HOUSE FINANCE COMMITTEE MARCH 13, 1996 1:45 P.M. TAPE HFC 96 - 74, Side 1, #000 - end. TAPE HFC 96 - 74, Side 2, #000 - end. TAPE HFC 96 - 75, Side 1, #000 - #620. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:45 P.M. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Mulder Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Kohring ALSO PRESENT Representative Jeannette James; Don Nessi, Deputy Assistant Secretary for Native American Programs, U.S. Department of Housing and Urban Development (HUD), Washington D.C.; Bryce Edgmon, Aid, Representative Richard Foster; John Bitney, Legislative Liaison, Alaska Housing Finance Corporation (AHFC), Department of Revenue, Anchorage; Jacqueline C. Johnson, Executive Director, Tlingit-Haida Regional Housing Authority, Juneau; Dan Fauske, Executive Director, Alaska Housing Finance Corporation (AHFC), Department of Revenue, Anchorage; Kay Murphy, Director, Mortgage Operations, Alaska Housing Finance Corporation (AHFC), Department of Revenue, Anchorage; Mr. Dillion, (Testified via teleconference), Anchorage; Sam S. Kito III, Legislative Liaison/Special Assistant, Office of the Commissioner, Department of Transportation and Public Facilities; Bob Bartholomew, Deputy Director, Income & Excise Audit Division, Department of Revenue; Arthur Snowden II, Administrative Director, Alaska Court System; Elmer Lindstrom, Special Assistant to the Commissioner, Office of the Commissioner, Department of Health and Social Services. SUMMARY HB 192 An Act relating to housing programs of the Alaska Housing Finance Corporation, the corporation's supplemental housing development grants to regional housing authorities, and to housing 1 programs of regional housing authorities, and permitting regional housing authorities to make, originate, and service loans for the purchase and development of residential housing. CS HB 192 (FIN) was reported out of Committee with "no recommendations" and with a zero fiscal note by the Alaska Housing Finance Corporation (AHFC). HB 284 An Act relating to the Alaska Commercial Fishing and Agriculture Bank. CS HB 284 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Commercial Fisheries (Limited) Entry Commission and the Department of Revenue and a House Finance Letter of Intent. HB 520 An Act relating to death investigations and inquests, coroners, public administrators, and medical examiners, including the state medical examiner; relating to the jurisdiction of district court judges and magistrates in certain cases involving death. CS HB 520 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Alaska Court System and the Department Health and Social Services and a zero fiscal note by the Department of Public Safety. HJR 49 Proposing amendments to the Constitution of the State of Alaska creating a highway fund. HJR 49 was HELD in Committee for further consideration. HOUSE BILL 284 "An Act relating to the Alaska Commercial Fishing and Agriculture Bank." Co-Chair Hanley asked if it was Representative Brown's intent to move Amendment #2 which had been held from the previous meeting. Representative Brown noted that she did not want to move the amendment but planned to instead move the Letter of Intent. Representative Mulder suggested amending language in the bill on Page 11, Section #20, deleting all material from Lines 15 - 23. Representative Mulder MOVED the amendment. There being NO OBJECTION, it was adopted. 2 Representative Brown spoke to the Letter of Intent which would request that Commercial Fishing and Agriculture Bank (CFAB) identify appropriate measures for financing options and then report those findings back to the Legislature. Representative Mulder MOVED to report CS HB 284 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. Representative Brown MOVED to adopt the Letter of Intent. There being NO OBJECTION, it was adopted. CS HB 284 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Commercial Fisheries (Limited) Entry Commission and the Department of Revenue. HOUSE BILL 192 "An Act relating to housing programs of the Alaska Housing Finance Corporation, the corporation's supplemental housing development grants to regional housing authorities, and to housing programs of regional housing authorities, and permitting regional housing authorities to make, originate, and service loans for the purchase and development of residential housing." Co-Chair Foster MOVED to adopt work draft #9-LS0463\U, Chenoweth, 3/08/96, as the version before the Committee. Representative Brown OBJECTED for purposes of discussing the changes. BRYCE EDGMON, AID, REPRESENTATIVE RICHARD FOSTER, stated that the legislation before the Committee addresses existing programs within Alaska Housing Finance Corporation (AHFC) and would also provide for individual regional housing authorities to investigate rural areas of the State in order to provide additional financing tools to make home mortgages more available. He provided Committee members with a sectional analysis of the proposed committee substitute. [Copy on file]. Mr. Edgmon