Legislature(1997 - 1998)
04/04/1997 06:25 PM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 4, 1997
6:25 P.M.
TAPES
SFC-97, # 77, Sides 1 & 2 (000-590, 590-000)
SFC-97, # 78, Side 1 (000-305)
CALL TO ORDER
Senator Bert Sharp, Cochair, Senate Finance Committee,
reconvened the meeting at approximately 6:25 P.M.
PRESENT
In addition to COCHAIR SHARP, SENATORS PHILLIPS, TORGERSON,
PARNELL and ADAMS were present when the meeting was
convened. COCHAIR PEARCE arrived as the meeting was in
progress. SENATOR DONLEY did not attend the meeting.
Also Attending:
SENATOR WILKEN, JACK CHENOWETH, Legislative Legal Counsel,
Legislative Affairs Agency (LAA); KEN BISCHOFF, Director,
Division of Administrative Services, Department of Public
Safety; MARYLOU BURTON, Budget Director, University of
Alaska; PETER BUSHRE, Chief Financial Officer, Permanent
Fund Corporation, Department of Revenue (DOR); MARY SUTTON,
Finance Officer, Division of Administrative Services, DOR;
GLENDA STRAUBE, Director, Child Support Enforcement Division
(CSED), DOR; JOHN MALLONEE, Assistant Director, CSED, DOR;
JOHN BITNEY, Legislative Liaison, Alaska Housing Finance
Corporation (AHFC), DOR; JOHN CAMPBELL, Financial Officer,
AHFC, DOR; PAM VARNI, Executive Director, LAA; STUART HALL,
Ombudsman; MIKE GREANY, Director, Legislative Finance
Division; fiscal analysts and aides to committee members.
SUMMARY INFORMATION
SB 13 INCREASE TOBACCO TAXES
COCHAIR SHARP noted Amendment #2 had been adopted
previously, but a "cleaned up" version from Legal
Services was in members' files. Amendment #1 was
before the committee. SENATOR TORGERSON MOVED
Amendment #1. COCHAIR PEARCE objected. Amendment #1
FAILED by a 2-4 vote. SENATOR ADAMS MOVED to rescind
previous action in adopting Amendment #2. Without
objection, Amendment #2 was RESCINDED. SENATOR
PHILLIPS MOVED the "cleaned up" version of Amendment #2
from Legal Services. Without objection, Amendment #2
was ADOPTED. SENATOR WILKEN addressed the committee
regarding Section 4 of the HESS CS. COCHAIR PEARCE
MOVED CSSB 13(FIN) from committee, then WITHDREW her
motion. SENATOR PHILLIPS MOVED Amendment #3. COCHAIR
PEARCE objected. Amendment #3 failed by a 1-5 vote.
COCHAIR PEARCE MOVED CSSB 13(FIN) from committee with
individual recommendations and appropriate fiscal
notes. Without objection, CSSB 13(FIN) was REPORTED
OUT with a forthcoming fiscal note from the Department
of Revenue.
SB 107 APPROPRIATIONS: CAPITAL & FUNDS
Testimony was heard on capital budget items from
representatives from the Department of Public Safety,
the University, Department of Revenue, AHFC, the
Legislature and the Ombudsman. SB 107 was HELD for
further consideration.
SENATE BILL NO. 13
"An Act relating to taxes on cigarettes and tobacco
products, and to the use of the proceeds of those taxes; and
providing for an effective date."
COCHAIR SHARP recapped the previous action on SB 13. He
brought attention to Amendment #2, which had been adopted.
A new "cleaned up" version of the amendment was in committee
files for consideration.
SENATOR TORGERSON MOVED Amendment #1. COCHAIR PEARCE
objected. SENATOR TORGERSON explained that the amendment
puts a question before the voters for approval in the 1998
election. Section 11 refers to the tax reverting back to
the general fund if a court challenge were successful
regarding dedication of the tax for education. If
challenged, the money may be put in escrow, making it
unavailable until after the court hearing. This placed it
before the voters in a ballot proposition and removed the
legal questions in trying to dedicate it. There were
opposing opinions regarding the constitutionality of
dedicating the tax and this was a third option. In response
to a question from SENATOR PHILLIPS, he explained that if
the amendment were adopted, there wouldn't be a need for
much of the language in Section 11.
