MINUTES SENATE FINANCE COMMITTEE April 1, 1999 8:07 A.M. TAPES SFC-99 # 78, Side A & Side B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 8:07 A.M. PRESENT In addition to Co-Chair John Torgerson, Senator Sean Parnell, Senator Loren Leman, Senator Gary Wilken, Senator Pete Kelly and Senator Lyda Green were present when the meeting was convened. Also Attending: SENATOR ROBIN TAYLOR; DOUG WOOLIVER, Administrative Attorney, Alaska Court System; JUANITA HENSLEY; Division of Motor Vehicles, Department of Administration; MARK HODGINS, staff to Senator Jerry Ward. Attending via Teleconference: From Anchorage: BARBARA BRINK, Director, Public Defender Agency, Department of Administration; DIANE WENDLANT, Assistant Attorney General, Collections and Support, Civil Division, Department of Law. SUMMARY INFORMATION SB 100-REIMBURSEMENT FOR PUBLIC DEFENDER The Committee heard from the Alaska Court System, the Department of Law and the Public Defenders Agency. An amendment was adopted and the bill was held. SB 6-DISPOSALS OF STATE LAND The sponsor testified. A committee substitute was adopted as a Workdraft and the bill was held. SB 33-TASK FORCE ON PRIVATIZATION The Committee heard from the sponsor and the Department of Administration. A committee substitute was adopted and reported from Committee. CS FOR SENATE BILL NO. 100(JUD) "An Act relating to the payment by indigent persons for legal services and related costs." This was the first hearing on this bill in the Senate Finance Committee. DOUG WOOLIVER, Administrative Attorney, Alaska Court System testified that the bill was introduced at the request of the Alaska Court System. He stated the bill amends the Public Defender reimbursement statutes by requiring those who receive public defender services repay the State for at least a portion of that representation. He noted that under current law, only those convicted of a crime are subject to the repayment provision. This bill would expand the law to require any individual receiving counsel at the State's expense to contribute to the cost of the representation whether they are convicted or not. He pointed out this provision is similar to the situation of an individual obtaining private counsel who is also required to pay the cost of the defense regardless of the outcome. Senator Sean Parnell interrupted posing a scenario of being sued as a private party in a civil matter where the plaintiff lost the case. He asked if, under this bill, he could then seek to recover from the plaintiff. Mr. Wooliver responded that public defenders are not appointed in such civil cases. He clarified that the cases addressed in this legislation are criminal and delinquency cases. Senator Sean Parnell wanted to know if the State brought a "bad case" against an individual, that individual would then be required to reimburse the Public Defenders' Agency (PDA) for their defense under the proposed statute, rather than having the opportunity to recover the defense costs from the state. Mr. Wooliver answered the current system is the same, if someone is charged with a crime, has enough money to hire their own defense counsel and is found innocent that individual is not reimbursed by the State for the cost of their defense. Mr. Wooliver reiterated that this bill provides that when an individual receives benefits from a publicly funded defense counsel, that individual will repay the defense counsel, whether they plead guilty, are convicted or the State defers prosecution. Mr. Wooliver continued qualifying that many individuals who receive public defender services do not have the funds to pay for private attorneys. However, he stated that most individuals have the ability to pay for a portion of their defense or will have that ability over time. This was not the first time this bill has been before the Legislature, Mr. Wooliver told the Committee. The Alaska Court System requested this change in 1993 along with some other changes, he noted. However, he pointed out, the portion of the resulting bill addressing repayment of public defender costs was eliminated before the legislation was adopted. Mr. Wooliver testified that the Division of Legislative Budget and Audit, during a subsequent audit of the PDA made the same request. He quoted the audit report recommending that, "the State statute and court rules be amended to assess judgement against public council defendants not on the basis of if convicted, but rather on the mere fact that services were provided." He noted that the Alaska Court System had done its part in making the necessary court rule changes, but stressed that the legislature needs to make statutory changes before the repayment requirements can be implemented. Mr. Wooliver asserted that although this type of repayment program makes both indigent and non-indigent individuals liable for defense costs, there are significant differences. [TAPE MALFUNCTION] Mr. Wooliver continued detailing the repayment requirements for indigent defendants. One difference, he explained, is that indigent defendants would only have to repay a portion of the costs of their defense subject to schedules found in Criminal Rule 39 and Appellate Rule 209. Furthermore, he pointed out, if repayment would create a financial hardship, the Court can reduce, remit or defer payment or establish a payment