Legislature(1995 - 1996)

02/01/1996 08:00 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
             HOUSE STATE AFFAIRS STANDING COMMITTEE                            
                        February 1, 1996                                       
                           8:00 a.m.                                           
 MEMBERS PRESENT                                                               
 Representative Jeannette James, Chair                                         
 Representative Scott Ogan, Vice Chair                                         
 Representative Joe Green                                                      
 Representative Ivan Ivan                                                      
 Representative Brian Porter                                                   
 Representative Caren Robinson                                                 
 Representative Ed Willis                                                      
 MEMBERS ABSENT                                                                
 All members present.                                                          
 COMMITTEE CALENDAR                                                            
 HOUSE BILL NO. 363                                                            
 "An Act requiring banks to pay interest on money in reserve                   
 accounts held in connection with mortgage loans."                             
      - HEARD AND HELD                                                         
 * HOUSE BILL NO. 422                                                          
 "An Act prohibiting the adoption of regulations by an agency of the           
 executive branch of state government, annulling all regulations               
 adopted by an agency of the executive branch, repealing provisions            
 of the Administrative Procedure Act, and relating to additional               
 legislation to carry out the purposes of this Act; and providing              
 for an effective date."                                                       
      - HEARD AND HELD                                                         
 * CS FOR HOUSE JOINT RESOLUTION NO. 49(STA)                                   
 Proposing amendments to the Constitution of the State of Alaska               
 creating a highway fund from state taxes on fuel used for the                 
 propulsion of highway or road use motor vehicles.                             
      - CSHJR 49(STA) PASSED OUT OF COMMITTEE                                  
 HOUSE BILL NO. 368                                                            
 "An Act relating to election campaigns, election campaign                     
 financing, the oversight and regulation of election campaigns by              
 the Alaska Public Offices Commission, the activities of lobbyists             
 that relate to election campaigns, and the definitions of offenses            
 of campaign misconduct; and providing for an effective date."                 
      - SCHEDULED BUT NOT HEARD                                                
 SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 317                                     
 "An Act relating to election campaigns, election campaign                     
 financing, the oversight and regulation of election campaigns by              
 the Alaska Public Offices Commission, the activities of lobbyists             
 that relate to election campaigns, and the definitions of offenses            
 of campaign misconduct; and providing for an effective date."                 
      - SCHEDULED BUT NOT HEARD                                                
 (* First public hearing)                                                      
 PREVIOUS ACTION                                                               
 BILL:  HB 363                                                               
 SHORT TITLE: INTEREST ON MORTGAGE ESCROW ACCTS                                
 SPONSOR(S): REPRESENTATIVE(S) BUNDE                                           
 JRN-DATE      JRN-PG            ACTION                                        
 12/29/95      2361    (H)   PREFILE RELEASED                                  
 01/08/96      2361    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/08/96      2361    (H)   STATE AFFAIRS, L&C, FINANCE                       
 01/18/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 01/18/96              (H)   MINUTE(STA)                                       
 01/23/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 02/01/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 BILL:  HB 422                                                               
 SHORT TITLE: ANNUL ALL ADMIN. REGS; REPEAL APA                                
 SPONSOR(S): REPRESENTATIVE(S) VEZEY, Foster                                   
 JRN-DATE      JRN-PG            ACTION                                        
 01/16/96      2454    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/16/96      2454    (H)   STATE AFFAIRS, JUDICIARY                          
 02/01/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 BILL:  HJR 49                                                               
 SHORT TITLE: DEDICATED HIGHWAY FUND                                           
 SPONSOR(S): REPRESENTATIVE(S) JAMES                                           
 JRN-DATE      JRN-PG            ACTION                                        
 05/16/95      2238    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 05/16/95      2239    (H)   STATE AFFAIRS, TRANSPORTATION, FINANCE            
 02/01/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 BILL:  HB 368                                                               
 SHORT TITLE: ELECTION CAMPAIGN FINANCE REFORM                                 
 SPONSOR(S): REPRESENTATIVE(S) JAMES                                           
 JRN-DATE      JRN-PG            ACTION                                        
 12/29/95      2362    (H)   PREFILE RELEASED                                  
 01/08/96      2362    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/08/96      2362    (H)   STA, JUDICIARY, FINANCE                           
 01/25/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 01/30/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 02/01/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 BILL:  HB 317                                                               
 SHORT TITLE: ELECTION CAMPAIGN FINANCE REFORM                                 
 SPONSOR(S): REPRESENTATIVE(S) FINKELSTEIN                                     
 JRN-DATE      JRN-PG            ACTION                                        
 04/21/95      1427    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 04/21/95      1427    (H)   STATE AFFAIRS, JUDICIARY, FINANCE                 
 01/08/96      2358    (H)   SPONSOR SUBSTITUTE INTRODUCED-REFERRALS           
 01/08/96      2358    (H)   STATE AFFAIRS, JUDICIARY, FINANCE                 
 01/25/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 01/30/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 02/01/96              (H)   STA AT 08:00 AM CAPITOL 102                       
 WITNESS REGISTER                                                              
 REPRESENTATIVE CON BUNDE                                                      
 Alaska State Legislature                                                      
 State Capitol, Room 108                                                       
 Juneau, Alaska 99801-1182                                                     
 Telephone:  (907) 465-4843                                                    
  POSITION STATEMENT:   Sponsor of HB 363.                                     
