HOUSE FINANCE COMMITTEE April 16, 1994 1:05 p.m. TAPE HFC 94-127, Side 1, #000 - end. TAPE HFC 94-127, Side 2, #000 - end. TAPE HFC 94-128, Side 1, #000 - end. TAPE HFC 94-128, Side 2, #000 - 511. CALL TO ORDER Co-Chair Larson called the House Finance Committee to order at 1:05 p.m. PRESENT Co-Chair Larson Co-Chair MacLean Representative Martin Vice-Chair Hanley Representative Navarre Representative Brown Representative Parnell Representative Foster Representative Therriault Representatives Grussendorf and Hoffman were not present for the meeting. ALSO PRESENT Senator George Jacko; Crystal Smith, Director, Member Services, Alaska Municipal League; Frank Homan, Commissioner, Commercial Fisheries Entry Commission; Duane Guiley, Finance Director, Department of Education; Juanita Hensley, Chief Driver Services, Division of Motor Vehicles, Department of Public Safety; Ray Gillespie, Lobbyist; Kent Dawson, Lobbyist, Silver Lining Seafood; Greg Winegar, Department of Commerce and Economic Development; Josh Fink, Senator Kelly; Ron King, Department of Environmental Conservation; Jeannie Larson, Staff, Representative Martin. SUMMARY INFORMATION HB 328 "An Act relating to motor vehicle registration and registration fees; to fees for drivers' licenses and permits; and providing for an effective date." CSHB 328 (FIN) was reported out of Committee with "no recommendation" and with a fiscal impact note by the Department of Public Safety. SB 45 "An Act relating to persons under 21 years of age; providing for designation of `safe homes' for runaway minors; and providing for an effective date." 1 HCS CSSB 45 (FIN) was reported out of Committee with "no recommendation" and with three fiscal impact notes two by the Department of Health & Social Services and one by the Alaska Court System; and with five zero fiscal notes three by the Department of Health & Social Services, one by the Department of Law, dated 2/17/94 and one by the Department of Labor, dated 2/17/94. SB 141 "An Act extending workers' compensation coverage to certain high school students in uncompensated work-study programs." HCS CSSB 141 (FIN) was reported out of Committee with "no recommendation" and with two fiscal impact notes one by the Department of Administration and one by the Department of Education; and with a zero fiscal note by the Department of Commerce and Economic Development. SB 251 "An Act relating to the commercial fishing revolving loan fund and the fisheries enhancement revolving loan fund." SB 251 was HELD in Committee for further discussion. HOUSE BILL NO. 328 "An Act relating to motor vehicle registration and registration fees; to fees for drivers' licenses and permits; and providing for an effective date." Representative Martin provided members with a proposed committee substitute, work draft 8-LS1316\D, 4/15/94 (copy on file). He noted that the proposed committee substitute incorporates the following changes: * Sets biennial vehicle registration fees at twice the current annual rate; and * Allows the Department of Public Safety to suspend or revoke the registration if the owner fails to obtain an emission inspection certificate. Co-Chair Larson noted that the ability to collect municipal personal property tax on automobiles upon registration has aided municipalities. Representative Martin noted that the provision for state collection will be optional. He stressed that the municipal 2 tax could be collected in conjunction with the property tax. Co-Chair Larson noted that the owner of an automobile purchased on January 2 would not pay their municipal tax until the following year. JUANITA HENSLEY, DIRECTOR, DIVISION OF MOTOR VEHICLES, DEPARTMENT OF PUBLIC SAFETY explained that section 17 of the proposed committee substitute contains the municipal tax schedule. Section 17 also provides for an agreement between the Commissioner of the Department of Public Safety and municipalities to collect the municipal tax upon registration. She clarified that municipalities are currently given the option of state collection. The proposed committee substitute would add an option for the state to collect the tax. She noted that the state collects municipal tax for ten municipalities. Ms. Hensley noted that the proposed committee substitute removes authorizing language from title 28.10.431. Language allowing the tax to be collected by the Department of Public Safety would be placed under title 29. The Commissioner of the Department of Public Safety would be given the discretion to collect or not collect the municipal tax. Representative Hanley expressed concern that the Commissioner could chose not to collect the tax on behalf of