Legislature(1999 - 2000)

03/26/1999 01:38 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
           HOUSE FINANCE COMMITTEE                                                                                              
              March 26, 1999                                                                                                    
                 1:38 P.M.                                                                                                      
                                                                                                                                
TAPE HFC 99 - 54, Side 1                                                                                                        
TAPE HFC 99 - 54, Side 2                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair Therriault called the House Finance Committee                                                                          
meeting to order at 1:38 p.m.                                                                                                   
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Co-Chair Therriault   Representative Foster                                                                                     
Co-Chair Mulder    Representative Grussendorf                                                                                   
Vice-Chair Bunde     Representative Kohring                                                                                     
Representative J. Davies   Representative Moses                                                                                 
                                                                                                                                
Representatives Austerman, Williams and G. Davis were absent                                                                    
from the meeting.                                                                                                               
                                                                                                                                
ALSO PRESENT                                                                                                                    
                                                                                                                                
Doug Gardner, Assistant Attorney General, Department of Law;                                                                    
Mike Krieber, Staff, Representative Kohring; Annalee                                                                            
McConnell, Director, Office of Management and Budget, Office                                                                    
of the Governor.                                                                                                                
                                                                                                                                
SUMMARY                                                                                                                         
                                                                                                                                
HB 40 "An Act combining parts of the Department of                                                                              
Commerce and Economic Development and parts of the                                                                              
Department of Community and Regional Affairs by                                                                                 
transferring some of their duties to a new                                                                                      
Department of Commerce and Rural Development;                                                                                   
transferring some of the duties of the Department                                                                               
of Commerce and Economic Development and the                                                                                    
Department of Community and Regional Affairs to                                                                                 
other existing agencies; eliminating the                                                                                        
Department of Commerce and Economic Development                                                                                 
and the Department of Community and Regional                                                                                    
Affairs; relating to the Department of Commerce                                                                                 
and Rural Development and the commissioner of                                                                                   
commerce and rural development; adjusting the                                                                                   
membership of certain multi- member bodies to                                                                                   
reflect the transfer of duties among departments                                                                                
and the elimination of departments; creating the                                                                                
office of international trade and relating to its                                                                               
duties; and providing for an effective date."                                                                                   
                                                                                                                                
HB 40 was placed in a subcommittee chaired by                                                                                   
Representative Therriault, and consisting of                                                                                    
Representative Austerman, Representative Kohring                                                                                
and Representative J. Davies.                                                                                                   
                                                                                                                                
HB 102 "An Act imposing certain requirements relating to                                                                        
cigarette sales in this state by tobacco product                                                                                
manufacturers, including requirements for escrow,                                                                               
payment, and reporting of money from cigarette                                                                                  
sales in this state; providing penalties for                                                                                    
noncompliance with those requirements; and                                                                                      
providing for an effective date."                                                                                               
                                                                                                                                
 HB 102 was REPORTED out of Committee with a "do                                                                                
pass" recommendation and two zero fiscal notes,                                                                                 
one by the Department of Law and one by the                                                                                     
Department of Revenue.                                                                                                          
HOUSE BILL NO. 102                                                                                                              
                                                                                                                                
"An Act imposing certain requirements relating to                                                                               
cigarette sales in this state by tobacco product                                                                                
manufacturers, including requirements for escrow,                                                                               
payment, and reporting of money from cigarette sales in                                                                         
this state; providing penalties for noncompliance with                                                                          
those requirements; and providing for an effective                                                                              
date."                                                                                                                          
                                                                                                                                
Co-Chair Therriault observed that Mr. Gardner, Department of                                                                    
Law responded to questions by the Committee in a letter                                                                         
dated 3/24/99 (copy on file).                                                                                                   
                                                                                                                                
DOUG GARDNER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW                                                                     
reviewed his letter to Co-Chair Therriault. He observed that                                                                    
the Committee questioned if the word "generally" could be                                                                       
deleted on page 3, line 11. He conferred with counsel for                                                                       
Phillip Morris. Phillip Morris takes the position that it                                                                       
would not be a qualifying statute with the deletion of                                                                          
"generally". He stated that the state of Alaska would not                                                                       
necessarily agree with Phillip Morris, but acknowledged that                                                                    
the change would open the state to litigation. He                                                                               
recommended that "generally" not be deleted. He emphasized                                                                      
that any benefit for clarification purposes would be                                                                            
outweighed by the risks of litigation.                                                                                          
                                                                                                                                