presented an overview of the sectional analysis. Representative Brown questioned the relationship between regional housing authorities and AHFC. She asked which agency would determine who would receive the loans. JOHN BITNEY, LEGISLATIVE LIAISON, ALASKA HOUSING FINANCE CORPORATION (AHFC), ANCHORAGE, responded, the regional 3 housing authorities are restricted to who they can grant a loan to. Currently, statute allows loans made only to those areas defined as "rural" communities. The proposed legislation would expand the authority to make loans outside of rural communities. The types of loans made would continue to be tied to interest rates. Mr. Bitney concluded that statutes define regional housing authority boundaries as identical to regional corporation boundaries. JACQUELINE C. JOHNSON, EXECUTIVE DIRECTOR, TLINGIT-HAIDA REGIONAL HOUSING AUTHORITY, JUNEAU, in response to Representative Martin's concern, replied that matching the supplemental grant program to the AHFC loan program does not exist at present. Instead, the supplemental housing grant funds match the U.S. Housing and Urban Development (HUD) appropriated dollars. She stressed that this would be a separate issue from mortgage lending. She pointed out, also, that the dollars primarily used for regional housing authority had been allocated to low income rentals. "Real loan" programs began years ago as a result of not many loans being generated to the rural communities. Ms. Johnson continued, a problem arose because the statute does not allow regional housing authorities to provide the loan service. The proposed legislation requests that change. Representative Martin asked how small of an area could qualify. Ms. Johnson advised that because the State had concerns with the rural sized communities, they created fourteen regional housing authorities. Each one is required to come back for Legislative approval, thus prohibiting small villages from creating their own housing authority. Representative Martin asked if there was anything in the legislation that could treat urban areas differently from rural areas. Mr. Bitney explained that the authorized projects listed on Page 3, would tie areas to the projects being constructed by the regional housing authority. The legislation would not authorize AHFC to go "outside" those projects. He noted that the statute allows AHFC to authorize up to an eight-plex unit without any type of determination. There must be a feasibility study and an evaluation provided by AHFC. The statute allows AHFC to go beyond an eight-plex, although a special determination must first be provided. The interest rate on the program would remain the same as it currently is. The legislation would only "modify" the existing program. Mr. Bitney indicated that no preference would be created. 4 Representative Martin inquired if more than one authority could exist in an urban area to encourage competition. Mr. Bitney suggested that beyond a regional housing authority, a party could rely on banks. Mrs. Johnson added that each housing authority does have public housing offered, and that development corporations do exist that deal with only housing services. She concluded, in urban areas, different needs exist as do different funding source mechanisms. Representative Brown asked for further information regarding the "unfavorable" report on the Interior Regional Housing Authority. DAN FAUSKE, EXECUTIVE DIRECTOR, ALASKA HOUSING AUTHORITY (AHFC), ANCHORAGE, stated, last spring when the incident occurred, AHFC immediately froze that account and sent a team to work with the new management. At that time, a duel signatory was put into effect. No new funds were transferred until the money concern was sorted out. The issue has been resolved at this time. Representative Brown WITHDREW the OBJECTION to move the committee substitute. There being NO further OBJECTION, the work draft, #9-LS0463\U, Chenoweth, 3/08/96, was adopted. Mr. Bitney stated that with the version adopted by the Committee, the fiscal impact would be reduced to zero. Representative Kohring MOVED to adopt Amendment #1. [Copy on file]. The amendment would lower the qualification age from 60 years to 55 years for senior housing. Representative Martin OBJECTED for discussion purposes. Representative Kohring explained that the amendment would allow people under the age of 60 years to be eligible to be considered for senior housing loans. He felt that there existed a housing demand among those persons who have not yet reached the age of 60, assuming that they have met the other criteria. Representative Martin stated that AHFC currently has a large demand for senior housing. If the age limit is lowered, the problem will become maximized. Representative Brown questioned the fiscal impact of the amendment. KAY MURPHY, DIRECTOR, MORTGAGE OPERATIONS, ALASKA HOUSING FINANCE CORPORATION (AHFC), ANCHORAGE, stated that the senior housing loan program was not used very often. Borrowers seem to fit into the "special needs" category. She did not feel that