Legislature(2001 - 2002)
04/12/2002 03:25 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 471-AIDEA LOANS AND DIVIDEND [Contains discussion of HB 492; this is a verbatim transcript.] VICE CHAIR HALCRO: We are going to change the order of the agenda. I understand we have a testifier who has to catch an airplane, who is on teleconference on an offnet site. So next we will go to House Bill 471, which is an act regarding AIDEA programs. And I believe we need to adopt the CS [committee substitute]. The chair would entertain a motion to adopt the CS. REPRESENTATIVE MEYER: Mr. Chair. VICE CHAIR HALCRO: Representative Meyer. Number 1801 REPRESENTATIVE MEYER: I move that we adopt CS for House Bill Number 471(CRA), F version. VICE CHAIR HALCRO: Is there any objections? Seeing none, we're operating under Version F. Ms. Achee, welcome to the committee. Number 1814 LAURA ACHEE: Thank you very much. For the record, my name is Laura Achee. I am staff for Representative Joe Green. This bill came out of a conversation; the Alaska Industrial Development and Export Authority asked us to sponsor a bill to make some necessary changes to help keep their operation flowing smoothly. I believe that Bob Poe is online to answer the more technical questions, but I'd actually -- if you'd like, I can go through the bill and explain it in English before he explains it in "accountingese." VICE CHAIR HALCRO: Please, go right ahead. MS. ACHEE: Okay. There are two additions to the bill that are in the form of a CS or an amendment before you, and I'll let Bob touch on those. I'll just stick to what's in the bill as it passed out of the House Community and Regional Affairs Committee. Section 1 changes the maximum loan amount for the bulk fuel revolving loan fund. There's a number of communities in rural Alaska that in order to afford to keep their houses and go about their daily business, must purchase their fuel when its available to them and they have to purchase it in bulk. As was explained to me - and this makes a lot of sense - if you had to pay for your next year's Enstar gas bill, you probably couldn't do it right out-of-pocket, and it's the same for these folks. So this fund provides them with upfront loans that they can then pay back over time. The limit of $100,000, with the rise in fuel costs and transportation costs, simply wasn't enough to meet the needs of the users, and so they've upped that. Also, there is a $5 million federal grant that's going into this fund, and so they will be able to fund, as I understand it, all of their requests for loans next year that are expected. Number 1882 MS. ACHEE: Section 2 and Section 3 make a necessary change to statute. The way that AIDEA does its financial statements is governed by the Governmental Accounting Standards Board (GASB) of the federal government. And they have made some changes in the terms that these groups can use on their statements. Our statute calculates the dividend that AIDEA pays to the State of Alaska general fund based on values that are on their year-end statement. And now that the GASB board has said that they can no longer use those terms, it leaves us with an empty definition in statute [for] net income and unrestricted net income. MS. ACHEE: So, this would change statute, that instead of directing whomever's reading it to go to the audited financial statement and look for that term, it actually puts real definitions in for net income and unrestricted net income. The change in the assets is now how it's read. Also, due to a change in the accounting practices - and I'm going to let Bob correct me if I'm wrong - but as I understand it, at the end of the year, AIDEA looks at their net profits, and the dividend that they pay to the state is paid out of that. And under the change, they would then have to record that payment on the next year's financial statement as an expense, thereby actually declaring it twice and, as a result, lowering their payment for the next year to the State of Alaska, and so forth and so on. So, what the second change in Section 2 and 3 does is it excludes the amounts that are paid to the State of Alaska; they'll still be in the ledger, but they'll only be recorded once and they won't affect future dividend payouts. Number 1959 MS. ACHEE: Section 4 makes necessary changes to the rural development initiative fund. This is a fund that provides commercial loans to those people who are out in rural Alaska, places where lending agencies who base their standards on Lower 48 standards might not believe that the risk is advisable. And so, it provides an opportunity for people to have businesses in rural Alaska that wouldn't necessarily have another way to do so. The problem is that under the current guidelines, a lot of folks are qualifying for "rural" who are really just kind of falling right outside some of our major population centers. And so while technically they're rural, they aren't really the people that this loan was designed for, and they probably have other loan options. And so this change in statute would tighten up the restrictions and get those loans to the people that they were intended for. And with that, I'd be happy to answer any questions. VICE CHAIR HALCRO: Any questions for Ms. Achee? Seeing none, thank you. Let's go online to offnet, Bob Poe. Number 1998 BOB POE: Yes, Mr. Chairman. Thank you, I appreciate you adjusting your schedule a little bit; I was getting a little worried there. I thought Laura did an excellent job in walking through the provisions of this bill. We do have some folks online to answer questions if the committee has any. We have Valerie Walker, who's AIDEA's CFO, and she can go through any accounting questions you might have. We also have Brian Bjorkquist, who's the Assistant Attorney General who assists AIDEA in a variety of matters, and he can speak both to the RDIF - Rural Development Initiative Loan Fund - guidelines as well as the amendments that I believe ... the committee members may have in front of them. I would point out that the increase in the bulk fuel revolving-loan-fund maximum amount also is important because we've been working with the Denali Commission for some time and have increased the capacity of a number of fuel [tank] farms out in rural Alaska. MR. POE: Certainly, ordering in bulk is the most economic way to get fuel and the best way to lower costs in rural Alaska. So, we're finding that [$]100,000 frequently didn't cover the cost, and [$]200,000 will allow us to do that. And the other important thing is, that I just want to mention, there's a $5 million grant coming to ... AIDEA from the ... USDA, and that will enable us to be able to make these loans. The dividend definition is an important one, and the changes ... here are designed to have the dividend program work just as [it] has so successfully since 1996. Since that time, AIDEA has provided, either in payment or commitment to