Legislature(1995 - 1996)
03/12/1996 03:32 PM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 "Koniag". 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 administration: 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 23) 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 17) 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 program. 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 harpoon"? 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 subcommittee. 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 deleted. 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 individuals. 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 modified. 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 modified. 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 set. 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 deleted. 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 speech. 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 fund-raisers. 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 loan? MR. CHENOWETH responded that if there is any evidence requiring repayment- 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 permitted. 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 initiative. 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 proposal. 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 represented." 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 too. 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, right? 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 deadline. 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 area. 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 office. 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 onward. 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 area. 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 challenge. 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 unconstitutional. 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 forth. 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 reelection. 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.