Legislature(2017 - 2018)HOUSE FINANCE 519

03/06/2017 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 49 EXTEND BOARD OF DIRECT-ENTRY MIDWIVES TELECONFERENCED
Heard & Held
+ HB 56 COMMERCIAL FISHING LOANS TELECONFERENCED
Heard & Held
+ HB 81 AK ENERGY EFFICIENCY LOANS: ELIGIBILITY TELECONFERENCED
Heard & Held
+ HB 106 CIVIL LEGAL SERVICES FUND TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 56                                                                                                             
                                                                                                                                
     "An Act relating to limitations on certain commercial                                                                      
     fishing loans made by the Department of Commerce,                                                                          
     Community, and Economic Development."                                                                                      
                                                                                                                                
1:57:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DAN ORTIZ,  SPONSOR, introduced  himself and                                                                    
the bill. He  spoke of comments made by  Alaska U.S. Senator                                                                    
Dan  Sullivan  during  a  joint   floor  session  about  the                                                                    
importance and value  of the fishing industry  to the state.                                                                    
He said that  the $6 billion per year  industry was critical                                                                    
to  the Alaska  economy, and  the fishing  industry was  the                                                                    
largest  private employer  of  the state's  labor force.  He                                                                    
noted that the "greying of  the fleet" was becoming an issue                                                                    
for  the  industry;  the  age of  the  fleet  was  gradually                                                                    
getting older. He  believed that the legislation  was a step                                                                    
in helping with  the issue by raising the  loan limit amount                                                                    
for  fishermen to  purchase gear,  permits, and  boats, form                                                                    
$300,000 to  $400,000. He stated  that the funds  would come                                                                    
from  the Department  of Commerce,  Community, and  Economic                                                                    
Development  (DCCED) through  a revolving  loan program.  He                                                                    
offered additional sponsor statement language:                                                                                  
                                                                                                                                
     This  bill increases  the aggregate  amount a  borrower                                                                    
     may,  in  aggregate,  hold   unpaid  from  $300,000  to                                                                    
     $400,000. The  amount of 300,000 was  assigned in 1982.                                                                    
     Due  to  inflation  and  technological  advances,  this                                                                    
     $300,000 amount  has become outdated. According  to the                                                                    
     calculation  method   of  the  Consumer   Price  Index,                                                                    
     $300,000  in   1982  is  equivalent   to  approximately                                                                    
     $746,136 today. This is why  a $100,000 increase to the                                                                    
     aggregate limit of $300,000  to $400,000, is reasonable                                                                    
     and pertinent today. An aggregate  limit of $400,000 is                                                                    
     a  reasonable  aggregate   unpaid  limit  for  Alaska's                                                                    
     commercial fishing businesses.                                                                                             
                                                                                                                                
Representative Ortiz  noted that member's  packets contained                                                                    
several letter of support for the legislation.                                                                                  
                                                                                                                                
2:01:47 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki queried the  solvency of the current                                                                    
fund.                                                                                                                           
                                                                                                                                
Co-Chair Foster  noted individuals from the  department were                                                                    
also available for questions.                                                                                                   
                                                                                                                                
Representative  Ortiz encouraged  the department  to address                                                                    
the specific question. He added  that there was initial seed                                                                    
money  established to  start the  fund; the  fund had  never                                                                    
needed  additional appropriation  from  the legislature.  He                                                                    
noted that the fund had an outstanding record of repayment.                                                                     
                                                                                                                                
Representative Kawasaki  pointed to a sheet  provided by the                                                                    
department  (copy  on  file)   that  addressed  a  statutory                                                                    
interest rate  provided by  the fund.  He asked  whether the                                                                    
statutory  interest  rate  being higher  than  the  industry                                                                    
interest rate was a problem for the fund.                                                                                       
                                                                                                                                
2:03:55 PM                                                                                                                    
                                                                                                                                
BRITTENY  CIONI-HAYWOOD,  DIRECTOR,   DIVISION  OF  ECONOMIC                                                                    
DEVELOPMENT, DEPARTMENT OF  COMMERCE, COMMUNITY AND ECONOMIC                                                                    
DEVELOPMENT,  explained that  the  department currently  had                                                                    
approximately $19  million in  available lending  funds. She                                                                    
asserted that the  fund was robust, and  reiterated that the                                                                    
fund  had not  used  general fund  dollars  since 1985,  but                                                                    
lived off of interest and fees charges through the program.                                                                     
                                                                                                                                
