Legislature(1995 - 1996)

03/12/1996 03:32 PM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               SENATE STATE AFFAIRS COMMITTEE                                
                         March 12, 1996                                        
                           3:32 p.m.                                           
  MEMBERS PRESENT                                                              
 Senator Bert Sharp, Chairman                                                  
 Senator Randy Phillips, Vice-Chairman                                         
 Senator Loren Leman                                                           
 Senator Jim Duncan                                                            
 Senator Dave Donley                                                           
    COMMITTEE CALENDAR                                                         
 SENATE BILL NO. 196                                                           
 "An Act naming the new maritime ferry vessel Koniag."                         
 SENATE BILL NO. 275                                                           
 "An Act relating to state procurement practices and procedures; and           
 providing for an effective date."                                             
 SENATE BILL NO. 191                                                           
 "An Act relating to election campaigns, election campaign                     
 financing, the oversight and regulation of election campaigns by              
 the Alaska Public Offices Commission, the activities of lobbyists             
 that relate to election campaigns, and the definitions of offenses            
 of campaign misconduct; and providing for an effective date."                 
  PREVIOUS SENATE COMMITTEE ACTION                                             
 SB 196 - See Transportation minutes dated 2/22/96.                            
 SB 275 - No previous senate committee minutes.                                
 SB 191 - See State Affairs minutes dated 1/25/96.                             
  WITNESS REGISTER                                                             
 Senator Fred Zharoff                                                          
 State Capitol, Juneau, Alaska, 99801-1182¶(907)465-3473                       
   POSITION STATEMENT: prime sponsor of SB 196                                 
 Dugan Petty, Director                                                         
 Division of General Services                                                  
 Department of Administration                                                  
 P.O. Box 110210, Juneau, AK 99811-0210¶(907)465-2250                          
   POSITION STATEMENT: representing governor-prime sponsor of SB 275           
 Ralph Winterrowd, Owner                                                       
 Winter Telecom, Inc.                                                          
 6901 East Tudor, #7, Anchorage, AK 99507¶(907)269-7000                        
   POSITION STATEMENT: opposed to SB 275                                       
 Jack Chenoweth, Legislative Legal Counsel                                     
 Legislative Legal Services                                                    
 130 Seward St., Ste. 409, Juneau, AK 99801-2105¶(907)465-2450                 
   POSITION STATEMENT: testified on SB 191                                     
 Representative David Finkelstein                                              
 State Capitol, Juneau, Alaska, 99801-1182¶(907)465-2435                       
   POSITION STATEMENT: testified on SB 191                                     
 Brooke Miles                                                                  
 Alaska Public Offices Commission                                              
 P.O. Box 110222, Juneau, AK 99811-0222¶(907)465-4864                          
   POSITION STATEMENT: testified on SB 191                                     
  ACTION NARRATIVE                                                             
              SB 196 NAMING FERRY VESSEL KONIAG                              
 TAPE 96-18, SIDE A                                                            
 Number 001                                                                    
 CHAIRMAN SHARP called the Senate State Affairs Committee to order             
 at 3:32 p.m. and brought up SB 196 as the first order of business             
 before the committee.  He called Senator Zharoff to testify.                  
 Number 010                                                                    
 SENATOR FRED ZHAROFF, prime sponsor of SB 196, stated the                     
 legislation would call for the naming of the new maritime ferry               
 vessel to be named the "Koniag".  That is in keeping with the                 
 tradition of naming state ferries after glaciers, and follows                 
 Alaska Statute as well.                                                       
 SENATOR RANDY PHILLIPS asked where the ferry will run.                        
 SENATOR ZHAROFF replied the new ferry will be the state's second              
 ocean-going vessel.  It will probably serve Southeast Alaska,                 
 Kodiak, and Western Alaska.                                                   
 SENATOR RANDY PHILLIPS asked if there is any opposition to the name           
 SENATOR ZHAROFF responded he has not heard any opposition.                    
 CHAIRMAN SHARP asked if the ferry that would bear the name "Koniag"           
 is the one that is currently under construction.                              
 SENATOR ZHAROFF replied that is correct.                                      
 Number 045                                                                    
 SENATOR LEMAN stated that currently, the politically correct thing            
 to do is not to name things after aboriginal groups.  He thinks             
 that denies proper attention to aboriginal people.                            
 CHAIRMAN SHARP asked the pleasure of the committee.                           
 Number 068                                                                    
 SENATOR LEMAN made a motion to discharge SB 196 and accompanying              
 zero fiscal note from the Senate State Affairs Committee with                 
 individual recommendations.                                                   
 CHAIRMAN SHARP, hearing no objection, stated SB 196 was discharged            
 from committee.                                                               
       SB 275 STATE PROCUREMENT PRACTICES & PROCEDURES                       
 Number 090                                                                    
 SENATOR SHARP brought up SB 275 as the next order of business                 
 before the Senate State Affairs Committee and called the first                
 witness.  He noted that the legislation was introduced at the                 
 request of the governor.                                                      
 Number 099                                                                    
 DUGAN PETTY, Director - Division of General Services, Department of           
 Administration, representing the governor, prime sponsor of SB 275,           
 stated that the State of Alaska reviewed the federal Acquisitions             
 Streamlining Act of 1994 to find things that would be applicable to           
 state procurement procedures.  The State of Alaska is fortunate in            
 that the existing procurement law is relatively new, and is based             
 on the model procurement code.  Many of the complexities that the             
 federal government suffers from are not suffered by the State of              
 Alaska.  However, the procurement practices that used to work,                
 don't work as well as they used to, and need to change with the               
 times and the business environment.  The state also cannot afford             
 to continue to conduct business in the manner in which it has been            
 previously conducted.  We need to look for innovative and effective           
 ways of conducting business.  We are beginning to make inroads in             
 that area, and SB 275 represents that.  To that end, Commissioner             
 Boyer of the Department of Administration initiated the Procurement           
 Advisory Council.  He charged that council with the responsibility            
 of looking at the statutes, regulations, and policies and making              
 changes to bring about efficiencies in the operation of state                 
 procurement practices.                                                        
 Number 145                                                                    
 MR. PETTY stated that the other duty of the Procurement Advisory              
 Council was to look at individual, non-functional or non-responsive           
 procurement practices and see if a better approach to doing                   
 business couldn't be engineered.  SB 275 is a result of about                 
 thirty of the recommendations of the council.  The Procurement                
 Advisory Council was made up of state practitioners, customers of             
 state government, officials from the University of Alaska,                    
 procurement officials from outside state government, vendors, and             
 representatives from Buy Alaska.                                              
 Number 160                                                                    
 MR. PETTY stated he would like to briefly review the changes.  He             
 won't cover every section; in members' bill packets is a matrix               
 which addresses the significant changes to the law.                           
