MINUTES SENATE FINANCE COMMITTEE April 21, 1999 8:07 AM TAPES SFC-99 SS1 # 102, Side A and Side B CALL TO ORDER Co-Chair Torgerson convened the meeting at approximately 8:07 AM. PRESENT Senator John Torgerson, Senator Al Adams, Senator Dave Donley, Senator Lyda Green, Senator Pete Kelly, Senator Loren Leman, Senator Randy Phillips and Senator Gary Wilken. Also Attending: CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development; DAN EASTON, Director, Facilities Construction, Department of Environmental Conservation; GREG CAPITO, Program Manager, Village Safe Water Section, Division of Facility Construction and Operation, Department of Environmental Conservation; KEVIN BROOKS, Director, Division of Administrative Services, Department of Fish and Game; DWIGHT PERKINS, Deputy Commissioner, Department of Labor; JIM BALDWIN, Assistant Attorney General, Governmental Affairs Section, Department of Law; CURT PARKINS, Deputy Commissioner, Department of Transportation and Public Facilities; DAVID TEAL, Director, Division of Legislative Finance; MARY MCDOWELL, Commercial Fisheries Limited Entry Commission; DON ETHERIDGE, Union Local #71; KIM ROSS, Executive Director, Alaska Air Carriers Association. Attending via Teleconference: From Anchorage: TOM COLLIDGE, Indian Health Service, Alaska Area Native Health Service, and Director, Office of Environmental Health and Engineering; TINA LONG, Coordinator, Rural Alaska Sanitation Coalition, Member, Alaska Native Health Board; SHEILA SELKREGG, Director for Rural Development, US Department of Agriculture; STEVE PARISH (incorrect last name provided by teleconference operator); BUTCH HALLFORD, Vice President, Northern Air Cargo; JOHN STEINER, Assistant Attorney General, Transportation Section, Civil Division, Department of Law From Metlakatla: TIM GILMARTIN, Mayor, City of Metlakatla; From Thorne Bay: GINNEY TIERNEY, City Administrator, City of Thorne Bay and Community Member, Governor's Rural Sanitation Council; From Tanana: PAUL ERHART; From McGrath: BRENT URSEL, Mayor, City of McGrath; From Koyikuk: LORETTA LOLNITZ, Mayor, City of Koyikuk, Member, Governor's Council on Rural Sanitation, and Member, Rural Alaska Sanitation Coalition; From Eagle Village: JOANNE BECK, Second Chief, Eagle Village Council; From Chalkyitsik: JAMES NATHANIEL, Environmental Coordinator for EPA/GAP Program. SUMMARY INFORMATION SB 146-COM. FISH LICENSE/FISHERMEN'S FUND The committee heard from the Department of Fish and Game, the Department of Law and the Commercial Fisheries Limited Entry Commission. Two amendments were adopted and the bill was reported from committee. SB 147-VILLAGE SAFE WATER ACT The committee heard from the Department of Environmental Conservation and took public testimony. The bill was held in committee. SB 148-AIRPORT LANDING FEES The committee heard from the Department of Transportation and Public Utilities and took public testimony. The bill was reported from committee. CS FOR SENATE BILL NO. 146(FIN) "An Act relating to the amount and disposition of the commercial fishing license fee and to the fishermen's fund; and providing for an effective date." This was the first hearing for this bill. Co-Chair John Torgerson explained that this bill would increase the commercial fisheries crewmember license fees from $30 for residents to $60 and $90 for nonresidents to $125. It would also change the percent of money that was deposited into the fisherman's fund from 60 percent to 36 percent and require that all funds be deposited into the fish and game fund. Co-Chair John Torgerson spoke to his proposed Amendment #1. This would clarify that the legislation would apply only to crewmember licenses rather than all commercial fishing licenses. Senator Al Adams moved to adopt Amendment #1. It was adopted without objection. KEVIN BROOKS, Director, Division of Administrative Services, Department of Fish and Game testified. The department worked with the co-chair on this bill and appreciated the efforts to assist with the budget reductions. There were a couple items on the bill he wished to work with staff to fix. Co-Chair John Torgerson informed him the bill would be reported out of committee this meeting. Kevin Brooks voiced the department's concerns shared with the Department of Labor, who administered the fisherman's fund. They did not want to jeopardize the dedication of the fund. He realized it was stated in the language of the bill. The Department of Law warned that the change in the percentage allocation would need to be addressed to ensure the fund was not compromised. Co-Chair John Torgerson had the same conversation with the Department of Law and had done research himself and he did not believe there was a problem with the dedicated funds. He had researched the minutes of the Constitutional Convention, which stated that a change in the rate was not supposed to change the properties that set it up as a dedicated fund. He was aware there were attorney general opinions that found in favor of both sides of the issue. The most recent opinion stated that the change in rate did not affect the constitutional dedication. Kevin Brooks then brought up the second concern. The department wished to maintain the cost differential between the two licenses. Currently, it was sixty-dollar differential. Co-Chair John Torgerson informed the committee that there was a test that dictated what differential could be charged to nonresidents. It was his understanding that the fee of $125 did not exceed that and was suggested by the Division of Legislative Finance after they applied the formula. Senator Al Adams noted that this