Legislature(2003 - 2004)
04/14/2004 01:55 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 14, 2004
1:55 P.M.
TAPE HFC 04 - 82, Side A
TAPE HFC 04 - 82, Side B
TAPE HFC 04 - 83, Side A
TAPE HFC 04 - 83, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 1:55 P.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Eric Croft
Representative Hugh Fate
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Carl Moses
Representative Bill Stoltze
MEMBERS ABSENT
None
ALSO PRESENT
Representative Harry Crawford; Jay Hardenbrook, Staff to
Representative Crawford; Representative John Coghill; Eddy
Jeans, Manager, School Finance and Facilities Section,
Department of Education and Early Development;
Representative Cheryll Heinze; Kelly Hepler, Director,
Division of Sport Fish, Department of Fish and Game; Rob
Bentz, Deputy Director, Division of Sport Fish, Department
of Fish and Game; Eric Yould, Executive Director, Alaska
Power Association; Bob Bartholomew, Chief Operating Officer,
Alaska Permanent Fund Corporation, Department of Revenue;,;
Caryl McConkie, Tourism Development, Division of Trade and
Development, Department of Community & Economic Development;
Jim Smith, Superintendent, Galena City Schools; Pete
Ecklund, Staff to Representative Williams; Bob Bartholomew,
Chief Operating Officer, Alaska Permanent Fund Corporation,
Department of Revenue,
PRESENT VIA TELECONFERENCE
Ralph Lindquist, Dean of Students, Nenana Living center,
Nenana; Morgan Dunker, Student, Nenana Living Center,
Nenana; Afton Brinkman, Student, Nenana Living Center,
Nenana; Don Johnson, Guide, Soldotna
SUMMARY
HJR 46 Proposing amendments to the Constitution of the
State of Alaska relating to the principal of the
Alaska permanent fund; limiting appropriations
from the Alaska permanent fund to amounts equal to
that part of the market value of the fund that
exceeds the principal based on an averaged percent
of the fund market value.
HJR 46 was REPORTED out of Committee with
individual recommendations and with two fiscal
impact notes.
HJR 47 Proposing amendments to the Constitution of the
State of Alaska relating to the principal of the
Alaska permanent fund; limiting appropriations
from the Alaska permanent fund to amounts equal to
that part of the market value of the fund that
exceeds the principal based on an averaged percent
of the fund market value; and permitting
appropriations from the permanent fund only for
costs of administering the fund, a program of
dividend payments for state residents, and public
education.
HJR 47 was REPORTED out of Committee with
individual recommendations and with two fiscal
impact notes.
HB 425 An Act relating to funding for school districts
operating secondary school boarding programs, to
funding for school districts from which boarding
students come, and to inoperative school
districts; and providing for an effective date.
HB 425 was heard and HELD in Committee for further
consideration.
HB 452 An Act relating to licensing and regulation of
sport fishing services operators and fishing
guides; and providing for an effective date.
CSHB 452(FIN) was REPORTED out of Committee with
individual recommendations and two fiscal impact
notes.
HB 512 An Act establishing the Hydrogen Energy
Partnership in the Department of Community and
Economic Development; requiring the commissioner
of community and economic development to seek
public and private funding for the partnership;
providing for the contingent repeal of an
effective date; and providing for an effective
date.
HB 512 was heard and HELD in Committee for further
consideration.
HB 553 An Act relating to investments of the Alaska
permanent fund and to the income of and
appropriations from the Alaska permanent fund and
making conforming amendments; relating to the
determination of net income of the mental health
trust fund; and providing for an effective date.
CSHB 553(FIN) was REPORTED out of Committee with
individual recommendations and no fiscal impact
notes.
HOUSE BILL NO. 425
An Act relating to funding for school districts
operating secondary school boarding programs, to
funding for school districts from which boarding
students come, and to inoperative school districts; and
providing for an effective date.
REPRESENTATIVE JOHN COGHILL explained that current
provisions are expanded under HB 425 allowing a district to
receive a stipend for a student to travel to attend a
secondary boarding school that began before January 1, 2004.
He noted that Sitka's Mt. Edgecumbe is a boarding school
under a different statute. Galena, Nenana and Bethel have a
broad range of boarding school options. HB 425 allows
students to choose between a school in their district or a
boarding school option. Representative Coghill noted that it
is a change in policy, which the fiscal note reflects. The
bill adds a sunset date of 2009 and protects smaller
districts from being dropped from the critical 10-student
Average Daily Membership (ADM) count if students leave to go
to boarding school. The boarding schools in Nenana, Bethel
and Galena offer cultural, social and educational changes
and possibilities for students.
Representative Coghill explained that Section 1 requires the
secondary school boarding program to have been operating by
January 1, 2004. Section 2 relates to the student count
being less than the minimum of ten, and Section 3 is the
repealer.
