HOUSE FINANCE COMMITTEE February 16, 1999 1:35 P.M. TAPE HFC 99 - 21, Side 1. TAPE HFC 99 - 21, Side 2. CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:35 P.M. PRESENT Co-Chair Therriault Representative G. Davis Co-Chair Mulder Representative Grussendorf Vice-Chair Bunde Representative Kohring Representative Austerman Representative Williams Representative J. Davies Representatives Foster and Moses were not present for the meeting. ALSO PRESENT Representative Jeannette James; Representative John Harris; Dennis Poshard, Legislative Liaison Special Assistant, Department of Transportation and Public Facilities; Frank Mielke, Chief, Right of Way & Utilities, SE Region, Department of Transportation and Public Facilities; Doug Gardner, Assistant Attorney General, Department of Law. SUMMARY HB 12 An Act relating to an easement for the extension of the Alaska Railroad to the Alaska-Canada border. CS SS HB 12 (FIN) was reported out of Committee with a "do pass" recommendation and with zero fiscal notes by the Department of Revenue dated 2/3/99 and Department of Transportation and Public Facilities dated 2/3/99. HJR 12 Relating to federal claims against funds obtained by settlement of state tobacco litigation. CS HJR 12 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the House Finance Committee. HOUSE BILL NO. 12 "An Act relating to an easement for the extension of the Alaska Railroad to the Alaska-Canada border." REPRESENTATIVE JEANETTE JAMES introduced HB 12 and explained the need for the legislation: ? 1982 A corridor was delineated by statute, connecting Alaska's existing railroad with the Canadian border; ? 1994 HB 184 authorized $10 thousand dollars for a study determining the cost of acquiring the right-of-way; ? 1995 Department of Transportation and Public Facilities reached a cost estimate of $6.363 million dollars to acquire the right-of-way. Of the $10 thousand dollars appropriated by HB 184 for the study, a total of $7,876 dollars has been expended; ? 1996 On May 5, 1982, the application to Bureau of Land Management (BLM) for the project was withdrawn by an order of Department of Transportation and Public Facilities due to lack of interest, in spite of the 1994 legislation indicating interest; ? 1999 HB 12 reauthorizes delineation of the corridor, subject to legislative appropriation. The bill carries no fiscal impact and would reauthorize the 1982 statute. Representative James continued, both the Canadian and Russian governments have been increasingly interested in an U.S.- Asian link via rail through Alaska. HB 12 would allow eventual funding from some source either private or governmental. Representative James concluded that the advantages to Alaska would be threefold: ? Resource development; ? Tourism: ? Job opportunities for all areas. Co-Chair Therriault noted that in delineating a corridor, there would be no right-a-way acquisition and it would move across state lands and property. Representative James replied that when an application is made from the Bureau of Land Management (BLM) to locate a corridor, it would stay on file. The steps would include authorization of a delineated quarter, finding out the best route to use for building and determining the survey and costs associated. She re- emphasized that the bill would provide authorization to delineate a corridor, subject to legislative appropriation. She acknowledged that if interest was to continue in the railroad, federal or "other" monies would be made available. Representative J. Davies voiced confusion with the legislation. He asked if to date a corridor had been authorized. Representative James referenced a book from a route selection project dated from July 1979, indicating the routes from outside the Canadian border. She noted that Department of Transportation and Public Facilities had also provided additional information on the project. [Copy on file]. Representative J. Davies questioned how could the State know what it would cost to acquire the right-of-way if the corridor had not been delineated. Representative James replied that the corridor was delineated and that maps exist that illustrate that information. Representative J. Davies pointed out that the proposed legislation would reauthorize funding for that which already was delineated. Representative James agreed, noting that in the cost estimate, the determined value had been included. Representative J. Davies questioned how the proposed legislation could change the existing situation with federal lands. Representative James commented that the legislation is requesting a utility corridor between the Alaska Railroad and the Alaska-Canadian border. Representative Austerman inquired if the authorization would be feasible. Representative James replied that she had been working on this issue for six years during which time, the Canadians have extended interest. DENNIS POSHARD, LEGISLATIVE LIASON SPECIAL ASSISTANT, OFFICE OF THE COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, offered to answer questions of Committee members. In response to Representative J. Davies, Mr. Poshard pointed out that the Department would not necessarily use the corridor delineated in 1982. In working closely with the Alaska Railroad, they might have a long- term maintenance preference. Although, considering that some of their land status has changed from the original corridor since 1982, it could be preferable to choose another corridor. He understood that the legislation would authorize that the Department of Transportation and Public Facilities start with the 1982 study, and then work with the Alaska Railroad to delineate a new, up-to-date corridor. Co-Chair Therriault noted that he had signed as a co-sponsor to the proposed legislation. He believed that there would be benefit in having a potential right-of-way platted as property ownership changes, and