SENATE STATE AFFAIRS COMMITTEE  February 7, 1995 3:35 p.m. MEMBERS PRESENT Senator Bert Sharp, Chairman Senator Randy Phillips, Vice-Chairman Senator Jim Duncan Senator Dave Donley MEMBERS ABSENT Senator Loren Leman COMMITTEE CALENDAR SENATE BILL NO. 40 "An Act making appropriations from the Alaska Housing Finance Corporation revolving fund to the general fund; and providing for an effective date." SENATE BILL NO. 1 "An Act relating to state implementation of federal statutes." CS FOR HOUSE CONCURRENT RESOLUTION NO. 1(FIN) Creating the Long Range Financial Planning Commission. PREVIOUS SENATE COMMITTEE ACTION SB 40 - No previous senate committee action. SB 1 - No previous senate committee action. HCR 1 - No previous senate committee action. WITNESS REGISTER Randy Welker, Auditor Legislative Audit Division P.O. Box 113300, Juneau, AK 99811-3300¶465-3830 POSITION STATEMENT: testified on SB 40 Joe Ambrose, Aide to Senator Taylor State Capitol, Juneau, Alaska, 99801-1182¶465-3873 POSITION STATEMENT: prime sponsor of SB 1 Bill Miles, Aide To Senator Pearce State Capitol, Juneau, Alaska, 99801-1182¶465-4993 POSITION STATEMENT: in favor of HCR 1 Jack Fargnoli, Office of Management & Budget P.O. Box 110001, Juneau, AK 99811-0001¶465-4678 POSITION STATEMENT: in favor of HCR 1 Kevin Ritchie, Alaska Municipal League 217 Second Street, #200, Juneau, AK 99801¶586-1325 POSITION STATEMENT: in favor of HCR 1 ACTION NARRATIVE SSTA - 2/7/95 SB 40 APPROP: AHFC TO GENERAL FUND  TAPE 95-3, SIDE A Number 001 CHAIRMAN SHARP calls the Senate State Affairs Committee to order at 3:35 p.m. and brings up SB 40 as the first order of business before the committee. Number 025 CHAIRMAN SHARP, the prime sponsor of SB 40, reads the sponsor statement for the bill. Number 085 CHAIRMAN SHARP asks Mr. Welker to testify. Number 090 RANDY WELKER, Legislative Auditor, states the Division of Legislative Audit performed an audit of AHFC in February, 1994. One of the concerns that initiated the audit was that when AHFC has been asked in the past whether there is any excess cash in the corporation to which the legislature could have access, the corporation always responds that all assets are tied up, and that the bond covenants and the restrictions imposed by the bonds preclude any extraction of cash. Last session the Legislative Budget & Audit Committee authorized the Division of Legislative Audit to perform an audit. The focus of the audit was to identify any and all surplus cash that may be available to the legislature. The conclusion of the audit was that 535 million dollars could be extracted over FY 94, 95, and 96 without impairing AHFC's ability to continue the programs in place at the time. There was some concern on the part of Legislative Audit and AHFC that the extraction of surplus cash might affect the bond rating of the corporation. However, since the extraction of 200 million dollars last session, there has been no negative impact on the corporation's bond ratings. One of the bond rating agencies did put AHFC on an alert, but AHFC's bond rating did not drop. Number 130 MR. WELKER states the legislature did extract less than the amount available for extraction last year. So there are excess funds still available. Legislative Audit is updating last years analysis at the request of the Budget & Audit Committee. We intend to have a report at Thursday's Budget & Audit Committee meeting providing updated numbers. Number 165 MR. WELKER states that the Legislative Budget & Audit Committee conducted an oversight hearing on AHFC on Thursday, February 2, 1995. The primary topic of that hearing was the recent 5% mortgage program. That topic will be continued at this week's Legislative Budget & Audit Committee hearing on Thursday, February 9, 1995. Legislative Audit has been asked to research the use of arbitrage earnings of the corporation. We have also been asked to look at some aspects of the proposed consolidated office building that AHFC is in the process of constructing in Anchorage. Thursday's hearing will deal exclusively with AHFC matters. Number 185 CHAIRMAN SHARP states that the intent of SB 40 is to keep AHFC in the forefront. The next referral of SB 40 is to the Senate Finance Committee. Senator Sharp would just as soon move