Legislature(1995 - 1996)
04/02/1996 03:36 PM Senate STA
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SENATE STATE AFFAIRS COMMITTEE
April 2, 1996
3:36 p.m.
MEMBERS PRESENT
Senator Bert Sharp, Chairman
Senator Randy Phillips, Vice-Chairman
Senator Loren Leman
Senator Jim Duncan
Senator Dave Donley
COMMITTEE CALENDAR
HOUSE BILL NO. 365
"An Act relating to the offense of possession of tobacco by a
minor."
SENATE BILL NO. 256
"An Act relating to the offices of mayor and mayor pro tempore of
a second class city."
SENATE BILL NO. 306
"An Act providing for the issuance of general obligation bonds in
the amount of $148,500,000 for the purpose of paying the cost of
design and construction of state correctional facilities; and
providing for an effective date."
SENATE BILL NO. 210
"An Act relating to taxes on cigarettes and tobacco products; and
providing for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
HB 365 - No previous senate committee action.
SB 256 - See Community & Regional Affairs minutes dated 3/18/96.
SB 306 - No previous senate committee action.
SB 210 - See State Affairs minutes dated 3/14/96.
WITNESS REGISTER
Patti Swenson, Aide
Representative Con Bunde
State Capitol, Juneau, AK 99801-1182¶(907)465-4843
POSITION STATEMENT: prime sponsor of HB 365
Stacy Goade
Seven Circles Coalition
3200 Hospital Dr., #202, Juneau, AK 99801¶(907)463-5881
POSITION STATEMENT: supports HB 365
Glenn Ray
Community Health & Emergency Medical Services
Division of Public Health
Department of Health & Social Services
P.O. Box 110616, Juneau, AK 99811-0616¶(907)465-5729
POSITION STATEMENT: supports HB 365
Cheryl Davis, Aide
Senator Al Adams
State Capitol, Juneau, AK 99801-1182¶(907)465-3707
POSITION STATEMENT: prime sponsor of SB 256
Commissioner Margaret Pugh
Department of Corrections
240 Main St., Ste. 700, Juneau, AK 99801¶(907)465-4652
POSITION STATEMENT: representing governor-prime sponsor of SB 306
Bob Cole, Director
Administrative Services
Department of Corrections
P.O. Box 112000, Juneau, AK 99811-2000¶(907)465-3342
POSITION STATEMENT: representing governor-prime sponsor of SB 306
Jim Baldwin, Assistant Attorney General
Governmental Affairs Section, Civil Division (Juneau)
Department of Law
P.O. Box 110300, Juneau, AK 99811-0300¶(907)465-3600
POSITION STATEMENT: representing governor-prime sponsor of SB 306
Ross Kinney, Deputy Commissioner
Treasury Division
Department of Revenue
P.O. Box 110405, Juneau, AK 99811-0405¶(907)465-4880
POSITION STATEMENT: representing governor-prime sponsor of SB 306
ACTION NARRATIVE
HB 365 MINOR IN POSSESSION OF TOBACCO
TAPE 96-27, SIDE A
Number 001
CHAIRMAN SHARP called the Senate State Affairs Committee to order
at 3:36 p.m. and brought up HB 365 as the first order of business
before the committee.
Number 010
PATTI SWENSON, Aide to Representative Con Bunde, prime sponsor of
HB 365, informed the committee that Representative Bunde is unable
to attend the meeting because the house is in session. She is
available to read the sponsor statement and answer any questions
committee members might have.
SENATOR LEMAN requested, in the interest of time, that the sponsor
statement not be read. He asked that the sponsor statement be
published in the record.
SPONSOR STATEMENT
HB 365
The problem of youth in possession of tobacco is pervasive in
Alaska and throughout the United States. In 1992, the problem was
addressed on a federal level by the passage of the Synar Amendment.
