MINUTES SENATE FINANCE COMMITTEE May 4, 1994 9:15 a.m. TAPES SFC-94, #87, Side 1 (450-end) SFC-94, #87, Side 2 (end-000) SFC-94, #89, Side 1 (000-end) SFC-94, #89, Side 2 (end-100) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 9:15 a.m. PRESENT In addition to Co-chairs Pearce and Frank, Senators Rieger, Kerttula, and Sharp were present. Senators Jacko and Kelly joined the meeting after it was in progress. ALSO ATTENDING: Diane Schenker, Special Assistant to the Commissioner, Department of Corrections; Elmer Lindstrom, Special Assistant to the Commissioner, Department of Health & Social Services; David Harding, aide to Representative Eileen MacLean, sponsor of HB 73; Alison Elgee, Director, Statewide Budget Office, University of Alaska; Representative John Davies, sponsor of HB 234; Bill Paulick, Business Development Information Network, Division of Economic Development, Commerce & Economic Development and member, Board of Directors, Aerospace Development Corporation; Representative Cynthia Toohey, sponsor of HB 507; Representative Con Bunde, sponsor of HB 506; Joe McCormick, Executive Director, Alaska Commission on Postsecondary Education (ACPE); Joe Ambrose, aide to Senator Taylor; C.E. Swackhammer, Deputy Commissioner, Department of Public Safety; Chris Christensen, Staff Counsel, Alaska Court System; Margot Knuth, Assistant Attorney General, Criminal Division, Department of Law; Juanita Hensley, Chief, Driver Services, Division of Motor Vehicles, Department of Public Safety; Senator Fred Zharoff; Wanda Cooksey, lobbyist for Single Site School District Consortium; Susan Sorenson and Dana LaTour, fiscal analysts, Mike Greany, Director, Legislative Finance Division; representatives of the media, aides to committee members and other members of the legislature. SUMMARY INFORMATION CSSSSB 301(HES): An Act relating to the calculation of instructional units used in determining state aid for education; and providing for an effective date. Joe Ambrose, aide to Senator Robin Taylor, sponsor of SB 301, spoke in support of the bill. Senator Kerttula proposed amendment 1. Wanda Cooksey, lobbyist for Single Site School District Consortium, and Senator Fred Zharoff testified in support of amendment 1. Amendment 1 FAILED to be adopted. Amendment 2 by Senator Kelly would tighten the title of SB 301. Amendment 2 was ADOPTED. CSSSSB 301(FIN) was REPORTED out of committee with a "no recommendation," and a fiscal note for the Department of Education for $96.4. SB 381: An Act relating to the construction of the Alaska Orbital Launch Complex by the Alaska Aerospace Development Corporation. Bill Paulick, Business Development Information Network, Division of Economic Development, Commerce & Economic Development, and member of the Board of Directors, Aerospace Development Corporation, testified in support of SB 381. SB 381 was REPORTED out of committee with a "do pass," and a zero fiscal note for the Department of Commerce & Economic Development. SJR 52: Proposing amendments to the Constitution of the State of Alaska relating to the budget reserve fund. Senator Rieger proposed amendment 1 incorporating new language for SJR 52. Amendment 1 was ADOPTED. CSSJR 52(FIN) was REPORTED out of committee with a "do pass," and a fiscal note for the Office of the Governor/ Division of Elections for $2.2. HB 73: An Act relating to state and local taxation and other state regulation as affected by the Alaska Native Claims Settlement Act, as amended, and related federal statutes; and providing for an effective date. David Harding, aide to Representative Eileen MacLean, sponsor of HB 73, testified in support of the bill. HB 73 was REPORTED out of committee with individual recommendations and a zero fiscal note for the Department of Revenue. CSHB 231(FIN): An Act relating to when previous conduct constituting a sexual offense may be used as an aggravating factor at sentencing. Margot Knuth, Assistant Attorney General, Criminal Division, Department of Law, answered questions until Diane Schenker, Special Assistant to the Commissioner, Department of Corrections, could be located to speak to the fiscal note and the bill. CSHB 231(FIN) was HELD in committee until a new fiscal note and committee substitute could be drafted. HB 234: An Act relating to endowments and donations of the University of Alaska and the University of Alaska endowment trust fund; and providing for an effective date. Representative John Davies, sponsor of HB 234, and Alison Elgee, Director, Statewide Budget Office, University of Alaska, testified in support of the bill. HB 234 was REPORTED out of committee with a "do pass," a zero fiscal note for the University of Alaska, and a fiscal note for the Department of Revenue for $22.5. SCSCSHB 409(HES): An Act relating to the maximum amount of assistance that may be granted under the adult public assistance program and the program of aid to families with dependent children; proposing a special demonstration project within the program of aid to families with dependent children and directing the Department of Health and Social Services to seek waivers from the federal government to implement the project. Scheduled but not heard. CSHB 412(HES) am: 