 SENATOR LEMAN asked Mr. Petty to identify the section as he reads             
 the matrix.  [The bill sections are identified in the matrix.]                
 MR. PETTY reviewed the matrix submitted to the committee from the             
                        MATRIX TO SB 275                                       
 Procurement Procedures:                                                       
  Raises the threshold for state's use of simplified small                     
 procurement procedures from $25,000.000 to $50,000.000. (Section              
  Raises the threshold for construction simplified small                       
 procurement procedures from $25,000.00 to $100,000.00. (Section 23)           
  Permits a streamlined simplified protest process for small                   
 procurements. (Section 29)                                                    
  Small office leases of up to 5,000 s.f. acquired through                     
 simplified small procurement procedures. (Sections 4 and 23)                  
  Bidders for other than construction contracts will no longer                 
 be required to list sub-contractors within five days of award.                
 (Sections 8 and 12)                                                           
  Bidders for other than construction contracts are given more                 
 latitude to replace sub-contractors. (Sections 8 and 12)                      
  Proposals will be returned to proposers when an RFP is                       
 cancelled to prevent disclosure to competitors. (Section 14)                  
 Procurement Officers:                                                         
  A procurement officer may shorten the notice of period for a                 
 purchase if adequate competition is anticipated. (Section 9)                  
  Permits greater use of RFPs when advantageous as determined by               
 the procurement officer. (Section 11)                                         
  Decreases restrictions on entering into a sole-source contract               
 by providing greater discretion to contract with a single source              
 when in the state's best interest and award through a formal bid or           
 RFP is not practical. (Section 16)                                            
  Grants discretion to the Chief Procurement Officer to permit                 
 other procurement officers to make determinations to enter into               
 single-source and limited-competition procurements. (Section 16 and           
  Expands requirement to independently verify material facts in                
 a determination to any state official completing the determination            
 of a single source, limited competition, or emergency contract.               
 (Section 22)                                                                  
  Expands penalty for a knowing false statement to any state                   
 official making a false statement in an alternate procurement                 
 determination. (Section 22)                                                   
  Permits the attorney general to determine when a legal                       
 services contract meets the requirements for a limited competition            
 procurement. (Section 17)                                                     
 Contracts & Practices:                                                        
  Prevents brokering of bidder preferences. (Section 10)                       
  Protects the state from protest damages beyond reasonable bid                
 preparation costs. (Section 33)                                               
  Removes debarred and suspended bidders from the bidders' list.               
 (Sections 3 and 38)                                                           
  Protects the state from untimely contract controversy claims.                
 (Sections 36 and 37)                                                          
 Procurement Practices:                                                        
  Permits a streamlined and simplified protest process for small               
 procurements. (Section 29)                                                    
  Exempts the operation and disposal of assets acquired through                
 foreclosure of agricultural loans from the complexities of the                
 state procurement process. (Section 39)                                       
  Permits purchase of lobbying, public relations, and                          
 advertising contracts by the Governor's Office and livestock by               
 Alaska Correctional Industries outside the requirements of the                
 procurement code. (Section 40)                                                
  Makes protest time deadlines more uniform and consistent with                
 court rules.(Sections 31, 32, 34, and 35)                                     
  Places all preference requirements in one part of statute for                
 ease of reference by procurement officers. (Sections 24-26, and 45)           
  Restricts disclosure of proposals until notice of intent to                  
 award is issued. (Section 13)                                                 
 Innovation & Better Value:                                                    
  Provides for an innovative method of procurement for new,                    
 unique requirements, new technology, or to acquisition best value             
 when advantageous to the state. (Section 19)                                  
  Encourages the use of RFPs when appropriate to achieve best                  
 value. (Section 11)                                                           
  Allows for economical and convenient purchases from federal                  
 supply schedules as authorized by the Federal Acquisition                     
 Streamlining Act of 1994. (Section 41)                                        
 Reductions in Operating Costs:                                                
  Lease rent concessions of at least 10% may be received in                    
 return for extensions of existing leases up to 10 years. (sec. 5)             
  Lease purchases of real property not exceeding $500,000.00                   
 per year or $2,500,000.00 for full-term may be entered into without           
 legislative approval or law. (Sections 6 and 7)                               
 Number 205                                                                    
 SENATOR RANDY PHILLIPS stated he has a problem with Sections 16,              
 22, 40, 6, and 7.                                                             
 MR. PETTY asked the committee to support the efforts of the                   
 Procurement Advisory Council.                                                 
 CHAIRMAN SHARP stated he would like to take testimony from other              
 people before taking questions from committee members.                        
