Legislature(2003 - 2004)

01/27/2004 01:30 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                        January 27, 2004                                                                                        
                           1:30 p.m.                                                                                            
                                                                                                                                
TAPE(S) 04-1                                                                                                                  
                                                                                                                              
MEMBERS PRESENT                                                                                                               
Senator Con Bunde, Chair                                                                                                        
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Gary Stevens                                                                                                            
Senator Hollis French                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Bettye Davis                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
Pulltabs Subcommittee Report                                                                                                    
                                                                                                                                
SENATE BILL NO. 237                                                                                                             
"An Act relating to the Alaska Railroad workforce development                                                                   
scholarship program."                                                                                                           
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 237                                                                                                                  
SHORT TITLE: AK RAILROAD EDUCATION APPRENTICE PROGRAM                                                                           
SENATOR(s): COWDERY                                                                                                             
                                                                                                                                
01/12/04       (S)       PREFILE RELEASED 1/2/04                                                                                
01/12/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/12/04       (S)       L&C, HES                                                                                               
01/27/04       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
                                                                                                                              
WITNESS REGISTER                                                                                                              
                                                                                                                                
Mr. Richard Schmitz, Staff                                                                                                      
Senator John Cowdery                                                                                                            
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on SB 237 for Senator Cowdery,                                                                  
sponsor.                                                                                                                        
                                                                                                                                
Ms. Wendy Lindskoog, Director                                                                                                   
External Affairs                                                                                                                
Alaska Railroad Corporation (ARRC)                                                                                              
PO Box 107500                                                                                                                   
Anchorage AK 99510-7500                                                                                                         
POSITION STATEMENT:  Opposed SB 237.                                                                                          
                                                                                                                                
Ms. Susan Lindemuth, Director                                                                                                   
Division of Human Resources                                                                                                     
Alaska Railroad Corporation (ARRC)                                                                                              
PO Box 107500                                                                                                                   
Anchorage AK 99510-7500                                                                                                         
POSITION STATEMENT: Opposed SB 237.                                                                                           
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 04-1, SIDE A                                                                                                             
                                                                                                                                
CHAIR CON  BUNDE called  the Senate  Labor and  Commerce Standing                                                             
Committee meeting  to order  at 1:30  p.m. Present  were Senators                                                               
Seekins,  Stevens, French  and Chair  Con  Bunde. Senator  Bettye                                                               
Davis was  excused. The  first order of  business to  come before                                                               
the committee was a report  from the Pulltab Subcommittee, manned                                                               
by Senators Seekins and French.                                                                                                 
                                                                                                                                
SENATOR  RALPH  SEEKINS said  he  and  Senator French  had  three                                                               
meetings on  this issue. He recapped  that last year a  number of                                                               
witnesses referred  to pulltab gambling as  charitable gaming and                                                               
warned of dire consequences to  the charities if the state raised                                                               
taxes  on them.  The definition  of a  charity was  questioned as                                                               
well as which charities are  permitted to participate in Alaska's                                                               
so-called   charitable  gaming   activities.  Further   testimony                                                               
revealed  that  some  permittees operate  pulltab  operations  in                                                               
communities  hundreds  of  miles   from  their  home  bases.  The                                                               
question arose  of whether or not  authorized participants should                                                               
be  limited  by statute  to  operate  within a  fixed  geographic                                                               
proximity to the  community in which they are  based. His further                                                               
comments  today  were  primarily directed  to  participation  and                                                               
proximity. He said:                                                                                                             
                                                                                                                                
     One thing  many people don't  know, I suppose,  is best                                                                    
     summarized  in the  quote from  the  2002 gaming  group                                                                    
     report, which  says, 'In  general, gambling  is illegal                                                                    
     in  Alaska.'   However,  the  Legislature   created  an                                                                    
     exception  for   what  is  commonly,   though  somewhat                                                                    
     inaccurately,  referred to  as  charitable gaming.  The                                                                    
     use  of the  word 'charity'  is really  a misnomer.  An                                                                    
     organization  does  not  have to  have  any  charitable                                                                    
     purpose  in   order  to  have  a   gaming  permit.  The                                                                    
     department 'may' only issue a  permit to a municipality                                                                    
     or qualified organization  and charities represent only                                                                    
     one of  15 qualified organizations eligible  to game in                                                                    
     Alaska.  Also, from  the Department  of Revenue,  we've                                                                    
     listed   13   of    those   15   categories   including                                                                    
     municipalities on top of that  and provided some of the                                                                    
     statutory definitions of those categories.                                                                                 
                                                                                                                                