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. Elmer Lindstrom, Special Assistant to the Commissioner, Department of Health & Social Services, testified in support of the bill. CSHB 412(HES) am was REPORTED out of committee with individual recommendations and a fiscal note for the Department of Health & Social Services-HFC for $30.0. SCSHB 445(JUD): An Act relating to operating or driving a motor vehicle, commercial motor vehicle, aircraft, or watercraft; to classifying certain driving while intoxicated offenses as felonies; to motor vehicle forfeiture; and providing for an effective date. C.E. Swackhammer, Deputy Commissioner, Department of Public Safety, spoke to the difference of the original and the Judicial version. He agreed with the bill on principle but the cost reflected in the department's fiscal note would not allow him to support the bill. Chris Christensen, Staff Counsel, Alaska Court System, testified that a new fiscal note was forthcoming approximately twice the amount of the existing one. Margot Knuth, Assistant Attorney General, Criminal Division, Department of Law, answered questions by the committee regarding the fiscal note for the Department of Law and number of hearings for DWI arrests. Juanita Hensley, Chief, Driver Services, Division of Motor Vehicles, Department of Public Safety, spoke to whose vehicles would be confiscated under HB 445. SCSHB 445(JUD) was HELD for a new committee substitute. CSHB 506(FIN) am: An Act relating to student loans; to sanctions for defaulting on a student loan, including denial of a state occupational license; and providing for an effective date. Representative Con Bunde, sponsor of HB 506, and Joe McCormick, Executive Director, Alaska Commission on Postsecondary Education (ACPE) testified in support of HB 506. Senator Rieger voiced his opposition to the denial of a state license to those in default of student loans. CSHB 506(FIN) am was REPORTED out of committee with a "do pass," with a zero fiscal note for the Department of Administration, and a fiscal note for the Department of Education (ACPE) in the amount of $99.7 also showing a revenue of $1,408.3. SCSCSHB 507(HES): An Act relating to licensure by the State Medical Board and temporary permits for certain optometrists. Representative Cynthia Toohey, sponsor of HB 507, testified in support of the bill. SCSCSHB 507(HES) was REPORTED out of committee with a "do pass," and a fiscal note for the Department of Commerce & Economic Development for $2.5. SENATE JOINT RESOLUTION NO. 52: Proposing amendments to the Constitution of the State of Alaska relating to the budget reserve fund. Co-chair Pearce announced that SJR 52 had been previously heard in committee. She said that Senator Rieger had proposed new language that could be incorporated into a committee substitute. It was understood that the House version was on the way to the Senate. SENATOR STEVE RIEGER said that in both versions of the bill the repayment provision was repealed because of court rulings that suggested repayment might require ratings and revolving loan funds or other funds that were serving a purpose but technically could be treated as repayment. Also, the amount that was withdrawn might not be practically repayable making this a meaningless provision in the Constitution. Secondly, he said this approach paralleled the prior constitutional amendment. The statement in support which was in the election pamphlet said that money in the budget reserve fund could be used only if it did not serve to increase spending over the prior year of spending, but if it was used to increase spending, it would require a three-quarter vote. He explained that the House approach was more restrictive, saying that money in the budget reserve fund could not be used for any purpose even in cases of a deficit or a shortfall that needed to be covered except with a three-quarter vote. The other issue raised was whether to use plain english or as it was drafted in technical language. He felt it should be put in plain English like the rest of the Constitution was written. Senator Rieger MOVED amendment 1 containing his plain English language. Senator Kerttula OBJECTED. Amendment 1 was ADOPTED on a vote of 3 to 1 (Co-chairs Pearce, Frank, and Senator Sharp were in favor, Senator Kerttula was opposed). CSSJR 52(FIN) was REPORTED out of committee with a "do pass," and fiscal note for the Office of the Governor, Division of Elections, for $2.2. Co-chairs Pearce and Frank, Senators Rieger and Sharp, signed a "do pass." Senator Kerttula signed a "do not pass." SENATE CS FOR HOUSE BILL NO. 445(JUD): An Act relating to operating or driving a motor vehicle, commercial motor vehicle, aircraft, or watercraft; to classifying certain driving while intoxicated offenses as felonies; to motor vehicle forfeiture; and providing for an effective date. Co-chair Pearce announced that SCSHB 445(JUD) was before the committee with 6 fiscal notes making the bill very prohibitive. She invited someone from the department to speak to the bill. End SFC-93 #87, Side 1 Begin SFC-93 #87, Side 2 C.E. SWACKHAMMER, Deputy Commissioner, Department of Public Safety, said the Governor's bill that was