 Number 275                                                                    
 RALPH WINTERROWD, Owner - Winter Telecom, Inc., testifying from               
 Anchorage, stated he is a probably a procurement expert, and SB 275           
 is not going to fix the problems of the state procurement code.  SB
 275 will make absolutely, positively sure that there will never be            
 any bids, at least in the telecommunications systems area.  He                
 wished that he had been invited to help write the legislation, and            
 stated SB 275 is anti-American.  There needs to be the ability to             
 bid on best product at best price.  He stated his company submitted           
 a bid to the Department of Fish & Game and beat the competitors on            
 bid and on points.  He stated his company has won bids, which it              
 has then lost because of sole-source awarding of contracts.  His              
 company currently has a case in court where the judge stated that             
 the Alaska Court System is not in compliance with the Alaska                  
 Statutes, Winter Telecom has been irreparably damaged, but the                
 judge will vote against him.  Mr. Winterrowd listed other examples            
 of problems he has had in bidding on procurement contracts.  He               
 stated that everyone should have an equal and fair footing from               
 which to bid.  If SB 275 is adopted, it will close out all                    
 competitive bidding in the State of Alaska.  He would be willing to           
 work with the committee on new procurement procedures.  He stated             
 that the federal government has some excellent guidelines.  He has            
 bid on some federal contracts, and you can win on those: they write           
 a reasonably fair bid.  Mr. Winterrowd stated he can back up his              
 testimony with documented facts.  All he is asking for is the                 
 opportunity to bid fairly and equally for state contracts.                    
 Number 360                                                                    
 SENATOR LEMAN stated that a number of Mr. Winterrowd's statements             
 were rather aggressive.  He would like to see the documentation to            
 which Mr. Winterrowd referred.  He asked Mr. Winterrowd to provide            
 that documentation to the committee.                                          
 MR. WINTERROWD responded he can do that.                                      
 SENATOR LEMAN stated what he wants to know, is how SB 275 would do            
 damage to the competitive process, and what the legislature can do            
 to enhance the competitive process.                                           
 MR. WINTERROWD replied he would work on that.                                 
 Number 387                                                                    
 SENATOR RANDY PHILLIPS informed Mr. Winterrowd that his best bet              
 would be to submit suggestions regarding procurement in general.              
 He also suggested sending information about the federal procurement           
 MR. WINTERROWD responded it is rather lengthy, but he can give a              
 brief overview of the federal process.  The main reason the federal           
 bidding process is fair, is that they don't try to slant the bid              
 toward a particular brand or try to disqualify other bidders: they            
 write a fair bid.                                                             
 CHAIRMAN SHARP encouraged Mr. Winterrowd to work with the committee           
 on the procurement process.  SB 275 is also referred to the Senate            
 Judiciary and Finance Committees.                                             
 SENATOR RANDY PHILLIPS asked Mr. Winterrowd to get his information            
 to the committee as soon as possible.                                         
 MR. WINTERROWD responded he would work on putting some information            
 together this weekend.                                                        
 CHAIRMAN SHARP asked committee members to identify areas of concern           
 so they can be worked on at a later date.                                     
 Number 425                                                                    
 SENATOR RANDY PHILLIPS stated he is concerned with Sections 6 and             
 7, which he would refer to as "condo-izing" a building.  He would             
 rather leave the law the way it is now, than do that.  He is                  
 concerned with Sections 16, 22, and 40.                                       
 CHAIRMAN SHARP is also concerned with those sections.  There will             
 be a subcommittee on SB 275, and Senator Phillips will be chairman            
 of that subcommittee.  Chairman Sharp stated he has a problem with            
 Section 9, because he thinks it could be in conflict with Section             
 30.  Section 9 states days of notice can be shortened to less than            
 21, but Section 30 states, "A protest based upon alleged                      
 improprieties or ambiguities in a solicitation must be filed at               
 least 10 days before the due date of the bid or proposal as stated            
 in the solicitation."  If it is shortened much before 21 days,                
 there would be no chance to protest.  The other area with which the           
 chairman is concerned with Section 10.  He would like to see "six             
 months" extended to "twelve months".                                          
 SENATOR RANDY PHILLIPS asked if he was picked for chairman of the             
 subcommittee on SB 275 because "the spouting whale gets the                   
 CHAIRMAN SHARP replied that Senator Phillips was chosen because he            
 appeared to have significant ideas on how to improve the                      
 legislation.  The subcommittee will consist of Senator Phillips as            
 chairman, and Senators Leman and Donley as the other members of the           
 SENATOR LEMAN asked Mr. Petty if he would be available to work on             
 SB 275 with the subcommittee.                                                 
 MR. PETTY responded he would.                                                 
 CHAIRMAN SHARP stated the committee would move on to the next bill.           
           SB 191 ELECTION CAMPAIGN FINANCE REFORM                           
 Number 465                                                                    
 CHAIRMAN SHARP brought up SB 191 as the next order of business                
 before the Senate State Affairs Committee and called Mr. Chenoweth            
 to walk the committee through the committee substitute.                       
 JACK CHENOWETH, Legislative Legal Counsel, stated that after the              
 first hearing on SB 191, he worked with a committee composed of               
 Representatives Finkelstein and James, Senator Kelly, and people              
 from other offices and produced a draft substitute for HB 368 and             
 SB 191.  The version for SB 191 is 1260\F, dated 2/27/96.  The                
 committee also should have a follow-up memo dated February 28,                
 1996, which lays out all of the changes to the original bill.  He             
 asked if the committee wanted him to outline the changes.                     
 CHAIRMAN SHARP responded, yes.  First though, he asked if a                   
 committee member would move the committee substitute for SB 191.              
 Number 494                                                                    
 SENATOR RANDY PHILLIPS made a motion to adopt the committee                   
 substitute for SB 191.                                                        
 CHAIRMAN SHARP, hearing no objection, stated the committee                    
 substitute was adopted.                                                       
 Number 500                                                                    
 MR. CHENOWETH began the review of the changes to SB 191, as                   
 outlined in his memo on the subject, dated February 28, 1996.  The            
 changes are outlined below:                                                   
 1. Indexing requirement deleted.                                              
 2. Requirement of registration before making contributions                    
 3. Cash contribution limit increased; current limitation restored.            
 4. Honorarium approach of existing law substituted.                           
 5. Dates on which campaign fund-raising may begin are changed.                
 6. Authority for candidates to accept and expend loans from family            
 members deleted.                                                              
 7. Requirement that certain copies of reports filed with APOC be              
 sent to candidates deleted.                                                   
 8. Definition of "prohibited contributions" for purposes of proper            
 disposition expanded.                                                         
 9. Surplus campaign funds: authorized uses expanded.                          
 10. Penalty provisions modified.                                              
 11. Definition of "political party" modified.                                 
 12. Criminal penalties for campaign misconduct offenses reduced.              
 13. 24-hour expenditure reporting requirement deleted.                        
