Legislature(1999 - 2000)

04/11/2000 03:15 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 11, 2000                                                                                           
                         3:15 P.M.                                                                                              
                                                                                                                                
TAPE HFC 00 - 112, Side 1                                                                                                       
TAPE HFC 00 - 112, Side 2                                                                                                       
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Therriault  called   the  House  Finance  Committee                                                                   
meeting to order at 3:15 p.m.                                                                                                   
                                                                                                                                
PRESENT                                                                                                                       
                                                                                                                                
Co-Chair Mulder                                                                                                                 
Co-Chair Therriault            Representative Foster                                                                            
Vice Chair Bunde               Representative Grussendorf                                                                       
Representative Austerman       Representative Moses                                                                             
Representative J. Davies       Representative Phillips                                                                          
Representative G. Davis        Representative Williams                                                                          
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Diane  Barrans, Executive  Director, Postsecondary  Education                                                                   
Commission,   Department   of   Education;   Karen   Rehfeld,                                                                   
Director, Division of Education  Support Services, Department                                                                   
of  Education and  Early  Development;  Carl Rose,  Executive                                                                   
Director,   Association  of  Alaska   School  Boards;   Diane                                                                   
Barrans,   Executive   Director,    Postsecondary   Education                                                                   
Commission,  Department of  Education;  Sheila King,  Finance                                                                   
Officer,  Alaska  Student Loan  Corporation;  Carol  Carroll,                                                                   
Director,  Division   of  Support  Services,   Department  of                                                                   
Natural Resources; Marie Marx, Staff, Senator Leman.                                                                            
                                                                                                                                
TESTIFIED VIA TELECONFERENCE                                                                                                  
                                                                                                                                
Milton  Byrd,  President,  Charter   Community  College;  Jon                                                                   
Stolle,   President,   American  Institute   of   Architects,                                                                   
Anchorage;  John   Davis,  Superintendent,   Bering  Straight                                                                   
School  District, Unalakleet;  Major  Thomas, Member,  Alaska                                                                   
National Guard;  Richard Turcic,  Division of  Administrative                                                                   
Services,  Military  and Veterans;  General  Thomas  Westall,                                                                   
Alaska  National  Guard, Glennallen;  Major  Richard  Thomas,                                                                   
Alaska National Guard.                                                                                                          
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 211    "An  Act   relating  to  liability   for  providing                                                                   
          managed  care services,  to  regulation of  managed                                                                   
          care  insurance plans,  and to  patient rights  and                                                                   
          prohibited  practices under  health insurance;  and                                                                   
          providing for an effective date."                                                                                     
                                                                                                                                
         HB 211 was Postponed.                                                                                                  
                                                                                                                                
HB 281  "An Act providing for the issuance of general                                                                           
          obligation bonds in  the amount of $665,000,000 for                                                                   
          the  purposes   of  paying  the  cost   of  design,                                                                   
          construction,  and renovation of  public elementary                                                                   
          and   secondary   schools,  renovation   of   state                                                                   
          buildings,  capital improvements at  the University                                                                   
          of  Alaska,  and  capital   improvements  to  state                                                                   
          harbors; and providing for an effective date."                                                                        
                                                                                                                                
         HB 281 was Postponed.                                                                                                  
                                                                                                                                
HB 331  "An Act relating to payment, allowances, and                                                                            
          benefits  of members of  the Alaska National  Guard                                                                   
          and  Alaska   Naval  Militia  in   active  service;                                                                   
          relating  to computation  of  certain benefits  for                                                                   
          members of the Alaska  State Militia; and providing                                                                   
          for an effective date."                                                                                               
                                                                                                                                
         CSHB 331 (MVA) was REPORTED out of Committee with                                                                      
          a "do  pass" recommendation and with  a zero fiscal                                                                   
          note by the Military and Veterans Affairs.                                                                            
                                                                                                                                
HB 373  "An Act relating to return of contributed capital,                                                                      
          or  payment of  a  dividend, to  the  state by  the                                                                   
          Alaska Student Loan  Corporation; and providing for                                                                   
          an effective date."                                                                                                   
                                                                                                                                
          HB  373  was REPORTED  out  of Committee  with  "no                                                                   
          recommendation"  and  a  zero  fiscal note  by  the                                                                   
          Department of Education and Early Development.                                                                        
                                                                                                                                
HB 445  "An Act relating to a rural school construction                                                                         
          and   planned   maintenance  pilot   program;   and                                                                   
          providing for an effective date."                                                                                     
                                                                                                                                
          HB 445 was heard and  HELD in Committee for further                                                                   
          consideration.                                                                                                        
                                                                                                                                