A roll call vote was taken on the MOTION to adopt Amendment
IN FAVOR: Torgerson, Parnell
OPPOSED: Phillips, Adams, Pearce, Sharp
Amendment #1 FAILED by a 2 to 4 vote.
SENATOR ADAMS MOVED to rescind previous action in adopting
Amendment #2. Without objection, Amendment #2 was
RESCINDED.
SENATOR PHILLIPS MOVED Amendment #2, version LS0159/Q.1.
Without objection, Amendment #2 was ADOPTED.
SENATOR WILKEN addressed the committee. He commented that
the Senate Health, Education and Social Services Committee
proposed a school construction savings account. Should the
tax law be judged unconstitutional, the money would go
directly into the general fund. The proposal would be a
safety net. It would remove the immediate drop into the
general fund and it would address the temporary nature of
the tax. If the tax was successful, it would eventually
drop to zero. If the money were put into a school savings
account, there would be an endowment to construct public
schools. He encouraged the committee to consider
reinstating the proposal into SB 13.
COCHAIR PEARCE MOVED the bill from committee with individual
recommendations. SENATOR PHILLIPS questioned SENATOR WILKEN
about the proposal. COCHAIR SHARP pointed out that the
Finance Committee version removed the automatic CPI
escalators. COCHAIR PEARCE withdrew her MOTION.
SENATOR PHILLIPS MOVED the section containing the school
construction savings fund for discussion purposes, which
would be Amendment #4. COCHAIR PEARCE objected. SENATOR
ADAMS requested testimony from Jack Chenoweth regarding the
constitutionality of dedicating the fund.
JACK CHENOWETH, Legislative Legal Counsel, Legislative
Affairs Agency, explained the provisions referred to by
Senator Wilken. He further explained that the way the
Finance Committee CS was drafted, the proceeds of the
increase in the cigarette tax would be directly paid into
the school fund, a dedicated fund that existed before
statehood. If a challenge were entered based on the loss of
the dedication because of the increase in the rate of the
tax, the increase would go to a non-dedicated fund.
COCHAIR SHARP clarified that there was also the ramification
that the money going into that account would accumulate,
called for inflation proofing, and only the amount left over
would be available to spend. MR. CHENOWETH confirmed that.
COCHAIR PEARCE appreciated the concerns expressed and
supported the tobacco tax, but didn't feel it was necessary
to develop a special fund to set aside the money. There was
more state money being spent per year to combat the effects
of tobacco products than the tax would ever bring in. She
didn't believe the legislature should tie its hands more
than necessary in terms of how they make spending decisions
and did not see a need to include that section in the bill.
SENATOR PHILLIPS wanted to make sure that in voting for the
tax it went for something other than general funds. He
reiterated his motion to adopt Amendment #3. COCHAIR SHARP
believed the original dedication would hold up and be used
for school construction and maintenance. He stated his
opposition to the amendment based on the fact that the money
would still be subject to legislative appropriation. There
was additional discussion and clarification about the effect
of the amendment.
A roll call vote was taken on the MOTION to adopt Amendment
IN FAVOR: Phillips
OPPOSED: Parnell, Adams, Torgerson, Pearce, Sharp
Amendment #3 FAILED by a 1 to 5 vote.
COCHAIR PEARCE MOVED the bill from committee with individual
recommendations. Without objection, CSSB 13(FIN) was
REPORTED OUT with a forthcoming fiscal note from the
Department of Revenue (41.5).
SENATE BILL NO. 107
"An Act making and amending capital and other appropriations
and to capitalize funds; and providing for an effective
date."
COCHAIR SHARP announced that the committee would hear first
from the Department of Public Safety.
KEN BISCHOFF, Director, Division of Administrative Services,
Department of Public Safety testified that their capital
projects were typical of what they submit every year. The
first, on page 17, line 15, for Fish and Wildlife Protection
aircraft and vessel maintenance was for annual maintenance
and operation of 43 aircraft and 19 marine vessels. The
next project was for replacement of outboard motors, skiffs,
snow machines, marine radar, etc. The third project was
equipment for Alaska State Troopers. Next was a data base
system to capture demographic and program data for domestic
violence and sexual assault. Line 21 was a request to
replace the fingerprint system that had been declared
obsolete.