 RICHARD ENBERG, Executive Vice President                                      
 First National Bank of Anchorage                                              
 646 West 4th Avenue                                                           
 Anchorage, Alaska 99510                                                       
 Telephone:  (907) 265-3563                                                    
  POSITION STATEMENT:   Provided testimony in opposition to HB 363.            
 ROBIN WARD, President                                                         
 Summit Title Insurance Agency Ltd.                                            
 341 West Tudor Road                                                           
 Anchorage, Alaska 99503                                                       
 Telephone:  (907) 562-3770                                                    
  POSITION STATEMENT:   Provided testimony in opposition to HB 363.            
 GARY ROTH, President                                                          
 Denali State Bank                                                             
 119th North Cushman Street                                                    
 Fairbanks, Alaska 99701                                                       
 Telephone:  (907) 456-1400                                                    
  POSITION STATEMENT:   Provided testimony in opposition to HB 363.            
 HEATHER BOSTLEY                                                               
 Alaska Public Interest Research Group                                         
 507 "E" Street                                                                
 Anchorage, Alaska 99501                                                       
 Telephone:  (907) 278-3661                                                    
  POSITION STATEMENT:   Provided testimony in support of HB 363.               
 LUCILLE STIETZ, Senior Vice President                                         
 National Bank of Alaska                                                       
 P.O. Box 107025                                                               
 Anchorage, Alaska 99510                                                       
 Telephone:  (907) 257-3442                                                    
  POSITION STATEMENT:   Provided testimony on HB 363.                          
 LISA BELL, Senior Vice President                                              
 Alaska Federal Savings Bank                                                   
 2094 Jordan Avenue                                                            
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 790-5104                                                    
  POSITION STATEMENT:   Provided testimony on HB 363.                          
 JOE RYAN, Legislative Assistant                                               
    to Representative Al Vezey                                                 
 State Capitol, Room 216                                                       
 Juneau, Alaska 99801-1182                                                     
 Telephone:  (907) 465-3719                                                    
 POSITION STATEMENT:  Provided sponsor statement for HB 422.                   
 JOHN LINDBACK, Chief of Staff                                                 
 Office of the Lieutenant Governor                                             
 P.O. Box 110015                                                               
 Juneau, Alaska 99811-0015                                                     
 Telephone:  (907) 465-3520                                                    
  POSITION STATEMENT:   Provided testimony in opposition to HB 422.            
 DEBORAH BEHR, Assistant Attorney General                                      
 Legislation and Regulations Section                                           
 Civil Division                                                                
 Department of Law                                                             
 P.O. Box 110300                                                               
 Juneau, Alaska 99811-0300                                                     
 Telephone:  (907) 465-3600                                                    
  POSITION STATEMENT:   Provided testimony in opposition to HB 422.            
 GERALD NEWTON                                                                 
 2616 West Lancelot Drive                                                      
 North Pole, Alaska 99705                                                      
 Telephone:  (907) 488-4839                                                    
  POSITION STATEMENT:   Provided testimony in opposition to HB 422.            
 BARBARA COTTING, Legislative Assistant                                        
    to Representative Jeannette James                                          
 State Capitol, Room 102                                                       
 Juneau, Alaska 99801-1182                                                     
 Telephone:  (907) 465-3743                                                    
  POSITION STATEMENT:   Provided sponsor statement for HJR 49.                 
 SAM KITO III, Legislative Liaison/Special Assistant                           
 Office of the Commissioner                                                    
 Department of Transportation and Public Facilities                            
 3132 Channel Drive                                                            
 Juneau, Alaska 99801-7898                                                     
 Telephone:  (907) 465-3904                                                    
  POSITION STATEMENT:   Provided testimony in support of HJR 49.               
 ROBERT EAKMAN, General Manager                                                
 Alaska Independent Truckers Association                                       
 P.O. Box 220366                                                               
 Anchorage, Alaska 99522                                                       
 Telephone:  (907) 276-1934                                                    
  POSITION STATEMENT:   Provided testimony in support of HJR 49.               
