Legislature(1993 - 1994)
03/23/1993 09:33 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 23, 1993
9:33 a.m.
TAPES
SFC-93, #42, Side 1 (000-end)
SFC-93, #42, Side 2 (end-250)
CALL TO ORDER
Senator Steve Frank, Co-chair, convened the meeting at
approximately 9:33 a.m.
PRESENT
In addition to Co-chairs Pearce and Frank, Senators Kelly,
Kerttula, and Sharp were present. Senators Jacko and Rieger
arrived while the meeting was in progress.
ALSO ATTENDING: Willis Kirkpatrick, Director, Division of
Banking, Securities and Corporations, Department of Commerce
and Economic Development; Jeff Bush, Attorney at Law, on
contract with the Department of Commerce and Economic
Development; Art Peterson, Attorney at Law; Clark Gruening,
Attorney at Law, Alaska Credit Union League; Mike Greany,
Director, Jeff Hoover, Fiscal Analyst, Legislative Finance
Division; and aides to committee members.
SUMMARY INFORMATION
SB 100 - An Act making supplemental and special
appropriations for the expenses of state
government; making, amending, and repealing
capital and operating appropriations; and
providing for an effective date.
Scheduled but not heard.
CSSB 154- An Act relating to the economic development grant
(L&C) program; and providing for an effective date.
Co-chair Pearce announced that a new zero fiscal
note for the Dept. of Community & Economic
Development had been received. CSSB 154(L&C) was
REPORTED OUT of committee with a new zero fiscal
note for the Dept. of Community & Economic
Development, and a fiscal note for the Dept. of
Administration in the amount of $67.7. All
members signed "do pass."
CSSB 112- An Act relating to the Uniform
Commercial Code;
(JUD) amending Alaska Rules of Civil Procedure 8 and 82,
and Alaska Rule of Evidence 402; and providing for
an effective date.
Testimony was heard by Senator Kerttula and Art
Peterson, Attorney at Law, in support of CSSB
112(JUD). Discussion was had regarding the
unconscionable clause by Senator Rieger and Mr.
Peterson. Senator Rieger MOVED an amendment and
then WITHDREW it adding words to page 93, line 20.
CSSB 112(JUD) was REPORTED OUT of committee with
zero fiscal notes for the Dept. Commerce &
Economic Development, the Dept. of Law, and the
Dept. of Natural Resources.
SB 149 - An Act revising the laws governing financial
institutions and relating to trust companies, the
Alaska Small Loans Act, and the Premium Financing
Act; amending Alaska Rule of Criminal Procedure 17
and Alaska Rule of Civil Procedure 45(b); and
providing for an effective date.
Senator Kelly spoke in support of SB 149. Willis
Kirkpatrick, Director, Division of Banking,
Securities and Corporations, Department of
Commerce and Economic Development; and Jeff Bush,
Attorney at Law, on contract with the Department
of Commerce and Economic Development; explained
and spoke in support of SB 149. Discussion and
questions followed between Senators Rieger, Frank,
Pearce and Kerttula. Clark Gruening, Attorney at
Law, Alaska Credit Union League, spoke in support
of amendment 1 dated March 22, 1993. Senator
Kelly MOVED for the adoption of amendment 1. It
PASSED with unanimous consent. CSSB 149(FIN) as
amended was REPORTED OUT of committee with a "do
pass" and with a zero fiscal note for Dept. of
Commerce & Economic Development. Co-chairs Frank
and Pearce, Senators Jacko, Kelly, and Kerttula
signed "do pass." Senators Rieger and Sharp
signed "no recommendation."
CS FOR SENATE BILL NO. 154(L&C):
An Act relating to the economic development grant
program; and providing for an effective date.
CO-CHAIR DRUE PEARCE announced that CSSB 154(L&C) was before
the committee with a new zero fiscal note from the
Department of Commerce & Economic Development. She stated
that the fiscal note for the Department of Administration in
the amount of $67.7 would accompany the bill.
SENATOR GEORGE JACKO MOVED that CSSB 154(L&C) pass from
committee with accompanying fiscal notes. No objection
having been raised, CSSB 154(L&C) was REPORTED OUT of
committee with a new zero fiscal note for the Department of
Commerce & Economic Development, and a fiscal note for the
Department of Administration in the amount of $67.7. All
members signed "do pass."
CS FOR SENATE BILL NO. 112(JUD):
An Act relating to the Uniform Commercial Code;
amending Alaska Rules of Civil Procedure 8 and 82, and
Alaska Rule of Evidence 402; and providing for an
effective date.
