Legislature(2003 - 2004)
05/05/2003 03:30 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 247 - SCIENCE & TECH FOUNDATION/BIDCO/INT.TRADE CHAIR ANDERSON announced that the next order of business would be HOUSE BILL NO. 247, "An Act repealing statutes pertaining to the Alaska Science and Technology Foundation and transferring money in the foundation's endowment; repealing statutes relating to the BIDCO assistance program; repealing statutes pertaining to the international trade and business endowment and transferring money in the international trade and business endowment; transferring oversight administration of outstanding Alaska Science and Technology Foundation loans and grants to the Alaska Industrial Development and Export Authority; establishing an Alaska BIDCO assistance program to be administered by the Department of Community and Economic Development; making conforming amendments; and providing for an effective date." Number 1630 EDGAR BLATCHFORD, Commissioner, Department of Community & Economic Development (DCED), paraphrased from his written testimony, which read: The bill repeals the existing AS 37.17 statutes that create the Alaska Science and Technology Foundation (ASTF) and programs it administers: foundation grants and the BIDCO (Business and Industrial Development Corporation) assistance program. The statute creating the international trade and business endowment in the ASTF is also repealed. Subject to appropriation, the bill provides for the transfer to the general fund of the money remaining in the ASTF [foundation] fund and in the international trade and business endowment. Oversight administration of existing ASTF grants and BIDCO assistance program loans and other financial assistance would be transferred to the Alaska Industrial [Development] and Export Authority (AIDEA). A new BIDCO assistance program, very similar to the repealed BIDCO assistance program is established and administered by the Department of Community and Economic Development (DCED). ASTF was created in 1988 with an endowment of more than $100 million to support grants for technology projects, knowledge projects, small business innovation research bridging grants and direct grants to teachers. Through its endowment, ASTF has generated about $126 million in income for distribution. Between 1988 and 2002, one half the endowment income, $63 million, has been appropriated and spent for "non-ASTF purposes": $35 million for University of Alaska operations, Alaska Aerospace Development Corporation (AADC) operations, and Trade and Development operations; $17 million was appropriated to the state general fund; and $11 million was used to match federal funding for construction of AADC's $39 million Kodiak Launch Complex. The remaining $63 million was distributed by the ASTF board over the last 14 years: $25 million in technology project grants; $10 million in knowledge project grants; $8 million to partners; $5 million to wiring K-12 schools and science museums or internet connectivity; $2 million in K-12 science and math teacher grants; Contributions to the principal of the ASTF endowment (less than $500,000); and $13 million in ASTF operations. In mid-March the Legislature passed and the Governor signed into law a supplemental appropriation reducing ASTF FY 2003 operations to amounts spent and obligated to date and included intent language to ASTF to wind down operations by May 15, 2003. The Governor's FY04 budget provided no funding for ASTF. Thank you for the opportunity to speak before you today and I urge you to support passage of HB 247. REPRESENTATIVE ROKEBERG asked if HB 247 needs to pass in order for the governor to access the corpus of ASTF's endowment. COMMISSIONER BLATCHFORD replied no. Number 1775 TOM LAWSON, Director, Division of Administrative Services, Department of Community & Economic Development, in response to Representative Rokeberg, specified that the BIDCO program has been used once. There is one licensed BIDCO in the state, the Alaska Growth Capital Program, which will remain in business. REPRESENTATIVE GATTO turned to the fiscal notes and mentioned that there would've been funds appropriated for the current year as well as funds that some of these ventures would've earned in future years. Therefore, he asked if the future funds that will never be realized are accounted for in the fiscal notes. MR. LAWSON explained that this legislation sets up AIDEA to monitor any payments that are due to the state. One of the categories of grants is the technology grant, for which there were up to $25 million of grants that were granted. All of the technology grants have a repayment clause, and therefore the purpose of the staff in AIDEA would be to ensure that the state receives its repayments. However, Mr. Lawson specified that there will be no new grant funds issued at the end of FY03. REPRESENTATIVE GATTO restated his question as follows: "Is the fiscal note understated in that there is additional funding, beyond the current, that we will see as a revenue source; and therefore, the fiscal note is saying look at how much money we get by eliminating the program and yet there's even more that I don't know if it's been accounted for." MR. LAWSON answered that [the department] isn't sure how much money will return because part of that relates to the health of the company that received the grant. The state felt it was important to have someone monitor the repayments in order to ensure that when repayments are due, they