Legislature(1999 - 2000)

04/18/2000 02:45 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                                                                                
HOUSE FINANCE COMMITTEE                                                                                                         
April 18, 2000                                                                                                                  
2:45 P.M.                                                                                                                       
                                                                                                                                
TAPE HFC 00 - 125, Side 1.                                                                                                      
TAPE HFC 00 - 125, Side 2.                                                                                                      
TAPE HFC 00 - 126, Side 1.                                                                                                      
TAPE HFC 00 - 126, Side 2.                                                                                                      
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair Therriault called the House Finance Committee                                                                          
meeting to order at 2:45 P.M.                                                                                                   
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Co-Chair Therriault   Representative Foster                                                                                     
Vice Chair Bunde    Representative Grussendorf                                                                                  
Representative Austerman  Representative Moses                                                                                  
Representative G. Davis   Representative Phillips                                                                               
Representative J. Davies  Representative Williams                                                                               
                                                                                                                                
Co-Chair Mulder was not present for the meeting.                                                                                
                                                                                                                                
ALSO PRESENT                                                                                                                    
                                                                                                                                
Senator Rick Halford; Mike Tibbles, Staff, Co-Chair                                                                             
Therriault; James Baldwin, Assistant Attorney General,                                                                          
Department of Law; Keith Laufer, Chief Financial and Legal                                                                      
Affairs Manager, Alaska Industrial Development and Export                                                                       
Authority (AIDEA), Department of Community & Economic                                                                           
Development, Anchorage; Ken Taylor, Director, Division of                                                                       
Habitat and Reforestation, Department of Fish and Game;                                                                         
Kaitlan Markley, Development Specialist, Alaska Industrial                                                                      
Development and Export Authority (AIDEA), Department of                                                                         
Community & Economic Development, Anchorage; Diana Rhoades,                                                                     
Staff, Senator Johnny Ellis; Devon Mitchell, Debt Manager,                                                                      
Department of Revenue; Eddie Jeans, Deputy Commissioner,                                                                        
Department of Education and Early Development; Annalee                                                                          
McConnell, Director, Office of Management and Budget, Office                                                                    
of the Governor; John Bitney, Legislative Liaison, Alaska                                                                       
Housing Finance Corporation (AHFC), Department of Revenue;                                                                      
Wendy Redman, Vice President, Statewide Services, University                                                                    
of Alaska, Fairbanks.                                                                                                           
                                                                                                                                
SUMMARY                                                                                                                         
                                                                                                                                
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 HEARD and HELD in Committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
SB 34 An Act relating to tattooing and body piercing;                                                                           
and providing for an effective date.                                                                                            
                                                                                                                                
HCS CS SB 34 (FIN) was reported out of Committee                                                                                
with a "no recommendation" recommendation and with                                                                              
a fiscal note by the Office of the Governor dated                                                                               
2/23/00.                                                                                                                        
SB 204 An Act extending the termination date of the                                                                             
Alaska Commission on Aging; and providing for an                                                                                
effective date.                                                                                                                 
                                                                                                                                
SB 204 was POSTPONDED for consideration at a                                                                                    
latter date.                                                                                                                    
SB 212 An Act authorizing the commissioner of fish and                                                                          
game to award grants for certain resource                                                                                       
activities; and providing for an effective date.                                                                                
                                                                                                                                
HCS CS SB 212 (FIN) was reported out of Committee                                                                               
with a "do pass" recommendation and with a zero                                                                                 
fiscal note by the Department of Fish and Game                                                                                  
dated 1/21/00.                                                                                                                  
                                                                                                                                
SB 248 An Act relating to the financing authority,                                                                              
payment in lieu of tax agreements, and tax                                                                                      
exemption for assets and projects of the Alaska                                                                                 
Industrial Development and Export Authority;                                                                                    
relating to renaming and contingently repealing                                                                                 
the rural development initiative fund within the                                                                                
Department of Community and Economic Development,                                                                               
and establishing the rural development initiative                                                                               
fund within the Alaska Industrial Development and                                                                               
Export Authority; and providing for an effective                                                                                
date.                                                                                                                           
                                                                                                                                
HCS CS SB 248 (FIN) was reported out of Committee                                                                               
with a "do pass" recommendation and with a zero                                                                                 
fiscal note by the Department of Community &                                                                                    
Economic Development dated 2/8/00.                                                                                              
                                                                                                                                
SJR 34 Proposing an amendment to the Constitution of the                                                                        
State of Alaska relating to certain public                                                                                      
corporations.                                                                                                                   
                                                                                                                                
CS SJR 34 (FIN) was reported out of Committee with                                                                              
"no recommendations" and with a fiscal note by the                                                                              
Office of the Lt. Governor dated 2/23/00.                                                                                       
CS FOR SENATE BILL NO. 248(FIN) am                                                                                              
                                                                                                                                
An Act relating to the financing authority, payment in                                                                          
lieu of tax agreements, and tax exemption for assets                                                                            
and projects of the Alaska Industrial Development and                                                                           
Export Authority; relating to renaming and contingently                                                                         
repealing the rural development initiative fund within                                                                          
the Department of Community and Economic Development,                                                                           
and establishing the rural development initiative fund                                                                          
within the Alaska Industrial Development and Export                                                                             
Authority; and providing for an effective date.                                                                                 
                                                                                                                                
KEITH LAUFER, FINANCIAL AND LEGAL AFFAIRS MANAGER, ALASKA                                                                       
INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA),                                                                            
DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT, ANCHORAGE,                                                                      
explained the intent of the legislation.  He summarized each                                                                    
section:                                                                                                                        
                                                                                                                                
? Section 1 would clarify changes to property tax                                                                               
exemption provisions.  Together with Sections 6, 7                                                                              
and 8, it would make clarifying changes in tax                                                                                  
exemption and payment in lieu of tax provisions                                                                                 
relating to AIDEA owned projects.                                                                                               
? Sections 2-4 would transfer the Rural Development                                                                             
Initiative Fund Program (RDIF) to AIDEA.                                                                                        
? Section 5 would extend AIDEA's general bonding                                                                                
authority which would otherwise sunset on July 1,                                                                               
2000.  Bonds for development finance projects in                                                                                
excess of $10 million dollars would continue to                                                                                 
require legislative authorization.                                                                                              
? Section 6 would amend AS 44.88.140(a) to recognize                                                                            
the permissive property tax exemption that local                                                                                
governments may grant for AIDEA's own projects.                                                                                 
? Section 7 would amend AS 44.88.140(b) to clarify                                                                              
the mechanism to be used by local governments and                                                                               
users of AIDEA projects for entering into payment                                                                               
in lieu of tax agreements.  The bill would make                                                                                 
clarify that these agreements are to be made                                                                                    
directly between the local governments and the                                                                                  
project users.                                                                                                                  
? Section 8 would amend AS 44.88.140 to add a                                                                                   
clarifying definition section for "local political                                                                              
subdivision".  The provision provides that the                                                                                  
political subdivision in which the AIDEA project                                                                                
is located is the "local political subdivision"                                                                                 
for purposes of the statute.                                                                                                    
? Sections 9-11 references the transfer of the Rural                                                                            
Development Initiative Fund Program (RDIF).                                                                                     
? Sections 12-15 provides for an effective date.                                                                                
                                                                                                                                
Co-Chair Therriault referenced Page 4, Line 22, the "$2                                                                         
million dollar" issue. He pointed out that he had submitted                                                                     
Amendment #1 to address that concern.  [Copy on File].  Mr.                                                                     
Laufer replied that the amendment would present no problem.                                                                     
                                                                                                                                
Representative J. Davies asked if there was a limit to the                                                                      
amount of a conduit bond.  Mr. Laufer replied that there was                                                                    
no limit on the size of a conduit bond, but that AIDEA does                                                                     
limit bonds that can be issued in a one-year period.                                                                            
Conduit bonds would be subject to that limit.  There is a                                                                       
limit under the federal Internal Revenue Service (IRS) laws                                                                     
as to the amount that the entire State can issue for private                                                                    
activity bonds.  The current limit is $150 million dollars.                                                                     
The State Bond Committee makes the allocations for those                                                                        
bonds.  Mr. Laufer noted that most conduit revenue bonds                                                                        
would fall within that cap and that certain bonds for non-                                                                      
profit do not fall within the cap.                                                                                              
                                                                                                                                