 JACK WIEGEL, President                                                        
 Alaska Independent Truckers Association                                       
 7227 Bosel                                                                    
 Anchorage, Alaska 99507                                                       
 Telephone:  (907) 344-8939                                                    
  POSITION STATEMENT:   Provided testimony in support of HJR 49.               
 TED DEBOER, Alaska Operations Manager                                         
 Totem Ocean Trailer Express                                                   
 2511 Tidewater Road                                                           
 Anchorage, Alaska 99501                                                       
 Telephone:  (907) 265-7211                                                    
 POSITION STATEMENT:  Provided testimony in support of HJR 49.                 
 DUANE SAULNIER                                                                
 P.O. Box 90500                                                                
 Anchorage, Alaska 99509                                                       
 Telephone:  (907) 344-8799                                                    
  POSITION STATEMENT:   Provided testimony in support of HJR 49.               
 BLAINE GHAN, Anchorage Terminal Manager                                       
 Lynden Transport                                                              
 3027 Rampart Drive                                                            
 Anchorage, Alaska 99501                                                       
 Telephone:  (907) 276-4800                                                    
  POSITION STATEMENT:   Provided testimony in support of HJR 49.               
 KYM SWIFT                                                                     
 P.O. Box 202087                                                               
 Anchorage, Alaska 99520                                                       
 Telephone:  (907) 276-7648                                                    
  POSITION STATEMENT:   Provided testimony in opposition to HJR 49.            
 ACTION NARRATIVE                                                              
 TAPE 96-08, SIDE A                                                            
 Number 0000                                                                   
 The House State Affairs Committee was called to order by Chair                
 Jeannette James at 8:00 a.m.  Members present at the call to order            
 were Representatives James, Ivan, Porter, and Willis.  Members                
 absent were Representatives Ogan, Green, and Robinson.                        
 HB 363 - INTEREST ON MORTGAGE ESCROW ACCTS                                  
 The first order of business to come before the House State Affairs            
 Committee was HB 363.                                                         
 CHAIR JAMES called on Representative Con Bunde, sponsor of HB 363.            
 REPRESENTATIVE CON BUNDE said he appreciated the House State                  
 Affairs Committee for hearing HB 363 again.  He said additional               
 research had been done to determine the actual cost to service an             
 account, and the amount of money made in interest on accounts held            
 in escrow.  However, the information and numbers were not available           
 today.  He mentioned the concern regarding an increase in mortgage            
 prices according to testimony from the industry.  He alleged there            
 were people who serviced mortgages and did not have a piece of the            
 action so they were obviously making a profit from the escrow                 
 account.  He also stated there were people who kept the mortgage              
 and serviced it doubling their profits.  Representative Bunde                 
 further stated the Real Estate Settlement Procedures Act (RESPA)              
 law was passed in 1970 prohibiting lenders and mortgage servicers             
 from requiring consumers to maintain more than an extra two months'           
 cushion in their accounts.  He alleged this was widely ignored.  He           
 read the following statement into the record.                                 
 "In issuing this proposed rule HUD reviewed the existing escrow               
 accounting procedures.  The prevalent practice exists called single           
 item analysis where the lender accounts for each escrow item                  
 separately.  The lender may collect more money under the single               
 item then under aggregate."                                                   
 REPRESENTATIVE BUNDE further said the lending institutions had been           
 ignoring RESPA since the 1970's and more regulation was needed.  He           
 cited institutions simply ignored the two month limitation and used           
 the single item accounting process to make more money.  He asserted           
 he was not against a profit being made, but rather he wanted to               
 bring some sunshine into the industry so the consumer could make an           
 informed decision.  Representative Bunde, in conclusion, said                 
 fences needed to be placed appropriately to encourage due                     
 The record reflected the presence of Representatives Robinson,                
 Green and Ogan.                                                               
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Richard Enberg.                                                    
 Number 0410                                                                   
 RICHARD ENBERG, Executive Vice President, First National Bank of              
 Anchorage, said he was opposed to HB 363 because it was liable to             
 cause lending operations to reconsider what they were doing.  The             
 banks in Alaska were subject to the federal laws mentioned and the            
 appropriate violations under the laws, he stated.  He further said            
 mortgages had become a commodity item sold to a national market.              
 Those mortgages, he said, were serviced by people outside of                  
 Alaska, and alleged a law of this nature would put Alaskan mortgage           
 firms at a distinct disadvantage.  Mr. Enberg said he would have to           
 look at both the originating and servicing side to determine the              
 impact HB 363 would have on his business.  He further said the                
 other problems associated with HB 363 would be reprogramming                  
 computers, changing rates on mortgages, and slowing down municipal            
 tax collections.  In conclusion, he said, to offset the problems,             
 a service charge would have to be required.                                   