Representative Coghill pointed out that Nenana's and
Galena's actual capacities are lower than the figures shown
on the second page of fiscal note Component No. 148. The
Bethel school students are not all within a single boarding
home.
He concluded that HB 425 would expand the circumstances
allowing the boarding school to receive a reimbursement
stipend. Under the bill, a student would not have to pass
the current entrance standards, which require that his home
district does not include a boarding school.
EDDY JEANS, MANAGER, SCHOOL FINANCE AND FACILITIES SECTION,
DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, stated that
the fiscal note totals $1,179,000 and he explained that page
2 shows how the figure was derived. Galena has the capacity
to serve 100 kids, but 8 already qualify for boarding home
stipends because they come from the Pribilof Islands and
don't have daily access to a secondary program on St.
George. He discussed the stipend and costs for the remaining
92 kids at Galena. Mr. Jeans pointed out that these three
programs are 180-day, or full term programs.
Mr. Jeans noted that all three programs are currently
operating at capacity and the Department would not recruit
additional students from schools. He favored the bill's
safety net of not penalizing districts for falling below the
10-student ADM minimum while the pilot program is in place.
Co-Chair Harris asked if a school would close if its
enrollment dropped below ten students. Mr. Jeans replied
that the current Foundation Formula statute provides for
adding fewer than 10 students in a community to the smallest
community in the district because the revenue drops so low
that it forces the district to close the school.
Co-Chair Harris asked if this was part of the Molly Hootch
case. Mr. Jeans clarified that it was actually part of SB
36 in which the Legislature set a new threshold minimum of
10 students for a separate site.
Co-Chair Harris asked if the boarding schools such as Mt.
Edgecumbe are funded by the ADM like the other State
schools. Mr. Jeans affirmed. Co-Chair Harris asked if the
boarding schools would receive funding from the Department
of Education. Mr. Jeans replied that they receive
educational dollars for the children enrolled in their
school.
Co-Chair Harris asked if a boarding school receives extra
money for the residence. Mr. Jeans reiterated that it is
only in the instance of serving children who lack daily
access to a secondary school in their community.
In response to a question by Co-Chair Harris, Mr. Jeans
affirmed that Nenana has a school with a current enrollment
of 138 students, but the enrollment is declining. The space
could handle up to 400 students. Mr. Jeans said that Nenana
would not qualify for the boarding home stipend under the
current regulation because it provides daily access to a
secondary school. He clarified that this bill would expand
the boarding home program for a five-year pilot, and allow
the Department to reimburse the boarding home stipend for
all of the kids attending the Nenana boarding school.
In response to a question by Co-Chair Harris, Mr. Jeans
clarified that the round-trip transportation costs and a
monthly stipend would be paid for the boarding school
students.
Co-Chair Harris questioned if the bill's purpose is to gain
more support for independent boarding schools or regional
schools. Mr. Jeans did not regard it as the Department of
Education advocating for additional boarding schools;
instead, it would offer students choices that they currently
don't have in their own communities. Unlike Mt. Edgecumbe,
the State does not operate the schools in Bethel, Nenana or
Galena, which are operated by the independent school
districts.
Representative Chenault asked about the analysis by the
Nenana Student Living Center (copy on file). Mr. Jeans
explained that if it is a smaller school, the State pays a
higher instructional cost per child, so the analysis
attempts to show the savings to the State through the
foundation program of including these kids in a larger
population.
In response to a question by Representative Chenault
regarding the figures used in the student allocation, Mr.
Jeans clarified that the Nenana number includes the boarding
school kids rather than the district that the kids came
from.
Mr. Jeans pointed out that the current program is in
regulation and this legislation would expand opportunities
for the kids. The Nenana program has an academic focus,
while the Galena program is more vocational in focus and
kids can gain certification and enter the workforce later
on.
Vice-Chair Meyer asked if boarding schools are similar to
charter schools. Mr. Jeans stated that charter school
legislation doesn't allow for spending State money on
boarding home programs. Vice-Chair Meyer asked if the
boarding schools are required to do exit exams and meet the
No Child Left Behind requirements. Mr. Jeans affirmed.
Representative Foster asked who currently pays the students'
transportation costs. Representative Coghill replied that
the parents do.
RALPH LINDQUIST, DEAN OF STUDENTS, NENANA STUDENT LIVING
CENTER (NSLC), VIA TELECONFERENCE, NENANA, stated that
passage of HB 425 is essential to the survival of the NSLC
next year. The NSLC is processing over 150 applications for
the 30-35 beds that will be available next year.
MORGAN DUGGERT, STUDENT, NENANA STUDENT LIVING CENTER, VIA
TELECONFERENCE, NENANA, stated that the Living Center has
improved the number and quality of classes that are offered.
She has received scholarship money for college.
AFTON BRINKMAN, STUDENT, NENANA STUDENT LIVING CENTER, VIA
TELECONFERENCE, NENANA, explained that he moved from Eagle
to Nenana two years ago, which has improved his life. He
will be graduating in May. He expressed that he would not
have the range of class choices or the opportunities for
scholarships back in Eagle.