COCHAIR SHARP brought up the University next.
MARYLOU BURTON, Budget Director, University of Alaska, noted
the first item that affected the university was in the front
section of the bill, Section 11. The intent was to allow
the university some flexibility to carry forward a limited
amount of funds for renewal and replacement projects that
don't fall within the confines of a fiscal year. They had
been working with OMB to develop a mechanism to do this and
it was a step in that direction. Since the time the bill
was drafted, they implemented a RIP program and reevaluated
current year needs and didn't anticipate they would lapse
any general funds and exercise the provision. If they did,
it would be to a limited degree. SENATOR ADAMS inquired
what number they would like the committee to utilize. MS.
BURTON thought the maximum they could lapse would be $100
thousand, but if the provision were eliminated, she didn't
believe it would affect the university.
The remainder of items were on page 29. The first on line
15 for $7 million was for deferred maintenance, code
compliance and renovation. There was still a backlog of
$165 million in deferred maintenance and it was the highest
priority. She had copies of the university's project
priority list for distribution to the committee. Next was
$1.5 million for development of the $33 million
International Arctic Research Center. She noted that sixty
percent of funding for the facility was coming from the
Japanese government, the balance would come from the federal
government, private sources, prior general fund
appropriations and university revenue bonds. The
appropriation would bring the university receipt authority
up to a level necessary to receive and expend the full
contribution of the Japanese government.
The last item was on line 19, a request of $450 thousand for
the small business development programs at UAA. Until last
year, these funds were channeled through the Department of
Commerce and Economic Development, but last year and this
year it is being funneled directly to the university through
the governor's budget. The difference this year was that the
funding would come from AIDEA. COCHAIR SHARP brought up the
Department of Revenue next.
PETER BUSHRE, Chief Financial Officer, Permanent Fund
Corporation, Department of Revenue (DOR) described the
request of $190 thousand on page 17, line 23, for
integration of office space with new office space being
developed.
End SFC-97 #77, Side 1, Begin Side 2
MR. BUSHRE added that the project would be paid from
corporate receipts.
MARY SUTTON, Finance Officer, Division of Administrative
Services, DOR, pointed out the next item on line 25, that
being the department's computer security system project.
The purpose was to reduce the threat of unauthorized access
to various systems containing sensitive information.
GLENDA STRAUBE, Director, Child Support Enforcement Division
(CSED), DOR, and JOHN MALLONEE, Assistant Director, CSED,
DOR, spoke of the next project on line 26. The project was
in response to the requirements of the welfare reform law,
which provides federal matching funds to help states further
develop existing computer systems to comply with the many
new requirements under the act. It was a three part project
consisting of developing two data bases that will feed
information into national data bases. One was a national
child support case registry, the other was a new hire
directory of all employees hired in the state. They were
contracting with the Department of Labor on the latter. He
gave additional information on the projects and the amount
of staff hours that would be saved. COCHAIR SHARP brought
up Alaska Housing Finance Corporation next.
JOHN BITNEY, Legislative Liaison, and JOHN CAMPBELL,
Financial Officer, AHFC, DOR, addressed the committee first
by pointing out that AHFC will provide the state
approximately $130 million for transfers to the treasury and
capital projects in FY 97. They are requesting $34.8
million in corporate receipts for capital projects, along
with $16.1 million in federal matching funds for housing
programs within AHFC. Most projects are for housing needs
for seniors, handicapped and low-income people, and facility
maintenance. A detailed report of the individual requests
was provided to the committee and is on file.
COCHAIR PEARCE commented that last year the legislature made
a designated grant to AHFC for the Alaska Craftsman Home
Program. AHFC chose to ignore it and spent it at their
will. She indicated that as long as the agency is going to
ignore the legislature's appropriations she did not intend
to appropriate any money to AHFC.
MR. BITNEY responded that there had been such a grant and at
the time the governor signed the capital bill, he requested
that AHFC follow the procedures outlined in statute for
designated grants which allows the agency to solicit other
proposals, which AHFC proceeded to do. During the process,
AHFC recommended the Alaska Craftsman Home Program be
awarded the funds as appropriated. Meanwhile, AHFC has been
working to get a plan from them for what they intend to do
with the funds, some funds have been advanced to date. The
designated funds were federal so they were restricted in use
and they requested a work plan that conformed with the
restrictions placed by the federal Department of Energy.
