HOUSE FINANCE COMMITTEE APRIL 27, 1996 1:20 P.M. TAPE HFC 96 - 144, Side 1, #000 - end. TAPE HFC 96 - 144, Side 2, #000 - end. TAPE HFC 96 - 145, Side 1, #000 - end. TAPE HFC 96 - 145, Side 2, #000 - #523. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:20 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 Con Bunde; Annalee McConnell, Director, Office of Management & Budget, Office of the Governor; Tom Williams, Staff, Senator Steve Frank; Terry Otness, Staff, Senator Robin Taylor; James Dieringer III, Staff, Senator Steve Frank; Sheila Peterson, Staff, Senator Steve Rieger; Mark Boyer, Commissioner, Department of Administration; James Baldwin, Assistant Attorney General, Department of Law; Wendy Redman, Vice President, University Relations, University of Alaska; Mary Rubadeau, Alaska Council of School Administrators, Superintendent, Juneau School District, Juneau; Jim Stratton, Director, Division of Parks and Outdoor Recreation, Department of Revenue; Diane Barrans, Executive Director, Postsecondary Education Commission, Department of Education; Judy Murphy, (Testified via teleconference), Barrow; Bill Donaldson, (Testified via teleconference), Kodiak; Mike Laundry, (Testified via teleconference), Sgt. Kodiak Police Department, Kodiak; Dennis Oakland, (Testified via teleconference), City of Homer, Homer; Nick Dudiak, (Testified via teleconference), State Employee, Homer; Greg MacDonald, (Testified via teleconference), Alaska Public Safety Employee Association, Alaska State Fire Fighters Association, Anchorage; Keith Perin, (Testified via teleconference), Board of Directors, Paternal Order of State Troopers, Anchorage; Lucy Hope, (Testified via teleconference), President, Mat-Su Education Association, Anchorage; Bill Bjork, (Testified via 1 teleconference), President, Fairbanks Education Association, Fairbanks; Don Davis, (Testified via teleconference), Fairbanks. SUMMARY SB 89 An Act relating to the members of the board and staff of the Alaska Permanent Fund Corporation. SB 89 was HELD in Committee for further discussion. SB 148 An Act relating to a defined contribution retirement plan for state employees. SB 148 was HELD in Committee for further discussion. SB 278 An Act relating to the authority of the Department of Natural Resources to allow credits against fees at state historical parks. SB 278 was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Natural Resources dated 2/21/96. SB 301 An Act relating to postsecondary education. CS SB 301 (FIN)am was reported out of Committee with "no recommendation" and with fiscal notes by the Department of Revenue dated 4/19/96, (2) by the Alaska Post Secondary Commission dated 4/2/97 and 4/19/96, by the Department of Education dated 4/19/96 and a zero fiscal note by the Alaska Post Secondary Commission. SB 303 An Act relating to management of the budget reserve fund; and providing for an effective date. CS SB 303 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Revenue dated 4/23/96. SB 307 An Act authorizing the Department of Natural Resources to exchange with the federal government state land within, and adjoining, Dude Creek Critical Habitat Area for federal land adjacent to Fall Creek; and providing for an effective date. CS SB 307 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Revenue dated 4/23/96. 2 SENATE BILL 303 "An Act relating to management of the budget reserve fund; and providing for an effective date." TOM WILLIAMS, STAFF, SENATOR STEVE FRANK, provided a sectional analysis of SB 303, noting that the legislation would allow the Governor authority to transfer management of the Constitutional Budget Reserve Fund (CBRF) to the Permanent Fund Corporation. Representative Grussendorf asked if the plan considered current investment concepts used by the Department of Revenue (DOR). Mr. Williams explained that CBRF currently is invested by DOR's Treasury Division. The bill would provide the governor latitude to transfer all or a portion of that amount over to the general fund. Co-Chair Foster MOVED to report CS SB 303 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS SB 303 (FIN) was reported out of Committee with a "do pass" recommendation" and with a zero fiscal note by the Department of Revenue dated 4/23/96. SENATE BILL 307 "An Act authorizing the Department of Natural Resources to exchange with the federal government state land within, and adjoining, Dude Creek Critical Habitat Area for federal land adjacent to Fall Creek; and providing for an effective date." JAMES DIERINGER III, STAFF, SENATOR STEVE FRANK, spoke in support of SB 307 noting that it would authorize the State of Alaska to exchange