Legislature(2001 - 2002)

05/03/2002 01:44 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                   SENATE JUDICIARY COMMITTEE                                                                                 
                           May 3, 2002                                                                                          
                            1:44 p.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Robin Taylor, Chair                                                                                                     
Senator Dave Donley, Vice Chair                                                                                                 
Senator John Cowdery                                                                                                            
Senator Gene Therriault                                                                                                         
Senator Johnny Ellis                                                                                                            
MEMBERS ABSENT                                                                                                                
All Members Present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
CS FOR HOUSE BILL NO. 208(RES)                                                                                                  
"An Act  relating to aquatic  farming of shellfish;  and providing                                                              
for an effective date."                                                                                                         
     MOVED CSHB 208(RES) OUT OF COMMITTEE                                                                                       
CS FOR HOUSE BILL NO. 286(RES) am                                                                                               
"An Act  allowing a  person to hold  two commercial fishing  entry                                                              
permits for a salmon fishery for  the purpose of consolidating the                                                              
fishing fleet  for a  salmon fishery;  relating to salmon  fishery                                                              
associations and to salmon fishery  assessments; and providing for                                                              
an effective date."                                                                                                             
     MOVED CSHB 286(RES) am OUT OF COMMITTEE                                                                                    
CS FOR HOUSE BILL NO. 498(FIN) am                                                                                               
"An  Act   expressing  legislative   intent  regarding   privately                                                              
operated correctional  prison space and services;  relating to the                                                              
development  and  financing  of  privately  operated  correctional                                                              
prison  space   and  services;   authorizing  the  Department   of                                                              
Corrections  to enter into  an agreement  for the confinement  and                                                              
care of prisoners in privately operated  correctional prison space                                                              
in the City of Whittier; giving notice  of and approving the entry                                                              
into and  the issuance  of certificates  of participation  for the                                                              
upgrade,  expansion, and  replacement  of  a certain  correctional                                                              
prison in the  City of Bethel; giving notice of  and approving the                                                              
entry  into  lease-financing  agreements  for  that  project;  and                                                              
providing for an effective date."                                                                                               
     MOVED CSHB 498(FIN) am OUT OF COMMITTEE                                                                                    
CONFIRMATION HEARING: SELECT COMMITTEE ON LEGISLATIVE ETHICS                                                                    
Arthur S. Robinson                                                                                                              
SENATE JOINT RESOLUTION NO. 13                                                                                                  
Proposing amendments to the Constitution of the State of Alaska                                                                 
relating to inflation- proofing the permanent fund.                                                                             
     MOVED CSSJR 13(RES) OUT OF COMMITTEE                                                                                       
PREVIOUS COMMITTEE ACTION                                                                                                     
HB 208 - See Resources minutes dated 4/24/02.                                                                                   
HB 286 - See Resources minutes dated 4/8/02 and 4/24/02.                                                                        
HB 498 - No previous action to record.                                                                                          
SJR 13 - See State Affairs minutes dated 4/26/01, 2/21/02,                                                                      
3/21/02 and 4/16/02.                                                                                                            
WITNESS REGISTER                                                                                                              
Representative Drew Scalzi                                                                                                      
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced HB 208 and HB 286.                                                                            
Mr. Roger Painter                                                                                                               
Alaska Shellfish Growers Association                                                                                            
PO Box 704                                                                                                                      
Juneau, AK 99802                                                                                                                
POSITION STATEMENT:  Testified in support of HB 208.                                                                          
Mr. Ron Long                                                                                                                    
No address given                                                                                                                
POSITION STATEMENT:  Testified in support of HB 208.                                                                          
Ms. Sue Aspelund                                                                                                                
Cordova District Fishermen United                                                                                               
PO Box 1715                                                                                                                     
Cordova, AK 99574                                                                                                               
POSITION STATEMENT:  Testified in support of HB 286.                                                                          
Mr. Victor Smith                                                                                                                
No address given                                                                                                                
POSITION STATEMENT:  Testified in opposition to HB 286.                                                                       
Mr. David Bedford                                                                                                               
Southeast Alaska Seiners Association                                                                                            
526 Main Street                                                                                                                 
Juneau, AK 99801                                                                                                                
POSITION STATEMENT:  Testified in support of HB 286.                                                                          
Mr. Jerry McCune                                                                                                                
United Fishermen Of Alaska                                                                                                      
211 4 St. Ste. 110                                                                                                              
Juneau, AK 99801-1143                                                                                                           
POSITION STATEMENT:  Testified in support of HB 286.                                                                          
Mr. John Manly                                                                                                                  
Staff to Representative John Harris                                                                                             
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced HB 498.                                                                                       
Mr. Frank Smith                                                                                                                 
No address given                                                                                                                
POSITION STATEMENT:  Testified in opposition to HB 498.                                                                       
Mr. Ben Butler                                                                                                                  
Mayor of Whittier                                                                                                               
PO Box 741                                                                                                                      
Whittier, AK 99693                                                                                                              
POSITION STATEMENT:  Testified in support of HB 498.                                                                          
Mr. Victor Wellington, Sr.                                                                                                      
Mayor of Metlakatla Indian Community                                                                                            
P.O. Box 8                                                                                                                      
Metlakatla, AK 99926                                                                                                            
POSITION STATEMENT:  Testified on HB 498.                                                                                     
Mr. Frank Prewitt                                                                                                               
8900 Upper Huffman Rd.                                                                                                          
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 498.                                                                          
Mr. Charles Campbell                                                                                                            
3020 Douglas Hwy.                                                                                                               
Juneau, AK 99801                                                                                                                
POSITION STATEMENT:  Testified in opposition to HB 498.                                                                       
Mr. David Katzeek                                                                                                               
Alaska Native Brotherhood Camp #2                                                                                               
320 Willoughby Ave.                                                                                                             
Juneau, AK 99801                                                                                                                
POSITION STATEMENT:  Testified in support of HB 498.                                                                          
Mr. Margot Knuth                                                                                                                
Strategic Planning Coordinator                                                                                                  
Department of Corrections                                                                                                       
431 N. Franklin St. Ste. 400                                                                                                    
Juneau, AK 99801                                                                                                                
POSITION STATEMENT:  Testified in opposition to HB 498.                                                                       
Mr. James Price                                                                                                                 
PO Box 7043                                                                                                                     
Nikiski, AK 99635                                                                                                               
POSITION STATEMENT:  Testified in  opposition to HB 498.                                                                      
Ms. Elsie Hendryx                                                                                                               
Kenai Native Association                                                                                                        
215 Fidalgo Ave. Ste. 101                                                                                                       
Kenai, AK 99611                                                                                                                 
POSITION STATEMENT:  Testified in support of HB 498.                                                                          
Mr. Ron Wilson                                                                                                                  
No address given                                                                                                                
POSITION STATEMENT:  Testified in  opposition to HB 498.                                                                      
Mr. Jim LeCrone                                                                                                                 
Public Safety Employees Association                                                                                             
4300 Boniface Pkwy.                                                                                                             
Anchorage, AK 99504                                                                                                             
POSITION STATEMENT:  Testified in  opposition to HB 498.                                                                      
Mr. Rick VanHatten                                                                                                              
Alaska Correctional Officers                                                                                                    
4300 Boniface Pkwy.                                                                                                             
Anchorage, AK 99504                                                                                                             
POSITION STATEMENT:  Testified in  opposition to HB 498.                                                                      
Mr. Brad Wilson                                                                                                                 
Public Safety Employees Association                                                                                             
4300 Boniface Pkwy.                                                                                                             
Anchorage, AK 99504                                                                                                             
POSITION STATEMENT:  Testified in  opposition to HB 498.                                                                      
Ms. Dee Hubbard                                                                                                                 
No address given                                                                                                                
POSITION STATEMENT:  Testified in  opposition to HB 498.                                                                      
Mr. John Duffy                                                                                                                  
Matanuska-Susitna Borough                                                                                                       
PO Box 459                                                                                                                      
Palmer, AK 99645-0459                                                                                                           
POSITION STATEMENT:  Testified in  opposition to HB 498.                                                                      
Mr. Arthur S. Robinson                                                                                                          
35401 Kenai Spur Hwy.                                                                                                           
Soldotna, AK 99669                                                                                                              
POSITION STATEMENT:  Testified for confirmation to the Select                                                                 
Committee on Legislative Ethics.                                                                                                
Mr. Jay Hogan                                                                                                                   
PO Box 21073                                                                                                                    
Juneau, AK 99802-1073                                                                                                           
POSITION STATEMENT:  Testified in opposition to SJR 13.                                                                       
Ms. Sheila R. Howe                                                                                                              
No address given                                                                                                                
POSITION STATEMENT:  Testified in support of SJR 13.                                                                          
Mr. Robert Storer                                                                                                               
Executive Director                                                                                                              
Alaska Permanent Fund Corporation                                                                                               
