Legislature(1997 - 1998)

04/08/1998 01:40 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
              SENATE JUDICIARY COMMITTEE                                       
                    April 8, 1998                                              
                      1:40 p.m.                                                
                                                                               
                                                                               
MEMBERS PRESENT                                                                
                                                                               
Senator Robin Taylor, Chairman                                                 
Senator Sean Parnell                                                           
Senator Johnny Ellis                                                           
                                                                               
MEMBERS ABSENT                                                                 
                                                                               
Senator Drue Pearce, Vice-Chairman                                             
Senator Mike Miller                                                            
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
SENATE BILL NO. 232                                                            
"An Act relating to electronic signatures, electronic records,                 
requirements for records, and the reproduction of public records."             
                                                                               
     - HEARD AND HELD                                                          
                                                                               
CS FOR SENATE BILL NO. 190(CRA)                                                
"An Act relating to eminent domain and to negotiations to purchase             
property before it is taken through eminent domain; and providing              
for an effective date."                                                        
                                                                               
     - HEARD AND HELD                                                          
                                                                               
SENATE BILL NO. 306                                                            
"An Act relating to the authority to claim a child who is the                  
subject of a child support order as a dependent for purposes of a              
federal income tax exemption; relating to certification of child               
support arrears; amending Rule 90.3, Alaska Rules of Civil                     
Procedure."                                                                    
                                                                               
     - MOVED CSSB 306(JUD)                                                     
                                                                               
PREVIOUS SENATE COMMITTEE ACTION                                               
                                                                               
SB 232 - See Labor and Commerce Committee minutes dated 3/31/98.               
                                                                               
SB 190 - See Community & Regional Affairs minutes dated 2/18/98.               
                                                                               
SB 306 - See HESS minutes dated 2/25/98.                                       
                                                                               
WITNESS REGISTER                                                               
                                                                               
Senator Dave Donley                                                            
State Capitol                                                                  
Juneau, Ak 99801-1182                                                          
   POSITION STATEMENT: Presented SB 306                                        
                                                                               
Senator Jerry Mackie                                                           
State Capitol                                                                  
Juneau, Ak 99801-1182                                                          
   POSITION STATEMENT: Presented SB 190                                        
                                                                               
Mr. Dave Gray                                                                  
Staff to Senator Jerry Mackie                                                  
State Capitol                                                                  
Juneau, Ak 99801-1182                                                          
   POSITION STATEMENT: Commented on SB 190                                     
                                                                               
Mr. Andy Kline                                                                 
Special Assistant to Lt. Governor Fran Ulmer                                   
PO Box 110017                                                                  
Juneau, Ak 99811-0017                                                          
   POSITION STATEMENT: Supported SB 232                                        
                                                                               
                                                                               
ACTION NARRATIVE                                                               
                                                                               
TAPE 98-31, SIDE A                                                             
Number 001                                                                     
                                                                               
CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to                
order at 1:40 and called up SB 306 as the first order of business.             
                                                                               
         SB 306 - TAX EXEMPTIONS IN CHILD SUPPORT CASES                        
                                                                               
                                                                               
SENATOR DAVE DONLEY, prime sponsor of SB 306, said the current                 
federal tax law allows a tax deduction for a person even if this               
person fails to make child support payments, unless they                       
voluntarily sign over the deduction to the custodial parent or the             
custodial parent takes them back to court. SENATOR DONLEY said his             
original bill set up a system whereby the non-custodial parent                 
would fill out a form during the settlement, to be held by the                 
court until such time the non-custodial parent was in arrears and              
the court would release the form, which would trigger the reversion            
of the tax credit to the custodial parent. SENATOR DONLEY said the             
court system had objected to the expense and trouble of keeping                
these forms on file and had no better suggestions to offer, so the             
bill had been modified to require a judge to include a provision in            
a child support order that stipulates if the payor receiving the               
tax deduction fails to pay, the deduction will revert to the                   
custodial parent.  SENATOR DONLEY said this bill is not as good as             
the original bill and won't be as easy for the custodial parent,               
but will be better than the current system and addresses the                   
concerns of the court system.                                                  
                                                                               
SENATOR PARNELL moved the adoption of the new committee substitute,            
version H. Without objection, it was so ordered.                               
                                                                               
