Legislature(1993 - 1994)
03/21/1994 09:11 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 21, 1994
9:11 a.m.
TAPES
SFC-94, #45, Side 1 (120-end)
SFC-94, #45, Side 2 (end-000)
SFC-94, #47, Side 1 (000-end)
SFC-94, #47, Side 2 (end-500)
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 9:11 a.m.
PRESENT
In addition to Co-chair Pearce, Senators Kelly, Jacko, Sharp
and Kerttula were present. Co-chair Frank and Senator
Rieger joined the meeting after it was in progress.
(Senator Kerttula was not present when the meeting
reconvened at 5:22 p.m.)
ALSO ATTENDING: David Gray, aide to Representative Jerry
Mackie; Duane Guiley, Director, School Finance, Department
of Education; Bruce Campbell, Commissioner, Department of
Transportation & Public Facilities; Paul Fuhs, Commissioner,
Department of Commerce & Economic Development; Jetta
Whittaker, fiscal analyst, and Mike Greany, Director,
Legislative Finance Division; aides to committee members and
other members of the legislature.
VIA TELECONFERENCE: Robert Hatfield, Jr., President & CEO,
Alaska Railroad Corporation from Anchorage; and Frank X.
Chapados, Acting Chairman, Railroad Corporation Board from
Anchorage spoke to SB 148 and SB 338. When the meeting
reconvened at 5:22 p.m., Phyllis C. Johnson, Vice
President/General Counsel from Anchorage; John Burns, real
estate representative from Anchorage; and Mark LoPatin,
LoPatin & Co., Detroit, MI., joined the teleconference.
SUMMARY INFORMATION
CSSB 312(HES): An Act relating to school construction grants
and to interscholastic school activities; and
providing for an effective date.
David Gray, aide to Representative Jerry
Mackie, spoke in support of SB 312. Duane
Guiley, Director, School Finance, Department
of Education, spoke to questions regarding
the bill. Extensive discussion was had by
the committee regarding school bonds, grants,
reimbursement, and temporary facilities.
Amendments 1 and 2 FAILED to be adopted.
Amendment 3, MOVED by Senator Rieger, is
pending. SB 312 was HELD in committee until
March 23, 1994 at 8:00 a.m., or until
Senators Frank and Rieger compose an amenable
amendment addressing committee issues.
SB 360: An Act amending the medical assistance and
community developmental disabilities grants
appropriations in sec. 38, ch. 65, SLA 1993;
and providing for an effective date.
Co-chair Pearce spoke in support of SB 360
and explained that since only $400,000 of the
$1.6M had been used in FY94, this bill would
enable grantees to complete their FY94
operations having a zero-net general fund
impact. SB 360, an appropriation, was
REPORTED out of committee with a "do pass."
CSSB 148(TRA): An Act relating to legislative approval of
certain acts of the Alaska Railroad
Corporation; taxation of certain property of
the Alaska Railroad Corporation; members of
the board and chief executive officer of the
Alaska Railroad Corporation; meetings of the
board of directors of the Alaska Railroad
Corporation; and providing for an effective
date.
A teleconference was held and Robert
Hatfield, Jr., President & CEO, Alaska
Railroad Corporation, and Frank X. Chapados,
Acting Chairman, Railroad Corporation Board,
in Anchorage, were questioned by Senator
Sharp regarding the Ship Creek Landings
Project. Due to lack of time, the meeting
was recessed and the teleconference was
scheduled to continue at 5:00 p.m. today.
The meeting reconvened at 5:22 p.m. and the
teleconference continued. Mark LoPatin,
LoPatin & Co., in Detroit, joined Mr.
Hatfield, other Railroad Board members, Ms.
Johnson, and Mr. Burns, at the Anchorage
site.
CSSB 338(L&C): An Act relating to the issuance of revenue
bonds for acquisition and construction of the
Northern Crossroads Discovery Center for the
Ship Creek Landings Project; relating to a
study of the feasibility and financial
viability of the Northern Crossroads
Discovery Center; relating to construction of
the Northern Crossroads Discovery Center; and
providing for an effective date.
See summary above for SB 148.
SENATE BILL 360:
An Act amending the medical assistance and community
developmental disabilities grants appropriations in
sec. 38, ch. 65, SLA 1993; and providing for an
effective date.
CO-CHAIR PEARCE announced that SB 360 was before the
committee. She said the House passed its companion bill
last week.
Co-chair Pearce said there was an April 1, 1994 deadline on
SB 360. She went on to explain that the bill amended the
developmentally disabilities grants appropriations. She
read her sponsor statement (see Attachment A, copy on file
in the committee minute book).
On page 1, line 10, there was a typographical error. It
should read "line 23". She said this would be taken care of
as a technical amendment.
SENATOR KERTTULA MOVED for passage of SB 360 from committee
with individual recommendations. No objection being heard,
it was REPORTED OUT of committee with a "do pass." It is an
appropriation. Co-chair Pearce and Senators Sharp, Rieger,
Jacko, Kelly, and Kerttula signed "do pass."
CS FOR SENATE BILL NO. 312(HES):
An Act relating to school construction grants and to
interscholastic school activities; and providing for an
effective date.
Co-chair Pearce announced that SB 312 was before the
committee, and had been sponsored by the Senate Finance
Committee at the request of Representative Mackie.
Senator Kerttula asked who had the competence to oversee
school construction and what was the plan in order to
initiate the bill. Co-chair Pearce remarked there was a
zero fiscal note so positions would not be required.
DUANE GUILEY, Director, School Finance, Department of
Education, said an architect had been hired last year that
had 40 years of experience and had designed over 200 school
buildings. Currently, this architect was serving as staff
to the Bond Reimbursement and Grant Review Committee. This
Committee had an architect on the committee and was looking
at different approaches toward cost effective construction
in order to conserve state dollars given the backlog that
continued to build.
In answer to Senator Kerttula, Mr. Guiley said that one of
the architects had written articles about building in arctic
and perma-frost areas and had experience in this climate.
Mr. Guiley went on to say that it was his belief the system
was being enhanced so that in the future it would be more
effective than it had been.
DAVID GRAY, aide to Representative Jerry Mackie, said that
Representative Mackie had spent considerable time trying to
generate interest in this bill. The bill was in response to
concern regarding school project prioritization, costs
involved, varied needs, and the kind of review the
legislature could expect. Senator Kerttula reiterated the
need for a timely review.
Mr. Gray said that originally school districts had to wait
for the Department of Education's decision on school
construction. The state then gave the school district
permission to pursue their own building. SB 312 was an
attempt to mesh those two processes.
SENATOR JACKO MOVED amendment 1 which provided
reimbursements to those communities that fell into the time
span between April 1, 1990 and April 30, 1993, when the
program had been suspended. Two boroughs in his district
would benefit - Bristol Bay Borough and Aleutians East
Borough.
SENATOR RIEGER asked the fiscal effect of the amendment.
Senator Jacko answered that the total reimbursement would be
$4M so the fiscal effect would be the same as if the
reimbursement process would have been in place. Senator
Kerttula gave some history on school bonding.
CO-CHAIR FRANK asked if this amendment would effect any
other districts and if it would also mean an immediate cash
reimbursement to the school districts. He also wanted to
know the fiscal impact and the process used to reimburse.