a 960 acre parcel near Gustavus with the federal government in order to construct a mini- hydroelectric power plant. Under the legislation, the federal government would receive a parcel which lies adjacent to Glacier Bay National Park--land that is already dedicated as a critical habitat area for sand hill cranes and other wetland wildlife. The State would receive a parcel that is situated near both the existing diesel power generation plant and Fall Creek. The parcel does have sufficient water flow to generate hydro-electric power. Co-Chair Foster MOVED to report CS SB 307 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was 3 so ordered. CS SB 307 (FIN) was reported out of Committee with a "do pass" recommendations and with a fiscal note by the Department of Natural Resources dated 4/23/96. SENATE BILL 278 "An Act relating to the authority of the Department of Natural Resources to allow credits against fees at state historical parks." TERRY OTNESS, STAFF, SENATOR ROBIN TAYLOR, testified in support of SB 278. He stated that the legislation was introduced to address concerns raised by the Ketchikan area State Parks Advisory Board and the Ketchikan Gateway Borough Assembly. SB 278 would provide a mechanism by which the Division of Parks and Outdoor Recreation could acquire two small parcels of land adjacent to Totem Bight State Historical Park. SB 278 would allow DNR to offer credits against fees paid by commercial tour operators for payments made to the municipality for projects which would assist in mitigating or alleviating access, congestion and parking problems at historical parks. In response to Representative Brown's question, Mr. Otness capsulized how the money would be spent. In the first year funds generated would be utilized as partial payment to the Ketchikan Borough for the land. JIM STRATTON, DIRECTOR, DIVISION OF PARKS AND OUTDOOR RECREATION, DEPARTMENT OF NATURAL RESOURCES (DNR), added, the base amount received in 1995 would not be "dropped income terms" made to the State. Co-Chair Foster MOVED to report SB 278 out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. SB 278 was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Natural Resources dated 2/21/96. SENATE BILL 89 "An Act relating to the members of the board and staff of the Alaska Permanent Fund Corporation." SHEILA PETERSON, STAFF, SENATOR STEVE RIEGER, spoke in support of SB 89. She pointed out in the past two years, 4 there has been a 100% turnover in top management of the Alaska Permanent Fund Corporation. SB 89 would provide greater continuity in the management of the fund, creating a more careful, deliberate financial decision-making tool. The legislation clarifies that removal of a trustee must be for cause. The number of public members would be increased from four to five, with staggered terms. SB 89 would clarify that investment policies and staffing decisions must be made in the best interest of the fund. JAMES BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, spoke to an amendment made in the House State Affairs Committee, addressing the concerns of keeping commissioners on the Board of Trustees. He requested that portion of the bill not be changed. Mr. Baldwin spoke to concerns from the Department of Law. He advised that the legislation would make dramatic changes to the make-up of the board. The Department's most significant concern would be increasing public membership with removal of board members only for cause. Mr. Baldwin reminded members that to remove a board members for cause is a difficult and expensive exercise. He urged that the bill be changed before passage. Mr. Baldwin referenced Page 1, Lines 13-14, Section (2), ".....public members of the board must have recognized competence and wide experience in finance, investments or other....". He advised that there are only a couple of people in the State who could meet proposed qualifications. Mr. Baldwin added, Page 3, Section 6, suggests that the corporation staff, serve at the "pleasure" of the board of directors. The language is too broad. He suggested including language "with investment responsibilities". He pointed out that language on Page 3, Section 7(b), would not permit removal of the executive director if a conflict of personality arose. That position would be unreplaceable regardless of fund performance. Representative Mulder believed that Sections 6 and 7 were in opposition. Mr. Baldwin agreed that the language could be conflicting. Representative Parnell asked if there was a "different" meaning of cause established in case opinions. Mr. Baldwin responded that the conviction of a crime could result from