MINUTES SENATE FINANCE COMMITTEE April 13, 1993 9:30 a.m. TAPES SFC-93, #56, Side 1 (415-500) SFC-93, #58, Side 1 (000-end) SFC-93, #58, Side 2 (end-255) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 9:30 a.m. PRESENT In addition to Co-chair Pearce, Senators Jacko, Kelly, Kerttula, Rieger, Sharp, and were present. Co-chair Frank arrived while the meeting was in progress. ALSO ATTENDING: Senators Robin Taylor and Randy Phillips, Jerry Burnett, staff to Senator Phillips; Sherrie Goll, Alaska Women's Lobby & KIDPAC; Donna Schultz, Associate Coordinator, Division of Family and Youth Services, Department of Health & Social Services; Mark Hickey, Contract Lobbyist, Alaska Railroad Corporation; David Skidmore, staff to Co-chair Frank; Jim Coate, Unemployment Insurance Program Manager, Division of Employment Security, Department of Labor; Judy Knight, Director, Division of Employment Security; Randy Welker, Legislative Auditor, Legislative Audit Division; Shelby Stastny, Director, Office of Management & Budget; Mike Greany, Director and David Tonkovich, Jeff Hoover, and Karen Rehfeld, Fiscal Analysts, Legislative Finance Division; and aides to committee members. SUMMARY INFORMATION CSSB 45(HES)- An Act relating to persons under 21 years of age; providing for designation of shelters for runaway minors; relating to the detention and incarceration of minors; and providing for an effective date. Testimony was heard by Senator Randy Phillips, sponsor of SB 45, in support of the bill. Sherrie Goll, Alaska Women's Lobby and KIDPAC, voiced concern over sections 3-8. Donna Schultz, Associate Coordinator, Division of Family and Youth Services; gave information in regard to the bill. Senator Frank MOVED a conceptual amendment regarding the non-custodial parent. CSSB 45(FIN) as amended was MOVED out of committee with individual recommendations. SB 162 - An Act relating to the implementation of the federal emergency unemployment compensation program; making changes relating to unemployment compensation under the extended benefits program and the supplemental state benefits program; and providing for an effective date. Testimony was heard by Judy Knight, Director, Employment Security Division, and Jim Coate, Unemployment Program Manager, Employment Security Division, Department of Labor, in support of SB 162. Discussion was had by Senators Kelly and Kerttula in regard to federal moneys, and questioned additional cost to the state. Amendment 1 was ADOPTED. CSSB 162(FIN) as amended was MOVED out of committee with individual recommendations. CSSB 148(TRA)- An Act relating to legislative approval of certain acts of the Alaska Railroad Corporation; taxation of certain property of the Alaska Railroad Corporation; members of the board and chief executive officer of the Alaska Railroad Corporation; meetings of the board of directors of the Alaska Railroad Corporation; and providing for an effective date. Testimony was heard by Mark Hickey, Contract Lobbyist, Alaska Railroad Corporation, and David Skidmore, staff to Senator Frank regarding an amendment offered by Senator Frank. Amendment 3 was ADOPTED. Discussion was held between Co-chairs Pearce and Frank and Senator Kelly regarding changes to the railroad board as set forth in the bill. CSSB 148(TRA) was held in committee. CSSB 128(STA)- An Act relating to legislative audits. The committee RESCINDED its action PASSING the bill out of committee. Discussion was held between Randy Welker, Legislative Auditor, Legislative Audit Division; Shelby Stastny, Director, Office of management & Budget; Senator Kelly, Co-chairs Pearce and Frank, regarding a new fiscal note from Office of Management & Budget in the amount of $210.6. CSSB 128(STA) was held in committee until April 14, 1993. The following bills were scheduled but not heard: SB 76 - CHARITABLE GAMING RESTRICTIONS SB 88 - CAPITAL PROJECT GRANTS SB 106 - AUTHORIZING POWER TRANSMISSION INTERTIES SB 126 - APPROP: POWER TRANSMISSION INTERTIES SB 129 - POWERS OF CHIEF PROCUREMENT OFFICER SB 163 - POWER COST EQUALIZATION CS FOR SENATE BILL NO. 45(HES): An Act relating to persons under 21 years of age; providing for designation of shelters for runaway minors; relating to the detention and incarceration of minors; and providing for an effective date. CO-CHAIR DRUE PEARCE announced that CSSB 45(FIN) work draft "K" was before the committee. SENATOR GEORGE JACKO MOVED for adoption of the "K" version of CSSB 45(FIN) work draft. Hearing no objections, IT WAS SO ORDERED. JERRY BURNETT, staff to Senator Phillips, sponsor of SB 45, spoke to the CSSB 45(FIN) work draft "K". He said that the amendment adopted at the last Senate Finance meeting had been incorporated into this work draft. In Section 14, changes were made giving a police officer discretion in deciding whether a minor should be given a choice of going home or entering a runaway home or program. End SFC-93 #56, Side 1 Begin SFC-93 #58, Side 1 SHERRIE GOLL, Alaska Women's Lobby & KIDPAC, spoke to CSSB 45(FIN). She said that the bill seeks to address the growing, serious problem of homeless youth in many communities of the state. She spoke in support of the system of safe homes this bill would create. However, she said that she had serious