Number 098                                                                     
                                                                               
SENATOR ELLIS asked if the person wanting the exemption would need             
to request the document in writing, or if an automatic issuance had            
been considered. SENATOR DONLEY replied that was how the original              
bill had been set up. Now, the person seeking the exemption may                
have to go to the court again but it would be easier for them since            
the court order would already be in their favor if the payor is in             
arrears.                                                                       
                                                                               
SENATOR ELLIS thought that the Internal Revenue Service (IRS) held             
a dim view of conditional exemptions. SENATOR DONLEY replied that              
if the court orders the award of the exemption, the IRS will go                
along with it.                                                                 
                                                                               
CHAIRMAN TAYLOR remarked that federal tax law allows the exemption             
to the parent who is paying more than 50 per cent of support and               
this is difficult to determine. He said this exemption seemed to be            
awarded by the court as a part of the settlement, and said he was              
concerned about a person who may be paying more than 50 per cent of            
their net pay plus arrearage might lose this exemption on top of               
all that. SENATOR DONLEY explained that current law provides that              
if a non-custodial parent cannot pay, they are allowed to enter                
into an agreement of a payment schedule that is liveable. If they              
do not fall more than four months behind on this payment schedule,             
they are allowed to keep the deduction. CHAIRMAN TAYLOR asked if               
this also applied to keeping any licenses this person held and                 
SENATOR DONLEY said it did.                                                    
                                                                               
Number 198                                                                     
                                                                               
CHAIRMAN TAYLOR said that a significant change of circumstance is              
required before a change to a support order and a request for such             
a change can only be filed once every six months. He said he, as a             
judge, has required each party to send a copy of their tax return              
to the court and to their ex-spouse. This allows each spouse as                
well as the court a self-enforcing mechanism to appropriately                  
adjust a support order. This mechanism is self-enforcing due to the            
fact that perjury committed on a tax return is a felony. CHAIRMAN              
TAYLOR asked if there was any way to work some kind of provision               
like this into the bill.                                                       
                                                                               
MS. CECILIA LACARA, Deputy Director of the Child Support                       
Enforcement Division (CSED) of the Department of Revenue, testified            
that she had not seen the latest version of the bill but had no                
position for or against the original bill. She mentioned it will               
cost something to track compliance and likely would require the                
hire of a temporary person for part of the year. CHAIRMAN TAYLOR               
asked if the division already tracks those people who are in                   
arrears. MS. LACARA said the way an arrearage is now traced is in              
the form of a long audit statement, the division had envisioned a              
simple one page form.                                                          
                                                                               
SENATOR DONLEY reported that the section of the bill dealing with              
CSED was the same in both versions of the bill.                                
                                                                               
CHAIRMAN TAYLOR moved to the next order of business, SB 190.                   
                                                                               
       SB 190 - ATTEMPT TO PURCHASE BEFORE EMINENT DOMAIN                      
                                                                               
SENATOR JERRY MACKIE, prime sponsor of SB 190, said this bill                  
attempts to bring fairness as well as expediency to the acquisition            
of land by the state and municipal government. SENATOR MACKIE                  
explained that SB 190 requires the government to make a good faith             
effort to purchase land from a land owner prior to invoking the law            
of eminent domain. SENATOR MACKIE said he is not trying to remove              
the authority of the state to take land by eminent domain, only                
adding a provision to ensure there is a good faith negotiation on              
the part of the state or municipal government before they claim                
land under eminent domain. SENATOR MACKIE indicated that in some               
cases a landowner can be at the mercy of the government, as their              
only recourse to keep their land once eminent domain has been                  
invoked is a costly and time-consuming court challenge, which                  
generally only serves to set the price to be paid for the land                 
anyway. SENATOR MACKIE stated that 23 other states have similar                
requirements.                                                                  
                                                                               
SENATOR PARNELL asked what is meant by the language that adds "and             
the property interest to be taken." SENATOR MACKIE replied that                
this change was added by the drafter to make the bill more                     
specific. MR. DAVE GRAY, staff to SENATOR MACKIE, interjected that             
these would be interests in addition to the property itself and                
might include rights of way or logging rights. CHAIRMAN TAYLOR                 
asked if a view could fall under this, for example if a power line             
was directly obstructing a view from a view lot - would this                   
diminish the property. CHAIRMAN TAYLOR expressed concern that this             
"property interest" may expand things beyond the actual property               
itself. SENATOR MACKIE said he was only concerned about things that            
would be taken under eminent domain; he said a view would not be               
taken under eminent domain and CHAIRMAN TAYLOR disagreed, saying it            
would apply if the value of a view lot was diminished by the loss              
of the view. MR. GRAY specified that there was never any discussion            
of this, and the change was intended for other kinds of interests              
other than pure ownership, like partnership.                                   
                                                                               