Representative Kawasaki  referred to industry  and statutory                                                                    
interest rates. He  noted that in some cases  it looked like                                                                    
the industry rate  was higher. He wondered  why people would                                                                    
lend at such high rates.                                                                                                        
                                                                                                                                
Ms. Cioni-Haywood  answered that  often the program  lent to                                                                    
people  who  could  not   secure  financing  elsewhere.  She                                                                    
relayed that the current interest  rate was 5.5 percent. She                                                                    
added that most recent  borrowers were younger borrowers and                                                                    
borrowers  that did  not  have a  credit  history, who  were                                                                    
willing to take the higher interest rate.                                                                                       
                                                                                                                                
Representative Wilson asked for the current default rate.                                                                       
                                                                                                                                
Ms. Cioni-Haywood  responded that  the current rate  was 2.2                                                                    
percent,  which  was  below   the  industry  standard  of  5                                                                    
percent.                                                                                                                        
                                                                                                                                
Representative Wilson  queried how  much the  fund currently                                                                    
had on-loan.                                                                                                                    
                                                                                                                                
Ms. Cioni-Haywood  replied that there was  approximately $90                                                                    
million in outstanding loans.                                                                                                   
                                                                                                                                
Representative  Wilson wondered  whether  the interest  rate                                                                    
could be lowered without a  statute change. She thought that                                                                    
the program  could be taking  advantage of those  that could                                                                    
not afford to take out a lower interest loan.                                                                                   
                                                                                                                                
2:07:18 PM                                                                                                                    
                                                                                                                                
Ms. Cioni-Haywood  shared that the interest  rate was deemed                                                                    
in statute and  that the program had  a pay-on-time program,                                                                    
in  which  people who  paid  on-time  received a  discounted                                                                    
interest rate.                                                                                                                  
                                                                                                                                
Representative  Tilton referred  to  legislation from  2012,                                                                    
regarding  the loan  fund. She  noted the  state's financial                                                                    
crisis and  wondered whether the  timing of  the legislation                                                                    
was appropriate.                                                                                                                
                                                                                                                                
Representative Ortiz  replied that  he could not  comment on                                                                    
what  was occurring  in  the legislature  in  2012 when  the                                                                    
legislature had  been considering  the issue. He  shared the                                                                    
reason he  had brought the  legislation forward was  that he                                                                    
wanted  to help  young people  have a  better chance  to get                                                                    
involved  in  the industry.  He  said  that the  legislation                                                                    
would be  a no-cost item to  the state that would  allow the                                                                    
state to assist young fishermen to enter into the industry.                                                                     
                                                                                                                                
Representative  Tilton asserted  that  there  was already  a                                                                    
disparity  in loan  amounts for  the commercial  and charter                                                                    
loan funds.                                                                                                                     
                                                                                                                                
Representative  Ortiz replied  that  he was  not looking  to                                                                    
increase the  difference between the commercial  and charter                                                                    
industry loans. He suggested that  someone could bring forth                                                                    
a piece  of legislation  that would address  that particular                                                                    
problem.                                                                                                                        
                                                                                                                                
2:10:57 PM                                                                                                                    
                                                                                                                                
Representative Tilton understood that  there was $19 million                                                                    
currently available in the fund.                                                                                                
                                                                                                                                
Ms. Cioni-Haywood answered in the affirmative.                                                                                  
                                                                                                                                
Representative Tilton referred to  a 2015 figure that showed                                                                    
a $2 million balance.                                                                                                           
                                                                                                                                
Ms. Cioni-Haywood was  surprised at the figure,  she did not                                                                    
think that the fund had  been that low for approximately two                                                                    
years.                                                                                                                          
                                                                                                                                
Representative Tilton hoped  to talk more in  depth with Ms.                                                                    
Cioni-Haywood about the issue.                                                                                                  
                                                                                                                                
