Legislature(1993 - 1994)
01/26/1994 01:40 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES COMMITTEE January 26, 1994 1:40 p.m. MEMBERS PRESENT Senator Steve Rieger, Chairman Senator Bert Sharp, Vice-Chairman Senator Loren Leman Senator Mike Miller Senator Jim Duncan Senator Johnny Ellis Senator Judy Salo MEMBERS ABSENT ALL MEMBERS PRESENT COMMITTEE CALENDAR SENATE BILL NO. 217 "An Act relating to land of the University of Alaska and authorizing the University of Alaska to select additional state public domain land." SENATE BILL NO. 229 "An Act making an appropriation for the construction of a dormitory at the University of Alaska Anchorage; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 217 - No previous action to record. SB 229 - No previous action to record. WITNESS REGISTER Senator Kelly Prime Sponsor State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Reviewed SB 229. Sherrie Goll Alaska Women's Lobby P.O. Box 22156 Juneau, Alaska 99802 POSITION STATEMENT: Supported SB 229. Brian Rogers Vice-President of Finance University of Alaska 207 D Butrovich Bldg. University of Alaska Fairbanks, Alaska 99775 POSITION STATEMENT: Supported SB 229 and reviewed SB 217. Senator Frank Prime Sponsor State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Supported SB 217. Chip Thoma Juneau, Alaska POSITION STATEMENT: Reviewed SB 217. Ron Swanson Director of the Division of Land P.O. Box 107005 Anchorage, Alaska 99510-7005 POSITION STATEMENT: Reviewed SB 217. Jack Chenoweth Legal Services Legislative Affairs Agency 130 Seward Street Juneau, Alaska 99801-2105 POSITION STATEMENT: Reviewed amendments to SB 217. Gerald Gallagher Director of the Division of Mining Department of Natural Resources P.O. Box 107016 Anchorage, Alaska 99510-7016 POSITION STATEMENT: Offered information. ACTION NARRATIVE TAPE 94-3, SIDE A Number 001 CHAIRMAN RIEGER called the Senate Health, Education and Social Services (HESS) Committee to order at 1:40 p.m. Number 011 CHAIRMAN RIEGER introduced SB 229 (APPROP: UAA 600 BED DORMITORY) as the first order of business before the committee. SENATOR KELLY, primary sponsor for SB 229, reviewed his sponsor statement. He emphasized the need to find a method of funding for additional housing on the Anchorage campus in order to develop the University of Alaska as a whole. He stated that the housing should pay for itself. He explained the current attempt to put together a plan with the Alaska Housing Finance Corporation, the Board of Regents, and the University trying to incorporate bonding mechanisms with some cash infusion that would make it all pencil out. SHERRIE GOLL, Alaska Women's Lobby, supported the building of a new dormitory on the Anchorage campus. She addressed the issue of students' safety in dormitories. She suggested installing peep holes and dead bolts in the dormitory to increase students' safety. Number 117 BRIAN ROGERS, Vice-President of Finance for the University of Alaska System, stated support for SB 229 from the University of Alaska. The Board of Regents capital request to the legislature this year does include some student housing in Anchorage, but not the entire amount of SB 229. He discussed the attempts at solutions to finance the dormitory. He supported this appropriation. SENATOR RIEGER stated that the primary question with SB 229 is the funding. Number 184 SENATOR DUNCAN asked if surveys similar to the University of Alaska Anchorage survey had been done in Fairbanks and Juneau. Dr. Roger's said that an analysis of student demand in Juneau indicates that Juneau needs fifty-two more beds, at a cost of $2.5 million. SENATOR LEMAN requested information regarding the projected $50,000 per student per occupant cost. BRIAN ROGERS explained that the cost includes common areas such as food service facilities and study areas. Furthermore, the cost includes built in features anticipating heavier wear and tear on the building. He said that they are considering alternative funding such as private operation with joint use. SENATOR ELLIS moved that SB 229 be passed out of committee with individual recommendations. Hearing no objections, it was so ordered. Number 278 CHAIRMAN RIEGER introduced SB 217 (INCREASE LAND GRANT TO UNIV. OF F ALASKA) as the final order of business before the committee. SENATOR FRANK, primary sponsor for SB 217, reviewed his sponsor statement. He explained that if some proposed amendments were adopted to SB 217, the bill would deal with the Mental Health Trust Issue by delaying the effective date until after the Mental Health Trust is settled. He stated that the $1 million fiscal note is substantial. He cited the dedication of funds prohibition in the constitution as an issue that needs addressing. There are some proposed amendments addressing this issue. Senator Frank pointed out that the university needs to look to non- General Fund sources of revenue to fulfill its goals. Currently, the university has attempted to increase private sector grant funding which would decrease dependence on the General Fund. He maintained that while SB 217 would exempt the university from