Mr. Lindquist clarified that kids live at the NSLC but go to
school in Nenana.
JIM SMITH, SUPERINTENDENT, GALENA CITY SCHOOLS, stated that
he'd been in Galena five years and the school is seven years
old. He discussed the residential school program, noting
that the boarding school provides 27 jobs for the community
with the potential for 100 kids, and it operated with 85
students this year. The scholastic program is successful,
with 72% of seniors passing all three portions of the
graduation test. Alaska Natives comprise ninety-four percent
of the student body. He felt that the strong point is the
provision of vocational training. He described the programs,
which are voluntary.
Representative Joule commented on the evolution of education
in the state, from Native and Non-Native after the eighth
grade to the current integration of schools. The State is
looking for solutions to its challenges in education, and he
anticipates an integrated K-14.
Co-Chair Harris referred to the large fiscal note, and
stated that the Co-Chair would like to hold the bill over.
Representative Joule asked if the Administration supports
the legislation. Mr. Jeans replied that the State Board
hasn't reviewed it yet.
Representative Coghill spoke in support of the fiscal note,
and the impact of the funding on "these three communities
that have been carrying the weight." He argued for the
significant college preparatory work that the three boarding
schools offer to students.
HB 425 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 452
An Act relating to licensing and regulation of sport
fishing services operators and fishing guides; and
providing for an effective date.
REPRESENTATIVE CHERYLL HEINZE explained that years ago she
was the owner of a fishing and guiding lodge on the Yentna
River and employed four guides, which influenced her
introduction of this bill.
Representative Heinze explained that currently Alaska lacks
a unified set of standards for sport fish guiding. This
makes it difficult to protect fish habitats and ensure the
maximum utilization of Alaska's resources. HB 452 is
intended to legitimize and protect the sport fishing
industry by establishing professional standards and ensuring
accurate reporting of guiding activity throughout the state.
This legislation will enhance public confidence in the
guided sport fishery and the data upon which management
decisions are made. HB 452 will establish licensing and
reporting requirements for businesses and guides providing
sport fishing guide services in fresh and salt waters of
Alaska.
Representative Heinze pointed out that the bill establishes
two types of licenses: a sport fishing services operator
license and a fishing guide license, and establishes minimum
requirements and fees for obtaining each license. Under the
provisions of the bill, sport fishing service operators must
meet licensing, insurance, and other requirements
established by the Board of Fisheries. It requires that
fishing guides operate under the authority of a sport
fishing service operator license, either by holding that
license themselves or by being employed by, or under
contract with, a holder of a fishing service operator
license. The bill also requires that the licensed guide be
certified in first aid, have applicable U.S. Coast Guard
vessel licenses, and meet other requirements adopted by the
Board of Fisheries.
HB 452 establishes reporting requirements, including where
guided sport fishing activities are conducted and the
quantity of fish harvested. The bill ensures that sensitive
information will be kept confidential. Representative Heinze
concluded by urging support of the bill.
Co-Chair Harris asked if the Alaska Outdoor Council supports
the bill. Representative Stoltze stated that he is the
legislative chairman of the Alaska Outdoor Council, which
officially opposes the bill.
Co-Chair Harris asked why the Outdoor Council doesn't
support the bill. Representative Heinze did not know.
Representative Stoltze was unable to answer.
TAPE HFC 04 - 82, SIDE B
Representative Fate referred to the fiscal note, and asked
about the corpus of the Fish and Game Fund.
KELLY HEPLER, DIRECTOR, DIVISION OF SPORT FISH, DEPARTMENT
OF FISH AND GAME clarified that the fiscal note shows a
Department account funded primarily by license sales.
Representative Fate asked if the funds come from the ADF&G
revolving loan fund. Mr. Hepler explained that the fees from
licensing of guides go directly into the account, which is a
uniquely different fund than the revolving loan fund for
commercial fishermen.
Vice-Chair Meyer asked if the fees are the same for out of
state fishing guides. Mr. Hepler replied that about 25% of
the guides are non-residents. The Department of Law advised
that ADF&G should evaluate if its program administration
costs are higher for non-resident than for resident guides.
He stated that the Department cannot verify higher costs,
but it can charge differentially under the sport-fishing
program, and it requires the non-resident licensed guides to
buy sport-fishing licenses.
Representative Chenault asked if the 25% non-resident guides
includes fly-in guides, and if they are required to have a
license. Mr. Hepler replied that they are required to
register if they are actively guiding.
Representative Chenault thought that fresh and saltwater
guides are currently required to be licensed and have CPR
certification. Mr. Hepler explained that Kenai has special
rules because it is under the Department of Natural
Resources, Division of Parks. The remainder of the
freshwater guides is not under the same provisions. He
explained that this bill consolidates other requirements.
