MINUTES SENATE FINANCE COMMITTEE April 25, 1994 9:10 a.m. TAPES SFC-94, #79, Side 1 (000-end) SFC-94, #79, Side 2 (end-000) SFC-94, #83, Side 2 (000-140) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 9:10 a.m. PRESENT In addition to Co-chairs Pearce and Frank, Senators Rieger, Kerttula, and Sharp were present. Senator Jacko joined the meeting after it was in progress. Senator Kelly did not attend the meeting. ALSO ATTENDING: Robert Hallford, Northern Air Cargo employee, and Vice President, Alaskan Air Carriers Association; Juanita Hensley, Chief, Driver Services, Division of Motor Vehicles, Department of Public Safety; Mary Nordale, Federal Express; Pat O'Brien, Social Services Program Officer, Division of Family & Youth Services, Department of Health & Social Services; Gerald L. Gallagher, Director, Division of Mining, Department of Natural Resources; Randy Welker, Legislative Auditor, Legislative Audit Division; James Baldwin, Assistant Attorney General, General Civil Section, Juneau, Department of Law; Tom Dow, Vice President of Hotels, Princess Tours; Jerry Burnette, aide to Senator Phillips; Virginia Stonkus, fiscal analyst, Legislative Finance Division; representatives of the media, aides to committee members and other members of the legislature. SUMMARY INFORMATION CSSB 56(STA): An Act relating to the budget reserve fund established under art. IX, sec. 17, Constitution of the State of Alaska; and providing for an effective date. CSSB 56(FIN) work draft "A" was ADOPTED. Jerry Burnette, aide to Senator Phillips; James Baldwin, Assistant Attorney General, General Civil Section, Juneau, Department of Law; and Randy Welker, Legislative Auditor, Legislative Audit Division, spoke to SB 56. Discussion was had by Senators Rieger, Sharp, Co-chairs Frank and Pearce regarding a forth coming decision by the Supreme Court and its effect on SB 56. CSSB 56(FIN) was HELD in committee with SJR 52 in order that new language could be drafted for a Senate Finance Committee CS. CSSB 166(JUD): An Act relating to registration of a motor vehicle and suspension of a driver's license for failure to appear in court or failure to pay a fine. Juanita Hensley, Chief, Driver Services, Division of Motor Vehicles, Department of Public Safety, testified in support of SB 166. Senator Rieger MOVED for adoption of amendment 1. Amendment 1 was ADOPTED for incorporation within CSSB 166(FIN). CSSB 166(FIN) was REPORTED out of committee with individual recommendations, a fiscal note for the Courts in the amount of $6.9, and a fiscal note for the Department of Safety for $101.9 with a revenue of $(247.5). CSSB 256(TRA): An Act relating to the tax on transfers and consumption of aviation fuel; and providing for an effective date. Mary Nordale, representing Federal Express, testified in opposition to SB 256. Robert Hallford, Northern Air Cargo employee, and Vice President, Alaskan Air Carriers Association, testified in support of the bill. CSSB 256(TRA) was REPORTED out of committee with individual recommendations, and fiscal note for Department of Revenue for $20.4 CSSB 268(JUD): An Act relating to facilities for the care of children; to child placement agencies; to maternity homes; to certain residential facilities for adults; and to foster homes for adults; and providing for an effective date. Pat O'Brien, Social Services Program Officer, Division of Family & Youth Services, Department of Health & Social Services, spoke to SB 268. CSSB 268(JUD) was REPORTED out of committee with individual recommendations and a fiscal note for the Department of Health & Social Services for $65.0. CSSB 320(L&C): An Act relating to architects, engineers, and land surveyors. Co-chair Pearce announced that the only change to CSSB 320(FIN) work draft "R" was to "tighten" the title. The committee ADOPTED CSSB 320(FIN) work draft "R". Senator Rieger OBJECTED to the inclusion of postsecondary teachers. CSSB 320(FIN) was REPORTED out of committee with "no recommendation," and zero fiscal notes for the Department of Commerce & Economic Development and the Department of Transportation & Public Facilities. CSSB 339(RES): An Act relating to the management and disposal of state land and resources; relating to certain remote parcel and homestead entry land purchase contracts and patents; and providing for an effective date. Gerald L. Gallagher, Director, Division of Mining, Department of Natural Resources, spoke to SB 339 by section. Questions were asked of Mr. Gallagher by Senators Rieger and Jacko. CSSB 339(RES) was REPORTED out of committee with individual recommendations, and a zero fiscal note for the Department of Natural Resources with revenue of $(100.0). CSSB 341(RES): An Act relating to the Alaska Tourism Marketing Council; and providing for an effective date. Scheduled but not heard. CSSB 358(STA): An Act relating to the existence and functions of certain multimember