CSSB 247(FIN)                                                                                                                   
          "An Act relating to  eligibility of certain persons                                                                   
          who receive veterans'  benefits for longevity bonus                                                                   
          payments; and providing for an effective date."                                                                       
                                                                                                                                
          CSSB 247  (FIN) was REPORTED out of  Committee with                                                                   
          a  "do  pass"  recommendation  and  with  a  fiscal                                                                   
          impact  note by the  Department of  Administration,                                                                   
          published date 3/20/00.                                                                                               
                                                                                                                                
CSSB 275(HES)                                                                                                                   
          "An Act  relating to  the school year  for purposes                                                                   
          of  the  postsecondary  student loan  program;  and                                                                   
          providing for an effective date."                                                                                     
                                                                                                                                
          CSSB 275  (HES) was REPORTED out of  Committee with                                                                   
          a "do  pass" recommendation and with  a zero fiscal                                                                   
          note  by  the  Department of  Education  and  Early                                                                   
          Development.                                                                                                          
CS FOR SENATE BILL NO. 275(HES)                                                                                               
                                                                                                                                
     "An Act relating to the school year for purposes of the                                                                    
     postsecondary student loan program; and providing for                                                                      
     an effective date."                                                                                                        
                                                                                                                                
Representative  J. Davies observed  that he further  reviewed                                                                   
the bill and is comfortable with the language.                                                                                  
                                                                                                                                
Co-Chair  Mulder  MOVED  to  report CSSB  275  (HES)  out  of                                                                   
Committee with  the accompanying fiscal note.  There being NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
CSSB  275 (HES)  was REPORTED  out  of Committee  with a  "do                                                                   
pass"  recommendation and  with  a zero  fiscal  note by  the                                                                   
Department of Education and Early Development.                                                                                  
HOUSE BILL NO. 445                                                                                                            
                                                                                                                                
     "An Act relating to a rural school construction and                                                                        
     planned maintenance pilot program; and providing for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
Co-Chair Mulder spoke  in support of HB 445.  He observed the                                                                   
expense  and difficulty  of  building  in rural  Alaska.  The                                                                   
legislation  creates a  pilot program  to see  if there  is a                                                                   
better way to  build schools in rural Alaska.  He pointed out                                                                   
that  there   are  four   functions  involved  in   building:                                                                   
financing,   design,   construction,  and   maintenance   and                                                                   
operation. He  maintained that  these four functions  tend to                                                                   
be  segregated. Each  has its  own  contingency. The  biggest                                                                   
contingencies  are generally in  design and construction  and                                                                   
can range  up to 15 percent.  Bonds are sometimes let  far in                                                                   
advance  of  when  the  money  is  actually  needed  for  the                                                                   
project. There are no time limits  between when bonds are let                                                                   
and when the money is needed.  He maintained that there would                                                                   
be less money lost through interest  paid if the time between                                                                   
the bonding and building were reduced.                                                                                          
                                                                                                                                
Co-Chair  Mulder summarized  that  the bill  unites the  four                                                                   
facets of school construction  under one umbrella and reduces                                                                   
costs associated  with timing, contingency-planning  dollars,                                                                   
and change  orders. The goal  of the  bill is to  have school                                                                   
construction  without   change  orders.  The   bill  provides                                                                   
coordination  and allows  all  components  to work  together,                                                                   
while  building  a  facility to  the  specifications  of  the                                                                   
school district  and employing  local hire standards  without                                                                   
contingencies and  cost overruns. This process is  not new to                                                                   
the private sector.                                                                                                             
                                                                                                                                
Co-Chair   Mulder  explained   that  the  legislation   would                                                                   
authorize the department  to enter into a RFP  process to see                                                                   
if  there  are entities  that  would  bid  as a  package  and                                                                   
oversee the construction  as a package in order  to guarantee                                                                   
savings to the state of Alaska.                                                                                                 
                                                                                                                                
In response to a question by Representative Grussendorf, Co-                                                                    
Chair Mulder  noted that  he worked  with the department  and                                                                   
other individuals on the legislation.  He maintained that the                                                                   
department wants  direction from the legislature.  He did not                                                                   
anticipate  that   there  would  be  a  fiscal   impact  note                                                                   
accompanying the legislation.                                                                                                   
                                                                                                                                
Co-Chair  Therriault observed  that  the  department did  not                                                                   
anticipate submitting  a fiscal impact note.  A House Finance                                                                   
Committee zero fiscal note would  be submitted with the bill.                                                                   
                                                                                                                                