Co-chair Pearce announced that CSSB 112(JUD) was before the
committee. SENATOR JAY KERTTULA, prime sponsor of SB 112,
spoke in support of CSSB 112(JUD). He said that this
legislation had been requested by the Supreme Court. He
explained that it would bring the Uniform Commercial Code in
Alaska up to date. He listed some of the changes contained
in the bill.
Co-chair Pearce asked Art Peterson, Attorney at Law, to give
an overview of CSSB 112(JUD) and, by request of Senator
Kelly, provide a brief explanation of the Uniform Commercial
Code.
ART PETERSON said he was appearing in his capacity as
Uniform Law Commissioner for the state, and voiced his
support of CSSB 112(JUD). He said the UCC was a compilation
of all the commercial law in the country enacted by the
states. It also serves as an international model. He said
there have been some amendments to the articles in the last
few decades.
SENATOR STEVE RIEGER asked for an explanation of
unconscionability on page 93. Mr. Peterson said that
because of an existing law in Alaska, this section made it
clear that the national version would be in effect, assuring
predictability and less litigation. Discussion followed
between Senator Rieger and Mr. Peterson regarding the
determination of attorney's fees and unconscionability. In
response to Senator Rieger, Mr. Peterson recommended that
this section not be amended, but agreed to raise the
question with the editorial board and develop an amendment
for next year if appropriate. Senator Kerttula agreed that
any change be proposed through the editorial board and
incorporate it into a national amendment.
Discussion followed between Senators Rieger and Frank
regarding attorney's fees and how consistent those were
across the nation. Mr. Peterson said that style changes
were given a low priority but that the issue regarding
attorney's fees was important. Mr. Peterson said that there
was a great value to Alaska to have the uniformity of such
laws, especially for Alaskans doing business outside of the
state, or for individuals from other states doing business
in Alaska.
Senator Rieger MOVED for adoption of an amendment on page
93, line 20, after the word "known", to add the words
"should have known." Mr. Peterson recommended that the
amendment be withdrawn and the committee take Senator
Kerttula's suggestion and contact Professor Miller,
University of Oklahoma, Executive Director, The National
Conference of Commissioners in Uniform State Laws, regarding
this issue. Senator Rieger WITHDREW his amendment and asked
Mr. Peterson to contact Prof. Miller for review of this
issue by the editorial board.
Senator Kerttula MOVED for passage of CSSB 112(JUD) from
committee with individual recommendations. No objections
being raised, it was REPORTED OUT of committee with a "do
pass" and with zero fiscal notes for the Department Commerce
& Economic Development, the Department of Law, and the
Department of Natural Resources. Senators Kelly, Jacko and
Kerttula signed "do pass." Senators Rieger, Sharp, and Co-
chairs Pearce and Frank signed "no recommendation."
SENATE BILL NO. 149:
An Act revising the laws governing financial
institutions and relating to trust companies, the
Alaska Small Loans Act, and the Premium Financing Act;
amending Alaska Rule of Criminal Procedure 17 and
Alaska Rule of Civil Procedure 45(b); and providing for
an effective date.
Co-chair Pearce announced that SB 149 was before the
committee. SENATOR TIM KELLY spoke in support of SB 149.
He said that he knew of no opposition to the proposed
legislation by the banking industry in Alaska. He stated
that he would offer an amendment suggested by the Credit
Union League.
WILLIS KIRKPATRICK, Director, Division of Banking,
Securities and Corporations, Department of Commerce and
Economic Development, asked Jeff Bush, Attorney at Law, on
contract with the Department of Commerce and Economic
Development, to join him in testifying in support of SB 149.
Senator Kelly stated that these new statutes apply only to
the five state-chartered banks in Alaska, one section
effects pawn shops, and a few provisions apply to state-
chartered credit unions. It does not concern the national
chartered banks. Mr. Kirkpatrick said that Key Bank, North
Rim, Denali State Bank in Fairbanks, First Bank in
Ketchikan, and Mt. McKinley Mutual in Fairbanks, are the
five banks that apply.
Mr. Kirkpatrick said that the marketplace changes and the
advent of the banking problems of the mid-80's pointed out
some incompatibilities and obsolete laws that are in
Alaska's statutes created in the 1930s. The state of Oregon
has recodified its laws at least twice since then, and its
revised regulations were used as a model for this bill. He
said this bill would correct the obsolescence in the
marketplace and regulatory enforcement action, and allow
banks to be more attune to the community needs of Alaska.
End SFC-93 #42, Side 1
Begin SFC-93 #42, Side 2
Co-chair Pearce asked if Mr. Kirkpatrick had spoken to Mr.
