05/01/2002 01:15 PM House JUD

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* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE HOUSE JUDICIARY STANDING COMMITTEE May 1, 2002 1:15 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chair Representative Jeannette James Representative John Coghill Representative Kevin Meyer Representative Ethan Berkowitz Representative Albert Kookesh MEMBERS ABSENT Representative Scott Ogan, Vice Chair COMMITTEE CALENDAR CS FOR SENATE BILL NO. 6(FIN) "An Act relating to required notice of eviction to mobile home park dwellers and tenants before redevelopment of the park." - HEARD AND HELD SENATE BILL NO. 183 "An Act relating to public interest litigants and to attorney fees; and amending Rule 82, Alaska Rules of Civil Procedure." - MOVED SB 183 OUT OF COMMITTEE CS FOR SENATE BILL NO. 278(FIN) "An Act requiring a good faith effort to purchase property before that property is taken through eminent domain; and providing for an effective date." - HEARD AND HELD SENATE JOINT RESOLUTION NO. 37 Proposing an amendment to the Constitution of the State of Alaska relating to officers and employees of the executive branch. - HEARD AND HELD PREVIOUS ACTION BILL: SB 6 SHORT TITLE:MOBILE HOME PARK EVICTION NOTICE SPONSOR(S): SENATOR(S) ELLIS Jrn-Date Jrn-Page Action 01/08/01 0013 (S) PREFILE RELEASED - 12/29/00

01/08/01 0013 (S) READ THE FIRST TIME - REFERRALS

01/08/01 0013 (S) Committee AUSTERMAN, LEMAN; 532 532 TITLE LEMAN; 203 UNAN CONSENT REFERRALS CROFT BILL: SB SHORT TITLE:ATTY FEES:APPORTIONMT/PUBLIC INT.LITIGANT SPONSOR(S): FINANCE Jrn-Date Jrn-Page Action REFERRALS 532 LEMAN; HOFFMAN, OLSON, 203 FAILED Y14 N6 4/26 CALENDAR RECONSIDERATION REFERRALS Postponed to 2:00 PM -- BILL: SB SHORT TITLE:TAKING PROPERTY BY EMINENT DOMAIN SPONSOR(S): SENATOR(S) TORGERSON Jrn-Date Jrn-Page Action REFERRALS Committee COWDERY RULES 532 MINUTE(FIN) 532 Committee WILKEN, UNAN CONSENT PASSAGE REFERRALS BILL: SJR SHORT TITLE:CONST AM: HIRING FREEZE SPONSOR(S): SENATOR(S) KELLY Jrn-Date Jrn-Page Action REFERRALS MINUTE(STA) HALFORD; THERRIAULT; 532 WILKEN, WARD, HOFFMAN, OLSON 203 Y14 N3 E3 CALENDAR CALENDAR READING RECONSIDERATION REFERRALS Recessed to Thurs. 4/18/02 -- CRAWFORD, COGHILL WITNESS REGISTER KIM OGNISTY, Intern to Senator John Torgerson Alaska State Legislature Capitol Building, Room 427 Juneau, Alaska 99801 POSITION STATEMENT: Presented 278. MICHAEL L. DOWNING, Director/Chief Engineer Division of Statewide Design & Engineering Services Department of Transportation & Public Facilities (DOT&PF) Juneau, Alaska 99801-7898 POSITION STATEMENT: Provided comments during discussion 278. JAMES CANTOR, Assistant Attorney General Transportation Section Civil Division (Anchorage) Department of Law (DOL) Anchorage, Alaska 99501-1994 POSITION STATEMENT: Provided comments during discussion 278. RICHARD "DICK" CATTANACH, Executive Director Associated General Contractors (AGC) Anchorage, Alaska 99518 POSITION STATEMENT: Provided comments during discussion 278. WILLIAM CUMMINGS, Assistant Attorney General Transportation Section Civil Division (Juneau) Department of Law (DOL) PO Box 110300 Juneau, Alaska 99811-0300 POSITION STATEMENT: Provided comments during discussion 278. GWENDOLYN HALL, Staff to Senator Pete Kelly Alaska State Legislature Capitol Building, Room 518 Juneau, Alaska 99801 POSITION STATEMENT: Presented ACTION NARRATIVE TAPE 02-58, SIDE A Number 0001 CHAIR NORMAN ROKEBERG called the House Judiciary Standing Committee meeting to order at 1:15 p.m. Representatives Rokeberg, James, Coghill, and Meyer were present at the call to order. Representatives Berkowitz and Kookesh arrived as the meeting was in progress. SB Number 0037 CHAIR ROKEBERG announced that the first order of business would be CS FOR SENATE BILL NO. 6(FIN), "An Act relating to required notice of eviction to mobile home park dwellers and tenants before redevelopment of the park." [Before the committee was the proposed House committee substitute (HCS) for 2/13/02.] Number 0109 REPRESENTATIVE COGHILL moved to adopt the proposed House committee substitute (HCS) for SB Number 0154 CHAIR ROKEBERG announced that the next order of business would be SENATE BILL NO. 183, "An Act relating to public interest litigants and to attorney fees; and amending Rule 82, Alaska Rules of Civil Procedure." Number 0201 REPRESENTATIVE COGHILL moved to report SB Number 0377 CHAIR ROKEBERG announced that the next order of business would be CS FOR SENATE BILL NO. 278(FIN), "An Act requiring a good faith effort to purchase property before that property is taken through eminent domain; and providing for an effective date." CHAIR ROKEBERG called an at-ease from 1:20 p.m. to 1:21 p.m. Number 0407 KIM OGNISTY, Intern to Senator John Torgerson, Alaska State Legislature, said on behalf of Senator Torgerson, sponsor, that SB 278 is taking" proceedings in Alaska statute. The bill introduces a "reasonable and diligent effort" clause that attempts the condemnor of land and the private landholder in an equal negotiating position. The bill is not intended to try to remove the authority of the state to acquire land by eminent domain, nor in any way complicate existing proceedings. The phrase "reasonable and diligent effort" or similar language adopted