COCHAIR PEARCE questioned why it had suddenly become so
different because the entity had received designated grants
through the same process over a number of years without any
question of meeting the federal requirements. MR. BITNEY
explained that there had not been monitoring of the program
in the past. AHFC initiated a grant review program of all
grantees, but was unsure of what problems existed. He noted
AHFC would be making a $300 thousand request for the program
for FY 98, which would be put out to competitive bid.
MR. CAMPBELL began with the first AHFC project on page 18,
line 5, that being Central Terrace/Fairmont Phase I in
Anchorage, to dispose, replace and renovate about 187 units
of low rent housing. They intend to sell 100 of the units
and use the proceeds to supplement the renovation of the
remaining units. SENATOR PHILLIPS queried where the units
were in Anchorage. MR. CAMPBELL responded that they were
primarily four-plex units scattered throughout the Fairview
and Mountainview communities.
The next project was on line 7 for their computer mainframe
renovation and upgrades. It would provide lower maintenance
costs and greater storage capacity with a smaller unit that
could be upgraded in the future. MR. BITNEY explained
further.
The Homeless Assistance Program was next and considered one
of the states most critical needs to help communities and
agencies develop programs to prevent homelessness. It was
comprised of three components. SENATOR PARNELL requested
additional description of the components and MR. CAMPBELL
complied. There was additional discussion about the
components, homelessness, the definition of near
homelessness, and anticipated shortfalls in federal
assistance.
Line 10 featured a project comprised of two components: Low-
Income Weatherization and Residential Energy Rehabilitation.
MR. CAMPBELL detailed the components. COCHAIR SHARP
inquired if there was a required match for federal receipts,
to which MR. CAMPBELL replied there was not.
MR. CAMPBELL next spoke of the Supplemental Housing
Development Program on line 11. It would use corporate
funds to supplement anticipated HUD funds of approximately
$40 million for safe and sanitary housing. There were
additional questions and discussion about projects on a list
provided by AHFC to the committee reflecting what was
applied for but not funded last year. MR. BITNEY informed
the committee that they were largely projects in remote
communities. There was some discussion about projects in
Metlakatla.
The next project was on line 12 using corporate receipts for
Public Housing Environmental Cleanup and Abatement for
underground storage tank removal, asbestos removal and
environmental assessments. SENATOR TORGERSON questioned if
the environmental assessment was contracted. MR. CAMPBELL
responded that it was. There was an environmental
specialist that supervises the work being done.
Senior and Statewide Deferred Maintenance using corporate
receipts was the next project. It was partially matched
with federal funds of $988.9 thousand. It was part of an
ongoing ten-year plan which will continue for the next two
or three years. In response to a question from COCHAIR
SHARP, MR. CAMPBELL stated there was no minimum requirement
of state money to match the federal funds.
Spruce Park Renovation of public housing on line 16 was
next, entailing disposition of 18 units, demolition and
replacement of 30 units. MR. CAMPBELL described the project
in further detail. COCHAIR SHARP requested he advise staff
if the project could be a two-phase development.
The Senior Housing Development Fund Program would use
corporate funds to make grants to municipalities and other
agencies for the development of senior citizen housing.
They would be used for the purchase of building sites, site
preparation, materials, construction and rehabilitation.
Awards would be made on a competitive basis. In response to
a question from SENATOR TORGERSON, MR. CAMPBELL stated that
they were requesting $3.3 million, but there were $3.6
million of projects that had been applied for, and would
have to be resubmitted.
Next was a project using $3.1 million of federal funds for
the HUD Comprehensive Grant program to help renovate and
modernize public housing units, provide for administrative
expenses, education projects, drug elimination and safety
projects and management improvements.
The HUD Federal HOME Grant followed on line 21. It was a
required match program with $750 thousand in corporate funds
and $3 million of federal funds for safe, energy-efficient
and affordable housing for low-income families.
Line 23 featured a request of $1.5 million of corporate
funds and $3 million of federal funds for federal and other
competitive grants that target housing for low-income and
special needs groups such as senior citizens, mentally ill,
disabled and homeless people. It would also apply for
energy grants related to housing. Match requirements would
vary among different federal programs.