Department of Revenue                                                                                                           
PO Box 25500                                                                                                                    
Juneau, AK 99802-5500                                                                                                           
POSITION STATEMENT:  Testified in support of SJR 13.                                                                          
Mr. Jim Kelly                                                                                                                   
Director Of Communications                                                                                                      
Alaska Permanent Fund Corporation                                                                                               
Department of Revenue                                                                                                           
PO Box 25500                                                                                                                    
Juneau, AK 99802-5500                                                                                                           
POSITION STATEMENT:  Testified in support of SJR 13.                                                                          
ACTION NARRATIVE                                                                                                              
TAPE 02-24, SIDE A                                                                                                            
CHAIRMAN  ROBIN  TAYLOR  called  the  Senate  Judiciary  Committee                                                            
meeting to  order at 1:44 p.m.   Senators Cowdery,  Therriault and                                                              
Chair Taylor  were present.   The first  order of business  before                                                              
the committee was HB 208.                                                                                                       
               HB 208-AQUATIC FARMS FOR SHELLFISH                                                                           
REPRESENTATIVE DREW  SCALZI, sponsor of  HB 208, said  the aquatic                                                              
farming act was passed in 1988 to  streamline the process by which                                                              
people interested  in mariculture could acquire  sites for aquatic                                                              
farms.   He said  acquiring sites  had become problematic  because                                                              
people often  found sites conducive  to procreating  species close                                                              
to transportation  routes and applicants were met  with contention                                                              
from individual  landowners or fishermen  who used the sites.   HB
208 would require  the Alaska Department of Fish  & Game (ADFG) to                                                              
find 90 specific sites that would  be conducive to both the farmer                                                              
and the people in  the surrounding area.  He said  ADFG would work                                                              
with the Department of Natural Resources  (DNR) and the Department                                                              
of Environmental Conservation (DEC) to accomplish this task.                                                                    
CHAIRMAN TAYLOR asked Roger Painter to provide testimony.                                                                       
MR. ROGER PAINTER,  Alaska Shellfish Growers Association,  said HB
208 would  provide a way for  the mariculture industry  to partner                                                              
with local  communities to find  sites around communities  seeking                                                              
economic development  and bring aquatic  farms into  production to                                                              
benefit the local  economy.  He said the public  process regarding                                                              
aquatic  farm sites  is very  intensive, and  includes the  Alaska                                                              
Coastal  Zone Management  process, DNR's  best interest  findings,                                                              
involvement  of  the   U.S.  Corps  of  Engineers   in  issues  of                                                              
anchorage, and ample time for public  input.  He said HB 208 would                                                              
not affect that process.                                                                                                        
CHAIRMAN  TAYLOR  asked  if  there  were  any  questions  for  Mr.                                                              
Painter.  There were none.                                                                                                      
MR. RON  LONG said he  was employed by  a shellfish hatchery.   He                                                              
said HB 208 would not change any  priority uses or displace prior,                                                              
existing or  conflicting uses.   He wanted  to reiterate  that the                                                              
bill would not change the public process.                                                                                       
He said one of the goals of HB 208  was to engage agencies and the                                                              
public  in determining  sites suitable  for aquatic  farming.   He                                                              
said the  intent was  not to  cut corners,  bump people  off their                                                              
sites or  take over anchorages.   He said  the intent of  the bill                                                              
was  to identify  sites that  would work  for the  farmer and  the                                                              
CHAIRMAN TAYLOR  asked if there were  any questions for  Mr. Long.                                                              
There were none.                                                                                                                
SENATOR  COWDERY  moved  CSHB  208(RES)   out  of  committee  with                                                              
attached fiscal notes and individual recommendations.                                                                           
There being  no objection,  CSHB 208(RES)  moved out of  committee                                                              
with attached fiscal notes and individual recommendations.                                                                      
The next order of business before the committee was HB 286.                                                                     
         HB 286-FISHING PERMITS/ASSOCIATIONS/ASSESSMENTS                                                                    
REPRESENTATIVE  SCALZI, sponsor  of HB  286, said  the bill  would                                                              
offer the  salmon industry a tool  for consolidation.  He  said it                                                              
would allow  individuals to hold  two salmon permits in  any given                                                              
area.  He said there was often a  lot of inactivity of permits and                                                              
believed  there  were  more  permits issued  in  some  areas  than                                                              
necessary;  more  permits were  activated  when  a fishery  became                                                              
healthy through  an increase  in prices  or salmon  runs.   HB 286                                                              
would offer  individuals in the  salmon fisheries  the opportunity                                                              
to buy and hold  some of the permits.  The permits  would carry no                                                              
privileges,  such   as  extra  fishing  gear  or   time.  He  said                                                              
consolidating  the effort  would keep fishermen  from other  areas                                                              
from coming in and exacerbating the problem of overcrowding.                                                                    
He said  HB 286  was the  highest priority  bill supported  by the                                                              
United Fishermen of  Alaska (UFA) because it would  offer the most                                                              
benefit to the commercial fishing industry.                                                                                     
CHAIRMAN TAYLOR asked Ms. Sue Aspelund to provide testimony.                                                                    
MS. SUE ASPELUND,  Executive Director, Cordova  District Fishermen                                                              
United (CDFU),  said CDFU represents  the fishing families  of the                                                              
Copper  River/Prince   William  Sound  area.  CDFU   believes  the                                                              
industry needs  a variety  of tools  to pursue structural  changes                                                              
necessary to compete in the new global  marketplace.  HB 286 would                                                              
provide  fishermen with  one of  the simplest  and most  immediate                                                              
tools  to  get  fishing  gear  out  of  the  water  in  distressed                                                              
CHAIRMAN  TAYLOR  asked  if  there  were  any  questions  for  Ms.                                                              
Aspelund.  There were none.                                                                                                     
MR. VICTOR  SMITH said UFA and  processors are saying that  HB 286                                                              
is part  of a  plan to  revitalize Alaskan  salmon fisheries.   He                                                              
said the main authors of HB 286 were  Mr. David Bedford, Executive                                                              
Director of the  Southeast Alaska Seiners Association  (SASA), and                                                              
Mr. Bob Thorstenson,  president of UFA and stockholder  of "Alaska                                                              
Seafoods."  He said fishermen themselves  had very little input on                                                              
the bill.  The SASA board did not  authorize or direct Mr. Bedford                                                              
to proceed on  its behalf regarding permit stacking.   He said the                                                              
board  authorized  a  committee   to  explore  options  for  fleet                                                              
reduction  but while  that committee  was  exploring options,  Mr.                                                              
Bedford  was also  working on  a plan  of his  own.   He said  Mr.                                                              
Bedford  denied saying  there  was a  deal  that processors  would                                                              
support  permit stacking  in exchange  for UFA's  support to  keep                                                              
global seafoods out.   He said Mr. Bedford now claims  he said UFA                                                              
wouldn't  oppose  the  processors'  new  management  plan  if  the                                                              
processors would support permit stacking.                                                                                       
MR. VICTOR  SMITH said one  of the touted  features of HB  286 was                                                              
that it  could be used in  different ways in different  fisheries.                                                              
He wondered why that would be necessary  because all Alaska salmon                                                              
fisheries were  subject to the  same laws.   He said UFA  and SASA                                                              
also used the  selling point that  HB 286 would be in  the control                                                              
of  fishermen.   He  said  they   had  possibly  been   guilty  of                                                              
involvement  or  trade   on  their  global  decision.     He  said                                                              
nonresidents couldn't  use their permits and were  forced to sell.                                                              
He said the salmon  industry needs to follow the  law.  Key people                                                              
involved in HB 286 had conflicts  of interest and had broken rules                                                              
of accountability.  He said these  same people would probably have                                                              
control over permit  stacking and how it would work.   He believed                                                              
HB 286 would  be as bad for many  Alaskans as it had  been for the                                                              
first round of nonresidents ousted from Alaska fisheries.                                                                       
CHAIRMAN TAYLOR asked  if there were any questions  for Mr. Victor                                                              
Smith.  There  were none.  He  asked Mr. David Bedford  to provide                                                              
MR. DAVID  BEDFORD, Executive Director,  SASA, said he sat  on the                                                              
board of UFA for SASA and was licensed  to practice law in Alaska.                                                              
He said HB  286 is the highest  priority piece of  legislation for                                                              
UFA   and  has   a  strong   majority  of   support  within   that                                                              
He said  UFA brought HB 286  forward because the  salmon fisheries                                                              
are in  dire straits and  some things need  to be done  to address                                                              
the  economic difficulties  the fisheries  are  experiencing.   He                                                              
said HB 286 would  give them the opportunity to  reduce the number                                                              
of people competing  for a share of a shrinking pie  so they could                                                              
have  a viable  fishing business  to support  the coastal  regions                                                              
that depend on the salmon fisheries.                                                                                            
MR.  BEDFORD  maintained  that  HB   286  was  drafted  to  be  as                                                              
transparent as possible to make sure  that control would be in the                                                              
hands of  the permit  holders.   It was  drafted that way  because                                                              
they were  concerned somebody  might be  able to  use the  bill to                                                              
force something  on fishermen that they  didn't want.  He  said HB
286 would require  a two-thirds vote of all permit  holders before                                                              
any kind of assessment  could be levied.  He  said anybody wanting                                                              
to initiate  the program  would be  required to  go to the  permit                                                              
holders with an outline of the plan  so they had a very clear idea                                                              
of what would  be done and what  their money would be  paying for.                                                              
The program  would be regional so  nobody from another  area would                                                              
have anything to say about a distant fishery.                                                                                   
MR. BEDFORD said  UFA and SASA are asking the  Legislature to give                                                              
them the tools to address their problems.                                                                                       
1:55 p.m.                                                                                                                       
SENATOR THERRIAULT asked who would buy and hold the permits.                                                                    
MR.  BEDFORD  said  the  limited entry  law  specifies  that  only                                                              
individuals  can hold  permits.   He  said  the association  would                                                              
decide it was going  to set up a program and figure  out how to do                                                              
it. They could contract with a permit  holder to send their permit                                                              
back  to   the  Commercial  Fisheries   Entry  Commission   to  be                                                              
extinguished,  or the  association  could contract  with a  permit                                                              
holder to hold  a second permit until sometime in  the future when                                                              
the fishery  was so  lucrative that  there should  be more  people                                                              
fishing.  Individuals would hold the permits at all times.                                                                      
SENATOR THERRIAULT asked if HB 286  might create a situation where                                                              
people would buy low and hope to sell high.                                                                                     
MR.  BEDFORD  said  that  is possible  with  any  kind  of  effort                                                              
reduction  program.  He  said the  Magnuson-Stevens  Act  provided                                                              
effort reduction  programs for federal  fisheries. A  person could                                                              
buy a permit and  try to speculate on it but he  didn't think that                                                              
would be a very  good investment. He said people  currently in the                                                              
fishery would  probably buy a second  permit to hold  because they                                                              