                                                                               
Number 385                                                                     
                                                                               
SENATOR MACKIE mentioned he had a proposed committee substitute                
that would clear up some ambiguities in an earlier draft of the                
bill and he hoped the committee would consider it.                             
                                                                               
SENATOR ELLIS asked why one version of the bill had included a                 
reasonable and diligent effort and the proposed committee                      
substitute required a good faith effort. SENATOR MACKIE replied                
that the Community and Regional Affairs Committee thought                      
reasonable and diligent was too stringent a standard to require and            
could prevent any takings by eminent domain, so they had changed               
the wording to good faith. SENATOR ELLIS clarified that good faith             
is a lower standard than reasonable and diligent. SENATOR MACKIE               
agreed good faith would be less problematic for a government                   
entity. CHAIRMAN TAYLOR interjected that these are terms often used            
in title actions and a diligent inquiry can be quite a bit of work.            
SENATOR MACKIE said all he wanted to see was that agencies extend              
the common courtesy of a good faith effort before taking a piece of            
property under eminent domain. SENATOR MACKIE said he did not mean             
to imply this was not being done now, he just wanted to ensure it              
would always be done.                                                          
                                                                               
Number 440                                                                     
                                                                               
SENATOR PARNELL asked if under the current process, the state used             
eminent domain to obtain a right of way. SENATOR MACKIE said they              
did. SENATOR PARNELL asked if this bill expands or just clarifies              
how things are done now. SENATOR MACKIE replied that depends on who            
you ask. He said there are good and bad cases of takings by                    
government entities. SENATOR PARNELL clarified that this bill would            
only add the requirement of a good faith negotiation and                       
consideration of other property interests and SENATOR MACKIE said              
he was not sure but further testimony might enlighten them.                    
                                                                               
MR. BILL CUMMINGS, representing the Department of Transportation               
and Public Facilities (DOT/PF) for the Department of Law, urged                
everyone to remember that 95 to 98 per cent of the land obtained by            
DOT/PF was through negotiation, while only 2 to 5 per cent was                 
through the condemnation process and the invocation of eminent                 
domain. MR. CUMMINGS said he is the last person to see a project               
before it goes out to bid and briefly explained the process by                 
which a piece of property is appraised; an offer is made and the               
negotiation takes place. He said eminent domain is used as a last              
resort. CHAIRMAN TAYLOR noted they were working off the Community              
and Regional Affairs Committee as the work draft brought by the                
sponsor had not yet been adopted.                                              
                                                                               
MR. CUMMINGS said now, a property owner who is not satisfied or                
unable to reach an agreement with the state can, when the state has            
taken his or her land under eminent domain, file a petition with               
the court challenging the project in terms of if it really achieved            
the goal of the maximum public good for the minimum private injury.            
MR. CUMMINGS said this bill adds two new provisions; a property                
owner can now file an additional court challenge to the                        
appropriateness of the particular property interest that the state             
takes for any particular project. MR. CUMMINGS explained the state             
can take a number of different property interests in a piece of                
property depending on the particular needs of a given project. For             
example, some projects require a fee simple interest which is the              
ultimate property right and acquires the entire property down to               
the core of the earth. Other projects may require only an easement,            
and the type of property interest to be taken is generally left to             
the discretion of the condemning authority. MR. CUMMINGS said                  
generally they try to take the minimum property right they need                
for any project.                                                               
                                                                               
MR. CUMMINGS said his question about this bill is: what's broken?              
He said good faith negotiations are happening now and only                     
exceptional cases wind up in court. This bill will introduce a                 
complicated process that will add to the cost of projects. MR.                 
CUMMINGS concluded by saying that eminent domain is very generous              
in its compensation to property owners and owners who contest                  
eminent domain and win are reimbursed for their court costs,                   
awarded any damages due to their land and they get their land back.            
MR. CUMMINGS said his concern is that there is nothing wrong with              
this process to require the changes proposed in this bill.                     
                                                                               