Co-Chair Therriault MOVED to ADOPT Amendment #1.                                                                                
                                                                                                                                
MIKE TIBBLES, STAFF, REPRESENTATIVE GENE THERRIAULT,                                                                            
explained that he had worked with AIDEA and Tam Cook, Alaska                                                                    
Legal Services, on the amendment.                                                                                               
                                                                                                                                
Representative J. Davies asked the purpose of the amendment.                                                                    
Mr. Tibbles stated that the language had been adopted in the                                                                    
Senate Finance Committee and then passed to the House                                                                           
Finance Committee.  The language clarifies that the assets                                                                      
transferred to the fund by that authority may not exceed $2                                                                     
million dollars.  He noted that there had been a question                                                                       
regarding what "asset" meant in this circumstance.  He                                                                          
pointed out that the amendment would clarify that language.                                                                     
                                                                                                                                
Representative J. Davies asked if the amendment would                                                                           
provide for a total or one time limit.  Co-Chair Therriault                                                                     
replied that it would be a total limit.  Mr. Laufer                                                                             
interjected that AIDEA supports the $2 million dollars being                                                                    
sufficient to turn this into a "true" revolving loan                                                                            
program.                                                                                                                        
                                                                                                                                
Representative J. Davies voiced concern with "other assets"                                                                     
becoming available.  He inquired if they would have to be                                                                       
addressed through statute.  Mr. Tibbles explained that the                                                                      
intent was to reflect "other" funds outside the previous                                                                        
sentence.  Beyond that, then there would be a $2 million                                                                        
dollar limit.                                                                                                                   
                                                                                                                                
Representative J. Davies pointed out that those are items                                                                       
transferred to AIDEA and thought the language should be                                                                         
modified by AIDEA.  Mr. Laufer advised that the new language                                                                    
begins with "in addition" after listing the assets that                                                                         
could be put into the account.  That language reflects the                                                                      
fact that it would be other than those that had been                                                                            
appropriated to AIDEA.   Mr. Laufer added that he did not                                                                       
think adding that language would change the meaning; the new                                                                    
language was designed to recognize assets that had been                                                                         
transferred to AIDEA for that purpose.                                                                                          
                                                                                                                                
Co-Chair Therriault agreed, pointing out the comment "in                                                                        
addition" to those funds.  Mr. Laufer stated that it could                                                                      
be clarified by adding "in addition to the assets described                                                                     
in the previous sentence".  Representative J. Davies agreed                                                                     
that would make him more comfortable.  Co-Chair Therriault                                                                      
recommended moving a conceptual amendment, "in addition to                                                                      
these assets" in order that the drafters could make it work                                                                     
grammatically.                                                                                                                  
                                                                                                                                
Co-Chair Therriault modified the original MOTION to include                                                                     
language as discussed above.  There being NO OBJECTION, it                                                                      
was adopted.                                                                                                                    
                                                                                                                                
Representative G. Davis MOVED to ADOPT Amendment #2, 1-                                                                         
GS2009\DA.1, Cook, 4/17/00.  [Copy on File].  Co-Chair                                                                          
Therriault OBJECTED for the purpose of discussion.                                                                              
                                                                                                                                
Mr. Laufer explained that this was a status quo amendment.                                                                      
The way it is written, it only applies to facilities that                                                                       
AIDEA would own that are open to the public.  That type of                                                                      
asset is typical of government infrastructure assets.  AIDEA                                                                    
has been used as a unique financing mechanism in the State                                                                      
for these purposes.                                                                                                             
                                                                                                                                
Representative G. Davis questioned the contract between                                                                         
COMINCO and AIDEA.  He pointed out that it had been agreed                                                                      
upon that it could be used by other entities.  It could be                                                                      
treated as a public facility for roads and ports.                                                                               
                                                                                                                                
Co-Chair Therriault noted that local government agrees that                                                                     
it should be a tax-exempt infrastructure.  He asked why the                                                                     
company would be paying a payment in lieu of tax.  Mr.                                                                          
Laufer replied that COMINCO and Nannana have not only the                                                                       
interest in the use rights of the road and the port, but                                                                        
also have the mine itself, which is not owned by AIDEA and                                                                      
which is not subject to these provisions.  They entered into                                                                    
a payment in lieu of tax provision that they thought had                                                                        
encompassed cooperation.  Co-Chair Therriault asked if they                                                                     
were getting tax proceeds under another name.                                                                                   
                                                                                                                                
Co-Chair Therriault WITHDREW his OBJECTION to Amendment #2.                                                                     
Representative Phillips noted that there would be a                                                                             
conceptual amendment submitted that would put a January 1,                                                                      
1999 retroactive date into it.                                                                                                  
                                                                                                                                
Representative Phillips MOVED an amendment to Amendment #2,                                                                     
which would place in the retroactive effective date.                                                                            
Representative Bunde OBJECETED and asked if the taxes had                                                                       
already been collected.  Mr. Laufer replied that they were                                                                      
not yet subject to payment and that they would "kick in" in                                                                     
July 1999.  Representative Bunde WITHDREW his OBJECTION.                                                                        
                                                                                                                                
Representative J. Davies noted that the amendment would                                                                         
preserve the status quo.  He asked if the tax assessor had                                                                      
made a statement regarding the policy.  Co-Chair Therriault                                                                     
replied that the effect was that there was only one user of                                                                     
the facility.  Representative J. Davies asked if there had                                                                      
been an event that triggered the decision.  Mr. Laufer                                                                          
explained that there currently is a new tax assessor; he                                                                        
came to a different conclusion than the original one.                                                                           
                                                                                                                                
There being NO OBJECTION to Amendment #2 as amended, it was                                                                     
adopted.                                                                                                                        
                                                                                                                                
Representative J. Davies asked which other properties would                                                                     
the amendment apply to.  Mr. Laufer replied that it would                                                                       
apply to the AIDEA port in Unalaska.  Another potential spot                                                                    
could be the AIDEA facility in Skagway.  That facility is                                                                       
not being used at this time and there would be no tax                                                                           
ramifications.                                                                                                                  
                                                                                                                                
Representative J. Davies questioned the distinction between                                                                     
the road and the load-out facility.  Mr. Laufer replied that                                                                    
there was a possibility of using it as a coal facility.                                                                         
Representative J. Davies inquired if the company using it                                                                       
would pay a fee.  Mr. Laufer replied they would and that                                                                        
under the agreement with COMINCO, it provides including a                                                                       
toll structure for other users.  In the event that there are                                                                    
other users, COMINCO would have a smaller burden.                                                                               
                                                                                                                                
Representative J. Davies asked if the local municipality was                                                                    
able to tax COMINCO's leasehold interests in that facility.                                                                     
Mr. Laufer responded that under the provisions adopted, they                                                                    
would not be able to do so.                                                                                                     
                                                                                                                                
Representative J. Davies commented that this is not really a                                                                    
public facility.  Mr. Laufer pointed out that it would be                                                                       
AIDEA charging the other user.  COMINCO's right is not                                                                          
exclusive now so the extent of other users would be making a                                                                    
toll payment.  COMINCO would be receiving a credit against                                                                      
its toll payments.                                                                                                              
                                                                                                                                
There being NO OBJECTION to the amended Amendment #2, it was                                                                    
adopted.                                                                                                                        
                                                                                                                                
Co-Chair Therriault referenced Section #6 of the bill                                                                           
questioning if that language should be included.  Mr.                                                                           
Tibbles suggested that the language does not make sense and                                                                     
that it would not create a tax exemption.  Mr. Laufer agreed                                                                    
that the section was not needed.  Representative J. Davies                                                                      
asked the inference to AS 29.45.050(P).  Mr. Laufer                                                                             
explained that section is the provision that deals with                                                                         
municipality's ability to grant exemptions for facilities.                                                                      
It is a stand-alone exemption that exists in law and that                                                                       
nothing in that section creates a tax exemption.                                                                                
                                                                                                                                
Co-Chair Therriault MOVED to delete Section #6.  There being                                                                    
NO OBJECTION, it was adopted.                                                                                                   
                                                                                                                                
