Legislature(1995 - 1996)
03/28/1995 09:15 AM Senate FIN
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MINUTES
SENATE FINANCE COMMITTEE
March 28, 1995
9:15 a.m.
TAPES
SFC-95, #22, Side 1 (000-575)
SFC-95, #22, Side 2 (575-end)
SFC-95, #24, Side 1 (000-575)
CALL TO ORDER
Senator Rick Halford, Co-chair, convened the meeting at
approximately 9:15 a.m.
PRESENT
Co-chairs Halford and Frank, Senators Donley, Phillips,
Rieger and Zharoff were present. Senator Sharp arrived
shortly after the meeting began.
Also Attending: Representative Jerry Mackie; Patrick
Pourchot, Legislative Director, Office of the Governor;
Wendy Redman, Vice President, University of Alaska; Del
Smith, Deputy Commissioner, Public Safety; Mike Greany,
Director, Legislative Finance; Andy Pekovick, Dept. of
Natural Resources; Leo B. Rasmussen, City of Nome, Official
Checker; and Bryce Edgmon, Aide to Senator Foster.
SUMMARY INFORMATION
SB 79 ADJUSTMENTS FOR DEFECTIVE SURVEY
Discussion was had with Representative Mackie and Andy
Pekovich. Amendments 1B and 1C plus a 3rd amendment by
Co-chair Halford were ADOPTED for incorporation within
a
Senate Finance CS. SCSCSHB 79 (FIN) was REPORTED OUT
of committee with a "do pass" recommendation and
zero fiscal notes from Dept. of Natural Resources
and Community & Regional Affairs.
HB 146 SLED DOG RACE CLASSIC
Testimony was heard from Leo B. Rasmussen. An Amendment
by
Senator Rieger and an Amendment adding 4-year sunset
provisions were ADOPTED. SCSCSHB 146 (FIN) w a s
REPORTED OUT of committee "without recommendation" with
a $25.0 fiscal note from the Dept. of Revenue.
SB 121 APPROP: U OF A DEFERRED MAINTENANCE
Discussion was had with Wendy Redman and Patrick
Pourchot.
SB 121 REPORTED OUT of committee "without
recommendation".
SB 80 MUNICIPAL POLICE SERVICES
Del Smith spoke to SB 80. Amendment was ADOPTED to be
incorporated into CSSB 80 (FIN) and brought back to be
discussed at the next meeting.
HOUSE BILL NO. 79
"An Act allowing the Department of Natural Resources to
quitclaim land or interests in land, including
submerged or shore land, to a municipality to correct
errors or omissions of the municipality when
inequitable detriment would result to a person due to
that person's reliance upon the errors or omissions of
the municipality."
Co-chair Halford invited Representative Mackie to join the
committee. Rep. Mackie distributed 3 possible amendments
drafted by Legal Services, explaining that in all three
cases, a title change is not necessary. Co-Chair Halford
stated that the errors being addressed were created decades
prior. The language of the bill creates an 18-month window,
which would allow a municipality to make an error next
month, and still come back to the state to correct that
error. He asked Rep. Mackie's approval to add, on page 3,
line 29, "January 1, 1993." He invited Andy Pekovich to
join the committee. Mr. Pekovich stated that he was in
agreement with the added language.
Senator Sharp joined the committee.
Senator Sharp MOVED for passage of AMENDMENT 1B. No
objection being heard Amendment 1B was ADOPTED. There was
further extensive discussion regarding language.
Senator Zharoff asked if Skagway does have entitlement lands
left?
Mr. Pekovich stated that Skagway does have a substantial
entitlement. Rep. Mackie noted that because Skagway does
have substantial entitlement, it allows for a zero fiscal
note. He assured Senator Sharp that the drafters of the
amendments have assured him that his concerns have been
taken care in the language.
Senator Sharp MOVED for passage of AMENDMENT 1C. No
objection having been heard, Amendment 1C was ADOPTED.
Senator Phillips MOVED for passage of a clause on page 3,
line 27, after the word "municipality", "made before January
1, 1993". No objection having been heard, the third
amendment was ADOPTED.
Senator Phillips MOVED for passage of SCSCSHB 79 (FIN) with
individual recommendations. No objection having been
raised, SCSCSHB 79 (FIN) was REPORTED OUT with two zero
fiscal notes from Dept. of Natural Resources and Dept. of
Community and Regional Affairs. Co-chairs Halford and Frank
along with Senators Phillips, Rieger, Donley, Zharoff, and
Sharp recommended a "do pass".