in at least 23 other states. Encouraging the state to initiate communication from an equitable bargaining position will promote productive negotiations, facilitate dialog over reasonable concerns, and encourage suggestions from all parties involved. MS. OGNISTY noted that SB is essentially the original bill. In response to a question, she indicated that the concept of SB reasonable alternatives. REPRESENTATIVE JAMES asked Mr. Harris whether he thought that the DOT&PF would now be more amenable to negotiations to begin with: "Do you think you have their attention? Do you think they would not do it that same way again, or did they do it to you more than once?" MR. HARRIS said: We've had repeat events.... We're working closer to getting their attention; we believe that this bill is really the vehicle to make sure that the attention exists with the people that we work with. We have their attention, but administrations change, internal policies change, and what we're doing is saying that this is an intelligent policy. It's clearly a policy that's acceptable in a variety of other states, and we believe that it's a reasonable one here. REPRESENTATIVE JAMES indicated that although it may be appropriate to provide for property exchanges for Native corporations, she is not convinced that it would be in the best interest of the state for everyone to have that alternative available. She asked whether there would be a way to stipulate different procedures for Native corporations. MR. TILLINGHAST noted that SB 278 is a opined that when taking private land for public purposes, it should be shown that such a process is really necessary. Senate Bill 278 will give private landholders the opportunity to seek an alternative to condemnation; if, however, a reasonable alternative cannot be arrived at, the state can say so and then proceed with condemnation. An example of an unreasonable exchange request would be an offer to exchange land worth $1,000 for land worth $100,000. REPRESENTATIVE JAMES mentioned that she has had a lot of experience with circumstances involving [taking by] eminent domain, and has concluded that oftentimes the landholders were better off after the taking, acknowledging, however, that the circumstances might be a little different when land in Southeast Alaska is at issue. She said that she did not want to see [the provisions of] SB speak to whether eminent domain filing could take place before implementation. He also asked: "Many times, go ahead and start processing the taking before they finish their negotiations with somebody because of the time elements necessary to get a project underway? Wouldn't this bill take that ability away?" Number 1900 MR. TILLINGHAST said no, it certainly wouldn't; the state can continue to file a motion to get possession. The state can continue to file a declaration of taking, which lets them take the land immediately. And in those cases, he noted, the court has an expedited procedure for the preliminary issues, where in the court asks: Is the taking necessary, and is the taking authorized. He opined that with passage of 278, reasonably and in good faith, he/she can file objections to the state's taking, with one of the objections being that the state didn't obey the law and wasn't reasonable and diligent. noted that there are already rules for ensuring that the court deal with those types of preliminary objections in an expeditious manner. He opined that a person who is not satisfied with the amount of compensation being offered for his/her land will not be able to use the provisions delay a project by even one day. He relayed that "the national experts" feel that clauses such those in 278 either. MR. TILLINGHAST said that the remedy is in Section 4, which provides that the state can be denied or dispossessed of the property if the court finds, as part of this preliminary process, that the state hadn't been reasonable with the landowner. Currently, he added, the court does not have that authority. In response to further questions, he reiterated that the issue of whether the state is being reasonable would be decided at the outset of the eminent domain proceedings. REPRESENTATIVE MEYER posited that the term "reasonable and diligent" is fairly subjective and could be hard to prove. MR. TILLINGHAST, in response, offered that this type of clause is relatively common, and that there is already quite a bit of case law that provides the courts with guidance and outlines the state's maneuverability. He explained that language in Section 2 was added with the intent of creating "an for the steps that the state must follow in order to satisfy the "reasonable and diligent effort" clause. TAPE 02-58, SIDE B Number 2377 DENNIS POSHARD, Legislative Liaison/Special Assistant, Office of the Commissioner, Department of Transportation & Public Facilities (DOT&PF), said that the DOT&PF really acquisition of property through eminent domain procedures as a very serious matter. He also said: We respect the rights and concerns of property owners. It starts right at the beginning. Our guidance to our staff - which we've given you a copy of - right at the beginning of it, it describes the rights of individual property owners as are stated by the Alaska [State] Constitution and the Fifth Amendment