CHAIR  BUNDE  said  he  saw   13  categories  listed  and  adding                                                               
municipalities made 14.                                                                                                         
                                                                                                                                
SENATOR SEEKINS responded that he  only found 13 categories also,                                                               
and  their  subcommittee report  provided  some  examples of  the                                                               
diversity of  types of  organizations that  fit inside  a general                                                               
category.  For  instance,   an  education  organization  includes                                                               
licenses  such as  the  Juneau Golf  Club,  the Southeast  Alaska                                                               
State Fair  and the  Nome Public Schools.  It does  not recommend                                                               
that  the  statutory  exception  allowing  charitable  gaming  be                                                               
changed. However, it  does recommend that the  Labor and Commerce                                                               
Committee review the list of  permitted gaming groups to consider                                                               
changes  that assure  that pulltab  licenses and  revenue fulfill                                                               
some charitable purpose,  as that was probably the  intent of the                                                               
Legislature   in   the   beginning.   Municipalities,   political                                                               
organizations,  chambers  of commerce,  and  the  like should  be                                                               
examined  to  see if  they  should  be beneficiaries  of  pulltab                                                               
income from Alaska's charitable gaming exception.                                                                               
                                                                                                                                
     However, because  of the  not-for-profit status  of the                                                                    
     currently  qualified organizations  and  so that  there                                                                    
     are  some  legitimate  fund-raising  opportunities  for                                                                    
     them, the subcommittee  recommends that raffle licenses                                                                    
     continue  to  be  granted  to   all  the  current  game                                                                    
     groups....                                                                                                                 
                                                                                                                                
     During the  committee hearings, it became  evident that                                                                    
     some permittees  that were  domiciled in  one community                                                                    
     operate  their pulltab  licenses  in other  communities                                                                    
     and so  some so-called  charitable gaming  revenue from                                                                    
     pulltab gambling  in some  communities did  not benefit                                                                    
     those communities at all; rather,  that revenue went to                                                                    
     organizations  in  communities  sometimes  hundreds  of                                                                    
     miles distant. This  led to the question  of whether or                                                                    
     not  the  Legislature  should  institute  a  geographic                                                                    
     proximity limit for the operation of pulltab licenses.                                                                     
                                                                                                                                
Pulltab permittees operate  in distant locations for  a number of                                                               
reasons. The  American Red Cross,  for instance, has  a statewide                                                               
presence and  mission. Some rural  permittees do not have  a very                                                               
large  population  base and  have  found  it more  profitable  to                                                               
operate in urban  locations. Some communities charge  a sales tax                                                               
on  pulltab sales  and permittees  have found  that they  can net                                                               
more by  operating in communities that  do not have a  sales tax.                                                               
Another  reason  is  that some  communities  are  saturated  with                                                               
pulltab operations  for their population  and the  opportunity to                                                               
play in some other community came up.                                                                                           
                                                                                                                                
SENATOR   SEEKINS   said   they    didn't   reach   any   unified                                                               
recommendation   regarding  specific   actions  to   address  the                                                               
proximity action, but agreed that  the matter should be discussed                                                               
in  the full  committee  and would  benefit  from further  public                                                               
testimony before a final decision was reached on the matter.                                                                    
                                                                                                                                
Other considerations came forward, i.e.,  a lot of the permittees                                                               
depend on gambling revenue as "a"  or "the" major source of their                                                               
revenue to operate. He maintained:                                                                                              
                                                                                                                                