Representative J. Davies asked if a new sunset had been                                                                         
inserted.  Mr. Laufer explained that the new sunset was                                                                         
July, 2003, as indicated in Section #5.                                                                                         
                                                                                                                                
Representative Foster MOVED to report HCS CS SB 248 (FIN)                                                                       
out of Committee with individual recommendations and with                                                                       
the accompanying fiscal note.                                                                                                   
                                                                                                                                
HCS CS SB 248 (FIN) was reported out of Committee with a "do                                                                    
pass" recommendation and with a fiscal note by Department of                                                                    
Community & Economic Development dated 2/8/00.                                                                                  
CS FOR SENATE JOINT RESOLUTION NO. 34(FIN)                                                                                      
                                                                                                                                
Proposing an amendment to the Constitution of the State                                                                         
of Alaska relating to public corporations.                                                                                      
                                                                                                                                
Co-Chair Therriault noted that the proposed resolution was                                                                      
the companion piece to HJR 52, which the Committee                                                                              
previously took action on.  There was additonal language in                                                                     
Secton 1, which allowed the Legislature to exclude                                                                              
corporations.  That language was not necessary and is not                                                                       
included in the Senate version.  Discussion followed among                                                                      
Committee members regarding the legislation proposed by                                                                         
Representative James.                                                                                                           
                                                                                                                                
SENATOR RICK HALFORD stated that the Alaska Constitution                                                                        
provides for legislative confirmation of any board or                                                                           
commission at the head of a principal department or                                                                             
regulatory or quasi-judicial agency.  That would include the                                                                    
Board of Education, the Board of Game and all the                                                                               
professional and regulatory boards, such as the Board of                                                                        
Dispensing Opticians.                                                                                                           
                                                                                                                                
Senator Halford noted that in sharp contrast, public                                                                            
corporations which manage much money in State assets, are                                                                       
not subject to the provision.  The corporations including                                                                       
the Permanent Fund Corporation, Alaska Railroad and Alaska                                                                      
Housing Finance Corporation, have a tremendous impact on all                                                                    
Alaskans and our State's economy.  Members are appointed at                                                                     
the Governor's pleasure and removed in the same manner,                                                                         
without legislative oversight.                                                                                                  
                                                                                                                                
Senator Halford stated that the amendment proposed in SJR 34                                                                    
is a necessary addition to Alaska's Constitution.  It would                                                                     
ensure that the people who control Alaska's largest assets                                                                      
are subject to a formal appointment, confirmation and                                                                           
removal process, and not the whim of a newly elected                                                                            
Governor.                                                                                                                       
                                                                                                                                
He stated that the framers of the Constitution would have                                                                       
passed this legislation if they had had the above named                                                                         
entitities before them.  The size and scope of these                                                                            
corporations has gone far beyond the imagination anyone 20-                                                                     
30 years ago could have envisioned.  He believed that the                                                                       
legislation would establish a better working relationship                                                                       
between the Executive and Legislative Branches of                                                                               
government.                                                                                                                     
                                                                                                                                
Representative J. Davies disagreed that the founding fathers                                                                    
would have written the Constitution differently.  He stated                                                                     
that the entities included,  the Alaska Railroad and the                                                                        
Alaska Permanent Fund, were set up to be private                                                                                
corporations.  The purpose in establishing them was not to                                                                      
make them departments in the State of Alaska.  One of the                                                                       
rationales for setting them up the way in which they were,                                                                      
was to have them separate from the government process so                                                                        
that they could operate more like a business.                                                                                   
                                                                                                                                
Representative J. Davies stressed that there was a reason                                                                       
for making the separation, in that they are meant to be an                                                                      
executive function.  They are meant to execute the                                                                              
operations of a business of the State.  Otherwise, they                                                                         
would have been set up as a department.                                                                                         
                                                                                                                                
Senator Halford commented that when the constitutional                                                                          
fathers did look at "high breds", they wanted them to have                                                                      
some independence.  They worked hard on the University of                                                                       
Alaska while continuing to provide for confirmations.                                                                           
                                                                                                                                
Representative J. Davies argued that creating an educational                                                                    
enterprise is different than creating a business enterprise.                                                                    
Senator Halford replied that to protect the Railroad from                                                                       
internal conflict, that protection was necessary.  He argued                                                                    
that how the Railroad deals with the Legislative branch is                                                                      
currently a problem.  He did not agree that government can                                                                      
operate effectively and function in the way that private                                                                        
business does.   Senator Halford claimed that the Judiciary                                                                     
review process belongs to the people.                                                                                           
                                                                                                                                
Representative J. Davies inquired why not run them as a                                                                         
department of the State.  Senator Halford replied that in                                                                       
the case of the Alaska Railroad, the State was attempting to                                                                    
get involved into all the arguments.  He believed that would                                                                    
be determinental to the operation of the Railroad.                                                                              
                                                                                                                                
Representative J. Davies stated that making these boards                                                                        
responsive to legislative confirmation would put politics                                                                       
back into the corporate business structure.  Senator Halford                                                                    
noted that of the major appointments, only 2% have been                                                                         
turned down.  Most legislators generally agree to give the                                                                      
Governor his choice.  Representative J. Davies disagreed                                                                        
with that statement, given votes the last six years.  He                                                                        
pointed out that on all the significant issues, there had                                                                       
been controversy.                                                                                                               
                                                                                                                                
Representative J. Davies voiced concern that the State would                                                                    
get into situations in which there would be discussions                                                                         
regarding each of those appointments. He agreed that a                                                                          
staggered appointment system would work, however, the cure                                                                      
being proposed could be worse than the problem fixed.                                                                           
                                                                                                                                
(TAPE CHANGE, HFC 00 - 126, Side 2).                                                                                            
                                                                                                                                
Representative J. Davies reiterated that the political                                                                          
process functions well.                                                                                                         
                                                                                                                                
Representative Grussendorf asked what the resolution would                                                                      
correct.  Senator Halford stated that the ability to support                                                                    
staggered terms to maintain an on going policy.  He noted                                                                       
that the last two governors had replaced the entire                                                                             
Permanent Fund Board.  He stated that was a mistake as                                                                          
continuity is important and added that protection is tenuous                                                                    
and noted that the Railroad is difficult to deal with                                                                           
through the legislative branch only.  Senator Halford spoke                                                                     
to the confirmation process and the possibility of creating                                                                     
a better working relationship.                                                                                                  
                                                                                                                                
Representative J. Davies agreed with the notion of                                                                              
staggering the terms.  He asked if there had been                                                                               
consideration given how to accomplish the staggering of                                                                         
terms without legislative appointment.  Senator Halford                                                                         
noted that a bill passed the legislature to do that and it                                                                      
was vetoed by Governor Knowles.  The ability to control                                                                         
terms and placements is derived from the sharing of                                                                             
appointment which comes through confirmation.  There are                                                                        
questions as to whether one can reach the enforceability in                                                                     
staggered terms.                                                                                                                
                                                                                                                                
Representative J. Davies agreed that the law passed did not                                                                     
work.  He reiterated his question if there was a                                                                                
constitutional method that would simply provide for                                                                             
staggered terms.  Senator Halford did not know.                                                                                 
                                                                                                                                
JAMES BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF                                                                        
LAW, voiced caution regarding the legislation.  He advised                                                                      
that there are technical problems with the resolution.                                                                          
                                                                                                                                
Initially, there are questions whether corporations other                                                                       
than the Permanent Fund are separate corporations to                                                                            
insulate the State from liability.  He agreed that the                                                                          
Permanent Fund should be included, however, Alaska                                                                              
Industrial Development and Export Authority (AIDEA), Alaska                                                                     
Housing Finance Corporation (AHFC) and the Alaska Railroad                                                                      
Corporation (ARRC) all have their own separate assets.  The                                                                     
language of the resolution creates a "disconnect" between                                                                       
what the drafter intended and what the language reports to                                                                      
do. It does not reach the public corporation that manages                                                                       
their own assets.  To bring language into the Constitution                                                                      
to manage State assets would be dangerous.                                                                                      
                                                                                                                                
