Legislature(2001 - 2002)

04/18/2001 01:45 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               SB 188-EDUCATION FUND/ LAND ENDOWMENT                                                                        
CHAIRWOMAN GREEN announced SB 188 to be up for consideration.                                                                   
MS.  SANDY  ALTLAND, staff  to  Senator  Ward,  sponsor of  SB  188,                                                            
explained  that SB 188  establishes  an education  fund from  a land                                                            
endowment of 5  million acres for public education  and provides for                                                            
an effective  date.  The education  fund would be separate  from the                                                            
general  fund:  the principal  of  the  fund  would be  funded  from                                                            
legislative appropriations,  gifts, bequests, and contributions from                                                            
individuals.   The principal  would be invested  and the  investment                                                            
income would be  appropriated for public schools and  the University                                                            
of Alaska.   SB 188 sets  up an education  fund board and  describes                                                            
the board's make-up,  its powers and duties.  SB 188  also defines a                                                            
timeline for  appropriating 5 million  acres to the education  fund.                                                            
The board would oversee  the management and disposition of the land.                                                            
SENATOR WARD moved Amendment 1, which reads as follows.                                                                         
     On page 2, following line 31 insert:                                                                                       
          2) a member of the Board of Regents of the University of                                                              
Alaska appointed by the Governor.                                                                                               
SENATOR WARD  noted its omission was  on oversight on his  part when                                                            
he drafted the bill.                                                                                                            
CHAIRWOMAN GREEN  announced that with no objection,  Amendment 1 was                                                            
adopted.  She then took public testimony.                                                                                       
Number 1440                                                                                                                     
MR.  DICK  MYLIUS,  Division  of  Mining,  Land  and  Water  of  the                                                            
Department of  Natural Resources (DNR), said that  under SB 188, DNR                                                            
will have  11 years to  transfer 5 million  acres, which amounts  to                                                            
455,000 acres  of land  per year, assuming  that the constitutional                                                             
amendment as  put forth in SJR 25  is approved.  The education  fund                                                            
cannot  select existing  oil, gas  and mineral  properties, but  can                                                            
select most of the general  grant state land, except for land within                                                            
state  parks.   DNR believes  this bill  will be  very expensive  to                                                            
implement  and  will   not  generate  additional  revenue   to  fund                                                            
education.   The bill will first result  in a transfer of  land from                                                            
one state agency  to another and it  will require DOEED to  become a                                                            
land management  agency.   DNR  has identified  several significant                                                             
concerns with SB 188:                                                                                                           
   · The endowment of lands is not likely to ever generate                                                                      
     sufficient  revenue  to fund education  needs  in Alaska.   The                                                            
     state's  education  budget is  about  100 times  the amount  of                                                            
     money that this fund will be able to generate.                                                                             
   · The transfer process will be very expensive.  DNR estimates                                                                
     the cost to be over  $12 million per year, primarily to pay for                                                            
     the  survey of the  5 million  acres.  The  bill establishes  a                                                            
     land management  program within DOEED which will  duplicate the                                                            
     existing functions  of DNR.  A land management program in DOEED                                                            
     could cost as much  as $2 million per year.  SB 188 reduces the                                                            
     legislature's  ability  to direct  state spending  as  revenues                                                            
     from state  public domain lands  currently go into the  general                                                            
     fund for appropriations.                                                                                                   
   · Identifying the 5 million acres will be time consuming and                                                                 
     contentious.   DNR and the University of Alaska  recently spent                                                            
     6 months  attempting to negotiate  a settlement of the  250,000                                                            
     acres  granted  to the  University  as  a substitute  for  last                                                            
     year's SB 7.                                                                                                               
   · SB 188 allows the education fund to acquire lands that are                                                                 
     important  for  public  use,  including  lands that  have  been                                                            
     legislatively designated  as state game refuges, state critical                                                            
     habitat   areas,  public  use  areas  and  the  Susitna   River                                                            
     recreational corridor.   The existing school trust is currently                                                            
     in  litigation.    SB  188  could  impair   the  prospects  for                                                            
     resolving that litigation.                                                                                                 
   · The state already has existing obligations to transfer over                                                                
     600,000 acres  of land to municipalities and,  depending on how                                                            
     litigation over the  University land trust is resolved, DNR may                                                            
     need  to identify 250,000  acres to  convey to the University.                                                             
     The  state   should  fulfill   its  current  land  entitlement                                                             
     obligations  before  it creates a  new one.   In addition,  the                                                            
     education  fund is likely to select in the unorganized  borough                                                            
     that  would otherwise  be  selected by  future municipalities,                                                             
     thereby  limiting  their  selection  options and  reducing  the                                                            
      incentive of local residents to form local governments.                                                                   
   · SB 188 will impede resource development.  Developers will be                                                               
     reluctant  to start  projects when  they are  not sure  whether                                                            
     land will be owned  by DNR or the education fund, and a new set                                                            
