Legislature(1995 - 1996)

04/02/1996 03:36 PM STA

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

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