that the new owners have some understanding of the future use for the lands. He suggested that if a Native Corporation or private property owner wanted to do something with their land, that information would be a helpful consideration. He reiterated that there is benefit to having a right-of-way delineation. Representative Bunde pointed out that the Department of Transportation and Public Facilities had prepared a zero fiscal note, although a memo was attached which indicate costs. FRANK MIELKE, CHIEF, RIGHT OF WAY & UTILITIES, SE REGION, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, explained that analysis accompanied the note because language in the bill indicates that it would be subject to appropriation. He noted that there are additional routes being scrutinized at this time. He believed that there was a good chance that the route could be located in the original area. Representative J. Davies agreed that the corridor should be delineated on the plat map. He suggested that such action would be good and bad, the positive being that it would allow planning and serve notice to the Alaskan people the intent of the State. The disadvantage, however, is that it could reduce property values. Representative J. Davies voiced concern that previous funding had been granted and somewhat disappeared into "thin air". He questioned if by going through the process again, the State would end up in the same predicament. He urged creating a structure that it would stay on the plats. Mr. Mielke explained that it was clear that this time the legislative intent would keep it on the status plat, leaving the application in until further direction from the Legislature. Co-Chair Therriault questioned if an appropriation would be necessary in order to accomplish the items outlined. Mr. Mielke replied that it would. Representative Austerman questioned status of conversations between the Department of Transportation and Public Facilities, the Canadian government and the Alaska Railroad. Mr. Poshard replied that Department had only been involved peripherally. He pointed out that Representative James had several discussions with the Canadian Government and the Alaska Railroad Corporation (ARC) and that the Alaska Railroad Corporation would most likely take the lead. Representative G. Davis inquired the Railroad's involvement. Mr. Mielke explained that two factors had been plugged into that time line. The State acquired the Railroad in 1984, and consequently, prior to 1984, work had been done by the agency. The proposed legislation would change land status in Alaska. Co-Chair Therriault asked if without an appropriation, would there be a means to revive the previously closed file. Mr. Mielke explained that to place it back on the status plat would take a minor action. Co-Chair Therriault asked if with passage of the legislation, would the Department be capable to pay the costs associated with it. Mr. Poshard replied that the Department could check into it as it had already been considered. Co-Chair Therriault noted that it wasn't his intention that by passing the legislation, it would obligate the State to an expenditure in the future. He hoped that passing it would provide new intent with a minor expenditure absorbed by the Department. Concurrently, the action might bring the State back to addressing land status plats. Representative Bunde pointed out that there had been a right-of-way before. The only way to guarantee that right- of-way would be to purchase the land. Mr. Mielke replied that the Department has never had a right-of-way, rather right-of-way permit which provided the right to survey, enter or take data. The full right-of-way is not usually granted until a proposed project is to be constructed. Representative James pointed out that without the authorization of the study, there would be no appropriation or action taken. Representative Bunde asked if a right-of-way were established, would it become part of the Alaska Railroad. Representative James commented that disposition of the Alaska Railroad Corporation is available, however, there would be no way to determine if the disposition would belong to them. Representative Grussendorf advised that the Alaska Railroad Corporation was an enterprise and that an expansion would be at their willingness to use federal funds. He pointed out that the Committee did not know the Railroad's position on the proposed legislation. He encouraged that they be a part of making any decision. Representative James noted that a representative from the Alaska Railroad did testify in the House Transportation Committee and spoke in support of the legislation. Co-Chair Mulder asked why a route had been "dropped" in the past. Mr. Mielke explained that there were two portions of the right-of-way, one, which was across the BLM lands, and one which was on State lands. The first one on the BLM lands stipulated that the State could not process the application without approval of the U.S. Department of Defense because it would be crossing three separate reservations. Representative J. Davies referenced Page 1, Lines 8, 9 and 10 and asked if that language included a survey. Mr. Mielke replied that it did not and that a survey would be the best legal description. Representative J. Davies MOVED a conceptual amendment to Page 1, Line 10, following "right-of-way" adding language "and shall be shown on the appropriate land status plats". There being NO OBJECTION, it was adopted. Representative Austerman MOVED to report CS SSHB 12 (FIN) out of Committee with individual recommendations and with the accompanying zero fiscal notes. There being NO OBJECTION, it was so ruled. CS SSHB 12 (FIN) was reported out of Committee with a "do pass" recommendation and with zero fiscal notes by the Department of Transportation and Public Facilities dated 2/3/99 and Department of Natural