 Number 0662                                                                   
 CHAIR JAMES wondered if the work done on mortgage escrow accounts             
 was comparable to other escrow accounts.                                      
 Number 0680                                                                   
 MR. ENBERG replied he was not sure what other escrow accounts she             
 was referring to.  However, if she was referring to collection                
 escrows, there were three parties involved - the bank, the buyer,             
 and the seller.  He further said a collection escrow was not the              
 same as an escrow mortgage account as each involved different                 
 Number 0720                                                                   
 CHAIR JAMES said she wanted to compare the work load for a bank               
 between mortgage escrow accounts and other escrow accounts.                   
 Number 0736                                                                   
 MR. ENBERG asked if she meant the other escrow collection services.           
 Number 0740                                                                   
 CHAIR JAMES replied, yes, she wanted to compare the work load                 
 between an escrow collection and a mortgage escrow.  She said she             
 understood there were more payouts because of insurance and taxes             
 for a mortgage escrow account compared to an escrow where there was           
 only a buyer and a seller.  She wondered again if the work load was           
 the same.                                                                     
 Number 0775                                                                   
 MR. ENBERG replied the work load was not the same.  He cited the              
 fees depended on the size of the escrow rather than the type of               
 account.  He further said there were a variety of things a                    
 fiduciary agent could do for a seller and a buyer, and these were             
 two separate issues.                                                          
 Number 0820                                                                   
 CHAIR JAMES said she was trying to determine what the service                 
 charge would be on servicing a mortgage escrow account if there was           
 no interest to cover the fees.                                                
 Number 0860                                                                   
 MR. ENBERG said he would have to look at both the servicing and the           
 originating operations.  He said it cost money to originate a loan.           
 He further stated it was important to look at establishing a long-            
 term relationship with the customer, which would hopefully offset             
 the cost of producing a loan.                                                 
 Number 0890                                                                   
 CHAIR JAMES asked if an origination fee was paid separately.                  
 Number 0900                                                                   
 MR. ENBERG replied, yes, an origination fee was paid separately,              
 but it did not cover the cost.  He cited the First National Bank of           
 Anchorage was offering a $150 coupon off loan origination and                 
 closing fees.  He said the bank was eating those fees.                        
 Number 0940                                                                   
 CHAIR JAMES said she understood the business decisions and the net            
 result was to make a profit.  She further said she wanted to know             
 what was fair and if the interest on the escrow accounts was                  
 contributing in a major way to offset the cost of maintaining the             
 accounts.  She commented on the varying sizes of escrow accounts              
 and wondered if individuals were paying disproportionately.                   
 Number 0990                                                                   
 MR. ENBERG said he did not know if they were paying                           
 disproportionately as taxes and insurance were based on the value             
 of the property.                                                              
 Number 1000                                                                   
 CHAIR JAMES said she meant the balance in the escrow was different            
 based on the value of the property and wondered if the cost of                
 servicing the accounts was the same.                                          
 Number 1015                                                                   
 MR. ENBERG said the cost of servicing a loan was the same whether             
 it was for $50 thousand or $150 thousand.                                     
 Number 1028                                                                   
 CHAIR JAMES said there were varying balances in escrow accounts and           
 the interest would be more for those with a bigger balance.                   
 Number 1040                                                                   
 MR. ENBERG said he agreed, but it was a dollar cost averaging                 
 situation.  He alleged all mortgages would be covered to make a               
 Number 1059                                                                   
 CHAIR JAMES said she did not want people to pay more for the                  
 services they were currently getting.  She thanked Mr. Enberg for             
 his time today.                                                               
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Robin Ward.                                                        
 Number 1088                                                                   
 ROBIN WARD, President, Summit Title Insurance Agency Ltd., said the           
 testimony regarding the abuse of over escrowing was six years old,            
 and aggressive action had been taken to correct the abuses                    
 nationwide.  She said she was concerned about another regulation              
 over correcting the situation.  She also said she was concerned               
 about the administrative cost for reporting interest, and was more            
 concerned it would end-up costing the consumer more.  She thanked             
 the committee members and said she was available to answer any                
 CHAIR JAMES called on the next witness via teleconference in                  
 Fairbanks, Gary Roth.                                                         
 Number 1175                                                                   
 GARY ROTH, President, Denali State Bank in Fairbanks, said he was             
 opposed to HB 363.  He said it was poorly worded, but more                    
 importantly he wanted to see the bill killed.  He said his                    
 customers were happy to escrow their insurance and tax payments so            
 they did not have to worry about delinquency.  Mr. Roth further               
 said the cost of administering an escrow was costly to the bank.              