This amendment requires states to conduct random, unannounced
inspections of locations which sell tobacco and to show a reduction
in illegal sales. States which do not conduct the inspections and
reduce rates of illegal sales will lose some portion of their
federal substance abuse block grants.
In order to reduce rates of nicotine addiction in youth and to
ensure compliance with the Synar Amendment, members of the Alaska
Tobacco Control Alliance (ATCA) have been seeking to undertake
"compliance checks" to determine which merchants are selling
tobacco to children. Compliance checks that involve having
undercover youth attempt to buy tobacco are equivalent to the
"random unannounced inspections" specified by the Synar Amendment.
However, because state law prohibits the possession of tobacco by
youth, the youth who participate in compliance checks could
conceivably be charged with breaking the law, and the adults who
work with them could be charged with contributing to the
delinquency of a minor.
HB 365 was introduced to ensure our state's ability to conduct
compliance checks consistent with the mandate of the Synar
Amendment. This legislation adds a section to existing statute
that will allow youth to work in tandem with law enforcement
agencies to complete compliance checks relating to the sale of
tobacco to youth.
If there are no compliance checks, there is no way to know which
stores are selling tobacco to children. If police don't know who
is selling, they obviously cannot enforce the law. Youth will
continue to purchase tobacco and become addicted to nicotine, and
we will continue to see high rates of tobacco related death and
disease in Alaska. In addition, many other substance abuse
prevention and treatment efforts will suffer if federal substance
abuse block grants are reduced.
I urge your positive support of this legislation. This legislation
will eliminate current obstacles to carrying out compliance checks
and will reduce illegal sales of tobacco.
CHAIRMAN SHARP stated there are three people signed up to testify.
He called Ms. Goade to testify.
Number 040
STACY GOADE, Seven Circles Coalition and Juneau Tobacco Prevention
Network, informed the committee that the coalition has almost
completed the third compliance check, and during this last check,
there has only been one sale out of twenty-one stores. So we know
that the compliance checks are working in Juneau. Although this is
working, she does not think it is a substitute for increasing
tobacco taxes. She asked for support of that, and other issues
around tobacco use by youth.
CHAIRMAN SHARP thanked Ms. Goade for her time, and stated that he
has read about the compliance checks in the newspaper.
Number 067
GLENN RAY, Community Health & Emergency Medical Services, Division
of Public Health, Department of Health & Social Services,
Coordinator of the Tobacco Prevention & Control Program, supports
HB 365. It is a very useful bill. It will in no means by itself
stop the problem of youth's addiction to tobacco, but it will show
significant reductions in the amount of tobacco that gets into
kid's hands. Anything that can be done to decrease the
experimentation by kids will decrease the number of frequent
smokers, and thereby decrease the number of addicted adults.
Number 080
SENATOR LEMAN asked Mr. Ray if he believes it's appropriate to have
parental consent for a minor under 18 to be able to participate in
this program?
MR. RAY thinks that's important.
SENATOR RANDY PHILLIPS stated he knows what Senator Leman's leading
up to.
MR. RAY stated parental consent has been the standard procedure for
participation in compliance checks.
SENATOR LEMAN agreed with Mr. Ray.
SENATOR RANDY PHILLIPS is sure Senator Leman will use that later.
CHAIRMAN SHARP asked if there are any further questions. If not,
what's the pleasure of the committee?
Number 100
SENATOR LEMAN made a motion to discharge HB 365 from the Senate
State Affairs Committee with individual recommendations.
CHAIRMAN SHARP, hearing no objection, stated HB 365 was discharged
from the Senate State Affairs Committee.
SB 256 SECOND CLASS CITY MAYOR
CHAIRMAN SHARP brought up SB 256 as the next order of business
before the Senate State Affairs Committee. He called the sponsor's
representative to testify.
Number 115
CHERYL DAVIS, Aide to Senator Al Adams, prime sponsor of SB 256,
asked the committee if they wanted the long version or the short
version of her testimony.