Senator Jacko reminded Co-chair Frank that it was limited to
those districts that had built facilities with cash. Co-
chair Pearce still wanted to know if any other districts
could be included in this amendment. Senator Kelly said his
concern was major rehabilitation projects that would be
eligible with this amendment.
Mr. Guiley said the department was not aware of how many
dollars were spent during that time period because the
program had been suspended and there was no need for a
district to report to the Department of Education (DOE) cash
expenditures for major rehabilitation, construction or
modernization projects. He explained to the committee how
it would work. Payments that were made by the municipality
during 1992 would qualify under this program and would be
effective immediately. If the bill was signed into law
before June 30, 1994, it would mean a fiscal impact this
fiscal year. At this time, there was no money appropriated
for this purpose. Final fiscal impact would result in 1995.
This amendment did not call for an approval from DOE so any
project that was built during that time period would be
subject to reimbursement provided it exceeded the $150,000
cap. DOE would have some discretion to approve facilities
that provided excess space and were overly expensive.
Senator Sharp seemed to think $150,000 was low. Senator
Jacko said that he had not specified the $150,000 cap.
Discussion followed by Senators Sharp and Jacko regarding
rehabilitation projects.
SENATOR KELLY asked how DOE defined a major rehabilitation
project. Mr. Guiley said that under current statute two
types of projects qualified for major maintenance. Those
projects were expected to extend the life of the facility
through a protection of the structure, such as a bearing
wall or roof, or a major code upgrade project that brought
the school into compliance with current fire marshall codes,
Americans with Disabilities Act, and other access codes.
They were projects that the nature of the code violation was
such that the building would be subject to being closed and
could no longer be used for educational purposes.
In answer to Senator Kelly, Mr. Guiley said that under DOE's
requested project list from school districts, there was a
backlog of $72M worth of major maintenance projects, and
$680M backlog of school construction projects (requested by
the districts in the FY95 cycle). He did not know what
amount of those would be subject to reimbursement.
Senator Kerttula said he would have some concern whether a
70 percent reimbursement could be had on cash projects that
may have originally been funded through state discretionary
funds. He requested that it be mandatory for districts to
provide information about the source of the funds for school
projects. Co-chair Pearce stated that the bill would carry
with it the requirement for an appropriation as it would go
through that approval process.
Co-chair Frank asked Mr. Guiley to restate the facts
regarding the Anchorage situation. Mr. Guiley said that SB
7 had an amendment that provided for retroactive
reinstatement of the school bond debt program to allow
districts to come forward and claim reimbursement for bonds
that had been sold during the time period the program had
been suspended. During public hearings, testimony was heard
by the Anchorage School District that they had sold bonds
and would be eligible based on their understanding of the
amendment. No other district came forward and identified
bonds. DOE testified that they had no way of knowing the
limit of bonds due to the fact that districts were not
required to report to the department during that time
period. The municipal bond bank was consulted and they said
they were not aware of any bonds. After the bill passed, a
letter was received from North Slope School District
indicating that they had sold $20M worth of bonds in that
interim, and were subject to retroactive reimbursement.
Mr. Guiley asked to comment on existing statute AS 14.11.102
in paragraph a. He said it did require the district to
notify DOE prior to October 15, of their desire to receive
an allocation for reimbursement under AS 14.11.100. Since
October 15 had already passed for FY94 and FY95, there was a
possibility that no one would be eligible for reimbursement.
Co-chair Pearce stated that was not Senator Jacko's intent.
In answer to Co-chair Frank in reference to the North Slope
reimbursement, Mr. Guiley said that reimbursement was part
of the $50M allocation. He said that $200M had been
authorized for new bond debt and was allocated throughout
the state based on municipality size. All municipalities
with less than 60,000 population, shared in the $50M. North
Slope competed on a priority basis with other districts of
equal size of their share of the $50M reimbursement. Mr.
Guiley said it was retroactive but it had to come out of the
$50M allocation.
Senator Kelly voiced his opinion that it was unconscionable
that DOE did not know $20M worth of bonds had been sold in
the North Slope Borough.
In answer to Senator Sharp, in reference to amendment 1, Mr.
Guiley said that the phase "two years earlier" was based on
audited projects and on the timeliness of the availability
of the data. The program had historically provided
reimbursement for expenses incurred two years prior. This
would reinstate the program under a similar model that did
exist prior to the suspension of the model. He again
explained the two year reimbursement process.
Co-chair Frank and Senator Kerttula gave their opinions on
the reason for the prior two year expenditure reimbursement.
Senator Kerttula asked what would stop a district from
borrowing cash to build a school and then in two years come
to the state for 70 percent reimbursement. Mr. Guiley said
that was one of the problems with the two year program in
that there was no prior approval through DOE if the district
decided they could afford to build and would subsequently
effect the cash flow of the state two years later. In
answer to Senator Kerttula, Mr. Guiley said this amendment
only applied to the time frame of April 1, 1990 through
April 30, 1993. Mr. Guiley said that last year's bill did
not provide for an opportunity for cash reimbursement.
Senator Rieger stated that the package proposed last year
was inequitable statewide. He said the legislature was
forced to go to bonded debt reimbursement because the
Governor's proposal used up all of the grant money available
for a selected part of the state. Senator Kerttula said it
was important to know if Bristol Bay had participated in
that for equity. Senator Jacko said the amendment targeted
Bristol Bay and North Slope's and it was his understanding
there was an inequity.
Co-chair Frank asked how those two districts had the cash to
build their schools. Senator Jacko said the money was
generated from raw fish taxes and the boroughs had not had
the ability to sell bonds.
Recess 9:55am
Reconvene 10:00am
Senator Jacko asked if the amendment should be tightened.
Co-chair Pearce reminded the committee that there was no way
to tell the fiscal impact of amendment 1. She felt the
amendment did not belong on SB 312 and would rather see it
taken care of in the appropriation process.
End SFC-94 #54, Side 1
Begin SFC-94 #54, Side 2
Co-chair Frank asked if DOE had control over criteria for
school projects including its appropriateness to the needs
of the district. He wanted to know if a district wanted to
build a new school twice as big as its projected population,
could DOE refuse to approve the project. Mr. Guiley said
that much of the authority that DOE had was listed in
regulations in order to clarify existing statutes. SB 7
created a Bond Reimbursement and Grant Review Committee.
One of the responsibilities of that Committee was to develop
cost effective school construction criteria. This bill
would provide an opportunity to implement the criteria
developed by that Committee. He said that DOE had shared
the funding of projects where a district had wanted to build
a project greater than the approved square footage. In such
a case, DOE provided funding for the square footage per the
guidelines and the district funded 100 percent of the
difference in excess.
Co-chair Pearce said that SB 312 only related to grant
review. Mr. Guiley agreed.
In answer to Senator Kerttula, Senator Rieger said that the
repealer in Section 2 was what DOE used to directly
administer interscholastic athletics. In the mid to late
80s, Alaska Student Athletic Assoc., Inc. (ASAAINC) was set
up which took over the duties of the department. Because
the statute was still on the books, there was a concern that
an appeal over a student's eligibility could still be
appealed to DOE. Section 2 deleted the statutes that linked
DOE with governance of interscholastic athletics. Mr.
Guiley agreed.
Co-chair Pearce reminded the committee that amendment 1 had
been MOVED. Co-chair Pearce OBJECTED. The amendment FAILED
to be adopted on a vote of 6 to 1 (All members were opposed
except for Senator Jacko who was in favor of the amendment).