 He cited, Denali State Bank subscribed to a service that provided             
 information on taxes from the borough.  He also said HB 363                   
 referred to banks only and would jeopardize entry into a secondary            
 market, and was concerned the secondary market would withdrawal               
 from Alaska as a result.  He cited the contract collection fees               
 associated with an escrow account were a $100 set-up fee, $50                 
 annual fee and $5 per month dispersement fee, and was viewed as a             
 service to the community rather than a profit maker.  In                      
 conclusion, he cited an example of interest paid on escrow.  He               
 said a $2,000 escrow account for taxes and insurance on the                   
 mortgage loan would produce a $1,000 average balance throughout the           
 year yielding $30 in interest at passbook savings, which was much             
 less than what the contract collection holder in the bank was                 
 charged.  He thanked the committee members and said he was                    
 available to answer any questions.                                            
 Number 1360                                                                   
 CHAIR JAMES thanked Mr. Roth for his testimony.  She said the                 
 escrow account varied based on the value of the property, and was             
 concerned about the disproportionate interest and service fees.               
 She was concerned legislation would affect those with smaller                 
 escrow accounts by paying more.                                               
 Number 1412                                                                   
 MR. ROTH said he understood and agreed with Chair James.  He cited            
 his previous example of a $2,000 escrow account with an average               
 monthly balance of $1,000.  He further said the more expensive                
 homes in Fairbanks would probably double to an average monthly                
 balance of $2,000.                                                            
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Heather Bostley.                                                   
 Number 1450                                                                   
 HEATHER BOSTLEY representing the Alaska Public Interest Research              
 Group (AKPIRG), said she was concerned about the cost.  She said              
 she supported HB 363 because at the end of a 30 year mortgage loan,           
 if no interest was paid the money would work less.  She stated                
 other states such as Iowa and California were practicing this and             
 doing it well.  She cited the interest rates were ranging from 2              
 percent to 5 percent.  She reiterated she was in favor of HB 363.             
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Lucille Stietz.                                                    
 Number 1530                                                                   
 LUCILLE STIETZ, Senior Vice President, National Bank of Alaska                
 (NBA), said she agreed with Mr. Enberg's and Ms. Ward's testimony.            
 She said the average mortgage loan was written for a 15 or 30 year            
 period.  The average life of a loan nationwide was six years due to           
 refinancing and moving.  She said NBA provided local servicing for            
 Alaskan borrowers and if HB 363 was passed, the loans, she alleged,           
 would go to an outside servicer affecting the 56 people employed by           
 NBA's Servicing Loan Department.  She thanked the committee members           
 and said she would be happy to answer any questions.                          
 CHAIR JAMES called on the next witness in Juneau, Lisa Bell.                  
 Number 1650                                                                   
 LISA BELL, Senior Vice President, Alaska Federal Savings Bank, said           
 she supported the previous testimony.  She stated Alaska Federal              
 Savings Bank had been a mortgage banking participant since 1935.              
 She said the headquarters was located in Juneau and the bank served           
 four southeast communities.  She said the servicing portfolio was             
 similar in size to Mt. McKinley's.  She commented smaller banks               
 would be more affected by HB 363 compared to larger banks.  She               
 alleged the bill would be burdensome to the banks and probably                
 provide very little benefit to the borrowers.  She felt her bank              
 was already a conservative custodian of the customer's money and              
 exercised due diligence.  She cited in the wake of RESPA's changes            
 trial runs were tested and discovered more money would need to be             
 collected from the borrowers therefore it was decided to adopt a              
 more conservative approach.  She announced the bank now collected             
 only a one month cushion.  She cited the average escrow balance was           
 $1,000 over the course of the year.  According to a profitability             
 analysis of the servicing department in September of 1995, she                
 found the bank was barely making a profit and the scales would tip            
 easily if required to pay interest on escrow accounts.  She further           
 commented on accounts served at the local community level.  She               
 said she felt strongly the citizens needed instate servicing.  Ms.            
 Bell said California paid 2 percent in interest which equated to              
 about $20 a year on a $1,000 average balance.  She asserted that              
 was not a lot of money especially coupled with taxes.  She also               
 said the California law did not provide for payment of interest to            
 out-of-state borrowers if the land was not located in California.             