Co-chair Halford stated that the Cambridge Energy Contract
required ratification by the committee as the
interpretations of the total amount of the two components
exceeds the amount that can be approved without formal
committee action. The contract is in the amount of $15,750.
This is a continuation at a lower cost of an on-going effort
which provides oil watch market information.
Senator Phillips inquired to the previous costs. The
response was $40.0. Senator Frank MOVED to approve the
Cambridge Energy Contract. No objection having been raised,
the Contract was ADOPTED.
HOUSE BILL NO. 146
"An Act relating to sled dog race classics."
Co-chair Halford invited Leo Rasmussen to join the
committee. Mr. Rasmussen spoke to the words "mushing
classics". He expressed that within five years this would
potentially provide a revenue stream for Iditarod. He is
convinced that it would take away the financing problems
that have plagued Iditarod in the past. Iditarod is
responsible for making Alaska an internationally known race.
It has become a premiere event in Alaska which will increase
tourism.
Mr. Rasmussen testified that he has been an official checker
for Iditarod. He retired from the Board in 1991 after 19
years, but is still actively involved in trail mail. Senator
Rieger asked if he thought the increasing competitiveness of
the race has improved the character of the race. He
testified as to the negativity of the race back in 1973 as
compared to now. Mr. Rasmussen said that there is much to
be proud of in spite of what the humane society is saying.
Co-chair Halford agreed to obtaining and maintaining the
volunteer support as much as possible. The flavor of the
race has changed. It is now able to pay its bills, it does
a better job economically, but along the way it has lost the
earlier attitudes of the 70's. Mr. Rasmussen indicated that
it takes 10,000-20,000 volunteers to make the race work. He
estimates that perhaps a third receives some compensation.
He noted that there were people all over the world who took
place in the race this year. This allows the locals to take
a break and come back at another time fresh and new. The
turnover has happened this year and is an on-going trend
every three to four years.
Co-chair Halford asked what could be done to safeguard this
race from abuse? Mr. Rasmussen supported regulation. He
stated that there is history with the All-Alaska
Sweepstakes. There was extensive discussion regarding prior
abuses in the race along with possible solutions. Co-chair
Halford stated that this legislation has been slowed down to
find a way to safeguard this game. He stated that there
must be a mechanism between the department and the committee
that guarantees the ability to safeguard. Various methods
of protection were discussed to keep a black mark from
occurring on the Iditarod. Mr. Rasmussen assured that he
did not have an answer, but does support the reasoning.
Senator Frank interjected that it is important to keep it
from becoming a game of chance, but to keep the game
interesting. He does not want it to become a lottery, he
likes the idea of trying to guess when the musher is going
to cross the line. He supports placing sanctions on the
musher or any other person attempting to defraud the
situation. He suggests language that says, "mushers can't
bet or be involved in the betting, nor is it legal for
anyone to ensnare or entangle a musher in a betting
situation." He elaborated on the language and said that
when sanctions are placed on the mushers the abuse will be
limited.
Co-chair Halford suggested placing bets on the combined time
of the top three or four finishers, maintaining a historical
perspective of past races. He suggested that the committee
wanted to respond to this bill, the legislature wants to
help the Iditarod, but that safeguards are needed and that
the sponsors and the trail committee need to come back to
the committee with something that gives a level of
confidence needed on how it will happen.
Co-chair Halford invited Mr. Edgmon to join the committee.
He stated that he did not have any solutions to safeguarding
against abuse, but that his office would be glad to research
it and come back with language which could be amended into
the bill. Co-chair Halford stressed that the participants
are also the volunteers and supporters of the Iditarod.
Therefore, he advocated not eliminating them from betting.
He indicated that the direct participants and family members
of mushers on the trail, as well as race officials and
staff, should not be betting on the race. Senator Donley
reiterated all the variables and does not know how to attack
the problem. He suggested deferring it to someone who has
the level of expertise to deal with it. He felt that
deferring the problem to the division would require a fiscal
note.
Co-chair Halford suggested adding a sunset of 4 years to the
bill and with a fiscal note of $25.0 along with a letter of
intent that provides criteria to protect the integrity of
this lottery. Co-chair Frank suggested a fiscal note from
program receipts.