concerns with Sections 3 through 8 which pertain to the emancipation of a minor, and said these sections carried a serious policy change for the state. She explained that in these sections, parents may emancipate their child at 16 years of age, basically divorcing them when they become a teenager. She explained that this can be done without the consent of the minor and is a serious change in Alaska statute and spoke in opposition to it. Ms. Goll felt that the a non-custodial parent should be contacted and that option should be included in the legislation. CO-CHAIR STEVE FRANK asked Senator Phillips to speak to Sections 3 through 8. SENATOR RANDY PHILLIPS said he recognized that CSSB 45(FIN) was not perfect but was an intent to address a problem, and try to balance the rights of the parent and child in difficult situations. Co-chair Pearce said that she shared Ms. Goll's concern. She said she understood that the judge would continue to go through the same procedure even if this legislation should pass and that the minor would not be emancipated without being included in the procedure. The judge would decide if it was in the best interests of all parties involved. What this bill did was add the ability of a parent to petition for emancipation of a minor child. Co-chair Frank said that his understanding was that the Office of Public Advocacy would continue to represent children's interests before the court. He asked if the Office of Public Advocacy would represent the minor in these situations. Senator Phillips said that he did not know but felt that they would do that. DONNA SCHULTZ, Associate Coordinator, Division of Family and Youth Services, Department of Health & Social Services, said she felt that a minor would have a right to an attorney. Ms. Goll said that Section 7, which is part of the current statutes, does say that the court may appoint an attorney or a guardian. She said that in earlier legislation the Office of Public Advocacy would not have been able to represent minors. She was opposed to such legislation since minors would be even more in need of representation. She wanted to point out that during the children's caucus meeting, the Tough Love organization had given a presentation. It seemed that even in their description of a case with a difficult minor, this organization was committed to keeping the family together and would not want to exacerbate the problem of homeless youth. SENATOR JAY KERTTULA said he understood that the Office of Public Advocacy could handle a whole range of problems. He would not want the organization to be removed. He said that he might offer a letter of intent to this effect on the floor. Co-chair Frank MOVED a conceptional amendment to say that "in granting the emancipation, the court shall first consider the non-custodial parent's willingness and ability to assume custody." No objections being heard, the amendment was ADOPTED. Co-chair Frank MOVED for passage of CSSB 45(FIN) as amended from committee with individual recommendations. No objections being heard, CSSB 45(FIN) was REPORTED OUT of committee with a "do pass," and with three zero fiscal notes for the Department of Law, Department of Public Safety, and Department of Labor, and fiscal notes for the Department of Health & Social Services for $74.0, and for the Alaska Court System for $20.1. Co-chairs Frank and Pearce, Senators Kelly, Jacko, Rieger, and Sharp voted "do pass." Senator Kerttula voted "no recommendation." SENATE BILL NO. 162: An Act relating to the implementation of the federal emergency unemployment compensation program; making changes relating to unemployment compensation under the extended benefits program and the supplemental state benefits program; and providing for an effective date. Co-chair Peace announced that SB 162 was before the committee. SENATOR TIM KELLY voiced his support of the bill but asked for clarification in terms of state dollars. Co- chair Pearce invited Jim Coate, Unemployment Insurance Program Manager, Division of Employment Security, Department of Labor, and Judy Knight, Director, Division of Employment Security, to join the members at the table and speak to the bill. JUDY KNIGHT said that SB 162 did three main things. It would allow the state to continue its participation in the emergency unemployment compensation program which Congress has enacted and amended for the fourth time. Prior legislation allowed the department to participate in that program and the participation was limited to two years, ending December 1993. Currently Congress has extended the program to pay benefits through the middle of January 1994. Secondly, the other provisions allow the state law to conform with federal law in the extended benefits program (changes made last year by Congress). The third item is an optional trigger allowing the department to pay the extended benefits program when the employment rate reaches a certain level. She explained emergency unemployment compensation is financed 100 percent by federal revenues. It is being paid because of high unemployment throughout the nation. When an individual becomes unemployed, they first draw regular benefits for 16 to 26 weeks, and during a period of high unemployment, they may be eligible