Legislature(2003 - 2004)
05/14/2003 09:40 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
May 14, 2003
9:40 AM
TAPES
SFC-03 # 94, Side A
SFC 03 # 94, Side B
SFC 03 # 95, Side A
SFC 03 # 95, Side B
SFC 03 # 96, Side A
CALL TO ORDER
Co-Chair Gary Wilken convened the meeting at approximately 9:40 AM.
PRESENT
Senator Gary Wilken, Co-Chair
Senator Lyda Green, Co-Chair
Senator Con Bunde, Vice Chair
Senator Ben Stevens
Senator Lyman Hoffman
Senator Donny Olson
Senator Robin Taylor
Also Attending: DOUGLAS BRUCE, Division of Public Health,
Department of Health and Social Services; DAN DICKINSON, Director,
Tax Division, Department of Revenue; MARK MYERS, Director, Division
of Oil and Gas, Department of Natural Resources; STEVE PORTER,
Deputy Commissioner, Department of Revenue; BROOK MILES, Executive
Director, Alaska Public Offices Commission; JOE BALASH, Staff to
Senator Gene Therriault; EDDY JEANS, Manager, School Finance and
Facilities Section, Education Support Services, Department of
Education and Early Development;
Attending via Teleconference: From an offnet location: KEVIN
TABLER, Land and Government Affairs Manager, Union Oil Company;
DAVID FINKELSTEIN; From Seward: STEVEN CONN, Alaska Public Interest
Research Group; From Kenai: JENNIE HAMMOND; TODD SYVERSON,
Assistant Superintendent, Kenai Peninsula Borough School District;
SUMMARY INFORMATION
SB 213-KNIK ARM BRIDGE AND TOLL AUTHORITY
The Committee commented on a legal opinion given in relation to
this legislation. No action was taken.
SB 26-STATE EMPLOYEES CALLED TO MILITARY DUTY
The bill moved from Committee.
HB 57-ROYALTY GAS CONTRACTS AGRICULTURAL CHEM.
The Committee adopted a committee substitute and reported the bill
from Committee.
HB 229-MEDICAL/ COGNITIVE DISABILITY PAROLE/SARS
The Committee heard from the Department of Health and Social
Services. An amendment was adopted and the bill was reported from
Committee.
SB 185-ROYALTY REDUCTION ON CERTAIN OIL/TAX CRED
The Committee heard from the Department of Revenue, the Department
of Natural Resources, and a representative of an oil company. A
committee substitute and an amendment were adopted. The bill moved
from Committee.
SB 119-APOC/ CAMPAIGNS/ LOBBYING/ DISCLOSURE
The Committee heard from the Alaska Public Offices Commission, the
Senate President, and members of the public. A committee substitute
was adopted, five amendments were considered and three were
adopted. The bill was reported from Committee.
SB 202-EDUCATION FUNDING &PUPIL TRANSPORTATION
The Committee heard from the Department of Education and Early
Development and members of the public. Four amendments were
considered and three were adopted. The bill was reported from
Committee.
SENATE BILL NO. 213
"An Act establishing the Knik Arm Bridge and Toll Authority
and relating to that authority; and providing for an effective
date."
This bill had previously reported from Committee.
Senator Bunde commented on a legal opinion relating to this
legislation regarding the ability of legislators to serve on an
authority. He recalled an argument challenging the ability of
legislators to serve on the Commission of Postsecondary Education,
although legislatures continue to serve in this capacity without
consequence.
Co-Chair Wilken indicated the Committee would reconsider the
matter.
CS FOR SENATE BILL NO. 26(STA)
"An Act relating to state employees who are called to active
duty as reserve or auxiliary members of the armed forces of
the United States; and providing for an effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill, sponsored by Senator Taylor and
Senator Elton "allow the State employees, who are members of a
reserve military unit, who are called to active duty, to receive
their previous salary and some or all of their State benefits." He
noted this bill had been held in Committee for the purpose of
learning why the fiscal note is an indeterminate amount. He cited
State personnel information that the cost of an average State
employee, including health insurance, retirement, Supplemental
Benefits System (SBS), and wages, is $62,520 per year, or $5,200
per month. He noted the "total exposure" of the 75 State employees
in Alaska serving in the Air or Army National Guard, but relayed
that the "vast majority" of these employees earn higher wages
serving in the military than in their capacity as State employees.
Senator Taylor offered a motion to report the bill from Committee
with individual recommendations and accompanying fiscal note.
Senator Taylor clarified that the State would only provide an
amount equal to the difference between the State employee's
military salary and regular State salary.
There was no objection and CS SB 26 (STA) MOVED from Committee with
fiscal note #1 affecting all agencies in an indeterminate amount.
CS FOR HOUSE BILL NO. 57(FIN)
"An Act amending the manner of determining the royalty
received by the state on gas production as it relates to the
manufacture of certain value-added products."
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated that this bill, sponsored by Representative
Chenault, "allows the Department of Natural Resources to adjust the
value of State royalty share for gas used by manufacturers of
agriculture chemicals." He noted the bill had been held in
Committee for the purpose of reviewing the fiscal note. He assured
that the co-chairs were "comfortable" with the indeterminate fiscal
note, understanding that future implications would occur.
Co-Chair Wilken also reminded of earlier concerns with this bill in
that the commissioner would operate as "the single point of
influence" as to determining the royalty rate between the best
value and the value offered to Agrium, the manufacturer affected by
this legislation. He indicated that after consultation and meetings
with several parties, including Mark Myers, Director of the
Division of Oil and Gas, Co-Chair Wilken learned this method is
currently employed in Alaska and elsewhere in the nation. He opined
this method "serves the best interests of the State and the
industry".
Co-Chair Wilken directed attention to an updated sponsor statement
[copy on file].
Senator Taylor offered a motion to adopt CS HB 57, 23-LS0303\C, as
a working draft.
There was no objection and the committee substitute, Version "C"
was ADOPTED as a working draft.
Senator Taylor offered a motion to report the committee substitute
from Committee with individual recommendations and new fiscal note.
There was no objection and SCS CS HB 57 (FIN) MOVED from Committee
with a zero fiscal note dated 5/5/03 for the Department of Natural
Resources.
CS FOR HOUSE BILL NO. 229(FIN)
"An Act relating to special medical parole and to prisoners
who are severely medically or cognitively disabled."
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill relates to "parole for medical and
cognitive disability" and "gives the Alaska Board of Parole the
flexibility to grant or deny medical parole. This authority allows
the Board to release severely disabled prisoners from confinement
and gives the Department of Corrections relief from the high cost
[of] providing medical service."
Amendment #1: This amendment inserts language into the title of the
committee substitute, following "disabled" to read as follows.
An Act relating to special medical parole and to prisoners who
are severely medically or cognitively disabled; relating to a
severe acute respiratory syndrome control program; and
providing for an effective date.
This amendment also inserts two new bill sections on page 1,
following line 3, and one new bill section on page 4, following
line 12 to read as follows.
Section 1. The uncodified law of the State of Alaska is
amended by adding a new section to read:
PURPOSE. (a) The purpose of sec. 2 of this Act is to
clarify the law and expressly establish a comprehensive
program for health care decisions to control severe acute
respiratory syndrome (SARS) in this state, including
reporting, examinations, orders, and detention to protect the
public health.
(b) The purpose of sec. 3 - 7 of this Act is to clarify
standards for special medical parole and to address prisoners
who are severely medically or cognitively disabled.
Sec. 2. AS 18.15 is amended by adding a new section to
read:
Article 1A. Severe Acute Respiratory Syndrome
(SARS).
Sec. 18.15.112. SARS control program
authorization. (a) A severe acute respiratory syndrome
(SARS) control program is authorized by the department.
The SARS control program shall be administered in the
same manner and has the same powers, authority,
obligations, and limited immunities as does the program
for the control of tuberculosis under AS 18.15.149,
except for the following:
(1) the provisions of the control program
described in AS 18.15.120(1) and (7);
(2) reports to state medical officers under AS
18.15.131;
(3) examinations of persons under AS 18.15.133;
(4) title to and inventory of equipment
allotted to private institutions under AS 18.15.140;
(5) the screening of school employees under AS
18.15.145.
(b) In this section, "SARS" or "severe acute
respiratory syndrome" means the infectious disease caused
by the SARS-CoV or the SARS coronavirus and the mutations
of that disease.
…
Sec. 8. Sections 1 and 2 of this Act take effect
immediately under AS 01.10.070(c).
Co-Chair Green moved for adoption.
Co-Chair Wilken reminded this amendment relates to the discussion
of the previous hearing regarding severe acute respiratory syndrome
(SARS).
Co-Chair Green clarified this amendment expands current statute
relating to tuberculosis to include SARS.
Senator Taylor commented in favor of the amendment.
Senator Hoffman asked if an updated fiscal note would be necessary
to incorporate the provisions of this amendment.
DOUGLAS BRUCE, Division of Public Health, Department of Health and
Social Services, answered the fiscal note would be "zero".
Without objection the amendment was ADOPTED.
Senator Taylor offered a motion to report CS HB 229 (FIN), as
amended, from Committee with individual recommendations and
accompanying fiscal notes.