Senator Zharoff raised his concern over the term "mushing
sweepstakes" and that soon there will be other activities
around the state like the Beaver Roundup, Yukon Quest, etc.
that want to participate too. The definition that is in the
bill is rather narrow. Mr. Edgmon stated the intention of
the Division of Gaming, is that there is statutory authority
for the race organizations to conduct the game activity.
Some of the interior race organizations do conduct lottery
game activity. The intent of this bill is to put this
language specifically in the statute that entitles the
Iditarod Trail Committee to sell tickets. The sponsor of
the bill, after speaking to legislative legal council, the
Gaming Division, and the Department of Law, has specific
questions as to the activity of wagering on the arrival,
check-point and finish line, and that it may not be allowed.
Co-chair Halford suggested a fiscal note of $25.0 in program
receipts, and pass the bill out with a 4-year sunset. This
gives the trail committee 4 years to work with the
department. If approved now, they will have it next year.
Senator Sharp expressed his agreement. He said it would
behoove the Iditarod Committee to maintain the highest
integrity in the checks. Mr. Rasmussen agreed that with
time the race is going to have to be handled much more
professional than in the past.
Co-chair Halford asked for a motion to add a program receipt
fiscal note of $25.0, recognizing that it will be reviewed
when the budget is closed out and the information is
provided by the department. Discussion was had on the
amount of the fiscal note.
Senator Donley reiterated that gambling makes people behave
differently. There have been few things in the statutes
that have encouraged and encountered as much litigation over
the precise meaning of them as gambling. The lawsuits come
rapid fire. When there is money involved there is a
pecuniary interest to file law-suits. An activity such as
this, paying 1% tax on gross, has the potential for immense
profits. Careful thinking and well-thought out planning is
urged. He associated the complexity of this race with the
intricate regulations for parimutuel horse betting.
Senator Rieger said that the concern over human interference
can cause potential abuse to the race. He suggested that
the more elements of uncertainty introduced into the race,
the harder it is for someone to control. He introduced an
amendment that would indicate that the sweepstakes must
include at least three variables. For example, in
submitting a guess, it might include the names of the top
ten teams that finish, the winning time and perhaps the time
between the arrival of the first and second teams. It would
be impossible to rig that sort of complexity of guessing.
This might take away Senator Donley's concern.
Co-chair Halford said that Senator Rieger's language leaves
a lot up to the trail committee. The existing language says
that the only thing they can bet on is the winning finish
time. He stated that with Mr. Rasmussen supporting a
concern, it validates the need to address the problem now.
He also supports making the betting easy as stated by Co-
chair Frank, and likes the language introduced by Senator
Rieger.
Senator Rieger asked Mr. Edgmon if he as in agreement with
the intent of the amendment? Mr. Edgmon indicated that he
didn't think the sponsor of the bill would be opposed to the
amendment. The bill did pass the House 30 to 5. Senator
Rieger moved to adopt the Amendment. Senator Frank OBJECTED
to the amendment. He withdrew his debate but not his
objection. Co-chair Halford asked, "Shall the Rieger
Amendment be adopted?" The Rieger Amendment passed 5 to 2
and was ADOPTED.
Senator Donley MOVED for passage of a $25.0 fiscal note to
the department of program receipts with a 4 yr sunset
provision. No objection having being raised, it was ADOPTED.
Senator Sharp MOVED for passage of SCSCSHB 146 (FIN) out of
committee with individual recommendations with accompanying
fiscal note. No objection having been raised, SCSCSHB 146
(FIN) was REPORTED OUT of committee with the accompanying
$25.0 program receipt fiscal note from the Department of
Revenue.
SENATE BILL NO. 121
"An Act making an appropriation for deferred
maintenance for the University of Alaska; and providing
for an effective date."
Co-chair Halford stated that SB 121 would appropriate $135
million from AHFC after the Board transferred it to the
general fund to the university for major maintenance. He
referred to the resolutions and the statement by the
university regarding major maintenance.
Senator Phillips asked how much money was being removed from
AHFC.
Co-chair Halford responded that the capital budget utilizes
$70 million of AHFC money. The governor's proposal on major
maintenance uses another $30 million, which requires AHFC to
sell bonds and carry the debt service on the bonds. In the
governor's cash flow projection, it is showing $450 million
from the constitutional budget reserve and $70 million from
AHFC. He stated that deferred maintenance has to be
addressed.
