Legislature(1993 - 1994)
02/23/1993 01:35 PM Senate 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
SENATOR KELLY introduced the fee bill by request of the Governor, SB 99 (FINANCIAL ADMINISTRATION OF STATE GOVERNMENT), and he explained a committee substitute would be written for Tuesday, 3/2/93. He also explained what has been done on the bill and asked JACK WRAY, Executive Director for the Alaska Police Standards Council, whether the fee should be charged to both public and private security officers, and MR. WRAY corrected his question to include "police" officers. JOSH FINK, aide to SENATOR KELLY, reviewed two questions referring to an exemption for state and public officers from the professional certification fees. MR. WRAY explained the Alaska Police Standards Council was agreeable to the proposed statute, but he said the membership was opposed to the exemption of state employees from the requirement. He quoted the members as considering it to be a professional certification, and they felt it would be unfair for municipal police to pay while airport safety officers be exempt. SENATOR RIEGER clarified the fees would be paid by the individual officers. Number 265 SENATOR KELLY questioned the amount of the fee, and MR. WRAY thought it should be $50 for an entry level certificate for all new police officers. SENATOR KELLY agreed to put that amount in statute. SENATOR KELLY continued on to DON HITCHCOCK, Director of Risk Management in the Department of Administration. MR. HITCHCOCK referred to Section 62 on page 19, and gave some background information on the need for claims recovery legislation in relation to the state insurance catastrophe reserve account. SENATOR RIEGER questioned the process, and MR. HITCHCOCK explained the appropriation process and the insurance fund. At present the fund contains $4.1 million. SENATOR KELLY asked for a review of Sections 61 through 64. JUANITA HENSLEY, Chief of Driver Services gave an explanation from the audience that was inaudible. SENATOR KELLY asked about Section 64, and MR. HITCHCOCK said he was only interested in AS 37.05.289. MR. HITCHCOCK explained, in answer to a question from SENATOR RIEGER, the mix of federal and state money in the catastrophe reserve account, and his interest in the state's fair share. Number 363 There was still some discussion about the account, and MR. HITCHCOCK said the federal government wanted to be sure Alaska is using the money for which it was originally given by the Federal government. SENATOR LINCOLN questioned where the money was previously deposited, and MR. HITCHCOCK explained the state had bought an insurance policy that guarantees that the state will not pay out any more than the amount received from the federal government. He discussed the use of an aggregate loss policy to be reimbursed for claims in excess of the money received from the federal government in a recovery process. MR. HITCHCOCK explained the audit department of Health & Human Services reported that if these claims paid were originally paid out in support of insurance programs that were supported by federal money, and, if we recover the money, the federal government wants their percentage of the recovery. SENATOR KELLY asked for his explanation in writing. SENATOR LINCOLN asked about the cap, and MR. HITCHCOCK said there was a $5 million cap, and he cited AS 37.05.289(c) in reference to the cap. Any money in excess of the cap returns to general funds. Number 428 MS. HENSLEY referred to two concerns from the last meeting, the first being a question on exemptions from a $10 fee for motor vehicle registration not conducted by mail. The department would waive the fee if a person had to come into the office for such reasons as to clear an non-sufficient check, a stolen status on the vehicle, a name change or a title change. MS. HENSLEY referred to a question from SENATOR RIEGER and gave some statistics from the Department of Transportation on traffic on roads not connected to a state maintained land system such as the Whittier traffic. SENATOR KELLY asked if there was anyone from the Department of Environmental Conservation, and KIT BALLENTINE, Acting Director for the Division of Environmental Health, appeared to testify on Sections 66 and 67. She answered a question on those public facilities which are inspected: restaurants, bars, markets, food processors, health care facilities, residential care, schools, pre-schools, barber and beauty shops, public showers, and two (unintelligible) facilities. She said it would exclude the facilities within the Municipality of Anchorage. SENATOR KELLY clarified the legislation would expand the inspection state-wide. MS. BALLENTINE explained they had always been inspected, but fees