introduced changed the implied consent law that would allow the taking of blood and urine in fatal and major injury accidents. In 1992, 382 major injury accidents occurred involving 552 drivers, and 89 fatality accidents involving 125 drivers. The Senate Judiciary version made two changes the department agreed with on principle but were prohibitive due to the high fiscal notes. The first change made a third time DWI offender a class C felony. The second change was that the court shall forfeit the offender's vehicle even if it was the first offense. He referred to page 10-11 of the bill. In answer to Senator Rieger, Mr. Swackhammer confirmed that forfeiture would occur on the first offense. In answer to Co-chair Frank, Mr. Swackhammer said that presently the Department had the right to take blood or urine samples if an arrest was made. In major injury accidents, the person would usually be in the hospital, and if an arrest was made, the department would be responsible for that person from that time on. Co-chair Pearce asked if the forfeiture portion of the bill added a fiscal note to the bill. Mr. Swackhammer referred to fiscal notes for the Department of Law for $786.3, and for the Alaska Court System in the amount of $986.9. In answer to Co-chair Frank, Mr. Swackhammer said there were over 600 cases of DWI third time offenders a year. The Department of Corrections had anticipated 320 additional beds would be needed for this legislation. CHRIS CHRISTENSEN, Staff Counsel, Alaska Court System, informed the committee that a new fiscal note, approximately double the existing one, would be forwarded to them. Each year there were about 4400 first time DWI cases in Alaska. The trial rate was under 5 percent because the consequences were generally 3 days in jail and a $250 fine. With this new legislation, consequences would change to a fine, 3 days in jail, and the confiscation of the vehicle. He said it would take four more district court judges to handle the conservative estimated 10 percent increase in trials which explained the revised fiscal note not yet received. In answer to Senator Rieger, Mr. Swackhammer said that drunk driving under SCSHB 445(JUD) would became a felony on the third offense. Mr. Christensen said that the day fines legislation specifically prohibited any crime with a mandatory sentence being treated with a day fine. DWIs would not come under that legislation if it should pass. In answer to Senator Sharp, Mr. Christensen said that any money the state received for the sale of any seized vehicle would go into the general fund. In answer to Co-chair Frank, Margot Knuth, Assistant Attorney General, Criminal Division, Department of Law, said the success rate of DWI cases going to trial was about 80 percent. If there was to be a mandatory sentence of 360 days in jail for the third DWI offense, the Department expected the success rate to go down because jurors would be aware of the sentence and may feel that it was not an appropriate sentence. It could drop to a 60-70 percent success rate. Again, in answer to Co-chair Frank, Ms. Knuth said that a ruling from the Alaska Supreme Court said that an error rate of one percent must be factored into cases on the breath machine, making a .10 no longer adequate but instead .11 was needed. Those cases would then be lost. Also, some DWI arrests were made on behavior or conduct rather than a breathalizer result and those were easier to argue. In any case that goes to the jury, there was a factor of a loss rate for unknown reasons even though the system did not allow for jury nullification. In answer to Senator Sharp, Ms. Knuth answered that if a person tested at 1.1, even though the jury should find the defendant not guilty of a DWI, his/her license would still stay suspended. Senator Sharp then asked why the forfeiture would not hold up. Ms. Knuth said the biggest problem with a forfeiture was that anyone that had an interest in the vehicle was entitled to a hearing on it. Rarely were the drivers sole owners of the vehicles. That was why a hearing was held in almost every forfeiture case. Mr. Swackhammer said it would be only the equity of the owner that would be wiped out. He said, in answer to Senator Sharp's first question, the forfeiture was court ordered and the refusal to take a breathalizer was implied consent. A driver's license could be suspended administratively and a forfeiture must be done through the court. In answer to Senator Rieger, JUANITA HENSLEY, Chief, Driver Services, Division of Motor Vehicles, Department of Public Safety, said under SCSHB 445(JUD) any vehicle could be forfeited whether it was borrowed or rented. She said the owner could petition the court for a hearing regarding the forfeiture of the vehicle. In answer to Co-chair Frank, Ms. Knuth said that about one- half to one-third of the fiscal note was caused by the forfeiture provision because of the hearings required in the forfeitures. In answer to Co-chair Frank, Ms. Knuth said that the Department of Law believed this legislation would have some deterrent effect, but not enough to offset the number of new trials expected. When a misdemeanor on a third offense became a felony, the motivation