Representative Hawker referred to the language on page 4,
line 3, "satisfies all additional requirements adopted in
regulation by the Board of Fisheries" and asked what
additional requirements are contemplated. Mr. Hepler said
there might be requirements for zoning, such as on the Kenai
River, or harvest recording. The Legislature would limit the
Board of Fish to the enforcement of the fishing regulations.
Representative Hawker expressed concern that the open-ended
language would place the Board of Fisheries in a regulation-
making role, with geographical differences within the state.
ROB BENTZ, DEPUTY DIRECTOR, DIVISION OF SPORT FISH,
DEPARTMENT OF FISH AND GAME, explained that the intent of
the language on line 3, page 4 is to request locations where
the guides intend to operate and to give them some choices.
Co-Chair Harris asked if the fiscal note is adding four new
and one part-time positions. Mr. Hepler affirmed, and the
positions would handle the administration of the large
number of licenses and provide data summaries to the Board
of Fisheries.
Co-Chair Harris pointed out that this bill would expand the
scope and size of government. Mr. Hepler agreed that it
would. Co-Chair Harris asked about the increase in revenues
in the next few fiscal years. Mr. Hepler replied that the
Department prorated the number of guides over five years.
Co-Chair Harris noted that it shows a decrease in costs from
FY05 to FY06. Mr. Hepler replied that there are initial
capital startup costs and personnel increases. In response
to a question by Co-Chair Harris, Mr. Hepler explained that
the $10 thousand travel budget is for meetings with the
guides or in Juneau, and it is not in the current budget.
Representative Chenault asked in relation to the required
reports for guides whether fish tickets would be required
for fresh and saltwater fishing. Mr. Hepler said that the
intent was to keep it a sport fishing bill and not bring
commercial fishing into it. The question is whether the
language is so broad that it needs to be amended. He
offered to discuss it with staff and suggest a committee
substitute by the sponsor if the Department believes it
poses a problem.
Representative Chenault commented that as a resource
management tool, he thought the Department would want to
track the real catch numbers from guided and non-guided
fishing.
Representative Croft asked how sport-fishing guides are
regulated now. Mr. Hepler explained that when a similar,
more broadly written bill did not pass the Legislature, the
ADF&G looked at revising regulatory language outside of a
statute change. The ADF&G wanted to register guides and
improve reporting in saltwater, which led to the saltwater
logbook. The guides are still required to have a business
license and to meet Coast Guard requirements. He said that
the only difference in this bill is guide licensing to get
the freshwater report information.
In response to a question by Representative Croft, Mr.
Hepler said that a large segment of the guiding industry is
not saltwater-based. There is no direct reporting from the
Kenai, Susitna Basin, Copper Basin and Bristol Bay. He
explained that it is a Board of Fish violation to operate a
guiding business without registering with the Department.
In response to a question by Representative Croft, Mr.
Hepler said that the Department currently could only track
the saltwater guide activity in an area. The bill would
provide reporting in fresh water, set misdemeanor fines for
not registering and reporting, and regulate the guiding
industry statewide.
Mr. Bentz commented that the numbers are currently
inaccurate and the bill would also require information on
where the activities are taking place.
Co-Chair Harris MOVED to ADOPT Amendment #1. Co-Chair
Williams objected.
Mr. Bentz explained that Amendment #1 has two parts.
Amendment #1 reads:
Page 6, line 16, following "board.": Insert "The
department and the board may adopt by regulation
requirements for timely submission of reports required
under this section or under regulations adopted by the
department or board."
Page 6, line 31, following "AS 16.40.270(e)": Insert
"or who knowingly fails to comply with a requirement
for timely submission of reports required by a
regulation adopted under AS 16.40.280(b)"
Mr. Bentz read the language on page 6, line 16. Co-Chair
Harris asked why it is needed. Mr. Bentz replied that when
Representative Heinze discussed the bill with Legislative
Legal, Mr. Utermohle recommended this language for legal
reasons even though it seems redundant.
Mr. Bentz explained that part two of Amendment #1, page 6,
line 31 would change the reporting time period of the
operator. Currently the logbook program is on a weekly basis
and he commented that an operator could be late for
circumstantial reasons. If this wording is not included on
line 31, one tardy report would fall under (a) which would
change the penalty from a violation to a Class A
misdemeanor, and would change the fine from a maximum of
$500 to a maximum of $10,000 and one year in jail. He
stated that the Department supports these changes in the
amendment.
Co-Chair Williams removed his objection. Amendment #1 was
adopted.
Representative Foster referred to the fourth paragraph of
the letter from the Kenai River Professional Guide
Association (copy on file) in which the Association states
that it already pays fees to the Department of Natural
Resources (DNR). Mr. Hepler explained that to guide on the
Kenai River, which is a park, currently requires payments to
DNR of $450 by residents and $1350 by non-residents. If it
is a concern of the guides, it could be brought before the
Legislature. Mr. Hepler thought fees might be split between
the DNR and his own Department.