plan. He assured the Committee that the cost of the Criminal Rule 39-repayment provision would not be ruined by the practice of alternate payment plans. He noted that the repayment system becomes a civil judgement and therefore protected by the Alaska Exemptions Act. Because of these protections, he avowed SB 100 would not drive poorer individuals further into poverty, but rather it would allow the State to recover a portion of defense costs from those who have an ability to pay. Mr. Wooliver noted that the Senate Judiciary Committee had made several amendments to SB 100; including adding Section 1 to the bill, which restricts the right of an indigent person to be represented by appointed counsel to the level and extent required by the US and state constitutions. Additionally, he stated the Senate Judiciary Committee "made mandatory entry of a judgement for repayment." He explained that under current statutes, the Court has the discretion whether or not to enter a judgement. The Senate Judiciary Committee also deleted the provision in the bill that allows for a stay of the judgement pending an appeal. Mr. Wooliver pointed out that the deleted language is no longer necessary since the legislation requires repayment regardless of a guilty or not guilty verdict. Mr. Wooliver stated that the Senate Judiciary version of the bill clarifies the language relating to the court's discretion on repayment, by stating "only the unpaid portion of a judgement can be reduced, remitted or deferred." A section of the bill was also deleted in the committee substitute, according to Mr. Wooliver, that had allowed the court to remit or reduce the balance owed on a judgement or change the method of payment that would impose a manifest hardship. However, he noted the provision remains that allows an individual to petition the court in times of hardship for a reduction of payment. Amendment #1: This amendment adds a new section to AS 18.85.120 to read: (e) Judgements entered under (c) of this section shall be imposed pursuant to trial and appellate court schedules adopted by the supreme court in consultation with the Public Defender Agency and the Office of Public Advocacy. The schedules shall be reviewed at least biannually and, when appropriate, adjusted to reflect changes in the cost of representation. The trial court schedule shall include provisions to impose additional costs in cases where paid expert witnesses are called on behalf of the defendant. Senator Dave Donley moved for adoption. Co-Chair John Torgerson objected for purpose of discussion. Co-Chair John Torgerson referred to a letter dated March 16, 1999 addressed to Senator Robin Taylor from Mr. Wooliver (copy on file) that answered some questions raised by the Senate Judiciary Committee. The first question reads, "Are the Criminal Rule 39 fees for the repayment of public defender representation in addition to other costs such as travel?" The letter replies, "No. If a court enters a civil judgement against a person to pay for defense costs, that judgement is the full extent of his or her liability for that representation. No additional fees are added for travel or other expenses." The second question answered in the letter asks, "When were the Criminal Rule 39 fees last amended?" The response is, "The fees were adopted in 1992 and have not been amended." Co-Chair John Torgerson pointed out that this amendment directs the courts to review the fee schedules and biannually adjust the rates for charge-backs based on consultation with the PDA and the Office of Public Advocacy (OPA). Co-Chair John Torgerson noted that the current rates are seven years old and he felt the rates should remain current with the amount budgeted to provide the services. He added that the amendment also directs the courts to include the costs paid for expert witnesses in the balance due. Currently, he stated, the state covers the entire cost of expert witnesses for the defense. Co-Chair John Torgerson did not include the matter of travel cost reimbursement in the amendment. He said this is because he was advised that if reimbursement were required for travel costs, there could be a conflict with the equal protection rights of those who had to travel farther distances. Mr. Wooliver concurred with the comments on Amendment #1 given by Co-Chair John Torgerson. He restated the provision requiring the court to biannually review the fee schedule and to make necessary revisions to reflect the actual costs incurred by the PDA and the OPA. Mr. Wooliver explained when the cost repayment rules were initially adopted the fee schedule was based on the projected cost rather than the actual costs. The original rules also took into account that most of the repayment funds came from the Permanent Fund dividend, according to Mr. Wooliver. The revised statute will require the court to take into account extra-ordinary costs for expert witnesses. Co-Chair John Torgerson commented that the bill drafter had some concerns relating to the wording of the amendment. Co- Chair John Torgerson explained that the state statutes have a different interpretation of the court's fee schedules and therefore, if the amendment is adopted, the drafter should be given latitude to clean up language while staying within the intent. Senator Dave Donley moved to conceptually