HB 373-STATE TREASURY WARRANTS [Contains brief mention of HB 109.] Number 0730 CHAIR WEYHRAUCH announced that the last order of business was HOUSE BILL NO. 373, "An Act requiring warrants drawn by the Department of Administration against the state treasury to be negotiable instruments." Number 0765 REPRESENTATIVE GRUENBERG mentioned that HB 109 passed last year. It was a bill that dealt with stale-dated warrants and "swept these into the unclaimed property Act after six months." He expressed his past and ongoing interest in the question of why the State of Alaska uses the system of treasury warrants rather than checks. He noted that in the late 1980s, there was a long- standing dispute between banks and the State of Alaska, because the latter took the position that treasury warrants were not checks and could be immediately dishonored without any notice. "Somebody" would have a warrant and would cash it, and someone in government would assume that they should dishonor it, and the banks were "left holding hundreds of thousands of dollars." He remarked that "we" tried to get that inequitable situation dealt with. He said, "The bill passed out of this committee and, for various reasons - mainly my own limitations - didn't follow through on that." As a result, he said, "They had to litigate this up to the Alaska Supreme Court. REPRESENTATIVE GRUENBERG cited the case, which was NATIONAL BANK OF ALASKA, National Banking Association, Appellants, v. UNIVENTURES 1231 and STATE OF ALASKA, DEPARTMENT OF ADMINISTRATION, Appellees. The court held that [warrants] were negotiable instruments. He noted that this case followed cases from Louisiana and Nebraska, for example. In the majority of cases it was held that warrants are negotiable instruments and, therefore, are under the Uniform Commercial Code. Representative Gruenberg described the bank as a holder in due course. He said that, unless that [holder in due course] had actual knowledge that the warrant had been dishonored, the state had to pay. He added that that was only a just and fair result. REPRESENTATIVE GRUENBERG stated that HB 373 simply codifies that case by stating that a treasury warrant must be a negotiable instrument, and that that negotiable instrument is defined under the Uniform Commercial Code. He stated that he thinks HB 373 should not be a controversial bill, and noted that the House State Affairs Standing Committee is the only committee of referral. Number 1034 KIM GARNERO, Director, Division of Finance, Department of Administration, thanked the committee for passing HB 109 last year. She said it changed the way [the division] does business; the stale-dated warrants are now being routinely paid by the unclaimed property program. She added, "You won't see any stale-dated warrants in your supplemental language this year." MS. GARNERO stated that HB 373 does nothing to change the way [the division] does business. It has treated its state warrants as if they were negotiable instruments since the supreme court decision in 1992. She explained that that's why there is a zero fiscal note. She said HB 373 simply clarifies in statute the supreme court decision. In response to a question by Chair Weyhrauch, she said the Department of Administration sees no trouble with [HB 373]. Number 1150 REPRESENTATIVE GRUENBERG moved to report HB 373 out of committee with individual recommendations and the accompanying fiscal note. [There being no objection HB 373 moved out of the House State Affairs Standing Committee.]