The Oil Overcharge Restitution program of $2.5 million were
federal funds received from court settlements against oil
companies who overcharged in the early seventies. The funds
were for restitution to the public through programs approved
by the Department of Energy for various energy conservation
activities and would be awarded competitively.
Competitive Grants for Public Housing on Line 26 was federal
and corporate match funds in which AHFC would apply for HUD
grants that target low-income and special needs groups,
crime prevention and substance abuse in public housing, and
assistance to help families attain economic self-
sufficiency.
The Energy Conservation Retrofit program was an ongoing
program to use corporate funds to increase energy efficiency
in public housing units and lower utility expenses. MR.
CAMPBELL described the types of improvements.
On Line 28 was the Alaska Craftsman Home Program. It
focused on training builders, energy raters and consumers in
northern building science and the development of related
education materials to encourage high energy standards in
building. The grants were to be competitively awarded on a
bi-yearly basis contingent on annual appropriations.
The last project was the Energy Rated Homes of Alaska
program, which would use corporate funds of $300 thousand to
promote energy-efficient construction throughout the state
and awarded the same as the above project.
End SFC-97 # 77, Side 2
Begin SFC-97 #78, Side 1
MR. CAMPBELL continued with his presentation with a brief
discussion about the restricted use of federal funds from
the Department of Energy. This year they brought the
programs into corporate receipt categories and will make
them available on an RFP basis to qualified groups. COCHAIR
SHARP referred to the last three items on page 18, stating
that they should fit under the Stripper well funds. MR.
CAMPBELL responded that the activities would fit under the
program, but would only apply to AHFC properties, whereas
the Stripper well funds were to be made available to all
Alaskans. There was additional discussion about
restrictions on the three items and categories under the
Stripper funds.
COCHAIR SHARP stated that beside the projects just
discussed, another $18 million of corporate receipts had
been proposed for other agency budgets, for a total of $53
million of corporate receipt expenditures. That was $20
million over the long range forecast limitation and may
require a reduction.
In response to a question from SENATOR PARNELL, MR. CAMPBELL
discussed dispersement and availability of funds from the
Federal Competitive Grants program. SENATOR PARNELL
requested additional back-up information on the topic.
MR. BITNEY clarified that the $70 million that was shown in
the revenue forecast counted the $50 million dividend and
$27.6 million of assets from the state mortgage insurance
fund. Added to that was the $53 million in expenditures for
capital projects, which brought the figure up to $130
million. SENATOR ADAMS inquired about the maximum figure of
corporate funds that the finance committees could use. MR.
BITNEY responded that the total of $130 million would allow
them to meet their debt obligations and maintain their
credit worthiness.
COCHAIR SHARP announced the legislature's capital budget
would be presented by Pam Varni.
PAM VARNI, Executive Director, Legislative Affairs Agency,
listed ten projects for the capital and supplemental
budgets. First was $55 thousand for completion of rewiring
for the ethernet project in the capitol building for
legislative offices. Second was $75 thousand for BASIS
analysis and design for the wide area network (WAN), to get
independent of the state mainframe. Third was $98 thousand
for conversion of the WAN, to save up to $120 thousand per
year. Fourth was $110 thousand for replacement of seven
copiers in Juneau, Anchorage, Homer and Fairbanks. The
fifth item was $38.3 thousand for teleconference equipment
replacement. The sixth project was $12.5 thousand for
window glass replacement in the capitol. Seventh was $10
thousand for re-roofing above the capitol steps. Eighth was
$10 thousand for routine outside brick replacement and
maintenance of the capitol. Ninth was $134.5 thousand for
replacement of the print shop collator. The last project
was $33 thousand to replace the e-mail system and make it
compatible with the executive branch.
STUART HALL, Ombudsman, described a two-element capital
project request of $100 thousand. One was development of a
PC-based software program for case management for $50
thousand. The other was replacement of existing computer
servers with hardware capable of handling the case
management software. The replacement of the outdated
software and hardware was expected to save maintenance
costs, streamline, modernize and simplify the system for
staff as well as public access. He hoped to have the
ability to provide data by legislative district and provided
additional details.
COCHAIR SHARP announced the agenda for tomorrow. He noted
that the only remaining capital project overview was for
DOTPF.
ADJOURNMENT
The meeting was adjourned at approximately 8:20 P.M.
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