Representative    Phillips   recalled   discussions,    which                                                                   
indicated that  the management  contractor would  oversee the                                                                   
project   for  three   years   after  its   completion.   The                                                                   
legislation   provides  for   "a   private  sector   facility                                                                   
maintenance   plan"  for   "a   period   of  time   following                                                                   
completion."  She  questioned  if  a  "period  of  time"  was                                                                   
included  over a  "three-year period"  because it  is a  test                                                                   
project.  Co-Chair Mulder  agreed  that  the anticipation  is                                                                   
that  there would  be  supervision  for a  three-year  period                                                                   
following completion.  He thought  that the department  would                                                                   
like to  have some flexibility  in regards to  the "warranty"                                                                   
period.                                                                                                                         
                                                                                                                                
Representative  Austerman referred to  a handout  provided by                                                                   
Co-Chair  Mulder titled  Rural  Schools Capital  Construction                                                                   
and Planned  Maintenance  Pilot Project  (copy on file.)  Co-                                                                   
Chair Mulder observed that Mark Pepper, was the consultant.                                                                     
                                                                                                                                
Representative Austerman noted  that the legislation pertains                                                                   
to all  schools. He emphasized  that schools in  Kodiak would                                                                   
have different  needs than schools  in Nome. Co-Chair  Mulder                                                                   
pointed  out  that  the  legislation  reads:  A  request  for                                                                   
proposals  required   under  this  subsection   must  solicit                                                                   
proposals   for  development   of  all  school   construction                                                                   
projects  funded for  construction  in fiscal  year 2001  and                                                                   
located  within   rural  educational  attendance   areas.  He                                                                   
observed  that  Kodiak  is not  within  a  rural  educational                                                                   
attendance  area. He  noted that there  are existing  designs                                                                   
for many of the  schools that are on the list.  The intent is                                                                   
not  to impose  a  prototypical design,  but  to have  proper                                                                   
management  of  the  design,   construction  and  maintenance                                                                   
phases  in order  to increase  efficiency  and reduce  change                                                                   
orders.                                                                                                                         
                                                                                                                                
Representative Grussendorf recalled  similar legislation in a                                                                   
previous year.                                                                                                                  
                                                                                                                                
Representative  J. Davies  referred to  page 2,  line 10  and                                                                   
questioned the  definition of "development".  Co-Chair Mulder                                                                   
responded that the intent is to  provide management, but that                                                                   
development  was  used  because   it  is  more  encompassing.                                                                   
Representative  J. Davies  pointed out  that the  legislation                                                                   
focuses on FY01  construction projects and that  projects may                                                                   
take more than one fiscal year  to complete.  Co-Chair Mulder                                                                   
clarified that the legislation  pertains to projects that are                                                                   
funded in fiscal year 2001. The  legislation would be a pilot                                                                   
program. He observed  that some communities do  not have much                                                                   
experience  with  school  construction.   The  intent  is  to                                                                   
provide assistance  and technical oversight to  make sure the                                                                   
state gets the best value for its dollars.                                                                                      
                                                                                                                                
Representative J.  Davies expressed concern that  each school                                                                   
be put  to bid as  an individual  package, so that  different                                                                   
people around the state might  work on the projects. Co-Chair                                                                   
Mulder affirmed that it was his  intent that the projects are                                                                   
put out as separate bids and not focused toward one entity.                                                                     
                                                                                                                                
Vice  Chair  Bunde  expressed  concern that  savings  can  be                                                                   
realized  through  an  economy   of  scale.  Co-Chair  Mulder                                                                   
stressed that most of the projects  have completed the design                                                                   
phase. In  response to  a question by  Vice Chair  Bunde, Co-                                                                   
Chair Mulder observed  that he did not know  how many schools                                                                   
would be affected.                                                                                                              
                                                                                                                                
Representative  G. Davis acknowledged  the use of  prototypes                                                                   
but emphasized concerns regarding local input.                                                                                  
                                                                                                                                
JON  STOLLE,  PRESIDENT, AMERICAN  INSTITUTE  OF  ARCHITECTS,                                                                   
ANCHORAGE testified via teleconference.  He expressed concern                                                                   
that  there had  been  insufficient debate  on  the bill.  He                                                                   
added  that   there  are  unsubstantiated  claims   that  the                                                                   
traditional  method is  slow and costly.  He maintained  that                                                                   
the  selection  criteria seems  to  be narrowly  crafted  and                                                                   
would exclude  many design  firms in  Alaska.  He  emphasized                                                                   
that  there are  few  entities  that would  meet  all of  the                                                                   
qualifications.  He  asserted   that  there  are  checks  and                                                                   
balances  in the  current  system  and recommended  that  the                                                                   
legislation be held for further consideration.                                                                                  
                                                                                                                                