bill would double the fee for Alaskan fishermen but did not do the same for out-of- state crewmembers. He felt if the rates were to be raised for in-state crewmembers, it should be raised for out of state crewmembers at the same rate as well. His reason was because Alaskans paid for state services such as water and sewer facilities while out-of-state crewmembers did not. Co-Chair John Torgerson said that was his original intent. However, after discussions with the Division of Legislative Finance and the Division Legal Services, he learned that even the current differential did not fit the formula. If the bill raised the nonresident fee higher than $125 then they would be in violation of the Interstate Commerce Clause. Senator Dave Donley pointed out similar formulas that went as high as a four-to-one ratio on the East Coast had survived challenges in the US Supreme Court. He understood that there was another side to that test regarding the actual cost relationship. Co-Chair John Torgerson detailed the formula was the total amount of money spent on commercial fisheries divided by all the residents. That number could not be three times higher that what was charged residents. He stated that was a federal law. Senator Dave Donley argued that it was not a federal law, it was a court interpretation of the US Constitution. He did not feel it was an absolute rule. He suggested the Division of Legal Services testify to why they advised as they did. He suggested it was one thing to design a law that would never lose and another to design a law to where it should be when there was a gray area. Senator Dave Donley agreed with Senator Al Adams and noted the other benefits that the out of state crewmembers had besides the cost of running the specific fishery. The state provided basic infrastructure, roads, etc. Co-Chair John Torgerson read into the record the legal opinion given by the Division of Legal Services based on the Alaska Supreme Court ruling in Carlson vs. the State Of Alaska. "The court had determined that the fees paid by nonresident commercial fishermen may not exceed the total of the fee paid by a resident plus the per capita amount of in state taxes used by the state to support fish management and commercial fisheries. The Carlson case interpreted the privileges and immunity clause of Article 9 Section 2 of the federal constitution. The privileges and immunities clause allows the person to pursue a livelihood in any state without unjust discrimination based on the person's state of residence." "The per capita cost to the state commercial fisheries program is determined by dividing the total amount of state expenditures for commercial fisheries programs by the number of residents of the state." He offered to share the entire opinion with the committee. Senator Dave Donley stated it was his opinion that the Supreme Court decision interpreted the US Constitution. If that was the state court's decision, it was not the final ruling. He believed that ruling was wrong in that it did not consider the other state expenditures that supported the industry. He gave more examples of municipal revenue sharing and other infrastructure costs. He felt there was a legitimate public policy argument. It was a gray area and he admitted he could be wrong. But he agreed with Senator Al Adams that under a fairness issue, the state had a stronger argument. Co-Chair John Torgerson did not disagree. However, he did not want to have the bill subject to challenge. Kevin Brooks shared his discussions with the Department of Law. It was explained to him that all commercial fishing licenses were considered not just the crewmembers licenses. The test was applied to the total nonresident licenses. Other licenses had a greater discrepancy and were subject to court challenge. He guessed that the state would end up reimbursing some crewmembers. Senator Al Adams asked what was the maximum amount that could be charged to stay within the court decision. Kevin Brooks answered that the formula was more complex than the co-chair alluded to. He detailed the commercial fisheries census and the use of oil revenue figures. Therefore it was difficult to give an exact figure. Senator Al Adams noted a conflict of interest due to his holding of a limited entry permit. Senator Loren Leman noted the same. He didn't feel this was the same as the crewmember license provision in this bill. Co-Chair John Torgerson objected to both members' motions to be allowed to abstain from voting. Senator Gary Wilken wanted to know if there was an age limit that required an eight-year old to buy a license. Kevin Brooks said there was no age limit. Anyone who fished on a commercial fishing vessel was required to hold a crewmember license. However, many felt it was a form of insurance since the permit covered the cost of medical services through the fisherman's fund. Senator Gary Wilken asked if they did not purchase the license if they were excluded from use of the medical services and facilities. Kevin Brooks was not definite, but believed that was true. Senator Gary Wilken requested that information provided to him in the future. Kevin Brooks added that when looking at the upper amount that might be charged an unintended result could be that the crewmember license could be higher than the limited entry license itself. The law stated that a crewmember license was not required for a holder of a limited entry license. Therefore, there was a possibility that some would chose to purchase the lower cost, limited entry license instead. Co-Chair John Torgerson had researched that earlier. He asked if the