There was no objection and SCS CS HB 229 (FIN) MOVED from Committee
with fiscal note #2 of ($500,000) from the Department of
Corrections, fiscal note #3 of $367,700 from the Department of
Health and Social Services, Medicaid Assistance, and fiscal note #4
of $8,700 from the Department of Health and Social Services, Adult
Public Assistance.
CS FOR SENATE BILL NO. 185(RES)
"An Act providing for a reduction of royalty on certain oil
produced from Cook Inlet submerged land."
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken directed attention to a draft committee substitute.
Senator Taylor moved for adoption of CS SB 185, 23-LS0926\S, as a
working document.
Co-Chair Wilken objected for an explanation.
DAN DICKINSON, Director, Tax Division, Department of Revenue,
detailed the changes in the committee substitute. He stated this
legislation relates to an oil and gas exploration tax credit. He
noted the committee substitute provides that this credit could be
taken any time after July 1, 2004. He clarified that although
credits could be accrued for expenses occurred before that date,
the credit could not be received until FY 04. He indicated the
credit is either 20 percent or 40 percent.
Mr. Dickinson spoke of the expenses that qualify for the credit and
pointed out they must be incurred between July 1, 2003 and July 1,
2007. He stated this would encourage exploration during this time
period. He furthered that the committee substitute "created a very
narrow base of just those expenses traditionally associated with
exploration." He asserted that and once a well is successful, the
State would stop "recovering the cost", because it is assumed that
a producer would continue development.
Mr. Dickinson pointed out an error with in the committee substitute
in that the practice of "cementing" qualifies for the credit on
page 6, line 16, however is disallowed on line 20. He recommended
deleting "cementing" from line 20, as the expense should be
allowable.
Mr. Dickinson next noted that if wells or work on wells has already
been committed to the State as a plan of development, the credit
could not be taken. He remarked this is to prevent producers from
delaying activities.
Mr. Dickinson stated that the 20 percent credit would apply to
exploration that is done more than three miles from a preexisting
well. He characterized this as small accumulations that would be
close to current infrastructure and in which development would
progress rapidly. He pointed out the three-mile requirement was
changed from the location of the "blow holes", as specified in
Version "Q" adopted at the previous hearing, to the location of the
"bottom holes." He also noted that the specification of
"preexisting" was inserted in the committee substitute Version "S"
to allow developers to pursue additional exploration near other
areas explored utilizing the proposed credit. He stated this would
allow developers to utilize a single drilling pad and would cover a
"drilling pad".
Mr. Dickinson next described the wildcat exploration activities
that would qualify for a 40 percent credit, which he compared to
the recent Alpine discovery. He explained that these activities
must occur at least 25 miles from a lease boundary, or
infrastructure. He clarified these explorations could be located
within 25 miles from another wildcat location. He also noted that
seismic exploration would also qualify for the 40 percent credit.
Mr. Dickinson outlined the procedure whereby information learned
during these exploration activities would be submitted to the
Department of Natural Resources and then made public after a period
of ten years. He stated this would provide opportunity for
explorers to develop their discoveries and also allow others to
"build on that knowledge base" after ten years has passed.
Co-Chair Green asked if ten years is the standard length of time in
which to make this information available to the public.
Mr. Dickinson replied it is standard in some places, although the
time period is two years in other areas. He surmised the existing
Department tax credit program has not been utilized because of the
two-year period.
Senator Taylor asked the benefit to the State for the ten year time
period. He noted the exploration credit would be valid for four
years and suggested the proprietary information should be made
public after four years as well.
Mr. Dickinson responded that the ten-year provision would benefit
the State in that commercial transactions in areas near these
drilling sites should not be interrupted because of proprietary
information gleaned from the exploration activities.
Senator Taylor expressed concern over the "vast amount of acreage"
the State has leased, upon which no activity has occurred for "an
extensive period of time".
Mr. Dickinson understood the leases have a seven-year term and the
contracts require a plan for development.
Senator Taylor asked whether the terms of the lease agreements are
enforces and if the State has terminated leases for lack of
development.
Co-Chair Wilken directed the witness to complete his explanation of
the committee substitute.
Mr. Dickinson noted that credits earned by a company that does not
have a production tax liability, could be transferred or sold. He
informed that a market exists for these credit certificates and
that this provision would encourage "nontraditional" and
independent explorers.
Senator Hoffman asked the difference between transfer, convey and
sell, as related to the certificates.
Mr. Dickinson responded this is legal terminology to cover the
situations in which a company could utilize the credit earned by a
subsidiary.
Mr. Dickinson continued that the committee substitute also contains
a provision allowing the purchaser of a certificate to pay less
than the full value of the credit, yet receive the full credit from
the State. He explained this is to maintain the value of the
certificates for the explorers and to provide incentive for
explorers.
Mr. Dickinson indicated other language in the committee substitute
addresses confidentiality and definitions.
Co-Chair Wilken moved for adoption of CS SB 185, 23-LS0926\S, as a
working draft.
The committee substitute, Version "S" was ADOPTED without
objection.
Amendment #1: This amendment deletes "cementing" from page 6 line
20 in Section 3 of the committee substitute. The amended language
of Sec.43.55.025 (b)(3) reads as follows.
(b) may not be for testing, stimulation, or
completion costs; administration, supervision, engineering, or
lease operating costs; geological or management costs;
community relations or environmental costs; bonuses, taxes, or
other payments to governments related to the well; or other
costs that are generally recognized as indirect costs or
financing costs; and
Co-Chair Green moved for adoption.
There was no objection and the amendment was ADOPTED.
Senator Taylor restated his earlier question relating to
maintenance of leases, acknowledging the subject is not directly
related to this legislation. He asked the number of exploratory
wells were drilled three years prior when the price of oil was
$8.56 per barrel.
Mr. Dickinson informed of the disappointment to the Department that
when the prices were "covered" in 1999 and 2000, similar recovery
in exploration did not occur. He relayed the theory that the higher
prices of the past three years have been a "bubble" sustained for
"various reasons" rather than due to a "fundamental shift in the
underlying price." Therefore, he stated projects were evaluated
based on a per barrel price of $14.00, despite the actual prices of
ten dollars higher.
MARK MYERS, Director, Division of Oil and Gas, Department of
Natural Resources furthered that seven exploration drills have
occurred on the North Slope over the past year, as well as "quite a
bit of activity" in Cook Inlet. He informed that companies base
expenditures on a production forecast and therefore plan several
years in advance and he detailed the statistical methods utilized
to determine exploration activities.
Senator Taylor asked why this program was not done four or five
years ago.
Mr. Meyers answered, "The state of Alaska's oil industry has been
in tremendous flux, largely due to the massive mergers and
acquisitions." He explained that it would have been difficult for
the large companies to invest in exploration in the midst of
merging with other companies.
Debate continued between Senator Taylor and Mr. Myers relating to
the reserves not under exploration or development. Mr. Myers
assured that no large known reserves were idle. He told of
exploration activities underway across the State facilitated by a
licensing program.
Senator B. Stevens asked whether an explorer retains rights to
seismic data submitted to the Department of Natural Resources after
it has sold the tax credit certificate earned from activities at
the claim in which the information was generated.
Mr. Myers responded that the State would be required to maintain
the confidentiality of this data for ten years. He furthered that
any other company wishing to obtain this data must purchase it
through the explorer.
Senator B. Stevens clarified that the explorer could sell both the
tax credit and the data collected.
Mr. Myers affirmed.
Senator B. Stevens asked whether this occurs often.
Mr. Myers stated that most seismic data "shot" is not collected for
speculation purposes and explained the existing practices of
sharing and selling data.
Senator B. Stevens asked whether a party could "shoot" seismic data
in an area it does not own a lease on.
Mr. Myers replied that seismic shot on State land is done by
permit, independent of ownership of mineral rights. He stated that
issuance of such permits is common practice for the Department.
Senator Hoffman asked whether this legislation would apply to the
National Petroleum Reserve - Alaska (NPR-A).
Mr. Dickinson replied it would.
Senator Hoffman asked the importance to this bill of the provisions
relating to the sale, transfer and conveyance of the tax credits,
and the consequences of deleting the provisions.
Mr. Dickinson stressed the intent to not create this credit only
for parties with current tax liabilities. He listed four companies
with current tax liabilities and stated the goal is to encourage
exploration to additional entities.
Senator Hoffman asked if other states allow these sales and
transfers and whether the credits are discounted according to the
sale price of the credit.
Mr. Dickinson understood that in other locations in the world where
this practice is employed, purchasers are allowed to retain the
full value. He remarked the intent is to protect the interest of
the explorers.
Senator Hoffman suggested the matter should be considered from the
best interest of the State.
Mr. Dickinson expressed the purpose is to promote exploration and
to generate revenue from income taxes once the oil is produced.
Senator Taylor clarified testimony that the oil industry is basing
exploration decisions on a model based on a price of approximately
$14.50 per barrel.
Mr. Dickinson responded that $14.00 is the "stress price", i.e.
"the low end price in the cycle". He stated this is one factor
utilized by industry, although the companies have complex models.