DR.  JOHN  DAVIS,  SUPERINTENDENT,   BERING  STRAIGHT  SCHOOL                                                                   
DISTRICT,   UNALAKLEET  testified   via  teleconference.   He                                                                   
expressed  concern that  the  legislation  would affect  FY01                                                                   
construction.  He observed  that  most of  the projects  that                                                                   
would  be funded  in  FY01 would  already  be  in the  design                                                                   
phase.  It would  cost additional  money  to reengineered  or                                                                   
rethink design  plans. He  expressed support for  legislation                                                                   
that   would   remove   the    school   district   from   the                                                                   
responsibility  of constructing  buildings. He stressed  that                                                                   
they have been  able to achieve cost savings  through the use                                                                   
of a  single architect  on several  projects. He pointed  out                                                                   
that many  schools built under  the Bureau of  Indian Affairs                                                                   
are prototypical in design.                                                                                                     
                                                                                                                                
Co-Chair  Mulder emphasized  that the  legislation is  not an                                                                   
effort  to force  prototypical design.  He acknowledged  that                                                                   
there  are  three  projects  in  Unalakleet  that  have  gone                                                                   
through the design phase.                                                                                                       
                                                                                                                                
KAREN  REHFELD,  DIRECTOR,  DIVISION   OF  EDUCATION  SUPPORT                                                                   
SERVICES,  DEPARTMENT  OF  EDUCATION  AND  EARLY  DEVELOPMENT                                                                   
testified  in  support  of the  legislation.  The  department                                                                   
supports  the  overall  goal  to  efficiently  manage  school                                                                   
construction projects,  to reduce costs, and  to maximize the                                                                   
dollars  available   for  schools.  She  observed   that  the                                                                   
department has  had discussions with Co-Chair  Mulder and his                                                                   
staff  regarding  the school  construction  management  pilot                                                                   
program in  HB 445 and understands  that it is the  intent to                                                                   
implement a  pilot program  for school construction  projects                                                                   
that are funded in FY01.                                                                                                        
                                                                                                                                
Ms. Rehfeld  pointed out  that the  department does  not know                                                                   
which projects would  be included. The pilot  appears to only                                                                   
involve  REAA school  district projects.  There are  concerns                                                                   
with the timing, preparing the  RFP and some of the technical                                                                   
issues.  There  are  some  details  that  would  need  to  be                                                                   
considered in order  for the pilot program to  be successful,                                                                   
but  the  department  is supportive  of  efforts  to  address                                                                   
school construction.                                                                                                            
                                                                                                                                
CARL ROSE, EXECUTIVE  DIRECTOR, ASSOCIATION OF  ALAKSA SCHOOL                                                                   
BOARDS expressed  concerns with the legislation.  He referred                                                                   
to experiences with cost overruns  relating to a school built                                                                   
in   Skagway.  He   stressed  that   availability  of   funds                                                                   
contributed  to cost overrun  problems.  He observed  that he                                                                   
was the president of an insurance  company that replaced four                                                                   
schools  that  burnt  down. He  stressed  that  schools  were                                                                   
replaced  with   the  assistance   of  an  architect   and  a                                                                   
contractor. It  was in the insurance company's  best interest                                                                   
to replace the schools promptly.  He maintained that adequate                                                                   
funding  reduced  cost  overruns.  He stressed  the  need  to                                                                   
identify the problem  and cost. He questioned  what insurance                                                                   
is there that equity and fairness  would be provided in terms                                                                   
of the distribution of jobs.                                                                                                    
                                                                                                                                
In  response  to a  question  by  Co-Chair Mulder,  Mr.  Rose                                                                   
observed  that schools  are  insured for  replacement  costs.                                                                   
Replacement  costs are  adjusted  for a  variety of  factors.                                                                   
The company worked  with the communities in all  but one case                                                                   
the  cost  was  contained.  The needs  of  a  community  were                                                                   
balanced.                                                                                                                       
                                                                                                                                
Co-Chair Mulder  pointed out that  savings could  be realized                                                                   
if there is someone responsible  to assure that shipments are                                                                   
timely. Mr.  Rose stressed that  the availability  of funding                                                                   
is the  major issue. Costs would  have increased if  they had                                                                   
spread  the  work between  seasons.  He  reiterated  concerns                                                                   
regarding  issues  of fairness  and  questioned  if the  work                                                                   
would be single  source to one person. Co-Chair  Mulder spoke                                                                   
in support of providing sufficient funding for projects.                                                                        
                                                                                                                                
Vice Chair Bunde stressed that  the goal is to produce school                                                                   
buildings  and not  provide  economic development.  Mr.  Rose                                                                   
responded that  the issue is  between a sole  source contract                                                                   
and  competitive  bid.  Co-Chair  Mulder  stressed  that  the                                                                   
department would protect competition.                                                                                           
                                                                                                                                