CHAIRMAN TAYLOR said he did not see how this could be a major                  
hurdle if it was already being done in 95 per cent of cases. MR.               
CUMMINGS replied that this legislation allows a property owner to              
contest the propriety of the taking as well as whether the                     
negotiations were conducted in good faith. MR. CUMMINGS explained              
this may significantly delay a project while waiting for a court               
decision. He said this provision would allow for significant,                  
inappropriate delays. SENATOR MACKIE interjected that this is                  
exactly what the bill is intended to do - to allow property owners             
recourse when the entity taking their land cannot show that just               
compensation was awarded for it after good faith negotiations.                 
SENATOR MACKIE said it is not his intent to stop development, but              
only to codify the requirement for a good faith negotiation to                 
prohibit an any possible abuse of the process.                                 
                                                                               
Number 569                                                                     
                                                                               
SENATOR PARNELL asked again about the "property or interest"                   
language and asked if this will expand the type of property                    
interests the state will be paying for or if it only puts in                   
statute what is already happening. MR. CUMMINGS replied it                     
increases an owner's ability to contest a taking, they may contest             
the nature of the interest taken as well as the taking itself. For             
example, a property owner may contest the necessity of a fee simple            
taking, saying an easement could have been used instead. SENATOR               
PARNELL said this gets at the issue of the maximum public good for             
the minimum private harm, but MR. CUMMINGS disagreed, saying that              
issue has more to do with the nature and location of a project than            
the type of land interest taken.                                               
                                                                               
Tape 98-31, Side B                                                             
Number 001                                                                     
                                                                               
CHAIRMAN TAYLOR said he's afraid the bill expands beyond                       
negotiating in good faith. He asked about page two of the latest               
draft ("K"). MR. CUMMINGS said he thinks that part says if a                   
property is to be condemned the condemning authority must be able              
to show they participated in a good faith negotiation prior to the             
condemnation, and that the person with whom they negotiated was not            
lacking intellectual capacity.                                                 
                                                                               
Number 552                                                                     
                                                                               
SENATOR MACKIE agreed with the question regarding what might be                
considered an additional interest, but he asked for them to                    
consider possible timber interests and like things.                            
                                                                               
CHAIRMAN TAYLOR asked MR. CUMMINGS if since most cases are resolved            
through negotiation, the others are not simply because there was no            
attempt to negotiate. MR. CUMMINGS replied the reasons cases are               
not settled include bad legal advice, greed and philosophical                  
differences. He cited a case in Ketchikan in which the property                
owner wanted an amount about twenty times higher than what the                 
state was willing to pay. SENATOR MACKIE asked if the state                    
determined the price through an appraisal process and MR. CUMMINGS             
indicated that was correct. SENATOR PARNELL asked if a jury would              
then determine what the value is using a body of case law that                 
assign value to different things. MR. CUMMINGS said this was also              
correct, and a master would be appointed to make the final                     
declaration of value under instructions given by the Superior                  
Court. If the owner is dissatisfied with the decision of the                   
master, they can appeal and exercise their right to a jury trial.              
CHAIRMAN TAYLOR asked if the appraisal happened before this and MR.            
CUMMINGS said it did. CHAIRMAN TAYLOR clarified that the master                
comes in after the owner has said no and a condemnation and a                  
declaration of taking has been filed. MR. CUMMINGS said this is                
correct. CHAIRMAN TAYLOR mentioned that they then deposit the                  
amount of the appraisal in an account on behalf of the property                
owner who has immediate access to the money should he or she                   
choose; the owner can even take this money, continue the protest               
and try to get more money on top of this. MR. CUMMINGS agreed this             
was all correct. CHAIRMAN TAYLOR explained the master can then                 
rehash the whole situation and change the award made by the                    
condemning entity. If the master does increase the award, the                  
property owner can even appeal this, all the while having access to            
the extra money deposited for the increased award.                             
                                                                               
CHAIRMAN TAYLOR said the government entity has already had the land            
conveyed at this point and may continue with the project even as               
the value continues to be contested. MR. CUMMINGS replied this was             
also correct.                                                                  
                                                                               