SB 40 up to the Finance Committee, so that it would be available for consideration in that committee. Number 200 SENATOR RANDY PHILLIPS makes a motion to discharge SB 40 from the Senate State Affairs Committee with individual recommendations. Number 202 CHAIRMAN SHARP, hearing no objection, orders SB 40 released from committee with individual recommendations. SSTA - 2/7/95 SB 1 REVIEW OF FEDERALLY MANDATED PROGRAMS SENATOR SHARP brings up SB 1 as the next order of business before the Senate State Affairs Committee and calls the first witness. Number 210 JOE AMBROSE, Aide to Senator Taylor, prime sponsor of SB 1, reads the sponsor's statement. Mr. Ambrose adds that Senator Taylor does not think the fiscal notes are very believable and thinks they should be reviewed. Number 265 SENATOR RANDY PHILLIPS asks Mr. Ambrose if the departments are supportive of SB 1 and if there is an official position paper from the Governor's Office. Number 268 MR. AMBROSE responds there is no position paper from the administration. Mr. Ambrose confirms that Senator Taylor would definitely like the Finance Committee to investigate the fiscal notes. Number 300 SENATOR RANDY PHILLIPS makes a motion to discharge SB 1 from the Senate State Affairs Committee with individual recommendations, with the understanding that the bill will get an additional referral to the Finance Committee. Number 301 CHAIRMAN SHARP states he will talk to President Pearce regarding the additional referral. Hearing no objection, the chairman orders SB 1 released from committee with individual recommendations. SSTA - 2/7/95 HCR 1 LONG RANGE FINANCIAL PLANNING COMMISSION Number 305 SENATOR SHARP brings up HCR 1 as the next order of business before the Senate State Affairs Committee and calls the first witness. Number 310 BILL MILES, Aide to Senate President Pearce, prime sponsor of SCR 3, the companion bill to HCR 1, informs the committee that a lot of work was done by the House Finance Committee on HCR 1. The House Finance Committee considered any number of majority and minority amendments and suggestions, and most of the suggestions made by the Governor's Office. HCR 1 passed the house by a 37-1 vote. The proposed SCS (senate committee substitute) is identical to the version passed by the house with one exception. Number 325 MR. MILES lists the changes made by the house: 1) page 1, line 7, the words "and expenditure" were added; 2) the whereas clause on page 1, line 9 is an entirely new clause; 3) page 1, lines 11 and 12 adds language specifying public participation; 4) page 1, line 14, adds the language "promote economic stability by diversifying the state's economy and lessening the dependence on oil revenues"; 5) page 2, line 3, the reference to a ten-year plan was replaced with a reference to a long-range financial plan; 6) a separate resolve clause was added referring to three, five, and ten-year plans; 7) page 3 of the proposed SCS (SCS CSHCR 1[STA]), paragraphs 8, 9, and 10 are new mandates; 8) three deadlines have been added: a March 15, 1995 start-up deadline, a July 15, 1995 preliminary report deadline, and a final report deadline of October 1, 1995. Number 355 MR. MILES informs the committee that Senator Pearce endorses the changes made by the house, and urges consideration of the committee substitute. MR. MILES states the final outstanding issue is the composition of the commission. Currently, the legislation passed by the House stipulates that all nine members be appointed jointly by the House Speaker, the Senate President, and the Governor. Senator Pearce feels that getting three people to agree on any nine appointees will be virtually impossible. That is why she suggets in the senate committee substitute that, of the nine public members, three members be appointed by the House Speaker, three by the Senate President, and three by the Governor. Number 380 SENATOR RANDY PHILLIPS asks what would force the legislature to implement the suggestions of the commission. MR. MILES responds there is nothing to force the legislature to follow the recommendations of the commission. SENATOR RANDY PHILLIPS states the vast majority of his constituents are opposed to the concept of a long-range planning commission; they think it will do no good. They