Resources dated 2/3/99. HOUSE JOINT RESOLUTION NO. 12 Relating to federal claims against funds obtained by settlement of state tobacco litigation. Co-Chair Therriault pointed out to the Committee that Representative Harris and his staff worked with the Chairman's office in preparing the proposed committee substitute. REPRESENTATIVE JOHN HARRIS spoke to the work draft that addresses the tobacco settlement which the State of Alaska has been involved with the federal government. The State is requesting Congress to not include funding from the lawsuit in the federal budget. The lawsuit states that Alaska, along with other states, should receive the full amount of those funds. DOUG GARDNER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, distributed a handout "Presentation on Tobacco Issues and HJR 12". [Copy on file]. The handout summarizes some of the issues relating to the tobacco settlement. It was Attorney General Botelho's view that in order to better understand the Health Care Finance Administration (HCFA) claims against the federal level, it would be important to create a context for it. (Tape Change HFC 99 - 21, Side 2). Mr. Gardner addressed the enforcement of tobacco vendor and tax laws. The tobacco vendor enforcement (STING Operations) has resulted in many criminal citations and convictions for clerks selling tobacco. A settlement has been reached with those vendors. Rather than litigating those issues with the vendors, the Department of Law has entered into a settlement which provides for a suspension of their licenses and will require that they re-train their clerks. The stores involved have agreed to make contributions to an advertising campaign to further the effort to educate people that tobacco is a dangerous substance. He continued, the Legislature has increased the per pack tax with regard to the State sales tax enforcement. Mr. Gardner noted that there is no evidence of smuggling of cigarettes into the State, however, the State is working to guarantee that all taxes are being paid on cigarettes imported into the State. The average monthly revenues received by the State has increased from $1.5 million to $4.3 million dollars. Mr. Gardner spoke to the litigation and the national settlement which the State has entered into. The settlement consists of $670 million dollars to Alaska to be paid over 25 years. HCFA, the federal agency that administers the Medicaid program, has taken a position that as much as $400 million dollars of the settlement belongs to them. The State of Alaska, however, assumes that the State did not sue to recover "federal" money. Mr. Gardner understood that the HCFA claim would not be made until the year has past, allowing time for the issue to be debated. Mr. Gardner advised that U.S. Senator Murkowski and U.S. Senator Kay Bailey Hutchinson co-sponsored SB 346, which would essentially protect all states tobacco settlement dollars from HCFA's claim. He pointed out the payment distribution date chart accompanying the handout on Page #5. Mr. Gardner noted that there is currently legislation relating to the settlement. It is assumed that all states will enact the legislation called the "Model Statute" or the "Renegade Provision". The Department expects to have the Model Law available and conforming to statute within the next two weeks. It is not necessary for this legislation to be enacted in order for the State to receive settlement money, but it is essential for it to be enacted against the tobacco industry fight. Co-Chair Therriault asked if the Department was involved with any litigation with Internet sales currently taking place for tax-free cigarettes. Mr. Gardner replied that anyone who causes cigarettes to be imported into the State of Alaska must have a license and must pay tax. The Department of Revenue is monitoring that activity closely. Co-Chair Mulder asked how much the State would be receiving from settlement payments. Mr. Gardner stated that a total of $8.1 million dollars followed by $30 million dollars would be received before June 30, 2000. Representative Bunde questioned the use of the settlement funds, and asked if the committee substitute was essential. Mr. Gardner advised that the State's position is that we do not want the federal government to "take" any of this money. However, many states are taking steps to try to comply with the McCain Bill. The debate on that legislation states that if you use 50% of the money from the tobacco bill to supplement existing health care programs, the feds would then assume a "hands-off" approach. Many states are allocating funds in a way which would insulate them from HFCA's plan. Representative Bunde asked, without the resolution, could the State spend these funds on something other than health care. Mr. Gardner pointed out that the proposed resolution does not deal with particular appropriations. Co-Chair Therriault stated that the McCain Bill did not pass U.S. Congress. Mr. Gardner added that the Attorney General believes that this is a long-standing commitment of HFCA and that agency wants to see the problem fixed and health care interests addressed. Representative J. Davies asked if there was information available regarding the position of HFCA and that of the Clinton Administration. Mr. Gardner replied that it is a broadly held view and that he could supply some info regarding that concern. Co-Chair Mulder MOVED to adopt work draft version 1- LS0418\G, Ford, 2/16/99, as the version before the Committee. There being NO OBJECTION, it was adopted. Co-Chair Mulder MOVED to report CS HJR 12 (FIN) out of Committee with individual recommendations and with the accompanying zero fiscal note. There being NO OBJECTION, it was so ordered. CS HJR 12 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the House Finance Committee. ADJOURNMENT The meeting adjourned at 2:55 P.M. H.F.C. 9 2/16/99