Legislature(2007 - 2008)HOUSE FINANCE 519
03/27/2008 01:30 PM House FINANCE
Audio | Topic |
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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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