Co-Chair Harris MOVED to report CSHB 452 (FIN) out of
Committee with individual recommendations and the attached
fiscal note. There being NO OBJECTION, it was so ordered.
CSHB 452(FIN) was REPORTED out of Committee with individual
recommendations and two fiscal impact notes.
HOUSE BILL NO. 512
An Act establishing the Hydrogen Energy Partnership in
the Department of Community and Economic Development;
requiring the commissioner of community and economic
development to seek public and private funding for the
partnership; providing for the contingent repeal of an
effective date; and providing for an effective date.
JAY HARDENBROOK, STAFF TO REPRESENTATIVE CRAWFORD, testified
in support of HB 512. He observed that hydrogen does not
occur naturally on earth in its pure form, and it is a means
of containing energy rather than an energy source. The
potential sources for hydrogen are water, oil, natural gas,
coal, geothermal and wind, all of which occur in Alaska.
Mr. Hardenbrook noted that the bill provides a structure to
allow the State to accept grants from both private and
public sources. He referred to the fiscal note reflecting
$71,000 for the Department of Community & Economic
Development.
Representative Stoltze asked if the local energy task force
discussed fuel cells. Mr. Hardenbrook observed that the
State of Alaska has one of the largest operational fuel
cells in the United States, located at the Anchorage
Airport. He noted that it is relatively cost effective given
the high costs for fuel oil, natural gas and electricity.
Alaska is unique in the hydrogen market because its power
costs are high and it has a great supply of potential energy
for hydrogen. He concluded that by establishing this
partnership, Alaska could be a test project for the rest of
the U.S.
In response to a question by Representative Hawker, Mr.
Hardenbrook explained that if there are not sufficient funds
through grants the partnership provision would be removed.
Representative Hawker asked the time that is needed to
secure funding. Mr. Hardenbrook replied that the partnership
would be dissolved in 2009. He felt that there would be
sufficient grants to continue beyond next year.
CARYL MCCONKIE, TOURISM DEVELOPMENT, DIVISION OF TRADE AND
DEVELOPMENT, DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT,
explained that the fiscal note would only support the first
year while the funding is being secured. The Department
would work with the University of Alaska, which has
completed some research, and with the Energy Task Force and
the Energy Authority.
Representative Hawker noted the repealer clause of 2009 to
secure stand-alone funding, and he asked if the State would
be required to continue support if the funding is
insufficient. Ms. McConkie explained the Department's
assumption that if funding were not available, the project
would be discontinued.
Representative Fate questioned if the viability of the
partnerships had been researched. Mr. Hardenbrook noted that
California has been successful with fewer resources and
lower energy costs than Alaska. The conclusion was reached
that the State of Alaska would be successful.
Representative Fate questioned if "the cart is before the
horse" since the gas pipeline is not yet a reality.
Hardenbrook responded that hydrogen could be made from other
technologies, including hydrogen from coal. Alaska has more
coal reserves than the rest of the United States combined.
Representative Fate acknowledged that the technology exists
but pointed out that it is currently expensive.
Representative Hawker questioned what would happen if
outside revenue sources fail. Mr. Hardenbrook noted that the
sunsets are the repealers in Section 6 that would allow
reevaluation by the Legislature in 2009.
Representative Hawker suggested that additional language be
used to clarify what would happen to the agency if outside
funding is not secured or ceases to be available. Mr.
Hardenbrook deferred to the bill drafter.
Representative Croft referred to Section 5, which would
prevent the provisions to take effect without funding. He
pointed out that if the funding never takes place, the
provisions would be repealed in 2009.
In response to a question by Representative Croft, Mr.
Hardenbrook noted that hydrogen is more stable than gasoline
and can be transported by pipeline or tanker, or liquefied.
Alaska has an abundance of zeolites [secondary minerals]
with a honeycomb structure used to trap hydrogen.
In response to a question by Representative Hawker, Ms.
McConkie stated that the Department has not taken a position
on the bill.
ERIC YOULD, EXECUTIVE DIRECTOR, ALASKA POWER ASSOCIATION
(APA), stated that he represents the electric utility
industry in Alaska. He spoke in support of the legislation
and stressed that new energy resources are needed. Hydrogen
can be produced through fossil fuels or water.
TAPE HFC 04 - 83, Side A
Mr. Yould noted that there has not been sufficient economic
incentive to further the technology. The State of Alaska
possesses a number of renewable resources in large
quantities that represent an indigenous resource that could
be developed. While hydrogen would not be developed in the
near future, the fuel cell industry is an emergent
technology. He noted that hydrogen could also be burned in
internal combustion engines. He concluded that the APA
supports the bill. If the partnership were not put in
place, it would fall to the individual interests to back the
technology.