SENATOR RANDY PHILLIPS stated they prefer the short version.
MS. DAVIS responded, please support this bill and pass it.
CHAIRMAN SHARP stated the bill appears to make sense to him.
MS. DAVIS read a brief statement submitted to the committee: Under
current law, mayors of second class cities are elected by the
elected city council members themselves. SB 256 would create the
option of a second class city passing an ordinance that would allow
for the election of the mayor by the voters rather than the city
council members.
MS. DAVIS stated that SB 256 would just give second class cities
the option to do this. They wouldn't have to do it. The
qualifications of the mayor would remain the same. The only thing
different would be the way he or she was elected.
CHAIRMAN SHARP asked if there are any questions from committee
members
SENATOR RANDY PHILLIPS asked if the mayor of Savoonga ever showed
up.
MS. DAVIS replied he did.
CHAIRMAN SHARP asked the pleasure of the committee.
Number 135
SENATOR LEMAN made a motion to discharge SB 256 from the Senate
State Affairs Committee with individual recommendations.
CHAIRMAN SHARP, hearing no objection, stated SB 256 was discharged
from the Senate State Affairs Committee.
SB 306 G.O. BONDS FOR CORRECTIONAL FACILITIES
Number 140
CHAIRMAN SHARP brought up SB 306 as the next order of business
before the Senate State Affairs Committee. He called the
commissioner of the Department of Corrections to testify.
MARGARET PUGH, Commissioner of the Department of Corrections,
stated that the back-drop of this bill is that the governor asked
the Criminal Justice Cabinet to develop a plan for protecting the
public. She informed the committee that the administration is
taking a three pronged approach to the problem of prisoner
overcrowding. SB 306 is just one of those prongs. The other two
prongs are to divert low-risk, non-violent offenders from
incarceration in the first place, and to increase the use of
alternatives to incarceration for those folks at the end of their
sentences.
COMMISSIONER PUGH stated that SB 306 has three major merits:
1) It builds the beds where we need them;
2) It is set in the context of the Long-Range Fiscal Plan;
3) It takes the issue of the expense of corrections to the
voters.
COMMISSIONER PUGH stated she has asked Ross Kinney from the
Department of Revenue, Jim Baldwin from the Department of Law, and
Nancy Slagle from OMB to be present to answer questions. She has
also asked Bob Cole, Director of Administrative Services for the
Department of Corrections to walk the committee through the
sectional analysis for SB 306.
Number 180
BOB COLE, Director, Division of Administrative Services, Department
of Corrections, reads the sectional analysis for SB 306, which was
submitted to the committee.
SECTIONAL ANALYSIS
SB 306
Section 1. Provides for the issuance of general obligation (GO)
bonds in the amount of $148,500,000.00 for the purpose of paying
the cost of issuance of the bonds and design and construction of
state correctional facilities across the state. The issuance is
subject to voter approval at the next general election in November,
1996.
Section 2. Establishes a "State Correctional Facility Construction
Fund" (SCFC) in DOT&PF to receive proceeds from bond issuances.
Section 3. Authorizes allocation of bond proceeds in the SCFC to
the projects listed.
Section 4. An amendment has been prepared to delete this section.
Section 5. Authorizes the Departments of Corrections and
Transportation/Public Facilities to withdraw funds from the "Public
Facilities Planning Fund" (PFPF) in OMB for the purpose of advance
planning for the improvements financed under this Act.
Section 6. Allows excess bond proceeds, should any be realized, to
be used by the bond committee to redeem these bonds or pay
arbitrage fees.
Section 7. Authorizes a ballot measure to be placed on the ballot
November, 1996 asking voters whether they support the issuance of
these bonds and associated operating costs.
Section 8. Establishes an immediate effective date for the Act
under AS 01.10.070(c).