limited entry license applied to only one person on the vessel. Kevin Brooks said that was correct, as the skipper would usually have the limited entry permit. However, the crew could have license for different fisheries such as for a herring fishery, etc. MARY MCDOWELL, Commercial Fisheries Limited Entry Commission, testified that limited entry permits ranged in renewal prices from $50 to $150 for residents. Anyone could purchase the lower priced permits, which were for unlimited fisheries. Therefore, there could be some motivation to buy a $50 permit rather than the $60 crewmember license. Co-Chair John Torgerson so the $50 fee was available to anyone regardless of what they were fishing. Mary McDowell answered that the unlimited fishery permit could be used to crew in any fishery. Co-Chair John Torgerson asked if vendors sold both licenses. Mary McDowell replied they only sold the crewmember licenses. Co-Chair John Torgerson wanted to know how would someone purchase the less expensive permit. Mary McDowell said that would have to be purchased by mail. Co-Chair John Torgerson than wanted to know if there were any plans to sell the permits by vendors. Mary McDowell answered no. Kevin Brooks noted the reason for raising the issue was because there were no estimates on how many licenses could be affected. Kevin Brooks added another concern relating to the dedication of the revenues to the fish and game fund. The Department of Law suggested changing the word in Section 4 from "deposit" to "appropriated". He felt that language would be more appropriate. Co-Chair John Torgerson had heard that argument but if the funds would then go to the general fund and it was not his intent to do that. Kevin Brooks said it was his understanding that the funds would be appropriated from the general fund to the fish and game funds. Senator Al Adams suggested making the change on page 2 line 24 to read, "shall be appropriated into the general fund to the fish and game fund." which should solve the budget concerns. He understood the relationship to the operating budget. Co-Chair John Torgerson asked it the Legislature appropriated or deposited the current forty-percent that went into the fund. He determined that went into the general fund and was appropriated. Kevin Brooks believed the remaining sixty-percent was deposited. Co-Chair John Torgerson wanted to know why the department wanted to change this. JIM BALDWIN, Assistant Attorney General, Governmental Affairs Section, Department of Law, answered that the part that was dedicated did not have to be appropriated. The part that went to the general fund went there automatically. He was unsure if that would change the general funds appropriation level. It would be similar to oil and hazardous substance surcharge fees. They were not considered general fund receipts, but were anticipated in the front section of the budget that once they were received, they were appropriated. It would take another appropriation at a later date for expenditure. Co-Chair John Torgerson said he would ask the Legal Services Division and the Division of Legislative Finance for an opinion on this matter. Kevin Brooks noted another item was with the fifteen- percent vender surcharge. He did not know if the intent of this legislation was to adjust that amount since it concerned a much higher dollar amount. Co-Chair John Torgerson noted the surcharge was a regulation not a statute. Kevin Brooks said he would have to check. Co- Chair John Torgerson suggested lowering the percentage. AT EASE 8:34 AM / 8:37 AM Co-Chair John Torgerson noted a call was being made to the Division of Legislative Finance for advice on the appropriation vs. deposit issue. Jim Baldwin testified. For the record, he stated that he had worked with the co-chair before this meeting. He felt some of the concerns raised by the department were worth consideration. There had been some confusion over the years, in the department's opinion, on the dedicated funds issue. In particular, changes in the rate of dedication on the pre- existing dedicated funds-those funds that pre-dated statehood and were continued under Article 9 of the Alaska Constitution. Most recently, the department dealt with this in connection with tobacco tax. Part of the tax was dedicated. When addressed in this committee during the last Legislature, the Division of Legal Services took the position that there was evidence in the minutes of the constitutional convention to support an interpretation that a rate of dedication could be changed. That was done in this bill with the rise of the fee and the lowering of the rate. The intent was that no more was being dedicated than what was in existing law. Therefore, there was not a change in the rate of dedication. The Department of Law opinion regarding the tobacco settlement at the time was that a change in rate would threaten a continuance of the dedicated funds. They advised installing back-up provisions in the bill to remove incentive to litigate and make it clear where the funds would go in the case of successful litigation. Another approach that had been used successfully in the area of tobacco tax was to send money to another place rather then dedicate. This would really impose an additional fee in a separate area and leave the dedication as is. He suggested doing this for the fish and game fund, which would avoid the issue altogether. He understood the committee might want to be consistent with the tobacco tax law. However, he warned there may be risks. The department would defend the actions, he assured. Senator Randy Phillips wanted to know how