Mr. Meyers furthered the models vary by company and would be a
"netted back price". He listed factors considered in determining
exploration and production activities, including differential in
transportation cost, whether the oil would be sold interstate or
intrastate, pipeline tariffs, incremental facilities costs, whether
existing infrastructure would be available, the commercial
arrangement for infrastructure, potential productivity rates of the
reservoir, etc.
Senator Taylor commented on the large profits of oil companies and
the need for those funds to be reinvested in Alaska. While he
supported providing $500 million of anticipated revenue to induce
additional exploration, he questioned the amount of revenue the
State would receive, given the testimony regarding the "bubble" in
oil prices. He predicted that significant exploration would occur
as a result of the tax incentives but that actual production would
not.
KEVIN TABLER, Land and Government Affairs Manager, Union Oil
Company, testified via teleconference from an offnet location to
express disappointment that concerns he expressed to the Committee
at the previous hearing were not addressed in the committee
substitute. He pointed out that this bill initially related to
royalty reduction necessary for continuation of exploration and
infrastructure in the Cook Inlet area, and that the committee
substitute adds another component at significant expense that could
subsequently jeopardize the original provision. He emphasized the
new provision relates to activities in the North Slope but would
not benefit activities in Cook Inlet.
Mr. Tabler spoke of wells drilled in the 1960s and 1970 that did
not contain oil but could contain natural gas and were ranked as
wildcat exploration. He stated that these are located close to
existing infrastructure and would therefore not qualify for the tax
credit, although there is no guarantee they contain natural gas. He
spoke of the current shortage of natural gas. He suggested a
provision to clarify the intent for increased production, as the
current language of the bill provides no incentive for independent
explorers operating in Cook Inlet.
Mr. Tabler proposed amending Section 3, Sec. 43.55.025 (c)(2), on
pages 6, line 30 through page 7, line 4 of the committee substitute
to read as follows.
(2) be for an exploration well that is located and
drilled in such a manner that the bottom hole is located not
less than three miles away from the bottom hole of an
abandoned oil or gas well certified by the AOGCC [Alaska Oil
and Gas Conservation Commission] as capable of producing from
the same formation in the exploration well;
SFC 03 # 94, Side B 10:27 AM
Mr. Tabler continued this would allow parties to explore for gas in
areas that had been explored for oil. He spoke to the different
formations and horizons of oil and gas exploration. He remarked the
proposed amendment would allow drilling utilizing the existing
infrastructure, as intended by the original version of the bill.
Mr. Meyers addressed the proposed amendment, noting the "many
different flavors of oil exploration", including "rank wildcats",
located far from infrastructure and with little geologic data and
increased risk. He stated that with increased known data available,
the exploration risk generally decreases. He titled areas within
existing production as "extension explorations", noting these
typically have significantly more data than the rank wildcat
explorations.
Co-Chair Wilken asked if the Department favors or opposes the
suggested amendment.
Mr. Meyers replied that the matter needs further discussion and the
Department would oppose the amendment until that time. He remarked
that the fiscal note would be difficult to quantify, although it
would be in a significantly larger amount based on the number of
wells that would qualify. He admitted he was unaware of the
relationship of AOGCC certification to exploration risk.
STEVE PORTER, Deputy Commissioner, Department of Revenue, testified
that if this if bill passes, the Department would review the
impacts to Cook Inlet.
Mr. Tabler remained concerned recalling HB 207, of 1995, relating
to royalty reduction in Cook Inlet. He asserted the final version
incorporated the North Slope and subsequently, "made that bill
unusable for us and unworkable." He reiterated the current bill
could fail to pass as a result of the increased fiscal note cost.
He understood the comments about exploration risk, but disagreed
with the Department. He supported the concept proposed in the
committee substitute, but warned that it does not apply equably to
both "oil provinces".
Co-Chair Wilken applauded the witness's presentation of arguments.
He assured that before this bill could pass into law, additional
opportunities would be available to address the witness's concerns.
He furthered that the Department has committed to review the
matter.
Senator Bunde added that dry holes incur a substantial cost and
would be a considerable risk.
Mr. Tabler affirmed. He spoke of "pleading for capital" to drill
those wells.
Senator Hoffman asked if the July 1, 2007 deadline for this
legislation would be in effect if the Alaska National Wildlife
Reserve (ANWR) were opened for oil exploration before that date.
Mr. Dickinson answered the credits would still apply.
Senator Hoffman asked whether the provision of this bill should
apply to potential activities in ANWR.
Mr. Dickinson responded the intent is to encourage drilling
presently and that the legislature could extend the provisions to
apply to ANWR.
Senator Hoffman noted that it is known that considerable oil
reserves exist in ANWR, and that the State is depending upon an
opening.
Senator Hoffman referenced the spreadsheet detailing the cost of
exploration and asked about oil development occurring in the other
countries listed and the incentives offered in those locations. He
expressed the need for a benchmark.
Mr. Dickinson replied that exploration is one factor and that
development, transportation, and marketing are also factors. He
stated that each fiscal regime is different in the incentives
offered.
Senator Hoffman asked what areas exploration is concentrated.
Mr. Dickinson listed areas in the former Soviet Union, noting that
although there have been difficulties these areas offer the most
enticing incentives.
Co-Chair Wilken appreciated the Committee discussion on this issue.
Senator Taylor offered a motion to report the committee substitute,
Version "S", as amended, from Committee with individual
recommendations and new fiscal notes.
Senator Taylor then objected to his motion to comment that this
legislation is "very brave" on the part of the Murkowski
Administration to deny $100 million to the general fund each year
for the next four years and provide that as an investment for
future administrations and future legislatures that hopefully would
realize a return.
Senator Taylor removed his objection.
Co-Chair Wilken pointed out the maximum exposure is $100 million
annually and would not be realized until FY 05. He shared Senator
Taylor's concern, but clarified that $400 million is not the
correct amount of lost revenues because of increased production
revenues.
Co-Chair Green commented that the competition has changed from five
years prior and that the State must adjust accordingly to
participate.
Co-Chair Wilken added that with regard to oil exploration, Alaska
"is sitting still while others are leapfrogging ahead of us with
exploration credits."
Senator Hoffman concurred with the comments, but expressed concern
th
that this is monumental legislation considered in the 114 day of
the legislative session. He asked why this bill was not introduced
two months ago, given that the governor campaigned about resource
development. He was unsure that he had adequate time to consider
the ramifications, whether this would benefit the State and whether
it would actually result in increased exploration activities. He
asserted that the Committee has a responsibility to fully consider
matters, and he questioned whether moving this legislation He
remarked that despite his concerns, he would not object to this
bill moving from Committee.
Co-Chair Wilken countered that legislation should have been
introduced two years ago. He informed that he became aware four
weeks ago that this legislation was being prepared. He surmised
that the Administration has researched the matter and understands
the importance and the risks and benefits. He asserted, "finally we
have a governor that has the courage to bring this to this table
because the prior governor did not."
Without objection, CS SB 185 (FIN) MOVED from Committee with a
fiscal noted dated 5/11/03 for $107,900 from the Department of
Revenue, and a zero fiscal note dated 5/9/03 from the Department of
Natural Resources.
CS FOR SENATE BILL NO. 119(STA)
"An Act authorizing the Alaska Public Offices Commission to
issue advisory opinions; amending campaign financial
disclosure requirements and the limits on lobbyists' campaign
contributions to candidates; removing municipal elections and
municipal officials from the campaign finance and public
official financial disclosure laws; amending campaign
contribution limits; amending the time limit on contributions
after primary elections; amending the complaint procedures of
the Alaska Public Offices Commission; amending the definition
of 'political party' for state election campaigns; relating to
the crime of campaign misconduct; providing for increased use
of electronic filing for reports to the Alaska Public Offices
Commission; amending the definitions of 'administrative
action' and 'lobbyist' in the regulation of lobbying laws;
amending the requirements for the reporting of financial
interests by public officials; repealing restrictions on
solicitation and acceptance of contributions during
legislative sessions and in the capital city; making
conforming amendments; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill "makes several changes to the
statutes governing APOC [Alaska Public Offices Commission]." He
indicated a proposed committee substitute, Version "Q".
BROOK MILES, Executive Director, Alaska Public Offices Commission,
presented the bill and the proposed committee substitute, Version
"Q". She informed that this bill is the result of numerous
Commission discussions regarding "tools necessary to accomplish its
mission and concepts to improve the disclosure laws."
Ms. Miles stated this bill would "provide the foundation" for
mandatory electronic filing under the campaign disclosure, lobbying
and financial disclosure laws.
Ms. Miles furthered that this bill would "codify" the complaint
process and provides more restrictive timelines to ensure
complaints reach final adjudication sooner. She also noted this
bill would provide an expedited process that would include cease
and desist powers for the Commission, with respect to alleged
violations that if not restrained, could cause irreparable harm or
materially affect the outcome of an election.
Ms. Miles remarked this bill would require full disclosure of all
campaign contributions and expenditures and would also require the
occupation and employer information only for contributors who
contribute more than $250. She noted currently this information is
required of contributors of more than $100.