Mr. Gardner discussed the second question that was posed by                                                                     
the Committee: What is the meaning of the phrase "generally                                                                     
perform its financial obligations under the Master                                                                              
Settlement Agreement." He observed that counsel for Phillip                                                                     
Morris would take the position that the change would render                                                                     
the statute a non-qualifying statute. The Department of Law                                                                     
takes the position that the term "generally perform its                                                                         
financial obligations" is a catch all phrase used to                                                                            
describe the myriad of financial obligations in the Master                                                                      
Settlement Agreement and in and of itself does not alter the                                                                    
obligations that are individually enforceable throughout the                                                                    
rest of the agreement. He recommended that the proposed                                                                         
change not be made.                                                                                                             
                                                                                                                                
Mr. Gardner discussed the third question: Can the committee                                                                     
amend HB 102 by deleting page 3, lines 10 - 12. He concluded                                                                    
that the need for the section still exists. He explained                                                                        
that a company could still become a Subsequent Participating                                                                    
Manufacturer (SPM).                                                                                                             
                                                                                                                                
Mr. Gardner discussed the fourth questioned: Does the bill                                                                      
have the affect of limiting a Non-Participating                                                                                 
Manufacturer's liability to the amount a manufacturer would                                                                     
be required to place in escrow under Sec. 45.53.020? He                                                                         
concluded that it would not. He noted that if a Non-                                                                            
Participating Manufacturer put a million dollars into an                                                                        
escrow account and was found to be liable to a plaintiff in                                                                     
Alaska for $2 million dollars, than the plaintiff could                                                                         
recover a million dollars from the escrow fund and continue                                                                     
to collect the judgement as allowed by Alaska law against                                                                       
the company. The fund is a vehicle for providing for                                                                            
compensation but not the only available source.                                                                                 
                                                                                                                                
Co-Chair Therriault clarified that the finding language is                                                                      
part of the model legislation.                                                                                                  
                                                                                                                                
Representative J. Davies asked what obligations and                                                                             
advantages would exist under the Subsequent Participating                                                                       
Manufacturer status. Mr. Gardner explained that a small                                                                         
manufacturing company could sign the agreement and take                                                                         
themselves out of the situation of possible liability. They                                                                     
would not have the ability to increase market share without                                                                     
any financial repercussions as they would have if they had                                                                      
signed as a SPM earlier. If they do not become a SPM they                                                                       
would have to deal with the escrow issue.                                                                                       
                                                                                                                                
Representative J. Davies questioned if they would be subject                                                                    
to advertising sanctions. Mr. Gardner replied that they                                                                         
would have to comply with SPM restrictions on advertising.                                                                      
                                                                                                                                
Representative Grussendorf maintained that "generally" is                                                                       
vague. He stressed that without "generally" the original                                                                        
agreement would be clear.                                                                                                       
                                                                                                                                
Representative J. Davies MOVED to ADOPT Amendment 1 (copy on                                                                    
file).                                                                                                                          
 Page 3, line 27                                                                                                                
                                                                                                                                
 Delete "Such money itself:"                                                                                                    
Insert "Money placed into escrow and interest earned on                                                                         
money in escrow"                                                                                                                
                                                                                                                                
Representative J. Davies expressed the concern that the                                                                         
phase "Such money itself" could be interpreted as relating                                                                      
only to the principle.                                                                                                          
                                                                                                                                
Mr. Gardner concluded that the phrase applies to both the                                                                       
interest and the principle amount. He emphasized that the                                                                       
language is clarified with the addition of page 4, lines 12                                                                     
- 15.                                                                                                                           
                                                                                                                                
Representative J. Davies Withdrew Amendment 1.                                                                                  
                                                                                                                                
Co-Chair Therriault questioned if the language on page 4                                                                        
line 12 should read "subsection".  Mr. Gardner stated that                                                                      
he thought the language should be "subsection".                                                                                 
                                                                                                                                
Co-Chair Therriault noted that there are two zero fiscal                                                                        
notes.                                                                                                                          
                                                                                                                                
Vice-Chair Bunde MOVED to report HB 102 out of Committee                                                                        
with the accompanying fiscal notes.                                                                                             
                                                                                                                                