effectively the Department of Law would defend the Legislature's actions. Co-Chair John Torgerson said the reason he had worked with the Department of Law earlier was to avoid the perception of "smoke and mirrors". He had considered a surcharge but preferred this method He intended for the fees to offset the cost of commercial fishing in the state. It would be cleaner if the fees went through the fish and game funds and came out again in commercial fisheries expenditures. He referred to page 7 of the legal opinion issued by George Utermohle of the Legal Services Division, which addressed the dedicated rate in the form of gasoline taxes. The Chairman of the Finance Committee of the Constitutional Convention stated the intent did not have any reference to rates. The convention finance committee intended that this applied to the allocation of particular taxes to a particular purpose. Senator Dave Donley wanted to know if the Department of Law argued the Carlson case. Jim Baldwin said it had although he had not handled it personally. Senator Dave Donley wanted a copy of the brief to the Supreme Court. Kevin Brooks made a follow-up comment on the fifteen- percent surcharge. This was governed by statute AS 16.05.470(a). He recommended setting the figure at ten percent. Co-Chair John Torgerson had asked for a breakdown of tickets sold by month to determine the best effective date of the bill. Kevin Brooks had provided that information to staff and detailed that most revenues were generated during January and February. Therefore, an effective date of January 1, 2000 would capture revenues. Co-Chair John Torgerson wanted to know why the department recommended against an effective date of June this year. Kevin Brooks responded that because many permits were already issued and the vendors were distributed the current forms and information, there would be hardship in retrieving the permits to replace with the new. Co-Chair John Torgerson understood the argument and agreed. Senator Loren Leman noted Mary McDowell talked about the possibility of crewmembers choosing to purchase a limited entry license rather than a crewmember license. There was a benefit of an insurance fund to those who did not have other insurance. Was that fund also available to those who purchased the limited entry permit? Kevin Brooks said it was. Senator Loren Leman wanted an incentive to keep people from purchasing the permit instead. At Ease 8:50 AM / 9:00 AM Co-Chair John Torgerson said discussions showed that changing the word "deposit" to "appropriated" would not make that much difference. David Teal, Director, Division of Legislative Finance was present to answer specific questions. Senator Loren Leman moved conceptual Amendment #2. This would apply to AS 16.05.470(a) and change the vendor surcharge from fifteen-percent to ten-percent. It would also change page 2 line 24 to delete "deposited" and insert "appropriated." Without objection, it was adopted. Senator Dave Donley made a motion to move from committee SB 146 (FIN). Co-Chair John Torgerson noted the department would have fiscal notes later in the day that would show an increase in the revenue component to reflect the changes from Amendment #2. There was no objection and the bill moved from committee. SENATE BILL NO. 147 "An Act relating to local contributions under the village safe water program; and providing for an effective date." Senator Dave Donley spoke to the bill. This was a Senate Finance Committee bill that applied the same guidelines for the Municipal Matching Grants program to the Village Safe Water program. Co-Chair John Torgerson referred to the text in Section 2 that determined the local municipality asking if that was currently in statute. Senator Dave Donley answered that used the same standards as were used in the Municipal Matching Grants program. Co-Chair John Torgerson noted the committee did receive a $304,000 fiscal note from the department to implement the legislation. The costs would mainly cover the tests dictated in the bill on how to determine the required local effort. DAN EASTON, Director, Facilities Construction, Department of Environmental Conservation testified in opposition to the bill. He had seven concerns to bring before the committee. He began with saying there was nothing wrong with the idea of local communities contributing to the projects. That was done currently in that they were asked to contribute based on what they had. This bill would create a "one size fits all," criteria and not all communities would be able to meet the requirement. The department was particularly concerned that some of the communities with more severe health and sanitation problems would be the ones that would have the most trouble meeting the standard match requirement. He stated the program would lose federal fund if this bill were implemented. Tape: SFC - 99 #102, Side B 9:07 AM Of the 71 projects waiting to begin on July 1 if the funding was approved. Of those, 44 projects could be considered new projects and would be subject to the match requirement. The communities did not currently have any idea that they would have to meet a match requirement. While the Environmental Protection Agency funding could wait for communities to collect match funding, the US Department of Agriculture funding could not wait. Alaska was in competition with other states for those funds. Senator Dave Donley wondered if the simple fix would be to change the effective date to July 1, 2000. Dan Easton replied that the department would consider that a vast improvement. Senator Randy Phillips asked if the department would