Legislature(1995 - 1996)
02/20/1995 01:34 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
February 20, 1995
1:30 P.M.
TAPE HFC 95-23, Side 2, #000 - end.
TAPE HFC 95-24, Side 1, #000 - end.
TAPE HFC 95-24, Side 2, #000 - 481.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 1:34 p.m.
PRESENT
Co-Chair Hanley Representative Kohring
Representative Brown Representative Navarre
Representative Grussendorf Representative Parnell
Representative Kelly Representative Therriault
Representative Martin
Representative Mulder
Co-Chair Foster was absent from the meeting.
ALSO PRESENT
Rod Mourant, Staff, Representative Kott; Mike McGee,
Director, Permanent Fund Dividend Division, Department of
Revenue; Mike Greany, Director, Legislative Finance
Division; Randy Welker, Legislative Auditor, Legislative
Audit Division.
SUMMARY
HB 4 An Act relating to absences from the state for
purposes of determining residency under the
permanent fund dividend program; and providing for
an effective date.
CSHB 4 (STA) was reported out of Committee with a
"do pass" recommendation and with a zero fiscal
note by the Department of Revenue, dated
HB 183 An Act extending the requirements of preliminary
evaluation, notice, and prior legislative approval
of certain lease-purchase agreements to include
proposed improvements to real property; and
providing for an effective date.
HB 183 was HELD in Committee for further
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discussion.
HJR 5 Proposing amendments to the Constitution of the
State of Alaska relating to terms of legislators.
HJR 5 was HELD in Committee for further
discussion.
HOUSE BILL NO. 183
"An Act extending the requirements of preliminary
evaluation, notice, and prior legislative approval of
certain lease-purchase agreements to include proposed
improvements to real property; and providing for an
effective date."
Co-Chair Hanley, sponsor of HB 183, gave a brief overview of
the legislation. He referred to problems past legislatures
have experienced with certificates of participation. He
emphasized that past legislatures have enacted laws to
restrict financing and require legislative approval for
acquisition by issuance of certificates of participation.
Co-Chair Hanley noted plans by the Alaska Psychiatric
Institute (API) to use certificates of participation to
finance a $63.0 million dollar facility. The Legislature
approved funding for the constriction of a $28.0 million
dollar facility in the FY 95 operating budget. He observed
that current statutes address "acquisition" of facilities
not "building" of facilities. The legal argument is that
certificates of participation do not represent general
obligation debt to the State. Debt on certificates of
participation is secured by the asset. He noted that if a
new API building is expanded, beyond the $28.0 million
dollars authorized by the legislature, an asset could be
claimed in which the State has invested. He emphasized that
there is no limit on spending if certificate of
participation financing is used.
Co-Chair Hanley explained that the legislation will address
the problem by adding "or improvement" to the property to
prevent improvement through lease-purchase of real property.
Representative Brown queried if the addition of
"improvement" would address the intent to prevent
construction of new facilities without legislative
authorization.
Representative Parnell agreed that the addition of
"construct" would further modify the legislation and
alleviate confusion. He concluded that the legislation as
written would address the problem. He explained that the
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underlying land is real property. The legislation requires
legislative authorization for improvement of real property.
Any building on real property would constitute improvement
of the property.
Representative Martin provided members with Amendment 1
(Attachment 1). The amendment would limit the authority of
the Alaska Housing Finance Corporation (AHFC) to use money
or another asset of the corporation to acquire, construct,
improve, or repair a building for the corporation's use and
occupancy. Representative Martin observed that AHFC
approached the Legislative Budget and Audit Committee with
the concept of constructing a new building. He observed
that the Legislative Budget and Audit Committee does not
have the authority to approve total appropriations for long
range contracts. He pointed out that a majority of the
Legislature does not currently approve of this budget item.
He observed that AHFC has contracted out for an architecture
design of a new building. Land has not yet been purchased.
Representative Martin accentuated that all Requests For
Proposal's for lease or purchase of office space are subject
to annual appropriation by the legislature. He emphasized
that the amendment would close another loop hole and send a
message to AHFC.
Representative Brown agreed with Representative Martin's
concerns, but pointed out the broad nature of the amendment.
She questioned if AHFC's ability to repair existing
facilities should be restricted. She asked if an
appropriation through the budget process would be an
authorization.
Representative Martin argued in favor of retaining "repair".
He noted that a repair could be a major face lift.
Representative Therriault asked for further clarification of
the last sentence on line 11 of the amendment: "For
purposes of this subsection, an appropriation for the
proposed acquisition, construction, improvement, or repair
does not constitute approval of the project."