of the [Constitution of the United States]; and we take it very seriously. We believe that the current process works well. About 93 percent of our acquisitions, of the roughly 350 or so that we acquire in a given year, we end up acquiring through negotiated settlement - we don't even go to court or any kind of eminent domain proceedings ... - which is a very good record compared to other states. First of all, in terms of the current process, our acquisitions take place under the federal uniform Act and the Alaska Statutes. By law, we're required to offer fair market value. It's not like buying a home, where it's in your best interest to go in and maybe offer a low price in hopes that you're going to get a good deal. We're required by law to go in and offer what we truly believe, based on an appraised value, to be fair market value for the property. We go in trying to compensate the owner what they're due ... for what their property is worth. Our right-of-way manual ... stresses the importance of fairness and just compensation. There's exhaustive case law on eminent domain procedures, and, ultimately, everything we do - every appraisal, every piece of property we acquire - ends up getting reviewed by the Federal Highway Administration. For them to participate and fund the acquisition of property, we have to do it according to federal law and according to the codes that they establish. And under the existing law, a judge already ... decides the issue of authority and necessity, and eventually, if necessary, fair market value. But the way the eminent domain process works now, we can go in and we can, through eminent domain, acquire title to a piece of property through a relatively quick procedure that, as you noted in Section 4 of the bill, requires us to prove authority and necessity, which is a pretty objective standard for us to go in and prove. Number 2219 MR. POSHARD continued: I think that entering a new standard of "reasonable and diligent" into what we have to prove in the court before we can divest the property owner of their title will only result in project delays and increased costs in legal fees. That's why we believe that encourages additional litigation during the acquisition process, and ultimately it shifts some of our project dollars from asphalt and needed highway improvements into paying for attorneys to defend our takings. This bill will also result in project delays. I think you have a letter from the commissioner ... [wherein] he expresses his concern, and he uses an example of one property owner who ... could use this new language to try and delay the project, for whatever reason, ... even on a project where all of the other homeowners ... were in agreement that this is a needed project and were willing to negotiate and settle with the state for their parcels of property. Another concern for us is whether or not the expenses - ... the additional expenses - will ultimately be eligible for federal highway reimbursement. I think they will, but at least it's a concern that we have. And then [there are] a couple of other issues ... related to ... some of the testimony that you heard.... I'm not intimately familiar with the cases and some of the property takings that were brought up, but I can say that the department is definitely willing to consider the concerns of the sponsor and other interested parties that have been expressed in testimony regarding this bill, particularly as it relates to land trades and appealing a master's decision. To that end I think you have in your packet a copy of a memorandum from Mike Downing [Director/Chief Engineer] ... that deals with the delegation of authority to appeal a master's decision. MR. POSHARD concluded: I think that in past committee hearings there was testimony about a case where a master's decision was appealed. That is a very, very rare thing for us to do; and that decision did occur by the regional staff and the Department of Law, and we've sent out a memorandum taking away that delegation of authority and bringing it back into the headquarters so that the chief engineer can review those cases and go over them with the commissioner before deciding to appeal. And ... with regard to land trades, ... I think you also have a memorandum in your packet ... from Mike Downing to staff requesting them to try to come up with a policy that we can put in place that is going to deal with that particular issue and maybe give some guidance for us in terms of ... looking at land trades as maybe a first option, particularly as it relates to ANCSA lands and Native corporation land acquisitions. Number 2020 MICHAEL L. DOWNING, Director/Chief Engineer, Division of Statewide Design & Engineering Services, Department of Transportation & Public Facilities (DOT&PF), referred to a handout in members' packets titled Simplified Project Development Flow Chart. He said: We go through these steps in the same way every time. It's detailed in the ... code of federal regulations, and we have to follow these steps; we've got lots of policies and manuals that add detail, but this is generally it. It's very simple; the actual library of all the guidance is pretty big. But you can get a sense of the steps here, starting with planning, then the environmental document phase