something involving moral turpitude and or dishonesty, citing AS 16.05.100. Representative Brown referenced Section 2, and suggested deletion of "and broad experience"; inserting "recognized competence". She thought that language would broaden the 5 pool. Representative Brown referenced Section 4, asking if the Administration had objected, wanting to select their "own" appointees. Mr. Baldwin replied that existing law provides that the board must be responsive to the governor and that the governor must be responsive to the voters of the State. In existing law, the governor can appoint and fire appointees, which guarantees that the board act in accordance with the wishes of the governor. Governor Knowles feels strongly that the board should be answerable to someone. Co-Chair Hanley commented that language changes could be more consistent. The board members could either be "accountable" to the governor or "influenced" by the governor. Representative Grussendorf pointed out that the Permanent Fund has never been affected by the transition of various governors elected since inception and there has been no fluctuation in the earnings of the fund. He noted that he did not support the legislation. Representative Brown questioned how the language would be incorporated. Representative Mulder stated that he viewed the Permanent Fund similar to other state resources and that board should be treated the same as other state boards. Members are appointed and their terms should "roll over" into the term of the next Governor. He suggested that action would provide continuity to each board. SB 89 was HELD in Committee for further consideration. SENATE BILL 148 "An Act relating to a defined contribution retirement plan for state employees." MARY RUBADEAU, SUPERINTENDENT, JUNEAU SCHOOL DISTRICT, ALASKA COUNCIL OF SCHOOL ADMINISTRATORS, JUNEAU, stated that the Alaska Council of School Administrators strongly opposes SB 148. She believed that the legislation would place the State of Alaska and the students of the State at risk because they would no long be able to attract the brightest and best educators to work in Alaska. Of the sixty-nine retirement systems compared, 53 plans allow for some combination of a Teacher Retirement System (TRS) and Social Security (SS) coverage. (Tape Change, HFC 96-144, Side 2). Ms. Rubadeau continued, SB 148 would reduce the current multiplier of 2% or 2.5% to 1.5%. Of the 69 retirement programs studied, thirty-one pension plans use an accrual 6 rate equal to or greater than 2% percent; twenty-four plans use an accrual rate between 1.79% and 1.99%. Only 7 plans use 1.5% or less as the multiplier for computation of retirement benefits. If Alaska were to adopt 1.5% multiplier, Alaska will be at the "bottom of the list" for attractive retirement system plans. She continued, the third tier retains the highest paid teachers in the system longer, at a time when districts are looking for means to reduce expenses, suggesting that the biggest budget area which could show a savings would be staff salaries. She asserted that the benefits for retaining the current retirement system out weigh the reasons for the proposed language. SB 148 would place Alaska at the bottom of quality and value when compared with other states. Ms. Rubadeau thought that Alaska teacher salaries are becoming more in line with those of other states. Alaska is now having difficulty in some districts retaining quality educators under the present system. Adoption of SB 148 would create more reasons not to come to Alaska to teach. She urged that the Committee not pass SB 148. Representative Therriault inquired if the Alaska Council had voiced blanket opposition to the legislation. Ms. Rubadeau noted that the TRS system works and is a good system. She believed it would make more sense to amend the current system as opposed to adopting the third tier system. Ms. Rubadeau commented on the opposition to the concept of the Tier III. Representative Therriault pointed out that the legislation could be amended in order to better work for the groups involved. In response to Representative Therriault's comment, Ms. Rubadeau explained that the number of people applying for jobs within the Alaska school districts has decreased by one-quarter in the past year. Recruitment considerations are a critical factor for the school system in Alaska. She added, teaching is a taxing profession; new people with energy and vision need to be given the opportunity to work to keep up the challenging concerns. Specifically why school districts supported the early retirement incentive program. Representative Parnell asked if there was a