certain elements of the Alaska Public Land Statutes, SB 217 would still provide notice and access to the public. Number 358 BRIAN ROGERS reviewed the history of the land grant for the University of Alaska referring to Terrence M. Cole's A Land Grant t College Without the Land: A History of the University of Alaska's Federal Land Grant. He said that the university is now actively in the land management business. Net income from the land development is deposited in an Endowment Trust Fund managed by the Department of Revenue. The university receives that income annually and uses it to inflation proof the trust fund, pay for the cost of land management, and for university programs. He pointed out that the spending of this money is annually part of the budget request. Dr. Rogers specified that SB 217 does not allow selection of land with leases of oil and gas. He concurred with Senator Frank's suggestion to place an effective date on the bill which acknowledged the primacy of the Mental Health settlement. He expressed the desire to change the fiscal note's fund source from the General Fund to Inter Agency Receipts. In conclusion, he indicated that Alaska had the largest federal grant of all of the states, however, Alaska's higher education percentage is the forty- ninth of the fifty states. SENATOR SALO asked about potential problems with selection and more specifically with municipalities that may not have completed their selection process. Dr. Rogers pointed out that the proposed three year delay to university selection should give the municipality time to finish its selection. Number 443 BRIAN ROGERS, in response to Senator Rieger, clarified that the Trust Fund was not subject to the Executive Budget Act because it was in existence at statehood. Dr. Rogers said that he had placed the income in the Annual Budget Request because he felt it was appropriate there. He specified that the $21 million is a financial asset of the Trust Fund not the land value. CHIP THOMA was concerned with the Gulf of Alaska due to the high value of these lands for king salmon and wildlife habitat. He stated that his only concern was with the timberlands. In review of SB 217, he said he would confine his comments to the Board of Regents. Number 474 RON SWANSON, Director of the Division of Land, said that the Department of Natural Resources does support, in principle, the university obtaining more land to support its educational program. He was concerned with the availability of suitable lands and the timing. He expressed the need to enact a time limit on university selection. He explained that the land conveyed to the university in the long term should be developed to generate money into the university system, however, this would not result in immediate revenue for the university. Mr. Swanson mentioned the type of land that can be conveyed. He pointed out that land sale contracts should be addressed. He stressed the need to clarify the definition of the word "mineral". He offered to fax his testimony for the packet on SB 217. Number 563 CHAIRMAN RIEGER numbered the proposed amendments and introduced Rogers' Amendment 1 which corresponds to Chenoweth's Amendment 6 as the first up for discussion. Regarding Rogers' Amendment 1, he said that "a final court determination which resolves all outstanding issues" might be unsteady because of issues occurring after the effective date. BRIAN ROGERS stated that Chenoweth's Amendment 6 would only hold hypothecated land out of selection while Rogers' Amendment 1 would delay the start of the selection process until the final court determination in Weiss v. State. He agreed that Chenoweth's Amendment 6 does the better job with this issue. TAPE 94-3, SIDE B Number 581 In response to Senator Salo's question about "all outstanding issues" causing a delay, Dr. Rogers stated that some substantial non-land related issues may need to be settled in addition to settling portions of the land. A final resolution in Weiss v. State may not come until the judge certifies that they have received all the land. Conveying the land could take four years, which under Rogers' Amendment 1 would delay the process for four years as well. Under Chenoweth's Amendment 6, the process could begin on lands that were not originally Mental Health lands, hypothecated lands, or Mental Health selected lands. CHAIRMAN RIEGER requested that Jack Chenoweth address Amendment 6. He asked when SB 217 would take effect if his amendment was adopted. JACK CHENOWETH of Legal Services for the Legislative Affairs Agency, said that ch. 66 SLA 1991 will not become effective until the courts have entered a decision on the Weiss litigation, at which time section 7 of his amendment becomes effective. Since the effective date of ch. 66 may be later than the effective date of SB 217, section 8 was inserted as a directive to the Commissioner of Natural Resources. This allows selection under the guidelines of section 7 during the time between the effective dates of SB 217 and ch. 66. Number 550 CHAIRMAN RIEGER asked if the university could select oil and gas lands under Chenoweth's