would  receive an  annual payment  from the  association and  they                                                              
would have to compete with one less  boat. He said the association                                                              
should be able to contract for less  money with a person who would                                                              
be gaining the additional benefits of less competition.                                                                         
CHAIRMAN TAYLOR asked if there were  any further questions for Mr.                                                              
Bedford.  There were none.                                                                                                      
MR.  JERRY  MCCUNE, UFA,  said  HB  286  wouldn't work  for  every                                                              
fishery; it would be an option that  some fisheries could use.  He                                                              
said  people probably  wouldn't buy  another permit  in a  fishery                                                              
where  permits  cost $60,000  to  $70,000.   However,  they  would                                                              
probably  buy  another  permit  if  the  permit  cost  $10,000  to                                                              
$18,000.  He said that might be a  good investment for a fisherman                                                              
planning to stay in the fishery.                                                                                                
MR. MCCUNE  said the  associations  would be difficult  to  set up                                                              
because the  permit holders need to  support the idea to  start an                                                              
association.  He  said many safeguards are contained  in HB 286: a                                                              
timeline  on assessments  is required;  a two-thirds  vote of  all                                                              
permit holders would be required  to extend an assessment; and 25%                                                              
of the permit holders  could petition to have a vote  to change or                                                              
remove an assessment.                                                                                                           
CHAIRMAN TAYLOR asked if there were  any questions for Mr. McCune.                                                              
There were none.                                                                                                                
SENATOR  COWDERY moved  CSHB  286(RES) am  out  of committee  with                                                              
attached zero fiscal note and individual recommendations.                                                                       
There being no objection, CSHB 286(RES)  am moved out of committee                                                              
with attached zero fiscal note and individual recommendations.                                                                  
The next  order of business  to come  before the committee  was HB
                 HB 498-CORRECTIONAL FACILITIES                                                                             
MR. JOHN  MANLY, representing the  House Finance  Committee, which                                                              
sponsored HB 498, said the bill would  authorize the Department of                                                              
Corrections  (DOC)  to  enter  into a  contract  for  a  privately                                                              
operated 1,000-bed  prison in  Whittier. He  said the State  would                                                              
contract for those beds over a 25-year  period.  HB 498 would also                                                              
authorize  the  expansion  of  the   Yukon-Kuskokwim  Correctional                                                              
Center (YKCC)  in Bethel by 96 beds  for a cost of $19  million to                                                              
be financed through certificates of participation.                                                                              
SENATOR COWDERY asked about housing for staff.                                                                                  
MR.  MANLY  said  there  is a  housing  problem  in  Whittier.  He                                                              
anticipated that housing  would be built for staff  or staff would                                                              
commute from Anchorage.  He said  the Department of Transportation                                                              
& Public  Facilities has agreed to  keep the Whittier  Tunnel open                                                              
17 hours each day if the prison is  built in Whittier, which would                                                              
cover the three shift changes.                                                                                                  
SENATOR  COWDERY asked  if the prison  would be  built on  private                                                              
land or city-owned land.                                                                                                        
MR. MANLY  said it would  be built on  land leased to  Whittier by                                                              
the Alaska Railroad Corporation (ARRC).                                                                                         
SENATOR THERRIAULT asked about water,  sewer, electrical and other                                                              
infrastructure needs.                                                                                                           
MR. MANLY said Whittier believes  it has utilities covered because                                                              
it  has adequate  power from  Chugach  Electric Association,  Inc.                                                              
(Chugach) and  wells to provide water.   He said the  prison would                                                              
have an onsite sewage treatment plant.                                                                                          
CHAIRMAN TAYLOR asked Mr. Frank Smith to provide testimony.                                                                     
MR. FRANK SMITH  said he has a 30-year background  in the field of                                                              
criminal justice.   He said the  proposed prison makes  less sense                                                              
than the prison  that was proposed  in Kenai.  He said  the prison                                                              
in  Whittier  is  similar  to the  prison  that  was  proposed  in                                                              
Wrangell  but  far less  feasible.  Representative  Andrew  Halcro                                                              
wrote an opinion  piece in the Anchorage Daily News  that said the                                                              
proposal made no  sense unless you looked at the  money trail.  He                                                              
said it doesn't  make fiscal sense  to spend an extra  $18 million                                                              
per year to move prisoners to Whittier.                                                                                         
MR.  SMITH said  it  would  be impossible  to  staff  a prison  in                                                              
Whittier  because nobody  would be  able to get  there.   Downtown                                                              
Anchorage is  65 miles from  Whittier and  there is often  a half-                                                              
hour wait at the tunnel because it  is only one-way.  Staffing was                                                              
a significant  challenge at the  Spring Creek Correctional  Center                                                              
(SCCC) in Seward, which has much easier access than Whittier.                                                                   
He  said HB  498 doesn't  make sense  because the  State would  be                                                              
required to pay whether or not the  prison ever housed a prisoner.                                                              
He  said five  years  would be  committed  to  building costs  and                                                              
building costs have  never been specified because  there has never                                                              
been  an economic  analysis of  the project.   He  noted that  the                                                              
building  costs   killed  a  private  prison  proposal   in  Delta                                                              
MR. SMITH  expressed concern  that the people  pushing for  HB 498                                                              
might have taken  money from contractors through  contractual work                                                              
and that HB  498 makes less sense  than any proposal he  has heard                                                              
in his 14 years of knowledge of Alaskan legislation.                                                                            
SENATOR  COWDERY asked  how  much money  the  State spent  housing                                                              
prisoners in Arizona.                                                                                                           
MR. FRANK SMITH  said the state spent $51 to $57  per day per bed.                                                              
He said  there were extra  charges for transportation  and medical                                                              
care but  those charges would  be the same  in Whittier.   He said                                                              
the Whittier prison would cost more  than the economic feasibility                                                              
study projected for the Delta Junction private prison proposal.                                                                 
SENATOR  COWDERY asked  how  much  money the  State  has spent  in                                                              
MR.  FRANK SMITH  thought  it was  approximately  $16 million  per                                                              
SENATOR COWDERY  asked if he thought  that money was  better spent                                                              
in Arizona rather than Alaska.                                                                                                  
MR. SMITH said  it would make more  sense to spend $16  million in                                                              
Whittier  than Arizona.   He pointed  out that  twice that  amount                                                              
would be spent  in Whittier at a  prison they wouldn't  be able to                                                              
staff because of poor pay and training.                                                                                         
SENATOR COWDERY asked how he knew that.                                                                                         
MR. SMITH  said he  had read  virtually every  article written  on                                                              
private prisons  in the  past five years  and has just  finished a                                                              
chapter on  Native Americans in  private prisons for  a publisher.                                                              
He  assured Senator  Cowdery that  he  knows the  subject and  has                                                              
demonstrated it time after time in debates and testimony.                                                                       
SENATOR COWDERY asked  why he thought access to  Seward was easier                                                              
than Whittier.                                                                                                                  
MR. SMITH  said Seward  doesn't have the  problems related  to the                                                              
wait to use the  tunnel and Seward has far more  housing.  He said                                                              
SCCC was a larger prison.  He said  a Wyoming study concluded that                                                              
a  community  of 9,000  couldn't  support  a  prison of  the  size                                                              
proposed in Whittier.   He said Whittier has an  annual population                                                              
of about 130  people, many of whom  are retired.  He  said, at the                                                              
most, 10 people  in Whittier could be potential  employees for the                                                              
prison.    He  said  HB 498  would  be  nothing  but  welfare  for                                                              
Whittier, which he thought received enough welfare.                                                                             
SENATOR COWDERY  asked why employees  wouldn't be able  to commute                                                              
from larger cities.                                                                                                             
MR. SMITH said the pay range that  was suggested was between $8.50                                                              
and $13 per  hour.  People  in South Anchorage and  Girdwood would                                                              
probably not want  to work at the prison and  people from downtown                                                              
Anchorage  would have  to drive  65 miles  twice per  day to  make                                                              
barely over minimum wage.                                                                                                       
SENATOR  COWDERY was  sure  they  would raise  the  wages if  they                                                              
couldn't get employees.                                                                                                         
MR. SMITH wasn't sure that would  happen.  He said the State would                                                              
be in  a peculiar  position because  the proposed  contract  was a                                                              
pay-for-pay  contract.  He  said the  request  for  qualifications                                                              
(RFQ)  was the  same RFQ  that was  used in  the Wrangell  private                                                              
prison proposal.   The company would  be protected under  the RFQ.                                                              
Whittier would  be charged for  start-up costs if  the Legislature                                                              
passed  HB 498  and  the Governor  vetoed it.  He  said Mr.  Frank                                                              
Prewitt cited $3.5 million for startup costs.                                                                                   
SENATOR COWDERY said he had two boats  in Whittier and could be on                                                              
either one  of them  from South Anchorage  in an  hour and  a half                                                              
from his house  and out enjoying Prince William Sound.   He didn't                                                              
think access was a problem.                                                                                                     
CHAIRMAN TAYLOR asked Mayor Ben Butler to provide testimony.                                                                    
MAYOR BEN  BUTLER, City of Whittier,  said unlike the rest  of the                                                              
communities  that  proposed  private  prisons,  the  community  of                                                              
Whittier  supports a  prison; the  City made sure  of that  before                                                              
going to  the State  or a contractor.   He  said they held  public                                                              
hearings and had  petitions circulated.  Approximately  80% to 85%                                                              
of the people in Whittier supported  the proposal.  He pointed out                                                              
that nobody from Whittier had testified against HB 498.                                                                         
He said  the infrastructure needs  of a large prison  were already                                                              
in Whittier.  Chugach  put in a large power line  that supplies 25                                                              
megawatts of power. The community  uses 15% of the available power                                                              
and  would  use  50%  with the  prison.  Natural  gas  comes  into                                                              
Whittier and there is plenty of water.  An onsite sewage treatment                                                              
plant would be built with the prison.                                                                                           
MAYOR BUTLER said Whittier was able  to learn from the experiences                                                              
of the  last two communities that  had proposed a  private prison.                                                              
The procurement method was done through  the Perkins Coie law firm                                                              
in  Anchorage.   He  said they  sent  out an  RFQ,  to which  five                                                              
companies responded.   He said an independent  team, consisting of                                                              
a building  construction  consultant from  Anchorage, a  certified                                                              
public accountant  firm and a  resident of Whittier,  reviewed the                                                              
proposals. The City Council picked  Cornell Corrections (Cornell).                                                              
He said  there was  no appeal to  that decision  so they  felt the                                                              
process was done fairly.                                                                                                        
SENATOR  COWDERY  said  Whittier's  population  increased  in  the                                                              
summer. He  asked whether the  vendors commuted from  Anchorage or                                                              
lived in Whittier during the summer.                                                                                            
MAYOR  BUTLER said  there is  a little  bit of both.   Access  was                                                              