also oppose the funding of such a panel. They think private groups should pick up the funding for this. The legislature should already be doing long-range planning. It would be a good concept if there was something to compel the legislature to follow the recommendations of the commission. But it is a non-binding resolution, and one legislature cannot bind another. Senator Phillips states he will not impede the forward motion of the resolution from committee, but he does not plan to vote for it when it reaches the floor of the Senate. Number 408 SENATOR DONLEY also thinks it is the job of the legislature and the governor's office to do long-range fiscal planning. SENATOR RANDY PHILLIPS thinks HCR 1 will have a difficult time passing the Senate. Number 450 MR. MILES states he cannot respond to Senator Phillips' and Senator Donley's concerns, but he will convey them to Senator Pearce. Number 456 JACK FARGNOLI, Office of Management & Budget, Governor's Office, states he is conveying testimony for Pat Pourchot. While the Governor supports HCR 1, the main concern is that in the proposed SCS, changing how the nine public members are appointed will alter the balance of power away from equality. Number 475 SENATOR RANDY PHILLIPS adds that two years ago, it was difficult to appoint members to the Legislative Ethics Committee due to a consensus clause. He thinks a consensus arrangement for appointing members to a long-range planning commission would cause similar problems. Number 480 MR. FARGNOLI responds it was felt that it would be easier to get unanimity than to deal with the minority issue. Number 485 SENATOR DONLEY suggests dealing with the problem by changing the number of public members the governor could appoint. Number 500 MR. FARGNOLI thinks the administration would be open to any approach that resulted in an equal balance. Number 505 KEVIN RITCHIE, Alaska Municipal League, states that state-wide, long-range financial planning is a priority of the municipal league. Many municipalities have completed long-range financial plans and would like to be involved in a state-wide effort. Mr. Ritchie thinks municipalities could provide technical and logistical support in creating a state-wide, long-range financial plan. Number 515 SENATOR RANDY PHILLIPS asks Mr. Ritchie how local governments funded their task forces. MR. RITCHIE replies some municipalities funded their task forces, while others simply did it internally. SENATOR RANDY PHILLIPS thinks the legislature and governor should do it internally. Number 525 CHAIRMAN SHARP says it is good to include the public, because the public then learns the ramifications of budget making. TAPE 95-3, SIDE B Number 580 SENATOR DONLEY offers an amendment to the proposed committee substitute for HCR 1. Amendment #1: page 3, line 3, after "programs", insert "of at least as much as the current fiscal gap between reoccurring revenues and current expenditures". CHAIRMAN SHARP objects to amendment #1. Number 574 SENATOR DUNCAN thinks it would be good to pass this amendment and HCR 1, if for no other reason than to show people how difficult it is to cut the budget. CHAIRMAN SHARP agrees with Senator Duncan. Balancing the budget is not going to occur simply by cutting the budget. Number 555 A vote is called on amendment # 1 to HCR 1. The amendment is adopted by 3 yeas, 1 nay, 1 absent. Voting for the amendment are Senators Phillips, Duncan, and Donley. Voting against the amendment is Chairman Sharp. Senator Leman is not present. Number 540 SENATOR DUNCAN offers amendment # 2 to the proposed committee substitute to HCR 1. Amendment # 2: page 2, paragraph 1, after the word "appoint" it will read, "the Speaker of the House of Representatives and the President of the Senate shall appoint two each, and the Governor shall appoint five of these members; page 2, paragraphs 2 and 3 shall stipulate that of the Senators and Representatives appointed, one of each shall be a member of the majority and one shall be a member of the minority. CHAIRMAN SHARP objects to amendment # 2. A vote is called on amendment # 2 to HCR 1. The amendment fails to be adopted by 2 yeas, 2 nays, and 1 absent. Voting for the amendment are Senators Duncan and Donley. Voting against the amendment are Senators