there would be a tremendous increase in activity through passage of the amendment. Representative Martin asked how many seniors currently receive aid. Ms. Murphy replied that the senior population is the fastest growing population in Alaska. Lowering the 5 age to 55 years would encompass a larger group of people. Ms. Johnson pointed out that currently, there are subsidy programs within the federal government using the 55 year old category. Through adoption of the amendment, a senior person would be able to tap into both the federal and state level funding. (Tape Change, HFC 96-74, Side 2). Co-Chair Hanley expressed concern that lowering the age would place an increasing demand on programs that currently exist. Ms. Murphy noted that on the federal level, the possibility exists of decreasing the age even further. Allowances are made in the guidelines for partnerships when only one member of the couple is 60 years of age or older. The other partner can stay at the residence as an eligible resident. The guidelines are established as a loan program, and are available to seniors, 60 years of age or older. A roll call was taken on the MOTION to adopt the amendment. IN FAVOR: Therriault, Brown, Kelly, Kohring, Mulder, Foster. OPPOSED: Martin, Hanley. Representatives Parnell, Grussendorf and Navarre were not present for the vote. The MOTION PASSED (6-2). Co-Chair Foster MOVED to report CS HB 192 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. Representative Brown asked AHFC authorities if there would be fiscal impact through adoption of Amendment #1. Mr. Fauske replied, the result would be adjusted through the loan process. AHFC provides estimates each year for the anticipated loan costs. The legislation could increase that estimate, although he assumed it would be small. If the cap was exceeded, AHFC would request supplemental funding. CS HB 192 was reported out of Committee with "no recommendations" and with a zero fiscal note by the Alaska Housing Finance Corporation (AHFC). HOUSE BILL 520 "An Act relating to death investigations and inquests, 6 coroners, public administrators, and medical examiners, including the state medical examiner; relating to the jurisdiction of district court judges and magistrates in certain cases involving death." ARTHUR SNOWDEN II, ADMINISTRATIVE DIRECTOR, ALASKA COURT SYSTEM, spoke to HB 520 which would create a unified death investigation system under the authority of the State Medical Examiner within the Department of Health and Social Services (DHSS). The bill has a net zero cost with funds transferred from the Alaska Court System to the Department of Health and Social Services (DHSS) reflecting the transfer of death investigation responsibilities. Co-Chair Foster MOVED to adopt work draft #9-LS1678\C, Lauterbach, 3/12/96, as the version before the Committee. There being NO OBJECTION, it was so ordered. Mr. Snowden provided background history on the coroner system used in Alaska. He emphasized that the old system did not work well. Magistrates have no knowledge of forensic pathology. If a magistrate declared the purpose of death, and then left town, a case could not be brought forth, without being subject to challenge. That system was used because there was no other alternative. Using that system, costs have always been significant. Mr. Snowden established that a number of years ago, the State Legislature provided funding for a State Medical Lab in Anchorage. The proposed legislation would provide for a professional medical examiner to better support the criminal justice system, by investigating deaths of concern to public health officers. The version before the Committee would leave the public administrator functions in the Court System. All other services would be moved to DHSS. Mr. Snowden spoke to Amendment #1. [Copy on file]. He pointed out that Amendment #1 would address technical changes. Representative Grussendorf MOVED to adopt Amendment #1. ELMER LINDSTROM, SPECIAL ASSISTANT TO THE COMMISSIONER, OFFICE OF THE COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, stated that Amendment #1 had resulted from suggestions made by Terry Lauterbach, legal drafter. There being NO OBJECTION, Amendment #1 was adopted. Mr. Lindstrom stated that DHSS supports the proposed legislation. The role of the medical examiner has been successfully seated in that Department. Historically, supplemental requests have been made to address that concern. He pointed out that this is the first year that a need does not exist for a supplemental request or a 7 reallocation within the Division of Public Health. The legislation will provide further tools to curtail costs in that area. Mr. Lindstrom added that a new fiscal note would reflect the action taken through the House Finance Committee substitute corresponding to the Court System fiscal note. The fiscal note reflects the public administrator position remaining in the Court System. Representative Brown inquired if the State examiner would be required to fill out a Certificate of Death for