Legislature(1995 - 1996)
04/02/1996 03:36 PM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.