Mr. Yould recommended minor changes to the bill. On page 2,
lines 2-3, after "including sufficient geothermal energy" he
suggested adding "hydropower, tidal power, wind and other."
Around line 21, page 2, he would include "the electric
utility industry," which would have vested interest in
seeing the technology move forward. He noted that the Alaska
Energy Task Force has also taken a strong stand in support
of hydrogen technology.
Representative Fate asked if Mr. Yould had projected when
the hydrogen industry would benefit the electrical
companies. Mr. Yould replied that hydrogen technology is not
on the immediate horizon and it has been emerging for 30
years. Fuel cells are the technology of the future and
hydrogen will fuel the world technology in the distant
future. He provided statistics, and discussed Cook Inlet
reserves.
Representative Hawker questioned if the industry could fund
a fellowship grant to the University to provide the needed
leadership. Mr. Yould thought the various groups, including
the task force, could do it in partnership.
Representative Hawker commented that he would like to change
Fiscal Note #2 to reflect indeterminate numbers. He asked if
the Department would consider changing the source from the
General Fund to Receipt supported services.
Representative Hawker proposed a conceptual amendment to
change Fiscal Note #2, DCED dated 2/24/04 to reflect
indeterminate numbers for FY06, FY07, FY08 and FY09. He
also proposed that the funding source for FY 05 be under
receipt-supported services, with funding contingent on
finding third-party funding.
Vice-Chair Meyer OBJECTED for purposes of discussion.
Ms. McKonkie agreed that she would work with the Department
to revise the fiscal note as proposed by Representative
Hawker. She stated that it would require finding outside
funding for the first year. An additional staff position to
secure that funding would be needed.
Representative Hawker commented that the fiscal note lacks
clarity regarding future needs. He doubted that soliciting
industry would require a lot of effort on the Department's
part. Ms. McKonkie replied that it wasn't likely the
program could be up and running in a year's time, with the
current staff "maxed out" in the existing grant programs.
She expressed that the Department would need guaranteed
first year funding in the current fiscal note.
Vice-Chair Meyer asked what would happen to the staff if the
program were discontinued after the first year. Ms. McKonkie
said that some programs are only funded for a year at a
time. The proposed program would require an expertise not
currently in the Department, and it must at least estimate a
portion of the staff time. In response to a question by
Vice-Chair Meyer, Ms. McKonkie explained that recruitment
would be tied to a person's experience in industry.
Regarding extended year funding, Ms. McKonkie stated that if
the funding were there, the activities would continue. The
Department did not estimate beyond the first year.
Representative Hawker reiterated doubt that the current
Department staff in various programs would not have time to
solicit public funding. Ms. McKonkie explained that there is
expertise in those areas, but this fiscal note reflects the
DCED implementing the bill. Representative Hawker expressed
hesitation in creating additional staffing when the
Legislature is on verge of stabilizing fiscal policies.
Vice-Chair Meyer removed his objection to the conceptual
amendment.
Representative Hawker explained that FY06, FY07, FY08 and
FY09 are really indeterminate numbers rather than zero,
because of potential federal receipts. Rather than pure
General Fund in 2005, he proposed to set it up as receipt-
supported services so that it is not a General Fund
appropriation.
Representative Fate asked Representative Hawker if his first
conceptual amendment also included third party funding.
Representative Hawker affirmed.
Representative Chenault suggested allowing the DCED to
provide a revised fiscal note and a response to the
Committee's concerns.
Representative Hawker withdrew his amendment.
HB 512 was heard and HELD in Committee for further
consideration.
HOUSE JOINT RESOLUTION NO. 46
Proposing amendments to the Constitution of the State
of Alaska relating to the principal of the Alaska
permanent fund; limiting appropriations from the Alaska
permanent fund to amounts equal to that part of the
market value of the fund that exceeds the principal
based on an averaged percent of the fund market value.
Co-Chair Harris summarized that in addition to the Percent
of Market Value (POMV) provision, the legislation would
incorporate in a constitutional amendment the value of
$22,988,000,000 plus deposits made between June 30, 2003 and
the date of the principal is determined.
PETE ECKLUND, STAFF, CO-CHAIR WILLIAMS, noted that the
intent is to define principal. Any deposits after June 30,
2003 will increase the principal. The principal would be
protected and could not be appropriated. Only the value of
the fund that exceeds the principal amount could be
appropriated. He noted that the principal amount as of
February 29, 2004, was $23,195,500,500.
Co-Chair Harris questioned if the Earnings Reserve Account
would remain.
BOB BARTHOLOMEW, CHIEF OPERATING OFFICER, ALASKA PERMANENT
FUND CORPORATION, DEPARTMENT OF REVENUE, provided
information relating to the legislation. He clarified that
there would be an account that would record the value in
excess of principal. He did not know what the account would
be called. Income or value from investments earned above
principal would be accounted for.