 She said she could see a situation whereby HB 363 would scare the             
 borrowers out of Alaska.                                                      
 Number 1880                                                                   
 REPRESENTATIVE CAREN ROBINSON commented Alaska Federal Savings Bank           
 was following and practicing the federal law, and asked if other              
 banks were also.                                                              
 Number 1895                                                                   
 MS. BELL said she would have to ask the other bankers because she             
 was the only servicer located in Juneau.  She said she did not know           
 what cushion they adopted, but said they were all acting within the           
 law and probably even more conservatively than realized.                      
 Number 1912                                                                   
 REPRESENTATIVE BUNDE reiterated he was not anti-profit.  He                   
 asserted every business needed to make a profit.  He said a banker            
 commenting on eating the cost was being disingenuous.  He stated              
 they did not eat the cost but simply made it up elsewhere.  He                
 again stated he wanted everyone to make a profit.  Representative             
 Bunde commented on the previous testimony regarding the minimal               
 amount of interest made, and further said it was a matter of                  
 principle, and the informed choice of a consumer.  He commented on            
 previous testimony regarding the happy mortgage holders in                    
 Fairbanks, and wondered if they would be as pleased if they                   
 received an exact accounting of what it cost to service the loan              
 and how much was being made on interest in the escrow.  He asserted           
 that was the question, and he heard no answers today.  He said                
 there was specific testimony on the cost between a borrower and a             
 seller, but it was not available on a mortgage.  He wondered why              
 that was kept in the dark.  He said he was not suggesting there was           
 something to hide, but the information was very slow in                       
 forthcoming.  Representative Bunde questioned the banks treating              
 the consumers as children because it was more comfortable if the              
 bank paid the taxes and insurance.  He further said a similar law             
 was passed in 14 other states of which no one was put out of work             
 and the banks did not close.  He said he did not want that to                 
 happen, but the people deserved an accurate accounting.  Therefore,           
 side boards were needed to raise the confidence of the general                
 Number 2090                                                                   
 CHAIR JAMES said Representative Bunde made a good argument.  She              
 cited previous testimony stating the average escrow account was               
 $1,000 yielding approximately $50 in interest.  Other testimony               
 indicated that escrow for buyers and sellers was $200 a year which            
 was a sizeable amount more.  She stated her biggest fear was                  
 passing legislation that would make the people pay more.  She                 
 stated she agreed with HB 363 philosophically, but because of the             
 manner in which a bank calculates a profit overall considering the            
 money in the accounts to service their customers, she could not               
 support HB 363.  She further said the majority of people were happy           
 to pay their taxes and insurance per month in their house payment             
 and for those reason she would not support HB 363.                            
 Number 2148                                                                   
 REPRESENTATIVE BUNDE said there were questions that remained                  
 unanswered, and asked the House State Affairs Committee to pass HB
 363 to the next committee of referral - the House Labor and                   
 Commerce Committee.                                                           
 Number 2163                                                                   
 REPRESENTATIVE BRIAN PORTER said he did not want to hear this bill            
 again as a Labor and Commerce Committee member.  He cited a bill              
 was being discussed in the Labor and Commerce Committee now which             
 addressed the small loans chapters of the statutes.  He said he was           
 convinced the cap on required interest was doing a disservice to              
 the consumer, because of the same issues being dealt with in HB
 363.  He said the loans went outside where there was no cap and               
 demonstrated a loss of capital and jobs in Alaska.  He further said           
 it should be enforced through the federal law.  In conclusion, he             
 said, he had a general philosophical problem with legislating the             
 market place and for all those reasons, he would not support HB
 Number 2233                                                                   
 REPRESENTATIVE SCOTT OGAN said when he first read the bill he was             
 in favor of it, but based on the testimony, he changed his mind.              
 He said the industry should have the latitude it needed, and                  
 therefore would not support HB 363.                                           
 Number 2266                                                                   
 REPRESENTATIVE ROBINSON wondered if a consumer had the option to              
 not have an escrow account.                                                   
 REPRESENTATIVE BUNDE replied no it was not possible.                          
 Number 2280                                                                   
 REPRESENTATIVE ROBINSON said he was wrong.                                    
 Number 2298                                                                   
 MS. STIETZ replied it depended on the holder of the loan.  She                
 cited some mortgage holders allowed the banks to waive the                    
 collection of escrow if the loan to value was 80 percent or less.             
 She further said some outside lenders waived the escrow interest on           
 conventional loans and paid less because it was a high risk loan.             
 She cited some investors such as, VA and FHA, did not allow the               
 escrow account to be waived.                                                  
 Number 2382                                                                   
 REPRESENTATIVE ROBINSON questioned if a state law was needed to               
 enforce an already existing federal law creating more regulations.            
