HOUSE FINANCE COMMITTEE MAY 1, 1995 1:50 P.M. TAPE HFC 95 - 108, Side 1, #000 - end. TAPE HFC 95 - 108, Side 2, #000 - #290. CALL TO ORDER Co-Chair Richard Foster called the House Finance Committee meeting to order at 1:50 P.M. PRESENT Co-Chair Hanley Representative Kohring Co-Chair Foster Representative Martin Representative Mulder Representative Navarre Representative Brown Representative Parnell Representative Grussendorf Representative Therriault Representative Kelly ALSO PRESENT John Bitney, Staff, Representative Terry Martin; Terry Otness, Staff, Senator Robin Taylor; Tom Williams, Staff, Senator Steve Frank; Dan Fauske, Corporate Executive Officer, Alaska Housing Finance Corporation, Department of Revenue; William Howe, Deputy Commissioner, Treasury Division, Department of Revenue. SUMMARY SB 1 An Act relating to state implementation of federal statutes. HCS CS SB 1 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Law and a zero fiscal note by the Senate Finance Committee dated 3/2/95. SB 92 An Act requiring that, in addition to its operating budget, all activities of the Alaska Housing Finance Corporation are subject to the Executive Budget Act. HCS CS SB 92 (FIN) was reported out of Committee with "no recommendation" and with a zero fiscal note by the Department of Revenue dated 3/1/95. SENATE BILL 92 1 "An Act requiring that, in addition to its operating budget, all activities of the Alaska Housing Finance Corporation are subject to the Executive Budget Act." Representative Martin MOVED to adopt work draft #9-LS0762\M, Chenoweth, 5/1/95, as the version before the Committee. There being NO OBJECTIONS, it was so ordered. JOHN BITNEY, STAFF, REPRESENTATIVE TERRY MARTIN, explained that the work draft addressed language as recommended by the Subcommittee. The language will spell out the new items provided in the Executive Budget Act for the Alaska Housing Finance Corporation (AHFC). That information was included in the new subsection (D). He added that an amendment had been prepared to address the exemptions referenced in Section (F). [Attachment #1]. Representative Martin MOVED to adopt Amendment #1. Representative Therriault OBJECTED for purposes of discussion. DAN FAUSKE, CORPORATE EXECUTIVE OFFICER (CEO), ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT OF REVENUE, commented that the refinancing concern would be remedied through the amendment. That language would allow for service of the mortgage loans and foreclosures while providing the flexibility needed to remain in the market, capitalize on savings and allow the corporations to be in a position to react quickly in the bond market. Representative Parnell questioned the scope of Section 2(A) contained within the amendment. Mr. Fauske explained that within the budget two numbers would be provided; one in the front end (D) and the other in (F). Mr. Bitney responded that the 5% loan program was financed with the use of arbitrage earnings. He referenced the adopted committee substitute, Line 10 (C), indicating the exempted portion. Representative Brown asked how the proposed committee substitute had changed from the State Affairs version. Mr. Bitney replied that there had not been any substantive changes. He continued, under the House State Affairs version, the two loan programs were exempt from the review procedures. Current language dictates that the Legislature would provide an aggregate appropriation number for the loan permits. He added that there are new exemptions listed in Amendment #1. Representative Brown asked how the multi-family loan portion of the bill would be addressed. Mr. Bitney said that had been referenced in Subsection (E), Page 2, Line 3. The 2 appropriation would be divided into two parts; an aggregate appropriation for the loan programs in which a subsidy was not provided and also (E) would provide an appropriation for all the "other" loan programs including multi-family. Representative Martin understood that language would allow the bill to be more "open". Representative Brown questioned why portions of the bill had been deleted. Mr. Fauske pointed out that he prefered the last bill, although through the course of negotiation, it became apparent that the language addressing AHFC would need to become more "stringent". He summarized that a position had been accomplished within the proposed legislation which would not bind the corporation upward and which would permit it to continue to function. Representative Brown asked if opportunities would be lost. Mr. Fauske felt that there would continue to be enough lead time in order for the Legislative Budget and Audit Committee (LBA) to explain the case when the amount of money stipulated in the front section might not be sufficient. The propsed legislation needs additional work, although it would be "doable". Mr. Fauske anticipated that this year's loan activity would be $350-$400 million dollars. He understood that the Legislature would appropriate that amount each year for loan programs. Representative Brown asked if AHFC's corporate dollars would be incorporated as well as the funds bonded