amend the motion to allow the bill drafter to conform the language of the amendment to existing statute and the court schedules. Without objection Amendment #1 as conceptually AMENDED was ADOPTED. Senator Sean Parnell asked how the repayment requirements affect court-ordered restitution. He wanted to know what priority is given to the judgement for attorney fees and if restitution is given a lower priority. He referred to the garnishment of Permanent Fund dividends. Mr. Wooliver replied that public defender costs is sixth on the debt repayment priority list using the Permanent Fund dividend. He explained that the public defender costs are considered a debt owed to the State Of Alaska. Child Support, restitution, college loans and court fines are some of the debts that have a higher priority, according to Mr. Wooliver. BARBARA BRINK, Director, Public Defender Agency, Department of Administration testified via teleconference from Anchorage. Her comments focused on page 1 lines 12 and 13 of the committee substitute, that changes the level of representation required by the PDA. She stated that existing statute requires public defenders to perform their duties at the level and to the extent as an individual could expect who retains private council. The language adopted in the Senate Judiciary committee substitute states that representation by a public defender must be provided, ".at the level and to the extent required under the United States Constitution and the Constitution of the State Of Alaska." She wanted to make sure there was no misperception of this change. She did not want this Committee or any other legislature to think this language change will reduce the level of service the PDA is required to give and that consequent budget needs will decrease. She stressed that the PDA duties are constitutionally defined and she emphasized that the state definition of the effective assistance of council is no different than the federal definition. In her opinion, the main point of the constitutional right to council is so that as a nation, and Alaska as a state, does not create a two-tiered system of justice - one justice system for the rich and one system for the poor. She asserted, "The duties and obligations of a lawyer to ethically, zealously and effectively represent their client don't depend on whether they are retained or appointed." She referred to a letter she sent on March 19, 1999 (copy not on file) and said she would not repeat the comments she made in that letter. DIANE WENDLANT, Assistant Attorney General, Collections and Support, Civil Division, Department of Law testified via teleconference from Anchorage that her section of the department is responsible for collecting the repayment fees. Co-Chair John Torgerson noted that with the adoption of Amendment #1, changes will need to be made to the Department of Law fiscal note. He anticipated that the biannual revision of the fee schedule and the reimbursement for expert witnesses would increase the revenue generated. Ms. Wendlant agreed there would be an increase but she could not speculate on the exact amount. Senator Dave Donley asked Ms. Wendlant to provide him with suggestions on how to increase collections, whether through statutory changes, or other changes to make the collection process easier for the department. Senator Sean Parnell was troubled by the underlying policy allowing a party to bring action against another party and even if the first party fails to win, the second party must bear the cost of defense. He noted that in civil proceedings, a prevailing defendant is allowed to recover a portion of the attorney fees. He understood that the criminal system is different but he wanted to know why the state is allowed to bring a criminal action against someone and that citizen must bear the costs if he or she acquitted or the charges are dropped. Mr. Wooliver responded that the costs the defendants are bearing are the cost of the services provided by the State. He noted that defendants who hire an attorney have to pay for the services provided by the private council as well. Senator Sean Parnell pointed out that in the case of public defenders, the state brought the charges and the state is charging for defense against those charges. He qualified that in America, citizens pay for services, but argued that citizens are also allowed to recover a portion of attorney fees in civil cases when there is a failure to convict. He wanted to know why this wasn't practiced in criminal cases as well as civil cases. Mr. Wooliver replied that the legislature could make a policy decision to not charge those defendants who are not convicted. He pointed out that the majority of the cases affected by this legislation are not ones where the defendant is brought to trial and found not guilty. Most of these cases, he said, involve deferred prosecutions, failure to meet the 120-day Rule or the State drops the charges for a variety of reasons. However, he emphasized, if the legislature wanted, and if the state could afford it, it could establish a system of charge-backs, where the State would refund attorney fees to defendants not convicted. He noted that the charge-backs would apply to private attorney fees as well as absorbing the costs of public defenders. However, he stressed that the Court feels