still oppose the bill. Dan Easton listed the third concern was that the match calculations were complex. He recommended that an engineer reviews and simplifies the calculations. He said the department oversaw other match programs that were more straightforward. The Municipal Water, Sewer and Solid Waste Matching Grant (AS 46.03.) program in statute was one of those simpler match programs. This program was for larger communities. Co-Chair John Torgerson asked if the recommendation was to adopt the criteria for that program into this bill. Dan Easton suggested looking at those statutes and regulations as a guide for a simpler way to calculate matching requirements. The fourth concern was the proposed thirty-percent cap would actually exceed the match requirement in the Municipal Water, Sewer and Solid Waste Matching Grant program. The smaller communities served by this program could actually be required to provide a larger match than larger communities. Co-Chair John Torgerson assured him the committee would look at the formula. The fifth concern was that the proposed method for which the match requirements were calculated required an evaluation assessment for first and second class cities. Those assessments were not available from any communities, according to the state assessor, and they would have to be done. It was not a matter of compiling data at hand. There was more to it than that. He continued with the sixth concern. The legislation would increase operating costs for the program. He noted the fiscal note. The changes would complicate the accounting process. Not only would the department have to track state and federal funds, it would also have to track local funds. The department would also have to place values on the in- kind contributions. He felt it was a good thing that the state allowed such contributions done as part of the local match. However, the worth would have to be determined. Finally, this would require the department to do an audit of every project to track local funds. This was not normally done. Co-Chair John Torgerson asked how would this effect the next phases of ongoing projects. Dan Easton interpreted the bill, as those projects under current construction would be exempt. However, that was a broad stipulation. If the original project was to build a road to a dump, what happens to the status of the project when the dump needed to be constructed? Would that be the same project? Co-Chair John Torgerson repeated the question and wanted to know if those projects would proceed with no match. He asked how many current projects there were. Dan Easton answered 140. Co-Chair John Torgerson asked what percent would be as described as road/dump type projects. Dan Easton responded fifty percent. Dan Easton gave another example of a project to put water pipe into a certain area of a town. Phase two would put the pipes into another area. Co-Chair John Torgerson stated that the committee then needed to better define the on-going projects. Senator Al Adams referred to the formula on page two and wanted to know if the state assessor was going to testify on the assessment. He noted that many of the affected communities were in his district that had never been assessed. He wanted someone to walk through the process and explain it to the committee. Co-Chair John Torgerson stated his intent was to have a simpler formula. He didn't oppose a match requirement but did not want it to incur further expenses to calculate. He also understood there were some areas of the state that could not afford any match. The bill would have to apply a grant similar to that for the underground storage tank programs. Senator Loren Leman suggested simplifying the formula to a five-percent match requirement. He supported community investment into projects. He felt the facilities would be better cared for. However, he knew there were some that could not afford it and he wanted better flexibility. He talked about in-kind services. He spoke to the stated need for audits. He wanted to know where that information came from. If an audit were not required for every project under state and federal funding, why would it be required for a municipal match? Dan Easton said that was a good point. Internal audits would ensure the matches were made. He felt it was a policy call. Senator Loren Leman suggested the department engineer could place a value and make a reasonable assumption of in-kind services. Senator Dave Donley understood this was the same formula used by Department of Community and Regional Affairs for community matching grants. How difficult could it be? He did support the co-chair's efforts to simplify. He felt there were strong incentives in the bill. He was in favor of volunteer labor and material and donated land, etc. Co-Chair John Torgerson noted that the Department of Community and Regional Affairs did not have a formula for unincorporated communities. That was were the difficulties would arise. Senator Al Adams added that those formulas did not go up to the thirty-percent necessary for this program. Until all communities were assessed, the formula won't work. Senator Loren Leman asked what first class cities were eligible. Dan Easton answered that first class city with a population less than 600. Seldovia was one example. All second class cities were eligible. GREG CAPITO, Program Manager, Village Safe Water Section, Division of Facility Construction and Operation, Department of Environmental Conservation came to the table to say that Galena and St. Mary were two eligible first class cities. He had a list to hand out to the committee. Senator