to go to trial would increase at least five times, causing trials to increase even though there might be a fifteen percent case load reduction because of the deterrent effect. Mr. Swackhammer agreed that the legislation would have some deterrent value but the system was already processing over 4,000 DWI cases a year and did not have enough beds to take care of existing offenders. Discussion was had by Senator Sharp and Mr. Swackhammer regarding restricting the forfeiture language to only third offenses. Ms. Knuth pointed out that the Courts already had a forfeiture provision that applied to third and subsequent offenses. The Court did use that provision when the defendant was the sole owner of the vehicle. The provisions of SCSHB 445(FIN) were mandatory in all offenses. She was not certain that any portion of the forfeiture provisions could be left in the bill and be useful. She suggested that over the interim a comprehensive forfeiture provision be written for this legislation. Ms. Knuth reiterated that the problem with the forfeiture provision was the number of hearings it would require. In answer to Senator Sharp, Mr. Christensen agreed that the new fiscal note was triggered by the forfeiture provision applied to first, second and third, etc. offenses. He said he would not have revised the fiscal note if it had applied only to third offenses. He wanted to point out that while the existing fiscal note did not take into effect the increased number of trials, it did take into account the increase in forfeiture hearings. He went on to say a conservative estimate said that 10 percent of the cases would have hearings, equating to 300 hearings at a half a day each, requiring three-quarter time of a circuit court judge. Discussion followed by Co-chair Frank and Ms. Knuth regarding real estate forfeiture procedures for use with vehicles. In answer to Co-chair Frank, Ms. Hensley said that there were very few forfeitures in process at present. Co-chair Frank observed that this process was cumbersome and he could understand why it was not used extensively. Ms. Knuth also pointed out that along with the process being burdensome, as offenses increased, the worth of the defendant's vehicle usually decreased. Co-chair Frank acknowledged that the opinion was that the vehicle should be taken out of the hands of the offender rather than capturing any money from the vehicle. Ms. Knuth again reiterated that the Department of Law completely supported the idea of confiscating vehicles but did not feel that this version of the bill was the appropriate one. In answer to Senator Rieger, Ms. Knuth said the original intent of the bill was to expand implied consent to cover accident cases where there was serious physical injury or death. The point was that the officer need not arrest the driver before asking for a blood or urine sample. Many of these accidents were caused by people under the influence of drugs and unlike alcohol there was no odor on the breath, bloodshot eyes or other signs of intoxication. The public's interest in finding out these persons were operating under the influence was so high it warranted asking them for blood or urine samples. Ms. Knuth agreed with Senator Rieger, that implied consent could be applied to a victim as well. Co-chair Pearce announced that SCSCSHB 445(FIN) would be held in committee. CS FOR HOUSE BILL NO. 506(FIN) am: An Act relating to student loans; to sanctions for defaulting on a student loan, including denial of a state occupational license; and providing for an effective date. Co-chair Pearce invited Representative Con Bunde, sponsor of HB 506, and Joe McCormick, Executive Director, Alaska Commission on Postsecondary Education (ACPE), to join the members at the table. REPRESENTATIVE CON BUNDE, sponsor of HB 506, said the bill had been requested by Postsecondary Education and would make the student loan program more "user friendly" and business- like. JOE MCCORMICK highlighted the purposes of HB 506. First, it was written to enhance the integrity of the Alaska Student Loan Program in the eyes of the bond holders, bond insurers, and financial markets. Since 1986, the legislature had directed that the Alaska Student Loan Program issue tax exempt bonds in order to continue funding the program. As a result, the program had been examined and was required to come before the legislature with recommendations that would improve and strengthen the stability of the program. Secondly, it provided for easier repayment terms for students by offering a consolidation program provision in the bill. Also, a variable interest rate provision would allow students the lowest possible interest rate depending on the cost of money at the time of issuance of the bonds. Third, provisions had been identified to improve program administration. Lastly, the ability to collect loans from borrowers had been improved. A strong message would be sent to students that the fund was a revolving one and their repayment was the most important aspect of the loan because it provided future opportunities for students to continue to borrow in the program. Senator Rieger asked if the department would consider seizing the delinquent