HB 102 was REPORTED out of Committee with a "do pass"                                                                           
recommendation and two zero fiscal notes, one by the                                                                            
Department of Law and one by the Department of Revenue.                                                                         
HOUSE BILL NO. 40                                                                                                               
                                                                                                                                
"An Act combining parts of the Department of Commerce                                                                           
and Economic Development and parts of the Department of                                                                         
Community and Regional Affairs by transferring some of                                                                          
their duties to a new Department of Commerce and Rural                                                                          
Development; transferring some of the duties of the                                                                             
Department of Commerce and Economic Development and the                                                                         
Department of Community and Regional Affairs to other                                                                           
existing agencies; eliminating the Department of                                                                                
Commerce and Economic Development and the Department of                                                                         
Community and Regional Affairs; relating to the                                                                                 
Department of Commerce and Rural Development and the                                                                            
commissioner of commerce and rural development;                                                                                 
adjusting the membership of certain multi- member                                                                               
bodies to reflect the transfer of duties among                                                                                  
departments and the elimination of departments;                                                                                 
creating the office of international trade and relating                                                                         
to its duties; and providing for an effective date."                                                                            
                                                                                                                                
Co-Chair Therriault observed that the legislation would be                                                                      
placed into a subcommittee.                                                                                                     
                                                                                                                                
REPRESENTATIVE KOHRING, SPONSOR, spoke in support of HB 40.                                                                     
He gave a brief history of the legislation. He observed that                                                                    
the bill was introduced in the previous legislative session                                                                     
as HB 400. HB 40 was based on earlier legislation sponsored                                                                     
by Representative Kelly. He maintained that HB 40 would save                                                                    
the state money by merging the Department of Community and                                                                      
Regional Affairs with the Department of Commerce and                                                                            
Economic Development. He stressed that the budget deficient                                                                     
cannot be addressed just by cutting out programs. He                                                                            
emphasized that programs and services must be delivered more                                                                    
efficiently. He maintained that the legislation would                                                                           
deliver programs with greater efficiency and fewer dollars.                                                                     
Upper management would be reduced. The legislation would                                                                        
save approximately $900 thousand dollars.  The existing                                                                         
program structure would be retained. He maintained that the                                                                     
integrity of programs in rural Alaska would remain.                                                                             
                                                                                                                                
Representative Kohring observed that there are nine programs                                                                    
that are being administered by both the Department of                                                                           
Environmental Conservation and Department of Community and                                                                      
Regional Affairs. He observed that one of the two                                                                               
commissioner's offices would be eliminated. He maintained                                                                       
that the legislation would shield programs that are                                                                             
important for the development of Alaska's economy. He                                                                           
explained that childcare programs would be transferred to                                                                       
the Department of Health and Social Services.  Job related                                                                      
programs would be transferred to the Department of Labor. He                                                                    
stressed that without these two components the department                                                                       
can focus strictly on economic development.                                                                                     
                                                                                                                                
Representative Kohring estimated that the cost of the merger                                                                    
would be approximately $200 thousand dollars. He                                                                                
acknowledged that the Administration estimates the cost at                                                                      
approximately $750 thousand dollars. He emphasized that                                                                         
there would be minimal staff disruption. He stated that                                                                         
staff associated with Headstart and job training would be                                                                       
the only ones that would need to move. He pointed out that                                                                      
the initial cost of the merger would not be repeated in                                                                         
subsequent years.                                                                                                               
                                                                                                                                
Representative Kohring observed that the Department would be                                                                    
named the Department of Commerce and Rural Development.  He                                                                     
stressed that the programs and intent of the Department of                                                                      
Community and Regional Affairs would be retained.  He                                                                           
reviewed support for the legislation.                                                                                           
                                                                                                                                
Representative Kohring discussed the one-stop shopping                                                                          
concept. He discussed changes to the legislation made by the                                                                    
House Community and Regional Affairs Committee. He noted                                                                        
that in response to concerns by Representative Joule the                                                                        
word "may" was changed to "shall" in section 77. A rural                                                                        
affairs advocate was also added in section 65. He reiterated                                                                    
that the legislation would benefit rural Alaska. He stressed                                                                    
that there would be a greater focus on economic development                                                                     
and commerce in rural Alaska. He stressed that                                                                                  
infrastructure and construction would be maximized. He                                                                          
asserted that urban Alaska would benefit from enhanced                                                                          
economic activity in rural Alaska.                                                                                              
                                                                                                                                