 14. Statement by contributor requirement revised to limit to                  
 15. Applicability of the "paid for by" requirement modified with              
 respect to certain materials.                                                 
 16. Definition supplied for "publicly-funded entity".                         
 17. Requirement of group name as inclusive of candidate's name                
 18. Contributions between political parties and subordinate or                
 associated units and vice versa allowed.                                      
 19. Cut-off date for receipt and acceptance of contributions by               
 candidates losing primary elections added.                                    
 20. Disclaimer provision applicable to independent expenditures               
 21. Effective date altered.                                                   
 22. Proceeds of charitable gaming other than from raffles and                 
 lotteries not to be used to support political activities.                     
 23. Contributions from out-of-state sources allowed; limitations on           
 amounts of these contributions set.                                           
 24. Maximum amounts that a political party may contribute to a                
 candidate increased; limitations on amounts of these contributions            
 25. Restoration to current law of amounts that groups may provide             
 to candidates.                                                                
 26. Group contributions to other groups allowed; limitations on               
 amount of these contributions set.                                            
 27. Provision limiting the governor and lieutenant governor from              
 raising election campaign funds during the legislative session                
 28. Litigation provision amended.                                             
 29. Exemption for "small campaigns".                                          
 30. Severability provision added.                                             
 SENATOR RANDY PHILLIPS asked Mr. Chenoweth if the changes are                 
 substantially similar to the initiative.                                      
 SENATOR DUNCAN doesn't think that judgement is up to Mr. Chenoweth.           
 That would be up to the lieutenant governor.                                  
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 Number 525                                                                    
 SENATOR RANDY PHILLIPS asked the other committee members if any of            
 them have ever been paid for making a speech.                                 
 Committee members indicated they have not ever been paid to make a            
 SENATOR DUNCAN noted that provision addresses candidates before               
 they've been elected to office.                                               
 SENATOR DONLEY thinks Senator Phillips made a good point: every               
 time you read something like this, it makes people think there's a            
 big problem with honorarium.  There has never been a problem in               
 that area.                                                                    
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 Number 540                                                                    
 SENATOR DUNCAN asked if change #5, dates on which campaign fund-              
 raising may begin are changed, would apply to all candidates, and             
 not just incumbents.                                                          
 MR. CHENOWETH responded that is correct: that change would apply to           
 all candidates.                                                               
 SENATOR DUNCAN asked if a person couldn't just say, "I'm a nice               
 guy; give me some money", then put it in a bank account.                      
 MR. CHENOWETH supposes a person could do that, but he thinks that             
 if they're caught-                                                            
 SENATOR LEMAN stated a person could give speeches, and if they're             
 good speeches, could get paid for being a good speech-maker, and              
 then use your own money.                                                      
 SENATOR DUNCAN would like it to be clear that the playing field is            
 equal for all candidates.                                                     
 MR. CHENOWETH stated he will look at the language again to make               
 sure there aren't obvious loopholes.                                          
 SENATOR DUNCAN commented there are always loopholes, and the                  
 republicans will find them.                                                   
 SENATOR LEMAN responded, no, Senator Duncan is the one hosting                
 Number 560                                                                    
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 SENATOR DONLEY thinks the Ethics Law exempts certain family                   
 financial transactions, so that leaves a huge loophole.                       
 MR. CHENOWETH stated SB 191 would prohibit loans from spouses,                
 children, parents, and so forth.  The only loan that would be                 
 available to a person would be a loan made from a person to their             
 own campaign.                                                                 
 SENATOR DUNCAN asked how a loan from a spouse would be determined.            
 If he and his wife have separate checking accounts; he's running              
 for office, and she transfers $5,000 to his account, is that a                
 MR. CHENOWETH responded that if there is any evidence requiring               
 SENATOR DUNCAN interjected, that means as long as he doesn't sign             
 a promissory note, his wife can give him money.                               
 MR. CHENOWETH suspects there is probably a relationship there that            
 will not get picked up on.  Watch what you sign.                              
 SENATOR RANDY PHILLIPS commented that Senator Duncan must have a              
 generous wife.  His wouldn't do it.                                           
 SENATOR LEMAN commented he just asked for $20.00 for lunch.                   
 SENATOR DUNCAN asked Senator Leman if he signed a promissory note.            
 SENATOR LEMAN stated she wouldn't give him $20.00.                            
 SENATOR DUNCAN wonders if loans or gifts of money from spouses                
 might be impossible to enforce, or even know when it happens.  He             
 asked if this provision was in the initiative.                                
 MR. CHENOWETH responded that loans from family members were                   
 authorized in the initiative.  The informal committee, whose                  
 members are listed in the memo, stripped that language from SB 191,           
 so that the only source of loans would be loans the candidate made            
 to his or her campaign.                                                       
 TAPE 96-18, SIDE B                                                            
 SENATOR DONLEY asked if there was a general prohibition, but then             
 exceptions for loans from family members.                                     
 MR. CHENOWETH responded, no.  There was a general authorization of            
 loans from close family members.                                              
 Number 585                                                                    
 SENATOR DONLEY stated that in the normal practice of the world,               
 there is no limit on family members giving loans to anyone.  So               
 there must have been some prohibition before they could authorize             
 it, because it was never prohibited, right?                                   
 MR. CHENOWETH responded that generally, a candidate would not be              
 allowed to raise money outside what was permitted under the                   
 initiative, or under the law as changed by the initiative.                    