state bodies, including boards, councils, commissions, associations, or authorities; and providing for an effective date. Scheduled but not heard. CSSB 370(JUD): An Act providing an exemption from gambling laws for gambling conducted by cruise ships for their ticketed passengers in the offshore water of the state outside of ports; requiring certain disclosures in connection with promotions on board cruise ships and making violation of that provision an unfair trade practice; defining `cruise ship'; and providing for exemption fees for certain cruise ships before they can conduct gambling in the offshore water of the state. Tom Dow, Vice President of Hotels, Princess Tours, spoke to CSSB 370(FIN). CSSB 370(FIN) work draft "U" was HELD in committee. SJR 52: Proposing amendments to the Constitution of the State of Alaska relating to the budget reserve fund. Scheduled but not heard. SJR 52 will be rescheduled with SB 56. CS FOR SENATE BILL NO. 256(TRA): An Act relating to the tax on transfers and consumption of aviation fuel; and providing for an effective date. CO-CHAIR PEARCE announced that SB 256 was before the committee and invited Mary Nordale, Federal Express, to join the members at the table. MARY NORDALE said that Federal Express was opposed to SB 256 for several reasons. One, it would add approximately $12- 13,000 per month to the cost of their operations out of Anchorage. She felt this legislation placed the burden of small airports on large air carriers that derive no benefit from that service. In 1993, the legislature directed that no landing fees be charged at small rural airports to those air carriers who use those airports. She felt if it was the determination of the legislature that no such landing fees should be charged, then it should be a general subsidy and not a subsidy supported by large carriers. Federal Express believed that this legislation would discourage increased usage of Anchorage and Fairbanks International Airports by large international carriers. When the stretch 747s were developed, usage of Anchorage International Airport dropped to almost nothing. She also believed that the foreign air carriers which pay a large fee to Anchorage and Fairbanks would likely diminish their service because of higher costs imposed making it uncompetitive. Federal Express also predicted that it would diminish purchases of fuel in Alaska to the detriment of Mapco, and Mapco would be the most seriously effected business in the state. She said Federal Express was exploring alternatives to purchasing fuel in Anchorage in order to stay competitive. Federal Express asked that the bill be held so a representative from the company could talk to the committee. He would be in town this afternoon. ROBERT HALLFORD, Northern Air Cargo employee and Vice President of Alaskan Air Carriers Association, representing large and small air carriers said that the Association was unanimous in its support of SB 256. It was a matter of choice that the fuel tax be increased, not desirable, but the lesser of two evils because without the fuel tax increase, there would be a reimposition of the rural landing fees. He disagreed with testimony by Mary Nordale, that the fuel tax hit the air carriers disportionately. He said it hit every carrier proportionately to the amount that they use Alaskan airports and air space. The landing fees only hit a very few specific carriers in the state. There was a substantial difference in cost but the fuel tax increase was the only one which hits everyone, small carriers to large. Mr. Hallford said that the landing fees previously imposed, were just sitting on the shelf ready to be reimposed. It was clear to him that the fuel tax was the preference over landing fees. SENATOR KERTTULA asked what percentage of Federal Express deliveries was passed on to other carriers in rural Alaska. Ms. Nordale felt there was very small percentage that went into the bush, and that the postal service took care of most of the rural service. SENATOR SHARP MOVED for passage of CSSB 256(TRA) out of committee with individual recommendations. No objection being heard, it was REPORTED out of committee with individual recommendations, and a fiscal note for the Department of Revenue for $20.4, showing revenue of $(1,725.7). Senator Rieger signed "do pass." Co-chair Pearce, Senator Sharp and Senator Kerttula signed "no recommendation." CS FOR SENATE BILL NO. 166(JUD): An Act relating to registration of a motor vehicle and suspension of a driver's license for failure to appear in court or failure to pay a fine. Co-chair Pearce announced that SB 166 was before the committee. She invited Juanita Hensley, Chief, Driver Services, Division of Motor Vehicles, Department of Public Safety, to join the members at the table. JUANITA HENSLEY said that SB 166 would require the amendment to the Uniform Traffic Summons to include a notice that if a person