Senator Rieger MOVED amendment 2. Senator Kelly OBJECTED.
Senator Rieger said that amendment 2 addressed a concern
that DOE might consider students who were housed in
temporary facilities and portables as being housed.
Amendment 2 attempted to clarify that "unhoused" includes
students in portables or in temporary housing.
In answer to Co-chair Frank, Mr. Guiley said that on some
occasions districts receive reimbursement from DOE to
purchase classroom space or to construct portable classroom
space, or sometimes finance them through available fund
balance, excess earnings, etc.
Again, in answer to Co-chair Frank, Mr. Guiley said that
historically, the cost of relocatables averaged from $12,000
to $400,000. Co-chair Frank remarked at the wide range.
Mr. Guiley said the type of construction, utilities housed,
self-contained heating systems, intercoms, etc., caused the
difference. DOE was attempting to come up with an adequate
definition of a relocatable, and was attempting to ignore
all students housed in temporary facilities for future
purposes. He would not have any problem with the amendment.
In answer to Senator Jacko, Mr. Guiley felt this amendment
would not overlook districts that had helped themselves in
an overcrowding situation and would not leave them out of
the priority sequence. Senator Jacko felt the effect of
amendment 2 was the same as amendment 1. Mr. Guiley said
this was an eligibility question and not a appropriation
question. Currently, there were about 260 portable
classroom units that were being used. Under the old
process, if a district housed a child in a relocatable
classroom, that classroom was counted in the gross square
footage available to the school district and therefore made
the district ineligible to receive a new school construction
grant. Senator Jacko said the end result was the same. Co-
chair Pearce disagreed with him and explained the effect of
the amendment again.
In answer to Co-chair Frank, Mr. Guiley said last year in SB
60 there were three grants that provided funds for
relocatable or portable classroom spaces. In one case, the
legislature provided an amount $690,000 for two portable
classroom facilities in western Alaska. The bid that had
just come in on those two were over $800,000. Co-chair
Frank asked if these relocatables would be considered
permanent. Mr. Guiley said that most states use relocatable
units that were pre-manufactured, installed on a axle
assembly, and it allowed them to be moved to another
location.
Co-chair Frank felt there should be some consistency when
building relocatables and portables. Mr. Guiley said the
most expensive relocatables were built on site and the
district chose to call them relocatables even though DOE did
not define them as such. In answer to Co-chair Frank, Mr.
Guiley believed that DOE was focusing on "temporary"
facilities (pre-manufactured, etc.) rather than those built
on site with post and pad construction.
In answer to Senator Jacko, Mr. Guiley said that sometimes
in the past, the state had given grants to provide cash to
districts to build temporary classroom facilities, or, at
least, to what districts referred to as portable classrooms.
What DOE was attempting to do was come up with a definition
of a temporary classroom facility that would be excluded
from the available gross square footage therefore not
disadvantaging a district that helped themselves. Mr.
Guiley said that the issue of a district building with cash
was separate from this relocatable issue.
In answer to Senator Frank, Mr. Guiley said that
relocatables were eligible for reimbursement.
Senator Kelly stated that temporary housing was not such a
bad solution since student population sometimes shifted
between districts. Co-chair Pearce invited him to Sandlake
School which had 165 percent population for the original
school and the rest were housed in relocatables. Those
relocatables had become permanent and would remain with that
school until a new school was built. Senator Kelly asked if
a bond issue had taken care of that situation. Co-chair
Pearce said it might be solved but she felt that all
districts in the state should have their projects looked at
with the same discretion by DOE for grants. Senator Kelly
said that it did not make any difference to a student if
he/she was in a temporary building. He went to a school
that had temporary classrooms and forty years later they
were still there. To everyone's amusement, he said he was
not a good example, but there were some good students to
come out of that school.
Senator Kerttula said he went to school in a freight car in
Palmer, Alaska. Co-chair Frank said he spent seventh grade
in a portable.
Senator Rieger said that the amendment he had offered with
Senator Kerttula spoke to AS 14.11.013, and that was the
only place in the statutes he could find any criteria for
prioritizing. He wanted to know if it would apply to debt
reimbursement and the grant program equally. Mr. Guiley
said it did not apply to the bond reimbursement program but
only to the grant program. Senator Rieger asked where
identical language could be added for bond reimbursement.
Mr. Guiley turned Senator Rieger's attention to AS 14.11.100
(j) 4. which currently dealt with adequate housing of
students for the bond debt reimbursement program. In answer
to Senator Rieger, Mr. Guiley agreed that parallel language
would be needed to give DOE authority to treat them both the
same.
Senator Rieger asked for an at ease so he could draft an
amendment.
Recess 10:13am
Reconvene 10:23am
Senator Rieger WITHDREW amendment 2.
Senator Rieger MOVED amendment 3. Senator Kelly OBJECTED.
Senator Rieger explained the amendment.
Co-chair Frank spoke to substandard housing for students.
He objected to the idea that a $200,000-400,000 facility
would be paid for by the state and then later another
facility would be built. He knew it was hard to draft
legislation in order to avoid this situation.
Senator Rieger said that districts chose the word temporary
instead of portable because a portable could become
permanent. This legislation was just asking DOE to consider
the fact that portables exist. A problem arose because an
earlier interpretation kept DOE from considering these
situations. This would not mandate that every temporary or
portable facility be replaced.
Senator Kelly estimated that this could cost the state up to
$300M. He felt the definition of temporary facilities
applied only to those that were found to be substandard. He
MOVED that after the words "temporary facility" the words
"found to be substandard by the department" be added to
amendment 3.
Co-chair Frank agreed with this change to amendment 3. He
wanted to know if the word "substandard" had been defined by
DOE or another more appropriate word could be used.
Mr. Guiley said that DOE had not defined "substandard." He
said that code violations and other violations made a
facility substandard. He also pointed out the temporary
housing issue also went beyond the facility, and took into
consideration the core areas of the main facility. There
was a problem when core areas, like the gym or cafeteria,
were stressed with overpopulation.
Co-chair Frank stated that good language should be drafted
to achieve the real purpose and that was not to rebuild
temporary facilities when they were adequate. He was
frustrated that the committee was attempting with these
amendments to solve several problems. Co-chair Frank asked
that SB 312 be held. Senator Rieger did not object to
holding the bill.
Senator Kerttula mentioned that temporaries were sometimes
moved around in bigger districts. Co-chair Frank felt there
should be a policy that handled temporaries well, since they
were an effective tool.
Co-chair Pearce announced that SB 312 would be HELD in
committee. She ask DOE to find out the fiscal impact
relating to amendment 1. Senator Sharp asked the report be
listed in individual amounts in order to place a cap, if
necessary, on the amendment.
Co-chair Pearce asked Co-chair Frank and Senator Rieger to
draft new language for SB 312.
Senator Sharp asked Mr. Guiley if any new bonds were
floating around in order to finance new schools carrying a
rate of 9 percent or over, tax free. Since the bonds were
being sold at $115 premium, in effect, a $10M issue was a
$1.5 free money paid back in the form of the 9 percent
interest over a four year period. He asked if the state
paid that percent and, if it did, he had a problem with it.