reasonable because  the tunnel  was open 17  hours per day  in the                                                              
summer.   He  said  quite  a few  vendors  lived in  Girdwood  and                                                              
commuted  every day.   Half of  the schoolteachers  also lived  in                                                              
Girdwood and  commuted, even  with the tunnel  only open  68 hours                                                              
per week  in the winter.   He said the  tunnel issues were  not as                                                              
serious as stated.                                                                                                              
CHAIRMAN  TAYLOR  asked  how  many   companies  competed  for  the                                                              
MAYOR BUTLER  said the City of Whittier  sent out five  RFQs.  One                                                              
company didn't respond at all and  two other companies decided not                                                              
to  respond.   He said  the two  companies that  did respond  were                                                              
Cornell and Corrections Corporation  of America (CCA), the company                                                              
that housed the prisoners in Arizona.                                                                                           
CHAIRMAN  TAYLOR asked  Mayor Victor  Wellington,  Sr. to  provide                                                              
MAYOR  VICTOR WELLINGTON,  SR.,  Mayor  of the  Metlakatla  Indian                                                              
Community,  asked that  request for proposal  (RFP) permission  be                                                              
put into HB 498.  He said Metlakatla  was interested in building a                                                              
prison yet  he heard in committee  meetings that Whittier  was the                                                              
only community interested  in building a prison.   That is not the                                                              
case;  Metlakatla officials  discussed the  possibility with  DOC,                                                              
legislators and  experts in Washington,  D.C.  He  said Metlakatla                                                              
has the infrastructure  to support a prison.  A new  road is being                                                              
built between Metlakatla  and Ketchikan, which would  increase the                                                              
workforce and a  new medical facility is being built.   He said it                                                              
would be good public policy to include  RFP permission to make the                                                              
option available to every community.                                                                                            
CHAIRMAN TAYLOR asked Mr. Frank Prewitt to provide testimony.                                                                   
MR. FRANK  PREWITT said  he was a consultant  for Cornell  and the                                                              
City of Whittier  on the proposed prison project.   He addressed a                                                              
handout  that showed  a  snapshot of  DOC's  inmate population  in                                                              
February 2002.  He said each red  block in the graph represented a                                                              
day in the month in which the prison  was operating over emergency                                                              
capacity.  He said  every prison in the state was  operating at or                                                              
near maximum  capacity.  He  said the graph  did not show  the 600                                                              
prisoners in Arizona.   He then addressed a handout  that had been                                                              
taken from the  DOC website showing growth in  prison populations.                                                              
DOC  experienced  a steady  upward  growth in  prison  populations                                                              
since  the  early 1980s.    He said  DOC  was  adding 150  to  200                                                              
prisoners per  year at an  average growth rate  of 4%.   He wasn't                                                              
aware of  any changes  in law  or demographics  that would  change                                                              
that upward trend.                                                                                                              
SENATOR COWDERY  asked what  the difference  was between  soft and                                                              
hard beds.                                                                                                                      
2:25 p.m.                                                                                                                       
MR. PREWITT said a hard bed was a  jail or prison bed.  A soft bed                                                              
was in  a privately  owned correctional  residential center,  also                                                              
known as a halfway house.  He noted  that 80% of the prisoners are                                                              
felons.   He  said  4,280  hard beds  would  be needed  in  Alaska                                                              
prisons by  the year 2005, leaving  the system roughly  1,380 beds                                                              
short.   He said there  was no question  that there was  a serious                                                              
need for  in-state beds.   He said the  State could deal  with the                                                              
problem by  sending its prisoners  to Arizona; that would  be less                                                              
costly.  He said  Senator Cowdery made a good  point about whether                                                              
that money could  be better spent in the state  circulating in the                                                              
local economy.                                                                                                                  
MR.  PREWITT addressed  another handout  that compared  HB 498  to                                                              
Senator Green's SB 231 and the Governor's  SB 336.  He said SB 231                                                              
and SB 336 were basically variations  on the same theme seeking to                                                              
expand  existing  State  correctional  facilities  throughout  the                                                              
state by roughly  1,100 beds in SB  231 and 1,200 beds  in SB 336.                                                              
He said HB 498 would add 1,000 beds in one site.                                                                                
He addressed a handout that showed  the prison population on March                                                              
25, 2002,  which showed  sentenced and  un-sentenced prisoners  in                                                              
DOC  facilities.   He said  sentenced  and un-sentenced  prisoners                                                              
were being combined under one roof throughout the state.                                                                        
He  said there  were  regional jails  at  statehood and  sentenced                                                              
felons were  housed outside the  state in federal  bureau prisons.                                                              
He said a jail  was a prison to hold offenders  after their arrest                                                              
through their  trial and sentencing.   At that point,  they needed                                                              
to be transferred  to a prison  that addressed their  security and                                                              
program  needs.   He said  regional  jails worked  well until  the                                                              
Cleary v.  State of Alaska  lawsuit in the  early 1980s.   Part of                                                              
the Cleary lawsuit ended up as a  settlement agreement between the                                                              
State and the prisoner plaintiffs  to bring sentenced prisoners in                                                              
the federal bureau prisons back to Alaska.                                                                                      
MR. PREWITT  said the regional jails  lacked the economy  of scale                                                              
to  be cost-effective  and  lacked the  resources  to be  program-                                                              
effective.   He said a prisoner  serving a 10 to  15-year sentence                                                              
should  come out of  prison with  some semblance  of a  behavioral                                                              
change  and  should  be  in  a  prison  close  to  mental  health,                                                              
substance abuse,  vocational training  and educational  resources.                                                              
He  said  there were  barely  enough  of  those resources  in  the                                                              
communities available for the public, let alone prisoners.                                                                      
He said  1,400 of the  prisoners in  Alaska were Native  Alaskans.                                                              
While 6% of the general population  was Native Alaskan, 37% of the                                                              
prison population  was Native Alaskan.  He said  these individuals                                                              
needed the  opportunity to try to  break the recidivism  cycle and                                                              
spreading the services throughout  the state couldn't provide that                                                              
opportunity.    He said  that  wasn't cost-effective  or  program-                                                              
He said  the Whittier  prison would make  room in regional  jails.                                                              
He said  the prison would  have enough  economy of scale  to offer                                                              
services  in  a cost-effective  fashion  and  be close  enough  to                                                              
resources to be able to deliver effective  programming and involve                                                              
the  various  regional  corporate entities  such  as  Southcentral                                                              
Foundation in the delivery of programs.                                                                                         
He addressed  a handout  that compared the  economic impact  of HB
498 to  SB 231 and SB  336.  SB  336 would increase  the operating                                                              
budget by $35 million and the capital  budget by $16.8 million for                                                              
a total  of $51.8  million per year.   SB  231 would increase  the                                                              
operating budget by $29.5 million  and the capital budget by $14.5                                                              
million  for a  total  of $44  million  per year.    HB 498  would                                                              
increase the  operating budget alone  by $14.2 million,  including                                                              
He said the  bottom of the handout  showed a cost per  day per bed                                                              
comparison of the three bills.  SB  231 and SB 336 would carry the                                                              
average cost  of $114  per day per  bed.  There  would also  be an                                                              
amortized daily  capital rate of $36  per day per bed for  a total                                                              
of $152 per  day per bed.  He  said HB 498 would cost  between $89                                                              
and $91 per  day per bed.  He  said HB 498 would set  a ceiling on                                                              
the Whittier prison whereby both  capital and operation would have                                                              
to be  provided for 18%  to 20% less  than the statewide  average.                                                              
He said  HB 498 would mean  a $59 per  day per bed savings  to the                                                              
TAPE 02-24, SIDE B                                                                                                            
2:30 p.m.                                                                                                                       
MR. PREWITT  said the Whittier plan  would cost more  than leaving                                                              
the  prisoners in  Arizona.   The  total  operating  costs of  the                                                              
Whittier  prison  would  be  $32 million  dollars,  which  is  $14                                                              
million more  than was  being spent  in Arizona.   There  would be                                                              
many benefits  to the  state if  the prisoners  were in  Whittier;                                                              
there  would  be  approximately   325  union  jobs  and  over  200                                                              
permanent jobs, as well as indirect jobs.                                                                                       
He said HB  498 was the best  of the three bills  because Whittier                                                              
is situated on a deep-water port  where materials could be shipped                                                              
in inexpensively.  Also, Whittier is situated near  Anchorage with                                                              
a population of  250,000 to 300,000 and available  contractors and                                                              
programs.  Thousands of people commute  from Wasilla and Palmer to                                                              
Anchorage every day.  Whittier is  approximately the same distance                                                              
from Anchorage and people could commute there as well.                                                                          
CHAIRMAN  TAYLOR  asked  if  there  were  any  questions  for  Mr.                                                              
Prewitt.   There  were none.   He  asked Mr.  Charles Campbell  to                                                              
provide testimony.                                                                                                              
MR.  CHARLES   CAMPBELL  said   he  was   a  former  Director   of                                                              
Corrections.  He  believed that legislators knew that  HB 498 is a                                                              
bad idea  and that  SB 231  is a superior  approach to  addressing                                                              
Alaska's prison bed space problems.   He said the committee should                                                              
table HB  498 and  allow the  Legislature to  move forward  with a                                                              
responsible solution to the problem for the sake of efficiency.                                                                 
He thought  that HB 498 probably  appealed to some members  of the                                                              
committee because  the initial  costs would be  less than  SB 231.                                                              
He said it would  be a matter of unwise expediency  to pass HB 498                                                              
because  it would  be  putting an  important  law enforcement  and                                                              
social  service function  at  risk at  the  urging of  a group  of                                                              
people with heavy financial stakes  in the proposition rather than                                                              
being guided by  knowledgeable experts.  He said  the future costs                                                              
could be enormous.                                                                                                              
Having worked  in various  roles in the  field of corrections  for                                                              
over 50  years, he believes  a 1,000-bed  prison in Whittier  is a                                                              
very  bad idea.    He doubted  the  committee  could find  another                                                              
corrections  professional, current  or retired,  who didn't  agree                                                              
with him unless they had some financial  stake in the proposition.                                                              
MR. CAMPBELL said  Whittier is very inaccessible.   Staff would be                                                              
marginally  qualified and  inexperienced with  no law  enforcement                                                              
backup.   Cornell would have a  difficult time recruiting  a staff                                                              
of qualified and  competent line officers and an  even harder time                                                              
keeping them.   He said a  new report in The  Corrections Yearbook                                                              
indicated that the  annual staff turnover rate  in private prisons                                                              
across the country  was 53% and the staff turnover  rate in public                                                              
prisons was 16%.                                                                                                                
He said the Whittier prison would  be a $100 million embarrassment                                                              
and  it  could also  be  a  legal  problem.   He  said  the  legal                                                              
principles  behind the  Cleary  case  were alive  and  well.   The                                                              
Constitution  of   the  State  of  Alaska   requires  correctional                                                              