Ms. Miles informed that the Commission's regulations governing
exempt fundraising events, such as "selling hot dogs on the park
strip for 25 cents," would become statutory through this
legislation. She explained that in these events, the candidates
must disclose only the number of participants and total
contribution.
Ms. Miles stated this bill would also raise campaign limits to keep
pace with inflationary costs of conducting election campaigns. She
noted candidates expending less than $5,000 on a campaign would be
exempt from filing disclosure reports; an increase from the current
$2,500 limit. She furthered that the" McIntire exemption", titled
after a US Supreme Court decision, permitting individuals who
distribute handbills or post yard signs, would be exempt from the
campaign disclosure laws if they expend $500 or less, which she
noted is an increase from the current $250 amount. She also said
the amount of individual contributions to candidates or political
action committees would increase from $500 to $1,000, and
individual contributions to political parities would increase from
$5,000 to $10,000, for reporting purposes. She summarized that the
current contribution limits would double.
Ms. Miles continued that this legislation would codify the
Commission's advisory opinion request. She explained the Commission
currently issues formal binding advice upon request under the
campaign disclosure law; however, it was discovered that the
Commission might not have this statutory authority.
Ms. Miles stated that this bill would increase the lobbyist
registration fees from $100 to $200 per lobbyist for each client in
each calendar year. She pointed out this would generate additional
program receipts for the Commission.
Ms. Miles remarked this bill would increase the limit for filing
sources of income under the financial disclosure laws for public
officials and legislators from $1,000 to $5,000 and that ownership
of stocks must be reported. She qualified that the filing
requirements relating to gifts would not change. She noted that the
process for filing disclosure reports would be streamlined.
Ms. Miles concluded that the Commission "strongly" supports this
legislation and is "eagerly seeking many of these tools" to assist
in achieving its mission.
Senator Taylor asked about prevision changes to prohibit or inhibit
a wealthy individual from entering the State and "buying an
election." He exampled the State of Washington and Marie Cantwell
who ran for congressional office against Slade Gordon, utilizing
$37 million of her own funds.
Ms. Miles informed that the Supreme Court has upheld individuals'
rights to make independent expenditures, and that the campaign
disclosure laws permits independent expenditures by individuals or
political groups. She agreed that a person with significant
personal wealth could impact on a campaign.
Senator Taylor therefore surmised that the campaign disclosure laws
would only restrict middle-income candidates.
Co-Chair Wilken clarified that the US Supreme Court prohibits such
restrictions.
Ms. Miles affirmed.
Ms. Miles pointed out language in the bill changing the definition
of "express communication" relating to issue advertising and issue
advocacy. She informed that the existing definition provides that
an express communication must include "vote for" or "don't vote
for" "elect or reject, etc." She stated that a decision issued by
the US Ninth Circuit Court of Appeals and upheld in other
proceedings provides that any inference of an express communication
to encourage election or defeat of a candidate must be subject to
campaign disclosure laws.
Co-Chair Green clarified that the changes to financial disclosure
requirements would also apply to the spouse of a public official.
Ms. Miles replied that in Co-Chair Green's situation, income
received from clients of her husband in amounts $5,000 and higher
would be subject to disclosure.
Ms. Miles added the current $1,000 amount has been problematic for
State boards and commissions members.
JOE BALASH, Staff to Senator Gene Therriault, referenced Section 18
on page 15 of the committee substitute, Version "Q", which reads as
follows.
Sec. 18. AS 15.13.400(7) is repealed and reenacted to read:
(7) "express communications" means a communication
that, when read as a whole and with limited reference to
outside events, is susceptible of no other reasonable
interpretation but as an exhortation to vote for or against a
specific candidate;
Mr. Balash noted the Senate adopted this language unanimously in
separate legislation of the prior session, although members of the
House of Representatives expressed concern it might not be
constitutional. He expressed that this language is necessary to
prevent funding from sources outside Alaska used to influence
elections.
Senator Taylor challenged that regardless of specific language, the
provision is useless if APOC requires several months to enforce
violations. He asked whether this legislation would provide faster
resolutions.
Mr. Balash replied that this legislation contains a provision
relating to expedited review of complaints. He commented that the
Governor had proposed eliminating the APOC because "it was not
capable of doing its job as a watchdog," and that this legislation
provides APOC with the "powers and expectations to act swiftly when
the timing is meaningful."
Senator Hoffman asked how this could be accomplished given the
negative amounts of the fiscal notes for this bill.
Mr. Balash qualified that the fiscal notes must be substantially
revised, noting the $500,000 reduction is in relation to the
original version of the bill, which would have eliminated APCO and
transferred its duties to the Lieutenant Governor's Office and the
Attorney General. He informed that the Conference Committee of the
FY 04 operating budget has restored some funding for administration
expenses, and he expressed intent that the remaining $100,000 would
be reflected in an updated fiscal note to reflect the increased
lobbyist fees.
Co-Chair Wilken asked if the provisions in Section 21 would
generate the $100,000. This section on page 16 of the committee
substitute Version "Q" reads as follows.
Sec. 21. AS 24.45.041(g) is amended to read:
(g) An application for registration as a lobbyist under
(a) of this section or for renewal of a registration under (f)
of this section is subject to a fee of $250 [$100]. The
commission may not accept an application for registration or
renew a registration until the fee is paid. This subsection
does not apply to a volunteer lobbyist under AS 24.45.161 or a
representational lobbyist under regulations of the commission.
Ms. Miles estimated this provision would raise $50,000 or half the
amount necessary. She explained this is due to the passage of other
legislation that would exempt some parties currently lobbying from
disclosure requirements and the registration fees.
Co-Chair Wilken calculated the additional $150 per registered
lobbyist would generate $50,000.
Ms. Miles listed 70 professional lobbyists who would still be
subject to the disclosure and registration requirements, and 114
part time lobbyists, of whom 75 would likely be exempt.
Senator Hoffman suggested levying the registration fees on a
percentage basis to offset the increased expenses.
Mr. Balash informed that the viability of imposing a fee based on
the percentage of a contract was researched; however, it would be
difficult to ascertain which portion of the contract covers
lobbying activities versus consulting.
Co-Chair Wilken pointed out that if the fee were increased to $400,
APOC operations would become revenue neutral.
Ms. Miles affirmed.
Senator Bunde questioned the use of "domestic partner".
Ms. Miles relayed that the Senate State Affairs Committee preferred
this terminology to, "spousal equivalent".
Senator Taylor asked about a prohibition of full time lobbyists who
are also married to or the domestic partner of a legislator.
Ms. Miles replied that this practice is reportable but not
prohibited.
Without objection CS SB 119, 23-GS1090\Q was ADOPTED as a working
draft.
Senator Hoffman questioned language in Section 34, amending AS
39.50.030(b), on page 20 lines 22 through 27, which reads as
follows.
(2) the identity, by name and address, of each
business in which the person, the person's spouse or domestic
partner [SPOUSAL EQUIVALENT], or the person's dependent child
has an interest or was a stockholder, owner officer, director,
partner, proprietor, or employee during the preceding calendar
year, except that an interest of less than $5,000 in the stock
of a publicly traded corporation need not be included;
New Text Underlined [DELETED TEXT BRACKETED]
Ms. Miles explained the language relating to stocks was added due
to situations in which filers hold portfolios including various
stocks valued at less than $5,000 and the current requirement to
delineate each company in which stocks are held.
Senator Hoffman asked whether $5,000 is an adequate amount.
Ms. Miles noted that the Commission originally suggested $10,000.
Senator Taylor clarified that any businesses in which a dependent
child is involved must be reported.
Ms. Miles affirmed that the filer must name any business in which
an interest is held by that party his or her spouse and dependent
children. She noted this applies to all businesses regardless of
income generated to the filer, spouse or child.
Senator Taylor commented that filers are allowed to repeatedly
amend their disclosures if the information is not original
declared.
Ms. Miles affirmed.
Senator Olson asked how this legislation relates to other
legislation that changed the definition of lobbyist.
Ms. Miles stated that some parties currently registered as
lobbyists would not longer be required to register as such and
subsequently would not be restricted as lobbyists from making
campaign contributions.
Co-Chair Wilken asked the impact of this legislation on municipal
elections.
Ms. Miles answered that the committee substitute makes no changes
relating to municipal elections.
STEVEN CONN, Alaska Public Interest Research Group, testified via
teleconference from Seward to note this bill originally intended to
eliminate APOC, and then was amended to change the definition of
lobbyist to allow many to contribute to campaigns outside of the
election district in which they reside.
SFC 03 # 95, Side A 11:16 AM
Mr. Conn requested the bill be held until the following legislative
session to await the outcome of other legislation relating to a
sales tax and how lobbyists impact that legislation in determining
which parties are exempt from a sales tax.
DAVID FINKELSTEIN testified via teleconference from an offnet
location to ask whether municipal government would be allowed to
"opt out" of the provisions of this bill.
Ms. Miles reiterated that the provisions relating to APOC governing
of municipal elections would be unchanged by this bill.
Mr. Finkelstein referenced written testimony submitted to a prior
version of the bill [copy not provided] and indicated he would
direct his comments to items included in the committee substitute.