Sharp and Phillips. Senator Leman is not present. Number 485 SENATOR DUNCAN offers amendment # 3 to the proposed committee substitute to HCR 1. Amendment # 3: page 2, paragraph 1, of the nine public members, five shall be appointed by the Governor, two by the Speaker of the House, and two by the President of the Senate. CHAIRMAN SHARP objects to amendment # 3. A vote is called on amendment # 3 to HCR 1. The amendment fails to be adopted by 2 yeas, 2 nays, and 1 absent. Voting for the amendment are Senators Duncan and Donley. Voting against the amendment are Senators Sharp and Phillips. Senator Leman is not present. Number 445 SENATOR DONLEY offers amendment # 4 to the proposed committee substitute to HCR 1. Amendment # 4: page 2, paragraphs 1-4: of the public members, two shall be appointed by the Speaker of the House, two by the President of the Senate, and three by the Governor. Of the non- public members, there shall be one Senate majority member, one Senate minority member, one House majority member, one House minority member, and two officials from the Executive Branch. Number 416 CHAIRMAN SHARP notes that the proposed committee substitute has not yet been adopted. SENATOR RANDY PHILLIPS makes a motion to adopt the proposed committee substitute. Number 412 CHAIRMAN SHARP, hearing no objection, states that SCS CSHCR 1(STA) has been adopted. The chairman notes that amendment # 1, which has been adopted applies to the SCS. Number 407 SENATOR DONLEY repeats amendment # 4 and moves the amendment. CHAIRMAN SHARP objects to amendment # 4. A vote is called on amendment # 4 to HCR 1. The amendment fails to be adopted by 2 yeas, 2 nays, and 1 absent. Voting for the amendment are Senators Duncan and Donley. Voting against the amendment are Senators Sharp and Phillips. Senator Leman is not present. Number 350 SENATOR DONLEY offers amendment # 5 to HCR 1. Amendment # 5: page 2, paragraphs 1-4: of the public members, two shall be appointed by the Speaker of the House, two by the President of the Senate, and three by the Governor. Of the non- public members, there shall be one Senate majority member, one Senate minority member, one House majority member, one House minority member, and one official from the Executive Branch. CHAIRMAN SHARP objects to amendment # 5. A vote is called on amendment # 5 to HCR 1. The amendment fails to be adopted by 1 yea, 3 nays, and 1 absent. Voting for the amendment is Senator Donley. Voting against the amendment are Senators Sharp, Phillips, and Duncan. Senator Leman is not present. Number 320 SENATOR DONLEY offers amendment # 6 to HCR 1. Amendment # 6: page 2, paragraphs 2 and 3, shall specify that there will be a majority member and a minority member from each house of the legislature. Number 313 CHAIRMAN SHARP objects to amendment # 6. A vote is called on amendment # 6 to HCR 1. The amendment fails to be adopted by 2 yeas, 2 nays, and 1 absent. Voting for the amendment are Senators Duncan and Donley. Voting against the amendment are Senators Sharp and Phillips. Senator Leman is not present. Number 243 SENATOR RANDY PHILLIPS makes a motion to discharge HCR 1 from the Senate State Affairs Committee with individual recommendations. SENATOR DUNCAN objects to releasing HCR 1 from the State Affairs Committee. A vote is called on releasing HCR 1 from committee. The motion fails, 2 yeas, 2 nays, and 1 absent. Voting in favor of the motion are Senators Sharp and Phillips. Voting against the motion are Senators Duncan and Donley. Senator Leman is not present. SENATOR DONLEY asks for reconsideration of amendment # 6. SENATOR RANDY PHILLIPS withdraws his motion to discharge HCR 1 from the Senate State Affairs Committee. SENATOR DONLEY moves amendment # 6 for reconsideration. Amendment # 6 is adopted by a vote of 4 yeas, 1 absent. Voting in favor of the amendment are Senators Sharp, Phillips, Duncan, and Donley. Senator Leman is not present. Number 208 SENATOR RANDY PHILLIPS makes a motion to discharge HCR 1 from the Senate State Affairs Committee with individual recommendations. Number 206 CHAIRMAN SHARP, hearing no objection, orders HCR 1 released from committee with individual recommendations. Number 199 CHAIRMAN SHARP adjourns the Senate State Affairs Committee meeting at 4:55 p.m.