Wendy Redman, University of Alaska, stated the need for the
maintenance. She pointed out that nearly 80% of the
buildings are 30 years or older, and that the university is
contained in 50% of the buildings owned by the state. This
puts a hardship on the state, with an investment of
thousands of dollars in buildings that are beginning to fall
apart. Ms. Redman spoke to the concern of the mismanagement
over the years to allow the buildings to deteriorate. She
stated that this is not true. There was no money moved from
maintenance accounts into administration or academics. In
1986 when there was a 20% budget reduction, there was $1
million at the Fairbanks campus that was taken from
maintenance to keep programs going. The money was replaced
that fall, into the maintenance account, which has been
audited. The problem has developed over time because there
hasn't been enough money appropriated to fix the buildings.
She stated that last year the university received zero
capital dollars. She stated that this has been a 10-year
accumulation which has accelerated. It continues to be the
Board's highest priority. There are major health and safety
issues that the campuses are facing with deteriorating
facilities that are dangerous for students to be occupying.
The Anchorage campus will cost $40 million in deferred
maintenance, with Fairbanks needing even more attention.
Senator Rieger asked who determines the needs of the various
campuses? Ms. Redman responded that the Board of Regents
and the university use a formula system of prioritizing
deferred maintenance programs, which is also used by DOT.
The formula is updated several times a year as needed. The
Office of Management and Budget (OM&B) has the complete
backup list of all the projects, starting with the most
need. OM&B is not involved in making individual project
decisions. The university makes the decisions.
Senator Donley stated that in his opinion the maintenance
should not be a capital item, but rather an operational item
in the budget. Ms. Redman said she agreed with this logic.
Three years ago, the Board of Regents did mandate that the
university would not be dependent on "hoping that the
legislature funded the operating maintenance requests". In
building new buildings there has been requests for operating
maintenance to go along with those facilities. It is rarely,
if ever, funded. The university's general fund operating
budget is exactly where it was 10 years ago. There has been
an increasing enrollment of 22% over the past 10 years, but
the general fund has remained flat. The tuition money has
been utilized to meet the need in student growth. The Board
of Regents agree with what you are indicating. The Board
has said to the university, "don't expect any money from the
state to build up the operating deficit in maintenance"
which is at this time guessed to be $11 million. The Board
has reallocated existing resources over a 3-year period of
time to bring the maintenance budgets up to where they need
to be, based on a formula. The Fairbanks campus will have
to reallocate from current funds this year $4 million.
Senator Donley asked about future maintenance issues. Ms.
Redman responded that it is the Board's intention to have
the maintenance costs rolled into the operating budget. The
campuses have to cut programs, restrict enrollments, and
essentially do whatever they have to do, to bring the
maintenance budgets up.
Pat Pourchot, Legislative Director for Governor Knowles,
stated the administration's concerns with the direct draw
against the reserves. In this case, $35 million versus
putting a number into the on-going annual capital projects
of the AHFC. AHFC would issue and be responsible for
servicing bonds. That is the case in the governor's bill
for the $30 million allocated from the governor's bill for
student housing maintenance. The allocation is limited to
student housing maintenance which the governor feels is more
in line with the on-going work and purposes and mission of
AHFC. This bill does not distinguish between major, or
deferred, maintenance for housing as opposed to other items.
The governor's approach is to address the other key non-
housing maintenance needs in the capital budget. There is
about $7 million in the capital budget that the governor has
submitted for non-housing goals. The difference within
AHFC, due to its special tax situation, is its ability to
borrow money at low interest rates. In turn, AHFC can
invest its reserves at higher interest rates. By having
AHFC servicing their bonds over a length of time, the real
cost of that money is significantly reduced. So, there are
very real and clear reasons for having AHFC finance and
amortize the costs of the bonds, opposed to a straight draw
in cash off the reserves. The reserves work for AHFC in its
on-going projects and missions, one of which, can be
legitimate student housing maintenance.
Co-chair Halford stated he has the same goals, expressing
concern with last years approach to revenue bonding or
borrowing. He emphasized that with the huge maintenance
backlog, this method borrowed into the future to pay for the
mistake of the past. He supports allocating the funds to
where they are needed, to catch up from real dollars,
instead of borrowing from the future. AHFC internally does
not gain or loose very much from the difference.