Loren Leman felt this matter would be an easy fix. He then referred to page one lines 13 and 14 addressing local contributions required for each draw of monies. He thought that could be cumbersome and suggested that the match be required before the project was completed rather than for each draw. Co-Chair John Torgerson requested Dan Easton draft language to incorporate the formula used for the other water and sewer program. He asked if the department would oppose any local contribution requirement or if they wanted the program to work right. Dan Easton felt the current system worked well and a more complicated formula would not benefit. Co-Chair John Torgerson requested match information for current projects for comparison. TOM COLLIDGE, Indian Health Service, Alaska Area Native Health Service, and Director, Office of Environmental Health and Engineering, testified via teleconference from Anchorage. He worked with the Village Safe Water program. He did not think the proposed changes would achieve the goal of the safe water projects for the following reasons. It would eliminate grants for some communities that could not afford the five-percent match. It would be hardest on small communities that the needed the sanitation improvements the most. The short timeframe for implementation could delay existing and new projects. It would result in a loss of federal funds. It was unlikely to result in new additional federal funds. Likely no new local resources would be generated by this effort. It would increase the administrative hurdles on existing sanitation projects. It was already the practice of the Indian Health Service to require in-kind contributions from communities. He saw little benefit of spending resources determine the value of in-kind contributions in detail. He saw no gain for the state at the expense of slowing rural health. He suggested there could be higher costs in other areas. TINA LONG, Coordinator, Rural Alaska Sanitation Coalition, Member, Alaska Native Health Board testified via teleconference from Anchorage. Speaking for the two groups and as an individual, she opposed the bill. She detailed the missions and efforts of the organizations. She felt this would disenfranchise rural communities. SHEILA SELKREGG, Director for Rural Development, US Department of Agriculture, testified from Anchorage. She spoke to the federal funding available. She worked to coordinate federal and state funding. She warned of the risk of the funds being sent to other states. She stressed the contributions already made by the communities. TIM GILMARTIN, Mayor, City of Metlakatla, testified via teleconference from Metlakatla. He spoke of the pending projects in his community and the state of the economy in Southeast Alaska that would prohibit them from coming up with matching funds. GINNEY TIERNEY, City Administrator, City of Thorne Bay and Community Member, Governor's Rural Sanitation Council, testified via teleconference from Thorne Bay in opposition to the bill. She would hold the remainder of her comments until the revised version was release and she could review it. Co-Chair John Torgerson noted there would be a committee substitute for the bill. PAUL ERHART testified via teleconference from Tanana. He spoke of a sewage plant under construction. This bill would delay the project. He spoke about the slow economy in Interior Alaska due to a poor commercial fishing season. BRENT URSEL, Mayor, City of McGrath, testified via teleconference from McGrath in opposition to the bill. The average family in the community paid $100 a month for water service. With cuts proposed to the Power Cost Equalization program and other services, they could not afford any other costs. He pointed out the efforts of the community in providing maintenance and operation of the facilities. LORETTA LOLNITZ, Mayor, City of Koyikuk, Member, Governor's Council on Rural Sanitation, and Member, Rural Alaska Sanitation Coalition, testified via teleconference from Koyikuk. She opposed the bill. She told the committee about the current water facility and the need for improvements She also told about the hazards of honey buckets. [Teleconference interrupted at the request of the co- chair.] JOANNE BECK, Second Chief, Eagle Village Council, testified via teleconference from Eagle Village. She opposed the bill. She didn't believe her community could meet the match requirements. She told of the difficulty for residents to earn a living. JAMES NATHANIEL, Environmental Coordinator for EPA/GAP Program, testified via teleconference from Chalkyitsik, in opposition of the bill. He told of problems with current water and sewer systems and the hazards of these. Co-Chair John Torgerson said the bill would be worked on and some of the concerns voiced by the witnesses would be addressed. He ordered the bill held in committee. SENATE BILL NO. 148 "An Act imposing landing fees at state owned and operated airports; and providing for an effective date." CURT PARKINS, Deputy Commissioner, Department of Transportation and Public Facilities testified. The department appreciated the committee's concern with the cost of operating the rural airports. This would be an additional revenue source that could help close the gap. He advised that other impact should be looked at. Tape: SFC - 99 #103, Side A 9:54 AM A past effort to impose landing fees in 1993 failed. The court had ruled that the department inappropriately imposed those fees. This was because policy rather than regulation instituted them. Under this bill, the department would have the ability to impose the fees through regulation and thus meet