Mr. Baldwin added that when interpreting the Constitution,                                                                      
the wording in Section 26, speaks to the governing entity of                                                                    
a public corporation.  Elsewhere, in Article 9, it speaks                                                                       
about public corporation, debt exemption, in which you could                                                                    
issue debt through a public corporation enterprise; that                                                                        
language refers to a public corporation enterprise of a                                                                         
State.  He did not know if any entity could be "managing"                                                                       
State assets and if the legislation would be applicable to                                                                      
those members.                                                                                                                  
                                                                                                                                
Representative J. Davies asked if there was concern with the                                                                    
phrase, "as defined by law".  Mr. Baldwin responded that                                                                        
there would not be any uniformity in accomplishing that.                                                                        
Certain corporations would escape the provision for reasons                                                                     
that are not rationale and would not be included in the                                                                         
requirement that their board members be confirmed.  Mr.                                                                         
Baldwin pointed out that there is not guidance as to what is                                                                    
"significant".  That word does not appear much in the                                                                           
Constitution as it is a difficult word to define.                                                                               
Representative J. Davies asked if "as defined by law" was                                                                       
used to define the word "significant".  Mr. Baldwin did not                                                                     
know and recommended that the language be tightened up to                                                                       
establish the intent.                                                                                                           
                                                                                                                                
Vice Chair Bunde asked if the Permanent Fund Board would be                                                                     
covered by the proposed legislation.  He believed that other                                                                    
entities were not as clear.  Mr. Baldwin acknowledged that.                                                                     
He asked that his testimony not be misconstrued to look like                                                                    
this was a good idea.  He added, it would become more of a                                                                      
problem when moving beyond the Permanent Fund.                                                                                  
                                                                                                                                
Representative Phillips inquired if the legislation would                                                                       
cover the Commercial Fishing and Agriculture Bank (CFAB).                                                                       
Mr. Baldwin stated that it was initially formed as a                                                                            
production credit association.  Representative Phillips                                                                         
pointed out that they manage State assets.  Mr. Baldwin did                                                                     
not know.  Representative Phillips noted that could bring                                                                       
the Legislature into the banking business.                                                                                      
                                                                                                                                
Senator Halford stated that in reference to the things that                                                                     
Mr. Baldwin had pointed out, the drafters solution was for                                                                      
each of those questions to be decided by the Legislature.                                                                       
He reiterated that each case would be a negotiation between                                                                     
the Legislative and the Executive Branch.                                                                                       
                                                                                                                                
Representative J. Davies asked about concerns raised                                                                            
regarding AIDEA and AHFC and how their assets are not                                                                           
considered to be the State's but rather assets of the                                                                           
corporation.  Senator Halford replied that would depend upon                                                                    
what State law defines.  He stated that "as defined by law"                                                                     
could be read to apply to that.  The Court would interpret                                                                      
in a constitutional amendment, the simplest version of what                                                                     
the words meant.                                                                                                                
                                                                                                                                
Representative J. Davies advised that the concern is, if the                                                                    
State passes a law that would clarify that those assets were                                                                    
assets of the State, and hence, they would fall under this,                                                                     
would there then be a risk of not having those liability                                                                        
assets for liability protection purposes and separate from                                                                      
the State.  Senator Halford explained that is the discussion                                                                    
that would occur at the time of the decision and added that                                                                     
the confirmation question would decide the assets of the                                                                        
State.                                                                                                                          
                                                                                                                                
Representative Grussendorf asked which public corporations                                                                      
would be included.  Senator Halford responded that AIDEA,                                                                       
AHFC, Alaska Railroad Corporation and the Permanent Fund.                                                                       
He emphasized that all those boards deal with large amounts                                                                     
of State assets.                                                                                                                
                                                                                                                                
Representative Grussendorf asked if there had been                                                                              
complaints about how these corporations had managed their                                                                       
portfolios.  Senator Halford explained that from a business                                                                     
point of view, he had received complaints regarding the                                                                         
Alaska Railroad Corporation.                                                                                                    
                                                                                                                                
Representative Williams MOVED to report CS SJR 34 (FIN) out                                                                     
of Committee with individual recommendations and with the                                                                       
accompanying fiscal notes.                                                                                                      
                                                                                                                                
Representative Grussendorf OBJECTED.                                                                                            
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Bunde, G. Davis, Phillips, Williams,                                                                                  
Austerman                                                                                                                       
OPPOSED:  J. Davies, Grussendorf, Moses                                                                                         
                                                                                                                                
Representative Foster, Co-Chair Mulder and Co-Chair                                                                             
Therriault were not present for the vote.                                                                                       
                                                                                                                                
The MOTION FAILED (5-3).                                                                                                        
                                                                                                                                
Representative Bunde noted that the Committee would need six                                                                    
votes for passage out of Committee.                                                                                             
                                                                                                                                
Representative Foster MOVED to RECONSIDER the passage of                                                                        
moving the bill out of Committee.  There being NO OBJECTION,                                                                    
the bill was again before the Committee.                                                                                        
                                                                                                                                
Representative Foster MOVED to report CS SJR 34 (FIN) out of                                                                    
Committee with individual recommendations and with the                                                                          
accompanying fiscal notes.                                                                                                      
                                                                                                                                
Representative Grussendorf OBJECTED.                                                                                            
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: G. Davis, Foster, Moses, Williams, Austerman,                                                                         
Bunde                                                                                                                           
OPPOSED:  Grussendorf, Moses                                                                                                    
                                                                                                                                
Representative J. Davies, Co-Chair Therriault and Co-Chair                                                                      
Mulder were not present for the vote.                                                                                           
                                                                                                                                
The MOTION PASSED (6-2).                                                                                                        
                                                                                                                                
CS SJR 34 (FIN) was reported out of Committee with a "no                                                                        
recommendation" and with a fiscal note by the Office of the                                                                     
Lt. Governor dated 2/23/00.                                                                                                     
CS FOR SENATE BILL NO. 212(FIN) am                                                                                              
                                                                                                                                
An Act authorizing the commissioner of fish and game,                                                                           
with the concurrence of the Board of Fisheries or the                                                                           
Board of Game, to award grants for habitat restoration,                                                                         
access, or enhancement projects; and providing for an                                                                           
effective date.                                                                                                                 
                                                                                                                                
KEN TAYLOR, DIRECTOR, DIVISION OF HABITAT AND REFORESTATION,                                                                    
DEPARTMENT OF FISH AND GAME, stated that the bill would                                                                         
authorize the Commissioner of the Department to award grants                                                                    
for certain resource activities.                                                                                                
                                                                                                                                
Under the bill, the Commissioner would have express                                                                             
authority to directly award grants that serve core missions                                                                     
of the Department, protecting, maintaining and improving                                                                        
public access to fish, game and habitat resources of Alaska.                                                                    
Current law necessitates the Department to channel money                                                                        
through other agencies which cause delay and add                                                                                
considerable administrative costs.                                                                                              
                                                                                                                                
Mr. Taylor added that an increasing amount of federal funds                                                                     
are available to restore fish habitat and passage.  The                                                                         
legislation represents a cost-effective way to continue                                                                         
efforts on private and public land to rehabilitate                                                                              
riverbanks, protect fish streams and enhance access to these                                                                    
areas.                                                                                                                          
                                                                                                                                
Vice Chair Bunde asked for further explanation of Line 10,                                                                      
the "concurrence by the Board of Fisheries or the Board of                                                                      
Game".  Mr. Taylor replied that during review in the Senate                                                                     
Resources Committee, language was amended to provide for the                                                                    
concurrence of those entities.  Most of the programs would                                                                      
be targeting salmon restoration activities.                                                                                     
                                                                                                                                
Mr. Taylor explained the process.  The State program would                                                                      
come to the Legislatture with a capital request for the                                                                         
item.  If the Legislature denied it, the funding would not                                                                      
be made available; however, if it were approved, they would                                                                     
go to the Board of Fisheries to determine if they approved                                                                      
of the plan.  Vice Chair Bunde pointed out that they give                                                                       
the Board of Fisheries veto power.  Mr. Taylor agreed.                                                                          
                                                                                                                                
Representative Phillips questioned why the language                                                                             
insinuated that this practice had been standard in the past.                                                                    
Mr. Taylor explained that it had not been a standard                                                                            
practice and that there had been a separation between the                                                                       
fiscal powers of the Department and the Board.  It is a                                                                         
deviation from standard practice.                                                                                               
                                                                                                                                