MR. COLE stated an amendment, which Mr. Baldwin will discuss, would
use the constitutional budget reserve fund to cover the cost of the
initial bond preparation by the Department of Revenue and the State
Bond Committee. The appropriation would cover only expenses that
must be incurred before bonds are sold. Once the bonds are sold,
proceeds would be used to cover the rest of the cost of preparation
and to reimburse the constitutional budget reserve fund. The net
affect would be revenue neutral once the bonds are issued.
CHAIRMAN SHARP asked if there were any questions from committee
members. [There were none.]
JIM BALDWIN, Assistant Attorney General, Department of Law, stated
that one of the things that has changed since the state last had a
GO bond, probably because of the state's financial condition, is
the access to general funds for paying certain costs that have to
be incurred before bonds are sold. The amendments that are being
proposed would use the constitutional budget reserve fund as a
funding source for the pre-issuance expenditures. The funds would
be paid back when the bonds are sold, so it would be a net
transaction.
Number 280
SENATOR DUNCAN asked if they aren't mixing an appropriation bill
with an authorization bill. He thought that wasn't allowed.
MR. BALDWIN responded that the administration is proposing the
changes that pre-fund these expenditures be done in the budget bill
itself, HB 412.
SENATOR DUNCAN stated he misunderstood; he thought they were
proposing these changes be made to SB 306.
MR. BALDWIN stated they are presenting the amendments to the State
Affairs Committee as an informational item. The only amendment
they are proposing that would be made to SB 306 is the deletion of
Section 4. But we are telling you that these funding sources need
to be provided elsewhere in an appropriation bill.
CHAIRMAN SHARP asked if there are questions of Mr. Baldwin.
SENATOR RANDY PHILLIPS asked if the administration supports SB 306.
ROSS KINNEY, Deputy Commissioner, Department of Revenue, Treasury
Division, stated he would like to discuss the issuance or
utilization of GO bonds as a mechanism for financing these
particular facilities. There are four major advantages to using GO
bonds. First, the voters have an opportunity to approve or
disapprove the issuance of bonds for the construction of a project.
If the voters approve the issuing of debt for construction of
facilities for corrections, they have authorized to pledge the full
faith and credit for the retirement of the principle and interest
of those bonds. That means that the state will pledge all revenue
sources that are not restricted by the constitution for the
retirement of that debt. Because the mechanism is GO debt, the
interest rates are historically lower, based on the fact that we do
pledge full faith and credit of the state. There are advantages to
that, from the aspect of lower cost for the borrowing of funds.
Because the state is in the position to issue the GO debt, we have
the option, should the market conditions prevail, that would allow
us to refund debt at a better rate and take advantage of those
savings in the future. We've been working on a long-range fiscal
plan and a capital improvements program of six years, and we are
proposing that through the utilization of GO debt, we have a single
authorization for $148,500,000.00 in debt.
MR. KINNEY stated that the issuance of debt would be served in five
instances for several reasons. The representative from the
Department of Transportation & Public Facilities can probably
explain the construction schedules better than he can. There are
some issues relating to arbitrage requirements that require the
state to be careful in the debt we issue from a timing standpoint
and the kind of interest earnings that we're able to garner as a
result of having those excess funds available. We are competing
with the private sector for funds in this case, and because our
funds are in a tax-exempt status, we are limited as to what we can
invest the money in while we're holding it. There are certain
restrictions as far as how long we can have that money and how long
we can invest it. We don't want to go in and authorize so much
debt at a single time that we're unable to handle it internally, as
well putting a tremendous impact on the construction community by
over-utilization of [indsc.] as it currently exists. This is one
part of an over-all six year program for the state. There are
limitations on the amount of debt that we can issue, the kinds of
debt that we can issue. We need to be extremely careful about how
we interface the various pieces of these puzzles. We have not
authorized any GO debts since 1980, and have not issued any since
1983. A substantial number of laws have changed, so it will be a
new experience for the state.
Number 355
SENATOR RANDY PHILLIPS asked when the last time was that the state
had any GO bonds for jails.
