Legislature(2001 - 2002)
04/27/2001 09:09 AM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HOUSE BILL NO. 234
An Act relating to the financing of construction and
renovation of certain public facilities; and providing
for an effective date.
Vice-Chair Bunde MOVED to ADOPT the new Amendment #1, 22-
LS0863\O.2, 4/26/01. [Copy on File]. Representative Davies
OBJECTED for discussion.
Vice-Chair Bunde explained that the amendment would secure
the final 20% of the Tobacco Settlement money for funding
smoking education and cessation and would remove any
reference to the University.
Representative Davies asked for more detail. Vice-Chair
Bunde explained that "taxable versus non-taxable" was still
being debated. The amendment would provide the detail and
vehicle to address the consequences.
Representative Davies questioned how the payout could be
addressed through the legislation.
Representative Croft interjected that it is imperative that
the final 20% of the money be used for tobacco cessation
programs.
Vice-Chair Bunde explained that there is a moral connection
with the use of that money.
MARK HICKEY, AMERICAN CANCER SOCIETY, COALITION OF ALASKANS
FOR TOBACCO FREE KIDS, JUNEAU, discussed that the amendment
would take the remaining 20% from the Master Settlement
Agreement (MSA) and would trade it in the same fashion as
the 40% was treated last year. The other 40% would be sold
to the Alaska Housing Finance Corporation (AHFC) or to its
subsidiary, the Northern Tobacco Seuritization Program, with
the intent to issue debt bonds. The corpus that comes from
that would have to be appropriated to the account created in
the bill. That account is located on Page 2, Section 3, the
Smoking Education Account. That is where the money
generated from the bond sale would be deposited and subject
for legislative appropriation. The intent is to have that
money used for prevention education cessation activities.
The Legislature would have to appropriate annually out of
that account for the program. He concluded that the
amendment attempts to address that detail.
Representative Davies asked an estimate of annual funds that
would be available. Mr. Hickey replied that AHFC has
indicated that the range would be between $40 to $63 million
dollars. Mr. Hickey stated the need was $8.1 million
dollars per year, in a perfect scenario. It could not be
done at the proposed level. The recommendation is to
provide that amount as close as possible, in the
neighborhood of $5-$6 million dollars per year. He
emphasized that number was conservative.
JOHN BITNEY, LEGISLATIVE LIAISON, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE, responded that based on
the current market condition, the amount would need to be in
taxable bonds with a 25-year term. He believed that could
generate about $40 million dollars in proceeds.
Co-Chair Mulder commented that the intent was to put a
"fence" around the payout. The payout averages $6.82
million dollars. He commented that in order to maximize
with a minimal amount of confusion, the language needs to
clarify the intent.
Representative Croft argued that there would be a benefit to
using the money for cessation programs. He pointed out that
the proposed language moves the Legislature out of the
program. He reminded members that the money is not
guaranteed.
Vice-Chair Bunde agreed that it is important to do things
the simplest way possible, however, there is a risk that the
tobacco industry will fall on hard times and that the income
stream would need to be securitized for other takers. He
commented that the legislation would build a "moral fence"
around the money. Vice-Chair Bunde wanted to guarantee
various groups offering programs that there would continue
to be an income stream.
Representative Hudson asked how much money would the 20%
generate. Mr. Hickey replied that the annual average would
be a little under $5 million dollars, unsecuritized. In
2008, there would be an additional $2.5 million dollars.
Mr. Hickey pointed out that the formula is complicated.
Representative J. Davies WITHDREW his OBJECTION. There
being NO further OBJECTION, the amendment was adopted.
Representative Foster MOVED to report CS HB 234 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 234 (FIN) was reported out of Committee with a "do
pass" recommendation and with a fiscal note by Department of
Revenue.
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