Representative  Williams  referred  to  a  tribal  government                                                                   
program where  the tribe manages the construction  of schools                                                                   
and provides local hire. The federal  government pays for the                                                                   
local  hire portion.  Co-Chair  Mulder stated  that he  would                                                                   
look into the concept.                                                                                                          
                                                                                                                                
Representative  J. Davies recommended  that the bill  require                                                                   
two  or  three  private  sector   developers  with  different                                                                   
expertise in different areas of  the state. He also suggested                                                                   
that  there   be  some  cost   analysis  regarding   how  the                                                                   
legislation would save money.                                                                                                   
                                                                                                                                
Representative  J. Davies  questioned  if the  second use  of                                                                   
"price"  in line  16 was  redundant. He  also suggested  that                                                                   
there  be a  sunset provision  to remove  pilot program  from                                                                   
statue.                                                                                                                         
                                                                                                                                
Co-Chair  Mulder  emphasized  that  the  department  has  the                                                                   
ability to  implement the  without legislation, but  observed                                                                   
that the department prefers to have legislative direction.                                                                      
                                                                                                                                
Representative  J. Davies noted  that some design  firms have                                                                   
indicated concerns  with the speed  in which the  legislation                                                                   
has advanced and the qualification list in subsection 2.                                                                        
                                                                                                                                
(TAPE CHANGE, HFC 00 - 112, SIDE 2)                                                                                           
                                                                                                                                
Co-Chair Mulder emphasized that he is open for suggestions.                                                                     
                                                                                                                                
HB  445  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
HOUSE BILL NO. 373                                                                                                            
                                                                                                                                
     "An Act  relating to return  of contributed  capital, or                                                                   
     payment  of  a dividend,  to  the  state by  the  Alaska                                                                   
     Student   Loan  Corporation;   and   providing  for   an                                                                   
     effective date."                                                                                                           
                                                                                                                                
DIANE  BARRANS, EXECUTIVE  DIRECTOR, POSTSECONDARY  EDUCATION                                                                   
COMMISSION, DEPARTMENT  OF EDUCATION testified  in support of                                                                   
the legislation.  She observed that the  legislation reflects                                                                   
the growing financial stability of a unique, longstanding                                                                       
and valued Alaskan program "the Alaska Student Loan                                                                             
Program". She read from a prepared statement:                                                                                   
                                                                                                                                
     As   you  may   already   be  aware,   legislative   and                                                                   
     administrative  changes   to  the  Alaska  Student  Loan                                                                   
     Programs  made  in recent  years  have resulted  in  the                                                                   
     Alaska  Student Loan Corporation  transitioning  from an                                                                   
     enterprise agency  operating with an annual  net deficit                                                                   
     to one producing an annual  net income. This outcome has                                                                   
     allowed  the  ASLC  board  to  identify  and  prioritize                                                                   
     several  policy goals.  In priority  order, these  goals                                                                   
     are:                                                                                                                       
                                                                                                                                
     1) Continue in a direction  of fiscal strength  and good                                                                   
     credit standing;                                                                                                           
                                                                                                                                
     2) Continue to  reduce  the costs  of  borrowing for  AK                                                                   
     residents;                                                                                                                 
                                                                                                                                
     3) Continue to reduce  the Corporation's equity  deficit                                                                   
     of $43 million; and                                                                                                        
                                                                                                                                
     4) Propose a mechanism  that, while  subordinate  to the                                                                   
     top  three  priorities,   makes  possible  a  return  of                                                                   
     contributed  capital to  the  ASLC's original  financing                                                                   
     source-the State of Alaska.                                                                                                
                                                                                                                                
     The  ASLC  is already  experiencing  success in  meeting                                                                   
     these  goals: in  1999 our  improved financial  standing                                                                   
     was rewarded  by a full  ratings upgrade to  double-A by                                                                   
     both Moodys  and Standard  and Poors; the  interest rate                                                                   
     on  2000-2001 state  student loans  has been reduced  to                                                                   
     8%, the lowest rate in several  years; the interest-free                                                                   
     borrowing while student-borrowers  are in school remains                                                                   
     intact; and,  the Corporation's equity deficit  has been                                                                   
     reduced by almost $7 million over the past two years.                                                                      
                                                                                                                                
     In recommending  this bill for your approval,  our board                                                                   
     is  seeking a  mechanism  for the  ASLC  to fulfill  its                                                                   
     fourth goal.  The bill provides  that, in any  year that                                                                   
     the Corporation  has at least  a $2 million  net income,                                                                   
     the board  will declare a  return of capital  payment to                                                                   
     the State of between 10%  and 35% of that income amount.                                                                   
                                                                                                                                