RANDY WELKER, LEGISLATIVE AUDITOR, LEGISLATIVE AUDIT
DIVISION
explained that the language was drafted by the Division of
Legal Services. He noted that the amendment was drafted
with the intention of implementing the strictest standard
requiring legislative approval. He observed that in the
leasing section of the procurement code, for the purpose of
a lease, an appropriation does constitute approval. In the
lease financing section of existing statute an appropriation
does not constitute approval. Separate legislative approval
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is required by law.
MIKE GREANY, DIRECTOR, LEGISLATIVE FINANCE DIVISION pointed
out that language contained in the front section of the
operating budget provides that all funding received by AHFC
is appropriated to AHFC for whatever purpose their statutes
allow.
Mr. Greany clarified that any project exceeding $25.0
thousand dollars which continues beyond a year is considered
a capital project.
Mr. Welker noted that the amendment is very restrictive.
The Alaska Housing Finance Corporation's ability to make
repairs on their existing facility would be limited. He
observed that elimination of "repair" would allow an
appropriation to constitute approval for a repair.
Representative Navarre spoke in support of allowing repairs
without legislative approval. He acknowledged that AHFC
should be required to obtain legislative approval for new
construction.
Representative Therriault questioned if two pieces of
legislation would be needed to allow new construction by
AHFC if HB 183 is enacted.
Mr. Welker stated that appropriation legislation would not
be enough. Authorizing legislation would be needed.
Representative Therriault queried if authorizing legislation
would suffice without a separate appropriation.
Representative Brown did not think that appropriation
legislation would be needed separate from authorizing
legislation. She pointed out that the legislation will not
be adopted in time to prevent construction of the project
currently being proposed by AHFC.
Representative Martin asserted that two bills would be
necessary. Co-Chair Hanley pointed out that lease-purchases
are handled differently than actual construction. New
building construction does not require authorization other
than in an appropriation bill. Representative Navarre
agreed that absent specific statutory prohibition against
construction an appropriation is sufficient.
Co-Chair Hanley asked if an appropriation from the
legislature is necessary for any of the AHFC's functions.
He concluded that if statutes require an appropriation from
the legislature for any of AHFC's functions then an
authorization law and appropriation would be required.
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Mr. Welker pointed out that AHFC can use its general bonding
authority to generate bond proceeds which are not subject to
an appropriation in order to raise capital. The amendment
clarifies that AHFC cannot use their general bonding
authority to acquire facilities.
Representative Navarre observed that another housing market
down-turn could result in AHFC's control of houses needing
repair before resale.
Representative Martin referred to the purchase of the
Department of Environmental Conservation building. Co-Chair
Hanley reiterated the need to close loop holes in the
statutes.
Representative Therriault concluded that AHFC would not need
a separate line item appropriation in addition to
authorizing legislation. Co-Chair Hanley agreed with his
conclusion.
Representative Parnell pointed out that an improvement to
property is a repair. He asked if there are other public
agencies or quasi public corporations like AHFC that have
similar bonding authority which should be addressed.
Mr. Welker noted that the legal definition of "improve"
includes "to increase the value or good qualities of, mend,
repair".
Representative Brown suggested that the Alaska Industrial
Development and Export Authority (AIDEA) and the Alaska
Railroad Corporation may be in similar situations. Mr.
Welker added that certain aspects of the University of
Alaska's operations are not subject to the Executive Budget
Act.
Representative Brown observed AHFC's duties and powers are
the subject of HB 189: "An Act requiring that, in addition
to its operating budget, all activities of the Alaska
Housing Finance Corporation are subject to the Executive
Budget Act." She suggested that the amendment be addressed
in HB 189.
Representative Martin acknowledged that HB 189 is more
inclusive and resolves the long range problem. He noted
that if AHFC pursues the construction project an increase in
the FY 96 or FY 97 AHFC budget will be needed.
Representative Brown observed that the amendment is not
retroactive. Representative Martin emphasized that the
amendment would send a message to AHFC. Co-Chair Hanley
suggested that the Legislative Budget and Audit Committee
made the Legislature's position clear.
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Representative Kohring pointed out that AHFC has received
the message that there is concern about proceeding with the
construction. He assured members that AHFC will look hard
at putting the breaks on the project if the Legislature
disapproves. He noted that AHFC is currently determining
the ramifications of cancelling the contracts.
Representative Martin asserted that AHFC did not provide the
legislature with all the available facts. He reiterated the
need to close a loop hole regarding lease-purchases.
Representative Kohring asked for a list of other state
agencies which are not subject to the Executive Budget Act
in regards to bonding authority.