Mr. Finkelstein objected to the increased contribution amounts,
noting the individual contribution amount would increase to the
amount allowed prior to a ballot initiative and subsequent
legislation intended to limit the influence of parties outside the
State on elections. He reported that the number of individual
contributions from Alaskan residents has increased and he requested
the current language remain unchanged.
Mr. Finkelstein requested the contribution limits of groups remain
the unchanged. He also opposed the changes to the lobbyist
definition pointing out that prior to the 1995 legislation,
lobbyist contributions constituted a considerable portion of
campaign funding and was suspected to be a "pass through" of
funding from lobbyists' clients.
ANDREE MCLEOD testified via teleconference from Anchorage from "the
people's point of view". She read her written testimony into the
record as follows.
By raising the contribution limits, you're impacting what
economists call the limit price. It's usually done in order to
bar others from entering a market. Increasing the limit price
discourages competition.
By increasing the contribution limits, you increase the price
of campaigns, and decreasing competition for the seats up for
election, and barring others from entering races.
Why the need for the increase? I just ran a race. I had enough
to buy signs, flyers and I walked door to door every night.
More money only buys more TV and Radio and newspapers. That
space is finite. Let's face it, any more political
advertisement and you get what economists call negative
externalities. Seeing and hearing your voice will actually
discourage people from voting for you or anyone else. People
are already turned off by politicians, raising the limits will
only increase the negative feelings they hold towards
politics.
If contributors have this compelling need to give more money,
there are enough charities in the world to satisfy their urge.
st
If they want to exercise their 1 amendment right of free
speech by handing out more money, let them satisfy it by
giving it to the general fund, in your name.
Also, what you are doing is barring others from running
against you and, I have to say, that is a conflict of
interest.
Now to the subject of redefining what a lobbyist is.
Increasing the numbers of hours to 16 will allow lobbyist to
speak to you 64 times, at 15 minutes at a time. Does that
really satisfy the purpose of the lobbying statute, which
you've sworn to protect for us. NO it does not. Does that
really protect our rights to know who's influencing you when
it comes to formulating public policy? No it does not.
What about state administrators? They have a need to also know
who lobbyists are and if they're dealing with someone that has
only their clients interest in mind. With a list of lobbyists
kept at APOC, that information is but a few clicks away. And
that makes for an efficient and accountable government.
There are many compelling reasons to keep the number of hours
low. But the most compelling is that increasing the number of
hours allows lobbyist to participate in campaigns. And having
the public not know who the people are that have one pocket
full of money and the other full of chits will lead us to
corruption of the system. Is that what you want? I don't think
so. Fix APOC if that's your intent, but please, for gods sake,
don't gut lobbying laws in the process.
Add both the increased contribution limits with the
redifinition of lobbyists and you end up with one huge
negative externality. That is a legislature peopled with
officials elected from the same pools of money, resulting in a
decreased number of legislators coming from varied human
experiences. End result, mob mentality and no innovative
thinking. If that's where you want Alaska to go, then by all
means, vote to increase the limits, shove lobbyists in the
dark caverns of the political process, and bar the ordinary,
average Alaskan from entering any race from here on in.
Leaving that kind legacy is not something to be par of, or
proud of.
Senator Bunde referenced the saying, "Beauty is in the eye of the
beholder" and asserted that he could not be "bought" for $1000 or
$5000 and that not all campaigns are lost because of money.
Senator Taylor noted the witness' comments were submitted in
written format [copy on file].
Co-Chair Green commented that arbitrarily established low
contribution amounts is "insurance" for incumbents. She surmised
that increased contribution allowances would allow challengers to
wage more competitive campaigns. She opined that the proposed
adjustments are reasonable.
Mr. Balash spoke to Mr. Finkelstein's comments, pointing out that
over $2.5 million raised by candidates during the previous election
was not reported because it consisted of contributions of less than
$100.
Senator B. Stevens clarified that currently contributions of less
than $100 must be reported although the name of the contributor did
not.
Ms. Miles affirmed.
Senator B. Stevens asked if current statute stipulates that a
candidate is limited to the total amount of cash contributions
received.
Ms. Miles replied that a candidate is not limited in the total
amount of contributions of less than $100 that could be received.
She specified that a candidate could not receive more than $100
from one contributor in a calendar year without reporting that
contributor.
Senator Hoffman asked if the allowable contribution that a group
that is not political party could make to a political party would
increase from $1,000 to $4,000.
Ms. Miles affirmed.
Senator Hoffman asked whether this would be the largest percentage
increase of allowable contributions.
Ms. Miles again affirmed.
Senator Taylor spoke to the concern over the small contributions
and questioned the cost benefit of requiring candidates to report
each contributor. He suggested the only benefit of the reporting
requirements has been to allow opponents to ascertain the amount of
funds raised to allow them to counter their fundraising efforts. He
opined that this legislation is not adequate in addressing the
situation, characterizing the system as "terribly unbalanced." He
explained that wealthy candidates could contribute an unlimited
amount, while "unwealthy candidates" are restricted in the amount
of funds they could receive.
Amendment #1: This amendment lowers the amount of allowable
contribution from a group that is not a political party to a
political party from $4,000 to $2,000. The amendment changes
language in AS 15.13.070(c)(3) in Section 9 on page 6 line 28 of
the committee substitute.
Senator Hoffman moved for adoption.
Co-Chair Wilken objected.
Senator Hoffman noted this amendment would allow an increase of
twice the current amount, rather than a fourfold increase as
proposed in the committee substitute.
Senator Bunde asked for a response from APOC.
Ms. Miles stated larger increase was proposed in "deference to the
political parties themselves and what they stand for and what they
try to accomplish".
Senator Hoffman commented on the options of groups that are not a
political party to contribute to a candidate, another group or a
political party.
A roll call was taken on the motion.
IN FAVOR: Senator Hoffman and Senator Olson
OPPOSED: Senator Taylor, Senator Bunde, Senator B. Stevens, Co-
Chair Green and Co-Chair Wilken
The motion FAILED (2-5)
The amendment FAILED to be adopted.
Amendment #2: This amendment increases the allowable amount of
interest in the stock of a publicly traded corporation exempt from
reporting requirements by a public official or candidate from
$5,000 to $10,000. The amended language of Section 34. AS
39.50.030(b)(2) on page 20 lines 22 - 27 reads as follows.
(2) the identity, by name and address, of each
business in which the person's spouse or domestic partner
[SPOUSAL EQUIVALENT], or the person's dependent child has an
interest or was a stockholder, owner, officer, director,
partner, proprietor, or employee during the preceding calendar
year, except that an interest of less than $10,000 in the
stock of a publicly traded corporation need not be included;
New Text Underlined [DELETED TEXT BRACKETED]
Senator Hoffman moved for adoption noting this is the amount
originally requested by APOC.
Co-Chair Wilken objected.
Senator B. Stevens asked when the increase was reduced to $5,000.
Mr. Balash replied that the current amount is $1,000, the Senate
State Affairs Committee increased then amount to $10,000 and that
the draft committee substitute reduced each $10,000 amount to
$5,000 in this legislation. He explained this was done "for no
particular reason" beyond "being uniform across the board."
Co-Chair Wilken removed his objection to the adoption of the
amendment.
Senator Taylor offered a motion to amend the amendment to replace
"$5,000" with "$10,000" wherever it appears in the committee
substitute.
Co-Chair Wilken objected, stating preference for addressing each
item individually.
Senator B. Stevens pointed out the amendment applies to financial
disclosures by legislators and public officials and asked for a
detailing of what the amendment to the amendment would affect.
Mr. Balash explained the amendment to the amendment would change
limits pertaining to loans, loan guarantees, fiduciary
relationships, as well as income reporting requirements.
Senator Taylor WITHDREW his motion to amend the amendment without
objection.
The amendment was ADOPTED without objection.
Amendment #3: This amendment increases the amount of certain income
that must be reported by legislators, public members of the
committee, and legislative directors to APOC, from $5,000, as
proposed in the committee substitute, to $10,000. The amended
language of Sec. 30. AS 24.60.200 (2) on page 19 lines 18 - 24
reads as follows.
(2) as to income in excess of $10,000 [$1,000]
received as compensation for personal services, the name and
address of the source of the income, and a statement
describing the nature of the services performed; if the source
of income is known or reasonably should be known to have a
substantial interest in legislative, administrative, or
political action and the recipient of the income is a
legislator or a legislative director, the amount of income
received from the source shall be disclosed;
The amended language of Sec. 34. AS 39.50.030(b)(1), (4) and (5) on
page 20, lines 17 - 21, and page 21, lines 5 - 20 reads as follows.