administration  based on  principles  of reformation.   He  didn't                                                              
think  Cornell had  given  serious thought  to  the principles  of                                                              
He disagreed  with Mr.  Prewitt's comment  that Whittier  would be                                                              
the best  place for the State  to center its correctional  efforts                                                              
such   as  education,   therapy,  Native   culture  programs   and                                                              
vocational programs.  The lack of  community resources in Whittier                                                              
would  make  it  impossible  to  have  an  effective  correctional                                                              
program and the large size of the  prison would make it even worse                                                              
because  large facilities  do not  work  half as  well as  smaller                                                              
facilities.  He said the main concern  was bringing prisoners back                                                              
from Arizona.                                                                                                                   
CHAIRMAN  TAYLOR asked  if Mr.  Campbell  really believed  anybody                                                              
cared about that.   He didn't think people cared.   He thought the                                                              
prisoners were going to stay in Arizona  as long as it was cheaper                                                              
for  them to  be there.   He  said anybody  who tried  to build  a                                                              
prison or tried to do anything in  Alaska would encounter advisory                                                              
votes or  organized labor  and contractors  would fight  about it.                                                              
He said the  prisoners would still  be in Arizona but  there would                                                              
be more of them.  He said if he listened  to Representative Andrew                                                              
Halcro, Alaska  should put out a  bid for Mexico  and Afghanistan.                                                              
He said if we  sent the prisoners far enough and  treated them bad                                                              
enough they could be housed for practically  nothing.  He asked if                                                              
Mr. Campbell  really believed something  would be put  together in                                                              
the state.                                                                                                                      
MR. CAMPBELL  said 95%  of the  people in  Alaska prisons  and the                                                              
Arizona prison were  going to be released back  into the community                                                              
so it  makes sense  to work with  them and try  to make  them less                                                              
likely to commit further crimes.   He said nothing would be worse,                                                              
in terms  of good correctional principles,  than to have  a 1,000-                                                              
bed for-profit  private prison in  Whittier. He said  Whittier was                                                              
hardly better than  Arizona in terms of accessibility  for many of                                                              
the prisoners' families.                                                                                                        
SENATOR COWDERY  didn't agree that  Whittier is inaccessible.   He                                                              
said he  lived in Anchorage  and had been  to Whittier as  many as                                                              
three times in one day.                                                                                                         
CHAIRMAN TAYLOR  hoped there  was some way  to find a  solution to                                                              
bring all the points made to some  sort of balance.  He hoped they                                                              
really were concerned about bringing  prisoners home from Arizona.                                                              
MR.  CAMPBELL  said  he  had worked  in  seven  different  federal                                                              
prisons and  had been in charge of  all of the prisons  in Alaska.                                                              
He couldn't recall one prison where  there wasn't staff that lived                                                              
close enough  to be  able to  assemble an  emergency crew  in five                                                              
minutes.   He said the  hour and a  half Senator Cowdery  spoke of                                                              
was too long a time in an emergency situation.                                                                                  
SENATOR COWDERY said he was only speaking in terms of access.                                                                   
CHAIRMAN TAYLOR asked Mr. David Katzeek to provide testimony.                                                                   
2:41 p.m.                                                                                                                       
MR. DAVID KATZEEK, Alaska Native  Brotherhood (ANB) Camp #2, spoke                                                              
in  Tlingit  throughout  his  testimony  and  translated  it  into                                                              
English.   He thanked the  committee for  allowing him to  share a                                                              
serious,  important and  emotional issue  for the Native  peoples.                                                              
He  said his  grandparents and  ancestors said  the most  powerful                                                              
thing human  beings can do  is work together  for the good  of one                                                              
another.  He  said HB 498 was  an opportunity to be able  to bring                                                              
private  industry,   government,  Native  communities   and  other                                                              
interested  parties  together to  restore  families,  rehabilitate                                                              
individuals, make  the public safe,  reduce recidivism  and reduce                                                              
the costs of prison care.                                                                                                       
He said ANB  Camp #2 was concerned  about the issue because  70 to                                                              
80 of  their people would  be incarcerated in  the next year.   He                                                              
said somebody  was making  money off of  their people,  whether it                                                              
was a private  prison or the State  of Alaska.  He said  the whole                                                              
picture needed to be looked at.                                                                                                 
He said  they went  to Cornell  because they  had an  opportunity.                                                              
They  worked  with the  City  of  Hoonah, DOC,  the  Tlingit-Haida                                                              
Central Council, the Alaska Federation  of Natives, the Department                                                              
of Health and  Human Services, the Department of  Justice and many                                                              
others to  work toward resolving problems  on their own.   He said                                                              
the committee had  the opportunity to practice  good leadership by                                                              
making decisions that  were very difficult and  sometimes not very                                                              
popular in public opinion.                                                                                                      
MR.  KATZEEK finished  by saying,  "Have you  heard the  cry of  a                                                              
little boy  who misses  his daddy?   Do you hear  the crying  of a                                                              
little girl?"  He said that was really  what it was all about.  He                                                              
said it wasn't easy  for him to sit in front of  the committee and                                                              
talk about  something as  difficult and  emotional as this  issue.                                                              
He said  part of  the healing of  the Native  community was  to be                                                              
able to say they wanted to help.                                                                                                
CHAIRMAN  TAYLOR  asked  if  there  were  any  questions  for  Mr.                                                              
Katzeek.  There  were none.  He asked Ms. Margot  Knuth to provide                                                              
MS. MARGOT  KNUTH, Strategic Planning  Coordinator, DOC,  said DOC                                                              
had concerns  about HB  498.  DOC  uses four  factors by  which it                                                              
measures   legislative   proposals   that   address   correctional                                                              
   · Is it safe;                                                                                                                
   · Does it meet the State's need for prison and jail beds;                                                                    
   · Is it within the structure of the government or government                                                                 
     relationship; and                                                                                                          
   · Is it cost-effective?                                                                                                      
She said  HB 498 failed  on all four standards.   She said  HB 498                                                              
was not  the best of  the three private  prison proposals  to come                                                              
before the legislature; it was the worst.                                                                                       
She  said Whittier  is a  difficult location  for that  size of  a                                                              
prison.   It has a  population of 182  people.  Adequate  fire and                                                              
police protection  are necessary for  a large prison  and Whittier                                                              
has neither.  Whittier does have  power and water, which is a good                                                              
start and land  could be rented from ARRC. Whittier  does not have                                                              
an adequate  sewage treatment  plant for such  a large  prison. It                                                              
would cost  $4 million to build  a new sewage treatment  plant for                                                              
the  prison alone  or  $9 million  to expand  Whittier's  existing                                                              
sewage  treatment plant.   She  said there  were some  significant                                                              
infrastructure costs to be considered.  In addition, housing would                                                              
have  to  be  provided  for  staff,   educators,  substance  abuse                                                              
counselors, clergy  and medical  staff for the  prison.   She said                                                              
they would  probably have  to commute  from Anchorage since  there                                                              
wasn't any housing.                                                                                                             
MS.  KNUTH didn't  believe  that Whittier  has  the capability  of                                                              
government to be  responsible for the operation of  a prison.  She                                                              
said Whittier  had never bonded a  project, let alone one  of this                                                              
magnitude.  She  said  the  bonding   would  require  a  level  of                                                              
sophistication Whittier  does not have  and the prison  would cost                                                              
at least $110 million.                                                                                                          
She said a private company usually  built private prisons and then                                                              
opened its  doors for  business and negotiated  a daily  cost with                                                              
interested clients.   She said the  cost for 700  Alaska prisoners                                                              
in Arizona was $57  per day per bed.  She said  Alaska was able to                                                              
change the rate  and the number of prisoners depending  upon needs                                                              
and market  pressures.   She said  there is  an excess of  private                                                              
prison bed  space in the  United States  and the daily  rates were                                                              
falling.   She said the opening  of the Anchorage jail  created an                                                              
additional 200 in-state beds, which  reduced the number of Arizona                                                              
prisoners to  600.  DOC  was in the  process of negotiating  daily                                                              
rates for those  prisoners and expected to agree  to about $53 per                                                              
day per bed or $11.6 million per  year.  She said every dollar per                                                              
day per bed represents $250,000 in Alaska's operating budget.                                                                   
2:47 p.m.                                                                                                                       
CHAIRMAN TAYLOR asked if she thought  the State could get a better                                                              
deal if the prisoners went to New Mexico, Mexico or Afghanistan.                                                                
MS.  KNUTH said  there  were  significantly cheaper  options  than                                                              
Arizona.    She  said  housing the  prisoners  in  Arizona  was  a                                                              
compromise  between appropriate care  for inmates  and cost.   She                                                              
said DOC  had monitors at the  Arizona prison.  The  contract with                                                              
Arizona  is fairly  strict in  the needs  for inmates.   She  said                                                              
Alaska  requires greater  programming and  higher staffing  ratios                                                              
than  any other  CCA clients  in  the United  States because  they                                                              
expected better treatment.                                                                                                      
CHAIRMAN TAYLOR asked why.                                                                                                      
MS. KNUTH  said that  is the  personal commitment  of DOC.   Other                                                              
prisoners  housed  in Arizona  were  U.S. Marshall's  inmates  and                                                              
inmates from  Hawaii, Montana  and Washington,  D.C.  The  Alaskan                                                              
representatives  worked  with  the representatives  of  the  other                                                              
inmate  populations  and  were  aware  of  how  many  hours  other                                                              
jurisdictions spent  working with  CCA and what their  programming                                                              
requirements  were.  She  said Alaska  had the greatest  presence.                                                              
She said  the only client  that was charged  more was  the federal                                                              
government for some of its inmates.                                                                                             
MS.  KNUTH said  the proposal  for  a private  prison in  Whittier                                                              
would cost  $32.8 million  per year  for 25 years.   She  said DOC                                                              
only paid  for occupied  beds in  Arizona and  could withdraw  its                                                              
prisoners at any time and stop paying.   She said HB 498 calls for                                                              
a 25-year commitment to $90 per day  for 1,000 beds, regardless of                                                              
whether all  the beds are  occupied or  not and that  doesn't make                                                              
economic sense.                                                                                                                 
She  disputed Mr.  Prewitt's  representation  that DOC  facilities                                                              
were over  capacity. She  said that was  probably true on  the day                                                              
that the  snapshot was  taken but since  that time, the  Anchorage                                                              
jail opened  and increased  total capacity by  over 250  beds. She                                                              
said  DOC  was  at  approximately   95%  capacity  statewide.  Two                                                              
facilities  were  over capacity  that  week because  of  logistics                                                              
problems in transportation. DOC could  house the Arizona prisoners                                                              
in the  Whittier prison,  but that  would only  occupy 600  of the                                                              