2:12:10 PM                                                                                                                    
Representative  Grenn  spoke  to  the last  paragraph  of  a                                                                    
letter of support from the United Fishermen of Alaska:                                                                          
                                                                                                                                
     The revolving  loan program  is one  of very  few tools                                                                    
     that  the state  has  to give  an  advantage to  Alaska                                                                    
     residents  with a  desire to  become fishing  skippers.                                                                    
     And,  because  a  traditional bank  lender  must  first                                                                    
     reject  a borrower  in order  to qualify  for the  Loan                                                                    
     Program, we  do not  anticipate major  negative effects                                                                    
     on private sector lenders.                                                                                                 
                                                                                                                                
Representative  Grenn wondered  what  a person  had to  shoe                                                                    
regarding  being previously  rejected  by a  bank. He  asked                                                                    
whether there had been opposition or support for the issue.                                                                     
                                                                                                                                
Representative Ortiz answered he  had received some critical                                                                    
feedback   from  the   commercial   lending  community.   He                                                                    
elaborated that one  of the reasons for  the higher interest                                                                    
rates  could be  a sensitivity  to  not wanting  to see  the                                                                    
state   directly   compete   with   the   commercial/private                                                                    
industry.  He  furthered  that  there  were  people  in  the                                                                    
private  sector who  viewed the  program as  competition, he                                                                    
believed that  the qualification of first  being rejected by                                                                    
a traditional bank showed good faith by the department.                                                                         
                                                                                                                                
2:14:37 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton  referred to  a letter  in the  packet about                                                                    
commercial  hardship [handout  titled "Division  of Economic                                                                    
Development Department  of Commerce, Community  and Economic                                                                    
Development  2016  Annual  Report of  Fisheries  Enhancement                                                                    
Term  Extensions  per  AS 16.10.510(11)"  (copy  on  file)],                                                                    
which  discussed term  extensions that  could be  granted in                                                                    
times  of  financial  hardship.   He  wondered  whether  the                                                                    
document  was informational  as he  had not  seen it  in the                                                                    
bill.                                                                                                                           
                                                                                                                                
Representative Ortiz replied  that it was not a  part of the                                                                    
bill. He deferred further discussion to the department.                                                                         
                                                                                                                                
Ms.  Cioni-Haywood  answered   that  the  program  currently                                                                    
provided extensions  for economic  hardships; it  required a                                                                    
separate application process.                                                                                                   
                                                                                                                                
2:16:03 PM                                                                                                                    
                                                                                                                                
Representative Pruitt felt that  the information provided on                                                                    
the bill was  lacking for him to determine  the stability of                                                                    
the fund.  He thought that  the program was a  good program.                                                                    
He agreed  with the higher  rate. He expressed  concern that                                                                    
doubling the loan  amount would take away  funding for other                                                                    
applicants in other loan programs.                                                                                              
                                                                                                                                
Representative Ortiz clarified that  the maximum loan amount                                                                    
would increase  from $300,000 to  $400,000, which was  not a                                                                    
doubling  of the  loan amount.  He asserted  that there  had                                                                    
been  prior testimony  concerning the  solvency of  the fund                                                                    
and the excellent repayment rate.                                                                                               
                                                                                                                                
2:18:50 PM                                                                                                                    
                                                                                                                                
Representative  Pruitt said  that  he was  referring to  the                                                                    
$100,000 to $200,000  by vessel. He stressed  that he wanted                                                                    
to  see the  information  in  writing. He  did  not want  to                                                                    
jeopardize the fund.                                                                                                            
                                                                                                                                
Ms.  Cioni-Haywood   replied  that  she  would   submit  the                                                                    
information  in writing.  She  shared  that projections  had                                                                    
been  done using  the assumption  of 21  new loans,  with an                                                                    
increased average loan  amount over the next  ten years, and                                                                    
using a  conservative repayment schedule, and  had estimated                                                                    
that the fund  would still maintain over $12  million in the                                                                    
fund balance.                                                                                                                   
                                                                                                                                
Representative Thompson expressed  appreciation for the loan                                                                    
program. He  queried whether any  of the loans  were awarded                                                                    
out of state.                                                                                                                   
                                                                                                                                