that all criminal defendants should pay their attorney fees. Senator Dave Donley reinforced Mr. Wooliver's argument saying there should be no discrimination between rich or poor. He believed all defendants should pay for the service according to their ability. He also noted there are many reasons why a guilty person is not convicted, citing the 120-day rule, technical reasons, lack of resources to prosecute, inadmissibility of evidence or admissions, etc. It particularly troubled him that judges may appoint counsel regardless of the monetary status of the individual. Regarding the differences between civil and criminal actions, he pointed out that there are different standards and that the state has a higher burden of proof. He told the Committee that there is a safeguard against wrongful prosecution in existing law so if the State was out of line and did not have grounds to prosecute the defendant could initiate a civil action and recoup defense costs. Senator Dave Donley offered a motion to report from Committee, CSSB 100(FIN). Without objection it was reported out with individual recommendations and accompanying fiscal notes from the Department of Law, $68.9 and the Alaska Court System, zero. SENATE BILL NO. 6 "An Act relating to the disposal of state land." This was the third hearing for this bill in the Senate Finance Committee. A motion to adopt and a motion to amend Amendment #2 were pending from the previous hearing. Co-Chair John Torgerson directed the Committee's attention to a proposed committee substitute, 1-LS0071/H, 3/26/99, the sponsor wanted adopted. Senator ROBIN TAYLOR, the sponsor of the bill, joined the Committee and explained that the proposed committee substitute shifts the obligation for both identifying and selling State land from the commissioner of the Department of Natural Resources to a State Land Commission that would be formed under this legislation. He noted that while the governor would appoint the members of the land commission, the commission would report to the legislature and the process would be subjected to a five-year review period and a ten-year sunset. This, he stressed, would give the legislature an opportunity to review and revise the process as necessary. He described the membership of the commission, saying it would consist of five members: a real estate appraiser, a real estate broker, a land surveyor plus two members of the public appointed at-large. He added that no more than three members could belong to the same political party. Senator Robin Taylor then noted that the committee substitute also calls for the creation of land disposal advisory boards in every municipality and borough. Those areas of the state not included in a borough would also be represented by advisory boards, he stated, following the Model Borough Boundary Act to establish the geographic regions. He stressed that the purpose of the advisory boards would be to provide local input to the State Land Commission recommending lands to be offered for sale. Senator Robin Taylor stated that the intent of this legislation is to create a land disposal bank that would have a minimum of 250,000 acres available each year for disposal by the state. Senator Robin Taylor pointed out that this legislation places some limitations on the size of land disposals. The legislation reads as follows: ".parcels identified as appropriate for sale must consist of 160 acres or more, except that parcels identified by an advisory board as suitable for recreation and homesites must consist of 40 acres or more, individual parcels in subdivisions intended for private residential or recreational use may not exceed five acres." He also noted that lands must be provided for a variety of uses such as agricultural, timber and recreational. In other words, he explained all the lands available for disposal would not be located in one area or have only one feasible use. Senator Robin Taylor stated the committee substitute provides that lands would be sold at auction and a provision requires that bidders meet the same Alaskan residency criteria as dictated in the Permanent Fund dividend program. He noted that the bidding procedures would not change from the current practices and that land not sold through the auction process would then become available to nonresidents for purchase. Senator Robin Taylor pointed out that the committee substitute replaces the word "Commissioner" with "Commission" in several places in the bill to reflect the change of authority over the land disposals. Senator Robin Taylor explained that the committee substitute establishes that the legislature annually reviews the lands selected and decides which lands are offered for disposal. Senator Robin Taylor summarized by saying that other language in the committee substitute is basically housekeeping items to state the terms of the commission members. However, he noted the absence of earlier clean-up language that was added to an earlier committee substitute regarding the appraisal system. He did not know why the language was omitted and felt it should be included. Co-Chair John Torgerson guessed the language was omitted due to changes made to the provisions governing auctions. Senator Pete Kelly asked if the committee substitute contained a mechanism for land that is put up for auction but not