borrower's vehicle since it would deny occupational licenses for unpaid loans. Mr. McCormick explained that the occupational license was not a forfeiture but a stop-gap measure so that prior to an issuance of a renewal of a license, a student loan must be brought current. If a loan was in default, the department would like to negotiate with the borrower prior to the issuance of the license. Seizing vehicles had not been something the Commission would like to pursue or suggest. Representative Bunde added that student loans were made without collateral and most borrowers had no credit history. Senator Rieger reiterated his discomfort in regard to holding someone's license if they were in default. He felt that by taking away someone's license, the person would be unable to make a living and likened it to debtor's prison. Representative Bunde responded that once a debtor had made arrangements for repayment they were no longer in default. Senator Sharp observed that with the new consolidation provision it would be easier for borrowers to repay their loans. Mr. McCormick stressed that this bill would not collect a lot of money for the Alaska Student Loan program but the Commission wanted to send a message to the borrowers and bond holders in New York that collection efforts would be taken seriously. He felt that if the State could loan money to a student for their education it was only right that the borrower remained current while enjoying the privilege of practicing law, medicine, etc. in Alaska. Senator Sharp MOVED for passage of CSHB 506(FIN) am from committee. Hearing no objection, the bill was REPORTED out with a "do pass", a zero fiscal note for the Department of Administration, and a fiscal note for the Department of Education, ACPE for $99.7 showing $1,408.3 revenue. Co- chairs Pearce, Frank, Senators Sharp, and Kelly signed "do pass." Senator Rieger signed "do not pass." SENATE CS FOR CS FOR HOUSE BILL NO. 507(HES): An Act relating to licensure by the State Medical Board and temporary permits for certain optometrists. Co-chair Pearce announced that HB 507 was before the committee and invited Representative Cynthia Toohey to come to the table. REPRESENTATIVE TOOHEY said HB 507 was the companion bill to SB 298 which had passed out of Senate HESS & Labor and Commerce Committees. She said it was requested by the State Medical Board regarding a problem in the bush or in an area where there was no physician present. The tenen locum problem stopped the attempt to secure a physician to cover for another one. It was a bill the optometrists also supported so that when they were sick or on vacation, they could find a substitute. In answer to Co-chair Frank, Representative Toohey said there had been an attempt to interview by telecommunication. The required interview must be made by a designated representative of the State Medical Board. Senator Kelly MOVED for passage of SCSCSHB 507(HES) from committee with individual recommendations. The bill was REPORTED out of committee with a "do pass", and with a fiscal note for the Department of Commerce & Economic Development for $2.5. Co-chairs Pearce, Frank, Senators Rieger, Kelly, Sharp and Kerttula signed "do pass." CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 301(HES): An Act relating to the calculation of instructional units used in determining state aid for education; and providing for an effective date. Co-chair Pearce announced CSSSSB 301(HES) was before the committee and invited Joe Ambrose, aide to Senator Taylor, sponsor of SB 301, to speak to the bill. JOE AMBROSE said the bill originally introduced by Senator Taylor encompassed a permanent fix on the single site school issue but that provision had been removed from the bill. He wanted the committee to know that Senator Taylor was in support of CSSSSB 301(HES) which drastically reduced the fiscal note. Mr. Ambrose outlined section 1 which reduced the percentage at which the hold harmless provision was triggered from the current 10 percent to 5 percent. It would bring Sitka into the hold harmless cycle which allowed their loss to be spread over three years. In answer to Co-chair Pearce, Mr. Ambrose ask Senator Rieger to speak to Section 2. Senator Rieger said Section 2 would effect Adak's hold harmless if, in fact, the Adak shutdown occurred as proposed. What the new hold harmless provisions did as a package was to create three tiers of hold harmless. He went on to explain if a reduction in entitlement of instructional units exceeded 5 percent in a year, it triggered the hold harmless similar to what was in existing law. There were two other brackets for more dramatic changes in the entitlement to instructional units. Existing law said there was a three-step process. First, a four-year phase-down where the school would receive 75 percent of what they would have been entitled to, then 50 percent, then 25 percent, then zero. The next, a three-year phase-down, two-thirds, one-third and then zero, as a hold harmless. Then a more extreme, two-year phase-down bracket, 50 percent and then zero. The more rapid phase-downs occurred in cases where there was a more dramatic drop in entitlement to instructional units. If a