Co-Chair Harris noted that 5 percent of the earnings would
be the maximum amount that could be appropriated in any one
year. Mr. Bartholomew explained that there would be a two-
step process: calculate based on the total value of the Fund
a five percent payout; and determine if there is enough in
the account to make the appropriation. The payout would be
reduced if there were insufficient funds to an amount above
principal.
In response to a question by Vice-Chair Meyer, Mr.
Bartholomew observed that the Alaska Permanent Fund
Corporation Board had not met on the new proposal, but
observed that it would meet their number one priority to
establish a spending limit. A proposal that retains
principal would be a workable solution. Short-term drops in
the stock market could reduce what is available for
spending, which would remove the benefit of a stable,
predictable payout amount.
Vice-Chair Meyer observed that if the average earnings were
only 2 percent, there would only be 1 percent for government
and 1 percent for dividends. He noted that people want at
least $1,000. He questioned if the pure POMV method would
provide the safest manner to insure a $1,000 dividend. Mr.
Bartholomew agreed and noted that [the constitutional
protection of the principal] adds the risk of less than a
full payout during a short-term down market.
Vice-Chair Meyer asked how many years the Fund has been
below the 5% threshold in earnings. Mr. Bartholomew observed
that the balance in the account has been less than 5 percent
a couple of times "intra-year" or during the year. However,
there was a rally during 2003, the year in which they were
most at risk, and funds were available to pay the 5%. He
observed that, last year, the amount in the available
spending account of the Permanent Fund grew by $3.5 billion,
which is more than enough to fund a 5 percent payout.
Vice-Chair Meyer supported the "pure" Percent of Market
Value method; at times earning 12-15% so he believes in long
run, always would get average 8%. He thought this method
would be "separate buckets" and would be easier to explain
to the voters.
Mr. Bartholomew observed that the Permanent Fund is invested
as one fund. It is not separated into buckets of principle
and the value above principal. There is one pool of money,
which is only treated differently for accounting purposes.
He observed that under HJR 26, it would be accounted and
invested as one fund.
Representative Croft asked re the new language on page 1,
lines 13-15 through line 2, page 2 and asked if envision it
would rise over time. Mr. Bartholomew, said under this
proposal it would be accounted for under what is not
principal, and it is not envisioned to appropriate it for
inflation-proofing while not losing that option.
Appropriations from any source would go into the principal.
Representative Croft asked what would happen to the 3
percent used for inflation proofing; would it be
appropriated each time. Mr. Bartholomew understood that the
3 percent, which would be retained over time to offset
inflation, would be kept in the Permanent Fund. Under the
proposal it would be accounted for in the account that is
not principle. There is no intent to annually appropriate a
portion of this to principal, but the option of a special
appropriation would remain. Any appropriation from any
source or an appropriation of earnings within the Fund would
be principal.
Representative Croft asked if a deposit to the Fund would be
an appropriation made to the principal. Mr. Ecklund
explained that the constitutional 25 percent royalties occur
automatically under subsection (1). Subsection (2) applies
to any other appropriation to principal. Since June 30, 2003
there have been appropriations to the principal for
inflation proofing. Any appropriation, along with the 25
percent automatic deposits will help the Fund grow.
Mr. Bartholomew observed that the 25 percent automatic
deposits are between $200 and $400 million. The FY04 fiscal
year is anticipated to be about $350 million. Last year's
appropriation under the current law was $400 million.
MR. Ecklund explained that the payout is limited to five
percent of the 5-year average of the earnings. Any accruing
of profits or value that rises would be in excess of
principal. The spending appropriation limit would still be
up to 5%. A future legislature could put money back into
the principal.
Representative Croft asked if the January 30, 2004 principal
amount was with realized gain. Mr. Bartholomew clarified
that it is without both the realized and unrealized gains.
Under the proposal, both the realized and unrealized
earnings would start in the account that is not principal.
Representative Croft asked if there was an opinion by
Attorney General Renkes that the realized gains should be
included in the principal amount. Mr. Bartholomew affirmed,
result of that opinion was the realized earnings went into
available to spend account and the unrealized gains and
losses were attributed to the principal. The proposal would
go back to the definition used prior to the Attorney
General's opinion, which placed all earnings accounted for
outside of that principal.
Co-Chair Harris MOVED to report HJR 46 out of Committee with
the accompanying fiscal note. There being NO OBJECTION, it
was so ordered.
HJR 46 was REPORTED out of Committee with individual
recommendations and with two fiscal impact notes.
HOUSE JOINT RESOLUTION NO. 47
Proposing amendments to the Constitution of the State
of Alaska relating to the principal of the Alaska
permanent fund; limiting appropriations from the Alaska
permanent fund to amounts equal to that part of the
market value of the fund that exceeds the principal
based on an averaged percent of the fund market value;
and permitting appropriations from the permanent fund
only for costs of administering the fund, a program of
dividend payments for state residents, and public
education.
TAPE HFC 04 - 83, Side B
Co-Chair Williams explained that HJR 47 includes a soft
enshrinement.