for. Mr. Fauske noted that was correct. He added that based on the companies appropriated estimates, that dollar amount will be in the front end of the budget. Representative Brown disagreed with that concept. Mr. Fauske understood the concern. Representative Martin explained that the Legislature has complete authority over appropriations as stipulated in Article 9. WILLIAM HOWE, DEPUTY COMMISSIONER, TREASURY DIVISION, DEPARTMENT OF REVENUE, responded to Representative Brown's concern. He noted that the intent of the language would be that the Legislature will review all of the loan programs that AHFC carries as part of their oversight process. With the multi-family housing loan and special-needs housing projects and programs will be reviewed through the Legislature. Both last year and this year, those programs consume approximately $50 million dollars of AHFC money, raised through new bond issues. The Legislature will have the right to review those programs. The amendment clarifies that once the scope of the total activities is determined, AHFC can operate freely within those boundaries. He stressed that the Legislature will not get involved in funding individual projects. 3 Representative Brown asked the distinction between (a)1(D) and 2(A). Mr. Howe stated that 2(A) would provide the ability to float bonds and borrow money for bond issues. He continued, Section 1(D) only deals with the lending of money. Representative Brown voiced confusion about the source of the money; she thought that they both represented the same funds. Mr. Howe explained that Section 1(D), the lending of money, the authorization is only related to an aggregate amount and provides the Legislature the ability to review programs. If the programs are supported by the Legislature, then the aggregate amount for all those programs will be given to AHFC to function. How they fund those loans will be a function of corporate receipts acquired from past loan payments, interest earnings as well as floating bonds. TOM WILLIAMS, STAFF, SENATOR STEVE FRANK, commented that Senator Frank requested that the bill return to the original Senate version or some modified version of that. Representative Martin noted that the committee substitute would represent the "middle ground" on the legislation. Representative Therriault WITHDREW THE OBJECTION to adopting Amendment #1. Representative Brown pointed out that the amendment would need a semi colon following the language "obligation" in Section (A). Representative Parnell noted that Section (B) would need an apostrophe in "corporations". There being NO further OBJECTIONS, Amendment #1 was adopted. Representative Martin MOVED to report HCS CS SB 92 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CS SB 92 (FIN) was reported out of Committee with "no recommendation" and with a zero fiscal note by the Department of Revenue dated 3/1/95. SENATE BILL 1 "An Act relating to state implementation of federal statutes." TERRY OTNESS, STAFF, SENATOR ROBIN TAYLOR, testified in support of SB 1. He stated that SB 1 was introduced as a companion measure to SJR 7, the Tenth Amendment resolution which has already passed the Legislature and been transmitted to the Governor. The resolution demands that Congress stop the practice of passing federal mandates which exceed Congressional authority under the Tenth Amendment. He added that SB 1 would be an attempt to identify federal 4 mandates, both statutory and regulatory, which conflict with State policy or exceed Constitutional limitations. Mr. Otness commented in order to accomplish that goal, SB 1 would require an annual review by the executive branch of each program mandated by Congress. An annual report to the Governor and the Legislative Budget and Audit Committee would set forth conclusions and would then make recommendations for changes in federal law to make the program consistent with state policy. Representative Brown spoke to Amendment #1. [Attachment a thorough review every four years rather than every year. Section (B) would stipulate that when there is a new federal law or requirement imposed, a review of "only" that material would be required. Representative Martin recommended dividing Amendment #1. Representative Brown explained that she had requested Legal Services to draft the amendment in order that a review would be provided every four years and when there was something new added, it would be reviewed. She understood that the amendment would cover that request. Representative Mulder agreed that the comprehensive review for the first year made sense, although questioned the timeliness to each new mandate. He felt anytime there were new changes, it would not be too cumbersome for each department to provide a review of those changes. Representative Brown agreed with Representative Mulder. (Tape Change, HFC 95-108, Side 2). Representative Parnell recommended adopting the amendment. Representative Martin stated that he would rather divide the question. He felt that four years would be too long and that annually would be too often. Representative Brown noted that on Page 2, Line 23, there