failed to appear in court and failed to pay their fine for a moving violation, the court may suspend their driver's license. The driver's license would be suspended until the fine was paid. It also had a provision that if a person failed to pay their parking fine or parking offense, a hold would be placed on their vehicle registration. Ms. Hensley said that the court had approximately 25,000 unpaid traffic tickets, moving violations or failure to appear fines. She said she did not know how many parking tickets were outstanding because those did not go through the court system. Co-chair Pearce pointed out changes in the bill. SENATOR RIEGER asked if Oregon was the only state that suspended driver's licenses for failure to appear in court. Ms. Hensley said she did not know how many states did but referred to California that placed failure to appear on a person's driving record, and refused to renew a person's license until it was removed. Washington had a similar law. In Alaska, if a person had a moving violation and there was a warrant for that citation, their driver's license would not be reissued. Unfortunately, many licenses are renewed every five years. Senator Rieger spoke in opposition to this bill. He felt that it was not appropriate to suspend someone's driver's license for parking violations. Ms. Hensley pointed out that a hold was put on a vehicle registration. It would not suspend a person's drivers license. Senator Rieger asked if the department would be able to enforce this legislation. Ms. Hensley said that the municipalities would report to the department and place an electronic hold on the registration. The only part the department would play would be to tell the individual that they must pay their parking fines before they could reregister their vehicle. In answer to Senator Rieger, Ms. Hensley said that a fee would not be charged by the department. In Sections 1 and 3, the individual would have to pay his fines for moving violations, and then come back to pay a reinstatement fee for their drivers license. She pointed out that the license was not suspended for a specific period of time, only until they paid their fines. Senator Rieger MOVED for amendment 1 adding a new Section 4. No objection being heard, amendment 1 was ADOPTED. Senator Sharp MOVED for passage of CSSB 166(FIN) as amended out of committee with individual recommendations. No objection being heard, it was REPORTED out of committee with individual recommendations. Co-chair Pearce signed "do pass." Senators Rieger and Sharp signed "no recommendation." Senator Kerttula signed "do not pass." CS FOR SENATE BILL NO. 268(JUD): An Act relating to facilities for the care of children; to child placement agencies; to maternity homes; to certain residential facilities for adults; and to foster homes for adults; and providing for an effective date. Co-chair Pearce announced that SB 268 was before the committee and outlined new language by the Judiciary Committee. She invited Pat O'Brien to testify to the bill. PAT O'BRIEN, Social Services Program Officer, Division of Family & Youth Services, Department of Health & Social Services, said the department had supplied the committee with a new sectional analysis. The changes in the Judiciary Committee did change the foster care definition and moved the exemption that had been placed in Senate HESS. She also turned attention to the two page explanation for the fiscal note for the department. Ms. O'Brien said, in referring to a pie chart supplied to the committee (copy on file, Attachment A), that over 2,000 facilities were licensed, including child foster homes, family child care homes, residential child care facilities, and child care centers. She said if the assisted living bill passed, it would remove adult licensing from the licensing statute. She noted the capacity of licensed facilities was 13,600, a large number of vulnerable individuals who received care in these facilities. What the bill was trying to accomplish was efficiency. In some locations in the state, there was only half the staff needed to meet national standards for performing the licensing function. There were 30 field offices and nine types of facilities. Regulations were developed under a different administration and procedures were different for every type of facility which made it a very tough job for the licensor. This bill would condense the licensing procedures since the addition of any workers seemed unlikely. She said that for the most part, procedures reflected existing procedures. Other objectives were to promote a share role with parents in the day care and other facilities, and extend partnerships to individuals in small communities to help the department perform license evaluation. This would also target native organizations eligible for federal grants and other individuals in small communities. Senator Kerttula MOVED for passage