had not been charged. There was a discussion on the fiscal note by MS. BALLENTINE and MR. FINK. Number 470 SENATOR SALO gave an example of inspecting a restaurant at Cooper Landing and asked what fee they would be charged. MS. BALLENTINE explained they were presently permitted to charge a fee on a sliding scale depending on the seating, but the bill would extend to all of the public facilities not previously covered. They continued to discuss the expanded list, the inspection, and the collection of fees. SENATOR SALO asked for information on the kinds of fees, and asked for a list of examples. SENATOR RIEGER expressed concern at the $6 million price tag for the Clean Air Act, and asked for the number of permits involved. MS. BALLENTINE talked in terms of indirect costs related to the Federal Clean Air Act, and she explained the present fee system. SENATOR RIEGER thought the fiscal note should more properly be attached to a clean air bill currently going through the legislature. (HB 39) SENATOR KELLY had some questions on Section 67 and Sections 13, 14, and 15, but MS. HENSLEY didn't have all of the information. (She gave some inaudible testimony from the audience.) SENATOR RIEGER led a discussion on the reimbursement of a dollar to those people selling Fish & Game licenses, and he outlined the cumbersome way presently used. Number 537 SENATOR LINCOLN asked if the committee had reviewed Section 65, the fees in parks. SENATOR KELLY asked for her questions, and she expressed a problem with the number of "mays" in the section. She gave examples of those that bothered her. SENATOR KELLY said no one from the Division of Parks had been advised to attend, and he asked MR. FINK to work on her questions. SENATOR KELLY asked for concurrence to drop the Department of Environmental Conservation from the bill, and it was agreed. # SENATOR KELLY presented a work draft of proposed legislation and regulations to revise the banking code. He introduced WILLIS KIRKPATRICK, Director of the Division of Banking, Securities, & Corporations, who would lead the committee through the proposed bill. SENATOR KELLY stated for the record he had no conflict of interest with the proposed work draft. Since it was not officially a bill, only testimony was presented, but no actions taken. Number 572 MR. KIRKPATRICK explained he would give an introduction leading up to the drafting of the proposed legislation, and would ask JEFF BUSH to join him for an in-depth description of the rough draft. TAPE 93-13, SIDE B Number 001 MR. KIRKPATRICK reviewed the problems with the present banking code, and he gave some examples such as not addressing the cash management account and non-banking institutions like Sears, ATT, etc. He said the Division of Banking decided it was time to look at various aspects of the banking code and work out those areas that needed to be addressed. MR. KIRKPATRICK said no amount of legislation could legislate good management, and they found the denial syndrome from the boards when their bank started to deteriorate. He described how they rated the banks on capital assets, liabilities management, and liquidity, but the banking code did not address the problems of the banks that were deteriorating. MR. KIRKPATRICK continued a lengthy description of multiple bank failures, depositor losses, the 13 C open bank assistance program, FDIC, sale of assumptions, all of which needed to be addressed in the banking code. He praised the vision and action COMMISSIONER GLENN OLDS brought to the banking division, and COMMISSIONER OLDS wanted the division to work on a process to allow international banks better entry into the Anchorage area. MR. KIRKPATRICK described the advantages of a strong international banking system. For all these reasons, MR. KIRKPATRICK was asked to recodify the banking code, and he described a 10 month period in which they planned their action, including the hiring of MR. BUSH, who was previous counsel to the Division of Banking. He described the search for assistance, their choice of MR. BUSH, and his assignment. MR. KIRKPATRICK outlined their plan, saying they did not want to re-regulate the financial institutions, and he mentioned the repealer for the Savings and Loan Act. He described the detailed plans for the savings and loans in making loans, and he lamented the loss of three saving and loans. He summarized the problems with the Savings and Loan Act, and suggested solutions using the Mutual Savings Bank Act. MR. KIRKPATRICK said he was using the Mt. McKinley Mutual Savings Bank in Fairbanks as a model for legislation. MR. KIRKPATRICK described using the input from the bank examiners with their 10 years of experience through good periods of banking as well as the down side