Mr. Guiley said that once a project was improved for bond
reimbursement, districts were only required to present
ballot language to DOE for approval. Once the ballot
language was approved, the district was free to sell the
bonds whichever time period the district felt was most
appropriate for their cash flow needs. The state reimbursed
those bonds, some outstanding at 100, 90 and 80 percent,
none at 70 percent. Typically, there must be at least a 1
percent spread in the new interest versus the old interest
rate for it to be feasible for the district to refund those
bonds. Districts can use the interest received off the
principle of those bonds invested to pay for cost overruns
or reduce the amount of bond reimbursement received from the
state. So, if the district made money off the bonds, in
theory, they could ask for less from the state for
reimbursement towards the bond principle.
Senator Sharp wanted to know if the state analyzed the rate
of interest carried on the face of the bonds where it was
obvious that the interest rate subsidized the premium on the
bonds. Mr. Guiley said that DOE had no opportunity to
analyze the interest rates on the face of the bonds. Once
they were approved, the interest rates were determined at
the time of sale. Senator Sharp said that the state could
pay up to 200 percent of the tax free bond rate or more.
Mr. Guiley said, based on the current program, the state
could find itself in that situation. Senator Kelly said DOE
should know where those bonds were.
In answer to Co-chair Frank, Mr. Guiley said the only
opportunity for DOE to review the actual elements of a bond
sale was in the ballot issue that went to the voters. He
went on to say that the district was required to notify
their voters of the total cost of the project including
interest over life of the bonds in the ballot language, and
that was an estimate at the time it went to the voters. The
actual interest was unknown until the bonds were sold.
Senator Rieger was surprised DOE interpreted it that way.
It seemed to him that statutes were filled with references
to school construction and he thought it spoke to eligible
costs of school construction. For an example, if a bond was
floated for a $100M, and cost of school construction which
was approved by DOE was $80M, there was statutory authority
to reduce the amount of your reimbursement to only pay for
the amount that the issue was used to pay the $80M. Mr.
Guiley agreed to this point. Senator Rieger went on to say
that if a bond was floated to raise $115M and of that $115M
that was raised, only $80M was used to pay the eligible cost
of school construction and the rest went to something else,
the state would reimburse whatever that fraction was - $80M
over $115M or whatever the prorated reimbursement each
period figured out to be. Mr. Guiley agreed again with this
statement. He went on to say that if the district did not
use the extra proceeds on that project and did not receive
DOE approval for an additional project, the state would not
reimburse for those extra costs.
Senator Rieger then asked Mr. Guiley to comment on a project
submitted to DOE in the context that it would cost $80M, but
there were overruns which took the total cost to $90M. Mr.
Guiley said under the old program, it would have been
reimbursed $90M over $115M. Under the current program it
would be reimbursed $80M over $115M because the district
must receive an allocation request in advance. In answer to
Senator Rieger, Mr. Guiley said that actual proceeds were
tracked.
In answer to several members, Mr. Guiley said the department
prorated the interest as well as the principle. He went on
to say that the state paid 70 percent of financing costs
including the actual interest premium paid by the district.
If the district was paying a higher premium than market and
was not aware of that, currently the state would be paying
70 percent of the debt service that the district had
indebted itself to. In answer to Co-chair Frank, Mr. Guiley
agreed that the state could be taken advantage of in this
example.
Discussion continued with Senators Rieger, Sharp, Kerttula,
and Co-chair Frank regarding the interest rate and premiums
on bonds.
Co-chair Pearce said this subject should be addressed in the
subcommittee and again announced that SB 312 would be HELD.
End SFC-94 #45, Side 2
Begin SFC-94 #47, Side 1
CS FOR SENATE BILL NO. 338(L&C):
An Act relating to the issuance of revenue bonds for
acquisition and construction of the Northern Crossroads
Discovery Center for the Ship Creek Landings Project;
relating to a study of the feasibility and financial
viability of the Northern Crossroads Discovery Center;
relating to construction of the Northern Crossroads
Discovery Center; and providing for an effective date.
Co-chair Pearce announced that SB 148 and SB 338 were before
the committee. She welcomed Robert Hatfield, Jr., President
& CEO, Director Frank Chapodos (acting Chairman), and
Director Michael Olson, Alaska Railroad Corporation, to the
meeting via teleconference from Anchorage. She invited
Commissioner Campbell and Commissioner Paul Fuhs to join the
members at the table.
Co-chair Pearce asked Senator Sharp to proceed with his
questions.
Senator Sharp said his main concern was support for the bond
authorization and he wanted to hear comments on the timing
of the authorization.
ROBERT HATFIELD said that the Board had allowed Mr. Lopatin
to attempt to get legislative approval for the bonds. It
seemed appropriate, especially due to prior experience with
the hotel venture, to receive legislative approval before
going to the bonding agencies, and spending a considerable
amount of money in preparation of that, only to find that
the legislature disapproved of the bond authorization.
In answer to Senator Sharp, Mr. Chapodos said that
discussion had been had at previous board meetings regarding
this project. There were concerns expressed regarding
liabilities, and after that was cleared, it was decided to
go to the legislature for approval.
Again, in answer to Senator Sharp, Mr. Hatfield said the
Lopatin & Co. lease was for five years (until 1997) in order
to produce the first phase of the project. Legislative
approval would be needed now if the other aspect of the
timing in regard to the feasibility study, bonds, and
construction was to happen in 1995. If legislative approval
was not received this session, construction would have to be
delayed until 1996.
Senator Sharp asked Mr. Hatfield what the $55M would be
spent on, and if it would include a hotel or other facility.
Mr. Hatfield said the $55M was only for the Discovery Center
and no hotel or office building would be included in that
amount.
Co-chair Frank objected to the fact that the legislature was
being asked to approve a project without more details and
then, today, the committee was informed that the railroad
only had a five year lease with Lopatin & Co. Mr. Hatfield
said the lease had options for renewal up to 105 years. He
went on to say that financing would not be given to any
project that did not have a long term lease, and this would
give the Railroad Board the opportunity to review and
approve the project for the longer term. Secondly, if
Lopatin & Co. did not perform, it would give the Railroad
Board an opportunity to cancel or end the lease without
litigation. Co-chair Frank insisted the legislature needed
more information. Mr. Hatfield said that Mr. Lopatin was
the best person to answer those questions.
Mr. Hatfield went on to assure Co-chair Frank that the
Railroad would have no equity in the project. He would be
glad to give the details of the current lease and said the
Railroad would just extend the five year lease. He said the
lease for the public amenity would be a non-compensatory
lease. Co-chair Frank said that Mr. Lopatin had told the
committee the Railroad would be paid fair market value for
the land lease. Mr. Hatfield agreed with that statement but
would get more information.
Recess 11:05am
Reconvene 5:22pm
Co-chair Pearce reconvened the meeting. She said that
Robert Hatfield, Jr., President & CEO, Alaska Railroad
Corporation, was on line via teleconference from Anchorage,
and Mr. Lopatin, via teleconference from Detroit. She also
invited Commissioner Fuhs and Commissioner Campbell to
return to the table.
Co-chair Frank voiced his concerns regarding the feasibility
of the project and latent concerns of government sponsorship
of private business. He had doubt about getting real
answers. He also voiced concern over curing a default in
this type of situation.
Discussion was had by Co-chairs Frank, Pearce, Senators
Kelly and Jacko, Commissioner Fuhs regarding the Red Dog and
other projects, bonds, and the state's equity position and
liability. Commissioner Fuhs said the legislature needed to
give approval before the feasibility study could be ordered.
Mr. Hatfield said that a fair market value lease was being
paid to the Railroad and would remain at fair market or be
frozen for five years at this particular rate. He
introduced Phyllis Johnson, legal counsel, via
teleconference from Anchorage.