of work, which is where all of the real decisions about an alignment get made. There might be little details that we put into the final designs, such as pulling in a slope or flattening one out, that changes the acquisition requirements, but, generally speaking, the right-of- way needs get addressed in the environmental document phase.... That's also the opportunity for any affected landowner to speak up and say, "Well, we object at this point to what you're planning to do because of what it would [do to] affect our property interests." Once we've gotten an approval from the Federal Highway Administration of that document, we're bound to stay within it. We can't start working on some scope of work that's not under that approved document. We also can't acquire right-of-way in advance of that document being approved because, ... if we had that option, we could pick our favorite route, acquire the right-of- way, and then prejudice the outcome of the document by saying, "Well, we already own the land here." So under NEPA, the National Environmental Policy Act [of 1969], we're prohibited from proceeding on with the acquisitions or any other steps that would prejudice the environmental document. That means that those two functions in the development of a project ... [are] the long items, they're the long-duration activities; they become the critical activities in terms [of] how long it takes to deliver a project. MR. DOWNING said that according to his interpretation Sections 2 and 4 will expand the time it takes to acquire right- of-way. First, by adding the process that is involved in allowing the owner to propose alternative means and allowing the owner to go out and seek his/her own appraisal. He noted that currently, landowners are not prohibited from getting their own appraisal and rebutting the department's appraisal, and such is often done. Number 1917 CHAIR ROKEBERG asked why then, if that activity is currently allowed, the department objects to such provisions being put into statute. MR. DOWNING said it is because Section 4 stipulates that the owner cannot be divested of his/her property until the department has proven that it has been "reasonable and diligent", which is defined in Section 2 as "having these steps that add time." CHAIR ROKEBERG posited that following the steps in Section 2 shouldn't add time. MR. DOWNING clarified that it is in proving "reasonable and diligent" that time will be added, since the owner cannot be divested of the property until after this "new "reasonable and diligent" is passed by the Department. MR. POSHARD pointed out that although property owners can currently choose to get their own appraisal and rebut the department's case, [Section 2 of SB Number 1232 JAMES CANTOR, Assistant Attorney General, Transportation Section, Civil Division (Anchorage), Department of Law (DOL), testified via teleconference. He explained that the fiscal note only reflects increased legal costs, and doesn't reflect possible delays in a project. He said: The legal issue here is not reasonableness or reasonable alternatives. Those are already addressed in our statutes, as they are in the statutes of other states. The issue is the sword, in Section 4, of being able to stop a project. And the stop of a project occurs merely with the allegation [that] the state was (indisc. - coughing) or diligent in their effort to acquire the property. We actually are not afraid of losing that issue in the end, once the court hears it, because we think we are reasonable and diligent. But there's a timing factor. And the timing factor's particularly serious here with short construction seasons. So what I'd like to do is quickly explain the process and then explain an example of one that happened to us up here recently. MR. CANTOR paraphrased from AS (1) Every reasonable effort shall be made to expeditiously acquire real property by negotiation. (2) Real property shall be appraised before the initiation of negotiations, and the owner or a designated representative shall be given an opportunity to accompany the appraiser during the inspection of the property. (3) Before the initiation of negotiations for real property, an amount shall be established that is reasonably believed to be just compensation for the real property and that amount shall be offered for the property. In no event may the amount be less than the approved appraisal of the fair market value of the property. MR. CANTOR noted that for properties of any value, [the DOT&PF] requires two "MAI appraisals" to determine just compensation. CHAIR ROKEBERG asked, "What's the break point there?" Number 1118 MR. CANTOR replied, "I think it's in the $200,000 range." continued with his opening remarks: [The Department of Transportation & Public Facilities] attempts to negotiate starting at that appraised value. If they fail, they refer to the Department of Law to file condemnation. We [the DOL] actually attempt to negotiate before condemnation as well; sometimes just changing personalities helps resolve an issue. At that point, condemnation is filed, and the most common kind of condemnation involves the state depositing the amount of money - that appraisal amount of money - with the court, and the property owner can then withdraw that money and have it while