municipalities. He emphasized that the state receives 8 percent of the money collected for administrative costs. Representative Martin noted that the state has the administrative burden and expense of collection. The state receives 8 percent of the money collected as compensation for the administrative costs. Ms. Hensley noted that the Division of Motor Vehicles collected $29.0 million dollars in FY 94. She added that $5.9 million was returned to municipalities. She observed that 8 percent of the collected tax is returned to the General Fund. Eight percent equals approximately $440.0 thousand dollars. She emphasized that the 8 percent marginally covers all of the costs associated with the collection. Representative Hanley discussed funding for the Division of Motor Vehicles. He reiterated his concern with the provision to allow the Commissioner of the Department of Public Safety to not collect the tax on behalf of municipalities. Members discussed amending the proposed committee substitute 3 to delete the provision allowing discretion. Ms. Hensley suggested that section 17 be deleted. Representative Martin clarified that the tax collection is based on annual registration. Ms. Hensley explained that the tax is still based on the annual registration fee. Representative Hanley express concern that municipalities would receive the same amount of revenue for each year. Ms. Hensley clarified that the fee would be collected every two years with a reflection of one year collected tax base. Municipal revenues would be cut in half if the tax base is not doubled for a biannual collection. Title 28.15.431 would have to be amended to double the tax base structure. Ms. Hensley noted that the legislation also allows payment by credit card. JEANNIE LARSON, STAFF, REPRESENTATIVE MARTIN observed that the tax structure could be taken out of statute to allow municipalities to set fees. Ms. Hensley noted that the Department of Public Safety would oppose the suggestion to allow municipalities to set fees. She emphasized that the Department wishes a standard fee structure. RON KING, PROJECT MANAGER, MOBIL SOURCES, DEPARTMENT OF ENVIRONMENTAL CONSERVATION referred to the department's fiscal note. He noted that the department has provided three fiscal notes based on different options. The department supports option one. Option one would provide that if an individual fails to renew the emmissions permit, the Department of Environmental Conservation would inform the Department of Public Safety. Mr. King explained that failure to renew could result in a violation of $100 hundred dollars issued by the municipal police department or a civil action through the small claims court. Mr. King discussed the Department of Environmental Conservation's fiscal notes. He noted that a $2 to $3 dollar per vehicle fee would be collected. He noted that section 21 amends AS 28.10.431 which addresses only Anchorage and Fairbanks. Ms. Hensley noted that section 14 of the proposed committee substitute addresses the program fees collected by the Division of Motor Vehicles. Program authority would be under section 19. Representative Martin noted that sections 10 and 15 allow registration to be paid by credit card. He noted that there are difficulties with implementation of biannual registration. 4 Ms. Larson recommended that sections 2, 7, 10, 14, 15 and 19 be retained to allow the Department of Environmental Conservation greater enforcement authority. CRYSTAL SMITH, ALASKA MUNICIPAL LEAGUE stressed that state collection of the municipal motor vehicle registration tax is the most efficient. She felt fee values should be increased. She spoke in support of a change to a two year collection of the tax. She discussed the municipal fiscal note. She noted that enforcement would be a local police function. She stressed that monitoring of the program would cost the municipality of Anchorage $181.6 thousand dollars. Co-Chair Larson noted that the word "biannual" would need to be deleted if the Committee does not change the collection period from an annual fee. Mr. King stressed that if the registration is kept on an annual basis the Department of Environmental Conservation would not have to exercise any fee requirements under section 19. He added that the Department would have improved enforcement abilities. He suggested that section 19 would allow the Department of Environmental Conservation to establish a fee to fund the Mobil Source Program by program receipts. He estimated the proposed change would result in a general fund savings of $287.0 thousand dollars. He noted that municipalities could increase revenues through the issuance of