 SENATOR DONLEY stated that they are talking about loans to a                  
 campaign committee, not to an individual.                                     
 MR. CHENOWETH replied they are talking about loans to an                      
 individual, because there was a provision at the end that covered             
 the permissive repayment of loans.  If you didn't jump through all            
 the hoops, keep to all the requirements, then you would not be in             
 a position to repay that loan from any surplus campaign funds.  He            
 is talking in terms of campaign funds, not loans to re-roof the               
 house or to buy a car.  This is not loans in the sense of an ethics           
 bill; it's loans as a source of money for campaign contributions.             
 SENATOR DONLEY commented that is one of the things that's                     
 confusing: this seems to interplay with the ethics bill.                      
 SENATOR DUNCAN gave a scenario: he needs $10,000.00 for his                   
 campaign, so he transfers that money from his personal account to             
 his campaign account.  Then he doesn't have enough money to pay the           
 house bill, so he borrows money from his wife for that bill so he             
 can put his personal money into his campaign.  Would that scenario            
 be prohibited?                                                                
 MR. CHENOWETH responded that if the loan from a spouse is for the             
 house, then it's not a source of money for the campaign and is                
 CHAIRMAN SHARP stated it is his understanding that the only way to            
 get your money back from surplus campaign funds, is if you make a             
 loan to your own campaign.                                                    
 Number 560                                                                    
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 Number 535                                                                    
 SENATOR LEMAN commented that repayment of contributions to                    
 contributors (the bill states it may be done only if done pro rata)           
 makes more sense to him if you could just return contributions made           
 by most recent contributors: those who contributed to the excess.             
 He asked if that provision was to be consistent with the                      
 MR. CHENOWETH responded, no.  This is in response to the argument             
 that if this provision wasn't in the bill, then a candidate could             
 determine for him or herself which contributors would benefit from            
 the return, to the exclusion of others.  The idea was to be even              
 handed about returning campaign contributions.                                
 SENATOR LEMAN stated he can understand that argument.  But he                 
 thinks that provision might be flagged for discussion.                        
 SENATOR DONLEY stated it makes sense: he has received $5.00 and               
 $10.00 contributions.  Under this provision, he would have to                 
 prorate a return to every single person; he might have to find                
 people to return $0.23.                                                       
 MR. CHENOWETH responded that is correct.  He thinks that at some              
 point if the returns become minimal, the candidate would do                   
 something other than returning the money.                                     
 Number 509                                                                    
 SENATOR DUNCAN asked how the transfer amounts to office accounts              
 were reached: why are the amounts allowed for transfer equal for              
 house and senate members?  Senators have twice as many constituents           
 as house members.  It seems to him that it's not equitable.                   
 Number 485                                                                    
 REPRESENTATIVE DAVID FINKELSTEIN stated the original idea was to              
 make the--we're talking about actual campaign amounts, make the               
 senate amount 150% of the house amount.  Senator Duncan makes a               
 good case that it should be higher in the senate, though.                     
 Representative Finkelstein mentioned that the word "approximate" in           
 the pro rata returns didn't come out exactly as intended.  The idea           
 was to cover the circumstances that Senator Donley was describing,            
 where you wouldn't send refunds to people who made small donations,           
 because it would become unrealistic.  You just don't want a                   
 candidate taking all the money left over from a campaign and giving           
 it back to their buddies or potential employers or somebody else,             
 instead of to a larger group.                                                 
 SENATOR DUNCAN thinks the public would have a big concern about               
 massive amounts of surplus campaign money being carried over, but             
 he thinks the public would also recognize that legislators have an            
 obligation to communicate with their constituents.  There have been           
 a rise in costs, but not nearly the same rise in office expense               
 accounts.  He suggested either lowering the amount representatives            
 would get or raising the amount senators would get.  He asked                 
 Representative Finkelstein what his reaction would be to that                 
 Number 455                                                                    
 REPRESENTATIVE FINKELSTEIN stated his role is as a house advocate             
 and as a supporter of the initiative.  He does think this would be            
 a reasonable area for compromise though.  The points Senator Duncan           
 makes are good ones.  He noted that a carry forward into future               
 campaigns, and carry forward of non-monetary campaign assets, all             
 those put together are $20,000.00 for a senate member, is                     
 significantly different than the approach in the initiative.  This            
 committee substitute allows $2,500.00 carryover for non-monetary,             
 such as computers and other things.                                           
 SENATOR DONLEY asked if that is in the initiative.                            
 REPRESENTATIVE FINKELSTEIN responds it is in the initiative.  There           
 is also $7,500 in the carry forward of the account to start your              
 new campaign.  There is also $10,000.00.  So add it all together              
 and they add up to $20,000.00.                                                
 Number 425                                                                    
 SENATOR DUNCAN stated he understands what Representative                      
 Finkelstein is saying, but no matter how you cut it, senators still           
 have twice as many constituents and four-year terms, and you're               
 asking senators to get by on--I mean, maybe the compromise is to              
 reduce the $5,000.00 to $3,750.00 for representatives, and                    
 $15,000.00 for senators.                                                      
 REPRESENTATIVE FINKELSTEIN stated he completely agrees with Senator           
 Duncan on principle.  It's just that the law is now $6,000.00 each.           
 There are some costs that are not double.  For instance, for                  
 Senator Donley and myself on travel: there is no real difference.             
 SENATOR DUNCAN stated, if you can drive, I agree.                             
 CHAIRMAN SHARP stated the total dollar perception is a problem, but           
 he thinks the intent is to be equally fair, and he would think that           
 language similar to language already in the bill, "...limited to a            
 maximum equivalent to $2,500.00 per year per election district                
 SENATOR DUNCAN added, and "election district" would be defined by             
 house districts represented, which for senators would be two house            
 election districts.                                                           
 SENATOR DONLEY commented that might be a way to get to it.  That              
 language would make all things equal.                                         
 SENATOR DUNCAN stated he likes that language.                                 