(1)The source of all income over $10,000 [$1,000]
during the preceding calendar year, including taxable and
nontaxable capital gains, received by the person, the person's
spouse or domestic partner [SPOUSAL EQUIVALENT], or the
person's dependent child, except that a source of income that
is a gift must be included if the value of the gift exceeds
$250;
…
(4)[5] the identity of each trust or other fiduciary
relation in which the person, the person's spouse or domestic
partner [SPOUSAL EQUIVALENT], or the person's dependent child
held a beneficial interest exceeding $10,000 [$1,000] during
the preceding calendar year, a description and identification
of the property contained in the each trust or relation, an
the nature and extent of the beneficial interest in it;
(5)[6] any loan or loan guarantee of more than
$10,000 [$1,000] made to the person, the person's spouse or
domestic partner [SPOUSAL EQUIVALENT], or the person's
dependent child, and the identity of the maker of the loan or
loan guarantor and the identity of each creditor to whom the
person, the person's spouse or domestic partner [SPOUSAL
EQUIVALENT], or the person's dependent child owed more than
$10,000 [$1,000]; this paragraph requires disclosure of a
loan, loan guarantee, or indebtedness only if the loan or
guarantee was made, of the amount still owing on the loan,
loan guarantee, or indebtedness was more than $10,000 [$1,000]
at any time during the preceding calendar year.
New Text Underlined [DELETED TEXT BRACKETED]
Ms. Miles briefly explained the components of the amendment.
Senator Hoffman clarified that each component of the amendment
would increase the amount to that recommended by APOC.
Ms. Miles affirmed.
Senator Taylor moved for adoption.
There was no objection and the amendment was ADOPTED.
Senator Taylor asked if other provisions in the committee
substitute reduce the proposed increase from $10,000 to $5,000, as
contained in the original bill.
Mr. Balash responded that other references to dollar amounts relate
to campaign contributions rather than financial disclosures of
candidates and public officials.
Senator Olson asked the total amount of all contributions reported
from the previous election to compare with the $250 million amount
of total contributions of less than $100.
Mr. Balash stated that some campaigns received a higher
concentration of the smaller contributions.
Ms. Miles listed $11,370,000 as the amount contributed to all
campaigns in the 2002 general election.
Co-Chair Green asked whether the committee substitute would require
reporting of the name, address and employer of all contributors
regardless of the donation amount.
Ms. Miles responded that the name and address would be required.
She noted this change would be enacted through the deletion of
current statutory language.
Co-Chair Green commented that many people wish to contribute
smaller amounts to campaigns but do not want their name associated
with political activities. She questioned the need for the
provision requiring that all contributors' names be reported.
Ms. Miles responded that currently, candidates are required to
maintain a record of the names of all contributors, regardless of
the amount of a contribution. She stated this information is not
required in the disclosure report, but must be made available to
APOC in the event of a requested audit. She explained the proposed
change to include this information in the disclosure report is an
attempt to "rein in" the number of audit requests as well as to be
compatible with electronic campaign software programs. She
qualified that the names of contributors giving less than $50 at
"high volume low cost fundraising events" would not be made public.
Senator Bunde understood the desire of contributors of small
amounts to be exempt from the reporting requirements; however, he
pointed to the significant percentage of the total contributions
that are less than $100 each. He opined that the "greater good
would outweigh the concern of the individual for privacy."
Senator B. Stevens asked if the $11.3 million raised during the
previous campaign included statewide elections or only legislative
elections.
Ms. Miles replied this amount includes statewide elections.
Senator B. Stevens asked the amount raised for statewide elections
and the amount raised for legislative elections.
Ms. Miles did not have the information.
Senator B. Stevens surmised the significant portion of the total
funding was related to the three statewide seats decided in the
previous election.
Ms. Miles agreed and approximated that the "main" candidates for
these seats expended $1.5 million each.
Senator B. Stevens favored full disclosure. He asserted that
candidates are aware of the names of each contributor, as they
write thank you notes to every person who donates to their
campaign. Therefore, he stated reporting this information would not
be an added burden.
Senator Hoffman agreed with Co-Chair Green that the purpose of
disclosure is to identify large contributors and perhaps show who
could be "buying influence". He reiterated that many contributors
do not wish to be affiliated with any campaign and predicted that
the number of smaller donations could "dramatically" reduce if
individuals knew their names would be made public.
Senator Bunde remarked that ten employees of one company each
contributing $99 equals almost $1,000 and is therefore a large
contributor. He suggested that people not wishing to be "counted"
could instead "provide sweat equity" such as posting signs,
distributing flyers, etc.
Senator Olson opined that if the goal is to support participation,
the process should provide encouragement for contributors.
Otherwise, he cautioned that only the "big players" would be
involved.
Senator Taylor exampled inviting the community to a "hot dog and
chili feed" with a basket set out to accept contributions, which
would be received in checks or cash. He asked how candidates would
be expected to account for cash received at these functions. He
also expressed concern about accounting for sales of $1 raffle
tickets. He warned that failure to accurately account for each of
these contributions would result in a candidate's opponent
"vilifying" them in the media and insinuating that the candidate
was accepting $50,000 in "some back room".
Amendment #4: This amendment restores and amends statutory language
removed by this legislation thereby increasing from $100 the
required contribution amount each candidate must report. The
amended language in Section 2. AS 15.13.040(a)(1)(C) and Section 3.
AS 15.13.040(b)(3) on page 3, lines 11 - 15 and lines 26 - 31 and
page 4, lines 1 and 2 reads as follows.
(C) and for all contributions in excess of $999
in the aggregate a year, the name, address, [PRINCIPAL
OCCUPATION, AND EMPLOYER OF THE CONTRIBUTOR AND THE]
date, and amount contributed by each contributor; and
…
(3) and for all contributions in excess of $999 in
the aggregate a gear, the name, address [PRINCIPAL OCCUPATION,
AND EMPLOYER OF THE CONTRIBUTOR, AND THE] date, and amount
contributed by each contributor and, for contributions in
excess of $250 in the aggregate during the calendar year, the
principal occupation and employer of the contributor [; FOR
THE PURPOSES OF THIS PARAGRAPH, "CONTRIBUTOR" MEANS THE TRUE
SOURCE OF THE FUNDS, PROPERTY, OR SERVICES BEING CONTRIBUTED];
and
New Text Underlined [DELETED TEXT BRACKETED]
Senator Taylor moved for adoption.
Co-Chair Wilken clarified the intent is to restore the existing
provisions in statute.
SFC 03 # 95, Side B 12:03 PM
Mr. Balash offered suggestions as to how the low cost fundraising
activities could be exempt from the individual contribution
reporting requirements.
Co-Chair Green questioned the deletion of "principal occupation and
employer of the contributor."
Without objection, Senator Taylor WITHDREW his motion to adopt the
amendment.
Amendment #5: This amendment restores statutory language removed by
this legislation relating to the required contribution amounts each
candidate must report. The amended language in Section 2. AS
15.13.040(a)(1)(C) and Section 3. AS 15.13.040(b)(3) on page 3,
lines 11 - 15 and lines 26 - 31 and page 4, lines 1 and 2 reads as
follows.
(C) and for all contributions in excess of $100
in the aggregate a year, the name, address, [PRINCIPAL
OCCUPATION, AND EMPLOYER OF THE CONTRIBUTOR AND THE]
date, and amount contributed by each contributor; and
…
(3) and for all contributions in excess of $100 in
the aggregate a gear, the name, address [PRINCIPAL OCCUPATION,
AND EMPLOYER OF THE CONTRIBUTOR, AND THE] date, and amount
contributed by each contributor and, for contributions in
excess of $250 in the aggregate during the calendar year, the
principal occupation and employer of the contributor [; FOR
THE PURPOSES OF THIS PARAGRAPH, "CONTRIBUTOR" MEANS THE TRUE
SOURCE OF THE FUNDS, PROPERTY, OR SERVICES BEING CONTRIBUTED];
and
New Text Underlined [DELETED TEXT BRACKETED]
Senator Taylor moved for adoption.
Senator Taylor explained that a contribution of less than $100
could be received without the candidate reporting the name of the
contributor. However, he noted the candidate must keep record of
the name of that contributor in the event that person contributed
additional funds, which would raise the total contribution to an
amount in which the name must be reported.
Co-Chair Wilken asked if this reflects current practice.
Ms. Miles affirmed.
Co-Chair Green referenced Section 2. AS 15.13.040(a)(1)(D) on page
3, lines 15-17, which reads as follows.
(D) for contributions in excess of $250 in the
aggregate during a calendar year, the principal
occupation and employer of the contributor; and
New Text Underlined
Co-Chair Green questioned why the name and address of the
contributor and the date the contribution is received is not
included in this language.
Ms. Miles detailed that if this amendment were adopted, a candidate
receiving a contribution of $100 or less would be required to
report the amount of the funds received and record the name of the
contributor. She continued that a candidate receiving a
contribution of between $100.01 and $250 must report the name and
address of the contributor. Contributions of more than $250, she
furthered, would require the reporting of the name, address,
occupation and employer of the contributor.
Senator Bunde objected to the adoption of the amendment.
Senator Taylor pointed out this amendment would increase the amount
of an allowable contribution requiring the reporting of a
contributor's occupation and employer from over $100 to over $250.
Ms. Miles restated her interpretation of the amendment at Senator
Hoffman's request.
Senator Bunde spoke to his objection. He understood individuals'
concern for privacy, but asserted that to participate in the
political process, people must be willing to "acknowledge" their
involvement. He questioned the reason for exempting one-fifth of
the total campaign contributions. He also noted this information is
available to the public if an audit is requested and therefore
contributors are "given a false illusion of privacy."
Senator Olson stressed that most rural residents do not have bank
accounts and operate on a "cash economy" and that the reporting
requirements would be cumbersome.
