not  propose a change to  definitions of community,                                                                    
but noted  that there was  an anomaly in the  Aleutians East                                                                    
Borough  that had  a  population of  39  and received  state                                                                    
assistance in the amount of $385,000.                                                                                           
Mr. Painter clarified that the  population of Aleutians East                                                                    
Borough  was actually  higher, and  the 39  individuals were                                                                    
those that did not live in an incorporated borough.                                                                             
Co-Chair  MacKinnon   asked  Mr.  Painter  to   discuss  why                                                                    
Aleutians East  would get extra compensation  if communities                                                                    
were already receiving funds from other sources.                                                                                
Mr.   Painter  stated   that   there   were  boroughs   with                                                                    
incorporated communities that received  the borough share of                                                                    
the program.                                                                                                                    
Co-Chair   MacKinnon  clarified   that  the   boroughs  were                                                                    
overlaid  upon the  city or  village designations,  and both                                                                    
were getting assistance.                                                                                                        
Mr. Painter answered in the affirmative.                                                                                        
Co-Chair   MacKinnon  asked   Mr.   Painter   to  create   a                                                                    
spreadsheet  to  illustrate  the cities  with  the  boroughs                                                                    
overlaid   atop,  with   associated   revenues,  to   better                                                                    
understand how the program gave  assistance to the boroughs.                                                                    
She thought  the information  would also  be helpful  in the                                                                    
next committee  of referral  if the  bill was  successful on                                                                    
the Senate floor.                                                                                                               
10:35:04 AM                                                                                                                   
AT EASE                                                                                                                         
10:39:14 AM                                                                                                                   
Senator Dunleavy thought that  he would benefit greatly from                                                                    
additional consideration  of the bill. He  wanted to discuss                                                                    
some questions about the bill with staff from LFD.                                                                              
Senator  Olson  referred  to  an  earlier  discussion  about                                                                    
communities  that   did  not   have  city   governments.  He                                                                    
commented that  he would  like a  list of  such communities,                                                                    
the  population,  and  how much  money  each  community  was                                                                    
receiving from the revenue sharing program.                                                                                     
Co-Chair MacKinnon  stated she  would be  happy to  hold the                                                                    
bill until the afternoon meeting.                                                                                               
Vice-Chair  Micciche  opined  that   there  were  a  lot  of                                                                    
legislators  that   thought  that  it  was   time  that  the                                                                    
communities with  tax authority  and/or a fund  balance move                                                                    
beyond community revenue sharing. He  thought the bill was a                                                                    
healthy  compromise. He  acknowledged that  the program  was                                                                    
slightly  advantaged to  smaller communities  that (in  some                                                                    
cases) had  the revenue  sharing program  as its  only state                                                                    
support. He thought there were  communities that objected to                                                                    
the proportional  differences. He  thought it was  a healthy                                                                    
shift for larger  communities that had a  greater ability to                                                                    
provide for themselves.                                                                                                         
10:41:30 AM                                                                                                                   
Co-Chair MacKinnon  stated that the conversation  around the                                                                    
creation and  reduction of the  revenue sharing  program had                                                                    
to  do with  Senator Hoffman's  comments regarding  the fact                                                                    
that the  state could no  longer afford to share  funding it                                                                    
did  not  have.  She  pointed  out  that  the  governor  was                                                                    
proposing multiple  ways to provide revenues  through taxing                                                                    
different  industry  groups  and  individual  Alaskans.  She                                                                    
suggested that larger communities  had the ability (provided                                                                    
by the  legislature) to  tax themselves,  and thereby  had a                                                                    
greater ability  for self-determination. She noted  that the                                                                    
smaller communities,  which had  not already done  so, still                                                                    
had the opportunity to tax themselves.                                                                                          
Co-Chair MacKinnon  relayed that  some of  her constituents,                                                                    
as well as other residents, had  asked that all of Alaska be                                                                    
incorporated  as  boroughs  so   as  to  tax  residents  and                                                                    
contribute to  education and other activities  funded by the                                                                    
state. She  thought the  bill was  a compromise.  Instead of                                                                    
eliminating  all  revenue  assistance  to  communities  with                                                                    
taxing  authority, the  compromise was  to reduce  to a  $30                                                                    
million program and utilize earnings  from the PCE Fund. She                                                                    
referred to  the suite of  interlocked bills,  including one                                                                    
that  concerned  the  Public  Employees'  Retirement  System                                                                    
(PERS)  and  the  Teachers'  Retirement  System  (TRS).  The                                                                    
committee  had heard  from a  variety  of people,  including                                                                    
those   that  were   highly  vocal   and  critical   of  the                                                                    
legislature and  cost-shifting. She  discussed PERS  and TRS                                                                    
liability.  She  thought  it  was  fair  to  say  that  more                                                                    
conversation  was  needed  on the  topic.  She  agreed  that                                                                    
proportionally,  smaller  communities  were protected  in  a                                                                    
better  way;  and  noted  that if  the  previous  bill  went                                                                    
forward, part of the PCE fund would help lower GF spend.                                                                        
10:45:08 AM                                                                                                                   
Vice-Chair  Micciche  thought Co-Chair  MacKinnon's  remarks                                                                    
were well  stated. He related  that he  tried to be  able to                                                                    
put himself in  other people's shoes. He referred  to his 5-                                                                    
year tenure as mayor of  an Alaskan community. He thought as                                                                    
mayor  he  would  have taken  issue  with  the  proportional                                                                    
change proposed in the bill.  He acknowledged the difference                                                                    
of his current role, as  well as the changed fiscal climate.                                                                    
He reiterated  that the bill was  an appropriate compromise,                                                                    
especially considering a PCE Fund shift.                                                                                        
SB  210  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair  MacKinnon  discussed  the afternoon  schedule,  at                                                                    
which time  the committee  would do  a full  walk-through of                                                                    
the capital  budget. She noted  that she would work  to move                                                                    
out SB  210 and SB  196 together  so that they  could travel                                                                    
together. She reiterated  that the two bills  were a portion                                                                    
of the same suite of bills.                                                                                                     
10:46:37 AM                                                                                                                   
AT EASE                                                                                                                         
10:47:02 AM                                                                                                                   
Co-Chair MacKinnon discussed the afternoon schedule.                                                                            
10:47:43 AM                                                                                                                   
The meeting was adjourned at 10:47 a.m.                                                                                         

Document Name Date/Time Subjects
SB 200 Public Testimony Nees.pdf SFIN 4/11/2016 9:00:00 AM
SB 200
SB 200 NEA Alaska Letter.pdf SFIN 4/11/2016 9:00:00 AM
SB 200
SB 210 Community Revenue Sharing Estimates.pdf SFIN 4/11/2016 9:00:00 AM
SB 210
SB 201 Responses to questions during SB 201 hearing SFIN 4.pdf SFIN 4/11/2016 9:00:00 AM
SB 201
SB 210 with $38.2 million vs Status Quo with $60 million.pdf SFIN 4/11/2016 9:00:00 AM
SB 210