Representative Phillips stated that the Legislature does not                                                                    
have the power to designate appropriation authority to                                                                          
anyone else.  She MOVED a conceptual amendment, deleting                                                                        
language on Line 10.  Vice Chair Bunde OBJECTED for                                                                             
discussion purposes.                                                                                                            
                                                                                                                                
Representative Austerman asked why the legislation was                                                                          
before the Committee.  Mr. Taylor advised that in the past,                                                                     
there were Exxon Valdez oil spill (EVOS) criminal settlement                                                                    
funds, which were appropriated through the Senate Capital                                                                       
Improvement Project (CIP) to the Department for restoration                                                                     
activities.  The funds could not be granted directly to                                                                         
private landowners to do that work and were handled through                                                                     
a cooperative agreement with a federal agency.  That process                                                                    
was cumbersome.  The State did all the work and then the                                                                        
credit went to federal agencies.  Many decisions were placed                                                                    
in the federal agencies.                                                                                                        
                                                                                                                                
Representative Austerman understood that some of the                                                                            
concerns were about access. He noted the title.  Mr. Taylor                                                                     
replied that the bill was amended on the Senate floor to                                                                        
include "access" as a project category that federal receipts                                                                    
would be applied towards.  He stated that the receipts,                                                                         
which were going to be available, would be for habitat                                                                          
restoration and enhancement.  Mr. Taylor noted that he did                                                                      
not envision many federal receipts available for purchasing                                                                     
access.                                                                                                                         
                                                                                                                                
Representative Grussendorf asked what would occur if the                                                                        
legislation did not pass.  Mr. Taylor replied that the                                                                          
Department would continue to be partners with federal                                                                           
agencies to funnel money in order to get people the grants.                                                                     
Representative Grussendorf asked if they would actually have                                                                    
veto power.  Mr. Taylor explained that there had been an                                                                        
amendment proposed by the Senate Resources Committee.                                                                           
                                                                                                                                
Representative Phillips MOVED the amendment which would                                                                         
remove Line 1 from the title, "with the concurrence of the                                                                      
Board of Fisheries or the Board of Game" and Line 9, "The                                                                       
award of a grant under this section is subject to                                                                               
concurrence by the Board of Fisheries or the Board of Game,                                                                     
whichever is appropriate."  There being NO OBJECTION,                                                                           
Amendment #1 was adopted.                                                                                                       
                                                                                                                                
Representative J. Davies MOVED that the appropriate title                                                                       
resolution be drafted to accompany the legislation.                                                                             
Representative Grussendorf again asked the Department's                                                                         
intent with passage of the legislation.  Mr. Taylor                                                                             
responded that the Department was attempting to gain better                                                                     
administrative efficiency.  There being NO OBJECTION, the                                                                       
title change was so ordered.                                                                                                    
                                                                                                                                
Representative Austerman reiterated his concern regarding                                                                       
the access.  Mr. Taylor explained that the access had been                                                                      
included by an amendment proposed on the Senate floor as a                                                                      
category of activities that federal receipts could be used                                                                      
for granting mechanisms.  Mr. Taylor did not envision any                                                                       
receipts, which the Department would be able to spend in                                                                        
that manner.                                                                                                                    
                                                                                                                                
Discussion followed regarding access concerns.                                                                                  
Representative Phillips questioned if it had been added as a                                                                    
result of the EVOS monies.  She suggested that the language                                                                     
be removed.                                                                                                                     
                                                                                                                                
Representative Austerman MOVED to remove "access" on Lines                                                                      
Davies pointed out that it would not cause a problem for the                                                                    
Department, however, it could provide a problem for the                                                                         
legislation.  Representative G. Davis voiced his objection                                                                      
to the amendment also.  Representative Austerman WITHDREW                                                                       
the MOTION to adopt the amendment.                                                                                              
                                                                                                                                
Representative Foster MOVED to report HCS CS SB 212 (FIN)                                                                       
out of Committee with individual recommendations and with a                                                                     
fiscal note by the Department of Fish and Game dated                                                                            
1/21/00.  There being NO OBJECTION, it was so ordered.                                                                          
                                                                                                                                
HCS CS SB 212 (FIN) was reported out of Committee with a "do                                                                    
pass" recommendation and with a fiscal note by Department of                                                                    
Fish and Game dated 1/21/00.                                                                                                    
HOUSE CS FOR CS FOR SENATE BILL NO. 34(L&C)                                                                                     
                                                                                                                                
An Act relating to tattooing, body piercing, and ear                                                                            
piercing; relating to other occupations regulated by                                                                            
the Board of Barbers and Hairdressers; relating to fees                                                                         
charged by the Board of Barbers and Hairdressers; and                                                                           
providing for an effective date.                                                                                                
                                                                                                                                
Representative Bunde pointed out that in previous testimony,                                                                    
concern had been voiced if ear piercing should remain a part                                                                    
of the legislation.                                                                                                             
                                                                                                                                
DIANA RHOADES, STAFF, SENATOR JOHNNY ELLIS, noted that                                                                          
Senator Ellis was supportive of the draft committee                                                                             
substitute before Committee members.  She added that there                                                                      
were two changes made in that draft which had been                                                                              
previously discussed.  The first was to guarantee that the                                                                      
exam for sterilization and health and safety was written and                                                                    
the second was a technical change made in the definition of                                                                     
tattooing and permanent cosmetics.                                                                                              
                                                                                                                                
Representative Foster MOVED that work draft #1-LS0279\X,                                                                        
Lauterbach, 4/18/00, be the version of the legislation                                                                          
before the Committee.  There being NO OBJECTION, it was                                                                         
adopted.                                                                                                                        
                                                                                                                                
Representative J. Davies asked if the draft had removed ear                                                                     
piercing.  Ms. Rhoades noted that it had not been removed,                                                                      
but that there would be amendment offered.  Representative                                                                      
Bunde advised that Co-Chair Therriault had voiced a concern                                                                     
regarding removal of that language.  Discussion followed                                                                        
regarding removing ear piercing.  Representative J. Davies                                                                      
voiced concern that the bill recognized that this would be a                                                                    
secondary level and that it did not require beaucratic                                                                          
effort.  Vice Chair Bunde suggested that the problem would                                                                      
rest with the enforcement.                                                                                                      
                                                                                                                                
Representative J. Davies replied that the language would add                                                                    
clarity regarding standards.  Representative Phillips                                                                           
interjected that there should not be regulations which cover                                                                    
each jewelry store in the State.                                                                                                
                                                                                                                                
(TAPE CHANGE, HFC 00 - 126, Side 1).                                                                                            
                                                                                                                                
Representative Foster MOVED to report HCS CS SB 34 (FIN) out                                                                    
of Committee with individual recommendations and with the                                                                       
accompanying fiscal notes.  There being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
HCS CS SB 34 (FIN) was reported out of Committee with a "do                                                                     
pass" recommendation and with fiscal notes by Department of                                                                     
Environmental Conservation dated 4/14/00 and Department of                                                                      
Community & Economic Development dated 4/14/00.                                                                                 
                                                                                                                                
RECESSED                                                                                                                        
                                                                                                                                
The Committee recessed at 4:20 p.m.                                                                                             
                                                                                                                                
RECONVENED                                                                                                                      
                                                                                                                                
The Committee reconvened at 6:15 p.m.                                                                                           
HOUSE BILL NO. 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.                                                                                   
                                                                                                                                
Co-Chair Mulder observed that there have been a number of                                                                       
legal questions regarding if this fund would be dedicated.                                                                      
He provided members with a legal opinion from James L.                                                                          
Baldwin, Assistant Attorney General, Department of Law,                                                                         
dated 4/15/00.  [Copy on File].                                                                                                 
                                                                                                                                
DEVON MITCHELL, DEBT MANAGER, DEPARTMENT OF REVENUE,                                                                            
provided information on the legislation.  He explained that                                                                     
he has had limited conversations with the State's Bond                                                                          
Counsel. The issuing entity, an arm of Alaska Housing                                                                           
Finance Corporation (AHFC), would be responsible for the                                                                        
issuance.                                                                                                                       
                                                                                                                                