the proceeding continues. So then the property owner is saying, "Well, sure, I have this amount of money, but I'm entitled to more," and you're arguing "more." Also at the time you deposit the money, title passes and [DOT&PF] takes possession and can start to build the project, and the rest of the legal proceeding is to determine if the property owner should get more money. However - and this is Section 4 of the bill, the "however" - ... the property owner can object to the state's authority and necessity.... As it works now, that's where the property owner says, "No, no, no, there's another alternative; you don't have to take this property." If the property owner has another idea of how the project should have been built, that's the chance for the property owner to stop the project so the state has to redesign it. The test there is, as the project crosses that particular parcel, was it designed to achieve the greatest public good with the least private injury. And until that issue gets resolved, property title does not pass, and the project does not proceed. Number 1031 MR. CANTOR said: Now, our courts set up in [Civil Rule 72 of the Alaska Rules of Civil Procedure] a series of deadlines to speed that process up so that projects can get going. However, in our experience, courts don't follow those rules, and there's a good reason for it: we're taking away somebody's constitutional right to possession of their property, and that should not be done ... lightly. And if that person needs extra time to do discovery, review documents, take depositions, have their experts review things, the courts are not going to stick to an artificial deadline; they'll give that person the time they need before we take their property from them. And so the Rule 72 deadlines don't actually define what happens in court; what happens in court is slower. After the court reaches a decision on authority and necessity, and ... if the court says, "Yes, the state had the authority and necessity," then the project can start up again and proceed to be built. And then you continue the litigation through [an] evaluation phase, and any amounts of money due the property owner are paid with 10.5 percent interest, which is higher than interest on most civil litigation - it's an extra help for the landowner.... Section 4 takes that authority and necessity objection and expands it to include an objection about reasonableness: you merely have to say the state was not reasonable and diligent, and the process stops, and you go to court and do your discovery, you take your depositions, and you figure [out] whether the state was reasonable or diligent.... The example I have is on the "Parks Highway"; this is one we went through last year. One of Anchorage's top-drawer aggressive trial lawyers interposed an objection on authority and necessity. The objection was basically that this highway, which [is] the freeway that's being built into Wasilla, didn't need to be built - instead there should be a second road, more or less parallel, in a different location. So that stopped the project. The project was set to be ... put out for bid, and it didn't get put out for bid. The objection was lodged on January 22; the court's decision on August 14 was that the state did have the authority and necessity to build the project where they designed it, but by that time, just with construction seasons, we've been delayed a year in the project. So, a proceeding that for the court system at least was relatively fast, delayed the project for a year. Number 0865 MR. CANTOR concluded: I expect to see a significant increase in this type of objection, under Section 4. The reason I expect to see it is because if I were representing the landowner, I would do it. I'd have a duty as a lawyer to zealously advocate my client's position, and I think that it's a very valuable advocacy tool to be able to allege [in order to slow the process down by stopping construction] that the state was not reasonable.... I think that gives me a very strong advocacy tool; I don't think it particularly benefits the landowner except as a negotiation tool, because, in the end, the landowner only gets just compensation and 10.5 percent interest. The penalty is to slow down the project; the penalty is not to pay the landowner more money or anything else. So all the landowner gets is the opportunity to stop the horses because the landowner feels - or at least can allege - that they weren't being treated reasonably. MR. CANTOR, referring to the fiscal note, opined that it is self-explanatory; he said that under the provisions of Section 4, it is estimated that of the current rate of condemnation rate of 7 percent, 84 percent of those would be subjected to "this type of challenge." He added that there may be an incentive "for people to push into condemnation in order to stop a project and get the upper hand in a negotiation; so we estimated what would happen if we had a 14 percent condemnation rate, and that's where those numbers come from." CHAIR ROKEBERG asked Mr. Cantor whether he would still have objections if Section 4 were removed from 278. public interest." REPRESENTATIVE MEYER asked whether it is state money or federal money that's being used when cases go to court. MR. DOWNING replied: That is