Representative Kohring pointed out that the merger would                                                                        
create an agency that would still be the fourth smallest in                                                                     
the state. There would be additional management oversight,                                                                      
but not additional duties or responsibility.                                                                                    
                                                                                                                                
Representative Kohring thanked the Administration for their                                                                     
cooperation on the legislation.                                                                                                 
                                                                                                                                
Representative Kohring referred to a letter of support by                                                                       
Don Tanner, former Deputy Commissioner, Department of                                                                           
Community and Regional Affairs (copy on file). Mr. Tanner                                                                       
stated that:  "Having one department responsible for                                                                            
improving our economy will help all communities and                                                                             
businesses." He also referred to a letter by former                                                                             
commissioner of the Department of Commerce and Economic                                                                         
Development, Paul Fuhs, dated March 17, 1998 (copy on file).                                                                    
Former Commissioner Fuhs stated that there would be many                                                                        
advantages to combining the state's economic development                                                                        
programs. He maintained that combined programs would be more                                                                    
effective.                                                                                                                      
                                                                                                                                
Representative Kohring concluded that the legislation would                                                                     
allow economic growth to be enhanced while preserving and                                                                       
protecting the integrity of programs.                                                                                           
                                                                                                                                
Vice-Chair Bunde asked if there were other states with                                                                          
similar agencies.                                                                                                               
                                                                                                                                
MIKE KRIEBER, STAFF, REPRESENTATIVE KOHRING responded that                                                                      
there are similar programs in at least two other states,                                                                        
Pennsylvania and Florida.                                                                                                       
                                                                                                                                
Representative J. Davies questioned if the commissioner of                                                                      
the Department of Community and Regional Affairs or the                                                                         
commissioner of the Department of Commerce and Economic                                                                         
Development would be eliminated.                                                                                                
                                                                                                                                
Mr. Krieber explained that the legislation eliminates the                                                                       
department of Community and Regional Affairs. Representative                                                                    
Kohring stressed that either department could be eliminated.                                                                    
                                                                                                                                
Representative J. Davies questioned if rural Alaskans would                                                                     
be comfortable with the deletion of the Department of                                                                           
Community and Regional Affairs.                                                                                                 
                                                                                                                                
Co-Chair Therriault observed that the new agency would take                                                                     
over the functions of the Department of Community and                                                                           
Regional Affairs. He stated that he would look at the issue                                                                     
in subcommittee.                                                                                                                
                                                                                                                                
Representative J. Davies noted that a commissioner would be                                                                     
eliminated. He questioned which of the duties that the                                                                          
commissioners are doing would be eliminated.                                                                                    
                                                                                                                                
Representative Kohring stated that the intent was not to                                                                        
eliminate the Department of Community and Regional Affairs'                                                                     
commissioner in particular. He stated that only upper                                                                           
management and oversight personnel would be eliminated. He                                                                      
did not think that there would be a negative impact on                                                                          
programs.                                                                                                                       
                                                                                                                                
Representative Kohring stressed that there was no                                                                               
alternative motive, as far as focusing on the commissioner                                                                      
of the Department of Community and Regional Affairs'                                                                            
position. He stated that either commissioner position could                                                                     
be eliminated. He reiterated that only upper management                                                                         
would be affected. He asserted that there would be no                                                                           
negative impact to programs and pointed out that the rural                                                                      
advocate would be a cabinet level position. He reiterated                                                                       
his sincerity in maintaining the integrity of rural                                                                             
programs.                                                                                                                       
                                                                                                                                
Mr. Krieber explained that the rural advocate position would                                                                    
observe other departments and their rural activities in                                                                         
order to look at state government as a whole.                                                                                   
                                                                                                                                
Representative J. Davies pointed out that commissioners do                                                                      
real work. He questioned which of their duties would not be                                                                     
done with the elimination of one commissioner.                                                                                  
                                                                                                                                
Representative Kohring stated that the current duties of the                                                                    
Department of Community and Regional Affairs' commissioner                                                                      
would not be eliminated. He stressed that the Division                                                                          
director and the rural advocate would continue the duties.                                                                      
Representative J. Davies asked how the duties could be                                                                          
combined without something being lost. Representative                                                                           
Kohring stated that the rural advocate position would assume                                                                    
the commissioner's responsibilities.                                                                                            
                                                                                                                                