Mr. Mitchell explained that the Commissioner of Department                                                                      
of Revenue would negotiate a sale of the revenue stream to                                                                      
the subsidiary of AHFC. The securitization of the revenue                                                                       
stream would be set up with a 40-year nominal debt service                                                                      
schedule.  This is the minimal amount that is required to be                                                                    
paid over a 40-year life, being the worst case scenario. The                                                                    
amortization would be flexible. If revenues are above that                                                                      
level, which is the expectation, all of the revenues, less                                                                      
$1.4 million dollars, would be applied to debt service.  The                                                                    
average life would be reduced to 10 years.                                                                                      
                                                                                                                                
In response to a question by Co-Chair Mulder, Mr. Mitchell                                                                      
explained that the $269 million dollar target was based on                                                                      
market conditions, the expectation that investment grade                                                                        
bonds would be issued, and the cash flow that is expected                                                                       
from the Tobacco settlement. The requirement of security                                                                        
which would be required from the cash flow, limits how far a                                                                    
revenue stream can be stretched when it is being                                                                                
securitized.  Investors are willing to take risks within an                                                                     
investment grade scale.  If the amount were increased there                                                                     
would be a higher interest cost.  He noted that more would                                                                      
be paid for the capital if the revenue stream were spread                                                                       
because it would be a higher risk for the investor.                                                                             
                                                                                                                                
Co-Chair Mulder questioned what would happen if $269 million                                                                    
dollars was not derived from the sale.  Mr. Mitchell did not                                                                    
know. He observed that the legislation authorizes the                                                                           
commissioner to sell the revenue stream to reach the target.                                                                    
He clarified that the State's hand would not be tipped by                                                                       
stating the amount desired and that the State bond counsel                                                                      
would not have a role in the issuance.                                                                                          
                                                                                                                                
In response to a question by Representative Williams, Mr.                                                                       
Mitchell explained that the revenue stream is complex.                                                                          
There is a base amount in the settlement that is on going.                                                                      
There is an initial payment amount and there are strategic                                                                      
contribution payments that come in from 2007 to 2018. The                                                                       
on-going payment and the strategic contributions are                                                                            
adjusted for inflation and volume.  Inflation pushes the                                                                        
number up and volume adjustment pushes the number down.                                                                         
There are a variety of opinions on how the adjustments would                                                                    
impact the revenue stream over time. In order to obtain                                                                         
something close to a single A rate bond issuance, there has                                                                     
to be an assumption of a 2.5 percent decline overtime.  A                                                                       
requirement exists to be within an annual debt service                                                                          
amount that would allow volume adjustments to be made.                                                                          
Speculations on increased smokers would be penalized in the                                                                     
bond issuance.                                                                                                                  
                                                                                                                                
Mr. Mitchell provided the analogy of a person with a known                                                                      
salary, attempting to get a bank loan.  The bank allows a                                                                       
home payment of 20 percent of their income, which is based                                                                      
on the opinion of how much of disposable income could be                                                                        
used on the home.                                                                                                               
                                                                                                                                
Vice Chair Bunde noted that Section 5 was dropped out of the                                                                    
bill, the School Major Maintenance Grant Fund.                                                                                  
                                                                                                                                
EDDIE JEANS, DEPUTY COMMISSIONER, DEPARTMENT OF EDUCATION                                                                       
AND EARLY DEVELOPMENT, provided information on the HB 281.                                                                      
He thought that section had been inadvertently included in                                                                      
the legislation.                                                                                                                
                                                                                                                                
Co-Chair Mulder asked if Section 5 would inadvertently                                                                          
suspend the local match.  Mr. Jeans noted that Section 5                                                                        
suspended the evaluation process of the Capital Improvement                                                                     
Projects (CIP) list. The projects that are in the bill are                                                                      
the ones in which the State share and the local match has                                                                       
been applied.                                                                                                                   
                                                                                                                                
Co-Chair Therriault questioned how the State guaranteed that                                                                    
70 percent would be covered.  He asked what would happen if                                                                     
the project came under budget.  Mr. Jeans noted that grant                                                                      
agreements are issued on every project.  If the cost were                                                                       
under the local match, it would be adjusted to assure that                                                                      
the local match is 30 percent.  That authority is under AS                                                                      
14.11.088.  He noted that when local communities go out for                                                                     
bonds, they are reimbursed on a bond schedule.  Projects in                                                                     
the bill are grants and can be adjusted by the authority                                                                        
listed in AS 14.11.088.                                                                                                         
                                                                                                                                
Co-Chair Mulder questioned if AS 14.11.088 should be                                                                            
included.  Mr. Jeans did not think it was necessary.  The                                                                       
local match requirement for school construction grants is                                                                       
established.                                                                                                                    
                                                                                                                                
Co-Chair Therriault referred to Page 3, Line 12.  He noted                                                                      
that AHFC "shall" make the proceeds of the bonds issued                                                                         
under that section available to the Department.  On Page 3,                                                                     
Line 22, the legislation states that the provision is                                                                           
subject to an appropriation.  He noted that the legislation                                                                     
is not an appropriation bill.  Mr. Jeans explained that the                                                                     
dollar amounts would have to be listed in a capital budget                                                                      
bill.                                                                                                                           
                                                                                                                                
Co-Chair Therriault questioned if the dedicated fund                                                                            
argument was based on the use of "shall" and if replacing it                                                                    
with "may" would alleviate the problems.                                                                                        
                                                                                                                                
Representative J. Davies noted that Line 11 indicates that                                                                      
the pledge would be subject to agreements and appropriation.                                                                    
                                                                                                                                
Co-Chair Mulder stated that there have been discussions                                                                         
regarding inclusion in the capital bill.  The decision would                                                                    
be to add an introduction to an appropriation bill to                                                                           
accompany the HB 281.                                                                                                           
                                                                                                                                
Co-Chair Therriault questioned if the projects would need to                                                                    
be listed in the accompanying capital bill.  Mr. Jeans                                                                          
stated that inclusion of a list would tie the projects                                                                          
between the two bills.  Co-Chair Mulder agreed.                                                                                 
                                                                                                                                
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND                                                                           
BUDGET, OFFICE OF THE GOVERNOR, spoke in support of the                                                                         
discussion.  She agreed that the projects would not be                                                                          
needed, but that they could add convenience. The                                                                                
administration supports the use of Tobacco Funds                                                                                
securitization. She emphasized that the securitization                                                                          
approach assists in shifting risk about the future of the                                                                       
tobacco companies to the bondholders and would allow                                                                            
projects to be done now.  There is a timing issue which must                                                                    
be addressed.  She observed that other states are attempting                                                                    
to securitize against the risk.  There is $10 - $15 billion                                                                     
dollars of investment opportunities nationwide. She                                                                             
estimated that the capacity could be tapped before another                                                                      
legislative session.  Ms. McConnell provided members with a                                                                     
letter indicating states aligning themselves to securitize                                                                      
their tobacco revenues.  [Copy on File].  Co-Chair Mulder                                                                       
acknowledged that other states are attempting to securitize                                                                     
those revenues.                                                                                                                 
                                                                                                                                
Co-Chair Mulder questioned what would happen if the capacity                                                                    
were met before the State's issuance.  Ms. McConnell                                                                            
responded that then there would not be a very good market                                                                       
for the bonds.  She stressed that the State is well                                                                             
positioned to move quickly.  She clarified that after the                                                                       
bonds are paid the revenue of the Tobacco Settlement would                                                                      
go into the general fund.                                                                                                       
                                                                                                                                
Co-Chair Mulder noted that "annually" should be inserted on                                                                     
Page 2, Line 7 and Line 24 after "$1,400,000".                                                                                  
                                                                                                                                
Ms. McConnell stressed that K-12 and university education                                                                       
makes sense as part of the tobacco securitization plan.  She                                                                    
maintained that the amount for K-12 funding should be                                                                           
increased.  She observed that there are other vehicles to                                                                       
handle transportation projects and added that it is                                                                             
important to go through the priority list.  She recognized                                                                      
the need for balance between the districts that can do their                                                                    
own bonding and those that can't. She recommended a                                                                             
combination of school debt reimbursement going further down                                                                     
the list for major maintenance and school construction. Ms.                                                                     
McConnell believed that it would be possible to do all of                                                                       
the major maintenance.  She concluded that HB 281 is the                                                                        
right vehicle.                                                                                                                  
                                                                                                                                