     It's easier  to have  a pulltab license  than it  is to                                                                    
     run a bake  sale.... Therefore, there is a  lot of fear                                                                    
     out there  that any change  in the gaming  structure at                                                                    
     all   would  have   a  devastating   effect  on   their                                                                    
     operations....  Operators  also   testified  that  they                                                                    
     operated on small margins and  changes could easily put                                                                    
     them out of business. There  aren't a lot of operators.                                                                    
     I think 14, or something  like that, were licensed last                                                                    
     year.                                                                                                                      
                                                                                                                                
SENATOR SEEKINS  said that  Jerry Richards,  a Fairbanks  CPA who                                                               
does  some  auditing  for gaming  operations,  presented  several                                                               
suggestions  for clarifying  gaming statutes.  He suggested  that                                                               
the  Legislature allow  licensed operators  to "pool"  the gaming                                                               
activities  of their  permittees.  Pooling  is currently  allowed                                                               
with the  multiple beneficiary permittees  (MBP) and  if extended                                                               
to  the operators,  it would  result  in the  sales being  spread                                                               
between more  permittees. In other  words, the  operator wouldn't                                                               
come to the  end of what one  person could earn and  have to stop                                                               
play in the middle  of a game; but he could  pool it, which would                                                               
result in  a more even  flow of  the net proceeds  throughout the                                                               
year. He felt  that was a good suggestion,  because it simplifies                                                               
the operation,  makes the cost  of operating cheaper and  gives a                                                               
more even flow to the people who are there.                                                                                     
                                                                                                                                
     In summary, I've  shown here in our  report that gaming                                                                    
     and gambling  is big business  in Alaska. In  2002, the                                                                    
     total amount gamed exceeded  $358 million. After prizes                                                                    
     were paid out, approximately  $85 million was available                                                                    
     for  gaming  expenses  and   net  proceeds  to  benefit                                                                    
     municipalities  and qualified  organizations [from  the                                                                    
     Department of Revenue report].                                                                                             
                                                                                                                                
SENATOR SEEKINS said there are  over 1,200 permittees and the $85                                                               
million pie  gets sliced thinner  and thinner.  Competition makes                                                               
it  harder  and harder  for  small  organizations to  effectively                                                               
compete  for any  share  at all.  He  felt it  was  time for  the                                                               
Legislature  to examine  the charitable  gaming exception  to the                                                               
general gambling  prohibition and start by  redefining whether or                                                               
not municipalities, political organizations  and others should be                                                               
permitted  to   operate  pulltab  operations.   They  recommended                                                               
considering  a geographic  proximity limitation  that would  keep                                                               
charitable  gaming revenue  in the  community where  the proceeds                                                               
are generated.                                                                                                                  
                                                                                                                                
1:48 p.m.                                                                                                                       
                                                                                                                                
SENATOR FRENCH said  he appreciated the work  Senator Seekins did                                                               
with him  on this  issue. They focused  on pulltabs  because they                                                               
are  the biggest  part  of the  gaming puzzle  at  77 percent  of                                                               
gaming  receipts statewide.  In general,  he felt  the system  is                                                               
working fairly  well. Since  1997, the  gross increase  in gaming                                                               
receipts  has been  28  percent, the  adjusted  gross income  has                                                               
grown by  25 percent  and the  net to charities  has grown  by 33                                                               
percent.  "It's not  as if  charities are  getting a  smaller and                                                               
smaller slice of  the gaming pie as time goes  on.... I'd like us                                                               
to continue that trend."                                                                                                        
                                                                                                                                
He also thought  that some groups that receive  money from gaming                                                               
could  generate their  own income  for their  own purposes,  like                                                               
municipalities.  His  sentiments  fall  with  the  smaller  rural                                                               
villages  and  towns  that  continue to  need  access  to  gaming                                                               
receipts whereas bigger cities should  have their own tax base to                                                               
fall  back  on. He  wasn't  that  concerned about  the  proximity                                                               
question as long as the group of players is worthy.                                                                             
                                                                                                                                
SENATOR  FRENCH revealed  that some  pulltab  parlors post  whose                                                               
permit is  being played at any  given moment on the  wall, so you                                                               
can see which  one is being played; and if  a player doesn't want                                                               
to contribute any dollars to  the Alyeska Ski Club, for instance,                                                               
he can walk  out. He thought making that a  requirement should be                                                               
considered.  The flip  side is  that most  players don't  look at                                                               
that information and wouldn't be concerned.                                                                                     
                                                                                                                                