CHAIRMAN TAYLOR asked if the property owner still at this point has            
the right to challenge the public interest of the project and MR.              
CUMMINGS said no, that must be done within 20 days of the filing               
for the taking. He added there are provisions for expedited                    
discovery in these cases. CHAIRMAN TAYLOR concluded that the                   
project could still be delayed by a court proceeding over the                  
public interest issue. MR. CUMMINGS replied that was correct.                  
                                                                               
Number 450                                                                     
                                                                               
MR. RICHARD HARRIS, representing Sealaska Corporation, supported               
the bill. MR. HARRIS stated that Sealaska Corporation, an Alaska               
Native Claims Settlement Act (ANCSA) corporation, holds about                  
330,000 of fee estate land and an equal amount of subsurface land              
in Southeast Alaska. Sealaska also owns other properties and  MR.              
HARRIS said Sealaska views and values all these properties                     
differently. ANCSA lands are a treasure that took hundreds of years            
to secure and Sealaska finds condemnation of these properties                  
problematic, and thinks SB 190 is an important vehicle to provide              
additional protection for landowners and ensure a diligent attempt             
is made to buy private land before any condemnation proceeding.                
                                                                               
MR. HARRIS said Sealaska would merely like to level the playing                
field by requiring two simple things: a good faith effort at                   
negotiation and the requirement of demonstrating a project is                  
necessary.  MR. HARRIS indicated that 20 other states do this now              
and it is recommended procedure under the Universal Eminent Domain             
Act.                                                                           
                                                                               
Number 418                                                                     
                                                                               
MR. HARRIS remarked that it is not always necessary to take a fee              
simple interest in a piece of property. He gave an example in which            
he did not think the proper property interest had been taken; it               
involved an air easement needed for an airport.  The government                
bought only the air rights to the land adjacent to the airport, but            
placed restrictions on how high the trees on the land could grow.              
Because this was timber land, the height restriction devalued it               
considerably, though Sealaska was not compensated for this.                    
                                                                               
MR. HARRIS said a good faith effort is a reasonable requirement,               
and might help avoid some problems in the future. MR. HARRIS said              
the bill does not expand the jurisdiction of government entities,              
and added that view rights can be challenged now as a property                 
interest.                                                                      
                                                                               
MR. HARRIS said the bill is a reasonable one and sufficiently                  
protects the state. The burden of proof is on a property owner to              
show grounds for a complaint and the state is only required to show            
that a proper assessment has been made, that they are taking the               
least interest needed for the project and that they have negotiated            
the deal in good faith. MR. HARRIS gave an example in which the                
state took fee estate for a piece of jointly owned property and                
left the two property owners to fight amongst themselves for the               
lump sum of money. He does not see this as a proper good faith                 
negotiation.                                                                   
                                                                               
MR. HARRIS stated that though Sealaska is not interested in selling            
land, they are willing to trade for other land. Unfortunately, the             
agency they deal with most (DOT) has no lands of its own and is                
unlikely to get land from its "sister agencies." MR. HARRIS said he            
is not happy with this and has tried to address this problem to no             
avail.                                                                         
                                                                               
MR. HARRIS restated his point that this is a reasonable bill that              
does not require much more than what is happening now. He stated it            
gives a level of protection to landowners and levels the playing               
field for negotiations between the two parties.                                
                                                                               
SENATOR PARNELL asked, in the airport example, what prevented                  
Sealaska from showing a loss of interest in the land. MR. HARRIS               
replied that nothing prevented that, he would just prefer for                  
Sealaska to ask the state to buy the fee estate in a case like                 
this. He said it is important to have a fair consideration of the              
land owner's interest and come to an agreement about the                       
appropriate interest to be acquired.                                           
                                                                               
SENATOR PARNELL asked if the language "or interest in the property"            
would extend this beyond the direct property owner and MR. HARRIS              
replied he did not think so.                                                   
                                                                               