1,000 beds.  She understood building  for the future but cautioned                                                              
against speculating  too high.  She said DOC experienced  a growth                                                              
rate of  200 prisoners per  year during  some years but  there had                                                              
been no growth in the previous two years.                                                                                       
She  said SB  336  proposed regional  expansion,  which is  needed                                                              
because of  the pretrial  population and short-term  misdemeanants                                                              
that  only   spend  a  short  period   of  time  in   the  system.                                                              
Approximately 33,000 people were  booked into the system each year                                                              
but only 5,000 of them were retained  at any given time.  She said                                                              
most of  these people couldn't go  through the prison  in Arizona,                                                              
Whittier,  SCCC or the  Palmer Correctional  Center (PCC)  because                                                              
they needed to be  housed close to their courts.   There were also                                                              
long-term felons who needed to be  in a prison with programs, such                                                              
as SCCC, PCC and Wildwood Correctional  Center.  She said there is                                                              
a need for 1,200 beds but not in one location.                                                                                  
SENATOR COWDERY asked  about the town where the  prison in Arizona                                                              
was located.                                                                                                                    
MS. KNUTH  said Florence is  about an hour  and a half  outside of                                                              
Phoenix and has a population of approximately 60,000.                                                                           
SENATOR  COWDERY asked  if  Florence has  public  water and  sewer                                                              
MS. KNUTH  said it does, as  well as adequate law  enforcement and                                                              
fire departments.                                                                                                               
SENATOR COWDERY asked if the prison is inside city limits.                                                                      
MS. KNUTH  said it  is.  She  noted that  Florence is the  largest                                                              
prison town in the United States.                                                                                               
She said  the contract proposed in  HB 498 represented  about $820                                                              
million.  She  said Mr. Prewitt compared the Whittier  estimate of                                                              
$90 per  day to the  DOC average  of $150 per  day.  She  said the                                                              
$150 also includes $32 for major  medical coverage, transportation                                                              
costs and  administrative costs.   She said the  proper comparison                                                              
would be $150 per day per bed spent  in DOC facilities to $122 per                                                              
day per bed  in Whittier.  She  noted that the State  wouldn't own                                                              
the  prison after  the  25-year contract  and  ownership would  be                                                              
worth something.   She said  the State  could build and  operate a                                                              
single prison for the same amount  of money or less but it doesn't                                                              
need one.   She said HB 498  proposes a prison in the  wrong place                                                              
with  the wrong  type of beds.   She  said DOC  is also  concerned                                                              
about the lack of a competitive procurement process.                                                                            
CHAIRMAN TAYLOR asked Mr. James Price to provide testimony.                                                                     
3:00 p.m.                                                                                                                       
MR. JAMES  PRICE believed  HB 498 was  a bad piece  of legislation                                                              
and that the statements made in support  of HB 498 were incorrect.                                                              
He didn't  believe it  would be cost-efficient  or that  the State                                                              
would see  any savings.   He believed  the location of  the prison                                                              
would drive costs up.                                                                                                           
He said a previous witness said there  was a lot of support for HB
498 in  Whittier.  He  said the Kenai  Peninsula Borough  made the                                                              
same claim about its private prison  proposal.  However, 73% voted                                                              
against  the  proposal  with  the largest  voter  turnout  of  any                                                              
borough election.   He  said there  was opposition throughout  the                                                              
large borough  so he  didn't think  it was a  "not-in-my-backyard"                                                              
He argued  that the  Whittier proposal  was worse  than the  Kenai                                                              
proposal and  believes that the lack  of local opposition  was due                                                              
to the fact that there was no provision  in the city code to allow                                                              
for  a vote  of the  people.   He  said people  were reluctant  to                                                              
oppose the Kenai  proposal because of the  political ramifications                                                              
of speaking out against a project  supported by local politicians.                                                              
He said that was probably also the case in Whittier.                                                                            
He also expressed  concern about the sole-source  contract because                                                              
Cornell got  the contract  without really having  to go  through a                                                              
competitive bidding  process.   He said the  City of  Whittier was                                                              
going  to  own  the  prison and  he  didn't  understand  why  they                                                              
wouldn't want to put the project  out for bid to bring costs down.                                                              
MR.  PRICE had  18  pages of  summary  detailing  the failures  of                                                              
private prisons in general and Cornell  in particular.  He said it                                                              
was interesting that auditors were  already looking at Cornell for                                                              
possible  conflicts  in violation  of  the Security  and  Exchange                                                              
Commission  rules.   He said  Cornell's  financial problems  could                                                              
cause  difficulties in  their management  of a  private prison  in                                                              
He urged the committee to kill HB 498.                                                                                          
CHAIRMAN TAYLOR asked Ms. Elsie Hendryx to provide testimony.                                                                   
MS. ELSIE  HENDRYX, Kenai Native  Association (KNA),  supported HB
498 and  urged the committee  to support the  bill.  She  said KNA                                                              
wanted to get  their people back into Alaska and  Whittier was not                                                              
that  far away  from Anchorage.    She believed  inmates would  be                                                              
closer to  their families,  which would  help the recidivism  rate                                                              
with the Native people.                                                                                                         
CHAIRMAN TAYLOR asked Mr. Ron Wilson to provide testimony.                                                                      
MR. RON WILSON  said he had  been a correctional officer  with DOC                                                              
for almost  19 years but the  opinions he was expressing  were his                                                              
own.  He first had contact with private  prisons when he worked in                                                              
Nome and Cornell wanted to place  a halfway house next to the high                                                              
school. The  people of Nome decided  that wasn't a good  idea.  He                                                              
said  communities in  Alaska, such  as Delta  Junction, Kenai  and                                                              
Wrangell,  decided private  prisons  were  not a  good  idea.   He                                                              
wondered what  kind of rules Cornell  had to play by.   He said if                                                              
they were playing baseball they would  have struck out already; if                                                              
they were playing basketball they  would have been penalized for a                                                              
flagrant foul  when they sued Delta  Junction for $1 million.   He                                                              
said despite all this Cornell was still in the game.                                                                            
He knew how  Cornell operated.   He used the following  analogy to                                                              
     They'll  come  into  your  town;   come  in  with  their                                                                   
     corporate  aircraft, their big  cars, their big  wallets                                                                   
     and promise you  a trip to the moon.  And  while they're                                                                   
     wining and  dining you and  doing everything  else, once                                                                   
     they have the  contract with all the i's  dotted and the                                                                   
     t's crossed and  it's so iron clad that the  turrets are                                                                   
     actually bleeding, they'll set  you out front and you'll                                                                   
     be  looking down  the road  and Jethro  Bodean from  the                                                                   
     Beverly Hillbillies  will be  coming down the  road with                                                                   
     his truck and  pick you up and he will be  taking you to                                                                   
     the moon.   Now the  only place  you'll be ending  up is                                                                   
     the Valley of the Moon Park  [ph.] in Anchorage and then                                                                   
     he'll tell you you have to get your own ride home.                                                                         
MR. WILSON said  private prisons were not a good  idea and most of                                                              
the communities  that had  been presented with  the proposal  of a                                                              
private prison  agreed.   He said SB  231 would help  prisoners by                                                              
increasing  the   size  of  prisons   in  local   communities  and                                                              
increasing revenues in local communities.   He had the opportunity                                                              
to observe  Native prison  populations reacting  with people  from                                                              
their community  when he worked  in Nome.   He said even  the most                                                              
obstinate Native prisoner  would lose their tough  demeanor in the                                                              
presence of  an elder.  He  said putting prisoners close  to their                                                              
own communities could only help in their rehabilitation.                                                                        
CHAIRMAN TAYLOR asked Mr. Jim LeCrone to provide testimony.                                                                     
MR.  JIM  LECRONE, Public  Safety  Employees  Association  (PSEA),                                                              
wanted to coin  a new term, "situational accessibility."   He said                                                              
Mayor  Butler mentioned  that  half of  the  teachers in  Whittier                                                              
commuted.   He suspected  that it  wasn't a  major emergency  if a                                                              
teacher missed a day of school because  of bad weather.  He worked                                                              
with DOC several  years previously and there was  a landslide that                                                              
closed the  highway between  Anchorage and  Seward for  five days.                                                              
He said most people who worked at  the Seward prison commuted on a                                                              
weekly basis.  He said the relief  crew was prevented from getting                                                              
to Seward because  of the landslide.   He said that was  not a bad                                                              
situation because  enough people lived  in Seward to  maintain the                                                              
security at SCCC.   He said that was "situational  accessibility."                                                              
He said  a crew couldn't  be expected to be  on duty more  than 24                                                              
hours maintaining security control over 1,000 inmates.                                                                          
He had  never heard  Cornell address  the Alaska Police  Standards                                                              
Council (APSC) requirements for certifying  correctional officers.                                                              
He said  Alaska statute  mandates that  all correctional  officers                                                              
must meet APSC standards, which is  a lengthy process of training,                                                              
psychological evaluations and background  evaluations. He expected                                                              
the  legislature  to  hold  Cornell   to  the  same  standard  but                                                              
suspected  it would  raise  their  labor costs  significantly.  He                                                              
urged the committee to let HB 498  die.  He said SB 231 and SB 336                                                              
were much better bills.                                                                                                         
CHAIRMAN TAYLOR asked Mr. Rick VanHatten to provide testimony.                                                                  
MR. RICK  VANHATTEN, Alaska Correctional  Officers, said he  was a                                                              
16-year  correctional   officer  and   president  of   the  Alaska                                                              
Correctional  Officers   chapter  of   PSEA.    He   was  speaking                                                              
personally and on  behalf of the 735 correctional  officers in the                                                              
state.  He didn't want to repeat  the points that had already been                                                              
made.    He  said SB  231  was  the  best  bill for  DOC  and  the                                                              
CHAIRMAN TAYLOR asked Mr. Brad Wilson to provide testimony.                                                                     
MR.  BRAD WILSON,  PSEA, said  PSEA represented  the Alaska  State                                                              
Troopers, police  departments and correctional officers.   He said                                                              
PSEA was opposed to HB 498.  He said  the committee should support                                                              
SB 231 if they were concerned about  the recidivism rate.  He said                                                              
spreading prisoners  throughout the state  would allow them  to be                                                              
in their  own communities  with their own  community support.   He                                                              
said that reduced recidivism.                                                                                                   
He said  Cornell said  their officers  would meet APSC  standards.                                                              
He asked  why anyone who could  meet APSC standards would  work in                                                              
Whittier with the  long commute and less money if  they could work                                                              
for DOC  with a  20-year retirement  program, benefits  and better                                                              
pay.  He said  DOC was hiring and had positions  that had not been                                                              
He  was involved  in the  private prison  proposals in  Anchorage,                                                              
Delta Junction,  Kenai and  Wrangell.  He  said in every  case the                                                              