of CSSB 268(JUD) from committee with individual recommendations. No objection being heard, it was REPORTED OUT of committee with individual recommendations, and a fiscal note for the Department of Health & Social Services for $65.0. Co-chair Pearce signed "do pass." Senators Rieger, Kerttula and Sharp signed "no recommendation." CS FOR SENATE BILL NO. 320(L&C): An Act relating to architects, engineers, and land surveyors. Co-chair Pearce announced that CSSB 320(FIN) work draft "R" was before the committee. She said that the bill had been waived from Judiciary and then Senate Finance Committee had received a request from Senator Leman, sponsor of the bill, to tighten the title. She said there had been no change to the body of the bill. Senator Jacko MOVED for adoption of the CSSB 320(FIN) work draft "R". No objection being heard, it was ADOPTED. Senator Jacko MOVED for passage of CSSB 320(FIN) from committee with individual recommendations. Senator Rieger said for the record, he had doubts that this was a positive change. He did not feel there was justification for requiring teachers in postsecondary institutions to be registered with the Board before they could teach. He believed occupational licensing should be for quality control and safety of the public but not for the purpose of operating a closed shop. No further objection being heard, it was REPORTED OUT of committee with "no recommendation," and zero fiscal notes for the Department of Transportation & Public Facilities and the Department of Commerce & Economic Development. Co-chair Pearce, Senators Jacko, Sharp and Rieger signed "no recommendation." Senator Kerttula signed "do not pass." CS FOR SENATE BILL NO. 339(RES): An Act relating to the management and disposal of state land and resources; relating to certain remote parcel and homestead entry land purchase contracts and patents; and providing for an effective date. Co-chair Pearce announced that SB 339 was before the committee. She invited to Gerald Gallagher to join the committee at the table. GERALD L. GALLAGHER, Director, Division of Mining, Department of Natural Resources, said that revisions to Title 38 in SB 339 were fairly broad and touched all resources. Sections 1 through 10 essentially reform the land disposal program in the state. What those sections did was require that land be identified in land use plans and properly classified. It also dictated that the department adopt regulations to sell land at no less than fair market value. Section 11 was amended in Senate Resources Committee and now conformed to language that allowed the exchange of native allotments when it was in the best interests of the state. Sections 12, 13, 14, again made conforming changes to coincide with land disposal changes in Sections 1 through 10. Section 15 was a minor definition change. Section 16 gave the department authority to require and to appropriate action if a lessee of state land did not clean up or remove material from the site at the end of the lease. Section 17 and 18 dealt with timber and allowed the Commissioner to negotiate timber sales where there might be a Spruce bark beetle infestation, or an economic loss to the resource for land conversion. Section 19 was identical to SB 322 that had passed the House and Senate. It would eliminate the 90 day restriction on oil and gas lease sales. Section 20 clarifies the Commissioner's authority to close land to mineral entry, limiting his authority on new claims and not on existing ones. Section 21 reformed who would be allowed to hold mining claims. This would conform to all business practices of the state. Section 22 changed how rents were adjusted for consumer price indexes. The new wording said "whenever it reached $5 increments" and would make for easier accounting. Section 23 allowed for surface use for mine tailings, mill sites, and changed out the word "permit" for "lease". Section 24 conformed. Section 25 changed old regulations that said if a person applied for a lease and did not return that lease to the department within 90 days, the lease was lost. Section 26 clarified when the department could use permits and was specific to reindeer grazing. It would allow such activities as rock collecting, etc. Section 27, 28, 29, 30, 31, and 32 were all conforming changes to coincide with the land disposal package in the first 10 sections of the bill. Section 33 contained all repealers to accomplish all of the above. Sections 34, 35, and 36 contained the effective dates and transitional provisions. In answer to Senator Rieger, Mr. Gallagher said there was nothing in the bill that dealt with water rights. In another answer to Senator Rieger, Mr. Gallagher said the Supreme Court had ruled that requiring the disposal be held in a local community and to have the winner present was unconstitutional. He acknowledged it was a good idea that the disposal be held in the