Legislature(1997 - 1998)
03/27/1997 03:35 PM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE STATE AFFAIRS COMMITTEE March 27, 1997 3:35 p.m. MEMBERS PRESENT Senator Lyda Green, Chairman Senator Jerry Ward, Vice-Chairman Senator Jim Duncan MEMBERS ABSENT Senator Jerry Mackie Senator Mike Miller COMMITTEE CALENDAR SENATE BILL NO. 42 "An Act relating to the fiscal operations of the Alaska Railroad Corporation and to land acquired by the State of Alaska under the Alaska Railroad Transfer Act of 1982 or otherwise acquired for railroad purposes; and providing for an effective date." -- CSSB 42(STA) ADOPTED AND MOVED OUT OF COMMITTEE SENATE BILL NO. 21 "An Act relating to ferries and ferry terminals, establishing the Alaska Marine Highway Authority, and relating to maintenance of state marine vessels; and providing for an effective date." -- AMENDED AND FAILED TO MOVE OUT OF COMMITTEE SENATE BILL NO. 116 "An Act relating to welfare to work tax credits under the Alaska Net Income Tax Act; and providing for an effective date." -- HEARD AND HELD IN COMMITTEE SENATE BILL NO. 129 "An Act relating to the employer's required savings under the retirement incentive plan; and providing for an effective date." -- HEARD AND HELD IN COMMITTEE SENATE BILL NO. 133 "An Act relating to a small business development tax credit under the Alaska Net Income Tax Act; and providing for an effective date." -- HEARD AND HELD IN COMMITTEE SENATE BILL NO. 81 "An Act relating to immunization records for children under the age of seven." -- SB 81 NOT TAKEN UP BY THE COMMITTEE THIS DATE PREVIOUS SENATE COMMITTEE ACTION SB 42 - See Senate Transportation Committee minutes dated 2/20/97 and Senate State Affairs Committee minutes dated 3/25/97. SB 21 - See Senate Transportation Committee minutes dated 2/18/97 and 3/6/97 and Senate State Affairs minutes dated 3/18/97, 3/25/97. SB 116 - See Senate State Affairs Committee minutes dated 3/25/97. SB 129 - No previous action to record. SB 133 - No previous action to record. WITNESS REGISTER Representative Terry Martin State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Offered information on SB 42 Bill Cummings, Assistant Attorney General Department of Law P.O. Box 110300 Juneau, AK 99811-0300 POSITION STATEMENT: Supported removing land provision from original bill Joe Ambrose, Staff to Senator Robin Taylor State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Explained amendment to SB 21 Gary Hayden, System Director Alaska Marine Highway System Department of Transportation & Public Facilities 3132 Channel Drive Juneau, AK 99801-7898 POSITION STATEMENT: Testified in opposition to SB 21 Jim Nodlund, Director Division of Public Assistance Department of Health & Social Services P.O. Box 110640 Juneau, AK 99801-0640 POSITION STATEMENT: Presented overview on SB 116 Bob Bartholomew, Deputy Director Income & Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, AK 99801-0420 POSITION STATEMENT: Offered information on SB 116 & SB 133 Joseph Freidman Trade Dollar Exchange 3820 Lake Otis Anchorage, AK 99508 POSITION STATEMENT: Testified in support of SB 116 Commissioner William Hensley Department of Commerce & Economic Development P.O. Box 110800 Juneau, AK 99811-0800 POSITION STATEMENT: Testified in support of SB 116 & SB 133 Senator Jim Duncan State Capitol Juneau, AK 99801 POSITION STATEMENT: Prime Sponsor of SB 129 Bill Church, Retirement Supervisor Division of Retirement & Benefits Department of Administration P.O. Box 110203 Juneau, AK 99801-0203 POSITION STATEMENT: Answered questions on SB 129 ACTION NARRATIVE TAPE 97-15, SIDE A Number 001 SB 42 ALASKA RR BUDGET AND LAND CHAIRMAN GREEN called the Senate State Affairs Committee to order at 3:35 p.m. and brought up SB 42 as the first order of business before the committee. REPRESENTATIVE TERRY MARTIN , Vice Chairman of the Legislative Budget & Audit Committee, said SB 42 was introduced on behalf of that committee. He explained the legislation will put the Alaska Railroad under the Executive Budget Act, which will give the Legislature more oversight over the corporation. The legislation will also transfer land not needed for rail operations to the Department of Natural Resources. CHAIRMAN GREEN directed attention to a proposed State Affairs CS, which she said splits out the land portion contained in the original bill. REPRESENTATIVE MARTIN added that the land issue is going to take a lot of time, and the Senate Resources Chair wants to specifically work on that issue, so removing the land provision eases that problem. SENATOR WARD moved the adoption of CSSB 42(STA). Hearing no objection, it was so ordered. Number 100 BILL CUMMINGS , an assistant attorney general in the Department of Law, agreed that separating the Executive Budget portion from the land portion of the bill is a good idea because the land's portion is a lot more complicated due to the environmental liabilities that attach to it. He advised that The Department of Law has been working with the Department of Environmental Conservation and they have come up with approximately 40 very polluted sites that are on railroad land. The way the bill was originally written