local  government  said they  didn't  need  a vote  because  their                                                              
people were 85% in support of it.   He said that always turned out                                                              
to be wrong when  it did go to a vote.  He said  the same argument                                                              
was being  used for Whittier.   He said  PSEA did everything  they                                                              
could to get a  vote in Whittier.  He said if  Mayor Butler was so                                                              
sure that 85%  of the community was  in support of the  prison, he                                                              
would  have a  vote.    He said  polling  and petitions  could  be                                                              
subjective  because they were  given by  supporters of  the prison                                                              
who presented  a one-sided story.   He agreed with  Representative                                                              
Eric  Croft's  statement that  HB  498  was  not about  a  private                                                              
prison;  it  was about  powerful  people  putting money  into  the                                                              
pockets of one corporation.  He said  we were better than that and                                                              
we needed to say no.                                                                                                            
CHAIRMAN TAYLOR said  the committee moved SB 231  out of committee                                                              
about two and a  half weeks previously.  He asked  Ms. Dee Hubbard                                                              
to provide testimony.                                                                                                           
MS. DEE HUBBARD  said she was a  mother from Sterling.   She asked                                                              
the committee  not to vote HB 498  out of committee. She  said Mr.                                                              
Prewitt emailed an RFQ to the city  manager of Whittier on October                                                              
23.     She said  it was  the  same RFQ  that  was to  be used  in                                                              
Wrangell.  She  said Mr. Prewitt also emailed a  list of companies                                                              
to send  the RFQ to  because the city  manager didn't know  who to                                                              
send it to.   She said a  number of communities were  "being asked                                                              
to jump through the Cornell hoops  with Mr. Prewitt giving them as                                                              
much information as  he possibly could to help them."  She said it                                                              
was odd that  Mr. Prewitt, who represented Cornell,  gave Whittier                                                              
an RFQ for Cornell to respond to.                                                                                               
She had found  nine permits that  Cornell would have to  apply for                                                              
and satisfy;  some of which  could be very  costly.  She  said the                                                              
incinerator could  cost $5 to $10  million.  She said no  one knew                                                              
what  the project  would  cost because  no  feasibility study  was                                                              
required.  She said there was a big  difference between building a                                                              
prison  in Anchorage  and  building  a prison  in  Whittier.   For                                                              
example, a prison in Whittier would  need to be built to withstand                                                              
a 200-pound  per square foot roof load.   She said that  was a lot                                                              
more concrete and steel than was used in Anchorage.                                                                             
She spoke to an analysis she had  given committee members and said                                                              
Cornell  and  Whittier  expected  to have  some  costs  reimbursed                                                              
through bonds.   She said the mayor had been living  in Juneau for                                                              
three weeks with Cornell covering those costs.                                                                                  
TAPE 02-25, SIDE A                                                                                                            
3:18 p.m.                                                                                                                       
MS. HUBBARD said Sec. 7 of HB 498  appeared to bundle the YKCC and                                                              
Whittier projects together.                                                                                                     
CHAIRMAN TAYLOR asked Mr. John Duffy to provide testimony.                                                                      
MR. JOHN DUFFY, Manager, Matanuska-Susitna  (Mat-Su) Borough, said                                                              
SB  231 was  the borough's  preference.   He  agreed with  Senator                                                              
Cowdery's  statement  that Alaskan  dollars  needed  to remain  in                                                              
Alaska to provide economic opportunities  for Alaska residents and                                                              
He said  the Whittier  prison would  cost $89 to  $91 per  day per                                                              
bed.   He  said other  facilities  have comparable  costs, if  not                                                              
less,  i.e. PCC  costs  $58 per  day per  bed.   He  passed out  a                                                              
handout that  showed the costs  of correctional facilities  in the                                                              
state and  noted that  other facilities  also  cost less than  the                                                              
Whittier proposal.                                                                                                              
MR.  DUFFY said  the capital  costs associated  with the  Whittier                                                              
prison would need to be scrutinized  closely. The sewage treatment                                                              
prison could cost  between $4 million and $9 million  according to                                                              
DEC estimates.   Electrical power  was available but  a substation                                                              
would be  needed to  connect it  to the  prison, which would  cost                                                              
$500,000 to $750,000.                                                                                                           
He  said there  are also  other reasons  to  support the  regional                                                              
approach.  Unemployment rates throughout  the state are very high:                                                              
7.7% in  the Mat-Su  and Ketchikan Gateway  Boroughs; 9.6%  in the                                                              
Kenai Peninsula  Borough; and  10.6% in Bethel.   He said  most of                                                              
the workers for the Whittier prison  would commute from Anchorage,                                                              
where there was a 4.3% unemployment  rate. The Mat-Su Borough felt                                                              
the  economic  benefits  of  prison  expansion  should  be  shared                                                              
throughout  the  state.  He  passed   out  a  memo  from  Northern                                                              
Economics  that  estimated  the effects  of  prison  expansion  as                                                              
detailed in SB 231. He said the regional  approach would result in                                                              
approximately  300 jobs in  Ketchikan, 200  jobs in Fairbanks  and                                                              
over  1,000 jobs  each in the  Mat-Su  and Kenai.  He said SB  231                                                              
would share  the economic impacts  of prison expansion  throughout                                                              
the state.                                                                                                                      
He   believed   providing   a   regional   approach   would   help                                                              
rehabilitation rates because prisoners  would be located closer to                                                              
their families and networks.                                                                                                    
SENATOR THERRIAULT  informed the committee  that he was  not going                                                              
to propose  an amendment  to include  language for  PCC in  HB 498                                                              
because it would trigger a title change.                                                                                        
SENATOR  ELLIS proposed  Amendment  1 to  delete Sec.  7. He  said                                                              
there  was  progress  earlier  in the  process  to  disengage  the                                                              
Whittier  and YKCC  projects  and  the deletion  of  Sec. 7  would                                                              
ensure that the two weren't entangled.                                                                                          
SENATOR  THERRIAULT asked  who brought  the  amendment to  Senator                                                              
Ellis and why legislative drafters didn't draft it.                                                                             
SENATOR ELLIS said he believed Senator  Hoffman's staff drafted it                                                              
in consultation with legislative drafters.                                                                                      
SENATOR THERRIAULT said  Sec. 7 made it appear  that nothing would                                                              
happen at YKCC unless the Whittier proposal went forward.                                                                       
CHAIRMAN TAYLOR objected  to the motion for the purpose  of a roll                                                              
call vote.                                                                                                                      
Upon a roll call  vote, Senator Ellis voted in  favor of Amendment                                                              
1 and  Senators Cowdery and  Therriault and Chairman  Taylor voted                                                              
against Amendment 1.  Therefore,  Amendment 1 failed to be adopted                                                              
by a vote of one to three.                                                                                                      
SENATOR  COWDERY moved  CSHB  498(FIN) am  out  of committee  with                                                              
attached fiscal notes and individual recommendations.                                                                           
SENATOR  ELLIS  objected.   He  strongly  supported  the  regional                                                              
approach proposed in  SB 231.  He would rather  see money invested                                                              
in vocational  and technical education, other  education programs,                                                              
other  alternatives in  diversion programs  and rehabilitation  at                                                              
other  levels than  new prisons.   He  said more  prison space  is                                                              
needed but there was no contest between HB 498 and SB 231.                                                                      
CHAIRMAN TAYLOR asked if there was  any further discussion.  There                                                              
was none.                                                                                                                       
Upon  a  roll  call vote,  Senators  Cowdery  and  Therriault  and                                                              
Chairman Taylor voted  in favor of moving CSHB 498(FIN)  am out of                                                              
committee and Senator Ellis voted  against moving CSHB 498(FIN) am                                                              
out  of committee.    Therefore,  CSHB 498(FIN)  am  moved out  of                                                              
committee by  a vote of  three to one  with attached  fiscal notes                                                              
and individual recommendations.                                                                                                 
The  next  order   of  business  before  the   committee  was  the                                                              
confirmation  hearing  for  Arthur   S.  Robinson  to  the  Select                                                              
Committee on Legislative Ethics.                                                                                                
  CONFIRMATION HEARING: SELECT COMMITTEE ON LEGISLATIVE ETHICS                                                              
CHAIRMAN TAYLOR  asked Mr.  Arthur S. Robinson  to explain  why he                                                              
would  like  to  serve on  the  Select  Committee  on  Legislative                                                              
MR. ARTHUR S. ROBINSON  said he was asked to fill  the position by                                                              
Chief Justice Dana  Fabe.  He said it had been  a while since he'd                                                              
done public  service.   He was a  district attorney almost  thirty                                                              
years ago and worked  in State government for a while.   He wanted                                                              
to give something back to the communities.   He thought serving on                                                              
the  Select   Committee   on  Legislative   Ethics  would   be  an                                                              
opportunity to do that without doing full-time public service.                                                                  
CHAIRMAN  TAYLOR  asked  if  there  were  any  questions  for  Mr.                                                              
Robinson.    There  were  none.   He  appreciated  Mr.  Robinson's                                                              
willingness  to serve.   He said  it isn't an  easy task  and many                                                              
people get the issues of morality and ethics confused.                                                                          
MR. ROBINSON agreed the issues are different.                                                                                   
CHAIRMAN  TAYLOR  appreciated  the  fact that  he  understood  the                                                              
distinction.  He wished him the best in his efforts.                                                                            
SENATOR COWDERY  moved that the Senate Judiciary  Committee report                                                              
a letter  to the full Senate  recommending Arthur S.  Robinson for                                                              
confirmation of the full body.                                                                                                  
There being no objection, it was so ordered.                                                                                    
The final order of business before the committee was SJR 13.                                                                    
                SJR 13-CONST. AM: PERMANENT FUND                                                                            
CHAIRMAN   TAYLOR  said   SJR  13  proposed   amendments   to  the                                                              
Constitution  of  the  State  of Alaska  relating  to  the  Alaska                                                              
permanent fund.  He asked Mr. Jay Hogan to provide testimony.                                                                   
MR. JAY HOGAN  referred the committee  to his letter dated  May 3,                                                              
2002.  He  wanted to make one  correction to that letter  and said                                                              
HB 304 had passed out of the House  of Representatives and was now                                                              
in the Senate.  He said the letter explained his position.                                                                      
He said  a great  deal of change  had been  made to the  permanent                                                              
fund by statute  over the past 26  years.  He said  the investment                                                              
policy  and inflation  proofing was  provided for  by statute,  as                                                              
well as a  host of other improvements.   He said that  was the way                                                              
it was supposed to be.                                                                                                          
He said he  sat through many  committee hearings in 1975  when the                                                              
statutory permanent fund was passed  by the legislature and vetoed                                                              
by  the governor.   He  said the  discussions in  1976 focused  on                                                              
making it a  flexible provision so that future  legislatures would                                                              
be able  to change the administrative  structure, purposes  of use                                                              
and other things.   He said the  only provisions that were  put in                                                              
the Constitution were  the concept of a trust fund,  the source of                                                              
income (25%  of certain  mineral royalties)  and that funds  could                                                              
not be withdrawn once they were in the corporate status.                                                                        
