Legislature(2001 - 2002)
04/27/2001 09:09 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.