the title would vest to that land immediately in the state of Alaska upon the effective date of the bill. By vesting title, it opens the state treasury to claims for cleaning up the pollution. Right now the claims are born strictly by the railroad and the railroad's revenue stream. Mr. Cummings related that the department believes that if the land portion were to be left in with the Executive Budget portion of the bill, it would necessitate the hiring of three more lawyers to handle the environmental litigation. He added that there are ways to deal with transferring the land to the state where the state would not be liable for cleaning up the sites. Number 170 There being no further testimony on CSSB 42(STA), CHAIRMAN GREEN stated she would entertain a motion. SENATOR WARD moved CSSB 42(STA) and the accompanying fiscal notes be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. Number 178 SB 21 ALASKA MARINE HIGHWAY AUTHORITY CHAIRMAN GREEN brought SB 21 before the committee as the next order of business. JOE AMBROSE , staff to Senator Robin Taylor who is the prime sponsor of SB 21, directed attention to a proposed Amendment No. 3. (Amendments one and two were adopted at the previous hearing on the bill.) SENATOR WARD moved adoption of the following Amendment No. 3. SENATOR DUNCAN objected and asked for an explanation of what the amendment does. SENATOR WARD moved adoption of the following Amendment No. 3: Amendment No. 3 Page 16, lines 12 - 16: Delete "In this subsection, "commissioner of the department that operates the marine vessel" includes the president of the University of Alaska with regard to a vessel operated by the university and the chief executive officer of the Alaska Marine Highway Authority with regard to a vessel operated by the Alaska Marine Highway Authority." Insert "A detailed list of the costs and factors considered in calculating the interport differential must be provided to each person who expresses an interest in submitting a bid to perform maintenance or repair work on a marine vessel owned by the state. [IN THIS SUBSECTION, "COMMISSIONER OF THE DEPARTMENT THAT OPERATES THE MARINE VESSEL" INCLUDES THE PRESIDENT OF THE UNIVERSITY OF ALASKA WITH REGARD TO A VESSEL OPERATED BY THE UNIVERSITY.]" Page 16, line 18, through page 17, line 1: Delete all material and insert: "(c) The commissioner of a department that operates a marine vessel shall adopt regulations establishing the criteria that the department shall use to determine whether the cost of maintenance or repair work at a shipyard facility located int he state is reasonable under (a) of this section. The commissioner shall designate by regulation the designated base port for each vessel operated by the department. A vessel's designated base port is the vessel's delivery and redelivery port. The Alaska Marine Highway Authority shall adopt regulations establishing the criteria that the authority shall use in calculating the interport differential under this section. The criteria for calculating the interport differential must include costs incurred from the time that the vessel leaves the vessel's designated base port to enter the shipyard facility until the time the vessel returns to the designated base port from the shipyard facility. (d) In this section, (1) "commissioner of the department that operates the marine vessel" includes the president of the University of Alaska with regard to a vessel operated by the university and the chief executive officer of the Alaska Marine Highway Authority with regard to a vessel operated by the Alaska Marine Highway Authority; (2) "interport differential" includes all costs related to the performance of the maintenance or repair work of a marine vessel at a shipyard located outside of the state, including travel costs incurred moving the vessel from its designated base port to the shipyard outside of the state; additional fuel consumption; cost of consumable including lubricants and other engine and deck stores; maintenance costs incurred during running time; cost of crew transfers including airfare between Alaska and the shipyard; wages in travel status; crew room and board; and other interport costs identified by the Alaska Marine Highway Authority." Number 200 MR. AMBROSE , speaking to Amendment No. 3, explained there has been discussion with DOTPF on a provision in the legislation that deals with the use of Alaska shipyards, and he believes the new language in the amendment is less onerous. He said the intent throughout this process is to make use of the two shipyards, which the state of Alaska has spent a tremendous amount of money on, a little more practical. Mr. Ambrose said a major change being made in the amendment requires that the commissioner, by regulation, designate a base port for each vessel, and that base port then becomes the delivery and redelivery port for the vessel. He said the delivery and redelivery port is important because that is the point of calculation for the interport differential when a vessel is shipped out of state. Federal highway authorities have indicated that in order to use that calculation all the time, there has to be a delivery and