citations. Representative Martin spoke against increased fees. He spoke in favor of deleting all sections except sections 10 and 15. Representative Therriault agreed that only retention of sections 10 and 15 should be retained. Representative Brown suggested that fees should be considered in light of the state's declining revenues. She suggested that the enforcement authority be retained if the fee sections are deleted. Mr. King reiterated that sections 2, 7, 10, 14, 15 and 19 would result in a zero fiscal note and that no fees would be executed by the Department of Environmental Conservation unless regulations are exercised. (Tape Change, HFC 94-127, Side 2) Representative Martin MOVED to delete all material except sections 10 and 15; and amend the title to reflect the change. Representative Brown MOVED to AMEND the motion to include the retention of sections 2 and 19. Representative Martin OBJECTED. Representative Brown argued that the amendment to 5 the amendment would strengthen the enforcement. Representative Martin spoke in opposition to the motion to amend. A roll call vote was taken on the amendment to the amendment. IN FAVOR: Brown, Larson OPPOSED: Hanley, Foster, Martin, Parnell, Therriault Representatives Grussendorf, Hoffman, Navarre, and MacLean were not present for the vote. The MOTION FAILED (2-5). Ms. Hensley noted that the Division needs legislative authority to pay the credit card collection fee. She estimated that the Division would need a $225.0 thousand dollar fiscal note to reflect the credit card collection cost. Representative Martin reiterated the motion to delete all material except sections 10 and 15; and amend the title to reflect the change. In response to a question by Representative Brown, Ms. Hensley clarified that the department needs authorization to seek appropriation to pay credit card costs. She estimated that credit card fees would equal approximately $225.0 thousand dollars a year. Ms. Hensley discussed costs associated with credit card collection and defaulted checks. Co-Chair Larson suggested that credit card collection will result in increased efficiency. There being NO OBJECTION, all material except sections 10 and 15 was deleted; and the title amended to reflect the change. Representative Brown expressed concern with the cost of credit card collection. Co-Chair Larson MOVED to report CSHB 328 (FIN) out of Committee with individual recommendations and with the accompanying amended fiscal note from the Department of Public Safety for $225.0 thousand dollars. There being NO OBJECTION, it was so ordered. CSHB 328 (FIN) was reported out of Committee with "no recommendation" and with a fiscal impact note by the Department of Public Safety. SENATE BILL NO. 45 6 "An Act relating to persons under 21 years of age; providing for designation of `safe homes' for runaway minors; and providing for an effective date." Representative Brown noted that Amendment 2A, which was adopted by previous action of the Committee, deleted "immediately" on page 4, line 31. She suggested that "immediately" be added back. Co-Chair Larson MOVED to RESCIND the Committee's action in adopting AMENDMENT 2A. There being NO OBJECTION, it was so ordered. Representative Brown MOVED to ADOPT AMENDMENT 2A as amended to add "immediately" after "make reasonable attempts to" on page 4, line 31. There being NO OBJECTION, it was so ordered. Representative Foster MOVED to report HCS CSSB 45 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSHB 328 (FIN) was reported out of Committee with "no recommendation" and with a fiscal impact note by the Department of Public Safety. SENATE BILL NO. 141 "An Act extending workers' compensation coverage to certain high school students in uncompensated work-study programs." Co-Chair Larson provided members with proposed committee substitute, work draft 8-LS0355\Q, dated 3/23/94 (copy on file). JOSH FINK, STAFF, SENATOR KELLY testified in support of SB 141. He noted that current law allows students enrolled for credit at a public high school in a course which combines academic instruction with work experience outside the school for a public or private nonprofit employer to be an employee of the state for workers' compensation purposes. The bill would broaden coverage so that all students participating for no financial compensation in on-the-job-training, as part of an academic program would be covered. This would provide workers' compensation coverage to students who participate in automotive maintenance, welding, carpentry, and various other work study programs. Mr. Fink noted that the bill was amended so that 7 uncompensated students injured at the