are made. REPRESENTATIVE GATTO asked if this revenue stream [of repayments] was accounted for in the fiscal note. MR. LAWSON responded that the fiscal note doesn't account for the amount of revenue that's coming in [through repayments]. The fiscal note specifies that around $300,000 has come in thus far and more is anticipated. Number 1954 REPRESENTATIVE GUTTENBERG related his understanding that the governor's intent is to take ASTF and the funds in it and HB 247 establishes a vehicle to monitor the funds and the returns. He inquired as to why ASTF is being eliminated from statute [rather than just not funding it]. COMMISSIONER BLATCHFORD said that "we" didn't consider that question. He related his belief that this legislation appears to be much cleaner. REPRESENTATIVE CRAWFORD remarked that he didn't understand eliminating endowments. He pointed out that ASTF has generated over $126 million in income over the $100 million endowment that was used to establish the program. He likened this to the plantations where he grew up; people would do various things with the earnings from the plantation but would never sell the land. This [legislation] is like selling the land, he said. He questioned why one wouldn't place the funds in the endowment somewhere else to generate income. Number 2058 COMMISSIONER BLATCHFORD replied, "The state needs the money." After reviewing all the projects in depth, it was decided that ASTF wasn't following the intent behind its creation. Therefore, it was decided it should wind down. Commissioner Blatchford indicated his disagreement with Representative Crawford's analogy. REPRESENTATIVE GATTO asked if it was Commissioner Blatchford's decision to dissolve ASTF. COMMISSIONER BLATCHFORD answered that it was a collective decision. REPRESENTATIVE GATTO specified that he was trying to determine whether Commissioner Blatchford was directed to do this or was actually a part of it. CHAIR ANDERSON interjected that it's difficult for a commissioner to say that he isn't part of such a decision because the governor is his boss. Conversely, the commissioner's have to counsel the governor. Number 2115 REPRESENTATIVE CRAWFORD acknowledged the need for money, but highlighted that ASTF has generated income that far exceeds the original investment. Therefore, he said he didn't understand why [the entire endowment] would be taken in one year and thus in the coming years the state wouldn't have [the revenue] on which to fall back. If there is dissatisfaction with regard to where the earnings are going, that can be changed, he pointed out. REPRESENTATIVE GUTTENBERG noted that over the past couple of days some in the legislature had the opportunity to listen to Red Boucher discuss e-commerce. According to Mr. Boucher, science and technology could be a vehicle for e-commerce. Therefore, he asked if there is any other vehicle to e-commerce and economic development besides this legislative process. COMMISSIONER BLATCHFORD pointed out that within DECD is the Division of Community Advocacy, which he views as an incubator for entrepreneurial ideas. This division works closely with all of the communities in Alaska and many suggestions regarding how to work with them to seize opportunities in the private and public sector are obtained. Furthermore, the University of Alaska system [provides] greater opportunities in this arena. Number 2355 REPRESENTATIVE CRAWFORD asked if Commissioner Blatchford is saying that DCED would be able to provide matching funds similar to those that made the Kodiak launch facility possible. COMMISSIONER BLATCHFORD said that the department has to be creative in working with local communities and the federal government. TAPE 03-47, SIDE B COMMISSIONER BLATCHFORD continued by saying that the department would work closely with the almost two dozen agencies that have impact on funding Alaskan projects. He indicated that in a situation in which there was an opportunity for projects with requirements for a match, the state would work closely with the unorganized boroughs to try to match it. Number 2340 CHAIR ANDERSON, upon determining that no one else wished to testify, closed the public testimony. REPRESENTATIVE GUTTENBERG reiterated his concern with regard to eliminating ASTF from the statute completely because often times there is the need for a vehicle. REPRESENTATIVE DAHLSTROM moved to report HB 247 out of committee with individual recommendations and the accompanying zero fiscal note. REPRESENTATIVE CRAWFORD objected and said, "I do believe that even if we were to strip the money away from this, it doesn't do us any good to do away with the vehicle if we are able to use it after we get our fiscal policy in order." REPRESENTATIVE GUTTENBERG echoed his earlier comments regarding his concern with completely eliminating ASTF from the statutes. REPRESENTATIVE ROKEBERG commented, "It's a shame we have this bill; it was a great idea for all the reasons of the technology, but it didn't work." REPRESENTATIVE CRAWFORD suggested that then ASTF should be fixed so that it does work because he believes some of the things ASTF did were good things. Number 2144 A roll call vote was taken. Representatives Lynn, Dahlstrom, Gatto, and Rokeberg voted in favor of reporting HB 247 from committee. Representatives Guttenberg, Crawford, and Anderson voted against it. Therefore, HB 247 was reported out of the House Labor and Commerce Standing Committee by a vote of 4-3.
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