was a "time certain" for the annual review. The reason that the date was added in the amendment, was to clarify which year it was to be submitted. Representative Martin reiterated that four years would be too long to wait for the information. Representative Brown MOVED to adopt Amendment #1. Representative Martin MOVED TO DIVIDE Amendment #1. There being NO OBJECTION, it was divided. Representative Brown MOVED to adopt 1(A). Representative Martin OBJECTED. He recommended that the time be changed to three years. Representative Navarre remarked that the report was being given too much attention and focus. He stressed that administrative ability was being reduced as 5 was the department's ability to manage. He advised that with the proposed legislation, additional costs will be placed on those departments. A roll call was taken on the MOTION to adopt Section 1(A). IN FAVOR: Therriault, Brown, Martin, Mulder, Navarre, Parnell OPPOSED: Kohring Representatives Hanley, Kelly, Hanley, Foster were not present for the vote. The MOTION PASSED (6-1). Representative Mulder MOVED to adopt 1(B), Amendment #1. There being NO OBJECTION, it was adopted. Representative Parnell MOVED an amendment change to Page 3, Line 15, adding the language "and the Legislature" following the word "Governor". There being NO OBJECTION, it was adopted. Representative Parnell MOVED to report HCS CS SB 1 (FIN) out of Committee with individual recommendations and with the accompanying Senate Finance Committee fiscal note. Representative Brown pointed out that the Senate Finance Committee had zeroed out all the fiscal notes. She recommended that the Committee consider passing a fiscal note for the Department of Law. She stressed that their role will become more difficult with passage of the legislation and that they will need to support all of the departments. She stressed that the Department of Law will have specific duties. She reminded members of the large operating budget reduction made to the civil division within that Department. Representative Parnell also MOVED to adopt the Department of Law fiscal note. There being NO OBJECTION, the SFC and the Department of Law fiscal notes were adopted as well as reporting the bill from Committee. Representative Navarre commented that the Department of Health and Social Services will have fiscal impact also, although he opted not move the fiscal note. HCS CS SB 1 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Law and the Senate Finance Committee dated 3/2/95. ADJOURNMENT 6 The meeting adjourned at 2:45 P.M. HOUSE FINANCE COMMITTEE MAY 1, 1995 1:50 P.M. TAPE HFC 95 - 108, Side 1, #000 - end. TAPE HFC 95 - 108, Side 2, #000 - #290. CALL TO ORDER Co-Chair Richard Foster called the House Finance Committee meeting to order at 1:50 P.M. PRESENT Co-Chair Hanley Representative Kohring Co-Chair Foster Representative Martin Representative Mulder Representative Navarre Representative Brown Representative Parnell Representative Grussendorf Representative Therriault Representative Kelly ALSO PRESENT John Bitney, Staff, Representative Terry Martin; Terry Otness, Staff, Senator Robin Taylor; Tom Williams, Staff, Senator Steve Frank; Dan Fauske, Corporate Executive Officer, Alaska Housing Finance Corporation, Department of Revenue; William Howe, Deputy Commissioner, Treasury Division, Department of Revenue. SUMMARY SB 1 An Act relating to state implementation of federal statutes. HCS CS SB 1 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Law and a zero fiscal note by the Senate Finance Committee dated 3/2/95. SB 92 An Act requiring that, in addition to its operating budget, all activities of the Alaska Housing Finance Corporation are subject to the Executive Budget Act. HCS CS SB 92 (FIN) was reported out of Committee with "no recommendation" and with a zero fiscal note by the Department of Revenue dated 3/1/95. 7 SENATE BILL 92 "An Act requiring that, in addition to its operating budget, all activities of the Alaska Housing Finance Corporation are subject to the Executive Budget Act." Representative Martin MOVED to adopt work draft #9-LS0762\M, Chenoweth, 5/1/95, as the version before the Committee. There being NO OBJECTIONS, it was so ordered. JOHN BITNEY, STAFF, REPRESENTATIVE TERRY MARTIN, explained that the work draft addressed language as recommended by the Subcommittee. The language will spell out the new items provided in the Executive Budget Act for the Alaska Housing Finance Corporation (AHFC). That information was included in the new subsection (D). He added that an amendment had been prepared to address the exemptions referenced in Section (F). [Attachment #1]. Representative Martin MOVED to adopt Amendment #1. Representative Therriault OBJECTED for purposes of discussion. DAN FAUSKE, CORPORATE EXECUTIVE OFFICER (CEO), ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT OF REVENUE, commented that the refinancing concern would be remedied through the amendment. That language would allow for service of the mortgage loans and foreclosures while providing the flexibility needed to remain in the market, capitalize on savings