SENATOR BUNDE  said he heard  rumors about inflated  expenses and                                                               
asked if they had looked at what auditing is done.                                                                              
                                                                                                                                
SENATOR  SEEKINS  responded that  his  sense  is that  there  are                                                               
allegations  of  inflated expenses  -  for  excessive rent  being                                                               
charged, for  instance, where 10  permittees were all  paying 100                                                               
percent  of the  rent rather  than one  tenth each  out of  their                                                               
expenses. The permittees are reluctant  to question the situation                                                               
because they might not be  allowed to continue to participate. He                                                               
knows  the  Department  of  Revenue (DOR)  doesn't  have  a  huge                                                               
commitment to examine  these types of allegations  on a continued                                                               
basis and he felt they could  have a few more investigators to go                                                               
through the  process. The DOR  annual report mentions  some cases                                                               
where  the  state  has  found  some  abuses  within  the  pulltab                                                               
operations. The  industry also says  that if an  operator catches                                                               
an  employee  stealing,  it's virtually  impossible  to  get  the                                                               
state's  prosecutors to  prosecute the  case. He  didn't know  if                                                               
that was true  or not. But if an employee  is caught stealing, he                                                               
gets  fired and  nothing else  happens to  him. He  might end  up                                                               
working in another  pulltab parlor down the street  and doing the                                                               
same thing and the charity doesn't  ever have a chance to recover                                                               
its losses.                                                                                                                     
                                                                                                                                
SENATOR  GARY   STEVENS  said  the  implication   is  that,  "the                                                               
organizations that  are not charitable  are not charitable  and I                                                               
know that that's not true."                                                                                                     
                                                                                                                                
The Alutiiq Museum in Kodiak is  funded largely by a bingo parlor                                                               
in Anchorage, for instance.                                                                                                     
                                                                                                                                
CHAIR BUNDE  asked the committee  if they  wanted to have  a work                                                               
session on  questions like  the percentage  that goes  to charity                                                               
and  whether  the  cost  of  licensing should  be  borne  by  the                                                               
applicant.                                                                                                                      
                                                                                                                                
SENATOR FRENCH  said he would be  willing to do that.  He pointed                                                               
out  that  the  DOR  has  seven employees  who  are  attached  to                                                               
monitoring this  $380 million industry.  "There's a lot  of money                                                               
being moved through here without a lot of oversight."                                                                           
                                                                                                                                
CHAIR BUNDE  announced that  he would schedule  a meeting  on the                                                               
regulatory regime of gaming probably February 5.                                                                                
                                                                                                                                
        SB 237-AK RAILROAD EDUCATION APPRENTICE PROGRAM                                                                     
                                                                                                                                
CHAIR BUNDE announced SB 237 to be up for consideration.                                                                        
                                                                                                                                
MR. RICHARD  SCHMITZ, staff to  Senator John Cowdery,  sponsor of                                                               
SB 237, said  the purpose of the bill is  to create a scholarship                                                               
program for  study in fields  related to railroad  operation. The                                                               
state is  coming up on  what looks like  a lot of  construction -                                                               
realignments with the  Alaska Railroad through the  Mat-Su and an                                                               
extension  to  Delta Junction  continuing  down  to the  Canadian                                                               
border, perhaps. The  Knik Arm Crossing and the  gas pipeline are                                                               
also possible. History shows that whenever  there is a heat up of                                                               
construction  in Alaska,  the positions  get filled  by a  lot of                                                               
outside hire. Senator Cowdery wants to  head this off at the pass                                                               
early.  The proposed  scholarship  program would  be for  Alaskan                                                               
students to  study in Alaskan  institutions for  railroad related                                                               
tasks.                                                                                                                          
                                                                                                                                
He explained  that two bills  established the Alaska  Railroad as                                                               
being  state owned.  One  is the  Alaska  Railroad Transfer  Act,                                                               
which is  the federal legislation  that gave the railroad  to the                                                               
state from  the Army, and the  other is the Alaska  Railroad Act,                                                               
the state enabling legislation.                                                                                                 
                                                                                                                                