Number 285                                                                     
                                                                               
CHAIRMAN TAYLOR asked if any other states are held up in their                 
condemnation proceedings by this type of provision, as they only               
employ the good faith negotiation portion of this legislation. MR.             
HARRIS said he was only saying that the interest to be taken should            
be negotiated with a property owner as well, in order to determine             
the minimum necessary property owner. CHAIRMAN TAYLOR asked if                 
there are any other states that do this, he said he could imagine              
a dispute over the property interest might hold projects up or                 
overly limit them. CHAIRMAN TAYLOR said he could see a myriad of               
opinions as to the correct property interest to be taken for a                 
given project, and he remarked that the efficiency of the process              
must be maintained. MR. HARRIS replied that there is insurance                 
built into the bill by the fact that the burden of proof is on the             
party opposing the taking. He said a simple challenge will not stop            
a project from progressing, especially if the state realizes it is             
an invalid claim.                                                              
                                                                               
CHAIRMAN TAYLOR asked if, in the airport example, they could file              
a suit of inverse condemnation for wrongful taking. MR. HARRIS said            
they could and CHAIRMAN TAYLOR added they could prove that through             
the same mechanism in the bill also if it were adopted. MR. HARRIS             
said they were trying to avoid getting to that point and merely                
avoiding the "iron glove" of condemnation by establishing a system             
in which the interest and its worth are negotiated in good faith.              
He again said this would simply codify, for the most part, what is             
already being done.                                                            
                                                                               
Number 195                                                                     
                                                                               
MR. BOB NAVRO testified via teleconference and said the bill is                
"wonderful." He is in the middle of a condemnation proceeding and              
takes exception to the comment that sometimes people contest these             
proceedings due to greed. He argued that our Constitution                      
guarantees life, liberty and the pursuit of happiness. He equates              
happiness with property and says an assessment might not equal the             
value of a piece of property in a property owner's mind's eye. He              
disagreed with the state's appraisal of his land and supported the             
bill.                                                                          
                                                                               
SENATOR PARNELL moved to adopt work draft "K" as the committee's               
working document. Without objection, it was so ordered.                        
                                                                               
MR. BILL CUMMINGS testified again, saying he is sympathetic to                 
Sealaska's concerns, but feels they have been dealt with in good               
faith.                                                                         
                                                                               
Number 058                                                                     
                                                                               
CHAIRMAN TAYLOR commented that it seems the state is limited by the            
value determined by the appraiser. CHAIRMAN TAYLOR asked how and               
when the state can deviate from this appraisal. MR. CUMMINGS                   
replied there must be a good reason for any deviation and an owner             
needs to show some level of proof for their claim that the land is             
worth more than the assessment, but the state wants to settle these            
disputes and they benefit from being able to do so.                            
                                                                               
CHAIRMAN TAYLOR asked if there was an offset for any increase to               
the value of the property made by the condemning authority to the              
condemned land. MR. CUMMINGS replied this was correct.                         
         SB 306 - TAX EXEMPTIONS IN CHILD SUPPORT CASES                        
                                                                               
                                                                               
CHAIRMAN TAYLOR expressed his intent to hold on to this bill for               
now and entertained a motion to move CSSB 306(JUD). SENATOR PARNELL            
so moved and without objection, it was so ordered.                             
        SB 232 - ELECTRONIC RECORDS; RECORD REQUIREMENTS                       
                                                                               
SENATOR PARNELL, prime sponsor of SB 232, explained that this bill             
establishes electronic signatures as a legal practice with the same            
standing as a standard signature and allows the Lt. Governor or                
another state agency to promulgate regulations for using electronic            
signatures by private and public entities. The bill also                       
establishes criteria for electronic signature regulations and                  
repeals some state agencies' selective notarization requirements to            
better utilize the efficiencies of electronic signatures. SENATOR              
PARNELL said the bill will allow such practical applications as                
filing articles of incorporation or dissolution or articles of                 
merger, etc. using electronically transmitted signatures.                      
                                                                               
CHAIRMAN TAYLOR asked who benefits from this and SENATOR PARNELL               
replied both public and private industry will benefit by allowing              
the use of electronic signatures, as well as state agencies.                   
                                                                               
CHAIRMAN TAYLOR asked if this included all corporate officers and              
SENATOR PARNELL replied it did.                                                
                                                                               
CHAIRMAN TAYLOR asked why the penalty was being changed from                   
"verified and under oath" to one of "unsworn falsification."                   
SENATOR PARNELL suggested that MR. ANDY KLINE, staff to Lt.                    
Governor Fran Ulmer might be better able to answer that. MR. KLINE             
came forward and explained the idea behind the change is that an               
oath is something sworn in person, involving writing. He said this             
is the same penalty, applied in an electronic format.                          
                                                                               