Amendment 6. Mr. Chenoweth stated that his amendment does not change what is in the main bill. BRIAN ROGERS explained that the university can select the mineral estate on lands, but not if there is an existing oil and gas lease upon them. SENATOR LEMAN moved that Chenoweth's Amendment 6 be adopted: AMENDMENT 6 Page 1, line 2, following " land ": Insert " ;and providing for an effective date " Page 4, line 28, through page 5, line 12: Delete all material and insert: "(d) The commissioner may not convey title to any land selection made by the university under this section if the commissioner determines that the proposed selection (1) includes land for which, at the time of its selection under this section, a municipality has made a selection under AS 29.65, unless the land selection is, at a later date, rejected by the commissioner of natural resources or relinquished by the municipality; (2) is not in the best interests of the state; in making a determination under this paragraph as to whether a selection by the university is in the best interests of the state, the commissioner shall consider (A) the interest of the general public in retention of the land in state ownership; (B) ensuring an appropriate diversity in the character of land owned by the state and by the university; (C) the public benefits achieved by conveyance of the land to the university; (D) the probable potential for the development of the land and its resources and the probable income to the university from the conveyance of the land; (E) benefits to the university from the conveyance of the land to it; and (F) the efficiency of the management of the land resulting from the conveyance of the land." Page 7, following line 17: Insert new bill sections to read: " * Sec. 7. APPLICABILITY OF UNIVERSITY SELECTION RIGHTS UNDER AS 14.40.365 TO LAND. In addition to the land that, under AS 14.40.365(d), the commissioner of natural resources may not convey to the University of Alaska, the commissioner of natural resources may not convey land for which, at the time of its selection by the university, (1) is subject to conveyance to the Alaska Mental Health Trust Authority under sec. 54, ch. 66, SLA 1991; (2) is land that the commissioner of natural resources reasonably believes should be conveyed to the Alaska Mental Health Trust Authority under sec. 55, ch. 66, SLA 1991, as compensation to that trust for original mental health trust land not available for return to the corpus of the trust; or (3) is land described in sec. 56, ch. 66, SLA 1991, as listed in "Lands Hypothecated to the Mental Health Trust, May 1991" located in the office of the director of the division of lands, Department of Natural Resources, in Anchorage, Alaska, that has been hypothecated to secure reconstitution of the mental health trust; however, as the reconstitution of the mental health trust is accomplished and the hypothecated land is release on a pro rata basis, the University of Alaska may select the land and the commissioner may convey it. *Sec. 8. LEGISLATIVE INTENT. It is the intent of the legislature e that, if sec. 7 of this Act takes effect after the effective date of secs. 1 - 6 of this Act, the commissioner of natural resources reject, as inconsistent with the best interests of the state, selections of land by the University of Alaska under AS 14.40.365, added by sec. 4 of this Act, of land described in sec. 7 of this Act. *Sec. 9. Section 7 of this Act takes effect on the effective date e of ch. 66, SLA 1991." SENATOR DUNCAN clarified the effective date issue. He asked if land could be conveyed to the university with the exception of possible replacement Mental Health lands. Mental Health replacement lands cannot be conveyed until the courts sign off on ch. 66. JACK CHENOWETH said that Senator Duncan was correct. He informed the committee that the Mental Health Trust Authority would have first choice on replacement land, compensation land, and hypothecated land until it is released. SENATOR DUNCAN questioned the hypothecated land list and if all such lands had been identified. JACK CHENOWETH referred to a previous suggestion that the section setting out the hypothecated land list should be revised. If this revision occurs then an amendment to this would follow. He asserted that the doubt is in the period of time between the taking effect of SB 217 and the taking effect of ch. 66. The commissioner could choose to ignore the statement of legislative intent in section 8 of his amendment. He stated that the hypothecated lands list should have been completed in May 1991, but he did not know if DNR could continually upgrade the list. Number 517 BRIAN ROGERS pointed out that section 7 of Chenoweth's Amendment 6 should cover the issue of the hypothecated lands list. Even if land was not on the 1991 list, the commissioner can convey land to the Mental Health Trust which would be on the replacement list. He said that the Mental Health Authority would be contacted before any lands are selected in order to avoid litigation. SENATOR DUNCAN asked if there is a cut-off date stating that no