sold. Senator Robin Taylor replied that the land would accrue in a "land bank", which is the current practice. He thought that the land bank currently contains 45 to 50 thousand acres that are surveyed and placed up for public sale. He noted that most of that land is property earlier sold but returned to the State for various reasons such as default on payment. Senator Robin Taylor added that this bill began as an effort to force the Department of Natural Resources to sell land held in the land bank. Co-Chair John Torgerson referred to the provision on page 3, beginning at line 26 of the committee substitute directing the Department of Natural Resources to dispose of land held in the land bank. He asked if there should be a cap on the amount of land held in the land bank. He had concerns with the wording, "disposed of". He suggested using, "offered" instead so that the department is not forced to simply give the land away. Senator Robin Taylor felt that a cap should be placed. Co-Chair John Torgerson qualified that he had not had much time to study the bill and that this hearing was intended as an overview. Senator Loren Leman shared Co-Chair John Torgerson's concern about the implication of the phrase "shall be disposed of". He also had concerns about the minimum and maximum parcel size stipulations. He thought the witness' testimony did not accurately reflect the language of the committee substitute. Senator Robin Taylor clarified his earlier statement. Senator Loren Leman wanted to know the reason for the minimum size restrictions for recreation use lands and homesites. He suggested there could be some areas smaller than forty acres that would be suitable for these uses such as around Lake Clark. Senator Robin Taylor replied that he has been working with the department to draft the bill's provisions. He learned that the cost of disposal of small parcels becomes unfeasible for the State. He qualified that he did not believe there should be any of the size limitations. For example, he wanted the land managers to dispose of the state's bug infested timberlands in any way possible for the purpose of cleaning up the land and reforestation. He stated, "trying to legislate common sense is very difficult." His intent with this legislation is to give the department perimeters and he was willing to amend the bill in any way to effectively achieve this. Senator Loren Leman suggested a fallback position stipulating that the size provisions will be standard except when a finding is made showing that another method is more appropriate. He stressed that he did not want the department to use the size provisions as an excuse to not dispose of certain lands. Co-Chair John Torgerson noted his efforts along with the sponsor's to establish a land disposal commission. He felt that more needed to be done on this legislation before it could be reported from Committee. He wanted the committee substitute distributed to the department for recommendations on how to further refine the bill. Senator Lyda Green moved for adoption of CS SB 6, 1- LS007/H, 3/26/99 as a Workdraft. It was ADOPTED without objection. Senator Dave Donley was concerned that the title is so specific that he was unsure if the other body would support the legislation. He wanted to know if the stipulation that 250,000 acres must be distributed annually could be deleted from the title. Senator Robin Taylor responded that he was not bound by any number and that he only used 250,000 as a starting point. He stressed that he was open to suggestions. Senator Dave Donley stated that he thought a generic figure would be more appropriate. Co-Chair John Torgerson agreed and felt 250,000 acres is aggressive especially if it is to be an annually reoccurring disposal. Senator Loren Leman moved to amend the committee substitute to delete "250,000 acres of" from page 1 line 2, the title. Co-Chair John Torgerson said the motion could be made but the Committee would then need to come back with a new committee substitute. He preferred to incorporate this change along with other suggestions into one committee substitute rather than make a few small changes here and there. Senator Loren Leman withdrew his motion. Co-Chair John Torgerson ordered SB 6 held in Committee. Co-Chair John Torgerson explained that the meeting will recess until 9:00 AM when the teleconference is connected to allow public testimony on the State's budget. Senator Gary Wilken asked if the Senate Resolution regarding crowning the Women of Senate Finance as Alaskan royalty would be heard today. Co-Chair John Torgerson said the resolution would be taken under advisement. He noted that the Senate Finance Secretary's office did not file the resolution in a timely manner. Senator Gary Wilken suggested the resolution be referred to a number of subcommittees for consideration. Co-Chair John Torgerson agreed and appointed Senator Gary Wilken as chair of the first subcommittee; Senator Loren Leman as chair of the second; Senator Dave Donley as chair of the third; Senator Lyda Green as chair of the forth and Senator Pete Kelly as chair of the fifth subcommittee. Senator Lyda Green protested that the Committee was not advancing the legislation in support of the Women of Senate Finance. [APRIL FOOLS!!] AT EASE until 9:05AM/9:06AM Co-Chair Sean Parnell noted this