everyone. Mr. Lindstrom responded that the proposed legislation would not provide a change to that process. If the death is referred to the State medical examiner, it would not necessarily be the medical examiner who fills out the death certificate, but would be filed under that authority. Mr. Lindstrom understood that every death in the State should have a death certificate. Representative Brown noted that HB 371 had been provided a DHSS fiscal note for the costs associated with changing a death certificate. Co-Chair Foster MOVED to report CS HB 520 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 520 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Alaska Court System and the Department of Health and Social Services and a zero fiscal note by the Department of Public Safety. HOUSE JOINT RESOLUTION 49 Proposing amendments to the Constitution of the State of Alaska creating a highway fund. REPRESENTATIVE JEANNETTE JAMES noted that HJR 49 would propose amendments to the Alaska State Constitution creating a dedicated transportation fund. The amendments would be placed before the voters of Alaska at the next general election. The bill would not address an amount of motor fuel tax increase, but merely would provide a mechanism for allocating the proceeds from collection of fuel taxes. She added that the resolution has received wide support relative to the current level of fuel taxes. She thought that Alaska's citizens would be more willing to accept a necessary increase in their motor fuel taxes if they knew 8 the money would be utilized to address the need for improved maintenance of the roads and highways. SAM S. KITO III, LEGISLATIVE LIAISON/SPECIAL ASSISTANT, OFFICE OF THE COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES (DOTPF), testified in support of HJR 49. He pointed out that the resolution contains the marine fuel tax component. The Department would utilize that revenue to transfer facilities to local governments. Mr. Kito pointed out the Department's recommendations to permit highway expenditures to include construction. He suggested changing the vote from 3/5 to 3/4 consenting votes. BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME & EXCISE AUDIT DIVISION, DEPARTMENT OF REVENUE, advised that the fiscal note provided by the Department of Revenue would change the effective date to July 1, 1998. At that point, proceeds for motor fuel tax would be deposited into a dedicated fund. He added, the fiscal note only indicates the impact of gasohol in the Anchorage area. In FY95, gasohol was required use by the Environmental Protection Agency (EPA) in Anchorage for duration of a two month period. During that two months, the State lost $2.4 million dollars in revenue, resulting from the motor fuel tax exemption. The stipulation in Anchorage was increased from two to four months required use, as well as two to four million gallons being sold each month during the transition. The estimates include FY96 lost revenue in the amount of $6 million dollars. Representative Mulder asked if there was any Alaskan grain used in production of gasohol. If not, he recommended revising that statute. Representative James agreed, indicating that there is a bill in another committee which addresses that tax. There could be some gasohol made in Alaska, although most of it comes from outside. Mr. Bartholomew pointed out that DOR's dedicated fund revenue dollars, includes a tax applied to off highway fuel. On off highway fuel, an eight cents per gallon tax is charged, and then a six cent per gallon refund is made. The resulting net tax amounts to two cents per gallon. The Department collects $3.2 million dollars per year from that tax. That revenue is not reflected in the fiscal note. MR. DILLION, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE, testified in support of HJR 49. He requested that intent language be added in order to tightly control the dedicated fund, stressing that the fund be used strictly for maintenance purposes. He recommended that a tool be implemented to focus behavior in spending fuel tax revenue. 9 He stressed that he would be against using the fund for construction. It must be a maintenance fund, and be used for highways only. Mr. Dillion noted that his company would not support the marine portion of the legislation. In response to Representative Therriault's question, Mr. Bartholomew noted that a separate account would be maintained for the marine fuel. Mr. Kito added, DOTPF has established that there is not enough revenue even with the proposed tax increases to expand beyond maintenance of the highway system. Co-Chair Hanley advised that there is not enough revenue available without a tax increase to cover the needs. The public wants to see current roads being maintained rather than new roads being built with those funds. Co-Chair Hanley voiced his concern adding "construction" to the use of the fund. Representative James noted that Commissioner Perkins had indicated in a previous committee discussion, that federal funds to Alaska