PHYLLIS JOHNSON said the lease was a circuitous approach
dependent upon a project coming on-line that required a long
term lease. The specific lease that Lopatin & Co. had was a
five-year term with two five-year extensions. There was a
specific provision in it for an individual project to come
on-line, at which time a regular long term lease would be
executed. Whether it was between Lopatin & Co. or another
leasee, and the Railroad. If the project came on-line as a
non-profit entity, then the rent would continue at the rate
set at the on-set of the lease at fair market value which
had been decided by an appraiser two years ago. If Mr.
Lopatin negotiated a higher rate with another company, it
would trigger a fair market rate to the Railroad. If a for-
profit organization took over the new portion of the
project, the lease would revert to project rent which would
be reappraised to current fair market value when the project
started. The lease left a small window for a percentage of
gross receipts, but if the parties could not come to an
agreement, fair market value would govern.
Co-chair Frank asked Ms. Johnson to fax the lease to the
committee. Ms. Johnson agreed to fax the first nine or ten
pages of the 40 page document which contained the meat of
the lease.
Senator Sharp said he continued to have concerns about the
amount of money that Lopatin & Co. would have to invest. He
wondered if there was a way to offer this project to other
companies. Co-chair Pearce and Senator Kelly remarked that
the Railroad had already put out a bid and that was how
Lopatin & Co. had come into the picture in the first place.
In answer to Co-chair Frank, Ms. Johnson said that rent was
accruing at $1000 per acre per year to the Railroad Corp.
for 120 acres less a certain number of acres of wetlands
that were not usable. Mr. Hatfield said that was the fair
market value of that industrial land. To everyone's
amusement, Senator Kelly said it was the going rate for mud
flats in Anchorage.
Mr. Lopatin corrected the word "accruing" and said rent was
being "paid" on a yearly basis. He went on to say that the
Discovery Center was a "for-profit" project, the lease would
be appraised at the fair market value, and would be of
significant economic benefit to the Railroad Corporation.
He felt the surrounding land the Railroad owned would also
come to benefit the Railroad.
Co-chair Pearce asked who would put in private dollars to
finance the Discovery Center. Senator Kelly was adamant
that the tax free bonds would be "private" money. Co-chair
Pearce went on to voice her concern over the numbers used in
justifying the Discovery Center visitor estimates.
Mr. Lopatin defended the feasibility study for the Discovery
Center by the McDowell Group. He went on to reassure the
committee that the project would not be totally financed by
bonds and 20-30 percent of equity dollars would be invested
by Lopatin & Co. through cash or grants.
In answer to Senator Kelly, Mr. Lopatin said that equity
would be required to sell the bonds. He went on to speak to
the market and equity required. He assured Senator Kelly
that the equity would not come from the Railroad or the
state of Alaska.
End SFC-94 #47, Side 1
Begin SFC-94 #47, Side 2
In answer to Senator Sharp, Mr. Lopatin said his company was
not a public traded company but assured him that the
company's money would go in first or the bonds could not be
sold.
Commissioner Fuhs pointed out the Red Dog project had been a
great success. The Discovery Center would not only help the
company that owned it but would provide a wider economic
benefit over the state and that would justify the public
financing of the bonds. He said Lopatin & Co. could save 2-
3 points on the bond sale and in the end it would benefit
the state of Alaska.
Senator Kelly commented that instead of $55M the project
would require about $47M in bonds. Mr. Lopatin agreed with
that statement if all the numbers held true. The request
for $55M would give some flexibility to the project.
CS FOR SENATE BILL NO. 148(TRA):
An Act relating to legislative approval of certain acts
of the Alaska Railroad Corporation; taxation of certain
property of the Alaska Railroad Corporation; members of
the board and chief executive officer of the Alaska
Railroad Corporation; meetings of the board of
directors of the Alaska Railroad Corporation; and
providing for an effective date.
In answer to Co-chair Pearce, Mr. Hatfield said the Board
position on SB 148 was that Board rule by 17, mimics many of
the more equity participation prohibition that was currently
in this legislation. The Board felt it was an improved
document but pointed out it was always subject to
interpretation. The Board would prefer not having the
legislation, and felt it had acted responsibly with the
assets of the Corporation, acted in concert with the current
legislation that existed, and felt the Railroad had been
managed responsibly as far as its public response and
willingness to work with the general public. He offered to
answer questions on these issues.
Co-chair Frank asked if the Railroad had developed a policy
on this bonding ability that Congress provided. Mr.
Hatfield said this was the first time such a bonding issue
had come up and the Railroad was asking for approval in
order to get a sense of how the legislature felt about it.
Co-chair Frank spoke to the broad policy of this bonding
issue.
Senator Sharp asked for the rate of return to the Railroad
in the Comfort Inn project. JOHN BURNS, real estate
representative, said it would not be a rate of return since
there was no investment but the market it was tied to was if
it was on a straight land lease. The income had nearly
doubled if it would have been received on an ordinary land
lease. He went on to clarify that no cash or utilities were
invested by the Railroad. He said the Railroad was a 40
percent owner of a 100 percent financed improvement without
a cash investment. The only thing he could compare it to
would be an ordinary land lease.
Again, in answer to Senator Sharp, Mr. Burns said the debt
service was being***FIN080AM
0AASFIN 0321940911
MINUTES
SENATE FINANCE COMMITTEE
March 23, 1994
8:06 a.m.
TAPES
SFC-94, #49, Side 1 (000-end)
SFC-94, #49, Side 2 (end-000)
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 8:06 a.m.
PRESENT
In addition to Co-chair Pearce, Senators Rieger, Sharp and
Kerttula were present. Co-chair Frank, Senators Jacko and
Kelly joined the meeting after it was in progress.
ALSO ATTENDING: Senator Fred Zharoff, sponsor of SB 92;
Represen-tative Jerry Mackie; Duane Guiley, Director, School
Finance, Department of Education; Nancy Bear Usera,
Commissioner, Department of Administration; Connie Sipe,
Executive Director, Older Alaskans Commission, Department of
Administration; Reed Stoops, Alaska Air Carriers
Association; and Mike Greany, Director, Legislative Finance
Division; aides to committee members and other members of
the legislature.
SUMMARY INFORMATION
CSSB 92(CRA): An Act relating to an advisory vote during
regional educational attendance area school
board elections; and providing for an
effective date.
Senator Zharoff, sponsor of SB 92, spoke in
support of the bill. CSSB 92(CRA) was
REPORTED out of committee with a "do pass,"
with a zero fiscal note for the Department of
Education, and a fiscal note for the Office
of Governor in the amount of $0.7.
CSSB 248(STA): An Act relating to services for and
protection of vulnerable adults; and
providing for an effective date.
Nancy Bear Usera, Commissioner, Department of
Administration, spoke in support of SB 248.
Senator Rieger MOVED amendment 1. Co-chair
Pearce OBJECTED for discussion purposes. Ms.
Usera said the department was neutral on
amendment 1. No further objections being
heard, amendment 1 was ADOPTED for
incorporation into a Senate Finance
Substitute for the bill. CSSB 248(FIN) was
REPORTED OUT of committee with a "do pass,"
with zero fiscal notes for the Department of
Public Safety and Department of
Administration (Pioneer Homes), and fiscal
notes for the Department of Administration-
$559.6, and the Department of Health & Social
Services-Adult Services-$(364.5), Northern-
$(68.0), and South Central-$(127.1).