community suffered a complete shutdown, it was reasoned that it should not take three years of gradual phasing out of the harmless. There was recognition of some need for hold harmless because some employment contracts needed to be honored and contractual obligations and funding were required to carry those out. Mr. Ambrose said that the Department of Education had advised them that a reduction of the 5 percent trigger would add only Sitka to the hold harmless provision. There were three other districts in one step or the other at the present time. In answer to Co-chair Frank, Mr. Ambrose did not know which communities those were. Senator Kerttula MOVED amendment 1. Co-chair Pearce OBJECTED for discussion purposes. Senator Fred Zharoff explained that amendment 1 would hopefully take care of funding for the single/dual site schools. Since the funding formula had been revised 5-6 years ago, a shortfall had happened each year. Wanda Cooksey, lobbyist for Single Site School District Consortium, spoke in support of amendment 1. She said the formula provided in amendment 1 was the exact formula that was being used now. She felt this was a good time to add this formula so when the foundation formula was worked on in the future, this issue would be included instead of being outside the formula. In answer to Senator Kelly, Ms. Cooksey answered that the fiscal impact for the coming year, $3.1M would be funded in HB 505. In answer to Senator Sharp, Ms. Cooksey said it effected 21 school districts that range in size from 50 to 800 students ADM. Again in answer to Senator Sharp, Ms. Cooksey answered that there were 3 REAAs in the group and the rest were small municipal schools. In answer to Senator Kerttula, she said each REAA had only one funding community. Co-chair Pearce called for a show of hands on the motion to ADOPT amendment 1 and the motion FAILED on a vote of 6 to 1 (Co-chairs Frank and Pearce, Senators Sharp, Kelly, Rieger and Jacko were opposed, Senator Kerttula was in favor). Senator Rieger MOVED for passage of CSSSSB 301(HES) from committee with individual recommendations. Co-chair Pearce noted that SB 301 had not received a "do pass." Senator Kelly noted that he was not comfortable with the title. No further objection having been heard, the bill was REPORTED out. Senator Kelly MOVED that CSSSSB 301(HES) be brought back before the committee for the purpose of an amendment to "tighten" the title. No objection being heard, the motion to RESCIND the committee's action CARRIED. Senator Kelly MOVED conceptual amendment 2 that would revise the title to conform with the contents of the bill. No objection being heard, amendment 2 was ADOPTED for incorporation within a Finance Committee Substitute for the bill. Senator Kelly MOVED for passage of CSSSSB 301(FIN) from committee with individual recommendations. No objection being heard, the bill was REPORTED out as amended with a "no recommendation", and a fiscal note for the Department of Education for $96.4. Co-chair Pearce, Senator Kelly, Rieger, Kerttula and Sharp signed "no recommendation". SENATE BILL NO. 381: An Act relating to the construction of the Alaska Orbital Launch Complex by the Alaska Aerospace Development Corporation. Co-chair Pearce invited Bill Paulick, Business Development Information Network, Division of Economic Development, Commerce & Economic Development, to speak to SB 381. BILL PAULICK explained he also was a member of the Aerospace Development Corporation Board of Directors. SB 381 authorized the Aerospace Development Corporation to engage in a project that would cost more than $1M. He noted that projects over $1M had to be authorized by the legislature. He felt the aerospace industry represented a new industry for the state, new employment, and new income for Alaskans. He was instrumental in setting up the new Corporation, as well as selecting the new Director and very pleased to be a part of the operation. Mr. Paulick went on to say that SB 381 marked the commercialization of aerospace for Alaska. The bill had a zero fiscal note and in no way obligated the legislature for future authorizations. It would allow the Corporation to bond and construct a commercial launch facility on Kodiak Island to be serviced by the ground facilities at the University of Alaska Geophysical Institute in Fairbanks. He offered to answer questions from committee members. In answer to Senator Kelly, Mr. Paulick said that bonds would be a combination of revenue and possibly AIDEA bonds. Since it would be a dual use facility through the Department of Defense, there were about five commercial contractors, including Lockheed Aerospace, that would participate in commercial debt funding in the facility. He did not anticipate any state financing besides AIDEA bonds for this project. In answer to Senator Rieger, Mr. Paulick said the facility had been planned and approved by the Aerospace Development Corporation Board of Directors. They had reviewed the draft plan and the plans could be adjusted depending upon commercial requirements decided over the next eighteen months prior to launch. Mr. Paulick handed out an aerial photo artist mock-up of the proposed facility. He then showed the