redelivery port. The second change is the defining of "interport differential" which is all costs related to moving a vessel to an out-of-state shipyard. Number 325 GARY HAYDEN , Director, Alaska Marine Highway System, Department of Transportation & Public Facilities, stated the Marine Highway System has demonstrated a commitment to doing work in Alaska shipyards. Over the last seven years, most of the work that did not involve federal funds has been done in Alaska. When federal funds are involved, it necessitates going out to bid on these projects. Mr. Hayden questioned the need for the amendment because he wasn't sure there was a problem at this point in time. He referenced a Legislative Budget & Audit Committee report where it stated they found the method used by DOTPF in determining the interport differential for bidding purposes to be sound and based upon a logical approach for determining vessel transport related costs. He also suggested that if a Alaska Marine Highway Authority is going to be established, maybe a good approach to this issue is to let its board of directors and executive director make the decision has to how they go out and put together their bidding package on getting their ships maintained. Mr. Hayden said there is definitely an issue of declining maintenance funds, while at the same time, the ships are getting older and the cost of maintenance is going up. His approach to getting the most possible out of the maintenance dollars has been to have competition and get good prices on the work that is being done. Mr. Hayden explained that in calculating the interport differential it starts at the point that the vessel is taken off line. Juneau, Ketchikan and Seward are currently designated the home ports for the vessels, but the home port designations are just for the purpose of crew changes. He questioned designating a base port in regulation because it ties the system's hands as to where they take the vessel off a revenue run. The past practice has been to take it off at the end of the revenue run, and then that would be the start of their calculations. Number 410 MR. AMBROSE pointed out that nothing in the amendment would affect the competitive bidding process, and nothing in the bill is intended to give the Alaska shipyards so much of an advantage that bids would be awarded that were not fair to the state as far as expense is concerned. Number 430 There being no further objection to Amendment No. 3, it was adopted. CHAIRMAN GREEN asked for the will of the committee on CSSB 21(STA). SENATOR WARD moved CSSB 21(STA), as amended, be passed out of committee with individual recommendations. SENATOR DUNCAN objected and stated he was concerned about this piece of legislation. The roll was taken with the following result: Senators Ward and Green voted "Yea" and Senator Duncan voted "Nay." CHAIRMAN GREEN stated the motion to move CSSB 21(STA) out of committee failed. SB 116 WELFARE TO WORK TAX CREDITS CHAIRMAN GREEN brought SB 116 before the committee. JIM NORDLUND , Director, Division of Public Assistance, Department of Health & Social Services, explained the legislation would offer tax credits to Alaskan corporations that hire disadvantaged workers. He said welfare recipients is one of the categories of disadvantaged workers that this legislation would help the most. In order to comply with federal law, there is a need to put approximately 4,000 individuals into a work activity within the next year. SB 116 allows an Alaskan corporation to use as a credit up to 15 percent of an employee's wages or up to $1,000 of wages paid in a year. There is an additional $500 credit if that employer offers training to that recipient. To earn the credit, the employee must be on the job for 180 days or 400 hours. Mr. Nordlund pointed out that they don't need to be consecutive days, taking into account the seasonality of employment in Alaska. It was also pointed out that the Alaska Welfare to Work program mirrors the federal work opportunity tax credit bill. Mr. Nordlund said SB 116 is one of several incentives the Administration is looking at because there are a number of tools they need to have at their disposal to encourage the employer community to hire welfare recipients. Number 510 Responding to an inquiry by Senator Ward, MR. NORDLUND explained that to the extent that an employer takes advantage of this provision and hires a welfare recipient, that welfare recipient is then going to not receive as much money in welfare benefits because of being employed and becoming self-sufficient. There is a cost to the state in the sense that there is a credit that's given to that employer for hiring that recipient, but that would be offset by the dollars that the recipient is earning on the job as opposed to being paid in welfare benefits. CHAIRMAN GREEN asked if this program was reflected in any of the budget proposals. MR. NORDLUND advised that the Governor's budget predicts a $2 million reduction in benefits that takes into consideration a number of different factors, one of which is the possibility of SB 116 passing this Legislature. Number 565 BOB BARTHOLOMEW , Deputy Director, Income & Excise