additional lands can be selected or added to the hypothecated list by the Mental Health community. Dr. Rogers said that in order for Judge Green to make a final decision the process must be complete. RON SWANSON clarified that ch. 66 requires the completion of the reconstitution of the buying process by December 1994. Statute specifies December 3, 1994 as the cut-off, after which no lands could be added. JACK CHENOWETH stated that SB 217 does have a December 1, 1994 cut- off date, however, that legislation cannot take effect until after litigation and appeals have ended. That could be fifteen years. Number 488 SENATOR SALO asked if although land could not be added to that list, land would be freed up from the list and available for university selection. Mr. Chenoweth explained that the hypothecated land list should shorten as land is reconstituted into the Trust, which would make land available to the university and others for selection. SENATOR SALO inquired as to potential litigation with lands that may come under the proposed exploration licensing legislation. Number 453 SENATOR LEMAN explained the proposed exploration licensing legislation, SB 151, with regard to SB 217. Senator Leman and Senator Salo discussed financial issues regarding who would receive profits from oil lands under these two bills. CHAIRMAN RIEGER reiterated Senator Salo's concerns. If both bills pass, then those exploration companies who want to bid on land for redevelopment are accepting the risk that the university may select some of that land subsequent to the exploration companies' commitment. BRIAN ROGERS informed the committee that if both bills pass, the agreement between the department and the oil company would have to be followed. The exploration agreement and the lease would have to be under the terms agreed to when the department entered into the agreement. There is a revenue issue for the state should there be oil that is profitable and royalties are paid. He stated that royalties not deposited into the Alaska Permanent Fund would be available to the university. SENATOR SALO commented that access by the companies to state land and to university land did not seem the same. She noted that the university could have a different plan for use of the land other than allowing exploration. Number 409 SENATOR DUNCAN asked if the department had taken a position on this. He further asked if the amendment did the job. RON SWANSON voiced the department's support. There being no further discussion or objections, Amendment 6 was adopted. CHAIRMAN RIEGER introduced Chenoweth's Amendment 5 which corresponds to Rogers' Amendment 2 as the next amendments up for discussion before the committee. BRIAN ROGERS stated that the income from the Endowment Trust Fund is dealt with under the Executive Budget Act, therefore, these amendments may not be necessary. These amendments were prepared in case of concern. JACK CHENOWETH discussed his amendment and his instruction to make the fund subject to legislation appropriation. He pointed out his editing of the definition of "University Receipts" which has an effect in the Fiscal Procedures Act and the Executive Budget Act. Number 358 CHAIRMAN RIEGER moved to adopt Chenoweth's Amendment 5: AMENDMENT 5 Page 1, line 1, after " Alas ka ": Delete " and " Insert " , " Page 1, line 2, after " land ": Insert " , and defining net income from the University of Alaska's endowment trust fund as 'university receipts' subject to prior legislative appropriation " Page 6, following line 10: Insert new bill sections to read: " *Sec. 6. AS 14.40.400(e) is amended to read: (e) Subject to legislative appropriation, the [THE] Department of Administration shall disburse the net income from the trust fund upon vouchers approved by the president and treasurer of the University of Alaska specifying the purpose for which the money is to be used and showing it is to be used in conformity with this section. *Sec. 7. AS 14.40.491 is amended to read: Sec. 14.40.491 DEFINITION OF UNIVERSITY RECEIPTS. In AS 14.40.120 - 14.40.491, "university receipts includes (1) student fees, including tuition; (2) receipts from university auxiliary services; (3) recovery of indirect costs of university activities; (4) the net income of the trust fund established in AS 14.40.400 and receipts from sales and rentals of university property; (5) federal receipts; (6) gifts, grants, and contracts; and (7) receipts from sales, rentals, and the provision of services of educational activities." Hearing no objections, Amendment 5 was adopted. Number 348 CHAIRMAN RIEGER introduced Chenoweth's Amendment 7 and Rogers' Amendment 3 as the next amendments up for discussion. BRIAN ROGERS said that both amendments accomplish the same objective and either would do the job. The purpose of these amendments is if there is an existing lease when the land is selected, the revenue from the existing lease would go to the state for the duration of the lease. SENATOR DUNCAN asked if the university might select land that is under a lease. Dr. Rogers said that the university might do this in order to issue