portion of the meeting was set aside for public testimony on long range solutions for the state's fiscal situation. There was no one present to testify so the Committee addressed the next bill on the agenda with the understanding that it would be set aside if anyone arrived wishing to testify on the budget. AT EASE 9:07AM/9:09AM SENATE BILL NO. 33 "An Act relating to the Task Force on Privatization; and providing for an effective date." This was the fifth hearing for this bill in the Senate Finance Committee. Co-Chair John Torgerson noted that the Committee had adopted a committee substitute, Version "N" as a Workdraft in an earlier hearing but there was a new proposed committee substitute before members for consideration. Co-Chair John Torgerson reminded the Committee that the first committee substitute amended the language relating to items not subject to bargaining and the unrestricted authority of the employer to enter into contracts with the private sector to perform certain public functions. He also noted that two amendments proposed by Senator Loren Leman were adopted. Senator Loren Leman detailed the changes made by the amendments, saying one amendment inserted "or to perform more efficiently" after each provision relating to debt consolidation. The other amendment, he noted, allows the commissioner to appoint an unpaid advisory council. Co-Chair John Torgerson pointed out that the proposed committee substitute incorporates those amendments. Senator Sean Parnell moved for adoption as a Workdraft, CS SB 33, 1-LS0317/S, 3/25/99. The committee substitute was adopted without objection. MARK HODGINS, staff to the bill sponsor, Senator Jerry Ward testified. He noted that the legislation had evolved from establishing a task force to a commission, but reassured the Committee that the committee substitute is compatible with the sponsor's intent for privatization of services and savings for the State. He stated that several individuals wished to testify on this legislation but have been unable due to the rescheduling of hearings. Therefore, he presented written testimony from some of those people. He referred to a letter supporting the bill from The Alliance dated March 18, 1999 and a resolution in support of the bill from the Alaska State Chamber of Commerce adopted December 4, 1998. (Copies on file) Tape: SFC - 99 #78, Side B JUANITA HENSLEY, Department of Administration, testified to the section of the committee substitute that amends the Public Employee Relations Act (PERA). She stated that the Administration has concerns with the PERA changes and believed that at this time, making changes of this magnitude affects the ability to enter into negotiations in the remaining term contract. She stressed the Administration's first priority in negotiation of contracts is cost containment and attempting to reach a zero cost contract. Changing PERA in the middle of the contract negotiations, she warned, could jeopardize the cost objectives. She added that the current contract with the state employees does not prohibit the State from outsourcing services if cost effectiveness for the State can be shown. She used the Division of Motor Vehicles as an example of the State entering a partnership with the private sector to enhance services to the public. Senator Lyda Green referred to the practice of outsourcing Division of Motor Vehicle services saying that the division could not expand privately administered services into the Mat-Su area was because of an inadequate cost savings as required under current statute. Juanita Hensley responded that the division outsources services when it can be shown to be cost effective. She listed Tok, Talkeetna and Glennallen as communities where the private sector is providing the services and the division has been able to eliminate the government positions. Senator Gary Wilken supported the legislation but was concerned that it contains an item that caused a similar bill to be vetoed the previous year. Co-Chair John Torgerson explained that the item in question is a provision allowing the governor to appoint a member to the commission. Senator Gary Wilken referred to the governor's veto message raising concerns about the separation of powers. Senator Gary Wilken hoped this bill would not be vetoed for the same reason and stressed that the Committee needs to recognize that possibility and perhaps address the issue. Co-Chair John Torgerson commented that the previous legislation gave subpoena power to the commission, which caused concern for the governor. He assured that provision is not in the current bill. He added that if the governor chooses to not participate in the process by vetoing this bill, it sends a strong message that the governor is not interested in working toward consolidation or privatization. Senator Loren Leman offered a motion to report from Committee, CSSB 33 (FIN) and without objection it was reported out with an indeterminate fiscal note from the Office of the Governor. Co-Chair John Torgerson noted the Committee would stand in recess and come back to order if someone arrived wishing to testify on the long-range budget situation. AT EASE 9:20AM/10:22AM Co-Chair Sean Parnell noted there was no one present to testify. ADJOURNED Co-Chair Sean Parnell adjourned the meeting at 10:22 AM. SFC-99 (16) 4/1/99