The Alaska  Railroad Corporation (ARRC)  has a 93  percent Alaska                                                               
hire rate over  the last five years, but 52  hires are from areas                                                               
outside  of Alaska.  The program  in  SB 237  is a  way that  the                                                               
Railroad  can fill  those positions.  The $1.2  million per  year                                                               
would come out  of the Railroad's operating funds  and would fund                                                               
about  200 scholarships  for about  $17,000 -  $18,000 each.  The                                                               
scholarships could  cover positions  from office work  to welding                                                               
and engineering.                                                                                                                
                                                                                                                                
CHAIR BUNDE  noted that  a dividend  back to  the state  from the                                                               
railroad had  been discussed and asked  if that would have  to be                                                               
limited  to  railroad  purposes  also.   He  also  asked  if  the                                                               
scholarship would take the dividend off the table.                                                                              
                                                                                                                                
MR. SCHMITZ replied that the dividend is a separate issue.                                                                      
                                                                                                                                
SENATOR  STEVENS said  while he  supports Alaskan  schools, there                                                               
might be only one place one could  learn how to be a diesel steam                                                               
operator,  for instance.  Second, he  asked if  current employees                                                               
would be  eligible to apply.  Third, he  asked if there  would be                                                               
any commitment  from those who  get the scholarships to  work for                                                               
the railroad.                                                                                                                   
                                                                                                                                
MR.  SCHMITZ replied  that the  idea is  to give  the railroad  a                                                               
broad selection of  people to choose from,  but individuals don't                                                               
have  to  commit  to  work  for the  railroad  when  they  get  a                                                               
scholarship.                                                                                                                    
                                                                                                                                
SENATOR STEVENS  thought language  could be  added that  says the                                                               
funds  would  be returned  unless  the  individual is  eventually                                                               
hired by ARRC.                                                                                                                  
                                                                                                                                
MR. SCHMITZ responded that was not Senator Cowdery's intent.                                                                    
                                                                                                                                
CHAIR  BUNDE said  there has  been  talk of  limiting the  Alaska                                                               
student loan  program to just  Alaskan schools,  but constituents                                                               
have strong  feelings about whether  they should be forced  to go                                                               
to school  here. He asked  if an  Alaska resident is  defined for                                                               
the bill's purpose.                                                                                                             
                                                                                                                                
MR. SCHMITZ responded that latitude would be given to the ARRC.                                                                 
                                                                                                                                
CHAIR  BUNDE said  he thought  the issue  of repayment  should be                                                               
discussed  if the  recipients of  the scholarship  don't stay  in                                                               
Alaska.                                                                                                                         
                                                                                                                                
MR. SCHMITZ added  that the sponsor envisioned  them staying some                                                               
period  of  time  in  Alaska.   "The  idea  would  be  that  this                                                               
scholarship would benefit Alaska students  in a broad and general                                                               
sense...."                                                                                                                      
                                                                                                                                
CHAIR  BUNDE asked  if the  requirements could  be stretched  far                                                               
enough that  someone who gets  the scholarship, but  doesn't work                                                               
for  the  railroad,  and  stays   in  Alaska,  would  somehow  be                                                               
considered a benefit to the railroad.                                                                                           
                                                                                                                                
MR.  SCHMITZ responded  that a  statutory  requirement under  the                                                               
federal  Alaska  Transfer  Act says  revenues  generated  by  the                                                               
state-owned railroad shall be retained  and managed by the state-                                                               
owned  railroad for  railroad related  purposes. That's  why this                                                               
bill mandates  that the scholarships  are for a  railroad related                                                               
purpose.                                                                                                                        
                                                                                                                                
CHAIR  BUNDE  bantered that  he  thought  a semi-talented  lawyer                                                               
could drive a train through that phrase.                                                                                        
                                                                                                                                
SENATOR STEVENS  asked if  these funds  could be  managed through                                                               
the  Commission  on  Postsecondary Education  to  avoid  creating                                                               
another bureaucracy.                                                                                                            
                                                                                                                                