     This  approach   was  developed  and  endorsed   by  the                                                                   
     Corporation as one that is  considered reasonable within                                                                   
     the  financial community  as  a conservative  method  of                                                                   
     meeting  this goal. The  Corporation's senior  staff and                                                                   
     financial advisors  met and discussed the  proposal with                                                                   
     both  rating  agencies and  bond  insurer  to avoid  any                                                                   
     adverse  impact  to  our  credit  standing  or  possible                                                                   
     related  increase in  the cost of  bond issuance.  Their                                                                   
     reaction  has been  positive-under  the conditions  that                                                                   
     this bill would place in law.                                                                                              
                                                                                                                                
     It is important for me to reference current proposals                                                                      
     for the FY200  1 budget year that use  ASLC receipts, in                                                                   
     both  the  House  and Senate  versions  of  next  year's                                                                   
     budget,  that make  passage of this  bill an  imperative                                                                   
     for  the  Corporation's   wellbeing.  Approval  of  this                                                                   
     return of  capital approach  will pre-empt  any concerns                                                                   
     raised by this year's budget  structure. Passage of this                                                                   
     bill will  insure that the Corporation's  capital return                                                                   
     payment is  made without  putting at risk  the financial                                                                   
     and  public  policy goals  of  the Alaska  Student  Loan                                                                   
     Corporation.                                                                                                               
                                                                                                                                
     I have provided  a handout that includes  a Statement of                                                                   
     Projected  Revenues  and  Expenses  that  projects  both                                                                   
     current and future, through  2004, payment amounts. Also                                                                   
     included  are  two  graphs that  illustrate  the  income                                                                   
     trend and  its impact on  the Corporation's  fund Equity                                                                   
     Balance over that same time period (copy on file.)                                                                         
                                                                                                                                
In response  to a question by  Vice Chair Bunde,  Mr. Barrans                                                                   
reviewed  the  establishment  of  interest  rates.  When  the                                                                   
program  was funded  through  the General  Fund  there was  a                                                                   
statutory  interest rate,  which  was set  at  5 percent  and                                                                   
later  increased  to  8  percent.  A  formula  was  developed                                                                   
through legislative  changes to tie the cost  of borrowing to                                                                   
the cost  of funds  to the Corporation.  The calculation  has                                                                   
two pieces:  a weighted average of  the cost of bonds  in the                                                                   
prior five years, and cost of the program operations.                                                                           
                                                                                                                                
Vice Chair  Bunde observed  that the Commission's  philosophy                                                                   
was, at  one time, that the  student loan should be  the loan                                                                   
of  last resort  and  that there  were  lower interest  rates                                                                   
available  through   the  federal  government.   Ms.  Barrans                                                                   
responded  that the program  is a  close competitor  with the                                                                   
federal student  loan program.  Subsidized federal  loans are                                                                   
still a  better deal  for students  that qualify. The  Alaska                                                                   
student  loan program  is close to  the unsubsidized  federal                                                                   
student   loan  and  does   not  require   income  or   asset                                                                   
qualifications.                                                                                                                 
                                                                                                                                
In response  to a question by  Vice Chair Bunde,  Ms. Barrans                                                                   
stated  that the  best way  to reduce  the cost  of loans  to                                                                   
borrowers  is to  reduce  the  cost to  run  the program  by:                                                                   
reducing  losses,  reducing  administration   costs,  and  to                                                                   
achieve  better rates  on bonds.  The amount  of capital  the                                                                   
bill  returns to  the state  does not  materially affect  the                                                                   
ability to reduce rates in the future.                                                                                          
                                                                                                                                
Representative  J. Davies questioned  if the Corporation  had                                                                   
discussed   reinstating  credit   on   loans  for   returning                                                                   
students.  The  Alaska  Student   Loan  Corporation  has  not                                                                   
engaged  in the discussion.  Ms. Barrans  clarified  that the                                                                   
focus  has been  on making  up the  ground that  was loss  in                                                                   
equity investment.  She added  that if  the full equity  were                                                                   
returned that discussions might occur.                                                                                          
                                                                                                                                
In response  to a question  by Representative J.  Davies, Ms.                                                                   
Barrans observed  that in the House version  of the operating                                                                   
budget  $1.6  million  dollars of  Student  Loan  Corporation                                                                   
receipts are  appropriated to offset  the cost of WAMI  and a                                                                   
new program that  would provide that would  provided National                                                                   
Guard tuition credit.  In the Senate $1.6 million  dollars of                                                                   
Student Loan  Corporation receipts  are appropriated  to fund                                                                   
the operation of the university.                                                                                                
                                                                                                                                