federal funds, if it's a federally funded project, ... as long we stay within the parameters of the guidance that they give us. We believe that there's elements of this bill that may go outside of that; for instance, if under "(b)(2)(1)," we end up having to pay for a value in excess of what you'd arrive at through the process detailed in the code of federal regulations, then that excess expenditure would be non-participating funds. We would try hard to avoid that occurrence, but it sits out there as a possibility. MR. DOWNING, in response to a question about the fiscal note, said: We arrived at that due to the estimates that we have of how much additional litigation we would see. When you go from a challenge of authority and necessity to include reasonableness and [diligence], we believe that encourages considerably more challenges as a negotiating tool. Our experience in "authority and necessity" challenges is that they're running us in the $35,000 range per occurrence, and we don't have many occurrences today - about one a year. And we think we'll see anywhere from ... 20 to 35 - maybe even 40 - a year ... [if] this bill goes through.... So that's what we're concerned about, is that increased litigation costs.... Again, we're going to be paying for attorney fees and ... not ... new pavement, safety improvements, ... [or] the other amenities that we get out of the transportation program. MR. POSHARD pointed out that although [the DOT&PF] believes that the dollar figure in the fiscal note would likely be "federal eligible," there is no guarantee from the Federal Highway Administration that such would be the case. If the Federal Highway Administration does participate, then approximately 90 percent of the amount estimated in the fiscal note would be paid for with federal funds, leaving the state responsible for the other 10 percent. REPRESENTATIVE MEYER asked for assurance that [the DOT&PF] will institute a land exchange program. MR. DOWNING offered his assurance, adding that there is a strong demand for such a program, and that the Native corporations have a legitimate point that must be addressed. Number 0288 RICHARD "DICK" CATTANACH, Executive Director, Contractors (AGC), testified via teleconference. He said: Our primary concern is getting the jobs out in a timely manner, and we're very concerned about the potential on this bill. We do acknowledge and are aware of the problem that Sealaska had, but I'm not sure this is the best solution to deal with that issue.... But I'm primarily concerned about Section 2(b)(2), because, imagine if you will, a hypothetical: let's assume that we want to extend the highway around Merrill Field - the Glenn Highway - and [the DOT&PF] is proceeding with that, and an antidevelopment group, if there is such a thing in Alaska, buys a piece of property, and they can't reach an agreement with [the DOT&PF], and they offer an alternative; they suggest the [DOT&PF] tunnel under the existing roadway from Bragaw all the way to (indisc.). Okay, that's an alternative, and [AS Cantor, said that the language therein is identical to language in the "model procurement code"; in other words, "we're already doing that. He said that opinion lies in the remedies available. He elaborated: Under the uniform eminent domain code, the state ... is put to the test, just like under this statute, but under the eminent domain code, if the state has gone through and acquired appraisals and has negotiated with the property owner and has offered him fair market value - ... no less than this approved appraisal that the statute called for - then that's prima facie evidence that the state has been reasonable and acting in good faith. The language that we have in the [proposed] statute in ... Sections 2 and 3 sets up quite a different standard for the state to follow, and allows a number of places for people to actively get in and litigate and what not, even though it's been in full compliance ... with the law already. MR. CUMMINGS indicated that comments pertaining to "Section 306 of the model code" say: This section requires that the condemnor attempt negotiations, as defined in Section 307, only to the extent reasonably necessary to satisfy the good faith effort requirement. An inflexible negotiation rule could well prove a source of unnecessary litigation, and unless carefully defined in a requirement, could provide an opportunity for dilatory tactics by property owners. MR. CUMMINGS opined that the aforementioned is precisely what Sections 2, 3, and 4 would do: enhance the opportunity for litigation and result in delays, which costs the state dearly in terms of time, money, and attorney fees. He also opined that there is a big difference between the remedies in those proposed by SJR Number 0305 GWENDOLYN HALL, Staff to Senator Pete Kelly, Alaska State Legislature, said on behalf of Senator Kelly, sponsor, that his intent in introducing SJR the constitution one line at a time." Mr. Kreinheder posited that although Representative Coghill was probably being facetious when he said that, his comment did contain a kernel of truth. Mr. Kreinheder said he is offering that quote in the context of questioning whether the concept embodied in rises to the level of deserving to be a constitutional amendment. He