Audit Division, Department of Revenue, speaking to the fiscal note, said the Department of Revenue worked with the Department of Health & Social Services to try to estimate what would be the impact of this legislation. The biggest issue was that not all businesses in Alaska are corporations, so this incentive relates to corporations that are registered to pay taxes in Alaska. They estimate that approximately 880 workers will go work each year, which is a best guess, high end estimate. If that were the case, the fiscal note reflects that corporations would have a $1 million a year reduction in taxes because of hiring employees that are eligible for that program. TAPE 97-15, SIDE B Number 001 Mr. Bartholomew pointed that currently the federal government allows for a federal work opportunity credit, which the state has never adopted in the past. It is just by the event that the state adopted the Federal Internal Revenue Code that it gets their tax credit along with it, so the state has been losing tax revenues every year because of people taking the federal credit and then flowing it to their Alaska return. SB 116 repeals that adoption of the federal tax credit and provides that if Alaska wants a credit, it will adopt its own. Mr. Bartholomew noted there was a lot of discussion amongst the agencies and with individual businesses about how to keep the process simple and keep the paper work down. As there is currently a federal program that employers use, those requirements have been adopted, so there is no new paper work or new Alaska guidelines. Number 546 JOSEPH FREIDMAN , testifying from Anchorage, said he was representing the Trade Dollar Exchange in Anchorage, which is a program created by private industry to assist small Alaskan businesses with programs such as the Alaska Welfare to Work program. It provides the opportunity for a lot of these people who must go to work at a minimum of 20 hours a week an opportunity to go into a small business where the business owner will provide the role modeling and the mentorship to make the transition successful. Mr. Freidman said their program is very dynamic in the way that it activates the community and presents a forum for the low income people to actually work together to help each other. He said to provide the successful transition for these people, he thinks it is small business that can do it and private industry needs to take the lead. He suggested providing a disregard for trade dollars that these people earn so as not to reduce their cash benefits and deter them from going to work. Number 496 COMMISSIONER WILLIAM HENSLEY , Department of Commerce & Economic Development, testifying from Anchorage, said he has spent a great deal of time in the last few weeks working with the Department of Labor and the Department of Health & Social Services on this issue of welfare to work, and he believes it is a problem that business and industry is going to have to help government with. He has also talked with a number of businesses in the private sector and they are universally supportive of working with the state on this subject, but he believes small business is the real key to putting these people to work. He said if these people are given the proper support systems and if they stay on the job, they have an opportunity to become productive. Number 465 There being no further testimony on SB 116, CHAIRMAN GREEN stated the bill would be held and scheduled for another meeting. Number 460 SB 129 PERS REQUIRED SAVINGS UNDER RIP CHAIRMAN GREEN brought SB 129 before the committee as the next order of business. SENATOR DUNCAN , prime sponsor of SB 129, explained the legislation relates to the Retirement Incentive Program (RIP) passed last year by the Legislature. Last year's bill allowed cost savings to be calculated over a three-year period of time, and SB 129 amends that provision to a five-year cost savings calculation. He said he thinks it is an important provision to consider as far as ensuring that the program that passed last year will work to its maximum and allow the cost savings that he believes should be generated under the program. Senator Duncan pointed out that the five-year cost savings calculation is not a new concept, having been in two previous Retirement Incentive Programs. The numbers of people who not only were eligible but designated to participate were of a much higher percentage than what is occurring in the current program. Changing to the five-year calculation would increase the number of people who would be eligible to retire and who potentially would retire. Therefore, as that happens, there is more cost savings in state government and it will have a very positive impact on helping reduce government expenditures overall, he stated. Number 420 CHAIRMAN GREEN commented that in listening to the budget process this year, she was disappointed in the amount of cost savings being shown. SENATOR DUNCAN said he thinks this program is being managed much more conservatively than previous programs were, primarily because the legislative intent was to do that. He said it is hard to compare this program with previous programs because of the three-year