SHEILA   KING,   FINANCE   OFFICER,   ALASKA   STUDENT   LOAN                                                                   
CORPORATION explained  surplus funds  that are recycled  into                                                                   
new loans.  The Corporation must  keep a level  of collateral                                                                   
to meet their bonds covenants.                                                                                                  
                                                                                                                                
Representative J. Davies questioned  how much is available in                                                                   
the  current   fiscal  year  that   would  be  used   by  the                                                                   
legislature.   Ms.   Barrans    observed   that   the   total                                                                   
appropriation of corporation receipts  is $2 million dollars.                                                                   
The Senate  worked with  the Corporation.  She observed  that                                                                   
this  is  slightly   less  than  the  35  percent   that  the                                                                   
Corporation would have available.                                                                                               
                                                                                                                                
Representative  G. Davis  noted that  the transmittal  letter                                                                   
from the Governor  indicated that some of the  earnings would                                                                   
go to the  Alaska Scholars Program. Ms.  Barrans acknowledged                                                                   
that  the  Governor recommended  the  use  of funds  for  the                                                                   
Alaska Scholars Program  but pointed out that  funds have not                                                                   
been  earmarked in  a statutory  way. The  university on  the                                                                   
Alaska Scholars Program could spend the funds.                                                                                  
                                                                                                                                
Vice Chair Bunde  recalled that the University  found funding                                                                   
for the first  year of the Alaska Scholars  Program and would                                                                   
look to the legislature to fund it for the next year.                                                                           
                                                                                                                                
Ms. Barrans voiced  strong support for the legislation.   She                                                                   
indicated that this has been a joint effort.                                                                                    
                                                                                                                                
Representative  J.  Davies MOVED  to  report  HB 373  out  of                                                                   
Committee  with  the  accompanying fiscal  note.  Vice  Chair                                                                   
Bunde OBJECTED  for the  purpose of  discussion.  He  pointed                                                                   
out that it is  a twice-removed tuition hike, but  that it is                                                                   
nice that the students support  their university. He WITHDREW                                                                   
his OBJECTION. There being NO OBJECTION, it was so ordered.                                                                     
                                                                                                                                
HB   373   was   REPORTED   out   of   Committee   with   "no                                                                   
recommendation" and  a zero fiscal note by  the Department of                                                                   
Education and Early Development.                                                                                                
HOUSE BILL NO. 331                                                                                                            
                                                                                                                                
     "An Act  relating to  payment, allowances,  and benefits                                                                   
     of  members  of the  Alaska  National Guard  and  Alaska                                                                   
     Naval   Militia   in   active   service;   relating   to                                                                   
     computation  of  certain  benefits  for members  of  the                                                                   
     Alaska  State Militia;  and providing  for an  effective                                                                   
     date."                                                                                                                     
                                                                                                                                
CAROL  CARROLL,  DIRECTOR,  DIVISION   OF  SUPPORT  SERVICES,                                                                   
DEPARTMENT OF  NATURAL RESOURCES provided information  on the                                                                   
legislation  and  spoke  in  its   support.  The  legislation                                                                   
changes the  name of the Alaska  State Militia to  the Alaska                                                                   
State Defense  Force.  The legislation  also changes  the way                                                                   
pay  is  calculated  for national  guardsmen  when  they  are                                                                   
brought onto state active duty.  Presently, pay is calculated                                                                   
based on  rank, years  of service  and added allowances.  The                                                                   
basic pay from the federal government  would be multiplied by                                                                   
200  percent.   This  would  streamline   the  administrative                                                                   
process without  affecting pay  of the members.  The proposal                                                                   
was presented  to and approved  by the officers  and enlisted                                                                   
men's  associations. The  legislation would  also clarify  in                                                                   
statute that  the members of  the Alaska State  Defense Force                                                                   
should  be paid  as if  they are  state  employees. They  are                                                                   
currently handled as emergency employees.                                                                                       
                                                                                                                                
Representative Phillips spoke  in the support of the bill and                                                                   
stated that she was ready to move the bill from Committee.                                                                      
                                                                                                                                
MAJOR  RICHARD THOMAS,  ALASKA NATIONAL  GUARD testified  via                                                                   
teleconference  in support  of the  legislation. He  stressed                                                                   
that anything  that can simplify procedures  during disasters                                                                   
would be  of assistance.  He noted that  the bill  would make                                                                   
pay more timely and accurate.                                                                                                   
                                                                                                                                
