Legislature(1993 - 1994)
04/02/1993 09:10 AM Senate STA
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SENATE STATE AFFAIRS COMMITTEE
April 2, 1993
9:10 a.m.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Mike Miller, Vice Chairman
Senator Robin Taylor
Senator Johnny Ellis
Senator Jim Duncan
MEMBERS ABSENT
All Present
COMMITTEE CALENDAR
SENATE BILL NO. 161
"An Act relating to interest rates and calculation of
interest under certain judgments and decrees and on refunds
of certain taxes, royalties, or net profit shares; and
providing for an effective date."
SJR 23
Proposing amendments to the Constitution of the State of
Alaska relating to the powers and duties of the legislative
auditor.
SJR 23 (LEGISLATIVE AUDITOR'S POWERS) was scheduled, but not
heard this date.
PREVIOUS SENATE COMMITTEE ACTION
SB 161 - No previous action to record.
SJR 23 - See State Affairs minutes dated 3/17/93 and
3/22/93.
WITNESS REGISTER
Joseph Geldhof, Assistant Attorney General
Department of Law
P.O. Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: Commented on SB 161.
Will James, Assistant Attorney General
Department of Law
P.O. Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: Commented on SB 161.
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Chris Christenson, Staff Counsel
Judicial Branch
303 K Street
Anchorage, Alaska 99501-2084
POSITION STATEMENT: Commented on SB 161.
Ellen Braden, Treasurer
Municipality of Anchorage
P.O. Box 196650
Anchorage, Alaska 99517
POSITION STATEMENT: Commented on SB 161.
Larry Meyers, Director
Income and Excise Audit Division
P.O. Box 110420
Juneau, Alaska 99811-0420
POSITION STATEMENT: Commented on SB 161.
ACTION NARRATIVE
TAPE 93-24, SIDE A
Number 001
CHAIRMAN LEMAN called the Senate State Affairs Committee
meeting to order at 9:10 a.m. and announced SB 161 INTEREST
RATES: JUDGMENTS/TAXES/ROYALTIES to be up for consideration.
JOE GELDHOF, Assistant Attorney General, explained the bill
briefly.
WILL JAMES, Assistant Attorney General, was available to
answer questions on Sections 4, 5, and 7.
Number 112
SENATOR ELLIS moved to adopt CSSB 161(STA). There were no
objections and it was so ordered.
SENATOR LEMAN asked regarding page 4, if the state's
assessment is wrong, would the person get a higher interest
rate on the refund for it. MR. JAMES said he wasn't sure of
the answer to that.
SENATOR TAYLOR asked if the rate of prejudgment interest was
calculated after the judgement was made? MR. GELDHOF
responded that you would probably wait until you find out if
you get a favorable judgement before you do your
calculations. Under the proposed legislation, he explained,
you could ascertain what the prejudgment rate would be by
looking at the week's previous Treasury Bill sale which
would be your prejudgment interest rate. When you get a
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judgement, you can then calculate the interest back to the T
Bill sale.
SENATOR TAYLOR said there is a significant enhancer for
people to settle suits, because of the decline interest
rates and fixed court rate. The state is caught in the
process of making the determination of whether they want to
litigate further if the odds are 75% we're going to loose,
or are they wiser to settle now and pay the low interest
rate.
Number 285
SENATOR LEMAN suggested that the Commissioner of the
Department of Revenue adjusting the interest rates on an
annual or semi annual basis.
MR. GELDHOF said the original concept for the post judgement
interest was derived from the system the federal government
currently uses which is based on the price of Treasury Bill
sales.
Number 334
CHRIS CHRISTENSEN, Staff Counsel to the Alaska Court System,
said the Court System is only concerned with Section 1 of
the CS which they oppose. There is a technical problem on
line 1 saying that money shall accrue in a "civil case."
The current statute doesn't say "civil case." It says "on a
judgement or decree" which they have been interpreting to
allow them to award post judgement interest on criminal
judgements or criminal fines and criminal restitution. He
did not think the state wanted to lose the ability to charge
criminals interest on restitution.