calculation and because the last two programs had only one window period whereas this program runs through 1999. He noted Senator Sharp has introduced legislation that would require eligible employees to take the RIP in the first window they are eligible. Number 400 SENATOR WARD commented that it would appear that the Administration has been restrictive and selective in their approach, making the program not necessarily working in the way the Legislature had intended. He also noted that Senator Sharp's bill, SB 126, has a broad enough title to extend the three-year calculation to five years, but it is his understanding that the 5-year calculation was rejected by Senate Finance because that tool was not considered as a necessity. SENATOR DUNCAN agreed that the provision was discussed in the Senate Finance Committee, but he said it was never rejected by the committee. It was only discussed because Senator Adams asked a question of a union representative. He also stated he would have no problem with amending Senator Sharp's bill to include a 5-year cost savings. SENATOR WARD then voiced his concern that he was not sure if changing the provision from three years to five years was good public policy. Number 340 BILL CHURCH , Retirement Supervisor, Division of Retirement & Benefits, Department of Administration, came forward to respond to questions from the committee. SENATOR WARD asked if it was correct that out of the state's 12,500 department employees, there have been 46 individuals that have actually retired under this RIP. MR. CHURCH responded that it is probably a little bit more at this point in time. There are people retiring each month under the program so it's very dynamic in nature. He agreed with Senator Duncan that they are seeing fewer people retire under this program than they have in previous RIPs, although this program is structured much differently than previous programs. SENATOR WARD asked Mr. Church if he thinks the new RIP has been structured to the letter of the legislative intent, or has it been selective and restrictive on the part of the Administration. MR. CHURCH replied that he wasn't at the committee hearings when the bill was passed, but it his understanding that the program is being run in accordance with the guidance and understanding that was given through the Legislature. Number 300 SENATOR DUNCAN asked Mr. Church his reaction to computing cost savings over five years instead of over three years. MR. CHURCH said when the law was changed in the previous RIP from three years to five years, there were many more individuals who met the qualifications to be able to retire under the program. He added he believes it was very successful by allowing more people to take advantage of the RIP, reducing personal services costs to the employers. Number 270 There being no further testimony on SB 129, CHAIRMAN GREEN said she was willing to move the bill out of committee, but she didn't think there were the signatures to do so. She advised SB 129 would be held over to the April 1 meeting. SB 133 SMALL BUSINESS DEVELOPMENT TAX CREDIT CHAIRMAN GREEN brought SB 133 before the committee as the final order of business. COMMISSIONER WILLIAM HENSLEY , Department of Commerce & Economic Development, said the vast majority of businesses in Alaska are "small" but they play an enormous role in the state's economy, providing 70 percent of the private jobs, so any effort to give a boost to business in Alaska must consider small businesses. Commissioner Hensley said SB 133 is one of several bills that are part of the Governor's Alaska Business Investment Incentive Plan. It was introduced to encourage growth in small businesses by offering them tax credits for improving and expanding their operations. The intent is to try to level the playing field between larger businesses, which have economies of scale and management, as well as ready access to investment capital at favorable interest rates. The program can assist small businesses in covering start-up costs, the purchase of new equipment, etc. Commissioner Hensley also said the tax credit would benefit non- affiliated corporations with fewer than 50 employees. The tax credit would be 10 percent of capital investment up to $100,000, with a maximum annual credit of $10,000 and 50 percent of the business's corporate tax liability. To qualify, the investment must be for new property and the corporation must be in good standing on unemployment insurance and other state taxes. Number 220 BOB BARTHOLOMEW , Deputy Director, Income & Excise Audit Division, Department of Revenue, speaking to the department's fiscal note, said it is estimated that over 2,000 small businesses would be able to benefit from the investment tax credit, which is a program that has been used in prior years by both the federal and state governments. The fiscal note shows the fiscal impact would be approximately $2 million a year. Number 209 CHAIRMAN GREEN inquired if this was reflected in the budget, and MR. BARTHOLOMEW answered that it was not. Because the committee had lost its quorum, there was no motion to move SB 133 out of committee, and the meeting adjourned at 5:00 p.m.