     of  rules will  need to be  generated for  managing the  fund's                                                            
     lands. Uncertain land  tenure complicates resource development.                                                            
      Alaska  has experienced  this  with the  prolonged  litigation                                                            
     over Alaska Mental Health Trust Lands.                                                                                     
   · SB 188 requires the education fund to allow mineral leasing                                                                
     procedures  similar  to AS 38.05.185  and AS  38.05.275.   This                                                            
     overly  broad statement implies  that leaseable minerals,  such                                                            
     as oil, gas and coal,  could be acquired through the staking of                                                            
     mining claims.  DNR  presumes this is not the sponsor's intent.                                                            
MR. MYLIUS noted  that Mr. Jim Hansen would also like  to comment on                                                            
the bill.                                                                                                                       
Number 1120                                                                                                                     
MR. JIM  HANSEN, Chief  Geophysicist  with the Division  of Oil  and                                                            
Gas, DNR,  stated SB 188  does not allow  selection of lands  within                                                            
the 5 year program  for lands permitted or leased.   SB 188 contains                                                            
a three year provision  in that the selected lands  must not include                                                            
exploration  but exploration could  be included at some point  after                                                            
that.   Currently, DNR has  a license over  the Copper River  Basin.                                                            
Should the education fund  board select land in the vicinity of that                                                            
license, DNR would  have to convey that land after  three years even                                                            
though  that land  still  may have  oil and  gas potential.    DNR's                                                            
concern  is with  the transfer  over of  management  of oil and  gas                                                            
lands  that  could   be  producing,  especially   in  light  of  the                                                            
possibility  of a gas pipeline coming  to the North Slope.   If that                                                            
plan  is finalized,  DNR expects  exploration  to  become much  more                                                            
involved  in Alaska.  DNR  currently has  one license, two  pending,                                                            
and  has received  two  others this  month for  other  parts of  the                                                            
state.  This  program is picking up  steam fast and DNR is  expected                                                            
to see much more activity  over the next two years.  Another problem                                                            
he sees with SB 188 is  that it does not address the fact that lands                                                            
could potentially  have natural gas leases on them.   DOEED does not                                                            
have the expertise to deal with natural gas leasing.                                                                            
SENATOR WARD commented  that he does not share the  same concerns as                                                            
the  two previous  speakers  but SB  188 has  been  referred to  the                                                            
Senate Resources  Committee. He explained that he  introduced SB 188                                                            
because the  state is currently  spending $830  million per  year of                                                            
general   funds  for  education   from   kindergarten  through   the                                                            
university level.  He tried  to put forth a similar plan in 1982 but                                                            
was told  it would  take seven  to 10 years  to get  this kind  of a                                                            
project  off  of the  ground.    He wants  to  bring  the  education                                                            
community  an  endowment comprised  of  5  million of  Alaska's  103                                                            
million acres.   That would make Alaska's  endowment the  largest in                                                            
the world.   If  this bill is  successful,  Senator Murkowski  would                                                            
consider  trying  to add  5 million  acres of  federal  land to  the                                                            
endowment.  SB 188 is not  an immediate fix, but had it been enacted                                                            
in 1982,  Alaska may  not be in the  position it  is in today.   His                                                            
constituents  tell him the Legislature  is not putting enough  money                                                            
into  education.   SB 188  does take  education funding  out of  the                                                            
legislative  appropriation  process,  which  is  troubling,  but  in                                                            
exchange,  Alaska will develop  some of its  103 million acres.   He                                                            
said he  does not favor  using the Permanent  Fund and he  disagrees                                                            
wholeheartedly that the  approach in SB 188 will not make money.  He                                                            
knows the  people in his  district would develop  some land  to fund                                                            
education,  and it would  be developed in  an environmentally  sound                                                            
way.   He believes  SB 188  is a mixture  of  two philosophies:  one                                                            
being to develop 5 million  acres to supply jobs and a tax base; and                                                            
second it will  slowly relieve the  education commitments  the state                                                            
has  under its  Constitution.    He believes  this  is  a good  step                                                            
forward.  He  pointed out the difference  between SB 188  and a bill                                                            
introduced  last year  is that  SB 188  does not  contain a  voucher                                                            
proposal and it covers funding for the University.                                                                              
Number 654                                                                                                                      
CHAIRWOMAN  GREEN commented  that throughout  the conflict  with the                                                            
university  lands  bill, a  lot of  work was  done  to minimize  the                                                            
conflict over land claims.   She asked if that was incorporated into                                                            
SB 188.                                                                                                                         
SENATOR WARD said, "This  sets up a mechanism to let it happen."  He                                                            
does not  believe Alaska  has had any significant  land development                                                             
and some have been frustrated  about an inability to get some of the                                                            
state's lands  out of the state coffers.   He feels a disservice  is                                                            
being  done to  the  education community  because  it  is not  being                                                            
funded adequately.                                                                                                              
CHAIRWOMAN  GREEN said she  will hold SB 188  until Friday  and that                                                            
the committee will take up SJR 25.                                                                                              

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