Ms.  Cioni-Haywood confirmed  that  it  was a  resident-only                                                                    
program; a person  had to be a resident for  two years to be                                                                    
eligible for the loan.                                                                                                          
                                                                                                                                
2:21:18 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster OPENED public testimony.                                                                                        
                                                                                                                                
JERRY MCCUNF, UNITED FISHERMEN  OF ALASKA, JUNEAU, testified                                                                    
in support  of the legislation.  He spoke of  the complexity                                                                    
of loan programs.  He spoke of the doubling  of vessel loans                                                                    
from $100,000 to $200,000, and  he noted that the number had                                                                    
not  increased since  1982.  He felt  that  a $200,000  boat                                                                    
would be  safer than a  $100,000, and that a  proper fishing                                                                    
vessel  could  cost  several of  hundreds  of  thousands  of                                                                    
dollars. He felt that the program was beneficial to younger                                                                     
fishermen just starting out in the industry.                                                                                    
                                                                                                                                
Co-Chair Foster CLOSED public testimony.                                                                                        
                                                                                                                                
HB 56 was HEARD and HELD in committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                

Document Name Date/Time Subjects
HB049 Sponsor Statement 1.30.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 49
HB049 Supporting Documents-Letters of Support 2.2.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 49
HB049 Supporting Documents-Full Sunset Audit 01.30.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 49
HB0056 Sponsor Statement 01.23.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 56
HB0056 Supporting Document-Constituent 01.24.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 56
HB0056 Sectional Analysis 01.23.17 .pdf HFIN 3/6/2017 1:30:00 PM
HB 56
HB056 Support SEAFA.pdf HFIN 3/6/2017 1:30:00 PM
HB 56
HB056 Support USAG.pdf HFIN 3/6/2017 1:30:00 PM
HB 56
HB056 Supporting Document - Decker 02.23.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 56
HB056 Supporting Document CED 2016 Annual State Loan Report.pdf HFIN 3/6/2017 1:30:00 PM
HB 56
HB056 Supporting Document CED 2016 FE Term Ext Report.pdf HFIN 3/6/2017 1:30:00 PM
HB 56
HB081 Additional Documents Guide AEERLFP 2.14.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB081 Additional Documents Memo Legal 2.14.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB081 Sectional Analysis 2.14.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB081 Sponsor Statement 2.14.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB081 Summary of Changes 2.14.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB081 Support Document Letter AAHA 2.14.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB081 Supporting Documents Letter CCS, Catholic Diocese of Juneau 1.27.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB081 Supporting Documents Letter Denali Commission 2.14.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB081 Supporting Documents Letter SFAC 2.14.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB081 Supporting Documents Letter TCC 2.14.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB081 Supporting Documents Report Rural Retrofits 2.14.2017.pdf HFIN 3/6/2017 1:30:00 PM
HB 81
HB 106 Supporting Document - Letters ACOA-ACT 2.14.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 106
HB106 Additional Document-2017 Civil Legal Services Fund Overview 2.8.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 106
HB106 Additional Document-2017 Fact Sheet 2.8.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 106
HB106 Additional Document-ALSC statement on Case Restrictions 2.8.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 106
HB106 Additional Document-Civil Funds filing fee info 2.8.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 106
HB106 Additional Document-FY2016 ALSC Fact Sheet 2.8.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 106
HB106 Additional Document-FY2016 ALSC Pro Bono Program 2.8.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 106
HB106 Sponsor Statement 2.8.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 106
HB106 Sectional Analysis ver A 2.8.17.pdf HFIN 3/6/2017 1:30:00 PM
HB 106
HB 49 Medicaid Cost Savings_CDMs 2015_word (002).pdf HFIN 3/6/2017 1:30:00 PM
HB 49
HB 49 Supporting Doc 2016 MID Fee Analysis.pdf HFIN 3/6/2017 1:30:00 PM
HB 49
HB56 Support UFA to HFin SB71 to SLC 030317.pdf HFIN 3/6/2017 1:30:00 PM
HB 56
SB 71
HB 56 Supporting Documents-letters.pdf HFIN 3/6/2017 1:30:00 PM
HB 56