MR. HOGAN  said Wyoming had created  a payout provision  for their                                                              
public school  fund and permanent  mineral trust fund  by statute.                                                              
He said  other states did  the same thing  by statute  and through                                                              
their constitution.   He said it was historically  correct to make                                                              
this change by statute.  He didn't  understand why there should be                                                              
a constitutional  provision  when a statutory  provision  would do                                                              
the job.                                                                                                                        
3:35 p.m.                                                                                                                       
CHAIRMAN  TAYLOR  said  it seemed  that  SJR  13  would set  up  a                                                              
disconnect between the earnings and  dividends by going to a fixed                                                              
average percentile  instead of  the 5-year  income averaging.   He                                                              
asked if  SJR 13 would cause  dividends to eat into  the principal                                                              
of the fund.                                                                                                                    
MR. HOGAN  said from his own  research on the issue  he discovered                                                              
that there were  a number of endowments and trust  funds that used                                                              
the 5%  payout method.   The  theory is  that over  time it  would                                                              
allow for  inflation proofing of  the fund and allow  a reasonable                                                              
return of money to be used for other  purposes.  He said the State                                                              
had  more than  20  years  of experience  inflation  proofing  the                                                              
permanent fund by  statute by putting earnings  reserve money into                                                              
it and inflation  proofing on an  annual basis.  He said  that was                                                              
the  choice  of  those  individual  legislatures.    He  felt  the                                                              
permanent fund  had been  doubly inflation proofed.   He  said the                                                              
legislature should  retain the ability  to choose what to  do with                                                              
the income of the permanent fund.                                                                                               
SENATOR THERRIAULT  commented that  Mr. Hogan's letter  provided a                                                              
good synopsis of the history of the  permanent fund and what other                                                              
states were  doing.  He would probably  use the first part  of the                                                              
letter that talked  about the creation of the permanent  fund.  He                                                              
received an email from a constituent  that said the permanent fund                                                              
was created to dish  out dividends.  He was amazed  that there was                                                              
so much misinformation out there.                                                                                               
He  said  the  Senate  State  Affairs  committee  substitute  (CS)                                                              
addressed the  issue of the  possibility of eroding  the principal                                                              
of the  permanent fund.   He referred  to page  1, line  16, which                                                              
stated,  "Money  may be  appropriated  from the  earnings  reserve                                                              
account."   He said Section 1  specified that all income  from the                                                              
permanent fund  would be retained  in a separate  earnings reserve                                                              
account.   He  said  the  5% draw  was  limited to  that  earnings                                                              
reserve account and would not be taken from the principal.                                                                      
CHAIRMAN TAYLOR asked if there were  any further questions for Mr.                                                              
Hogan.   There were  none.  He  asked Ms.  Sheila Howe  to provide                                                              
MS. SHEILA  HOWE, N.E.C.,  said she  was a mother.   She  said she                                                              
spent most of  the summer reading over the information  on SJR 13.                                                              
She supports  SJR 13  because the bill  would give some  stability                                                              
and  permanency  to  the  inflation   proofing  qualities  of  the                                                              
permanent  fund.   She  understood  that  the permanent  fund  was                                                              
initially intended to  meet the needs of the state  in the future.                                                              
She wasn't  concerned  about the  dividends paid  out on a  yearly                                                              
basis.   She saw the  need to protect  the permanent  fund against                                                              
inflation and perpetuities and thought  SJR 13 was the best way to                                                              
accomplish that.                                                                                                                
SENATOR THERRIAULT asked if she was  in Alaska during the advisory                                                              
vote  on the  permanent fund  dealing with  the long-range  fiscal                                                              
MS.  HOWE said  she had  been in  Alaska  since 1969  and had  not                                                              
missed an election.                                                                                                             
SENATOR  THERRIAULT  asked if  she  felt comfortable  telling  the                                                              
committee how she voted.                                                                                                        
MS. HOWE was against that proposal  because of the way it was laid                                                              
out.  She wasn't against using the APF.                                                                                         
SENATOR THERRIAULT  said Mr. Eddie  Burke [ph.] said he  spoke for                                                              
Ms. Howe.   He said Mr. Burke's  editorials lumped Ms.  Howe's no-                                                              
vote with the  83% that voted against  the proposal.  He  said Ms.                                                              
Howe's position was very different than Mr. Burke's.                                                                            
CHAIRMAN TAYLOR asked Mr. Robert Storer to provide testimony.                                                                   
MR.  ROBERT  STORER, Executive  Director,  Alaska  Permanent  Fund                                                              
Corporation (APFC),  Department of  Revenue (DOR), said  the board                                                              
of APFC  believed that inflation  proofing should  be memorialized                                                              
in the  Constitution.  He  said that could  be done by  creating a                                                              
spending limit  of no more  than 5% of  the moving average  of the                                                              
APF over  a five-year period.   He said only the  earnings reserve                                                              
of the APF would  be available and the principal  of the APF would                                                              
be protected.  He said SJR 13 was  heard extensively in the Senate                                                              
State Affairs Committee.                                                                                                        
MR. JIM  KELLY, Director  of Communications,  APFC, DOR,  referred                                                              
the  committee  to  the  memorandum  from  Mr.  Storer  requesting                                                              
amendments  to SJR  13 dated  April 23,  2002.   He addressed  the                                                              
fourth paragraph  on page 2 of  the memorandum, which  requested a                                                              
technical amendment:                                                                                                            
     Sec.  30.  Transition.   On  the effective  date of  the                                                                 
     2002 amendments  relating to  the Alaska permanent  fund                                                                   
     (art.  IX,  sec.  15),  the  balance  [PORTION]  of  the                                                               
     statutory earnings reserve account  (AS 37.13.145) [THAT                                                                   
     CONSISTS   OF  INCOME]   of   the  permanent   fund   is                                                                   
     transferred to the earnings  reserve account established                                                                   
     in Section 15(a) [15(b)] of Article IX.                                                                                
MR.  KELLY   said  he  discussed   this  amendment   with  Senator                                                              
Therriault and  believed he  was supportive of  it.  He  said APFC                                                              
had not had time to show the Senate  State Affairs CS to the board                                                              
and  legal counsel  when it  was moved  out of  committee.   After                                                              
legal counsel reviewed the CS, it  was discovered that 15(b) would                                                              
need to be  changed to 15(a).   He said that was just  a technical                                                              
error.  The addition of the word  "balance" and the subtraction of                                                              
"that consists  of income" would  be necessary to make  the intent                                                              
clear.  He said  the APF's market value was the  combined total of                                                              
the principal,  the realized and  the unrealized income.   He said                                                              
5% of  that would be the  payout limit in  any given year,  all of                                                              
which would come from the earnings reserve account.                                                                             
He  asked for  a further  amendment  to add  the words  "inflation                                                              
proofing" after the  words "relating to" in the first  line of the                                                              
title.   He said SJR  13 was really  about inflation  proofing the                                                              
APF.   He said  the 5% limit  would ensure that  the APF  was made                                                              
permanent  in  the  Constitution.    He  said  as  long  as  those                                                              
provisions  were  in  the  Constitution,  APFC would  be  able  to                                                              
provide  a growing  income stream  in  addition to  what would  be                                                              
needed  to be  retained  to offset  inflation.    He believed  the                                                              
change  in the  title  would  make it  easier  for  the people  to                                                              
support SJR 13 at the polls after it passed the legislature.                                                                    
CHAIRMAN  TAYLOR moved  Amendment 1  to add  the words  "inflation                                                              
proofing" after the  words "relating to" on page 1,  line 1 in the                                                              
title; replace the word "portion"  with the word "balance" on page                                                              
2, line 9; strike  the words "that consists of income"  on page 2,                                                              
line 10; and replace "15(b)" with "15(a)" on page 2, line 11.                                                                   
3:50 p.m.                                                                                                                       
SENATOR THERRIAULT  said the  wording of the  title had  gone back                                                              
and forth between the legislative  drafters and the APFC.  He said                                                              
bill titles  were supposed  to express the  contents of  the bill.                                                              
He  understood  that  the  APFC  wanted  the  title  reworded  for                                                              
salesmanship but  inflation proofing didn't really  cover the full                                                              
contents of the  bill.  He said  SJR 13 was more than  just an act                                                              
dealing with  inflation proofing  because it would  set up  the 5%                                                              
draw.   He said inflation  proofing would  be accomplished  but he                                                              
didn't think that would be a correct title for the bill.                                                                        
SENATOR DONLEY said it wouldn't be a legal title.                                                                               
CHAIRMAN TAYLOR removed the title change from Amendment 1.                                                                      
MR. KELLY  said the  rest of the  amendment was for  clarification                                                              
purposes.  He said  the point of that section was  to transfer all                                                              
of  the  money  that  was in  the  earnings  reserve  account  and                                                              
everything  that everybody  thought  was in  the earnings  reserve                                                              
account.   He  said that  was currently  in  a statutory  earnings                                                              
reserve account and SJR 13 would  set up a constitutional earnings                                                              
reserve  account.   They  just  wanted to  be  sure  that the  two                                                              
accounts matched up.                                                                                                            
SENATOR  THERRIAULT  said  that  was added  in  the  Senate  State                                                              
Affairs Committee so that the legislature  wouldn't have access to                                                              
the earnings reserve  account by a simple majority  vote.  He said                                                              
the new  account would  be protected  and only  5% per year  would                                                              
come out.                                                                                                                       
MR.  KELLY said  the words  "that  consists of  income" should  be                                                              
stricken  because  they  suggested that  the  unrealized  earnings                                                              
would not be transferred when they should be.                                                                                   
SENATOR THERRIAULT  said they wanted to make sure  that everything                                                              
from the  statutory earnings  reserve account  got moved  into the                                                              
constitutional earnings reserve account.                                                                                        
CHAIRMAN TAYLOR asked if there was objection to Amendment 1.                                                                    
There being no objection, Amendment 1 was adopted.                                                                              
CHAIRMAN TAYLOR asked  if there was further discussion  on SJR 13.                                                              
There was none.  He asked if anyone  else wished to testify on SJR
13.  There was nobody.                                                                                                          
SENATOR  THERRIAULT  moved CSSJR  13(JUD)  out of  committee  with                                                              
attached fiscal note and individual recommendations.                                                                            
CHAIRMAN TAYLOR noted that there was an objection.                                                                              
Upon a roll call vote, Senators Cowdery,  Ellis and Therriault and                                                              
Chairman  Taylor voted  in favor  of moving CSSJR  13(JUD)  out of                                                              
committee and  Senator Donley voted  against moving  CSSJR 13(JUD)                                                              
out  of  committee.    Therefore,   CSSJR  13(JUD)  moved  out  of                                                              
committee by a vote  of four to one with attached  fiscal note and                                                              
individual recommendations.                                                                                                     
There being no further business before the committee, the Senate                                                                
Judiciary Committee meeting was adjourned at 3:54 p.m.                                                                          

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