MR. SCHMITZ  replied that  Senator Cowdery  would be  amenable to                                                               
that.                                                                                                                           
                                                                                                                                
TAPE 04-1, SIDE B                                                                                                             
                                                                                                                                
SENATOR  SEEKINS asked  if they  were considering  a ramp-up  for                                                               
funding the program.                                                                                                            
                                                                                                                                
MR. SCHMITZ  replied that they  envisioned $1.2 million  from the                                                               
railroad per year.                                                                                                              
                                                                                                                                
SENATOR SEEKINS  asked how  many employees the  ARRC has  now. He                                                               
also  wanted to  know what  their retention  rate was  to justify                                                               
their turnover needs.                                                                                                           
                                                                                                                                
MR.  SCHMITZ replied  that there  were  732 new  hires over  five                                                               
years  and 52  of those  were from  areas outside  of Alaska.  In                                                               
2003, there were l17 new hires.                                                                                                 
                                                                                                                                
CHAIR BUNDE  was concerned  that Alaskans  are very  creative and                                                               
could figure out a way to absorb that money.                                                                                    
                                                                                                                                
SENATOR SEEKINS  related how  a federal  program tried  to target                                                               
particular  qualifications  by   designating  a  student  trainee                                                               
status.  To encourage  students to  start working  for a  certain                                                               
department,  retirement benefits  started accruing  from the  day                                                               
they enrolled  in college as a  student trainee. A lot  of people                                                               
were retained  as a result  of that.  He wondered if  any thought                                                               
was given  to using  some kind  of status  for the  students that                                                               
would be reportable back to the Alaska Railroad.                                                                                
                                                                                                                                
CHAIR BUNDE asked  how many scholarships would  be available next                                                               
year if this program started immediately.                                                                                       
                                                                                                                                
MR. SCHMITZ replied 200 - 250 scholarships.                                                                                     
                                                                                                                                
CHAIR  BUNDE noted  that the  Railroad wouldn't  hire 250  people                                                               
annually.                                                                                                                       
                                                                                                                                
MR. SCHMITZ responded  that the thinking is that  ARRC would have                                                               
a broad range of trained people to choose from.                                                                                 
                                                                                                                                
SENATOR SEEKINS said he would have a problem without a ramp-up.                                                                 
                                                                                                                                
MR.  SCHMITZ  said that  Senator  Cowdery  would be  amenable  to                                                               
letting  the  Commission  on   Postsecondary  Education  run  the                                                               
scholarship program; he just wants a workforce to be available                                                                  
when needed.                                                                                                                    
                                                                                                                                
MS. WENDY LINDSKOOG, Director, ARRC External Affairs, said:                                                                     
                                                                                                                                
     While  management for  the Alaska  Railroad Corporation                                                                    
     strongly  believes that  investing in  an educated  and                                                                    
     skilled workforce is essential  to operating a safe and                                                                    
     successful  railroad, we  do not  support SB  237. This                                                                    
     bill seeks to remedy a  problem that does not exist and                                                                    
     fails   to  recognize   the   extensive  training   and                                                                    
     education   programs   already  provided   for   Alaska                                                                    
     Railroad employees. In 2003,  the Alaska Railroad spent                                                                    
     $1.8  million  on  workforce development  programs  and                                                                    
     plans to sustain that level  of support in the years to                                                                    
     come.  SB 237  contains no  findings or  other evidence                                                                    
     that  ARRC  is  currently experiencing  a  shortage  of                                                                    
     skilled  and  educated  employees  or  expects  such  a                                                                    
     shortage in the future. In  fact, there is an abundance                                                                    
     of Alaskan  workers who can  fill the few  openings the                                                                    
     railroad  has  available   each  year  for  management,                                                                    
     administration,  technical and  professional employees.                                                                    
     The only  area where ARRC may  have problems recruiting                                                                    
     a  qualified employee  is in  the specialized  railroad                                                                    
     trades such  as car  men and locomotive  electricians -                                                                    
     those types of trades. This  bill will not increase the                                                                    
     pool  of qualified  workers in  these trades,  because,                                                                    
     quite frankly,  there are no Alaska  schools that teach                                                                    
     these types of specialized  railroad skills. To address                                                                    
     the   situation,  ARRC   does  provide   apprenticeship                                                                    
     programs   and   other   in-house  training   for   new                                                                    
     employees.   And,  as   mentioned   before,  we   spent                                                                    
     approximately  $1.8 million  last year  to educate  and                                                                    
     train employees over  the past five years,  and we have                                                                    
     a 93 percent Alaska hire rate.                                                                                             
                                                                                                                                