CSSB 250(STA): An Act relating to the Older Alaskans
Commission and staff of the commission;
changing the name of the Older Alaskans
Commission to the Alaska Commission on Aging
and extending the termination date of the
commission; relating to the Alaska Pioneers'
Homes Advisory Board; relating to services
and programs for older Alaskans; and
providing for an effective date.
Nancy Bear Usera, Commissioner, Department of
Administration, spoke in support of SB 250.
Connie Sipe, Executive Director, Older
Alaskans Commission, Department of
Administration, spoke to questions regarding
grants and matching monies for pilot
projects. Senator Kelly MOVED amendment 1,
page 7, line 1, removing the words "program
or" and adding the word "pilot." No
objections being heard, amendment 1 was
ADOPTED for incorporation into a Senate
Finance Substitute for the bill. CSSB
250(FIN) was REPORTED OUT of committee with a
"do pass," and a zero fiscal note for the
Department of Administration.
CSSB 256(TRA): An Act relating to the tax on transfers and
consumption of aviation fuel; and providing
for an effective date.
Senator Sharp spoke in support of SB 256.
Discussion was had by Co-chair Pearce,
Senators Rieger, Kelly, and Sharp, regarding
rural landing fees and fuel taxes. Co-chair
Pearce announced that CSSB 256(TRA) would be
HELD in committee until more information was
obtained comparing jet fuel prices in Alaska
with the lower 48 states. (The bill was
heard again on Friday, March 25, 1994.)
CSSB 312(HES): An Act relating to school construction grants
and to interscholastic school activities; and
providing for an effective date.
Amendment 3 pending from a prior Senate
Finance meeting was withdrawn. Senator
Rieger MOVED amendments 4 and 5. Discussion
was had between Senators Rieger, Kerttula,
Sharp, Co-chairs Frank, Pearce, and Duane
Guiley, Director, School Finance, Department
of Education, regarding reimbursement to
schools for school construction debt,
portable and temporary housing, and interest
rate ramifications on bonds. Amendment 5 was
amended on page 4, line 2, after "bond
sells..." and before the words "...premium to
par value", the words "an original issue"
were added. In answer to information
requested by Senator Jacko, Mr. Guiley
provided Attachment A, dated April 15, 1994.
Discussion followed. CSSB 312(FIN) was HELD
in committee until March 24, 1994.
CS FOR SENATE BILL NO. 312(HES):
An Act relating to school construction grants and to
interscholastic school activities; and providing for an
effective date.
CO-CHAIR PEARCE announced that SB 312 was before the
committee. She said amendments 4 and 5 were proposed by
Senator Rieger. She also noted that an April 1991 report
from the Department listed portable units used in Alaska
(see Attachment A, copy on file in the committee minute
book). At that time, 16 of the 54 school districts reported
having portable units in use. Anchorage had 98, 50 of which
were over 20 years old. Matsu had 54. Fairbanks had 28, 17
of which were over 20 years. Kenai had 22, Craig and
Unalaska, only one. Her objection to bringing in so many
portable units was that it overpopulated a school, and the
children did not have access to adequate library facilities,
restrooms, etc. Schools would still be eligible for bonding
even if portables met the per student square footage
requirement. She asked Senator Rieger to move amendment 4.
Senator Rieger MOVED amendment 4. He went on to explain the
amendment. He called attention to the language "materially
substandard," and said he would be comfortable with or
without this in the amendment. Some examples of "materially
substandard" could be an uncovered walkway from the
portables to the rest of the school, inadequate plumbing, or
inadequate heating. Senator Kerttula agreed that the
department would need some leeway in judging this area.
DUANE GUILEY, Director, School Finance, Department of
Education, said that the amendments proposed were in-line
with the bond reimbursement and grant review committee who
had discussed the future. It also was in line with a
request from the Department of Education Anchorage caucus
suggesting that in all situations regarding portables, the
population of students enrolled at the facility should not
exceed 110 percent of the design capacity of the core area
of the building.
Senator Kerttula voiced his opinion that, with a rare
exception, all new construction paid for by the state would
be rural or in the bush because there were no existing
basements in churches to house students. When a large
number of students begin to be housed in portables, the
Department of Education (DOE) should look at the reasons.
He felt there had been a rapid shift in population in some
districts and too large a percentage of students were being
housed in portables. He wanted to solve and prioritize the
problem.
Co-chair Pearce reminded the committee that there was a
motion on the floor to ADOPT amendment 4. No objection
being heard, amendment 4 was ADOPTED for incorporation into
CSSB 312(FIN).
Senator Rieger said there had been concern about bonds
issued that sold at a premium. He said amendment 5 would
put a penalty on payback. He believed that there should be
some kind of general dis-incentive for a district to issue
bonds at premium.
Senator Rieger MOVED amendment 5.
Mr. Guiley understood the amendment to say that bonds might
be available at 115 percent as compared to par, and would
require the department to reduce the eligible reimbursement
to the District by 200 percent of that 15 percent increase
over par which would be a 30 percent reduction in the 70
percent reimbursement rate. That would provide a penalty
for selling the bonds over par keeping in mind that the
state reimbursed 70 percent of the principle amount as well
as 70 percent of the interest amount. If the interest
amount was higher than necessary, the district would be
making themselves eligible for a greater level of
reimbursement by the state. That would deter this from
happening.
Senator Rieger confirmed that the new higher debt service
was what would be reduced by the additional 30 percent. Mr.
Guiley said that was correct under the current statutory
definition of cost of school construction.
In answer to Senator Sharp, Mr. Guiley said he read the
amendment to mean it would apply to all of the eligible
reimbursement which would include the reimbursement of the
principle amount as well. Everyone was amused when Senator
Sharp said he felt that was a little severe.
Senator Rieger MOVED an amendment to amendment 5 changing
the wording on page 4, line 2, to read "by which a bond
sells at an original issue premium to par value". No
objection being heard, it was ADOPTED.
At the request of Senator Sharp, Mr. Guiley turned the
committee's attention to page 3, Section 3 (o). He read
that section to mean that the total reimbursement to the
district would be reduced by that fraction. Under current
statutes, districts were eligible to receive 70 percent
reimbursement of principle and associated financing costs.
He would read this to mean the department would calculate
the fraction. For example, a 30 percent reduction to the 70
percent reimbursement would result in a 21 percent reduction
of the 70 percent, if he was reading it correctly. As
stated earlier, the reimbursement amount of the principle
would remain unchanged. The state's obligation on the
interest for bonds that carry a higher interest rate than
market value would place a greater obligation on the state
at the point to which there would be a break even.
Discussion continued by Senators Rieger, Kerttula and Sharp
regarding reimbursement, school districts and bonding.
Co-chair Pearce reminded the committee that there was a
motion on the floor to ADOPT amendment 5. No objection
being heard, amendment 5 was ADOPTED for incorporation into
CSSB 312(FIN).
In answer to Senator Rieger, Mr. Guiley said, to his
knowledge, none of the old programs (2, 5, 7 year old bonds)
had been sold with no material premium at all.
Co-chair Pearce commented that amendment 3 had been pending
and it was replaced with amendment 4 (which was adopted).
Co-chair Pearce asked if Mr. Guiley had the answer to a
question raised by Senator Jacko. Senator Jacko had wanted
to know the dollar amount expended for local capital
improvement projects by districts throughout the state. Mr.