(Tape Change, HFC 95-24, Side 1)
Representative Kohring stressed that AHFC felt that they
could save the State money. He emphasized that AHFC's
intent was good.
Representative Navarre referred to the 5 percent housing
loan program initiated by AHFC.
Amendment 1 was held.
HB 183 was HELD in Committee for further discussion.
HOUSE JOINT RESOLUTION NO. 5
Proposing amendments to the Constitution of the State
of Alaska relating to terms of legislators.
Representative Therriault, sponsor of HJR 5, gave a brief
overview of the legislation. He noted that the resolution
is designed to bring term limits to the State of Alaska
Legislature. He observed that the legislation treats the
House and Senate the same. Members of each body would be
limited to twelve regular sessions of continuous service
before being required to depart for two regular sessions.
He noted that discussions had suggested that term limits
from 8 to 16 years be adopted. He observed that "regular
sessions" served will be used to calculate "sessions"
served. A person could not serve more than 12 consecutive
regular legislative sessions. They could not hold office
again until two regular legislative sessions have elapsed.
Representative Therriault observed that section 2 clarifies
that special sessions do not count toward the 12 regular
sessions. He added that the House Judiciary Committee
amended the legislation to allow a Senate term to be
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completed if the 12 years fell in the middle of a term.
Representative Therriault noted that a member could be
appointed to serve before, during or after they run for
elective office. The legislation states that an appointment
to fill a vacancy shall not be considered when tabulating
tenure, unless it is the result of resignation from one
House to fill the appointment in the other House.
Representative Navarre expressed support for HJR 5. He
preferred an immediate effective date. He suggested that
House terms be staggered terms of four years. He emphasized
the high expense and time required to ensure a successful
election.
In response to a question by Representative Mulder,
Representative Therriault clarified that any combination of
House and Senate service that equals 12 consecutive years
would trigger the cut off, unless the individual is half way
through a Senate term, in which case they would finish the
term.
Representative Therriault stressed problems associated with
an immediate effective date. He noted that the resolution
would not be voted on untill the next election. He
emphasized that members could be immediately cut off if they
have served 12 years, even if they were just elected.
Representative Kelly questioned if a series of plans could
be put on the ballot. Representative Therriault stated that
a resolution could not list different options. He did not
feel that a member's effectiveness would be limited by the
knowledge that they would not be allowed to run during the
next election. He stressed that they could run after the
two year waiting period. He emphasized that the intent is
to try and reduce the incumbent's advantage.
Representative Brown suggested that the resolution be
effective two years after being adopted during a general
election. She questioned the necessity of creating an
exception for members being appointed to another House. She
asked how appointments would be counted. Representative
Therriault clarified that appointments would not be count
toward the 12 years. He clarified that the intent in
providing an exception for members who resign from one House
to fill the appointment in the other House, is to prevent
the appointment from being interpreted as a break in service
that would invalidate the prior time served.
Representative Navarre noted the high percentage of turnover
among House members.
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Representative Martin emphasized that the resolution will
result in public debate. He emphasized that the
constitutional amendment needs to be clearly stated. He
observed that the National State Legislative Conference
recommends term limits of 12 years.
Representative Therriault agreed that the Alaska State
Legislature has a healthy turnover. He emphasized that the
legislation is designed for the exception. He argued that a
member can effectively serve their district in 12 years. He
reiterated that a member can run again after the two year
break.
In response to a question by Representative Parnell,
Representative Therriault observed that the United States
Supreme Court has agreed to take under consideration the
State of Arkansa's Supreme Court ruling that the State could
not restrict eligibility of federal candidates.
Representative Kelly stated his preference for the addition
of "in one body" after "consecutively" on page 1, line 9;
and the change from "12" to "8". The amendment would allow
a person to serve 8 years in the House and then 8 years in
the Senate without a break.
Co-Chair Hanley clarified that a person would have to sit
out two years before serving again in the same body.
Representative Brown asked if subsection (c) on page 2 would
be affected. Co-Chair Hanley pointed out that the amendment
as suggested would allow a member to return to the House
after serving 8 years in the Senate and 8 years in the
House. A member could continue to serve if they switched
bodies every 8 years. Representative Kelly clarified his
intent that a member be allowed to serve eight years in the
House then 8 years in the Senate, and then be required to
sit out two years before returning to service. Co-Chair
Hanley suggested that the amendment would need further
drafting.
Representative Martin reiterated that constitutional
amendments should be short and clear.
Representative Therriault pointed out that members that did
not move to the Senate would be limited to eight years in
the House. He argued in favor of the original bill. Co-
Chair Hanley expressed support for Representative
Therriault's original version.
Representative Kelly argued that the right of the people to
elect the representative of choice should be protected. He
asserted that the needs of the district must be considered.