the court requirement. Another effort was made by the Legislature in the increase the aviation fuel tax to an amount that approximated what had been collected in landing fees at the time. The 1994 legislation raising that tax stipulated the department could not impose landing fees and the fuel tax could not increase more than what was previously generated with the landing fees. That provision would expire in January 1, 2000. The benefit to the department would be that the fees generated could be used to operate the rural airports. He noted potential weakness in that it did not give the department flexibility to adjust fees over time or to modify for the weight of equipment. There was a potential disadvantage in an inequality occurring with commercial aircraft weighing less than 6000 lbs. He noted smaller aircraft weighing under 6000 lbs. would not be charged the landing fee. Two carriers servicing a community would be charged differently according to the size of their aircraft. Another concern was with the ability to monitor the activity reports to ensure compliance. He recommended additional staff to audit. He also suggested a penalty fee to impose on violators. Senator Randy Phillips wanted to know if the department charged a passenger fee for rural airports. Curt Parkins replied that there was no passenger fee. The department generated most of its fees through space rental. Some funding came from the US Air Force for the Galena and Cold Bay airports. Other funding came from the Federal Aviation Administration. Senator Randy Phillips asked what the department collected versus the cost of operations. The airports generated $2.8 million in general funds statewide. He wanted to know how much was then spent on rural airports alone. Curt Parkins estimated the cost of operating rural airports including the cost of leasing projects, at about $20 million. That was about ten-percent. Senator Randy Phillips suggested the department consider a passenger fee. Curt Parkins replied that the department had chosen to pursue passenger charges first at the international airports to access the public acceptance. Senator Al Adams suggested imposing the landing fee in Anchorage since that was were most of the landings occurred. He knew the legislation applied to state-owned airports. He wanted to know if the legislation considered state-owned and leased airports and municipal-owned airports that were maintained by the state. Curt Parkins said it was his understanding this would apply to airports state-owned and operated. The airport in Ketchikan was state-owned but was operated by the municipality and had its own fee schedule that was considerably higher than what was proposed here. Airports that were owned and operated by the municipalities, such as Juneau and Kenai would remain the same using their own fee schedules. The legislation would apply to 25 certificated airports that the state owned and operated. Senator Al Adams asked if this legislation would impose the fee based on weight rather than on the number of passengers. Curt Parkins affirmed and detailed the fees imposed on the different types of aircraft. A Cessna 206 and 207 would not pay any landing fee. A Navaho weighing 7000 lbs. would pay $3.50 each time it landed. A DC-6, often used for cargo shipments would pay $50. Senator Al Adams was concerned how this would affect Prudoe Bay and the impact on the economy. Curt Parkins said the fee would not be based on the number of passengers but on the gross weight of the aircraft. He had done some figures on what the cost per passenger would be and would give that information to the committee it the members were interested. Senator Al Adams then asked about mail, noting that the carriers were subsidized by the US Postal Service. How would that be affected? Curt Parkins was unsure. Co-Chair John Torgerson said it was his intention that if the mail was handled by a private carrier they would be charged the fee. Senator Gary Wilken asked what was the take-off weight of a Cessna 206 and a 207. Curt Parkins answered the 206 was 3600 lbs. and the 207 was slightly larger. Senator Gary Wilken then wanted to know why floatplanes were exempted. Curt Parkins understood this was similar to what was proposed in the earlier landing fee in 1991-93. He deferred to Steve Pabish (?) to give more information. STEVE PARISH (incorrect last name provided by teleconference operator) testified via teleconference from Anchorage. He explained that the float plane operation cost the rural airports nothing. This was discovered during the public testimony process of the earlier attempt. There were relatively few floatplanes that exceeded the 6000 lb. limit. Co-Chair John Torgerson asked why the 1992 regulations were not written to include all commercial aircraft rather than just charging by weight. Curt Parkins was unsure but said they did not want to push the airlines into using smaller aircraft to avoid the fees. He noted it was a potential safety concern. There was discussion between the co-chair and Curt Parkins about the use of the different aircraft. Senator Loren Leman asked how the Ketchikan airport landing fees compared. Curt Parkins responded it was a different mechanism in that a flat fee was charged up to a certain weight. The fee was $1.62 per thousand pounds. An aircraft weighing over 12,000 lbs. was charged $8.50 per landing. Co-Chair John Torgerson asked if 50-cent charge was reasonable. Curt Parkins said it was and compared it to the Anchorage airport. Co-Chair John Torgerson asked about the size of aircraft using the rural airports. The fees charged various