of the economy. He carefully outlined the procedure for collecting the information from survivors of the recent banking failures. At this point, MR. KIRKPATRICK introduced MR. BUSH, who would give an outline on the proposed banking code. SENATOR LINCOLN suggested she might have a conflict with the committee, since she is a party to a lawsuit between FDIC and United Bank Alaska. SENATOR KELLY said he was not aware of any conflict. Number 103 MR. BUSH reviewed the hand outs for the proposed legislation, including a Sectional Analysis on the 2/19/93 work draft for details on each section. He noted two changes in the draft on page 14, Section 87, removing paragraph (3), and he explained why. The second change was on 17, near the bottom, to replace AS 06.05.521 with AS 06.05.570. Number 136 MR. BUSH referred the committee to the handout entitled Outline of Presentation on Recodification of the Alaska Banking Code, and began by listing the three major subject headings: BANK POWERS, BANK REGULATION, and ENFORCEMENT. On page 51, in Section 88, MR. BUSH described setting up a new article on interstate and international banking, to allow foreign and other US banks to enter the Alaska market place. He then listed all of the prerequisites for implementing these provisions dealing with interstate or international banks, and discussed the distinction between interstate and international banks. He explained how the new banks could be established in Alaska. SENATOR KELLY asked if that could be done now, and MR. BUSH said they could. SENATOR SALO clarified it also meant international banks, and MR. BUSH explained the rules for establishing a foreign bank in Alaska. Number 171 SENATOR KELLY asked MR. KIRKPATRICK if there was any interest by other countries in the establishment of a bank in Alaska, and MR. KIRKPATRICK noted a Korean bank was interested earlier. He said they had discussed it with other interests, but had not been approached for an application. MR. BUSH said the distinction was that an international bank could establish a new branch in Alaska, but an interstate bank could not, and must buy an existing bank or branch. He outlined the regulations that would have to be followed by an interstate bank, including reciprocity and FDIC insurance, while an international bank would have to maintain assets in this state at least equal to 100% of its Alaska deposits. This would mean full protection for depositors. MR. BUSH explained that any banks, either foreign or interstate, would be subject to examination, just the same as an Alaskan bank. Additionally, the Division of Banking would be authorized to examine the home office of the bank any where in the world, for the protection of Alaska depositors. MR. BUSH said the second significant change in the proposed recodification would allow the banks to have subsidiaries, and he explained the code specifically authorized real estate ownership, development and leasing, insurance, and securities brokerage. Number 222 SENATOR KELLY asked if this was allowed at this point, and MR. KIRKPATRICK explained, at present, there was no authority for the banks to have any other subsidiaries. MR. BUSH explained the present limited conditions. SENATOR KELLY asked why this was being allowed, and MR. KIRKPATRICK discussed reasons such as a limited market, competition, profit centers, management decisions, and trust subsidiaries. He described in an area without services such as a title company or insurance coverage, a bank could set up those services, and he gave an example in Fairbanks as a way to finance needed businesses. He also described the federal prohibitions in relation to banks, and he gave an example of this in Oregon. SENATOR RIEGER confirmed securities brokerage was allowed, and asked if it was a service for a fee. Number 200 MR. KIRKPATRICK described two instances where securities could be purchased in the State of Alaska through banks, and in both instances the banks provided the facilities for the sales - but didn't provide the salesman. MR. BUSH said a third major area in the BANK POWERS section, that has changed, is in the lending statutes, and he explained the banking code has a unique clause called the "wild card statute," which permits the division to adopt regulations, even if they conflict with statutes, that are necessary to allow state banks to be competitive with national banks. MR. BUSH gave extensive background information on this wild card clause in relation to the lowering of federal lending standards. MR. BUSH said the code would throw out all regulations adopted under the wild card statute and adopt statutes that are competitive with the federal statutes, so all banks could follow state law. He took the federal lending