Pete Ecklund explained that the first portion of HJR 47 is
the same as HJR 46. He noted that HJR 47 has a purposes
section not included in HJR 46. Co-Chair Williams observed
that the legislation was based on work by Senator
Therriault, but that he would prefer not to have a purposes
section. He felt that the legislature would be giving up the
legislature's power of appropriation and could be challenged
in court.
Mr. Ecklund observed that some of the details would be
included in a statutory bill (HB 553).
Representative Hawker questioned if community dividends
would be included. Mr. Ecklund could not respond.
Representative Hawker stated that he would continue to
pursue clarification on the inclusion of community
dividends.
Co-Chair Harris MOVED to report HJR 47 out of Committee with
the accompanying fiscal notes.
Representative Croft OBJECTED. He spoke in opposition to the
legislation. He pointed out that the legislation would not
implement POMV and would not offer protections to dividends
or guarantee additional money for public education. He
questioned what the legislation would buy.
Representative Croft WITHDREW his OBJECTION. There being NO
OBJECTION, it was so ordered.
Representative Fate expressed his concern but noted that he
would allow the bill to move.
Representative Hawker acknowledged concerns, but felt that
the bill should be forwarded.
Vice-Chair Meyer stated that he did not support the
legislation but added that he would also support its
movement.
Representative Joule questioned if it is possible to see
each proposal compared.
HJR 47 was REPORTED out of Committee with individual
recommendations and with two fiscal impact notes.
HOUSE BILL NO. 553
An Act relating to investments of the Alaska permanent
fund and to the income of and appropriations from the
Alaska permanent fund and making conforming amendments;
relating to the determination of net income of the
mental health trust fund; and providing for an
effective date.
PETE ECKLUND, STAFF TO REPRESENTATIVE WILLIAMS, observed
that the legislation is similar to HB 298, which was
previously moved from Committee. He discussed differences
between HB 298 and HB 553. He observed that Section 3 of HB
553 directs the Alaska Permanent Fund Corporation to use the
prudent-investor rule while investing that value of the Fund
in excess of principal.
BOB BARTHOLOMEW, CHIEF OPERATING OFFICER, ALASKA PERMANENT
FUND CORPORATION, DEPARTMENT OF REVENUE, further explained
that statutory directions regarding how money in excess of
principal is invested would be repealed. The statutory list
of allowed investments would apply. The authority of how to
invest the balance in excess of principal is currently in AS
37.13.145, which is being repealed. A portion of AS
37.13.145 would be brought into HB 553: (a) This section
applies to investment of fund principal and all other
amounts in the fund
Mr. Ecklund noted that the Committee might want to change
"general fund" to "public education" on line 20, page 3. He
further explained that the cost of operating the Corporation
would before the split occurred. Then not more than 50
percent could be to the General Fund [subsequently amended
by the Committee to read: "public education"] and not more
than 50 percent could be appropriated for dividends.
Section 5 is the same as HB 298.
Mr. Ecklund discussed page 4, lines 1 and 2. He noted that
the section is basically the same as language contained in
HB 298, with the exception of the: The revenue generated by
the fund's investments must be identified as the source of
the operating budget of the corporation and shall be
included in the state's operating budget under AS 37.07.
The only other difference from HB 298 was on page 5:
disclose the amount of each dividend attributable to [INCOME
EARNED BY THE PERMANENT FUND FROM] appropriations to the
permanent fund.
Representative Hawker MOVED to delete "general fund" and
insert "public education" on line 20, page 3, in order to
conform to HB 298. There being NO OBJECTION, it was so
ordered.
Mr. Ecklund noted that the effective date might need to be
changed to June 30, 2005. Co-Chair Williams noted that it
could be changed on the House Floor if necessary.
Co-Chair Harris MOVED to report HB 553 out of Committee with
the accompanying fiscal note. There being NO OBJECTION, it
was so ordered.
CSHB 553(FIN) was REPORTED out of Committee with individual
recommendations and no fiscal impact notes.
HOUSE BILL NO. 452
An Act relating to licensing and regulation of sport
fishing services operators and fishing guides; and
providing for an effective date.
DON JOHNSON, GUIDE, SOLDOTNA, spoke against HB 452. He
stated he has expressed his objection to the legislation
with the sponsor. He observed that had provided written
testimony. He felt that the legislation would place
unnecessary restrictions. He maintained that creating
similarly situated subclasses within the general sport fish
class would create illegal exclusive fishery rights. He
claimed that the legislation attempts to grant non-guided
anglers exclusive fishing rights over guided anglers. He
maintained that it is unconstitutional to create regulations
designed to establish exclusive fishery rights between
similarly situated residents.
Representative Chenault asked for further documentation
regarding groups opposing the legislation.
Mr. Johnson further argued against the legislation and
maintained that its passage would end in litigation.
HB 425 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 4:47 PM
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