Senator Taylor agreed with the arguments in favor of full
disclosure; however, remarked that the "most zealot advocates" of
disclosure realize the "diminimous" returns on some contributions.
Senator B. Stevens stated he objected to the amendment because it
would provide no limitation to the amount an individual could
contribute to a campaign.
A roll call was taken on the motion.
IN FAVOR: Senator Hoffman, Senator Olson, Senator Taylor, Co-Chair
Green and Co-Chair Wilken
OPPOSED: Senator Bunde and Senator B. Stevens
The motion PASSED (5-2)
The amendment was ADOPTED.
Senator Taylor offered a motion to report the committee substitute,
as amended from Committee with individual recommendations and new
fiscal note.
Without objection CS SB 119 (FIN) MOVED from Committee with fiscal
note dated 5/14/03 for $100,000 from the Department of
Administration.
SENATE BILL NO. 213
"An Act establishing the Knik Arm Bridge and Toll Authority
and relating to that authority; and providing for an effective
date."
Senator Taylor offered a motion to rescind the Committee's action
to report this bill from Committee for the purposes of adopting the
following amendment.
Amendment #2: This amendment inserts two subsections in Sec.
44.90.030. Board of directors authority., of Section 1. The amended
language on page 2, following line 13 reads as follows.
(4) one nonvoting member who is a member of the
state house of representatives appointed by the speaker of the
house and who serves at the pleasure of the speaker of the
house; the speaker of the house shall consider the appointment
of a legislator elected from a house district that lies
entirely or partially within the Municipality of Anchorage or
the Matanuska-Susitna Borough for appointment under this
paragraph; and
(5) one nonvoting member who is a member of the
state senate appointed by the president of the senate and who
serves at the pleasure of the president of the senate; the
president of the senate shall consider the appointment of a
senator elected from a senate district that lies entirely or
partially within the Municipality of Anchorage or the
Matanuska-Susitna Borough for appointment under this
paragraph.
This amendment also clarifies Sec. 44.90.041. Operation of
authority., to apply to "voting" members of the board. The amended
language on page 2, lines 22 and 23 reads as follows.
(b) Two voting members of the board constitute a quorum.
(c) The public member of the board serves as the chair of
the board. The voting members of the board shall elect other
officers they determine desirable.
Senator Bunde objected to the motion to rescind the Committee's
action. He reiterated his earlier comments relating to other
commissions with legislative members that have functioned for years
without challenge.
Senator Olson noted the legislative members of the Alaska
Commission on Postsecondary Education (ACPE) are voting positions
and the membership positions proposed in the amendment would be
nonvoting and asked whether this could affect the ability to rely
on the precedence established with the ACPE system.
Senator Bunde surmised it would not and suggested that because
these positions would be nonvoting, they would be less subject to
constitutionality challenges.
Senator Hoffman commented that the current language of the bill is
appropriate.
Senator Taylor stated that discussion on the proposed amendment
should not occur before the bill was before the Committee.
Co-Chair Wilken ruled the discussion could include the amendment,
as the intent of rescinding the motion to report the bill from
Committee was for the purposes of considering the amendment.
A roll call was taken on the motion.
IN FAVOR: Senator Taylor
OPPOSED: Senator Bunde, Senator Hoffman, Senator Olson, Co-Chair
Green and Co-Chair Wilken
ABSENT: Senator B. Stevens
The motion FAILED (1-5-1)
SENATE BILL NO. 202
"An Act relating to school transportation; relating to the
base student allocation used in the formula for state funding
of public education; and providing for an effective date."
This was the third hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill, "revises the method in which
local school districts are reimbursed for pupil transportation
costs. Under this bill, a pupil transportation grant program is
established. In addition it raises the student dollar; an increase
of $159, which is the conversion from LOGs [Learning Opportunity
Grants] to student dollars."
JENNIE HAMMOND, resident of Nikiski, testified via teleconference
from Kenai in opposition to the bill. She expressed concerns that
the Kenai Peninsula Borough School District would "lose" funds as a
result of the transportation provisions. She spoke of academic
programs and other operations that have received reduced funding in
the past several years. She informed that transportation costs
within the district vary by community and that funding should be
assessed based on the cost of each route rather than on the number
of students in a district. She requested this portion of the bill
be "tabled" to garner additional input from affected districts. She
furthered that State, federal and local parties should discuss the
issue of who is responsible for the education of children. She
stated that transportation and foundation formula funding are
different issues that should be addressed independently. She
indicated that as a parent, she is willing to contribute to the
cost of her children's education.
Senator Bunde asked if the Kenai school district has considered
requesting that parents help pay the cost of transporting students.
Ms. Hammond repeated that the matter should be discussed in school
districts across Alaska.
TODD SYVERSON, Assistant Superintendent, Kenai Peninsula Borough
School District, testified via teleconference from Kenai to express
concerns that the District has with this legislation. He stated
this bill would reduce funding for pupil transportation and
informed that the District must transport students 45 miles from
Cooper Landing to Skyview High School, and from Moose Pass to
Seward, regardless of the number of students along each route. He
also told of the special education students that must be
transported, often involving "singleton routes". He explained this
involves picking up only one student and transporting them to the
school equipped to meet their special requirements. He pointed out
this legislation does not address the extra expense of transporting
special education students.
Mr. Syverson supported Co-Chair Wilken's proposed amendment to
inflation proof the funding for pupil transportation funding.
Mr. Syverson appreciated the proposed increase to the base student
allocation, but stressed the amount of the increase is inadequate
to address the needs of the District. He also noted that an area
cost differential is not addressed in this bill.
Co-Chair Wilken requested Mr. Jeans address comments on the
differing costs of routes and special education students' routes.
EDDY JEANS, Manager, School Finance and Facilities Section,
Education Support Services, Department of Education and Early
Development, testified the grant amount awarded to each school
district would be determined by dividing the amount of the FY03
State appropriation by the total number of students enrolled in the
district during FY 03. He stated that therefore, the costlier
routes are already reimbursed in FY 03. He qualified this
legislation does not provide increased funding in the event a
district must add any special education routes or the development
of a new subdivision.
Co-Chair Wilken remarked this has been an important concept the
Committee has considered.
Amendment #1: This amendment inserts a new bill section on page 2,
following line 7 to read as follows.
Sec. 3. The uncodified law of the State of Alaska is
amended by adding a new section to read:
TRANSITION PROVISION FOR TRANSPORTATION FUNDING. In
addition to funding provided for public transportation under
AS 14.09.010, a school district that provides student
transportation is, beginning July 1, 2004, and ending June 30,
2006, eligible to receive additional funding for operating the
student transportation system in an amount equal to funding
provided to the school district under AS 14.09.010 multiplied
by a percentage equal to 50 percent of any percentage increase
during the second preceding calendar year in the consumer
price index for all urban consumers for the Anchorage
metropolitan area, compiled by the Bureau of Labor Statistics,
United States Department of Labor. The index for January 2002
is the reference base index.
Co-Chair Wilken moved for adoption.
Co-Chair Green objected.
Co-Chair Wilken explained this amendment acknowledges that some
school districts would prefer transitional funding to implement the
changes. Therefore, he stated this amendment would increase the
"per pupil grant" for FY 05 and FY 06 calculated from the consumer
price index for Anchorage.
Co-Chair Green asked impacts of this amendment.
Co-Chair Wilken noted a draft fiscal note dated 5/14/03 for the
Pupil Transportation budget request unit (BRU).
Senator Hoffman understood the increase would be one half of two
percent, or a one percent increase.
Co-Chair Wilken clarified the actual amount of the increase could
vary based on the consumer price index for Anchorage.
Senator Hoffman asked why the increase would not be a full percent,
rather than a partial percentage of the consumer price index.
Co-Chair Wilken responded it is a "matter of money", and that
increasing funding for this item could not exceed $1 million.
Co-Chair Green opposed funding items based on any index, as it
would become an "automatic escalator".
Co-Chair Wilken shared the concern about automatic increases, but
expressed that because this legislation would impose a significant
change to the program, this amendment would lessen the fiscal
impact to school districts.
Senator Hoffman pointed out the increase would end after FY 06.
Senator Hoffman moved to amend the amendment to increase the
multiplier percentage of any percentage increase during the second
preceding calendar year from 50 to 75 percent.
Co-Chair Green and Co-Chair Wilken objected.
A roll call was taken on the motion to amend the amendment.
IN FAVOR: Senator Hoffman
OPPOSED: Senator B. Stevens, Senator Bunde, Co-Chair Green and Co-
Chair Wilken
ABSENT: Senator Olson and Senator Taylor
The motion FAILED (1-4-2)
The amendment FAILED to be amended.
Co-Chair Wilken affirmed his intent that this increase would not
extend beyond FY 06 and that the funding is solely for transitional
purposes.
Senator B. Stevens asked how the increase would be distributed
given that the calculation is different than the method used to
determine the grant funding for each district.
Mr. Jeans referenced the fiscal note, which details the dollar
amount allocated per student to each district. He explained these
amounts would be adjusted by one percent of the consumer price
index for Anchorage.