 SENATOR LEMAN commented we might want to look at lowering                     
 representative's office accounts to make things more equitable.               
 Number 390                                                                    
 SENATOR DONLEY stated he is concerned with the low amount for                 
 carrying over non-monetary campaign assets, such as computers.                
 Under the initiative provisions, one would have to sell that                  
 equipment, which seems really counter-productive.  Over the years,            
 the computers he's bought with campaign money, he's ended up using            
 in his state office.  When he first got here, most legislators                
 didn't have computers.  About the only way to get a computer was to           
 go out and buy one yourself.                                                  
 CHAIRMAN SHARP asked Senator Donley if he served in the minority              
 SENATOR DONLEY replied, no, he served under Ben Grussendorf.  It's            
 really hard to assess the value of computers and other office                 
 equipment; they depreciate rapidly, and who knows what they're                
 worth?  It would probably be some kind of crime if you didn't,                
 MR. CHENOWETH nodded "yes".                                                   
 Number 368                                                                    
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 CHAIRMAN SHARP stated he has observed a problem with the reporting            
 on campaign finance reports: he thinks 8 out of 10 campaign finance           
 reports would not be properly filed, because they aren't                      
 arithmetically correct.  This would make it a $500.00 a day fine if           
 you fail to file a properly completed and certified report at the             
 Number 338                                                                    
 REPRESENTATIVE FINKELSTEIN stated the idea behind this particular             
 work draft is to only increase the maximum, and the minimum would             
 still remain zero, or whatever the commission considers                       
 appropriate.  The wording you're describing is just part of                   
 existing law.  This approach, which isn't the approach in the                 
 initiative, is intended as much as possible to not change the                 
 system in place now.  The initiative did envision a new system with           
 mitigating factors and with state of mind to be determined.  That             
 approach is abandoned, and returns to the existing system.  The               
 only change to acknowledge the content of the initiative is to put            
 a higher maximum in place.                                                    
 SENATOR DONLEY stated his experience with civil and criminal fines            
 is that they come down from the maximum, and discount from there,             
 based upon the facts of the individual case.  Although one would              
 hope it would be administered thus, in his experience it would not          
 be administered in that manner.  He thinks everything would                   
 increase five-fold.                                                           
 REPRESENTATIVE FINKELSTEIN responded that is a good point; he is              
 not sure whether they'll do that or not.  If you're concerned about           
 that, there are two ways you could solve it.  One is to return to             
 the more specific standards and have lower categories for lower               
 levels of fines.  The other would be to have a letter of intent               
 indicating they should continue with the current fine structure for           
 late filings and unintentional filings, and all the other                     
 categories that aren't the worst categories.  This figure is just             
 the only remnant of the initiatives provision in this particular              
 SENATOR DONLEY commented he does not have a problem with the fine             
 rising for the more serious categories.  But he thinks this would             
 accelerate it for everything.                                                 
 Number 298                                                                    
 CHAIRMAN SHARP stated he is concerned that the possibility of                 
 $500.00 daily fines will frighten away potential candidates.  He              
 realizes that was triggered by the petition, but he thinks it will            
 have the reverse effect of what the petitioners thought would                 
 happen: he thinks there will be only more wealthy people filing for           
 SENATOR LEMAN stated he would like to hear from the commission as             
 to what is actually being collected, compared to the fine of not              
 more than $10.00 per day on multiple-day offenses, like a year, or            
 half a year.  What is actually collected by the commission?  He               
 would guess it is substantially less than even $10.00 per day.  So            
 it doesn't make sense to him to increase it to $50.00 per day, if             
 the commission has been fining substantially less than that.                  
 CHAIRMAN SHARP asked Mr. Chenoweth to continue his review, and                
 questions to the commission would be addressed later.                         
 Number 264                                                                    
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 Number 220                                                                    
 SENATOR DONLEY asked Mr. Chenoweth for a copy of the MacEntire                
 decision.  In that decision, did they distinguish campaign                    
 expenditures by formal campaigns from independent expenditures?               
 MR. CHENOWETH responded he does not think they did.                           
 SENATOR DONLEY thinks it's only a matter of time.  He finds it hard           
 to distinguish between the two.  You're talking about a First                 
 Amendment right, that's somehow it's stronger for anonymous,                  
 independent parties, than it is for the candidates themselves.  He            
 thinks it's problematic.                                                      
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 Number 200                                                                    
 SENATOR DONLEY asked if #17, "Requirement of group mane as                    
 inclusive of candidate's name modified", is in the initiative.                
 MR. CHENOWETH replied it is not.  50% is in existing law, and it is           
 not addressed in the initiative.                                              
 Number 185                                                                    
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 Number 150                                                                    
 SENATOR RANDY PHILLIPS asked why #22, "Proceeds of charitable                 
 gaming other than from raffles and lotteries not to be used to                
 support political activities", was not in the initiative.                     
 MR. CHENOWETH responded he does not know.                                     
 REPRESENTATIVE FINKELSTEIN commented that the view of the                     
 initiative committee is that, and it's arguable, the intention of             
 the initiative is to preclude operators of charitable gaming                  
 permits from returning money to groups or parties, because                    
 operators are corporations, and corporations are not allowed to               
 give money.  There is a contrary view to that, but that is the                
 intention of the commission.                                                  
 Number 133                                                                    
 SENATOR DUNCAN asked what the impact is of the effective date.                
 What happens January 1, 1997, the effective date, to campaign funds           
 carried forward from an election at an earlier time?                          
 MR. CHENOWETH responded that, as a general rule, acts are not                 
 retrospective, unless made so.  The safest thing would be to take             
 the excess campaign funds, and move it, as permitted by the                   
 initiative.  But if that is not done, he doesn't know that it's               
 fair to say that a legislator would be in violation of the law.               