for extended benefits. Since Congress passed the emergency unemployment compensation program, we have bypassed the extended benefit program and used the federal program. Senator Kelly asked which fund would pay those extended benefits. Ms. Knight said that in Alaska, like other states, there is an unemployment insurance trust fund. Employers and employees are taxed and the money goes into that fund. Regular unemployment benefits are paid out of that fund. Emergency unemployment compensation is drawn from the U.S. Department of Labor fund. Senator Kelly asked if the state fund had a surplus. Ms. Knight said that there was not a surplus but a sufficient balance to maintain solvency. This balance was equal to 3 percent of the state's total wages. She explained, in case of a severe recession, employers' taxes would not have to be increased to maintain solvency of the fund. JIM COATE said that the formula that determines tax rates has what is called a solvency adjustment. That solvency adjustment is both positive and negative. As the balance in the trust fund gets too large, by formula, a negative tax is applied to the overall tax rate, reducing it. It is an automatic and controlled balance. Senator Kelly asked if SB 162 would pass this session, how much federal money would be distributed throughout Alaska. Ms. Knight said that over $100 million had already been paid out since the state started the emergency unemployment compensation program. It is expected that an additional $40 million would be paid out between now and January 1994. Ms. Knight said that the state would save approximately $20 million in the coming year because claims would be paid under the emergency program and not under the state's extended program. There are other provisions that the state must pass to coincide with federal law. If the state does not pass these statutes to meet federal law, then the Secretary of Labor, through a hearing process could find the state out of compliance, and the state would lose administrative funds. The administrative funds are all the federal employment and training dollars that come into the state. Those funds come from the U.S. Department of Labor for administrative costs for unemployment insurance, the employment service and training partnership. In answer to Senator Kelly, Mr. Coate said that the statute changes in order to come into federal compliance would not cost any state dollars. However, the six weeks of benefits that the state would not be able to pay, if SB 162 does not pass, would be a loss of about $1.5 million to the state. The danger is that federal law mandates extended benefits be paid through January 15, 1994, and state law would stop payments in the first part of December 1993. The compliance issue with the federal government could cost the state $25- 30 million in administrative funds that are expected to come into the state to pay for the administrative part of the three programs. Ms. Knight said that the Labor and Commerce Committee had requested an amendment that would repeal the emergency compensation provisions and that was provided to the committee as amendment 1. Senator Kelly MOVED amendment 1. No objections being heard, amendment 1 was ADOPTED. Discussion was had by Mr. Knight and Senator Kelly regarding additional costs to the state regarding the extended compensation. Senator Kerttula MOVED for passage of CSSB 162(FIN) as amended from committee with individual recommendations. No objections being heard, CSSB 162(FIN) as amended was REPORTED OUT of committee with a "do pass," and a zero fiscal note for the Department of Labor. Co-chairs Frank and Pearce, Senators Kelly, Rieger, and Kelly voted "do pass." Senators Jacko and Sharp were absent from the meeting and did not sign. CS FOR SENATE BILL NO. 128(STA): An Act relating to legislative audits. Co-chair Pearce said that CSSB 128(STA) was before the committee. She announced that Shelby Statsny, Director, Office of Management & Budget, Office of the Governor, had wanted to prepare a fiscal note for the bill. Co-chair Frank asked if follow-up was being required so that audit recommendations can be implemented. RANDY WELKER, Legislative Auditor, Legislative Audit Division, said that CSSB 128(STA) would establish a recommendation monitoring system providing, once recommendations are made, a system to follow up the numerous recommended implementations, and report back to the committee. The basic purpose of the bill is to provide a mechanism to keep the items before the Budget and Audit Committee. He said the fiscal note prepared by the Office of Budget and Audit Committee was an overstatement. He felt it is an important proposal and would hate to see it get buried by the department's fiscal note. Senator Kerttula asked if one staff person could accomplish this follow-up task. Mr. Welker said that one position within the division would be a good start in establishing a system so the impact on the division could be determined. He felt it could be handled in house. Co-chair Frank said that follow-up on audits by the Office of Management & Budget is a good idea but would have to be done on a priority basis. The really dramatic situations that need attention should be top priority. He felt that