and allow the corporations to be in a position to react quickly in the bond market. Representative Parnell questioned the scope of Section 2(A) contained within the amendment. Mr. Fauske explained that within the budget two numbers would be provided; one in the front end (D) and the other in (F). Mr. Bitney responded that the 5% loan program was financed with the use of arbitrage earnings. He referenced the adopted committee substitute, Line 10 (C), indicating the exempted portion. Representative Brown asked how the proposed committee substitute had changed from the State Affairs version. Mr. Bitney replied that there had not been any substantive changes. He continued, under the House State Affairs version, the two loan programs were exempt from the review procedures. Current language dictates that the Legislature would provide an aggregate appropriation number for the loan permits. He added that there are new exemptions listed in Amendment #1. Representative Brown asked how the multi-family loan portion of the bill would be addressed. Mr. Bitney said that had 8 been referenced in Subsection (E), Page 2, Line 3. The appropriation would be divided into two parts; an aggregate appropriation for the loan programs in which a subsidy was not provided and also (E) would provide an appropriation for all the "other" loan programs including multi-family. Representative Martin understood that language would allow the bill to be more "open". Representative Brown questioned why portions of the bill had been deleted. Mr. Fauske pointed out that he prefered the last bill, although through the course of negotiation, it became apparent that the language addressing AHFC would need to become more "stringent". He summarized that a position had been accomplished within the proposed legislation which would not bind the corporation upward and which would permit it to continue to function. Representative Brown asked if opportunities would be lost. Mr. Fauske felt that there would continue to be enough lead time in order for the Legislative Budget and Audit Committee (LBA) to explain the case when the amount of money stipulated in the front section might not be sufficient. The propsed legislation needs additional work, although it would be "doable". Mr. Fauske anticipated that this year's loan activity would be $350-$400 million dollars. He understood that the Legislature would appropriate that amount each year for loan programs. Representative Brown asked if AHFC's corporate dollars would be incorporated as well as the funds bonded for. Mr. Fauske noted that was correct. He added that based on the companies appropriated estimates, that dollar amount will be in the front end of the budget. Representative Brown disagreed with that concept. Mr. Fauske understood the concern. Representative Martin explained that the Legislature has complete authority over appropriations as stipulated in Article 9. WILLIAM HOWE, DEPUTY COMMISSIONER, TREASURY DIVISION, DEPARTMENT OF REVENUE, responded to Representative Brown's concern. He noted that the intent of the language would be that the Legislature will review all of the loan programs that AHFC carries as part of their oversight process. With the multi-family housing loan and special-needs housing projects and programs will be reviewed through the Legislature. Both last year and this year, those programs consume approximately $50 million dollars of AHFC money, raised through new bond issues. The Legislature will have the right to review those programs. The amendment clarifies that once the scope of the total activities is determined, AHFC can operate freely within those boundaries. He stressed that the Legislature will not get involved in 9 funding individual projects. Representative Brown asked the distinction between (a)1(D) and 2(A). Mr. Howe stated that 2(A) would provide the ability to float bonds and borrow money for bond issues. He continued, Section 1(D) only deals with the lending of money. Representative Brown voiced confusion about the source of the money; she thought that they both represented the same funds. Mr. Howe explained that Section 1(D), the lending of money, the authorization is only related to an aggregate amount and provides the Legislature the ability to review programs. If the programs are supported by the Legislature, then the aggregate amount for all those programs will be given to AHFC to function. How they fund those loans will be a function of corporate receipts acquired from past loan payments, interest earnings as well as floating bonds. TOM WILLIAMS, STAFF, SENATOR STEVE FRANK, commented that Senator Frank requested that the bill return to the original Senate version or some modified version of that. Representative Martin noted that the committee substitute would represent the "middle ground" on the legislation. Representative Therriault WITHDREW THE OBJECTION to adopting Amendment #1. Representative Brown pointed out that the amendment would need a semi colon following the language "obligation" in Section (A). Representative Parnell noted that Section (B) would need an apostrophe in "corporations". There being NO further OBJECTIONS, Amendment #1 was adopted. Representative Martin MOVED to report HCS CS SB 92 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CS SB 92 (FIN) was reported out of Committee with "no recommendation" and with a zero fiscal note by the Department of Revenue dated 3/1/95. SENATE BILL 1 "An Act relating to state implementation of federal statutes." TERRY OTNESS, STAFF, SENATOR ROBIN TAYLOR, testified in support of SB 1. He stated that SB 1 was introduced as a companion measure to SJR 7, the Tenth Amendment resolution which has already passed the Legislature and been transmitted to the Governor. The resolution demands that Congress stop the practice of passing federal mandates which exceed Congressional authority under the Tenth Amendment. 10 He added that SB 1 would be an attempt to identify federal mandates, both statutory and regulatory, which conflict with State policy or exceed Constitutional limitations. Mr. Otness commented in order to accomplish that goal, SB 1 would require an annual review by the executive branch of each program mandated by Congress. An annual report to the Governor and the Legislative Budget and Audit Committee would set forth conclusions and would then make recommendations for changes in federal law to make the program consistent with state policy. Representative Brown spoke to Amendment #1. [Attachment a thorough review every four years rather than every year. Section (B) would stipulate that when there is a new federal law or requirement imposed, a review of "only" that material would be required. Representative Martin recommended dividing Amendment #1. Representative Brown explained that she had requested Legal Services to draft the amendment in order that a review would be provided every four years and when there was something new added, it would be reviewed. She understood that the amendment would cover that request. Representative Mulder agreed that the comprehensive review for the first year made sense, although questioned the timeliness to each new mandate. He felt anytime there were new changes, it would not be too cumbersome for each department to provide a review of those changes. Representative Brown agreed with Representative Mulder. (Tape Change, HFC 95-108, Side 2). Representative Parnell recommended adopting the amendment. Representative Martin stated that he would rather divide the question. He felt that four years would be too long and that annually would be too often. Representative Brown noted that on Page 2, Line 23, there was a "time certain" for the annual review. The reason that the date was added in the amendment, was to clarify which year it was to be submitted. Representative Martin reiterated that four years would be too long to wait for the information. Representative Brown MOVED to adopt Amendment #1. Representative Martin MOVED TO DIVIDE Amendment #1. There being NO OBJECTION, it was divided. Representative Brown MOVED to adopt 1(A). Representative Martin OBJECTED. He recommended that the time be changed to three years. Representative Navarre remarked that the report was being given too much attention and focus. He 11 stressed that administrative ability was being reduced as was the department's ability to manage. He advised that with the proposed legislation, additional costs will be placed on those departments. A roll call was taken on the MOTION to adopt Section 1(A). IN FAVOR: Therriault, Brown, Martin, Mulder, Navarre, Parnell OPPOSED: Kohring Representatives Hanley, Kelly, Hanley, Foster were not present for the vote. The MOTION PASSED (6-1). Representative Mulder MOVED to adopt 1(B), Amendment #1. There being NO OBJECTION, it was adopted. Representative Parnell MOVED an amendment change to Page 3, Line 15, adding the language "and the Legislature" following the word "Governor". There being NO OBJECTION, it was adopted. Representative Parnell MOVED to report HCS CS SB 1 (FIN) out of Committee with individual recommendations and with the accompanying Senate Finance Committee fiscal note. Representative Brown pointed out that the Senate Finance Committee had zeroed out all the fiscal notes. She recommended that the Committee consider passing a fiscal note for the Department of Law. She stressed that their role will become more difficult with passage of the legislation and that they will need to support all of the departments. She stressed that the Department of Law will have specific duties. She reminded members of the large operating budget reduction made to the civil division within that Department. Representative Parnell also MOVED to adopt the Department of Law fiscal note. There being NO OBJECTION, the SFC and the Department of Law fiscal notes were adopted as well as reporting the bill from Committee. Representative Navarre commented that the Department of Health and Social Services will have fiscal impact also, although he opted not move the fiscal note. HCS CS SB 1 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Law and the Senate Finance Committee dated 3/2/95. ADJOURNMENT 12 The meeting adjourned at 2:45 P.M. 13