aircraft were again discussed. Senator Gary Wilken asked if a city-owned airport would be exempt. Co-Chair John Torgerson said they would along with the City of Ketchikan, which leased from the state. Senator Al Adams compared the tax rates on air carriers to other businesses across the state such as mining and tourism. Curt Parkins was unable to respond but noted that the aviation industry was crucial to development across the state. He referred to his earlier statement that the impact this would have in other areas should be considered. Senator Al Adams commented that this could impact rural development and asked for the department's position on the bill. Curt Parkins answered that the department supported finding mechanisms to close the funding gap for rural airport maintenance and operation costs. This was one mechanism and there could be other ways to meet the need. He was not in a position to say whether the department fully supported or opposed the legislation and that it could be improved. DON ETHERIDGE, Union Local #71, testified in opposition to the bill. This affected members of the union. KIM ROSS, Executive Director, Alaska Air Carriers Association testified in opposition to the bill. She told about her organization. The association wanted the Legislature to cut the budget. However, caution and common sense must prevail, she stressed. Any tax policy decision should be based on accurate facts and sound analysis. She gave a history of the prior attempt to impose a landing fee. She then told of other carrier's attempt to comply with FAA criteria. She gave an analogy of a carrier operated by "Charlie". To avoid paying landing fees, "Charlie" would choose to fly a smaller, less safe aircraft to transport a high school basketball team. Landing fees were discriminatory and created an additional administrative burden. Senator Gary Wilken wanted clarification of "Charlie's" problem. Kim Ross had a breakdown of the amounts the different aircraft would pay. Senator Gary Wilken wanted to understand why "Charlie" would send the basketball team on an unsafe aircraft in order to save $3.50. Kim Ross gave totals of daily amounts the aircraft would pay based on the number of flights they would have. BUTCH HALLFORD, Vice President, Northern Air Cargo, testified via teleconference from Anchorage in opposition to the bill. He felt the administrative cost would cut into the revenue generated. He believed this legislation placed an unfair expectation on rural communities to make up budget shortfalls. Co-Chair John Torgerson commented that the financial load was distributed across the state by the many bills sponsored by the committee. Senator Loren Leman noted there was an overall net gain to the rural operating budget. Butch Hallford said he had not considered that valid because the Village Safe Water projects would be done in a couple years and the airport fees would continue indefinitely. He noted that the burden would fall on nine carriers. He also pointed out that there would be a need for more administrators to oversee the program. Co-Chair John Torgerson clarified *. Senator Randy Phillips asked if the witness advocated an increase in aviation tax in lieu of this bill. Butch Hallford chose the aviation tax. Senator Pete Kelly pointed out that the money would have gone away under the current structure. Therefore that tax structure did not work. JOHN STEINER, Assistant Attorney General, Transportation Section, Civil Division, Department of Law, representing the airports, testified via teleconference from Anchorage. He noted the department was already allowed to impose landing fees, as they felt appropriate. They had the flexibility to give considerations CORBY HUNT, Alaska Airlines testified via teleconference from off net out of state. He felt the legislation was discriminatory and should be imposed on all commercial carriers. He also suggested the fees should be accessed on an airport by airport basis. He noted the last time the landing fees were imposed, they were ruled by the court. Co-Chair John Torgerson said he felt there should be a cost analysis for each airport anyway. Tape: SFC - 99 #103, Side B 10:42AM Senator Al Adams recommended the bill be left in committee. Senator Loren Leman thought there was merit to the argument that some commercial carriers would be charged because of their larger aircraft. He did not have an amendment prepared to address that. Co-Chair John Torgerson agreed but did not think the fee was sufficient. He felt that to impose the fee to smaller aircraft would entail more expenses. Senator Randy Phillips suggested the committee consider an aviation fuel tax over the landing fee. Co-Chair John Torgerson asked Corby Hunt if Alaska Airlines would prefer the aviation fuel tax over the landing fee. Corby Hunt noted the accounting of the landing fee was done with no oversight. As far as the aviation fuel tax, he said he would need to confer with his boss. Senator Lyda Green was reluctant to put the Department of Transportation and Public Facilities into the regulation process because of the difficulties with airport leasing regulations. Senator Gary Wilken asked what revenues this fee would generate. Co-Chair John Torgerson noted the fiscal note had not yet been prepared but the department estimated $1.5. Senator Gary Wilken offered a motion to move SB 148 from committee. Senator Al Adams objected. By a vote of 6-1-2, the motion passed. Senator Al Adams cast the nay vote. Senator Pete Kelly and Senator Sean Parnell were absent. ADJOURNED Senator Torgerson adjourned the meeting at 10:50 AM. SFC-99 (23) 4/21/99