worksite, in a work- study program, are considered state employees for the purpose of medical benefits only under workers' compensation. Uncompensated students who are injured would not receive compensation for lost wages as they received no compensation for the work study. Mr. Fink noted that the proposed committee substitute would provide the exclusive liability provision to the work site, school district and to the state. He noted that no claim has ever been filed under current statutes. Representative Brown referred to page 1, lines 11 - 14. Mr. Fink explained that school districts want to be able to offer activities such as automotive body shop, but be protected from liability. DUANE GUILEY, FINANCE DIRECTOR, DEPARTMENT OF EDUCATION further explained that the purpose of exclusive liability in the state of Alaska is to provide, without proving fault, to the injured party medical payments and if they were making wages, lost wages. The legislation clarifies that the state of Alaska bares the financial responsibility for the situation. The Department of Education would prefer that the student be employees of the school district sponsoring the activity or of the employer providing the work experience. He noted that under the legislation there would be no limitation of state liability. He noted that if the legislation is passed the Department of Education will seek a way to bill the expense to the district participating in the program. Mr. Guiley discussed student work experience at the Kotzebue Technical Center and AVETEC. He clarified that students not working for a salary are covered by school districts as voluntary employees under a $200.0 hundred dollar endorsement to their workers' compensation policy. He noted that self insured districts cannot buy volunteer endorsement policies. Salaried students must be covered by the employer's policy. Representative Parnell observed that employers are not willing to shoulder the cost of increased premiums. Mr. Fink agreed that employers do not have protection of workers' compensation statutes. Mr. Fink reiterated that the legislation would allow medical costs without compensation. He asserted that there has not been a previous claim filed by a student. In response to a question by Representative Martin, Mr. Fink noted that the Department of Education has submitted a 8 fiscal note for $24.0 thousand dollars. He noted that the fiscal note is an estimate of actual costs. He suggested that the fiscal estimation is high. Co-Chair Larson MOVED to ADOPT work draft, #8-LS0355\Q, dated 3/23/94 (copy on file). There being no OBJECTION, it was so ordered. Representative Foster MOVED to report CSHB 141 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being no OBJECTION, it was so ordered. HCS CSSB 141 (FIN) was reported out of Committee with "no recommendation" and with two fiscal impact notes one by the Department of Administration and one by the Department of Education; and with a zero fiscal note by the Department of Commerce and Economic Development. SENATE BILL NO. 251 "An Act relating to the commercial fishing revolving loan fund and the fisheries enhancement revolving loan fund." SENATOR GEORGE JACKO maintained that the fishing industry is undergoing an economic crisis due to weak markets. He observed that fishermen have experienced difficulty in meeting their loan and tax obligations. He asserted that the legislation would make the Commercial Fishing Revolving Loan Fund more flexible in order to meet the needs of the fishing industry. Senator Jacko explained that the legislation would allow IRS debts that threaten ownership to be paid from the Commercial Fishing Revolving Loan Fund. Loans would be one time only and capped at $30,000. The legislation contains a three year sunset. He emphasized that there are 12,000 permits in arrears to the IRS. Senator Jacko noted that the legislation would also allow the department to refinance loans up to $300,000 thousand dollars incurred by borrowers for the purchase of a commercial fishing vessel or for gear. He discussed factors which have lead fishermen into fiscal difficulties. (Tape Change, HFC 94-128, Side 1) Senator Jacko observed that the legislation also amends the Fisheries Enhancement program to provide authority to the Department of Commerce and Economic Development to use excess funds in the fisheries Enhancement Revolving Loan 9 Fund for the purposes of the Commercial Fishing Revolving Loan Fund. He maintained that loan priority will be established through regulation. Expenditures would be prioritized in the following manner: 1. Limited Entry Permits 2. Vessels 3. Gear 4. Refinance loans 