     Requiring ARRC  to hand  out $1.2  million per  year in                                                                    
     scholarships   to   unnecessarily   educate   managers,                                                                    
     administrators,    computer     technicians,    account                                                                    
     insulators and  other white  collar employees  that are                                                                    
     already  in abundant  supply in  Alaska would  actually                                                                    
     reduce the  amount of money  ARRC does need  to provide                                                                    
     its   new  operational   employees   with  the   unique                                                                    
     railroad-specialized training. The  cost of a full-ride                                                                    
     scholarship at  the University of Alaska,  according to                                                                    
     what  we  found,  is  approximately  $8,000  per  year.                                                                    
     Requiring  ARRC to  provide $1.2  million per  year for                                                                    
     such scholarships  means we would be  paying to educate                                                                    
     about 150 people per year  to work at the railroad when                                                                    
     there  are really  only  about  70 full-time  permanent                                                                    
     positions available  each year. Thus there  would be no                                                                    
     ARRC jobs  for approximately  50 percent of  the people                                                                    
     trained  each  year.  Furthermore,   SB  237  does  not                                                                    
     require scholarship  recipients to actually go  to work                                                                    
     for ARRC  when they  complete their training,  nor does                                                                    
     it require  a payback to  the railroad if they  fail to                                                                    
     complete their training.                                                                                                   
                                                                                                                                
     Finally,  the  Railroad's  net earnings  are  our  only                                                                    
     source of  federal match funds.  We do not  receive any                                                                    
     state  matching  funds  to garner  federal  funds.  The                                                                    
     Railroad  currently has  a  9  percent Federal  Transit                                                                    
     Administration (FTA)  match. Requiring the  Railroad to                                                                    
     pay $1.2 million for  unneeded scholarships could cause                                                                    
     ARRC to lose over $12  million in FTA formula funds per                                                                    
     year.                                                                                                                      
                                                                                                                                
CHAIR  BUNDE commented  that if  they couldn't  put $1.2  million                                                               
toward scholarships  each year, why  not just have ARRC  give the                                                               
state a  dividend each year  to grow  the economy and  that would                                                               
help railroad  related purposes. Seriously, though,  he wanted to                                                               
hear from  their legal department  about why some  dividend can't                                                               
come  back  to  the  state  since  it  capitalized  the  railroad                                                               
originally.                                                                                                                     
                                                                                                                                
SENATOR  GARY  STEVENS asked  Ms.  Lindskoog  to talk  about  the                                                               
railroad's current education program for its employees.                                                                         
                                                                                                                                
MS. LINDSKOOG  replied that  apprenticeship programs  are offered                                                               
through the Union.  They also have a scholarship  type program in                                                               
house  for someone  who  wants  to get  a  new  skill that  would                                                               
benefit the railroad.                                                                                                           
                                                                                                                                
CHAIR  BUNDE asked  if those  people who  get the  extra training                                                               
have an obligation to work for the railroad afterward.                                                                          
                                                                                                                                
MS.  SUSAN LINDEMUTH,  Director, ARRC  Human Resources,  answered                                                               
that  they don't,  but the  job  relatedness of  the training  is                                                               
reviewed before any training is started.                                                                                        
                                                                                                                                
SENATOR SEEKINS  asked if the  railroad has a method  of tracking                                                               
residency status of its employees.                                                                                              
                                                                                                                                
MS.  LINDEMUTH replied  that it  doesn't have  a method  in place                                                               
now, but  uses the address  on the job application  for residency                                                               
and doesn't do any kind of verification.                                                                                        
                                                                                                                                