Co-Chair Mulder stated that they would be asking fewer                                                                          
people to do more work. Representative J. Davies stated that                                                                    
the approach assumes that people can do more work and that                                                                      
they are not already working long hours. Representative                                                                         
Kohring reiterated that there would not necessarily be more                                                                     
work. He stressed that upper management would have more                                                                         
oversight.                                                                                                                      
                                                                                                                                
Representative Kohring reviewed the organization of the new                                                                     
Department of Commerce and Rural Development. There would be                                                                    
four Divisions: Rural Affairs Division, Statewide Economic                                                                      
Development Division, Division of Administration, and                                                                           
Independent Agencies                                                                                                            
                                                                                                                                
(Tape Change, HFC 99 - 54, Side 2)                                                                                              
                                                                                                                                
Representative Kohring stated his intent for a strong                                                                           
bipartisan effort with a strong level of trust.                                                                                 
                                                                                                                                
Representative J. Davies expressed concern that the                                                                             
constitutional provision for local government be met. He                                                                        
asked where the general community emphasis for local                                                                            
government would fall.                                                                                                          
                                                                                                                                
Mr. Krieber maintained that the new department would                                                                            
continue to be an advocate for communities. Representative                                                                      
Kohring stated that the structure would allow the department                                                                    
to focus on the needs of both urban and rural Alaska.                                                                           
                                                                                                                                
Representative J. Davies stressed that their needs are                                                                          
broader than commerce. Representative Kohring stated that                                                                       
the intent is to give a focus and attention of economic                                                                         
development in addition to reducing the budget and                                                                              
streamlining government.                                                                                                        
                                                                                                                                
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND                                                                           
BUDGET, OFFICE OF THE GOVERNOR explained that in an attempt                                                                     
to outline reductions the Governor identified areas that can                                                                    
be consolidated. The Administration concluded that job                                                                          
training and childcare programs would benefit from                                                                              
consolidation. She noted that job training programs have                                                                        
been placed in different departments, in part, due to                                                                           
federal mandates. She observed that recent changes at the                                                                       
federal level allow consolidation of some of the services.                                                                      
She suggested that there could be a realigning of services                                                                      
in the Department of Labor, Department of Community and                                                                         
Regional Affairs, and Department of Commerce and Economic                                                                       
Development. She observed that some components could be                                                                         
transferred to other agencies. Childcare programs could be                                                                      
transferred to the Department of Health and Social Services.                                                                    
She emphasized that consolidation would accomplish a number                                                                     
of key goals in addition to budget savings. The Governor's                                                                      
goals include improving access in rural areas and                                                                               
maintaining a clear focus on rural Alaska. She noted that                                                                       
Power Cost Equalization is one of the most important                                                                            
functions of the Department of Community and Regional                                                                           
Affairs. It is the Governor's goal to find a solution to the                                                                    
delivery of Power Cost Equalization (PCE) funding in the                                                                        
process. She stressed that none of the functions currently                                                                      
being provided by the three departments can be eliminated                                                                       
without significant impacts.                                                                                                    
                                                                                                                                
Representative Foster asked if other departments would be                                                                       
reviewed for consolidation. Ms. McConnell stated that they                                                                      
did not have plans to consolidate other departments.                                                                            
                                                                                                                                
Co-Chair Therriault noted that this consolidation has been                                                                      
under review for a number of years. He spoke in support of                                                                      
the consolidations and identified areas that can be improved                                                                    
by the consolidation. He observed that the legislation would                                                                    
impact the operating budget. He explained that the FY00                                                                         
operating budget would be based on the current structure. If                                                                    
the consolidation occurs the conference committee can adopt                                                                     
fiscal notes to make the structural changes in the operating                                                                    
budget.                                                                                                                         
                                                                                                                                
Co-Chair Therriault stated that the subcommittee would                                                                          
consist of Co-Chair Therriault as chair, Representative                                                                         
Austerman, Representative Kohring, and Representative J.                                                                        
Davies.                                                                                                                         
                                                                                                                                
HB 40 was HELD in Committee for further consideration.                                                                          
ADJOURNMENT                                                                                                                     
                                                                                                                                
The meeting adjourned at 2:45 p.m.                                                                                              
House Finance Committee 9 3/26/99                                                                                               

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