Mr. Pourchot stated that in terms of revenue bonds and
university or housing maintenance, there is no cash flow
going towards those bonds. Ideally, capital budget cash
would be the best way of addressing the problem. He stated
that now, the state is faced with an incredible backlog of
maintenance and even with a 5-year plan, it would be a
stretch for capital dollars. That is what has led to the
governor's proposal. The disadvantage again of the straight
draw off the reserves is that by keeping the reserves of
AHFC, it can provide valuable programs into the future with
the ability to make money or at least narrow the real rate
of borrowing within their own agency to minimal levels.
Co-chair Halford asked what the governor's approach is for
next year when the answer this year is $30.0 for housing?
If it means borrowing continuously for each and every step,
then what is created is a passing debt. Mr. Pourchot said
that is why the "back stop" legislation was introduced. It
was granting the university authority to issue its' own
revenue bonds that would be repaid through a general fund
budget category, if the administration and legislature did
not act on some other plan prior to June, 1. Co-chair
Halford stated that it does not apply to maintenance. It
would work on a new dormitory with new receipts, but asked
how that works on past maintenance on a common building.
Mr. Pourchot stated that it work only in the sense that
there is no revenue stream to repay the bonds. The
repayment comes into the front section of the budget along
with $10-$11 million. It's just another operating budget
item for debt service. The reason for that was to meet
pressing needs. The development that Co-Chair Halford was
referring to is the project in the next several months, in
the development of the whole budgeting process for next
year. There is no concrete plan for the mechanism of
addressing the balance of the backlog of maintenance. The
governor's pledge is to work on this and develop a plan. No
options have been selected beyond this year. Co-chair
Halford stated his concerned that if revenue bonds are
passed, and becomes a state appropriation, it is in
violation of the state constitution. When using a revenue
bond to build a dormitory, with new receipts, it is
different than using a revenue bond to pay for major
maintenance held over from the past. Mr. Pourchot stated
that it was authorized under law. Co-chair Halford
recognized that it would never be found illegal in Alaska
because it was first done by the Court System to build the
court building in Juneau. Other buildings were subsequently
built for the court system.
Co-chair Frank moved for passage of SB 121 with individual
recommendations. Senator Phillips OBJECTED without having a
plan for the full-scale funding. Co-chair Halford stated the
question is not decided regarding AHFC. He said that SB 121
is legitimate start, tho it will probably sit in the Rules
Committee, while other parts are discussed. He recommended
moving it. Senator Phillips withdrew his objection. With
no further objection, SB 121 REPORTED OUT of committee with
"other recommendations" by Senators Rieger, Phillips, Donley
and Zharoff. Co-chair Halford and Frank and Senator Sharp
recommended "do pass".
SENATE BILL NO. 80
"An Act relating to police protection service areas in
unified municipalities; and to police protection
provided by the state in certain municipal areas."
Senator Rieger stated the purpose of this measure will
increase local self-determination and provide relief to the
state's operating budget. It allows for the citizenry who
have the desire and willingness to pay for public safety
protection and sets forth a mechanism by which that payment
is delivered to the state.
The purpose of the bill is to create a permissive situation
where a unified municipality can set up a service area and
pay for trooper protection. He offered an amendment in
response to a fiscal note by the Dept. of Public Safety,
which spoke to the desire to have an extended gearing up
time and winding down time compared to the original bill.
This bill is good government at its best.
Co-chair Halford invited Del Smith to join the committee.
Mr. Smith stated that the administration opposes this bill
because they are not interested in contracting. He stated
that if the law does pass, the Dept. of Public Safety will
do their best to implement the contracting.
Senator Rieger stated that he has had good cooperation in
working with the Dept. of Public Safety in discussing the
issues. The opposition has come from the governor's office.
Senator Rieger MOVED Amendment #1. No objection having been
raised, Amendment #1 was ADOPTED and will be incorporated in
the Finance CS. This bill will be taken up at the next
committee meeting.
Senator Zharoff asked how many municipalities could
participate in this activity? He inquired as to the
department's fiscal note. Senator Rieger stated that you
could make an argument that the department benefits. The
wording of the actual costing out is, direct cost plus
markup. The department is the recipient, meaning more money
is available for the delivery of services throughout the
rest of the state.
Co-chair Halford noted they had run out of time, and would
take up SB 80 first thing at the next meeting.
ADJOURNMENT
The meeting was adjourned at approximately 11:00 a.m.
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