JOHN BITNEY, LEGISLATIVE LIAISON, ALASKA HOUSING FINANCE                                                                        
CORPORATION, DEPARTMENT OF REVENUE, provided information on                                                                     
the legislation.  He pointed out that there are two timing                                                                      
issues:                                                                                                                         
                                                                                                                                
? The purchase of the assets; and                                                                                               
? The issuance.                                                                                                                 
                                                                                                                                
Mr. Bitney clarified that these could happen at the same                                                                        
time depending on the cash flow.   He stated that AHFC would                                                                    
try to complete the transactions by the upcoming fall.  He                                                                      
agreed that actions of other states are an issue.                                                                               
                                                                                                                                
In response to a question by Co-Chair Mulder, Mr. Bitney                                                                        
responded that the goal would be set up as an agreement that                                                                    
would not require the districts to concern themselves with                                                                      
the issuance of the bonds.                                                                                                      
                                                                                                                                
Co-Chair Mulder asked if the issue of risk in relationship                                                                      
to the funds as a dedicated revenue stream has been                                                                             
discussed with bond counsel.  Mr. Bitney stated that there                                                                      
had been some discussion with their bond counsel and that                                                                       
they have been requested to look at the concern.  The AHFC                                                                      
bond counsel did not indicate that it was a problem in                                                                          
earlier conversations.  He observed that the concern is that                                                                    
there is a pledge of the revenue stream for debt service                                                                        
payments.  He pointed out that the State was reimbursed up                                                                      
front for the right to purchase the revenue stream.  He                                                                         
noted that it has been viewed by AHFC as a purchase and that                                                                    
dedication is a non-issue.                                                                                                      
                                                                                                                                
Ms. McConnell clarified that even if the money was                                                                              
available, communities would have to go through a bidding                                                                       
process and that construction would probably not happen this                                                                    
year.                                                                                                                           
                                                                                                                                
Co-Chair Mulder pointed out that Mr. Baldwin's letter had                                                                       
omitted "not" on Page 2.                                                                                                        
                                                                                                                                
JAMES BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF                                                                        
LAW, provided information on the legislation.  He agreed                                                                        
that his letter should have stated that "this transaction                                                                       
does not violate the dedicated fund prohibition." He                                                                            
explained that under Alaska law, the term "property" is                                                                         
defined to include what is known as a chosen action; the                                                                        
right to receive something pursuant to a court type                                                                             
proceeding.  That is a recognized type of property in Alaska                                                                    
and other jurisdictions.  Since, it is property, it can be                                                                      
sold or conveyed by a State agency, given proper authority                                                                      
by the Legislature. The legislation grants the proper                                                                           
authority.                                                                                                                      
                                                                                                                                
(TAPE CHANGE, HFC 00 - 126, Side 2)                                                                                             
                                                                                                                                
Mr. Baldwin explained that it would pick out a period of                                                                        
time, stream of revenue, would reserve certain amounts for                                                                      
tobacco programs and to convey this property right to AHFC                                                                      
in the form of a true sale. There have been other ways that                                                                     
these transactions have been done in the State by                                                                               
contributing the property to another entity.  He added that                                                                     
because of the dedicated fund prohibition, it would be a                                                                        
cleaner transaction and would support the validity better if                                                                    
it were a clean sale.  The Department proposed that the                                                                         
bonds are issued for the projects, and in the capital bill,                                                                     
it would be appropriated proceeds for those projects, which                                                                     
would cover any indicated fund addressed.  The Legislature                                                                      
would retain its ability to appropriate the proceeds.                                                                           
                                                                                                                                
Co-Chair Mulder asked about the protection of a separate                                                                        
bill.  Mr. Baldwin explained the Governor's approach, which                                                                     
would have a bond authorization and actual appropriations                                                                       
would be somewhere else in an appropriation bill.                                                                               
                                                                                                                                
Co-Chair Therriault referenced the Four Dam Pool process.                                                                       
He asked the amount in the Governor's bill for the                                                                              
appropriations.  Mr. Baldwin replied that their numbers were                                                                    
in the Capital Bill as amendments.  He noted that a similar                                                                     
approach was taken with the approval of the rural                                                                               
development loans in the AIDEA bill.   There is a well                                                                          
established precedence treating these as property rights                                                                        
that can be sold.                                                                                                               
                                                                                                                                
Co-Chair Therriault noted that there is a prohibition                                                                           
against substantive legislation and appropriations in the                                                                       
same bill.  Mr. Baldwin encouraged the Committee to take the                                                                    
appropriation step.  He noted that sometimes in a bonding                                                                       
context, the bonding bill itself could be viewed as proper                                                                      
authorization.  In the proposed  situation, it would be                                                                         
better to have a separate appropriation.                                                                                        
                                                                                                                                
Co-Chair Mulder asked if the revenue stream was expected to                                                                     
flow between two points without an appropriation.  That                                                                         
arrangement could be vulnerable under Article 9, Section 13                                                                     
of the State Constitution.  By selling the State assets and                                                                     
then appropriating them money back to those entities could                                                                      
conflict with Article 9.  Mr. Baldwin interjected that there                                                                    
would not be a problem and that it would be a sensible                                                                          
transaction.  It would address the problem that the                                                                             
dedicated fund was attempting to remedy, that being, taking                                                                     
a revenue source and removing it completely from the                                                                            
Legislature's discretion and appropriating it for any                                                                           
purpose it wants.                                                                                                               
                                                                                                                                
Co-Chair Therriault noted that clearly, AHFC does not own                                                                       
the revenue stream.  He asked if the Legislature would have                                                                     
to consider a two step process to transfer that revenue                                                                         
stream over to that ownership.  Mr. Baldwin noted that the                                                                      
Governor proposed that authority could be given to                                                                              
Department of Revenue to convey it.  Then the conveyance was                                                                    
made to AHFC, and they would be given value for that. Then                                                                      
the Legislature would appropriate the value which was                                                                           
received back.  He suggested an additional step would be to                                                                     
appropriate the revenue.  Describing it could get "messy".                                                                      
The easiest approach would be to authorize revenue to convey                                                                    
it in such a way that satisfies bondholders.                                                                                    
                                                                                                                                
Co-Chair Mulder referenced Section 3, "the sale of right to                                                                     
receive anticipated special revenue..".  He asked if that                                                                       
language would satisfy what Mr. Baldwin was referencing.                                                                        
Mr. Baldwin stated it would.  The next step would be to                                                                         
separate appropriations of that money.  Later in the bill                                                                       
would be the authorization of specific capital projects, and                                                                    
their needs as a step to appropriation, beyond that.                                                                            
                                                                                                                                
Ms. McConnell added that there was another aspect in the                                                                        
process.  The point is to protect the State from the risk                                                                       
that the ultimate amount of payment would be less than                                                                          
anticipated.  It is important to insure that the State's                                                                        
full faith and credit is not involved.  There are aspects of                                                                    
the proposed transaction that do not have to do with the                                                                        
mechanics of the sale, but to insure that the bond holders                                                                      
do not become limited.  She acknowledged that would add to                                                                      
the complexity of the issue, at the same time, providing for                                                                    
greater safety.                                                                                                                 
                                                                                                                                
Co-Chair Therriault asked about the revenue stream for the                                                                      
capital projects.  Mr. Baldwin replied that the fund source                                                                     
would be corporate receipts.  Co-Chair Therriault asked if                                                                      
the projects would be pro-rated.  Mr. Baldwin replied that                                                                      
current language of the bill states that the fees would be                                                                      
allocated.  Mr. Baldwin added that the projects are                                                                             
allocations and if you run short in one project, you could                                                                      
reallocate to another.  That is how a shortage would be                                                                         
addressed.  There would be an issuance for a set principle                                                                      
amount.  It is an allocated process and can reallocate to                                                                       
another project.  Co-Chair Therriault asked if that would                                                                       
address the issue should a project come in over budget.  Mr.                                                                    
Baldwin explained that in the Legislative Drafting Manual, a                                                                    
General Obligation (GO) bond issue would take the allocation                                                                    
approach.  AHFC would be managing the funds.                                                                                    
                                                                                                                                