waiting list of qualified teaching positions in Juneau. Ms. Rubadeau responded that there have been qualified applicants who have not been able to obtain employment because there have been no new hires in the past few years. Representative Mulder suggested that the decision be based 7 on "financial reality" rather than trying to modify social behavior in terms for employment practices. He suggested that teachers be held to the same level as other professions in determining when they should leave their post. Ms. Rubadeau spoke to the realities which face school districts; once teachers are tenured, they stay in the teaching system, and that many of their choices evolve around financial issues regarding the retirement system. JUDY MURPHY, (TESTIFIED VIA TELECONFERENCE), BARROW, stated that new retirement proposals would not encourage teachers to stay in the system nor would it encourage new students to pursue degrees in education. She emphasized that the proposed changes would be too drastic and urged members to vote against the proposed legislation. BILL DONALDSON, (TESTIFIED VIA TELECONFERENCE), KODIAK, spoke in favor of the legislation, specifically the portion which addressed the Early Retirement Incentive Program (RIP) for state employees. He agreed that it was fiscally responsible to reduce state government. MIKE LAUNDRY, (TESTIFIED VIA TELECONFERENCE), KODIAK POLICE DEPARTMENT, KODIAK, spoke in support of the legislation. He thought that the bill would be of benefit to the Kodiak Police Department, pointing out that people would be eligible for early retirement through passage of the legislation. He thought that could create more options for entry level employees. DENNIS OAKLAND, (TESTIFIED VIA TELECONFERENCE), CITY OF HOMER, HOMER, commented that the City of Homer is facing declining city revenues, forcing down-sizing and restructuring of the city work force. SB 148, RIP portion of the bill would allow the city to reduce the work force and bring on new employees at lower costs, creating substantial savings. He concluded, the City of Homer supports SB 148 and urges the Committee's approval and passage. NICK DUDIAK, (TESTIFIED VIA TELECONFERENCE), SELF, STATE EMPLOYEE, HOMER, testified in favor of SB 148, echoing that savings would be provided to the State through passage of the legislation. He pointed out that without passage of the bill, many lower paid recruitment positions would be laid off resulting from the proposed budget plan. GREG MACDONALD, (TESTIFIED VIA TELECONFERENCE), PUBLIC SAFETY EMPLOYEE ASSOCIATION, ALASKA STATE FIRE FIGHTERS ASSOCIATION, ANCHORAGE, stated that members of the associations which he represents strongly urge the Committee to separate the RIP and Tier III sections of the proposed 8 legislation. Each should stand on their own merit. He pointed out that there was broad support for the RIP portion of the bill, although, citizens felt strongly about the "Tier III" portion and would not support the legislation with that included. He pointed out that SB 148 would cut spouse and dependent health care for the police and fire workers. Mr. MacDonald stressed that these employees have stressful work lives. If they have to remain in service longer, that increases family stress and will make it "tough" to recruit quality people. KEITH PERIN, (TESTIFIED VIA TELECONFERENCE), BOARD OF DIRECTORS, PATERNAL ORDER OF STATE TROOPERS, ANCHORAGE, advised that the Tier III retirement portion of the bill would be detrimental to all State troopers. In order to maintain the quality work force in the State, changes as proposed in Tier III would not be advisable. The current plan in Alaska is considered to be in the "middle of the road" compared to other states. Mr Perin commented that Tier III will put Alaska at the "bottom of the barrel". California and Delaware have superior plans. He urged that the two portions of the bill be separated. LUCY HOPE, (TESTIFIED VIA TELECONFERENCE), PRESIDENT, MAT-SU EDUCATION ASSOCIATION, ANCHORAGE, spoke in opposition to SB 148. She pointed out that the Mat-Su School District has a difficult time recruiting specialty teachers; the proposed legislation would make it more difficult. Representative Therriault commented on the actuarial soundness referenced by Ms. Hope, suggesting that fear was ungrounded. Representative Therriault noted that the different tiers are individually funded and by adding a Tier III would not jeopardize other employees retirement. BILL BJORK, (TESTIFIED VIA TELECONFERENCE), PRESIDENT, FAIRBANKS EDUCATION ASSOCIATION, FAIRBANKS, spoke in opposition to SB 148 because it will negatively impact Alaska's ability to