Guiley said he researched the most recent school district
audits to determine how many dollars were recorded in school
district audits for local cash expenditures of capital
projects in fiscal year 1993. Based upon that analysis,
there was a recording of $9,908,651 of local school
construction projects not currently being reimbursed by the
state through either a bond reimbursement or grant process.
That was an estimate of what existed on the actual school
district audits in one year of the three year suggestion for
cash reimbursement process. The list included all 54 school
districts under current statute. The ARA school districts
would not be eligible for such reimbursement. He took three
specific school districts and looked at three fiscal years.
Of those three districts, the total was $1,061,863. He said
he provided brief descriptions of the projects.
Mr. Guiley went on to say that the old cash reimbursement
program ended with projects that had to be approved prior to
July 1, 1990. Therefore, there was a potential of double
payment for projects incurred during the time period of
April 30, 1990 through June 30, 1990. The issues he brought
forth previously related to the two year lag process whereby
expenses incurred by the district in 1990 under current
programs would have been eligible for reimbursement in 1992.
That fiscal year was currently closed out. Based on the
wording under current statute, excluding the proposed
amendment, the only expenses eligible for reimbursement
would be those incurred in FY93 prior to April 1993. This
would exclude any capital projects that were recorded on the
city or borough books. He had requested the information but
did not have access to those books.
Co-chair Pearce asked if $10M in unreimbursed cash
expenditures was a good estimate for 1993. Mr. Guiley said
that was a conservative number in that the cities and
boroughs were not required to actually record capital
projects related to schools on the school audit. They were
allowed to record them on their own audit because under
state statute, they had responsibility for the buildings.
This number would be understated by the amount of projects
recorded in city and borough audits, and overstated in
relation to the projects incurred by the REAAs.
In answer to Senator Jacko, Mr. Guiley said that he had
included all projects of all dollar amounts recorded in
local capital projects.
Discussion was had by Co-chairs Pearce, Frank and Mr. Guiley
regarding projects in his report and different cities and
boroughs relating to school districts.
In answer to Co-chair Frank, Mr. Guiley said that this
legislation could have an immediate impact on the general
fund. Co-chair Frank remarked that more information was
needed.
Co-chair Pearce agreed with Senator Rieger to HOLD CSSB
312(FIN) for at least another day.
CS FOR SENATE BILL NO. 248(STA):
An Act relating to services for and protection of
vulnerable adults; and providing for an effective date.
Co-chair Pearce announced that SB 248 would be taken up
next. She invited Nancy Bear Usera, Commissioner,
Department of Administration, to join the members at the
table.
COMMISSIONER NANCY BEAR USERA said the bill had been heard
in two committees and was strongly supported by the senior's
community. She saw it was an excellent step toward a
central focal point for delivery of senior services in the
state. The fiscal notes were transfers or a net zero
impact. The bill defined elder abuse, response needed and
responsibilities for various senior programs, and did a
better job of protecting seniors in a vulnerable position.
She strongly supported the passage of SB 248.
In answer to Senator Kelly, Commissioner Usera said that the
Department of Administration had housed a majority of the
senior's programs. Through an administrative order, a new
Division of Senior Services was created which merged the
Division of Pioneer Benefits and the Older Alaskans'
Commission. An accompanying bill, SB 250, contained the
organizational framework for the Division of Senior
Services. It transferred all the major senior services into
one division. In the past, Department of Health & Social
Services dealt with vulnerable adults as they would with
vulnerable children. Upon analysis, the needs of children
were very different from adults. The determination was made
that a better job of serving this constituency would be done
if it was put in a like framework. The common thread being
seniors rather than vulnerability. Consequently, the
Division of Senior Services would be under the Department of
Administration because it was the right thing to do.
Senator Rieger MOVED amendment 1. Co-chair Pearce OBJECTED
for discussion purposes. Senator Rieger said he read this
bill in HESS and the language that referred to the state,
police officer or VPO taking immediate action to protect,
etc. reminded him of the Busby decision in Anchorage.
Because of that, he requested amendment 1 be drafted.
Commissioner Usera said that she did not have strong
feelings one way or the other but had supported the language
in the bill prior to HESS removing it.
End SFC-94 #49, Side 1
Begin SFC-94 #49, Side 2
Co-chair Pearce called for a show of hands and amendment 1
was ADOPTED unanimously.
Senator Rieger MOVED for passage of CSSB 248(FIN) from
committee with individual recommendations. No objection
being heard, it was REPORTED OUT of committee with a "do
pass," zero fiscal notes from the Department of Public
Safety and Department of Administration (Pioneer Homes), and
fiscal notes for the Department of Administration-$559.6,
and the Department of Health & Social Services-Adult
Services-$(364.5), Northern-$(68.0), and South Central-
$(127.1). Co-chair Pearce, and Senators Rieger, Sharp and
Kerttula signed "do pass." Senator Kelly signed "no
recommendation."
CS FOR SENATE BILL NO. 250(STA):
An Act relating to the Older Alaskans Commission and
staff of the commission; changing the name of the Older
Alaskans Commission to the Alaska Commission on Aging
and extending the termination date of the commission;
relating to the Alaska Pioneers' Homes Advisory Board;
relating to services and programs for older Alaskans;
and providing for an effective date.
Co-chair Pearce announced that SB 250 would be heard next
and asked Commissioner Usera to remain at the table.
Commissioner Usera said that SB 250 was the administrative
piece that went along with the senior's initiative that had
been put forward this session. In order to have a division
that effectively and efficiently housed the programs, it was
felt that some realignment of the old divisions should be
done which were served by two advisory boards, the Older
Alaskans Commission and Pioneer Home Advisory Board. This
bill maintained both of those commissions separately but
housed them in the same division aligning them more closely.
The chairperson of one board was now a member of the other
board. Secondly, it changed the name of the Older Alaskans
Commission to the Alaska Commission on Aging which was more
consistent with the national model. This was important
since a large number of matching federal funds were received
for the administration of these programs.
She went on to say that one change made in the State Affairs
Committee was that instead of the Governor appointing
chairpersons of the Board, seniors would appoint them. She
said that the administration had no problem with that.
Senator Kelly asked for an explanation of Section 16 on page
6, line 19. Ms. Usera said it was a technical amendment to
do with the grant process and whether the match could be in-
kind versus cash. Senator Kelly asked for more of an
explanation.
Ms. Usera went on to say that this section allowed the
Commission the flexibility to reduce or waive the local
match requirements for grantees when waiver was in the
public interest. Currently, the non-profits that received
some grants had to have match requirements and because of
the nature of some of the local senior service programs,
they do not necessarily have a cash match but labor match.
It provided flexibility to the non-profit group. She said
this section provided regulator authority to establish
regulations which would define when a waiver of the match
could happen and under what circumstances.
Co-chair Pearce pointed out that this was a portion of the
orignial Governor's bill. Ms. Usera said the genesis of the
bill was a review by a task force on senior services that
was established with both the Older Alaskans Commission and
the administrative representatives of a number of senior's
programs. This was their recommendation.
At that time, Connie Sipe, Executive Director, Older
Alaskans Commission, Department of Administration, arrived
and Co-chair Pearce posed the question to her regarding the
waiver for grants.