 Nothing in the initiative or in SB 191 indicates that existing                
 balances are to be treated under these provisions.  The provisions            
 are new as of January 1, and would apply, by their terms, to                  
 election campaign fund-raising that begins from that date and                 
 SENATOR DUNCAN asked if a campaign in the fall, 1996 election                 
 raised $100,000.00 and spent $50,000.00, they could keep that                 
 $50,000.00 balance.                                                           
 MR. CHENOWETH replied neither the initiative by it's terms, nor SB
 191 is made retroactive.  It's a very good question about what                
 happens with account balances on January 1, or the date of the                
 initiative.  His "off the top of his head" advice would be that he            
 cannot say for certain whether you would have to conform to its               
 requirements.  It would probably be a good idea to do so, to                  
 eliminate the question.  But he cannot say for certain a candidate            
 would be in violation of the law if they did not.                             
 Number 080                                                                    
 SENATOR DUNCAN commented the alternative would be to put everything           
 into an office account.                                                       
 MR. CHENOWETH responded, to the extent one could.                             
 SENATOR DUNCAN stated he is not trying to bring up problems, but              
 they need to know what it all means.                                          
 MR. CHENOWETH stated it's a very good question, and one that has              
 kind of floated through his mind, but he has not done any research            
 on it whatsoever.  Perhaps the APOC or the Department of Law might            
 have another reading on it.  But since neither one of these things            
 specifically addresses existing balances on the effective date of             
 the bill or the initiative, he thinks those things are not                    
 necessarily covered.                                                          
 CHAIRMAN SHARP stated, in that case, a candidate with money in the            
 bank at the time of the effective date would have an advantage.  He           
 assumes it could be used for future campaigns, as long as the                 
 balance has been raised prior to the effective date of the law.               
 Number 040                                                                    
 REPRESENTATIVE FINKELSTEIN stated the conclusion is absolutely                
 right as to when the provisions would kick in.  You certainly                 
 retain all rights prior to the effective date.  It isn't completely           
 clear though, the money coming in, because remember, the bill                 
 limits use of funds based on the source.  While Mr. Chenoweth is              
 correct in that there is no provision permitting it, there is also            
 a provision prohibiting the use of funds coming from non-                     
 individuals and out of state, etcetera.  So he thinks it is a gray            
 CHAIRMAN SHARP stated the question is the balance of the fund                 
 belongs to the candidate's campaign account, and not to the                   
 limitations imposed on individual donors from the effective date.             
 REPRESENTATIVE FINKELSTEIN stated there is no provision in the                
 initiative allowing use of those carry-over funds.  Both sides                
 could be argued.  It is certainly an appropriate area to clarify.             
 TAPE 96-19, SIDE A                                                            
 Number 001                                                                    
 SENATOR DUNCAN is not sure we can do anything about it.  The IRS              
 would make the determination on this.  If you transfer any amount           
 of money from your campaign account to your office account, that's            
 taxable income presently.  Is there any way we can structure this             
 so that we don't lose a great deal of it to the federal government?           
 Number 022                                                                    
 MR. CHENOWETH does not know of any way to do that.  As this was               
 drafted, he did not spend a lot of time worrying about the tax                
 implications of it.                                                           
 SENATOR DUNCAN asked Mr. Chenoweth to look into structuring that              
 language in some way that could avoid that problem.                           
 Number 038                                                                    
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 Number 050                                                                    
 CHAIRMAN SHARP asked Mr. Chenoweth if there is a definition in SB
 191 on "out-of-state source".                                                 
 MR. CHENOWETH responded there is not, other than the language on              
 page 7, line 10.  We were trying to leave the door open a little              
 bit for those who said they have a relative or friend outside who             
 would want to contribute to their campaign.                                   
 SENATOR RANDY PHILLIPS asked if foreign contributions were legal.             
 MR. CHENOWETH does not know.                                                  
 SENATOR RANDY PHILLIPS asked if there is a federal law prohibiting            
 foreign campaign contributions.                                               
 MR. CHENOWETH responded there may be a federal law, but he thinks             
 federal law generally covers federal candidates, not the candidates           
 addressed in SB 191.                                                          
 REPRESENTATIVE FINKELSTEIN stated foreign campaign contributions              
 are illegal.                                                                  
 BROOKE MILES, Alaska Public Offices Commission, stated that it is             
 federal law, but it is also prohibited at the state level because             
 of the federal law.                                                           
 CHAIRMAN SHARP announced that the Senate State Affairs Committee              
 meeting will proceed until 5:30 p.m.                                          
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 SENATOR RANDY PHILLIPS asked if #24, "Maximum amounts that a                  
 political party may contribute to a candidate increased;                      
 limitations on amounts of these contributions set." is                        
 constitutional.  Would these limitations withstand a constitutional           
 MR. CHENOWETH does not know.  He thinks it would, but he cannot               
 guarantee it.                                                                 
 REPRESENTATIVE FINKELSTEIN noted there are federal limits on how              
 much money you can give to parties in federal races.                          
 SENATOR RANDY PHILLIPS stated he is referring to any limit, period.           
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 SENATOR DUNCAN asked how "group" is defined.                                  
 MR. CHENOWETH replied "group" is essentially two or more                      
 individuals who get together and attempt to influence an election.            
 We're talking generally, PACs-                                                
 Number 125                                                                    
 SENATOR RANDY PHILLIPS asked what about husband and wife?  That's             
 a group of two or more.                                                       
 MR. CHENOWETH responded, that's a group of two.  He supposes if               
 they want to set themselves up that way and make contributions like           
 that, he doesn't know of anything that would prevent that.                    