committee a notebook of specifications for the facility. He went on to explain the relationship between Fairbanks and Kodiak. He said that Kodiak represented a unique location and opportunity for launching different directions and into different orbits. In comparing Vandenberg to Kodiak, he said the weather was as good in Kodiak as it was in Florida and the rainfall and cloud cover was about the same. He admitted that the temperature was different. He also noted that it was economically more feasible to launch out of Kodiak that Vandenberg. In answer to Senator Jacko, Mr. Paulick agreed there was existing infrastructure at Kodiak (about 32 miles out of town) and other places around the state. Fairbanks and Kenai had been ruled out. In answer to Senator Kelly, Mr. Paulick said the first launch would hopefully be in late 1995. The safety analysis would be complete early 1995. The Japanese and several others were interested in using the launch site. He said the people in Kodiak were very supportive of the project. Co-chair Frank MOVED for passage of SB 381 from committee with individual recommendations. No objection being heard, the bill was REPORTED out with a "do pass", and a zero fiscal note for the Department of Commerce & Economic Development. Co-chair Pearce, Senators Kelly, Rieger, and Jacko signed "do pass," and Senator Sharp signed a "no recommendation". HOUSE BILL NO. 234: An Act relating to endowments and donations of the University of Alaska and the University of Alaska endowment trust fund; and providing for an effective date. Co-chair Pearce invited Representative Davies to come before the committee and speak to HB 234. REPRESENTATIVE JOHN DAVIES, sponsor of HB 234, said the University was interested in managing the endowment trust fund. The University felt it could get a better return for their money and showed a good track record on other funds it managed. Senator Kelly asked if he was referring to the same University that was unable to maintain its buildings and now wanted to manage its own money. ALISON ELGEE, Director, Statewide Budget Office, University of Alaska, provided a copy of the investment performance rating by Callan & Assoc. of the Department of Revenue's management of the land grant trust funds for the University. She said that over the past three years, the University's own performance of the management of the foundation funds had realized approximately 3 percent greater rate of return than the Department of Revenue which placed them in the top three percent nationwide for the management of these types of funds. In comparison, she said the Department of Revenue was placed in the bottom one percent nationwide. Co-chair Frank reminded the committee of the SBS investment losses made by the Department of Revenue several years ago. He said he did not know if there was any connection between managing money and coping with deferred maintenance. Senator Sharp MOVED for passage of HB 234 from committee with individual recommendations. No objection being heard, the bill was REPORTED out with a "do pass", a zero fiscal note for the University and a fiscal note for the Department of Revenue for $22.5. Co-chairs Pearce and Frank, Senators Sharp and Rieger signed "do pass." Senator Jacko and Kelly signed a "no recommendation" CS FOR HOUSE BILL NO. 412(HES) am: 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 invited Elmer Lindstrom, Special Assistant to the Commissioner, Department of Health & Social Services, to speak to HB 412. ELMER LINDSTROM said that HB 412 was not substantially different than CSSB 268(JUD) which was previously moved from Senate Finance. The most significant change related to page 6 of the bill, exemptions from foster home licensor. The other difference was that the House Finance Committee reduced the fiscal note submitted by the Department to $30.0. The Department preferred the larger, previously submitted fiscal note but would proceed with the $30.0 note if so directed by the legislature. Senator Rieger MOVED for passage of CSHB 412(HES) am from committee with individual recommendations. No objection being heard, the bill was REPORTED out with individual recommendations, and a fiscal note for the Department of Health & Social Services for $30.0. Co-chair Pearce, and Senator Jacko signed "do pass." Co-chair Frank, Senators Rieger and Sharp signed "no recommendation." HOUSE BILL NO. 73: An Act relating to state and local taxation and other state regulation as affected by the Alaska Native Claims Settlement Act, as amended, and related federal statutes; and providing for an effective date. Co-chair Pearce announced that HB 73 had previously been heard by the committee in February 1994. Co-chair Frank had some questions regarding federal law. She invited David Harding to join the members at the table to speak to HB 73. DAVID HARDING, aide to Representative MacLean, sponsor to HB 73, said that the bill made technical changes to state law to bring it into compliance with changes in the federal Alaska Native Claims Settlement Act as it related to exemptions from property taxation at the state, local and federal level. He referred the committee to a memo written by Jack Chenoweth