limit restrictions and put them into state statute. Number 248 SENATOR KELLY asked if the wild card was still around. MR. BUSH said if changes occurred in federal law requiring the state to be competitive for state banks, the Division of Banking would still have the authority. He gave an example of cases in Alaska where there was unethical lending, and he explained the legislation would adopt regulations to determine when a loan to one person would be attributed to another, for purposes of calculating the lending limits of AS 06.05.205(b). Number 384 SENATOR KELLY wanted to know for whom the rules were being written, and MR. KIRKPATRICK answered by explaining they were looking at the banks that were chartered under the Alaska Banking Code. He used a loan to the Jordan Creek Mall from the B.M. Behrends Bank and the Rainier Bank to discuss the problem of over-runs in the cost of building the mall. Money began to be borrowed by separate people still involved with the building corporation, and MR. KIRKPATRICK explained it was difficult, under the banking code of that time, to withhold the loans, but there wasn't enough income from the mall to pay back the loan. He explained the problems evolve when the limits of the loan are exceeded. MR. BUSH explained the recodification in the proposed legislation applies to state banks, but doesn't apply to trust companies or federally chartered banks, except for some changes to the entire Title 6. SENATOR KELLY reviewed a letter from a credit union in Sitka, expressing some concerns. He then turned to the Anchorage site on teleconference to hear JIM CRAWFORD, the CEO of the City Commerce Corporation, which he entitles a non-bank. Number 460 MR. CRAWFORD reported he had reviewed the work draft, and felt comforted by the remarks from MR. KIRKPATRICK and MR. BUSH regarding the changes in the industry. He described his non-bank and said there were passages in the recodification he would like to see deleted. He spoke specifically to page 23, Section 49, and, "(d) A person may not own, operate, or acquire an institution that engages in the business of making commercial loans, unless the institution accepts demand deposits." MR. CRAWFORD explained Alaska has always been a tough place to get a loan, and he described a growing banking industry with a non-bank component, which doesn't deal with depositor's money. He thought depository institutions, because of federal regulation, were too conservative and restrictive in their lending, and he cited his service on the Advisory Council for the SBA for his information from bankers. Number 530 MR. CRAWFORD described the pure lenders that match the source of capital to a source of needed capital for a fee, and he described an affiliate in Texas who is a non-bank banker as well as an investment banker. In order to have a vibrant lending community, he thought raising capital needed less regulation for small businesses, in particular. MR. CRAWFORD reviewed: (The section NUMBERS given by the teleconference participants were different from those on the rough draft dated 2/19/93, Bannister. The new section numbers were substituted for those given by MR. CRAWFORD and MR. LANGDON.) - Section 50 - He thought banking business is poorly defined. - Section 69 - He disagreed with the provision (5) prohibiting a person from being on a board of directors, if that person has filed for bankruptcy. TAPE 93-14, SIDE A Number 001 - Section 87 - He disagreed with the definition of banking, which he said makes any lender a bank. SENATOR KELLY returned to the Anchorage teleconference to hear MARC LANGDON, CEO of the NorthRim Bank, and CHARLES MCKEE. Number 044 MR. LANGDON basically agreed with the legislation and MR. KIRKPATRICK, but he thought there should be some changes: - Section 7 (d) which should have a better definition on the penalties of insolvency. - Section 17, which affects a holiday closure, is outdated. - Section 15 (a) - He thought it gave too much authority to an agency to manage a bank. Number 109 - Section 32 (a) would not permit a customer to have an overdraft. They happen daily, and the person shouldn't be considered a felon. - Section 38, involved a permitting process, which he doesn't understand. - Section 51 - He thought present bank examiners were over-zealous in classifying assets. Number 171 SENATOR KELLY broke into the testimony from MR. LANGDON to ask him to fax his suggested changes to his office before the next hearing on the proposed legislation. He invited the teleconference participants to let him know if they wanted to be heard at the next meeting. There being no further business to come before the committee, the meeting was adjourned.
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