 REPRESENTATIVE FINKELSTEIN commented except the intent to violate             
 the law.                                                                      
 Number 135                                                                    
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.                                                      
 CHAIRMAN SHARP asked if governor or lieutenant governor candidates            
 could transfer money raised during that six-month period to a                 
 legislative race.                                                             
 MR. CHENOWETH responded that, as individuals, they are in a                   
 position to make contributions.                                               
 Number 155                                                                    
 MR. CHENOWETH continued his review of the changes made to SB 191,             
 as outlined in his memo.  He stated that because of the possibility           
 that any bill produced by the legislature would not be found to be            
 substantially the same as the initiative, and because of the                  
 possibility that then the initiative would continue to appear on              
 the November General Election Ballot, and because of the                      
 possibility that both the law and the initiative might become law,            
 he put a provision in SB 191 that "one or the other, but not both,            
 would become law."  If the Lieutenant Governor finds that the two             
 measures are substantially the same, then the initiative does not             
 appear on the ballot and the bill becomes law.  If she says the two           
 are not substantially the same, the initiative appears on the                 
 ballot, and the bill does not become law.                                     
 SENATOR DUNCAN stated, unless the initiative doesn't pass.                    
 MR. CHENOWETH stated if the initiative appears on the ballot and              
 goes down in November, then the law is as it is today.                        
 SENATOR DUNCAN commented that was a fat chance.                               
 SENATOR RANDY PHILLIPS asked Mr. Chenoweth if it is his opinion               
 that there are any sections that could be considered                          
 MR. CHENOWETH responded they have tried, based on the materials               
 provided by Av Gross, Susan Burke, and Mike Frank, to address most            
 of the concerns that had a constitutional dimension.  To tell you             
 the truth, he has not gone back and satisfied himself that they               
 have answered all of the questions that were raised.  He will do              
 that, if the committee wishes.                                                
 SENATOR RANDY PHILLIPS asked Mr. Finkelstein if Mr. Frank realizes            
 that some of these could possibly be ruled unconstitutional, if               
 ever challenged.                                                              
 Number 220                                                                    
 REPRESENTATIVE FINKELSTEIN responded he would be glad to submit to            
 the committee a legal opinion addressed to Senator Kelly from Mike            
 Frank responding to some of the arguments made by Gross and Burke.            
 There is also an analysis that Mr. Chenoweth wrote to the original            
 version of SB 191.  The basic conclusion of all those documents is            
 that this goes into a bunch of gray areas, and it could go either             
 way.  Anything in the area of campaign reform includes provisions             
 that will be subject to review.  His own opinion is the provision             
 that is most likely to be struck down is the one relating to the              
 limited time period for raising funds for a challenger is not                 
 enough time.  The funny thing about it is that it doesn't                   
 disadvantage the challenger.  Most of the money that would be                 
 raised prior to that time period would be raised by the incumbent.            
 Number 253                                                                    
 SENATOR DUNCAN stated he has heard there might be constitutional              
 concerns over limiting contributions from someone outside your                
 legislative district.  Is that provision still in SB 191?                     
 REPRESENTATIVE FINKELSTEIN responded it is, but only in regard to             
 lobbyists.  Mr. Frank's response is that might be an issue, but               
 there are states where a ban on contributions from persons holding            
 liquor licenses has been upheld.                                              
 MR. CHENOWETH added that was also upheld for casino gambling.                 
 REPRESENTATIVE FINKELSTEIN stated the constitution states that the            
 legislature shall regulate lobbying, so he thinks that is a strong            
 case.  Mr. Frank never claims anywhere in his memo that absolutely            
 any of these are going to be found constitutional.  It's the nature           
 of the business.  It's important to remember that the law we're               
 operating under right now was an initiative.  The legislature                 
 passed a bill that was found to be substantially the same.  It went           
 to court, eventually provisions were knocked out, including all the           
 spending limits that were in it.  The law we have now is only the             
 portion of the law that survived the constitutional challenges.               
 CHAIRMAN SHARP asked if there are other states that have prohibited           
 businesses from contributing to political candidates.                         
 Number 275                                                                    
 REPRESENTATIVE FINKELSTEIN thinks that's the only one there isn't           
 an issue on.  The federal government has banned corporations since            
 1910, and unions since 1940, and half the states only allow                   
 individuals to give.  He thinks that is more the rule than the                
 exception.  That's where the rise of PACs partially came from.                
 CHAIRMAN SHARP asked Mr. Chenoweth why the committee substitute for           
 SB 191 deleted the ban on executive staffs' campaign participation            
 during session, which was in the original version of SB 191.                  
 Number 290                                                                    
 MR. CHENOWETH responded that the instructions that came to him from           
 the committee were to open it up to governor and lieutenant                   
 governor.  He just made a call that as the governor and lieutenant            
 governor go, so go their staff.                                               
 CHAIRMAN SHARP stated he just wondered what the logic was there.              
 REPRESENTATIVE FINKELSTEIN stated you may want to ban those people;           
 we didn't discuss that.  Mr. Chenoweth made a reasonable                      
 interpretation.  It only applies to one session.  They're already             
 banned in three out of four sessions.  It only seemed fair that if            
 a governor's opponent is out raising money, they should be able to            
 do so also.  A governor isn't tied directly to the session; a lot             
 of the big decisions are made after the session with vetoes and so            
 CHAIRMAN SHARP stated a governor or lieutenant governor in their              
 second term could not be out soliciting funds for political purpose           
 as of January 1, because they weren't eligible to file for                    
 REPRESENTATIVE FINKELSTEIN stated that's a good point that he                 
 hadn't thought of.                                                            
 CHAIRMAN SHARP stated he raised that point because it's a loophole            
 for a governor to raise funds for legislative races.                          
 REPRESENTATIVE FINKELSTEIN stated the chairman has a good point,              
 but this doesn't solve it completely.                                         
 Number 323                                                                    
 CHAIRMAN SHARP stated there are some amendments that will be                  
 brought up at the next hearing on SB 191.  He will try to schedule            
 the bill for action on Thursday, if time permits.                             
 Number 328                                                                    
 CHAIRMAN SHARP adjourned the Senate State Affairs Committee meeting           
 at 5:26 p.m.                                                                  

Document Name Date/Time Subjects