SENATOR PARNELL offered an amendment on this point which ties the              
penalty for unsworn falsification to the precise criminal statutes             
it would fall under. CHAIRMAN TAYLOR said the amendment takes care             
of one of his concerns.                                                        
                                                                               
SENATOR PARNELL moved his amendment as amendment #1. Without                   
objection, it was adopted. SENATOR PARNELL remarked that he had no             
opposition to the bill and the Department of Administration and the            
Lt. Governor both supported the bill.                                          
                                                                               
SENATOR PARNELL said he had a second amendment regarding                       
certification of electronic signatures and asked MR. KLINE to                  
explain it. MR. KLINE said the bill does not specify what type of              
technology will be used for electronic signatures, since this                  
technology changes so rapidly. MR. KLINE said instead the sets out             
certain criteria that electronic signatures must meet.                         
                                                                               
MR. KLINE explained that the way this works is there are two halves            
to an electronic signature: the public key and the private key. The            
two keys contain encrypted codes which must match for the signature            
to be authentic. The electronic signer keeps one key and the other             
is retained by the certifying authority.                                       
                                                                               
MR. KLINE indicated there are two ways to set up a certifying                  
authority, either through the state or through the private sector.             
MR. KLINE said the amendment establishes that the certifying                   
authority will be public in a private to private transaction. This             
will encourage businesses, typically banks, to come forward and act            
as certifying authorities. The amendment allows the state to be the            
certifying authority in any transactions in which the state is                 
involved, permitting the state to go forward with the use of                   
electronic signatures even if the private sector is not yet                    
employing them.                                                                
                                                                               
CHAIRMAN TAYLOR said he was concerned about hacking and the                    
possibility that someone might break into the system and alter                 
information. MR. KLINE said the bill does not set out any anti-                
hacking criteria. CHAIRMAN TAYLOR agreed, saying electronic                    
signatures eliminate the third party witness currently required by             
law to prosecute crimes such as forgery. He said he would not have             
much comfort as a bank president under this bill. SENATOR PARNELL              
informed him that was part of the reason he wanted the state to act            
as a certifying authority. He said the bill enables the state to be            
the certifying authority and to set standards and protocols to                 
prevent hacking. CHAIRMAN TAYLOR asked what would protect other                
transactions to which the state is not a party.                                
                                                                               
Number 212                                                                     
                                                                               
SENATOR PARNELL explained if CHAIRMAN TAYLOR would like the state              
to  be the certification authority for all transactions, he should             
vote no on amendment #2. SENATOR PARNELL then moved amendment #2.              
CHAIRMAN TAYLOR objected.                                                      
                                                                               
SENATOR ELLIS asked MR. KLINE what his position was on the                     
amendment. ANDY KLINE indicated he supported the amendment. He                 
added that he shares CHAIRMAN TAYLOR's concerns but explained that             
all the literature he has reviewed has indicated that these                    
electronic signatures are secure and very verifiable. MR. KLINE                
says the bill does not specify the technology to be used, but only             
requires electronic signatures to meet the same criteria set out               
for written signatures. SENATOR PARNELL commented that another                 
safeguard is the fact that it is very much in the interest of a                
private certification authority to ensure safeguards are in place              
to protect the validity of electronic signatures. MR. KLINE also               
mentioned that the bill is permissive, not restrictive, and simply             
allows the use of electronic signatures in addition to written                 
signatures.                                                                    
                                                                               
CHAIRMAN TAYLOR called the roll on the amendment and voted against             
it. Both SENATOR ELLIS and SENATOR PARNELL voted in favor of the               
amendment. CHAIRMAN TAYLOR explained he has further concerns with              
the bill including state bank reporting requirements.                          
                                                                               
SENATOR PARNELL moved the bill with individual recommendations but             
CHAIRMAN TAYLOR said he'd rather hold it. The bill was held in                 
committee.                                                                     
                                                                               
CHAIRMAN TAYLOR indicated he had a list of witnesses suggested by              
MR. NORSWORTHY and asked if any members had additional witnesses to            
add to the list. Hearing none, CHAIRMAN TAYLOR said he would bring             
the matter up later for discussion with the entire committee. The              
meeting was adjourned at 3:30 p.m.                                             
                                                                               
                                                                               

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