Co-Chair Therriault did not like the idea of AHFC deciding,                                                                     
when short of capital, which areas would be cut.  He                                                                            
suggested that it is important to determine if the money                                                                        
would flow out of Department of Education and Early                                                                             
Development.                                                                                                                    
                                                                                                                                
Co-Chair Mulder suggested that it would be an interesting                                                                       
"turf war".  He asked if AFHC would be at risk with that                                                                        
structure.  Mr. Baldwin replied that would be determined in                                                                     
how the structure plan was determined.  Ms. McConnell                                                                           
interjected, that aspect had not yet been covered.  She                                                                         
noted that once it was in the market, would be the time to                                                                      
determine much more.  She noted that they would come back to                                                                    
the Legislature to determine how to move forward.                                                                               
                                                                                                                                
Representative J. Davies recommended cleaning up language on                                                                    
Page 2, Line 27, and Page 6, Line 26.  He noted that there                                                                      
needs to be a method to reconcile that language.  He pointed                                                                    
out that how to deal with the shortfall is included in the                                                                      
appropriation language contained in the second vehicle.  Co-                                                                    
Chair Mulder agreed that reconciliation would be a way to                                                                       
address that concern.                                                                                                           
                                                                                                                                
Co-Chair Therriault asked to clarify the mechanism.  He did                                                                     
not think that AHFC would be "fronting" the State money and                                                                     
then going out and recouping the transfer. Mr. Baldwin                                                                          
understood that AHFC would hold the funds for a certain                                                                         
amount of time and then the Department of Education and                                                                         
Early Development would make the request, and then the funds                                                                    
would be transferred.  AHFC would be holding the funds as                                                                       
long as they can.  Co-Chair Therriault pointed out that                                                                         
would occur after the sale.                                                                                                     
                                                                                                                                
Representative J. Davies commented that normally when                                                                           
something like this is established, there is a fund to which                                                                    
the money can be transferred.  He asked if there was a                                                                          
school construction fund.                                                                                                       
                                                                                                                                
Mr. Bitney noted that in 1998, when SB 360 passed, it was                                                                       
the last $200 million dollars of AHFC general obligation                                                                        
bonds.  In that session, the appropriation fund source was                                                                      
created called AHFC Bond Proceeds.  All the appropriations                                                                      
for each project in the capital budget were given its own                                                                       
fund source.                                                                                                                    
                                                                                                                                
Mr. Jeans indicated that the Department did not perceive                                                                        
that to be a problem.                                                                                                           
                                                                                                                                
Vice Chair Bunde asked what would happen if there was too                                                                       
much money.  Ms. McConnell explained that the way it was                                                                        
structured, it is not just a 40-year bond plan.  The idea                                                                       
was to pay it back more quickly.  She noted that $1.4 would                                                                     
be reserved before AHFC was to receive any of the revenue                                                                       
stream.                                                                                                                         
                                                                                                                                
Representative J. Davies commented that if there were excess                                                                    
funds, they would presumably reside at AHFC.  If they were                                                                      
in an account called AHFC proceeds, then the Legislature                                                                        
would know where they were and how to find them.                                                                                
                                                                                                                                
Co-Chair Mulder asked if the Department had anticipated                                                                         
preparing an amendment to address what would happen in the                                                                      
case of a shortfall.  He noted that there is an                                                                                 
appropriation bill in Committee, the Governor's Capitol                                                                         
budget.  He advised that there is a committee substitute                                                                        
being prepared that would marry the two recommendations.                                                                        
                                                                                                                                
Co-Chair Therriault referenced Page 5, the University                                                                           
deferred maintenance project and asked if it was essential                                                                      
to "lock" the University into those different categories.                                                                       
He pointed out that in the past, they had been linked                                                                           
together to give the University flexibility.  He recommended                                                                    
in the new committee substitute to have the language                                                                            
structured to indicate deferred maintenance/renewal/code of                                                                     
compliance.                                                                                                                     
                                                                                                                                
Co-Chair Mulder questioned if the Bond Council would care                                                                       
where the money was spent as long as there was revenue                                                                          
coming in.  Mr. Bitney replied that this would need to be                                                                       
done for public purposes.  The only instance where that                                                                         
could be a problem would be in situations where grants were                                                                     
provided to non profit agencies.                                                                                                
                                                                                                                                
Co-Chair Mulder agreed that the new committee substitute                                                                        
should reflect as an allocation toward the University for                                                                       
deferred maintenance/code compliance/renewal replacement.                                                                       
Representative Williams asked where the numbers came from.                                                                      
Co-Chair Mulder replied that the numbers came from the                                                                          
University.                                                                                                                     
                                                                                                                                
Co-Chair Mulder replied that the list came from the actual                                                                      
University list and in consultation with the specific                                                                           
campuses.  Representative Williams noted that he was                                                                            
concerned with moving the money around.  Ms. McConnell noted                                                                    
that the Administration recommended clustering the deferred                                                                     
maintenance projects to avoid extra accounting.  That would                                                                     
be consistent with how other deferred maintenance projects                                                                      
have been addressed.                                                                                                            
                                                                                                                                
Representative J. Davies advised that each item was an                                                                          
estimate.  The language would provide the University more                                                                       
flexibility.                                                                                                                    
                                                                                                                                
WENDY REDMAN, VICE PRESIDENT, STATEWIDE SERVICES, UNIVERSITY                                                                    
OF ALASKA, FAIRBANKS, noted that the money is allocated to                                                                      
the individual campuses.  There is a detailed list of the                                                                       
deferred maintenance and code compliance projects.  The list                                                                    
contains the top priority projects from each campus.  The                                                                       
money would not move from campus to campus.  There are many                                                                     
points of accountability on how the money is spent.                                                                             
                                                                                                                                
Representative Austerman observed that renewal and                                                                              
replacement could be listed as deferred maintenance.  Ms.                                                                       
Redman reiterated that the deferred maintenance was the                                                                         
University's highest priority.  The deferred maintenance is                                                                     
the renewal and replacement that did not get done last year.                                                                    
In fact it has not been done for many years. She noted that                                                                     
with the AHFC bond with $35 million dollars in deferred                                                                         
maintenance, this was the wording used and that it provided                                                                     
flexibility to address some of the unexpected thing that may                                                                    
come up.                                                                                                                        
                                                                                                                                
Representative J. Davies pointed out that the Board of                                                                          
Regents has to approve each project and each expenditure.                                                                       
Co-Chair Mulder advised that there would be a new committee                                                                     
substitute drafted which would consolidate all the concerns                                                                     
which had been voiced.                                                                                                          
                                                                                                                                
Representative Grussendorf asked what happened to the                                                                           
original premise of HB 281.  He spoke about transferring                                                                        
harbors to the local municipalities.  Co-Chair Mulder                                                                           
clarified that it was still the intent that harbors be                                                                          
transferred to the local communities.  He noted that the                                                                        
Department of Transportation and Public Facilities would be                                                                     
addressing that concern.  With regard to the Sitka project,                                                                     
unfortunately, there was only one harbor not placed into HB
269.  Representative Grussendorf emphasized that the                                                                            
communities that he represents are coastal communities and                                                                      
that they could take over these operations and turn them                                                                        
into an enterprise.  Representative Phillips pointed out                                                                        
that every community on the list had made the agreement that                                                                    
they would take it over.  Representative Grussendorf advised                                                                    
that there had been some added that were not on the original                                                                    
list.                                                                                                                           
                                                                                                                                
Representative J. Davies asked if all the projects were in                                                                      
fact "ready to go" in the next year or so.  Representative                                                                      
Phillips assured members that her district was ready.                                                                           
                                                                                                                                
Representative Grussendorf noted that in the original HB
281, there was a three-year period in which there would be                                                                      
$10 million dollars available.  This is no longer the                                                                           
approach.  Co-Chair Mulder commented that they would                                                                            
continue to work on the language so to expand that concept.                                                                     
                                                                                                                                
HB 281 was HELD in Committee for further consideration.                                                                         
ADJOURNMENT                                                                                                                     
                                                                                                                                
The meeting adjourned at 7:40 P.M.                                                                                              
                                                                                                                                
H.F.C. 26 4/18/00                                                                                                               

Document Name Date/Time Subjects