Senator Taylor clarified that school districts with declining
enrollments would receive reduced funding and those funds would be
reallocated to districts with increased enrollment.
Mr. Jeans detailed the per student allocation would be calculated
for each district utilizing the number of students and the amount
appropriated in the base year of FY 03. He continued that the
actual number of students enrolled in FY 05 would be multiplied by
the per student allocation for that district to determine the grant
amount for FY 05. He affirmed that districts with declined
enrollment would receive fewer funds under this proposal.
Senator Taylor expressed confusion, saying that if the consumer
price index increases dramatically the actual appropriation would
increase but not based on per capita.
Co-Chair Wilken understood that districts with declining enrollment
would receive less of a reduction under the provisions of this
amendment.
Mr. Jeans affirmed.
Senator B. Stevens asked if the baseline for determining grant
funding of FY 03 be utilized for calculating the grant amount for
FY 06.
Mr. Jeans explained the adjustment proposed in this amendment for
FY 06 would be based on the FY 05 appropriation. He clarified the
increase of FY 05 would "roll forward" and the adjustment would be
"added to the prior year".
Co-Chair Wilken furthered the increase would be cumulative.
Senator Hoffman asked when and how often the consumer price index
for Anchorage is determined.
Mr. Jeans replied this information is published on the Department
of Labor and Workforce Development website.
Senator B. Stevens informed the index is calculated annually on
July 1.
Co-Chair Green removed her objection to the adoption to the
amendment and Amendment #1 was ADOPTED.
Amendment #2: This amendment deletes "to school transportation;
relating" from the title of the bill. The amended bill title reads
as follows.
"An Act relating to the base student allocation used in the
formula for state funding of public education; and providing
for an effective date."
This amendment also deletes Section 1 from the bill, amending AS
14.09.010. Transportation of pupils.
Senator Hoffman moved for adoption.
Co-Chair Wilken objected.
Senator Hoffman stated this amendment would eliminate the grant
formula proposed in this bill.
Co-Chair Wilken understood this would "continue the status quo" of
the current system.
Senator Hoffman affirmed.
A roll call was taken on the motion.
IN FAVOR: Senator Taylor, Senator Hoffman and Senator Olson
OPPOSED: Senator B. Stevens, Co-Chair Green and Co-Chair Wilken
ABSENT: Senator Bunde
The motion FAILED (3-3-1)
The amendment FAILED to be adopted.
Amendment #3: This amendment repeals the provisions of Section 1 of
the bill, amending AS 14.09.010. Transportation of pupils., on July
1, 2006.
Senator Hoffman moved for adoption.
Co-Chair Wilken objected for an explanation.
Senator Hoffman pointed out that the impacts of the grant proposal
are unknown. He asserted the proposal is unfair to the school
districts located in his election district. He remarked it would
penalize the districts that have been frugal and kept costs down
and reward the districts that have allowed costs to "run willy-
nilly".
Senator Hoffman stated this amendment would implement the program
for two years, after which it could be evaluated with input from
school districts and a fairer program could be created.
Co-Chair Wilken maintained his objection.
A roll call was taken on the motion.
IN FAVOR: Senator Taylor, Senator Hoffman and Senator Olson
OPPOSED: Senator B. Stevens, Co-Chair Green and Co-Chair Wilken
ABSENT: Senator Bunde
The motion FAILED (3-3-1)
The amendment FAILED to be adopted.
Amendment #4: This amendment increases the base student allocation
from $4,169 to $4,280.
Senator Hoffman moved for adoption.
Co-Chair Wilken objected.
Senator Hoffman remarked, "The cost of education has been stagnant"
and that the National Education Association-Alaska and some school
districts support the amount proposed in this amendment.
Senator Taylor expressed concern about the unknown amount of
education funding that would be appropriated in the FY 04 operating
budget. He reminded that he has supported the proposed increase in
the past and would continue to support it.
Co-Chair Wilken pointed out the fiscal note for this amendment
would be approximately $41 million.
Mr. Jeans affirmed.
Senator Bunde moved to amend the amendment to change the funding
source to earnings of the permanent fund.
Co-Chair Wilken objected.
A roll call was taken on the motion to amend the amendment.
IN FAVOR: Senator Bunde, Senator Hoffman and Senator Olson
OPPOSED: Senator B. Stevens, Senator Taylor, Co-Chair Green and Co-
Chair Wilken
The motion FAILED (3-4)
The amendment FAILED to be amended.
A roll call was taken on the motion to adopt the amendment.
IN FAVOR: Senator Hoffman, Senator Olson and Senator Taylor
OPPOSED: Senator Bunde, Senator B. Stevens, Co-Chair Green and Co-
Chair Wilken
The motion FAILED (3-4)
The amendment FAILED to be adopted.
Co-Chair Wilken recalled a discussion between himself and Mr. Jeans
regarding instituting a specific funding amount into statute rather
than a funding formula.
Mr. Jeans explained the option of listing in statute a specific
dollar amount to be appropriated to each school district. He
cautioned against this practice, warning that individual districts
would begin lobbying for an increase to their district. He
furthered that it would be difficult to justify funding changes to
one districts without reviewing all districts.
Senator Taylor countered that rather than assigning a specific
funding amount to each school district, this legislation institutes
a formula based on number of students enrolled during FY 03. He
expounded on the inequity of this system to school districts that
have declining enrollment.
Senator Hoffman recalled provisions included in the legislation
establishing the foundation funding formula to address the "eroding
floor" in an attempt to achieve equity. He asked whether a similar
provision has been considered for this formula program as well. He
exampled that an upper limit of $1,000 per student could be phased
in so that over a period of time, "restraints" could be imposed to
address those routes currently costing $1,200 per student.
Co-Chair Wilken asserted that changes would not be made to increase
funding to this program. He pointed out this has been a "cost plus"
program across the State and he surmised that program managers
would identify sufficient funding to operate routes as efficiently
as possible.
SFC 03 # 96, Side A 12:52 PM
Co-Chair Wilken continued that decisions on how to efficiently
deliver education services must be made locally by school boards
rather than by the legislature. He predicted this legislation would
result in a "vast improvement" in the operation of the pupil
transportation system and funds saved that could be spent "in the
classroom".
Senator Taylor agreed with Co-Chair Wilken's concerns about the
rising costs of pupil transportation and pointed out that until
recent years, the legislature has not fully funded these expenses.
He surmised this caused the costs to rise dramatically and
inefficiencies especially in larger school districts with
"economies of scale". He stressed that much of the expense is the
result of federal mandates and compliance with the Americans with
Disability Act requirements.
Senator Taylor referenced the hold harmless provision intended to
limit the impact to the two largest school districts from the
consolidation of the LOGs into the funding formula. He asserted
that a hold harmless provision should be adopted for the proposed
pupil transportation grant formula to limit the impact to schools
with declining enrollment.
Co-Chair Wilken agreed this proposal does not include a hold
harmless provision, although "token" funding would be allocated to
limit the impact. He cited the higher costs of transporting certain
special needs students and the significant percentage this
comprises of the total pupil transportation expenditures. He
referenced a spreadsheet titled, "Department of Education and Early
Development, Reimbursable Transportation Costs Per Student (Regular
V. Sped)--FY 02, May 8, 2003".
Mr. Jeans qualified the information on the spreadsheets was
gathered from each school district and includes transportation of
all special education students, not just those requiring additional
assistance, such as full time aid workers or wheelchair lift.
Mr. Jeans reiterated that the higher cost of transporting special
education students is included in the base formula. He relayed the
concern of school districts is their "profile" would change "so
dramatically" as to be negatively affected by this program. He
stressed that 100 percent of the special needs expenses are
currently reimbursed by the State.
Senator Taylor asked how special education student transportation
cost increases would be addressed in contract negotiations.
Mr. Jeans responded these costs are currently reimbursed calculated
by dividing the student population by the total transportation cost
per district to determine the allocation for each district. He
explained that this formula does not make adjustments if the
percentage of special needs students in a district increases.
Senator Taylor commented that currently, the funding is provided
based on the needs of students and that under this proposal future
funding would be provided based on the total number of students,
regardless of their special needs.
Mr. Jeans affirmed, and again voiced the concern of school
districts that the amount of funding does not increase if the
percentage of a district's population that has special needs
changes.
Senator Bunde surmised that such percentage increases have not
occurred in the past.
Mr. Jeans affirmed.
Senator Taylor agreed with Senator Bunde that such changes have not
occurred historically on statewide average. However, he remarked
that the percentage change considerably in smaller school districts
when "a family moves to town" that has one or more special needs
children.
Co-Chair Green offered a motion to report the bill, as amended from
committee with accompanying and new fiscal notes.
There was no objection and CS SB 220 (FIN) MOVED from Committee
with fiscal note #1 of $32,136,600 for the Department of Education
and Early Development, K-12 Support BRU, Foundation Program
component, and a new fiscal noted dated 5/14/03 of $10,745,600 for
the Department of Education and Early Development, Pupil
Transportation BRU and component.
AT EASE 1:02 PM / 1:03 PM
AT EASE 1:03 PM / 4:52 PM
ADJOURNMENT
Co-Chair Gary Wilken adjourned the meeting at 04:52 PM
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