5. Hatcheries Senator Jacko observed that loans would be categorized as (a) or (b) loans. The (a) loans would be made to finance the purchase of limited entry permits. The (b) loans would be made for repair, restoration, or upgrading of existing vessels and gear or purchase or limited entry permits, gear or vessels. Loans are distinguished on page 1, line 7 through page 3, line 23. He discussed requirements of the loan. He observed that fishermen would need to be current in their IRS filings in order to apply for the loans. He noted that there is a two year Alaska residency requirement. A lack of employment opportunity in the area of residence or economic dependency on the fisheries must be demonstrated. The applicant must have been active in the fisheries for three of the last five years. The applicant must have a commercial fishing license for the year immediately proceeding the loan application. In response to a question by Representative Navarre, Senator Jacko clarified that payments would be made directly to the IRS. He reiterated the loans would be one time eligibility. He observed that the $30,000 thousand dollars loan cap would address 80 percent of the IRS obligations. Senator Jacko explained that limited entry permits cannot be used as collateral for loans. Representative Hanley argued that the federal government would not take permits if holders attempt to contact and negotiate for repayment of obligations. He did not see the need for the state to assume the risk of repayment. Senator Jacko maintained that the program would act as assurance to the IRS for a means of repayment in order to achieve an executed agreement. Representative Navarre noted that payment can be suspended for one year upon a showing of good cause. He observed that the tax liability could have been incurred through activities other than commercial fishing. He questioned the constitutionality of the program. Senator Jacko emphasized the goal of the program is to 10 prevent loss of limited entry permits to the IRS. Representative Parnell echoed concerns that tax obligations could be the result of other activities. Representative Therriault hypothesized that the tax liability would not have to be associated with commercial fishing. Representative Navarre suggested that the state negotiate with the federal government to allow state purchase of seized permits. FRANK HOMAN, COMMISSIONER, LIMITED ENTRY COMMISSION provided members with a chart summarizing tax delinquencies among permit holders (Attachment 1). He gave a brief history of the Commissioner's interactions with the IRS. The Commissioner was unable to reach an agreement with the IRS in regard to seized permits. He emphasized that the state will not lose money as a result of the program. Permits would be held as collateral. He reviewed areas of the state having difficulty with tax delinquencies as detailed in attachment 1. In response to a question by Representative Therriault, Mr. Homan explained that the IRS did not want restrictions placed as to how they could discharge the permits. He noted that all transfers must come through the Limited Entry Commission. He observed that if the state is given first right at permit purchase the bidding may not be as active. Representative Navarre queried the status of permits under dispute by both the federal and state governments for the default of payments. Representative Hanley observed that the federal government generally wins in state/federal disputes. Representative Hanley expressed concern that the difficulties experienced by the fishing industry are not temporary. In response to a question by Representative Therriault, Mr. Homan further discussed the permit as collateral for the loan. Representative Therriault noted that the permit is generally used as collateral for its purchase. He asked if provisions are included to allow loans not to exceed the equity of the permit. Mr. Homan stressed that it would be a criteria of the Division of Investment. RAY GILLESPIE, testified on behalf of four aquaculture associations. He noted that aquaculture associations support the legislation. He referred to provisions on page 6, which allow the Commissioner of Department of Commerce and Economic Development to move excess money from the 11 Commercial Fisheries Revolving Loan Fund to the Fisheries Enhancement Revolving Loan Fund in order to refinance loans. He noted that loans were made at higher than current interest rates. The ability to reduce loans for aquaculture associations would indirectly benefit fishermen. He noted that aquaculture association loans are secured by a volunteer enhancement tax. The enhancement taxes