retain teachers and to attract new teachers throughout the State. He added that the association is concerned about the bills negative influence on TRS participants. Teacher shortages still exist in rural Alaska. If SB 148 becomes law, teachers will be forced to moon-light after school and during the summers to qualify for a modest social security annuity. Representative Martin noted that he did not favor the RIP or the Tier III program. He thought that neither would provide a cost savings. Representative Kelly inquired if University of Alaska was 9 able to supply the number of needed replacement teachers. Mr. Bjork replied that the University can not supply the number of graduates necessary especially in the "special needs" area. DON DAVIS, (TESTIFIED VIA TELECONFERENCE), FAIRBANKS, spoke against SB 148. He stated that it was an additional step made by the Legislature to punish the working class individual. Without a retirement incentive, one would assume that a stable work force would be less available for state employment. He pointed out, the Legislature had voted an additional raise for themselves while funds were depleted taken from the working class. Co-Chair Foster indicated that the proposed legislation was the Governor's bill. ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, commented that the proposal prepared last year by the Governor differs in many respects from current retirement incentive suggestion. (Tape Change, HFC 96-145, Side 1). Ms. McConnell reported that the legislation would not provide an automatic age in which to be able to retire, but rather it would be used at the Administration's discretion to determine which work units could achieve savings to allow employees to retire early. The program would calculate how much savings would occur by either eliminating the position or by replacing the employee at a lower pay range. The other calculated portion would be the employers contribution toward retirement, an amount paid by the Department over a three year period. Representative Martin voiced concern with the fiscal impact. He maintained that the retirement program would be at the expense of new employees, who would need to provide personal savings three times greater than current employees. Ms. McConnell explained that the initial bill submitted by the Administration was a "straight-forward" retirement and separation incentive. It did not include any adjustments to retirement. In the Senate, that bill was combined with a bill prepared by Senator Rieger addressing retirement benefits. The Administration stated that this was not the preferred approach and then suggested alternatives. MARK BOYER, COMMISSIONER, DEPARTMENT OF ADMINISTRATION, commented that the assumption is that wages which drive retirement will continue to rise with the consumer price index (CPI). These will have increased benefits added so that the future retiree should have a base which has kept 10 pace with retirement costs. Commissioner Boyer pointed out that a 4% gross factor was used to determine the retirement reduction from the employee. Representative Martin asked if that was determined by the 1.5% contribution added per year. Commissioner Boyer replied that the 1.5% is a broad base private industry standard. Base adjustments are still assumed at the 4% per year increase. He agreed that the 1.5% was low and will result in a lower retirement piece. Representative Martin asked if the fiscal note submitted had been calculated at the 1.5%. Commissioner Boyer explained that Tier III savings was built upon blending the Tier I and Tier II employees, eventually being replaced by the Tier III employee. Representative Therriault asked if going to a Tier III would jeopardize the benefit paid to the Tier I and Tier II employees. Commissioner Boyer advised that the tiers are distinctively different and the contributions paid are separate pools of retirement resources. The actuarial assumptions which provide the contribution is based on the individual employees placement. There will be no reduction to the Tier I or Tier II level employee benefits from implementing an additional tier. Representative Therriault asked how the money would be saved from the RIP program. He understood that it was the intent of the Administration to use RIP savings to address department budget reductions. Ms. McConnell offered to provide the Committee with a handout explaining the plan and the impact. Representative Therriault reiterated that the budget reductions should not effect an employee who had already RIP'ed out. Representative Brown referenced the outdated fiscal notes. She asked if they reflected savings expected through the Tier III proposal. Commissioner Boyer explained that the Department would provide a new fiscal note based on Committee action. The budget anticipates a $30 thousand dollar savings in FY97 associated with the implementation of Tier III, based on turnover assumptions. Tier III savings will accrue at a small rate over a period of time. Representative Brown asked if there was any part of the Tier III which the Administration supported and considered good policy. Commissioner Boyer advised that the Administration does not support the Tier III portion of the bill. He suggested that the defined contribution needs to be substituted with the defined benefit approach. 