 She also said she believed in consumer protection, and wondered               
 what she was missing and not understanding because a law already              
 Number 2418                                                                   
 REPRESENTATIVE BUNDE replied the 55 miles per hour speed limit was            
 also a law.  He asserted RESPA was not being followed.  The                   
 Attorneys General of seven states in the report titled                        
 "Overcharging on Mortgage:  Violations of Escrow Account Limits by            
 the Mortgage Lending Industry," said it was followed at face value,           
 and the single item accounting system was used to get around the              
 law.  He stated it had to be enforced further and we were not                 
 getting the information.  He further wondered what they were                  
 hiding, and if they were hiding something maybe the interest would            
 keep them from continuing to hide it further.                                 
 Number 2444                                                                   
 CHAIR JAMES asked if there was evidence RESPA was not followed in             
 Number 2450                                                                   
 REPRESENTATIVE ROBINSON further asked if the Attorney General from            
 Alaska had looked at this issue.                                              
 Number 2463                                                                   
 REPRESENTATIVE BUNDE said the Attorney General from Alaska was not            
 part of the group that investigated this issue.  He reiterated it             
 would be better if the banking industry shared the information with           
 their consumers.                                                              
 Number 2479                                                                   
 REPRESENTATIVE JOE GREEN wondered if there were statistics                    
 available that suggested the banks following the laws were                    
 disadvantaged somehow.                                                        
 TAPE 96-08, SIDE B                                                            
 Number 0000                                                                   
 REPRESENTATIVE BUNDE replied there were 14 states that required               
 banks to pay interest, and there were still mortgages, people still           
 bought homes, and the banking institutions still survived.                    
 Number 0021                                                                   
 REPRESENTATIVE ROBINSON wondered if the Labor and Commerce                    
 Committee would look HB 363 in more depth as it was the committee             
 that dealt with these issues.  However, she said, she was not ready           
 to put do pass and if no one else put do pass she wondered if it              
 would be able to move from the committee.                                     
 Number 0040                                                                   
 CHAIR JAMES replied a motion was only needed with individual                  
 recommendations to move HB 363 from the committee.  She further               
 stated the bill could not leave the Rules Committee without at                
 least one do pass recommended throughout the committee process.               
 She said the House State Affairs Committee could pass this bill               
 from the committee without a do pass.                                         
 Number 0058                                                                   
 REPRESENTATIVE BUNDE replied a bill could come to the floor of the            
 House of Representatives without a single do pass with a two-thirds           
 Number 0072                                                                   
 MS. BELL said she did not deny that there might have been banks               
 that were not following RESPA previously, but the escrow accounting           
 rules were new and tighter phasing out the single item analysis and           
 moving towards an aggregate item analysis.  The single item                   
 analysis, she alleged was a servicing nightmare anyway and assumed            
 most banks would have opted for the aggregate item analysis.  She             
 commented on the bank examination process and suggested RESPA would           
 be a high priority for the bank examiners in 1996.                            
 Number 0134                                                                   
 REPRESENTATIVE ROBINSON asked who were the examiners.                         
 Number 0140                                                                   
 MS. BELL said it depended if the bank had a state or federal                  
 charter.  She cited federal chartered banks fell under the Federal            
 Deposit Insurance Corporation (FDIC).  The Alaska Federal Savings             
 Bank, however, fell under the Office of Thrift Supervision (OTS),             
 and state chartered banks were examined by the state.                         
 CHAIR JAMES commented no one wanted to move the bill.  She offered            
 to hear it again if the sentiment changed.  She stated HB 363 would           
 remain in the House State Affairs Committee until new information             
 HB 422 - ANNUL ALL ADMIN. REGS; REPEAL APA                                  
 Number 0218                                                                   
 The next order of business to come before the House State Affairs             
 Committee was HB 422.                                                         
 CHAIR JAMES called on Joe Ryan, Legislative Assistant to                      
 Representative Al Vezey to read the sponsor statement for HB 422.             
 Number 0218                                                                   
 JOE RYAN, Legislative Assistant to Representative Al Vezey, said              
 Representative Vezey was not feeling well today and read the                  
 following sponsor statement into the record.                                  