went on to say: I'm not going to get into a lot of detail on the pros and cons or merits of a hiring freeze; we debated that at some length in [HSTA] and Representatives James and Coghill were familiar with that. The Knowles Administration did do a hiring freeze in 1999 when oil prices dropped below $10 a barrel. I don't recall exactly how long it was in effect - I believe it was somewhat in excess of six months. There were some modest savings, but we did that in response to a short-term problem, which was oil prices dropping precipitously. [In] our current situation, ... our revenue problem is not a short-term problem - oil prices are higher than average right now. We've got a long-term problem, and it's simply not realistic to have a hiring freeze in effect for the next five or ten years and expect that to solve our problem. ... A number of other states have done hiring freezes or [are] in the middle of it because of the national recession and the declines in their tax revenues and so forth. But, again, they're looking at a short-term problem, and those hiring freezes will be lifted when the economy picks back up and their revenues return to normal. The people have referred to the hiring freeze as a management tool; that's true, but I would characterize it as management by chance, or management by meat axe really, as opposed to a precision type of tool, because if you want to reduce the budget, our view is that the legislature should decide where they want it reduced and do that. With a hiring freeze, it is just chance or luck ... which employees will leave their jobs and which positions will end up vacant. Number 0632 MR. KREINHEDER continued: I just checked with ... Sharon Barton [Director, Division of Personnel, Department of Administration] and she tells me that ... their preliminary latest estimate for annual state turnover is between 11 and 12 percent; in other words, 11 or 12 percent of state employees leave their jobs in any one year.... And there's approximately 16,000 state employees now, not counting the university, so if we had a hiring freeze in effect for a year and there were no exceptions to it, we'd be looking at something in excess of 1,600 positions being left vacant, with the corresponding impacts on state services. And while you could argue that it's more fair or better for the employees to have hiring freeze than layoffs, the effect on state services isn't going to be any different than if you fired 1,600 state employees. And, as you can imagine, those would be some significant impacts. One thing we hadn't mentioned in prior testimony: speaking with the representative of the university, her understanding is that this [constitutional] amendment, unless there were some exception, would apply to the university as well.... The [constitutional] amendment does say, "in accordance with law"; however, it does not provide any exceptions ... for public safety or health issues such as [Alaska] State Troopers, or child protection/child abuse workers, correctional officers, and so forth. So that's one concern, is that it appears to be, on the face of it, a blanket requirement that the ... executive branch could not hire any employees or fill any vacancies in the executive branch. Perhaps that would be clarified by statute, but there's certainly no guarantee of that. Number 0787 MR. KREINHEDER concluded: [The] Department of Law raised some legal concerns about this amendment; we discussed those in [HSTA]. Just briefly, there has been case law, nationally, that a constitutional amendment that significantly changes the balance of power between the executive branch, legislative branch, or the court system, depending on how far it goes, if it goes too far, the courts have held that cannot be done by a constitutional amendment because it's one branch of the government imposing its will on the other, and that it would have to be done in a constitutional convention instead. Whether this [constitutional] amendment rises to that level is debatable, it's not black and white, but the question does exist, since it's taking one of the governor's powers - basic powers, which is for the executive branch to hire and appoint employees - and restricting that and giving the legislature that power. MR. KREINHEDER, in response to a question, said that he was referring to case law from California and elsewhere, and noted that he could provide the committee with further information later. In response to another question, he said that even if an exception for Department of Public Safety employees were included, the administration would still oppose SJR require the executive branch to implement a hiring freeze. She noted that SJR deficit problem, it is merely intended as a tool to help decrease the growth of state government. She pointed out that 1,200 new state positions have been created since 1995. She observed that although the legislature can appropriate money to individual departments, it has no say in how those funds are actually spent once received by the departments. CHAIR ROKEBERG surmised that if SJR ADJOURNMENT Number 1112 There being no further business before the committee, the House Judiciary Standing Committee meeting was adjourned at 3:10 p.m.

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