the next lease upon the expiration of the current lease. JACK CHENOWETH pointed out that something other than a lease, a contract, would be handled by the bill as page 5, line 18 provides. He stated that his amendment, 7, does not cover something other than a lease. RON SWANSON reiterated the scenario Senator Duncan posed. SENATOR RIEGER asked if a contract or a lease contained a renewal option, who would receive the benefit if the option was renewed. Mr. Chenoweth said that he did not address that specifically. Mr. Chenoweth stated that if the leases' agreement itself provides for a renewal option, the state being the leaser is in a position to exercise that. That option should be renewed with the benefits continuing to go to the state until the completion of the lease. SENATOR DUNCAN clarified that the department's support is behind Rogers' Amendment 3. SENATOR SHARP moved to adopt Rogers' Amendment 3: AMENDMENT 3 Page 6, after line 3, insert new *Sec. 5 to read: *Sec. 6. AS 14.40 is amended by adding a new section to read: Sec. 14.40.366.DISPOSITION OF INCOME FROM EXISTING ENCUMBRANCES. Income from land selections by the University of Alaska under AS 14.40.365 which are subject to encumbrances listed in AS 14.40.365(a)(1)(A)-(E) shall be transmitted to the State of Alaska during the pendency of the primary term of the lease, contract, claim, sale or permit. Equitable title to such selections shall vest with the University of Alaska only upon fulfillment of the primary term of said lease, contract, claim, sale or permit. Number 285 GERALD GALLAGHER, Director of the Division of Mining at DNR, explained the process of his issuing of leases. Mr. Chenoweth specified that if the renewal of the lease arises from a provision in the current lease, then the renewal is part of the original. The state would continue to receive the benefits of the lease or any renewal of it until it ends. SENATOR SALO asked if not allowing the university selection of lease lands would create hardship for the university. Dr. Rogers expressed the universities' preference to select land with other encumbrances which are limited in time duration. He explained that the university does not want to be precluded from some of the better land in Alaska. Senator Salo communicated the need to anticipate the potential conflict between the university and the interests of the state in selection. SENATOR SHARP recommended consideration of Rogers' Amendment 3. SENATOR DUNCAN suggested that Mr. Chenoweth draft some language that clarifies renewable leases and renewed leases. GERALD GALLAGHER explained sub-surface leases and the renewal process. He said that there is a clause in the first lease that states there will be a subsequent lease as long as there is production. RON SWANSON addressed the lease question as well. SENATOR SHARP moved to redraft Amendment 3. Hearing no objections, it was so ordered. CHAIRMAN RIEGER introduced Rogers' Amendment 4 as the final amendment up for consideration. He clarified that the issue of this amendment was regarding municipalities that have not made selection and have unfulfilled entitlements. Number 198 RON SWANSON pointed out that there are statutes limiting municipal selection. In response to Chairman Rieger, Mr. Swanson said that some municipalities have an entitlement which they have not yet selected and their time limit has not run out. Mr. Swanson referred to an amendment that froze municipal entitlements until January of this year. CHAIRMAN RIEGER requested that the sponsor and Mr. Chenoweth work together towards an amendment addressing Rogers' Amendment 4 and the clean up of Amendment 3. BRIAN ROGERS offered an amendment to the fiscal note. He proposed changing the fund source of the fiscal note from the General Fund to the net income from the land. SENATOR SHARP expressed his doubts regarding the state's ability to transfer 6(i) mineral lands. SENATOR FRANK said that the university is a municipality of the state and that this is not a transfer from the state. By bringing this issue through the Executive Budget Act there shouldn't be a violation of 6(i). SENATOR DUNCAN stated that the 6(i) question involves the Mental Health lands which could be possible litigation in the U.S. Supreme Court. GERALD GALLAGHER clarified that 6(i) refers to Section 6(i) of the Statehood Act. He discussed the rules regarding 6(i). BRIAN ROGERS asserted that the university is a constitutional corporation of the state unlike municipalities. He reiterated that transfer of ownership to the university is not a transfer out of state ownership. CHAIRMAN RIEGER requested that the amendments be done by Monday when SB 217 will be before the committee again. He stated that the time limit issue, land sales contracts and co-leases for Amendment 3, and municipal selections should be addressed. BRIAN ROGERS expressed the need to exclude selection of existing land sale contracts. He said that a six or seven year limit would be appropriate to complete selection. There being no further business before the committee, Chairman Rieger adjourned the meeting at 3:00 p.m.