community near the land in question, but it could not be required by law. In answer to Senator Rieger, Mr. Gallagher said rents on state mining claims, instead of a 10-year interval adjustment, would be increased by $5 increments for ease of accounting which would mean every 5, 10 or 15-years depending on the price-index. End SFC-93 #79, Side 1 Begin SFC-93 #79, Side 2 In answer to Senator Rieger, Mr. Gallagher said Section 24 exempted land surface from the competitive bidding process. Only the company that was developing the mine would have any reason to lease the surface for mine improvements. It did not exempt it from best interest findings and all the costs associated with that. Again in answer to Senator Rieger, page 13, line 23, Mr. Gallagher said that "limited value" was not defined but referred to a practice that had a low dollar value and little impact on the resources. Mr. Gallagher said there had been some discussion internally about the term. Some examples given were rock collecting, and short term grazing of reindeer. In answer to Senator Sharp, Mr. Gallagher said that there was nothing in the bill that applied to lands leased within the international airport systems. He did say that any state lease would come under this bill since it was state land. In answer to Senator Jacko, Mr. Gallagher said that Senate Resources Committee had added language that had already passed the Senate. Again in answer Senator Rieger, Mr. Gallagher said that most repealers were related to the land disposal program to make it conform with the fair market value competitive package. The one repealer that did not fall under that was 38.05.207, which pertained to a mining production license. The other repealers were conforming while this was a straight repealer. Senator Jacko MOVED for passage of CSSB 339(RES) from committee with individual recommendations. No objection being heard, it was REPORTED OUT of committee with individual recommendations, and a zero fiscal note for the Department of Natural Resources. Co-chair Pearce and Senator Jacko signed "do pass." Senators Rieger and Sharp signed "no recommendation." Recess 10:05am Reconvene 10:25am CS FOR SENATE BILL NO. 56(STA): An Act relating to the budget reserve fund established under art. IX, sec. 17, Constitution of the State of Alaska; and providing for an effective date. Co-chair Pearce announced that SB 56 was before the committee. She invited Jerry Burnette, aide to Senator Phillips, to join the members at the table. Co-chair Frank MOVED for adoption of CSSB 56(FIN) work draft "A". No objection being heard, it was ADOPTED. JERRY BURNETTE, aide to Senator Phillips, explained that this legislation said that the Constitution provided that when appropriations were made from the Constitutional Budget Reserve Fund, that the amount of money in the general fund available for appropriation at the end of each succeeding fiscal year be transferred to the Budget Reserve Fund, and that the legislature would implement this subsection by law. He went on to say that HB 58, which had already passed this legislature, contained a section implementing 17D. That provision provided that the undesignated, unreserved fund balance in the general fund be transferred to the Constitutional Budget Reserve Fund on December 16 of the preceding fiscal year. Mr. Burnette said that Judge Reese found HB 58 unconstitutional, giving the opinion that the limitation to the general fund unreserved, undesignated fund balance limited the scope of funds unconstitutionally. What SB 56 did was allow for the undesignated fund balance of the general fund and each of the separate accounts or sub-funds of the general fund to be transferred to the Constitutional Budget Reserve Fund. The Constitution provided the money in the general fund that was available for appropriation. He felt it was the best definition of money available for appropriation. He said that included a number of funds, including the Oil and Hazardous Substance Response Fund, and the Railbelt Intertie Reserve Fund. Co-chair Pearce invited Mr. Baldwin to join Jerry Burnette at the table. In answer to Senator Rieger regarding timing, Mr. Burnette said that December 16, 1995 would be the first time this transfer of funds would happen. Senator Rieger said that was the literal reading of the Constitution but may not have been the intent. In answer to Senator Sharp, Mr. Burnette said it referred to the Department of Administration because it kept the books for the state. Senator Sharp asked for a list of accounts and balances from the Department of Administration. Mr. Burnette referred that question to Randy Welker. In answer to Co-chair Frank, JAMES BALDWIN, Assistant Attorney General, General Civil Section, Juneau, Department of Law, said the funds had appropriated balances and were multi-year in nature. RANDY WELKER, Legislative Auditor, Legislative Audit Division, said