Legislature(2007 - 2008)HOUSE FINANCE 519
03/27/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB367 | |
| HB419 | |
| HB400 | |
| HB50 | |
| HJR37 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 50 | TELECONFERENCED | |
| + | HB 314 | TELECONFERENCED | |
| + | HJR 37 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 419 | TELECONFERENCED | |
| += | HB 367 | TELECONFERENCED | |
| += | HB 400 | TELECONFERENCED | |
HOUSE BILL NO. 419
An Act prohibiting certain state leases and lease-
purchase agreements for equipment and other personal
property; and providing for an effective date.
Co-Chair Chenault MOVED to ADOPT work draft 25-LS1567\K,
Cook, 3/26/08, as the version of the bill before the
Committee. There being NO OBJECTION, it was adopted.
1:50:46 PM
TOM WRIGHT, STAFF, REPRESENTATIVE MIKE CHENAULT, explained
that the work draft proposes a "kinder and gentler" version
of the original bill. He stated that HB 419 places into
statute, authorization for State departments and other
agencies such as the Supreme Court, the Board of Regents for
the University of Alaska and the Legislative Council to
enter into lease-purchase contracts for equipment and other
properties that are not considered real property.
In the past, there were no limitations on a department's
ability to enter into lease purchases for non-real property
purchases. The Administration interpreted an Attorney
General's opinion from 1987 to give them the power to enter
into the agreements. The new section of HB 419, AS
36.30.086, provides the explicit authorization for
departments to enter into lease-purchase agreements for
equipment to perform the duties and statutory functions of
the department.
Mr. Wright continued, the legislation requires that any
agency that enters into a lease-purchase contract that
exceeds $100 thousand dollars, provide written notice to the
House and Senate presiding officers and the Finance
Committee chairs. It also requires that the Office of
Management and Budget (OMB) submit a report containing each
lease-purchase agreement entered into by an agency during
the preceding fiscal year. The report will need to include
the purchase price, term payments, the amount of each
payment and the amount of interest or financing charges
paid.
He identified changes made to the bill:
· Section 1 designates in AS 36.30.085 as pertaining
to only real property. Previously, there were no
provisions addressing the legal definition of
personal property.
· AS 36.30.086, lease-purchase of personal property,
provides all departments ability to enter into
lease-purchase agreements.
· Additional reporting requirement was added,
th
indicating by January 15 of each year, all lease-
purchase agreements must be reported to the
Legislature.
1:53:29 PM
Co-Chair Meyer pointed out the testifiers available for
comment on the bill. Mr. Wright indicated his gratitude to
the many agencies that had assisted in preparation of the
bill. He understood that OMB has indicated concern with
some reporting requirements for the lease-purchase items &
that the Department of Administration might also have
concerns. He maintained, it is prudent for all lease-
purchase agreements to be reported.
1:54:36 PM
Representative Hawker inquired if there was a definition of
lease-purchase agreement in Statute. Mr. Wright did not
believe there was but noted there is a definition of real
property and non real property.
Representative Hawker questioned if the intent was to
provide an agreement at the end of the lease purchase title
to the State of Alaska and if that would be limited scope.
He wondered if a loophole was there, escaping reporting.
Mr. Wright deferred to the department. He pointed out that
AS 36.30.085 discusses lease-purchase agreements and does
relate to real property agreements and provides guidelines
to lease-purchase agreement concerns.
Representative Kelly asked if the bill would increase or
decrease the amount of lease-purchasing done by the State.
Mr. Wright did not think it would be affecting it one way or
the other and that the sponsor did not want to see the
system abused in the future.
1:57:45 PM
Co-Chair Chenault interjected, the intent is to determine if
there are abuses occurring in the programs. Presently, the
process indicates there are no abuses but certainly, large
amounts of money have gone out. It is the Legislature's
authorization to know how the departments are spending the
money and how loans are paid back. He wanted to present
legislation that provides a report and the details as to how
the funds will be used. He reiterated the issue of
appropriation power and tracking of money spent across
department lines.
1:59:30 PM
VERN JONES, CHIEF PROCUREMENT OFFICER, DEPARTMENT OF
ADMINISTRATION, responded to a previous query by
Representative Hawker regarding the difference between a
lease and a lease purchase, noting no statutory definition.
The difference is that at the end of a lease-purchase, the
State would own the asset and at the end of a lease, the
asset is returned to the party that it was leased from.
Representative Hawker questioned the terminology of those
concepts. He pointed out the principle regarding the title
transfer lessee; in other cases where the lease involves
substantial value of the asset, while it does not transfer
title, it is still required to be recognized as a
capitalized asset. He believed that it would be possible to
circumvent the intent of the Statute by terms of a lease-
purchase agreement, which could actually be a transfer title
risk of ownership. At the end of the lease term, the title
could remain with the leaser and would not require
disclosure. Mr. Jones agreed that if the State intends to
simply lease a piece of equipment with no option of
ownership, the bill does not apply.
Representative Hawker requested working with the Sponsor to
correct the loophole.
2:02:37 PM
Representative Crawford remembered that the bill had
initially been submitted in conjunction with Governor
Murkowski's jet purchase and asked if it was intended to
deter future actions such as that. Mr. Jones said if the
bill been in place, the Department would have been required
to make the transaction and report it to the Legislature and
would have shown up in the January report.
2:03:52 PM
Representative Thomas remembered that the press had
indicated that the Legislature allowed the Governor to
purchase the jet because of certain language in Statute. He
wanted to be guaranteed that would not happen again. Mr.
Wright said that the sponsors did discuss caps; however,
created complications in cases where the Legislature wants
to authorize or approve a lease-purchase by adding unwanted
steps. That option has created stumbling blocks by not
limiting the Legislature's ability to authorize.
Representative Joule inquired if it could be an option for
the Legislative Budget and Audit (LBA) Committee for
consideration of adding a cap exceeding the request. Mr.
Wright advised that LBA can not authorize exceeding the
caps; they do not have that approval authority.
2:05:59 PM
Representative Hawker observed that the work draft was
intended to be the "nicer" version of the bill; he suggested
consideration of the original version. Co-Chair Meyer
proposed the bill be held so that Co-Chair Chenault and
Representative Hawker could discuss the version to move
forward.
2:06:41 PM
HB 419 was HELD in Committee for further consideration.
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