SENATE STATE AFFAIRS COMMITTEE  February 28, 1995 3:35 p.m. MEMBERS PRESENT Senator Bert Sharp, Chairman Senator Randy Phillips, Vice-Chairman Senator Loren Leman Senator Dave Donley MEMBERS ABSENT Senator Jim Duncan COMMITTEE CALENDAR SENATE BILL NO. 92 "An Act requiring that, in addition to its operating budget, all activities of the Alaska Housing Finance Corporation are subject to the Executive Budget Act." SSTA - 2/28/95 SB 72 (VOLUNTEERS AND EMPLOYEES OF NONPROFITS) was scheduled, but not taken up on this date. PREVIOUS SENATE COMMITTEE ACTION SB 92 - No previous senate committee action. WITNESS REGISTER Representative Terry Martin, Chairman Legislative Budget & Audit Committee State Capitol, Juneau, Alaska, 99801-1182¶465-3783 POSITION STATEMENT: prime sponsor of SB 92/HB 189 Randy Welker, Auditor Legislative Audit Division P.O. Box 113300, Juneau, AK 99811-3300¶465-3830 POSITION STATEMENT: testified on SB 92 ACTION NARRATIVE TAPE 95-7, SIDE A Number 001 SSTA - 2/28/95 SB 92 AHFC SUBJECT TO EXEC. BUDGET ACT CHAIRMAN SHARP calls the Senate State Affairs Committee to order at 3:35 p.m. and brings up SB 92 as the first order of business before the committee. The chairman calls the first witness. Number 030 REPRESENTATIVE MARTIN, Chairman of the Legislative Budget & Audit Committee, prime sponsor of SB 92 and companion bill, HB 189, relays information to the committee contained in the sponsor statement. Representative Martin stresses the importance of having all AHFC programs and activities under the review procedures of the Executive Budget Act (AS 37.07). Number 070 CHAIRMAN SHARP remarks, regarding the legislature retrieving some of the equity that has been invested in AHFC, that if the legislature were to receive just 5% of the money it has invested in AHFC from 1980-1984, that amount would equal $800,000,000. If one were to use real market rates in calculating that amount, it would probably be in excess of a billion dollars. The equity in AHFC is an asset of the state, not the AHFC. Number 095 REPRESENTATIVE MARTIN mentions there is a loop-hole that should be closed regarding the bonding authority of AHFC: AHFC is a public corporation backed by the funds of the State of Alaska. Number 115 SENATOR LEMAN notes that an article he read yesterday stated just discussing potential withdrawal of money from AHFC damages the corporation's bond rating. Number 120 CHAIRMAN SHARP comments AHFC claims it went out of the subsidized- loan business several years ago, but he would dispute that. The chairman thinks the 5% low-income loan program the corporation offered recently was a highly subsidized program. Number 130 REPRESENTATIVE MARTIN thinks SB 92 will show how money has been invested, and that investment in housing can be looked at as a renewable resource. Number 150 RANDY WELKER, Legislative Auditor, states SB 92 is the result of frustration experienced by the Legislative Budget & Audit Committee in the past with AHFC. Mr. Welker mentions the 5% loan program as one example. Another example is the AHFC's attempt to construct an office building for their administrative use outside the Executive Budget Act process. SB 92 is an attempt to bring the corporation back under the legislature's control and oversight. Number 189 SENATOR RANDY PHILLIPS asks Mr. Welker if there is any reason the Alaska Industrial Development & Export Authority (AIDEA), the Alaska Railroad Corporation (ARRC), and the Alaska Science & Technology Foundation (ASTF) should not be addressed by SB 92. Number 195 MR. WELKER responds none of those entities are identical to AHFC, so it would be hard to address them all in one bill. Mr. Welker informs the committee that Senator Frank has introduced a bill which would address the University of Alaska endowment income. Number 220 SENATOR RANDY PHILLIPS asked Mr. Welker about the default provision in the bond issue in November. MR. WELKER replied a clause in the letters of credit for the default provision stated, "should the legislature appropriate any assets away from AHFC, that agreement would be considered in default." Mr. Welker states that bond issue was short term financing. Number 250 SENATOR RANDY PHILLIPS expressed fear that AHFC would be able to do that long-term, and wants to know if that problem can be addressed through SB 92. MR. WELKER thinks that might diminish AHFC's ability...it is his understanding that provision was not initiated by AHFC, but was a requirement of the financier. He thinks AHFC is well aware of several legislators' dissatisfaction with that clause. Mr. Welker thinks that clause may impact the timing of appropriation of funds from AHFC, but he does not believe it would preclude transfer of funds in FY 96. Number 267 CHAIRMAN SHARP asks if there is any indication AHFC would coach lenders to include that clause in order to thwart the intent of the legislature. Number 273 MR. WELKER states he had the same concern, but the best he could tell was that the clause was initiated from the bank. There was indication that certain staff members at AHFC were not pleased to see the clause in the letters of credit, and did not think it was necessary. He is satisfied the clause was not prompted or initiated by AHFC, but of course there is never any absolute assurance of that. Number 285 SENATOR RANDY PHILLIPS makes a motion to discharge SB 92 from the Senate State Affairs Committee with individual recommendations. Number 288 SENATOR DONLEY asks if the committee should consider amending SB 92 to make sure it covers some other.... Number 290 SENATOR RANDY PHILLIPS responds he is satisfied with Mr. Welker's explanation. SB 92 could always be amended in the Senate Finance Committee. SENATOR DONLEY states he would be supportive of the amendments Senator Phillips suggested. Number 300 CHAIRMAN SHARP adds his support, also. The chairman asks staff to work on possible amendments to SB 92 to include other agencies. Number 303 CHAIRMAN SHARP, hearing no objection or further discussion, orders SB 92 released from committee with individual recommendations. Number 315 CHAIRMAN SHARP adjourns the Senate State Affairs Committee meeting at 3:55 p.m.