Walsh regarding future international insurance issues that
were tied to the banking community, that SB 149 would
coincide with international market opportunities as set
forth by Mr. Walsh in a bill passed last session. Mr.
Kirkpatrick answered that he had worked closely with Mr.
Walsh through the staff of the Commissioner's office in the
Department of Commerce & Economic Development.
In answer to Senator Jacko, Mr. Kirkpatrick said that a
state-chartered financial institution is one that applies to
the state and agrees to conform to state laws through its
corporation and licensing and to the laws of the state of
Alaska. A charter through the federal government is also
available through the Department of the Treasury. There are
more state chartered banks than national chartered banks in
Alaska, but more assets are held by national banks than by
state banks.
Discussion was had by Senator Sharp and Mr. Kirkpatrick
regarding federal reserve requirements for banks and the
banks need for liquidity. Mr. Kirkpatrick agreed that this
bill would allow the state division of banking to make
different liquidity rules than the national chartered bank,
and give the state banks an advantage.
JEFF BUSH, Attorney at Law, on contract with the Department
of Commerce and Economic Development, said that the proposed
regulations set a figure of 15 percent of total deposits as
a required reserve. The current statute is 20 percent of
demand deposits and 8 percent of timed savings deposits,
which is no longer enforced. The current statute is no
longer in force. Also, current regulations require vault
cash for reserve and do not recognize current needs in the
marketplace. The proposed regulation expands what can be
used for calculating reserves to include liquid assets such
as government bonds and deposits on deposit with federal
reserve in other banks. He said that the proposed
regulations will not negatively impact or increase reserve
requirements for in state banks.
In answer to Senator Kerttula's comments regarding real
estate, Mr. Bush said that the proposed legislation would
liberalize lending and remove specific statutory
restrictions that exist on real estate lending and would
allow bank management more freedom in the decision making
process.
In answer to Senator Rieger question about the reserve
requirement for national chartered banks, Mr. Bush said the
requirement was calculated based on a list of different
types of deposits and those numbers would shift as a method
to control the money supply. Mr. Kirkpatrick said at one
time a bank did not have to be a member of the federal
reserve, and now, whether you are a member or not, a bank is
required to follow federal reserve requirements. Mr. Bush
said that this bill is designed to be independent of the
federal requirements, because the numbers change so rapidly.
He explained that if requirements are inconsistent, the bank
would have to meet both. For example, if the federal
reserve requirement is higher than the state's, the bank
would have to meet the higher federal requirement.
In answer to Co-chair Pearce, Mr. Kirkpatrick answered that
CSSB 149(FIN) would not change audit functions in any way.
Co-chair Pearce voiced her frustrations in the 1980s when
some banks closed, some merged, and some sold their real
estate packages to institutions outside Alaska. In answer
to Co-chair Pearce, Mr. Kirkpatrick said there was no
provision in the bill that would provide for a local agent
in case a real estate loan package was sold out of state.
Mr. Bush explained that this was a consumer issue and
addressing it in this bill would have been difficult.
CO-CHAIR STEVE FRANK asked if HFC had a regulation that
required an in-state service office. Mr. Kirkpatrick said
that type of regulation had been considered but did not know
if it was in effect. Senator Kerttula voiced his support
for this type of legislation.
Co-chair Pearce invited Clark Gruening, Attorney at Law,
Alaska Credit Union League, to join the committee at the
table and speak to the amendments regarding credit unions.
CLARK GRUENING stated that the Credit Union League was an
association of all eighteen credit unions in Alaska (sixteen
federal and two state charters). The amendments would bring
the state credit union act on par with the federal credit
union act. Most are small technical changes but one
significant change allows the board of directors of the
state chartered credit unions to appoint a credit committee.
In practice, the loan committee is already chosen by the
board but the statutory requirements maintain another credit
committee. He said there was no opposition to these
amendments by the department or the credit unions. Mr.
Kirkpatrick said he also supported the amendments.
Senator Kelly MOVED for adoption of amendment 1. No
objections being raised, amendment 1 was ADOPTED.
Senator Kelly MOVED for passage of CSSB 149(FIN) as amended
from committee with individual recommendations. No
objections being raised, it was REPORTED OUT of committee
with a "do pass" and with a zero fiscal note for the
Department of Commerce & Economic Development. Co-chairs
Frank and Pearce, Senators Jacko, Kerttula and Kelly signed
"do pass." Senators Rieger and Sharp signed "no
recommendation."
ADJOURNMENT
The meeting was adjourned at approximately 10:45 a.m.
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