MR. KINNEY is not sure he has that information with him.
SENATOR RANDY PHILLIPS stated there is a major difference between
then and now: he thinks it would be easier now for voters to vote
in favor of this proposition because they are no longer paying
income tax.
MR. KINNEY added that there were a number of GO bonds that carried
the title of "various". He doesn't know whether or not those
included jails. The most common method utilized in the recent past
has been using revenue-type debt or certificates of participation
for things like Springcreek, Wildwood, Homer Jail, and some of the
court houses. In those cases, it does not require a vote, and
requires a higher rate of interest because you are only pledging
the revenue derived from the income stream as a result of the lease
payments that have been pledged as collateral. That is subject to
legislative approval on an annual basis to determine whether or not
that debt is paid.
SENATOR RANDY PHILLIPS stated, but then we would be subjugated to
about $13,500,000.00 every year for repayment, right?
MR. KINNEY responded that because of the way the debt will be
phased, the first years payment runs from about $2,700,000.00.
SENATOR RANDY PHILLIPS stated it doesn't say that on the ballot
proposition.
MR. KINNEY replied they are trying to put enough disclosure in SB
306 so that people will really understand what they're doing. Over
a period of time, based on the fact we're dealing with oil
revenues, we're going to have to provide voters and investors with
assurance that we can meet the debt payment stream. This debt must
be retired no later that 2013, regardless of the issuance [indsc.].
As a result of the staggered issuance schedule, payments will range
from approximately $2,700,000.00 to $15,000,000.00. The average
will be around $13,000,000.00.
CHAIRMAN SHARP noted that there would be staggered maturity dates,
with the last one maturing in 2013.
MR. KINNEY clarified that all debt will mature in 2013. What they
are looking at is staggered issuance dates. There will be a single
authorization by the voters, and we will issue in five increments.
We have to look at what our projections are for unrestricted
revenues, and currently we are extremely dependant on oil revenues.
Until we come up with another stream of revenue, investors want us
to rely on 5-8% of unrestricted general fund revenues as a maximum
amount for debt issuance.
CHAIRMAN SHARP asked if there are further questions. Hearing none,
he asked for a motion on the amendment to delete Section 4.
Number 420
SENATOR DUNCAN made a motion to adopt the amendment which would
delete Section 4.
CHAIRMAN SHARP, hearing no objections, stated the amendment was
adopted. He asked if there was any other testimony on SB 306 at
this time. Hearing none, he asked the pleasure of the committee.
SENATOR DUNCAN made a motion to discharge SB 306 from the Senate
State Affairs Committee with individual recommendations.
Number 433
CHAIRMAN SHARP, hearing no objection, stated SB 306 was discharged
from the Senate State Affairs Committee.
SB 210 INCREASE TOBACCO TAXES
Number 444
CHAIRMAN SHARP brought up SB 210 as the next order of business
before the Senate State Affairs Committee.
SENATOR LEMAN made a motion to adopt the Senate State Affairs
Committee substitute for SB 210.
Number 448
CHAIRMAN SHARP, hearing no objection, stated the committee
substitute was adopted. The chairman stated he spoke with the
prime sponsor about the major intentions of the committee
substitute, and he had no problems with it.
SENATOR DUNCAN asked what the committee substitute would do to the
level of taxation.
CHAIRMAN SHARP stated the level of taxation would be the same. The
only changes are that there will be no indexing and we added
legislative intent. But the tax rates are exactly the same. He
noted that there will be a new fiscal note, due to removal of the
indexing. The chairman asked the pleasure of the committee.
Number 470
SENATOR LEMAN made a motion to discharge SB 210 from the Senate
State Affairs Committee with individual recommendations.
CHAIRMAN SHARP, hearing no objection, stated SB 210 was discharged
from the Senate State Affairs Committee.
CHAIRMAN SHARP adjourned the Senate State Affairs Committee at 4:10
p.m.
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