11 In response to Representative Brown's query, Commissioner Boyer replied that the Administration would support an element of the Tier III system, seeking changes to the health benefit provision and the multiplier. Representative Brown asked if those two items were changed, would the remainder of the bill be acceptable. Commissioner Boyer stated that the Administration did not have a final consensus regarding SB 148. Representative Brown emphasized that there is "high" interest understanding the "range of changes" proposed by the Administration. She asked access to the information currently available. Representative Parnell asked if the Administration had calculated the savings. Commissioner Boyer replied that health benefits had been cost-out for a twenty-five year period, and those numbers were available. He added, the system needs to be able to attract and retain good public employees. The goal is to decrease employer contribution to 6% range. Representative Therriault interjected that the effected groups would of course want to continue the status quo; he intended to a change that system. Commissioner Boyer reminded members that savings accrue over time and are incremental; for administrational ease, the blended number would be 13.8% employer contribution. Representative Therriault pointed out that the social security contribution was 6.2%. He stressed that the PERS contribution was too "rich". Commissioner Boyer disagreed with that characterization. He stated that the private sector often had other retirement plans available to their employees. Representative Therriault asked the Administration's objection to a defined contribution plan. Commissioner Boyer replied that plan tends to be of less benefit to large public employers than it is for the private sector employers. He agreed that it was attractive, although, felt that the defined benefits arrangement would provide more certainty to public employees. People are awarded for their longevity as opposed to a defined contribution plan. Representative Therriault agreed that the bill needed adjustments, although recognized the need for change to our current situation. He stressed that it would always be opposed by the private sector. (Tape Change, HFC 96-145, Side 2). Discussion followed between Representative Martin and Commissioner Boyer regarding the information requested from the Administration highlighting options and cost analysis. 12 Representative Therriault asked how the Administration felt about including Tier III and RIP in the same bill. Commissioner Boyer clarified that language was inconsistent, encouraging employees to "leave early" while and on the other hand developing a system to encourage them to stay longer. Representative Therriault pointed out that the time scenarios differed. He stressed that employees have a personal obligation for providing for their own future outside of the retirement accrued through their jobs. Representative Martin agreed. SB 148 was HELD in Committee for further discussion. SENATE BILL 301 "An Act relating to postsecondary education." DIANE BARRANS, EXECUTIVE DIRECTOR, POSTSECONDARY EDUCATION COMMISSION, DEPARTMENT OF EDUCATION, spoke to the fiscal note attached to the Executive Order (EO) which indicates a reduction in costs because the Commission would be eliminated. What was not included in the Executive Order was information that the Department of Education (DOE) has a pending RSA for $40 thousand dollars. DOE backed that amount out of their proposed FY97 budget and the fiscal note provided by the Department of Revenue represents that amount. Representative Brown MOVED to adopt Amendment #1, 9- LS1749\K.2, Ford, 4/26/96. Ms. Barrans explained that the amendment would eliminate the Commission and would move the regulation of the post secondary institutions to the Department of Education as a department function and would also provide the needed technical corrections. She reiterated that the amendment would eliminate the separation of power issue, which was of concern to the Administration. Representative Mulder asked if Amendment #1 would be comparable to the Executive Order. Ms. Barrans stated it would. Representative Mulder OBJECTED to Amendment #1. A roll call was taken on the MOTION. IN FAVOR: Brown. OPPOSED: Kelly, Kohring, Martin, Mulder, Parnell, Therriault. Representative Grussendorf, Navarre, Hanley and Foster were not present for the vote. The MOTION FAILED (1-6). 