pay, $128 million in dividends - and actually, Mr. Chairman, as of AIDEA's board action yesterday, it's really about $129 million. What this change does is allows us to continue to pay those dividends the same as we have in the past. And I think Laura did an accurate job of describing the problem of double-counting dividends, as GASB would require under the new rules. Mr. Chairman, would you want me to speak to the proposed amendments? VICE CHAIR HALCRO: Yes. Hold on just a second; let me make sure all of the committee members see those in those packets. There's ... an amendment in there; it looks like a page ... and a quarter. Just make sure everybody's on the same page. Okay, go ahead, Bob. Number 2117 MR. POE: Thank you, Mr. Chairman. You adopted the CS [CSHB 471(CRA)] at the beginning of this discussion, and the CS reflects an amendment that happened in the previous committee, which added in this rural bulk fuel revolving-loan-fund change. And that came from an earlier bill. There were two other provisions in that earlier bill, HB 492. Both of these provisions were designed to clean up a couple of problems with the AEA - the Alaska Energy Authority - legislation. The first was to deal with a liability issue. Right now in the law, it says that AEA shall train rural electric operators, not "may" but "shall". MR. POE: Now, we just received our budget caps in the Senate yesterday, where it received an "UNAPNA" (ph), an unallocated reduction to the circuit rider program we have in AEA. That further reduces our ability to do training at all, let alone can we assure that we train every operator in rural Alaska. Unfortunately, recently a man in rural Alaska had an accident in a power system and damaged his hands and arms, and was, I believe, successful in suing the State of Alaska - and Brian Bjorkquist can clean this up for me - ... saying that we had a responsibility to train him, and since we didn't, there was an asserted liability. What we want to do is change this provision in the law from "shall" to "may". We still believe it's important to train rural electric operators, and we'll do everything we can to train as many as we can. But this provision of "shall" simply leaves us open for liability that we don't really have any way to effectively protect the state against. MR. POE: The second change is including the word "construction" in the enabling legislation for the Alaska Energy Authority. As you probably know, we work as a partner with the Denali Commission in building bulk fuel tank farms and rural power- systems upgrades. Now, all of this construction we do through private-sector construction managers. We don't actually get out there and pound nails or drive pilings or anything like that. But we are actively involved in causing that construction to happen, and we wanted to make sure that in our enabling legislation there was no question about our ability to do what we're already doing. So, those ... are those two provisions. And I'd ask Brian Bjorkquist or Valerie Walker if they would correct anything ... I may have said a little inaccurately, Mr. Chairman. VICE CHAIR HALCRO: Thank you for your testimony, Bob. Any questions? Seeing none, we have Mr. Bjorkquist online. Did the committee members have any questions for Mr. Bjorkquist? Seeing none. Representative Crawford. Number 2242 REPRESENTATIVE CRAWFORD: Thank you, Mr. Chairman. Just for my own edification here, who is responsible for the training of these employees that work out in rural Alaska? MR. POE: Through the chair, Representative Crawford, we are. The real question isn't, "Do we have that responsibility because we feel we do"; it's just, "Are we adequately funded to accomplish the full range of that responsibility". And we would argue that we aren't. And ... we understand why reductions are happening this year, but we received an additional reduction, and that makes it even harder to live up to the "shall" language in the law. We don't want to shirk our responsibility, and we don't want to have this change imply that we don't want to continue to train rural electric operators; it's just that we probably can't live up to the rigid interpretation of "shall" versus "may". VICE CHAIR HALCRO: Any other questions? Is there anybody else online that wishes to give testimony on House Bill 471? Is there anyone in the committee that would like to give testimony on House Bill 471? Seeing none, I will close public testimony. Would ... committee members please mark the amendment you have in front of you Amendment Number 1. And the chair would entertain a motion and/or any discussion. [Amendment 1 to CSHB 471(CRA), with original punctuation, read as follows: Page 1, line 2: Following "Authority;": Insert "precluding legal action concerning certain technical assistance to rural utilities; relating to powers of the authority;" Page 2, following line 1: Insert new bill sections to read: "* Sec. 2. AS 42.45.400 is amended by adding a new subsection to read: (c) This section does not create a duty in tort, and may not be the basis for an action against the state, the authority, or the officers, agents, or contractors of either for damages, injury, or death. * Sec. 3. AS 44.83.080(10) is amended to read: (10) to enter into contracts with the United States or any person and, subject to the laws of the United States and subject to concurrence of the legislature, with a foreign country or its agencies, for the financing, construction, operation, and maintenance of all or any part of a power project or bulk fuel storage facility, either inside or outside the state, and for the sale or transmission of power from a power project or any right to the capacity of it or for the security of any bonds of the authority issued or to be issued for the project; * Sec. 4. AS 44.83.080 is amended by adding a new paragraph to read: (16) to make grants or loans to a person and enter into contracts or other transactions regarding the grant or loan: Renumber the following bill sections accordingly. Page 2, line 27: Delete "secs. 2 and 3" Insert "secs. 5 and 6" (end of Amendment 1)] Number 2303 REPRESENTATIVE MEYER: Mr. Chairman, I'll move Amendment Number 1. VICE CHAIR HALCRO: Representative Meyer. Amendment Number 1 has been moved. Is there any objection? Is there any discussion? Seeing none, Amendment Number 1 is adopted, which brings the bill back before us, amended. What is the will of the committee? Representative Kott. Number 2316 REPRESENTATIVE KOTT: Mr. Chairman, if nobody else is going to step up to the plate, I guess I'll make the motion. Mr. Chairman, I would move that we move out of committee CS for House Bill Number 471(CRA) as amended, [with] individual recommendations and accompanying zero fiscal note. VICE CHAIR HALCRO: Any objections? Seeing none, [CSHB] 471[(L&C)] is moved from committee. MR. POE: Thank you, Mr. Chairman.
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