MR. CHRISTENSEN said they thought this bill would also
impose a substantial clerical impact by requiring the rates
to change every week at a time when funding is being cut.
He said there is also a significant policy change in the
bill from current non-tort cases where interest rates are
calculated from the date of the breach of contract. It is
easy to know when the contract was breached, because it says
so in the complaint. However, they do not know when the
summons was served, because generally they are not told.
Phone calls would have to be made to attorneys or process
servers to try to figure out the correct date which is
normally not in the file.
He also commented that the interest rate has to be
calculated twice now instead of once. However, frequently
many cases have multiple defendants who were served in
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different weeks. There could be 4 defendants in a case,
each with a different rate of interest which means instead
of just doing one calculation for the entire case, you're
doing 8 different calculations. Then the clerk would have
to figure out the date of service and do the calculation.
He said they handle about 10,000 of these cases per year and
if you calculate 15 minutes times 10,000, that is a
substantial increase in the clerical work load.
The federal courts do this calculation only with post
judgement interest, not with prejudgment interest, MR.
CHRISTENSON said.
Number 410
SENATOR LEMAN didn't agree that making the calculation would
be particularly difficult. He asked if it would help to
make the calculation only semi annually. MR. CHRISTENSON
said that would still be some additional workload, but it
would be a lot easier.
Number 458
SENATOR TAYLOR asked if that annualized calculation would
apply to both pre and post judgement interest rates and
would different rates be applied to different years for
cases that went on for a long time? SENATOR LEMAN said the
methodology that tracks the market is the more accurate one
and that whenever the rate is adjusted is what should be
valid for that period of time.
SENATOR TAYLOR asked what would be the simplest way to do
the calculation? MR. CHRISTENSON said the best thing to do
would be to change the rate as infrequently as possible,
perhaps once a year. Also, if one rate would apply to both
pre and post judgement, that would make things easier.
Number 478
ELLEN BRADEN, Treasurer of the Municipality of Anchorage,
commented on Sections 1 and 2 of the CS. She wanted an
exception made for the interest charged by a municipality on
its delinquent revenue. As it is written the interest rate
is charged only to debtors.
On page 2, line 20 she suggested changing the word "paid" to
"issued."
SENATOR TAYLOR asked if she had noted an increase in
overpayment by taxpayers in Anchorage over the last few
years? MS. BRADEN said she hadn't noticed an increase in
overpayment. She explained that overpayments result from
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two things - taxpayer error and a change by the assessor.
Number 565
LARRY MEYERS, Director, Income and Excise Audit Division,
testified on Section 4 of the CS.
TAPE 93-24, SIDE B
Number 580
He illustrated how the state is losing money as the law is
written. There would be substantial savings to the state
with SB 161.
MR. MEYERS said Section 4 of the bill also provides that if
a taxpayer pays his taxes on the basis of an assessment
which was erroneous, a refund would be paid them at the
current rates.
SENATOR LEMAN said he didn't see why they shouldn't deal
with retainage along with interest rates.
Number 545
JEFF OTTESON, Department of Transportation, said they have
two classes of activity where this interest rate comes to
bear -one is on a right-of-way acquisition where the price
is in dispute and they end up in condemnation and the
state's last offer is deposited in the court. The
difference between the last best offer and the judgement can
be making interest which is currently about 3 times what
market rates are. So there is no incentive to settle. Then
they can have very large construction claims. If the state
loses those claims, it will be paying 10.5 times $7.5
million times the number of years involved. Their concern
is that it can add up to a lot of money.
SENATOR LEMAN asked him to comment on the interest rate for
retainage. MR. OTTESON said they had a lot of experience
with that and this bill should address that area as well "to
keep things equal."
Number 520
SENATOR LEMAN asked about including criminal cases. MR.
GELDHOF said there was no problem with that. They feel
where restitution is made in a criminal matter that interest
should accrue.
SENATOR LEMAN said addditional work would be done on the
language in SB 161 and bring it up at another time. He then
adjourned the meeting at 10:10 a.m.
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