cannot be repealed until loans are paid. Representative Hanley summarized that reduction of interest rates would reduce payments to the Funds. He discussed the operation of the Funds. He expressed concern that the legislature retain its ability to control the amount loaned through the fund programs. Co-Chair MacLean noted that the department has projected that $14 million dollars will be available for loan activity, $9 million dollars will be used to satisfy normal loan demand, and $5 million will be used for the applicants of the bill. Fifty percent of any remaining funds could be transferred to the Fisheries Enhancement Revolving Loan Fund. (Tape Change, HFC 94-128, Side 2) Representative Hanley stressed that priorities for loan payments should be set in statute. Mr. Gillespie replied that the Commercial Fisheries Revolving Loan Fund demands will be the top priority, before any funds are transferred. He maintained that any funds transferred must be determined to be an excess of the demands of the Commercial Fisheries Revolving Loan Fund as determined by the Commissioner. Co-Chair MacLean observed that the Department has determined that there will be no excess funds available in the current fiscal year. Mr. Gillespie explained that the impact of reductions would be experienced in future years. At that time the Commissioner could exercise discretion to transfer excess funds. Representative Hanley questioned the amount needed to refinance the loans. Senator Jacko pointed out that the demand for hatchery loan refinancing will be more than is available. KENT DAWSON, NORTHWEST SEAFOODS, SILVER LINING SEAFOODS spoke in support of the provision to allow hatcheries to lower their debt burden. He maintained that the health of 12 the hatcheries is directly related to the health of the fishing industry. He noted that hatcheries operated by the aquaculture associations cannot secure bank refinancing since the state holds their collateral. GREG WINEGAR, LOAN MANAGER, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT stated that refinancing hatcheries loans would be separate from the legislation. He clarified that loans can be refinanced under the Commercial Fisheries Revolving Loan Fund. If money was available the department could refinance under the Fisheries Enhancement Revolving Loan Fund. Discussion pursued regarding refinancing interest rates. He anticipated that there will not be funds available for transfer in FY 95. Representative Navarre discussed loan financing requirements and mechanisms. Mr. Winegar explained that the legislation would allow the department to refinance other than state held loans. Representative Navarre questioned if loans could be provided based on the value of collateral. He suggested that sections referring to loans for tax obligations be deleted in order to assure that constitutional problems do not occur. Representative Brown discussed delinquent revolving loan fund loans. Mr. Winegar clarified that permanent fund dividends can be garnished. Co-Chair MacLean provided members with AMENDMENT 1 (copy on file). Amendment 1 would delete "one-half of". She explained that the amendment would allow the entire surplus balance from the Commercial Fisheries Revolving Loan Fund to be transferred to the Fisheries Enhancement Revolving Loan Fund. She maintained that future surplus funding should be available for hatchery loans. Senator Jacko explained that the provision to allow only half of the surplus funds to be transferred was adopted to assure that Commercial Fisheries Revolving Loan Fund retain sufficient funds. In response to a question by Representative Navarre, Mr. Winegar noted that $44 million dollars have been reappropriated from the Commercial Fisheries Revolving Loan Fund to the General Fund after loan demand. There has not been excess funds in the Fisheries Enhancement Revolving Loan Fund. Representative Navarre noted that the amendment could reduce 13 money appropriated back to the General Fund for general appropriations. Discussion pursued in regards to the effect of section five on legislative appropriations. Co-Chair MacLean MOVED to ADOPT AMENDMENT 1. Representative Navarre OBJECTED. A roll call vote was taken on the MOTION. IN FAVOR: Therriault, Foster, Larson, MacLean OPPOSED: Brown, Hanley, Martin, Navarre, Parnell Representatives Hoffman and Grussendorf were not present for the vote. The MOTION FAILED (4-5). Representative Foster MOVED to report HCS CSSB 251 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. The motion was held pending in order to allow members to allay constitutional concerns. ADJOURNMENT The meeting adjourned at 3:45 p.m. 14