SENATOR SEEKINS asked  if she had any indication  of what percent                                                               
of ARRC's new hires are Alaska residents.                                                                                       
                                                                                                                                
MS. LINDEMUTH  replied that  a majority  of ARRC's  employees are                                                               
Alaska residents and "have been here for some period of time."                                                                  
                                                                                                                                
SENATOR SEEKINS  asked how  many railroad  employees are  sent to                                                               
ARRC from local unions.                                                                                                         
                                                                                                                                
MS. LINDEMUTH replied that the  local union doesn't have any kind                                                               
of  local hiring  hall. In  other words,  when people  are hired,                                                               
they then join the union.                                                                                                       
                                                                                                                                
SENATOR STEVENS  said he heard  that Alaskan schools  don't teach                                                               
railroad trades and asked where people go to learn those skills.                                                                
                                                                                                                                
MS. LINDEMUTH replied  that scales and maintenance  of weights is                                                               
taught on the job and workers  move up through the ranks by union                                                               
seniority. ARRC  has an apprenticeship  program for the  car men,                                                               
the locomotive  electricians, and  the locomotive  mechanics that                                                               
eight  apprentices  have  recently  been hired  for.  If  skilled                                                               
journeyman are needed, ARRC looks outside to other areas.                                                                       
                                                                                                                                
MS.  LINDSKOOG added  that  there are  special  schools for  some                                                               
railroad skills  in the  Lower 48  and offered to  get a  list of                                                               
them for the committee.                                                                                                         
                                                                                                                                
SENATOR  SEEKINS  asked  her  to   estimate  what  percentage  of                                                               
railroad  jobs  required  either  a  vocational  or  a  four-year                                                               
college degree.                                                                                                                 
                                                                                                                                
MS. LINDEMUTH  replied that a majority  of the 120 people  in the                                                               
mechanical department require an  apprenticeship. There are about                                                               
150 management positions,  75 percent of which may  not require a                                                               
college degree, but would certainly require in-lieu experience.                                                                 
                                                                                                                                
CHAIR  BUNDE  asked  what ARRC's  minimum  requirements  are  for                                                               
someone walking in off the street to apply for a job.                                                                           
                                                                                                                                
MS. LINDEMUTH  replied that each job  has different requirements,                                                               
but an entry level skill  like track laborer requires high school                                                               
graduation and a good driving  record and preferably some type of                                                               
mechanical aptitude and background.                                                                                             
                                                                                                                                
SENATOR HOLLIS FRENCH asked how the FTA match works.                                                                            
                                                                                                                                
MS. LINDSKOOG explained that the ARRC  is required to provide a 9                                                               
percent match for any money it  receives from FTA. No state match                                                               
is involved.                                                                                                                    
                                                                                                                                
SENATOR FRENCH said if $1.2 million  is taken out of the railroad                                                               
side, ARRC would  lose $12 million in federal  matching funds and                                                               
asked how high up that figure could go.                                                                                         
                                                                                                                                
MS. LINDSKOOG  replied that she  didn't have the FTA  totals, but                                                               
could get them. The railroad has  a net income between $1 million                                                               
and $10 million;  $1.2 million is used  for workforce development                                                               
programs and  matching funds for internal  capital projects, etc.                                                               
"There is a  limited amount that we  have and we try  to make the                                                               
most of it."                                                                                                                    
                                                                                                                                
CHAIR BUNDE inserted  that the federal match is  not an unlimited                                                               
amount of  money. ARRC wouldn't get  the 9:1 ratio from  the feds                                                               
with $10 million, for instance.                                                                                                 
                                                                                                                                
SENATOR SEEKINS  commented that not  coming up with  enough money                                                               
to  get  the  matching  funds  was  a  worst-case  scenario.  The                                                               
committee indicated its general agreement.                                                                                      
                                                                                                                                
CHAIR BUNDE  said he  would hold  SB 237 and  hoped the  ARRC and                                                               
Senator Cowdery could find some  middle ground. He looked forward                                                               
to  learning  how tightly  the  federal  regulation on  railroad-                                                               
related purposes is  written. There being no  further business to                                                               
come before the committee, he adjourned the meeting at 2:45 p.m.                                                                

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