this bill would give the department another tool to accomplish what they are already required to do. He felt it was not an additional responsibility. SHELBY STATSNY, Director, Office of Management & Budget, Office of the Governor, said that he was in support of SB 128. However, he argued that the bill was an additional mandate and it would take more employees. He felt that his department had worked hard this last year to come up with a program to follow-up on their own audits. There is a schedule that a minimum of six months after an audit, a follow-up is done with the audited department to insure that recommendations have been done. He did not want his department to become a division of Legislative Audit. In answer to Senator Kelly, Mr. Statsny said that his department's auditors served at the pleasure of the Governor. Senator Kelly felt that was the reason Legislative Audit had been established outside the Officer of the Governor. Senator Kelly pointed out that in the past, auditors had been fired if the Governor had disagreed with the audit. End SFC-93 #58, Side 1 Begin SFC-93 #58, Side 2 Co-chair Frank said he was in support of reducing the scope of SB 128 so that additional employees were not required. He asked Mr. Welker if that would be possible. Mr. Welker said that could be accomplished through Budget & Audit policy and procedure in developing and reviewing what items they choose to forward for follow-up. Co-chair Frank MOVED to rescind the committee action of April 12, 1993 reporting CSSB 128(STA) from committee. No objections being heard, CSSB 128(STA) was returned to committee. Co-chair Pearce announced that Co-chair Frank, Mr. Welker and Mr. Statsny would work together on amending CSSB 128(STA), and the bill was held in committee. CS FOR SENATE BILL NO. 148(TRA): An Act relating to legislative approval of certain acts of the Alaska Railroad Corporation; taxation of certain property of the Alaska Railroad Corporation; members of the board and chief executive officer of the Alaska Railroad Corporation; meetings of the board of directors of the Alaska Railroad Corporation; and providing for an effective date. Co-chair Pearce announced that CSSB 148(TRA) was before the committee. Co-chair Frank said that amendment 3 further clarifies the definition of non-transportation activity. DAVID SKIDMORE, staff to Co-chair Frank, spoke to amendment 3. He said that points A and B were identical to the original definition that was in the transportation CS. He said point C is the clarifying point which provides that the railroad is prohibited from obtaining an equity position in an activity that occurs before or subsequent to the movement, handling, or distribution of people or personal property not withstanding activities that were conducted by the corporation on the date of transfer to the state or activities that are directly related to the movement, handling, or distribution of people or personal property. Mr. Skidmore said that the amendment was acceptable to Mark Hickey. Senator Kelly asked if the railroad corporation was grandfathered in the equity position in the existing hotel somewhere in the bill. Mr. Skidmore said that action had not been taken regarding the existing hotel. MARK HICKEY, Alaska Railroad Corporation, said that in CSSB 148(FIN) work draft, page 4, lines 21 through 24, addresses specific activities engaged in by the railroad corporation and "does not apply to specific activities in which the corporation is engaged on the effective date of this section..." Co-chair Pearce announced that CSSB 148(FIN) work draft dated April 12, 1993 had been adopted by the committee. Co-chair Frank MOVED for adoption of amendment 3. No objections being heard, amendment 3 was ADOPTED. Co-chair Frank MOVED for passage of CSSB 148(FIN) from committee with individual recommendations. Senator Kelly OBJECTED. He questioned the filling of a vacancy on the board of directors for the railroad corporation by this legislation. Co-chair Pearce said that the next vacancy of the board would come up this fall. She said the railroad would have to appoint an outside director at that time. She went on to explain the Governor's role in the appointments and his options. Senator Kelly voiced his opposition to a change in the board. Co-chair Pearce explained that there never had been an expectation that the CEO of the railroad would also hold the position of outside railroad expert. She felt that outside expert should be someone other than the CEO. Since there was a seat that was becoming vacant, she felt it was a good opportunity to accomplish this change. Senator Kelly asked Mr. Hickey what the fee was for board of directors of the railroad. Mr. Hickey said the law provided for $400 a day plus per diem. Co-chair Pearce said that it was the highest paid board in the state. It was pointed out that it was modeled after the permanent fund board of director's fees. Senator Kelly reiterated his opposition to a change in the board of directors for the railroad corporation. Co-chair Frank withdrew his motion to move CSSB 148(FIN) out of committee. Co-chair Pearce announced that CSSB 148(FIN) would be held in committee. ADJOURNMENT The meeting was adjourned at approximately 10:32 a.m.