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Representative Therriault noted that 22 states have passed
initiatives to limit the terms of their congressional
members. Of those 22 all but 2 (Alaska and North Dakota)
have also enacted term limits for their state
representatives.
HJR 5 was HELD in Committee for further discussion.
(Tape Change, HFC 95-24, Side 2)
HOUSE BILL NO. 4
"An Act relating to absences from the state for
purposes of determining residency under the permanent
fund dividend program; and providing for an effective
date."
ROD MOURANT, STAFF, REPRESENTATIVE KOTT maintained that HB 4
will remedy a problem caused in a recent court ruling. The
ruling disallowed Permanent Fund Dividend (PFD) payments to
spouses of PFD recipients while accompanying an eligible
spouse out of state on an allowable absence. The
legislation would allow individuals who accompany an
eligible spouse out of state on an allowable absence to
retain their eligibility for a PFD if that was the only
reason that the spouse was disallowed. He explained that
the legislation applies retroactively to January 1, 1994.
This was the first time the Permanent Fund Dividend Division
disallowed dividends for that reason. He cited two cases
involving local residents. He noted that there is a $600.0
hundred dollar current year fiscal note accompanying the
legislation. The fiscal note will fund costs associated
with contacting individuals that have not repealed their
denial.
Representative Brown noted that the legislation contains
language similar to HB 392, which was introduced during the
Eighteenth Legislative Session. She noted that some
provisions of HB 392 were enacted as regulations.
MIKE MCGEE, CHIEF OF PFD OPERATIONS, PERMANENT FUND DIVIDEND
DIVISION, DEPARTMENT OF REVENUE explained that the court
ruled that the regulation was in conflict with existing
statute. The law stated that the Division could not use the
residency of a spouse as the primary source of an
individual's eligibility. The intent is to separate
absences from residency.
Representative Mulder asked for further clarification of the
insertion of "maintains and demonstrates at all times an
intent" and deletion of "intends" on line 27 and 18 on page
2. Mr. McGee explained that the change was made to be
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consistent with the definition of "residency" in existing
statute.
Representative Brown noted that HB 392 proposed sixteen
allowable absences. She observed that HB 4 contains eight
allowable absences. Mr. Mourant explained that only the
existing allowable absences were included due to the
complexity of the issue.
Co-Chair Hanley noted that the legislation does not specify
that absences for educational purposes must be due to full-
time participation. Mr. McGee stated that regulations
specify full-time status of good standing must be
maintained.
Representative Martin noted that PFD checks were denied to
many students in the previous year. Mr. McGee discussed
reasons students were denied their dividends.
Representative Navarre noted that many students were
enrolled to vote on their campuses during the last
presidential election. Out-of-state voter registration
challenges their intent to return to Alaska.
In response to a question by Representative Navarre, Mr.
McGee noted that dividends will be paid from the subsequent
year's permanent fund dividend. Payments made as a result
of the legislation would be identified with the dividend
payment.
Representative Brown observed that HB 392 would have allowed
absences while "attending a special education program to
assist in the treatment of learning or physical disabilities
or treatment of mental disorders if attendance is
recommended by a licensed physician, psychologist, physical
therapist, or the commissioner of eduction; attending full-
time technical training as part of a career education
program recognized by the Alaska commission on Postsecondary
Education; and attending full-time an academic institution,
seminar, or other program for continuing professional
educational development, including a sabbatical, legal, or
accounting program, recognized by the Alaska Commission on
Postsecondary Education." She noted that the Department of
Revenue requested the changes contained in HB 392.
Mr. Mourant observed that the legislation was drafted
independent of the Department of Revenue. He noted that
item eight is the only item not contained in existing
statute, AS 43.23.095 (8).
Mr. McGee noted that the absences quoted by Representative
Brown are included in regulation. Mr. McGee provided
members with a copy of the regulations, 15 AAC 23.163
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(Attachment 2).
Representative Kohring spoke in support of HB 4. In
response to a question by Representative Kohring, Mr. McGee
reiterated that funding will be paid out of the over
estimation of this year's dividend or off the top of next
year's dividend payment. He added that individuals whose
1992 and 1993 PFD's were denied for other reasons and their
denial overturned by appeal would also be paid.
Representative Mulder MOVED to report CSHB 4 (STA) out of
Committee with individual recommendations and with the
accompanying fiscal note.
CSHB 4 (STA) was reported out of Committee with a "do pass"
recommendation and with a zero fiscal note by the Department
of Revenue, dated 2/1/95.
ADJOURNMENT
The meeting adjourned at 3:40 p.m.
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