CONNIE SIPE explained that in some circumstances where
start-up grants for certain organizations, such as the World
Delivery of In-Home Respite Care, did not reside in the same
location where they were setting up and arranging for
respite care, were not able to raise a total match the first
year. Many of the organizations receiving the grant may ask
the client for contributions, much of which may be in-kind
such as rent, but found it hard in the start-up year to come
up with the 10 percent match even with client contributions.
She noted, in contrast, the grants for home care services
for people with developmental disabilities had no match
requirement. The 10 percent match had become a barrier in
starting up some home care providers especially in rural
areas. The Department of Law had recommended handling this
in regulations rather than in statute.
Senator Kelly maintained that it should be defined in
statute. Ms. Sipe said the statutes already define a "pilot
project" and she would support an amendment to that effect
for SB 250.
Senator Kelly MOVED amendment 1 changing the words "program
or" to the word "pilot" on page 7, line 1. No objection
being heard, it was ADOPTED for incorporation into CSSB
250(FIN).
In answer to Senator Sharp regarding the length of pilot
projects, Ms. Sipe explained that the pilot project grant
section had been used rarely in the past. The regulations
said that the Commission made the determination of the
length of time but, at present, were on a 2-year grant
cycle. The pilot project language talked about the fact
that to get approved as a pilot project there had to be an
estimated projected cost of operations for the next 3
succeeding years but did not say that it would be in a pilot
project status that long. That was part of the planning for
approval. Senator Sharp felt, with this incentive, the
pilot project might become more popular. He wanted the
record to read that a pilot project should have a maximum of
three years.
In answer to Senator Rieger regarding AS 47.65.040 (a), Ms.
Sipe agreed that (a) contradicted (b). She said that (b)
set a percentage and then (a) capped it at 10 percent. Most
cities and towns larger than Petersburg would have
percentages larger than 10 percent if the percentage formula
was used in Section (b) but then (a) capped it. This
statute was first adopted in 1980. She pointed out that
grant matches of 20 or 30 percent would be difficult for
groups to meet. She said the 10 percent was significant
enough. Community mental health centers had 25 percent
match requirements but were allowed to charge fees. The
federal programs only allowed the organizations to ask for
suggested donations for nutrition, transportation, and
support services which limited how much cash could be
generated from client fees. The more intensive client
services like adult day care could ask for fees since they
were supported with state funds rather than federal. She
felt the 10 percent match was reasonable but it was an old
statute.
Senator Rieger asked if Section (b) should be repealed. Ms.
Sipe said that Section (b) could be repealed but not Section
(c). Senator Rieger left it up to Co-chair Pearce on
whether to take any action on this issue. Co-chair Pearce
said she would let it go.
Senator Kerttula MOVED for passage of CSSB 250(FIN) from
committee with individual recommendations. No objection
being heard, it was REPORTED OUT with a "do pass," and a
zero fiscal note for the Department of Administration. Co-
chair Pearce, Senators Rieger, Kelly, Kerttula and Sharp
signed "do pass."
CS FOR SENATE BILL NO. 92(CRA):
An Act relating to an advisory vote during regional
educational attendance area school board elections; and
providing for an effective date.
Co-chair Pearce asked the committee to turn their attention
to SB 92. She invited Senator Zharoff to join the members
at the table.
SENATOR ZHAROFF, sponsor of SB 92, said the bill allowed the
Division of Elections to include on an REAA ballot an
advisory question if it was adopted by the regional school
board in the area. At present, statutes allowed the
Division of Elections to deal with the school board, and
there was an instance when one REAA had wanted a question on
the ballot and there was no method to achieve that. He said
both the Department of Education and Division of Elections
supported this version of SB 92.
Senator Kerttula MOVED for passage of CSSB 92(CRA) from
committee with individual recommendations. No objection
being heard, it was REPORTED OUT with a "do pass," a zero
fiscal note for the Department of Education, and a fiscal
note for the Office of the Governor in the amount of $0.7.
Co-chairs Pearce and Frank, Senators Kelly, Rieger,
Kerttula, and Sharp signed "do pass."
CS FOR SENATE BILL NO. 256(TRA):
An Act relating to the tax on transfers and consumption
of aviation fuel; and providing for an effective date.
Co-chair Pearce announced that SB 256 was before the
committee.
Senator Sharp said the bill was introduced by the
Transportation Committee and it addressed the statement in
last year's operations budget where the situation was noted
that rural landing fees in rural airports should not be
considered. They were difficult and expensive to collect.
This bill was another option to landing fees for rural
airports. Some organizations did support it. Without this
bill, rural landing fees would have to be reinstated. He
said SB 256 would sunset in the year 2000. It prohibited
charging rural landing fees while this tax was in effect.
Co-chair Pearce commented that Northern Air Cargo supported
the bill. An unidentified man in the audience also said
that Alaska Air Carriers supported the bill.
Senator Sharp said he thought Alaska Airlines supported the
bill.
REED STOOP, Alaska Air Carriers Association, said he
believed that Alaska Airlines would be beneficiaries under
this bill. They would pay less in fuel taxes than they
would in landing fees if landing fees were the alternative.
There had been some mixed correspondence but Kim Daniels,
Alaska Airlines, had told him that they did not object to
the bill.
Mr. Stoop said his organization was very appreciative of
Commissioner Campbell's efforts last year to suspend the
landing fee program which none of the carriers liked. Most
agreed with the Commissioner when he made the decision not
to reinstate the landing fees. At that time, the air
carries agreed that they would not object to a fuel tax
increase that would raise an equivalent amount of money.
They felt it would be a fair tax and a better alternative.
If the money was not raised, the department would be forced
to make cuts to its operation in rural airports and that
would hurt the air carriers.
Co-chair Pearce felt that all members of ATA that opposed
the bill in some way had to benefit from having the feeder
lines going into Anchorage and going back out to provide
other passenger and cargo service throughout the state
because so many towns and villages were not on the road
system and relied on air travel. She agreed that lack of
upkeep at rural airports would cut down on service for these
carriers.
Mr. Stoop agreed with Co-chair Pearce's statement. He said
that an earlier recommendation by Commissioner Turpin to
raise the tax 2 to 2.5 cents was unacceptable and would have
raised 3 or four times what was being collected in rural
landing fees. He said SB 256 was a more modest contribution
of $1.5M and he knew the Department of Transportation's
budget cuts were beginning to effect the rural airport
maintenance support.
Co-chair Pearce asked for a jet fuel comparison between
Alaska's large cities like Anchorage and Fairbanks, and
other major airports in the lower 48. An unidentified man
in the audience said that it was his understanding that fuel
costs were more reasonable in Alaska than in the lower 48.
Senator Sharp said he would have that information for the
committee in a few days.
Discussion was had between Senator Kelly and Co-chair Pearce
regarding the new Albuquerque airport and how it was
financed. Co-chair Pearce noted that it was an old military
base and some funding was paid for or such things as fencing
had already been installed by the federal government.
Senator Rieger asked why the year 2000 had been chosen as
the sunset date. Senator Sharp said he did not know
anything special about the year 2000 but the Transportation
Committee had wanted a sunset in the bill.
Co-chair Pearce announced that SB 256 would be HELD in
committee until Senator Sharp requested that it back before
the committee.
Discussion followed by Co-chair Pearce, Senators Sharp and
Kelly regarding the report regarding jet fuel costs in other
states.
ADJOURNMENT
The meeting was adjourned at approximately 9:40 a.m.
| Document Name | Date/Time | Subjects |
|---|