13 Representative Parnell MOVED to adopt Amendment #2, 9- LS1749\K.1, Ford, 4/25/96, for purposes of discussion. Representative Brown OBJECTED. Ms. Barrans noted that the Commission has been supportive of the WAMI program and that the amendment would reinstate it. She pointed out that it was a low cost program to administer. WENDY REDMAN, VICE PRESIDENT, UNIVERSITY RELATIONS, UNIVERSITY OF ALASKA, understood Representative Bunde's intent in the amendment to move the WAMI program to a new base. She acknowledged that the University was willing to work with him on that concern. Ms. Redman advised that the WAMI program is a major public policy question that the State of Alaska needs to deal with. It is an expensive program, although, it is not an expensive program as an alternative to medical school. The University of Washington sets aside ten seats for Alaskans. The policy issue needs to be determined by the Legislature if the intent is to provide for rural doctors. She recommended establishing an interim committee to pursue the concerns. Ms. Redman objected to Amendment #2 as proposed. It would place into the University budget, the money for the years 2, 3 and 4 as part of the program. She pointed out that this was not part of the University of Alaska's program; it is a straight pass through to the University of Washington. It would inflate the University of Alaska's budget. Representative Brown asked where the first year funding would come from. Ms. Redman replied all first year funding is contained in the UAA budget. The students attend UAA for the first year and then go to the University of Washington for the next three years. Representative Therriault asked some ideas which could attract students to rural Alaska. Ms. Redman stated that there are some states which pay a flat amount of money enticing doctors into rural areas. Other states pay back the student loans. These systems do work and would be cheaper than the current system used in Alaska under the WAMI program. REPRESENTATIVE CON BUNDE commented that the driving force behind the WAMI program was UAA. They want the program. He thought it would be advisable to consolidate the funding into one entity. Representative Martin noted that he did not believe that anyone from the University "desperately" wanted this program. 14 Ms. Redman corrected that Representative Bunde had been referring to the maintenance of the first year budget at the University of Alaska. She added that this was a high priority for UAA. The residency program currently being implemented at the Anchorage hospital would not exist if it were not for the WAMI program participation. The University does not want the funding responsibility for years 2, 3 and 4. In response to Representative Brown's question, Ms. Redman noted that forty students per year are participating in the WAMI program. Ten from each class. The cost is $2 million dollars; emphasizing that it is a very expensive program. Representative Brown suggested adding a Letter of Intent to attach to the legislation. Representative Kohring voiced his support of the amendment. Representative Bunde thought that since years 2, 3 and 4 were at the University of Washington, that would be the ideal place to have the funding located. A roll call was taken on the MOTION. IN FAVOR: Kohring, Kelly. OPPOSED: Martin, Mulder, Parnell, Therriault, Brown. Representatives Navarre, Grussendorf, Hanley and Foster were not present for the vote. The MOTION FAILED (2-7). Representative Mulder noted that it was his intent to support the Letter of Intent to further investigate alternatives. Representative Martin MOVED to report CS SB 301 (FIN)am out of Committee with individual recommendations and with the attached fiscal notes. There being NO OBJECTION, it was so ordered. CS SB 301 (FIN)am was reported out of Committee with "no recommendation" and with fiscal notes by the Department of Revenue dated 4/19/96, two from the Alaska Post Secondary Commission dated 4/02/96 and 4/19/96 and two by the Department of Education dated 4/19/96 and a zero fiscal note by the Alaska Postsecondary Commission. ADJOURNMENT The meeting adjourned at 4:00 P.M. 15