that stated that federal law took precedence and at present, state law did not reflect those changes. He drafted HB 73 so that it would now and in the future track federal law. There had been several cases that had ended up in court because state law was misread. HB 73 was drafted to avoid that confusion in the future by the state assessor or anyone else reading the law. In answer to Senator Sharp, Mr. Harding said the cases had taken place in Cook Inlet but he did not know the exact circumstances. Senator Jacko MOVED for passage of HB 73 from committee with individual recommendations. No objection being heard, the bill was REPORTED out with a individual recommendations, and a zero fiscal note for the Department of Revenue. Co-chairs Pearce, and Frank, and Senator Jacko signed "do pass." Senators Rieger and Sharp signed "no recommendation." CS FOR HOUSE BILL NO. 231(FIN): An Act relating to when previous conduct constituting a sexual offense may be used as an aggravating factor at sentencing. Co-chair Pearce invited Margot Knuth, Assistant Attorney General, Criminal Division, Department of Law, to the table since Diane Schenker, Special Assistant to the Commissioner, Department of Corrections, had not arrived at the meeting. Ms. Knuth said there was an assumption being made by the Department of Corrections that this aggravator provision would be used in extremely few cases and anticipated a one percent incidence. Because of the sex offenders that were already in custody, she explained any impact at all carried with it a fiscal note. HB 231 would pick up situations where a sex offender's prior offense was either sexual assault (rape) or sexual abuse of a minor, and either of those would be used as an aggravating factor. At this time, Diane Schenker joined the meeting. Co-chair Pearce explained that there were questions about the Department of Correction's fiscal note and why it was so late in coming. DIANE SCHENKER said that the fiscal note was submitted last year when the original bill included a mitigator which was not in the bill at present. She said that as long as the aggravating factor was in the bill, it must be assumed that sentences would be aggravated. In answer to Co-chair Frank, Ms. Schenker said an operating cost was included because the bill aggravated sex offenses which already generally resulted in a year of incarceration. The actual prisoner would already be incarcerated on a normal sentence and if the aggravator went into effect, the sentence would be lengthened at some point. She explained that the capital expenses were put into FY95 because approximately five beds would need to be added. A rough estimate was made of the aggravate increase and capital money was asked for up front. In answer to Co-chair Pearce, Ms. Schenker said she did not know why Section 3 with the mitigating language was removed. Ms. Knuth said there was a philosophical objection to the language that said why should someone be rewarded whose conduct was becoming more serious. Co-chair Frank concurred with that opinion. In answer to Co-chair Pearce, Ms. Schenker remarked that even if the mitigating language was put back into the bill, a zero fiscal note would not be applicable. Co-chair Pearce said that she would prefer to move the bill and add back in the mitigating language in Rules Committee or on the floor if it would make a difference in the fiscal note. After comments from Co-chair Frank, Ms. Schenker said, based on the crime legislation that would pass this year, not including the third time felony DWI, the Department of Corrections would require the construction of over 200 additional beds. The Department did consider every conceivable way that those could be housed in outside contract or less secure beds. The beds needed for HB 231 were on top of those additional 200 beds, none of which were funded. In fact, she said, some existing beds had been threatened to be defunded. In answer to Senator Rieger, Ms. Schenker said in regard to the expansion of the furlough policy, the department was not prohibited from furloughing presumptive sentences or any offender by crime offense. The only restriction on furlough was that they had to have served a third of their sentence, be within three years of their release, and able to be in community custody. At this time, the department had gone as far as it could in this area. in fact, it had to pull back in furloughing untreated sex offenders. At Co-chair Pearce's request, Ms. Schenker agreed to provide the committee with a new fiscal note if the mitigating language was added back into HB 231. Co-chair Pearce announced that HB 231 would be HELD in committee. Scheduled but not heard: SENATE CS FOR CS FOR HOUSE BILL NO. 409(HES): An Act relating to the maximum amount of assistance that may be granted under the adult public assistance program and the program of aid to families with dependent children; proposing a special demonstration project within the program of aid to families with dependent children and directing the Department of Health and Social Services to seek waivers from the federal government to implement the project. ADJOURNMENT The meeting was recessed at approximately 11:00 a.m.