the listing of funds basically was sub-funds to the general fund and varied in nature. He agreed with Mr. Baldwin in that the majority of those funds were established by appropriation, and labeled by the legislature for an intended future use. Some of them had regular activity while others were more dormant but had fund balances. Many were changing on a regular basis. Those with any significant balances were the Oil and Hazard Response Fund, Railbelt Energy Fund, the Intertie Reserve, the Storage Tank Assistance Fund, and the Marine Highways Fund, and may be subject to the payback provisions. Mr. Baldwin said that the equity remaining in the general fund group was close to $800M. Mr. Welker pointed out the various reservations and legal commitments on that money. "Unreserved and undesignated" would help define and determine the portion of those balances available. Discussion was had by Co-chair Frank, Senators Rieger, Sharp, and Mr. Welker regarding funds, the general fund, and their relationship. It was noted that the Science and Technology Fund had been designated as a legal endowment fund and would not be able to be swept. Mr. Baldwin said that the court seemed to realize how complicated it would be for the state if funds were swept. He said the decision had been moved on to the Supreme Court. In answer to Co-chair Frank, Mr. Baldwin said that it was his opinion that none of the general fund groups should be swept but that it should be only the year-end carry forward balance. In answer to Senator Rieger, Mr. Baldwin said there would be a repayment obligation for this year because an appropriation was made but there would be no sweep since there was no carry forward balance. Co-chair Pearce announced that SB 56 and SJR 52 be HELD in committee and a subcommittee would further study both bills. Senator Rieger said there was some philosophical difference between SB 56 and SJR 52 and he would like to see those differences resolved. Co-chair Pearce asked Mr. Baldwin to work with the committee in drafting new language. CS FOR SENATE BILL NO. 370(JUD): An Act providing an exemption from gambling laws for gambling conducted by cruise ships for their ticketed passengers in the offshore water of the state outside of ports; requiring certain disclosures in connection with promotions on board cruise ships and making violation of that provision an unfair trade practice; defining `cruise ship'; and providing for exemption fees for certain cruise ships before they can conduct gambling in the offshore water of the state. Co-chair Pearce announced that SB 370 was before the committee long enough to hear Tom Dow's testimony since he was from out of town. She said the bill would be brought back before the committee on April 26, 1994. TOM DOW, Vice President of Hotels, Princess Tours, spoke in support of SB 370 which would authorize, through the granting of an exemption for a fee, the operation of casinos aboard cruise ships within Alaskan state waters. He was opposed to the flat fee. His company had estimated that the total gaming activity aboard ships was in the 20-25 percent range based upon the time those ships were in international waters outside the three-mile limit. Of the total activity, about 22 percent occurred within the Alaskan state waters. He did not object to the establishment of an Alaska Tourism Marketing Council Fund that would have the effect of establishing legislative intent and the monies raised through these fees would be forwarded or used for a portion of the private sector match against state funds for tourism marketing. He did have problems with this law if it would extend the large hand of government behind the company's wallet into its books. He felt that was hard to justify for the public good. Mr. Dow said they had no problem with restricting on-board promotions that might apply to locally owned gift shops. They understood that the basic fee level would be doubled from the original bill and was acceptable to Princess Tours. They cautioned it was the outer limit. He pointed out a similar license from Maryland was only $25. The fee was proposed to be $40,000 for the larger ships and $30,000 for others in return for an unregulated practice that had been going on for over 20 years. Co-chair Pearce announced that SB 370 would be HELD in committee. SCHEDULED BUT NOT HEARD: CS FOR SENATE BILL NO. 341(RES): An Act relating to the Alaska Tourism Marketing Council; and providing for an effective date. CS FOR SENATE BILL NO. 358(STA): An Act relating to the existence and functions of certain multimember state bodies, including boards, councils, commissions, associations, or authorities; and providing for an effective date. SENATE JOINT RESOLUTION NO. 52: Proposing amendments to the Constitution of the State of Alaska relating to the budget reserve fund. ADJOURNMENT The meeting was recessed at approximately 11:15 a.m.