RICHARD   TURCIC,   DIVISION  OF   ADMINISTRATIVE   SERVICES,                                                                   
MILITARY  AND  VETERANS  AFFAIRS,   ANCHORAGE  testified  via                                                                   
teleconference  in  support.  He stressed  that  the  current                                                                   
system is extremely  complicated and emphasized  that the new                                                                   
system  would   simplify  and  reduce  the  time   needed  to                                                                   
calculate  pay.  The  legislation would  also  ensure  timely                                                                   
payments.                                                                                                                       
                                                                                                                                
GENERAL THOMAS  S. WESTALL,  BRIGADOR, ALASKA STATE  MILITIA,                                                                   
GLENNALLEN  TESTIFIED  via  teleconference  in  support.  The                                                                   
Alaska  State Defense  Force is  a  trained military  service                                                                   
that principally  trains  in the field  of mobilization.  The                                                                   
defense  force can  mobilize  in 24  hours.  There are  three                                                                   
trained  soldiers   assigned  specific  jobs  in   the  State                                                                   
Emergency Coordination  Center. The Alaska State  Militia has                                                                   
operated in  almost every  disaster that  the state  has been                                                                   
involved  in  over  the  past  16  years.  The  soldiers  are                                                                   
civilians in their  normal capacity. They need  protection of                                                                   
their  civil  jobs, which  is  provided  under AS  24.  These                                                                   
soldiers  are not  looking for  compensation.  He noted  that                                                                   
they have  been committed for  extended periods of  time. The                                                                   
Division of  Emergency Services would  have to hire  staff to                                                                   
do the  task that the State  Defense Force has  traditionally                                                                   
done.  Emergency Services  would not  be able  to operate  24                                                                   
hours a day without exhaustion.                                                                                                 
                                                                                                                                
Vice  Chair Bunde  noted that  there  is a  zero fiscal  note                                                                   
accompanying the bill.                                                                                                          
                                                                                                                                
Representative  Phillips MOVED to  report CSHB 331  (MVA) out                                                                   
of Committee with the accompanying fiscal note.                                                                                 
                                                                                                                                
CSHB  331 (MVA)  was REPORTED  out  of Committee  with a  "do                                                                   
pass"  recommendation and  with  a zero  fiscal  note by  the                                                                   
Military and Veterans Affairs.                                                                                                  
CS FOR SENATE BILL NO. 247(FIN)                                                                                               
                                                                                                                                
     "An Act relating to eligibility of certain persons who                                                                     
     receive veterans' benefits for longevity bonus                                                                             
     payments; and providing for an effective date."                                                                            
                                                                                                                                
MARIE  MARX, STAFF,  SENATOR LEMAN  spoke in  support of  the                                                                   
legislation  on  behalf of  the  sponsor. She  observed  that                                                                   
Senator  Leman was  contacted by  constituents regarding  the                                                                   
loss  of the  longevity bonus  to  veterans entering  nursing                                                                   
homes because their  stay in the nursing home  was being paid                                                                   
by  their  veteran's  benefits.  The  Division  of  Longevity                                                                   
Bonus' interpretation  of a private  source was the  cause of                                                                   
the problem.  "Private source"  is anything paid  directly by                                                                   
an individual. If  an individual's care is paid  by a private                                                                   
source they  are able  to keep  their longevity bonus  check.                                                                   
Senate Bill 247 restores the eligibility  of certain veterans                                                                   
who  are  being  cared  for  in   nursing  homes  to  receive                                                                   
longevity  bonus  payments. Veterans'  benefits  are  federal                                                                   
benefits earned by  those who have served our  country in the                                                                   
armed forces.  It is not  fair to include veterans'  benefits                                                                   
in the  same category as  needs-based state benefits  such as                                                                   
Medicaid, the  receipt of which  disqualifies a  nursing home                                                                   
patient  from   receiving  longevity   bonus  payments.   The                                                                   
longevity  bonus payments  are prospective  from the  time of                                                                   
re-qualification;   the  bill   is  not  retroactive.   Those                                                                   
veterans  disqualified  under   the  existing  statute  could                                                                   
reapply for  qualification for bonus payments  beginning July                                                                   
1, 2000.  Six veterans  are estimated to  be affected  by the                                                                   
bill and the estimated cost is $12 thousand dollars.                                                                            
                                                                                                                                
Representative  Williams MOVED to  report CSSB 247  (FIN) out                                                                   
of Committee with  the accompanying fiscal note.  There being                                                                   
NO OBJECTION, it was so ordered.                                                                                                
                                                                                                                                
CSSB  247 (FIN)  was REPORTED  out  of Committee  with a  "do                                                                   
pass" recommendation  and with  a fiscal  impact note  by the                                                                   
Department of Administration, published date 3/20/00.                                                                           
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 4:40 p.m.                                                                                          
                                                                                                                                

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