would be reduced, which would create a reduction to the federal tax requirement. That action would provide a need for the State to tax, thus placing more revenue into that account. Mr. Kito noted that a general accounting office report had been released in January, 1996, which indicates how the U.S. Congress plans on putting together the next funding authorization for the Federal Highway Trust Fund. In four of the seven scenarios, Alaska went from receiving $230 million dollars to being allocated approximately $40 million dollars. Mr. Dillion questioned how the ferry system would be integrated as part of the highway system. He understood that ferries do not pay a fuel tax. Mr. Kito responded that some activities on the ferry system would be permissible as an expenditure. The primary focus would be pavement, repair and maintenance from the dedicated fund. Representative James agreed that within the legislation, the marine highway would be an allowable use of fund monies for maintenance only. (Tape Change, HFC 96-75, Side 1). Representative Brown asked how much the State currently spends on highway maintenance. Mr. Kito replied the best estimate of the direct and indirect FY95 costs is $75 million dollars. The indirect expenses would include some administrative costs which helps to keep equipment working. The Department does not have a clearly defined break-out of 10 those costs. Representative Brown asked the current costs of construction and improvement of harbor facilities. Mr. Kito replied that FY97 budget requests a $1 million dollar appropriation for the harbor fund. He added, those costs have averaged approximately 37% of the amount collected in fuel tax. The balance would be placed into the general fund. Representative Brown pointed out that passage of the legislation would provide that revenue available to the general fund be decreased and the amount spent on harbor construction be increased by $7.6 million dollars. Co-Chair Hanley suggested that costs could be added to the amount currently spent. He voiced concern with that portion of the bill, pointing out that it could increase by six times the expenditures for ports and harbors. Co-Chair Hanley recommended separating the issues. Representative Brown asked how much the State spends on maintaining local government roads. Mr. Kito replied that revenue for local government road maintenance passes through the Department of Community and Regional Affairs (DCRA) in a revenue sharing request, for a road program component in the amount of $4.4 million dollars. Representative Brown asked if local governments would be entitled to some of the maintenance money. Mr. Kito commented that provision had been included in order to prevent incentive to take over roads. Without increasing the tax rate, there would not be enough revenue for the State to initiate the transfer or sharing program. Mr. Kito noted that the "airport system" would not be considered a "highway" within the language of the legislation. Mr. Kito spoke to upgrading facilities which belong to a municipality. The Department currently is negotiating with the municipalities to determine the level of community acceptance. He added, the Department is currently investigating a "tax sharing" mechanism, whereby, a community that does accept ownership of a facility would also receive a portion of the tax revenue collected. Discussion followed among Committee members regarding inclusion of the marine highway to the resolution. Representative Brown inquired if the State currently collects shared taxes on behalf of local governments. Mr. Bartholomew replied that the State does not collect any shared highway or marine fuel taxes. A minimum amount has been collected for aviation air revenue. Representative Brown argued that if the Constitution is to be amended, the new language should be clear. She recommended deletion of Section (b). Co-Chair Hanley replied that there should exist some statutory mechanism to 11 address when the State collects taxes for the municipalities. He questioned who would pay the administrative costs. Co-Chair Hanley interjected that he was not in support of including the marine fuel tax, suggesting that it be a separate issue. Discussion followed among Committee members regarding the marine fuel tax. Representative Brown voiced opposition to creating a dedicated fund source. Representative Navarre commented that the State spends far more than collected on highway maintenance. He suggested that the amount assessed should be increased, otherwise, there would be no reason to pass a constitutional amendment. Representative Navarre suggested the harbor facilities provision be removed. He added, if a dedicated fund is to be established, a 3/5ths vote would not provide enough protection for a dedicated fund, and recommended that a 3/4th or 4/5th majority vote be required. Co-Chair Hanley agreed. Representative Grussendorf elaborated his support to include harbor maintenance. HJR 49 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 3:45 P.M. 12