 "The people of Alaska have been demanding that the legislature, the           
 people elected to represent them, accept the responsibility and the           
 corresponding accountability for the laws that they the people have           
 to live under.                                                                
 "It is time for the legislature to reclaim it's legislative                   
 authority and accept the constitutional responsibility they have              
 for making laws.  HB - 422 will ensure that the people of Alaska              
 live under laws passed by the people whom they have elected to                
 represent them and not by the employees they have hired to carry              
 out the these same laws.                                                      
 "More and more Alaskans are voicing concern that the cost of                  
 regulations has gotten out of hand.  In addition to the cost, the             
 frustrations experienced by the public in trying to comply with an            
 every increasing maze of regulations, have brought the matter to              
 our attention.  In quite a few instances, new regulations often               
 conflict with those already in place by federal agencies making it            
 impossible to get there from here.                                            
 "The question is; does the legislature want to shirk it's                     
 responsibility and allow major policy changes to be implemented by            
 the employees of the state of Alaska who are not elected by any               
 MR. RYAN:  I can give you a brief summary of how this                         
 Administrative Procedures Act came in.  I remember hearing                    
 Representative Congressman Young talking about how when he was in             
 this legislative body, Governor Hickel in his first term requested            
 an Administrative Procedures Act and they gave it to him much to              
 their chagrin.  The...no where in the Constitution of the United              
 States or the state of Alaska does it say that legislative                    
 authority will be given to the Administration, in fact, the                   
 separation of powers is what's suppose to keep our government                 
 working in a balance.   The -- unfortunately Madison didn't die               
 until 1840 and his minutes of the Constitutional Convention were              
 such that he didn't release them, and so people didn't really know            
 what the founding fathers when they put the Constitution together             
 meant.  And in the interim, people like John Marshall usurped the             
 authority of the Supreme Court to interpret the Constitution.  A              
 number of other people jumped in to the gap and grabbed whatever              
 power was available because there was no one to contradict them.              
 What we have in Alaska with the Administrative Procedures Act is              
 basically instances such as some of the things we received last               
 year where the Department of Labor and the Department of                      
 Transportation adopt a whole cloth the code of federal regulations            
 for state regulations.  Now, these were regulations that had been             
 made by federal bureaucrats and we in turn have them here in Alaska           
 as Alaska law under which people have to live...have to go through            
 the same appeal process and so forth and thought wasn't even given            
 to these things to deal with local considerations.  They just said            
 well, we're going...proposed to adopt...here we are we're taking              
 CFR 43 chapters blah, blah, blah to blah, blah, blah.  And this               
 will be it, and there's not a large public (indisc.) cry.  That's             
 what the people in the state have...(indisc.) to live under.  So,             
 extraordinary, if I may borrow from Thomas Paine, "these are the              
 times that try men's souls."  Extraordinary problems sometime                 
 require extraordinary solutions.  My representative feels that it's           
 time the legislature come back and take the authority that it's               
 given by the constitution back and then if you'll notice in                   
 the...in here it asked the Administration to propose laws to fill             
 the gaps that the regulations would leave and then this body will             
 consider those laws and decide which ones are prudent and which               
 ones that the citizens of the state should be required to live                
 under, and discard those that aren't.  And,  that's about all I               
 Number 0394                                                                   
 REPRESENTATIVE ROBINSON commented, if all regulations were                    
 repealed, then new regulations would need to be developed and                 
 adopted by the legislature.                                                   
 Number 0407                                                                   
 MR. RYAN:   What this...what this bill calls for is the repeal of             
 4462 which is the Administrative Procedures Act, and when...when              
 you repeal of course the legislation that gives you authority for             
 the regulatory authority for the delegation of authority that goes            
 away because there's no substantial...substantive basis for anyone            
 writing a regulation.  The statute had been repealed.  So, it also            
 requires that the Administration prepare -- back here on Section              
 3...no I mean B.                                                              
 "Each agency the executive branch of state government with the                
 authority to adopt regulations shall submit proposed draft                    
 legislation necessary to accommodate this act of the House and                
 Senate Rules Committee on the first day of the first regulation               
 session of the Twentieth Alaska State Legislature."                           
 MR. RYAN:  So, because a lot of times in the past of the                      
 Administrative Procedures Act a lot of people have come up with a             
 one page bill - not very comprehensive legislation - and delegated            
 the authority to the Administration to flush it out.  Now, it will            
 have to be -- these laws that are in effect will have to be flushed           
 out by the legislature, and giving the Administration an                      
 opportunity to contribute their thoughts and the legislature, of              
 course, exercising its prerogative will decide which of those                 
 suggestions should be adopted and which shouldn't.                            
 Number 0466                                                                   
 REPRESENTATIVE ROBINSON wondered what type of legislation this                
 would require, and if the legislature would write the regulations.            
 Number 0490                                                                   
 MR. RYAN:  The people that founded the country knew how difficult             
 it was to try to get a group of people to agree.  And, the                    
 underlying principle was if you look back at King George, and the             
 Declaration of Independence, how he would send his agents among us            
 to rob us of our substance...these are the words that are used.               
 They indiscriminately pass the king's regulations -- remember they            
 chose to facilitate their jobs and make things easier -- and so the           
 people in their wisdom, if you...the minutes of the Constitutional            
 Convention decided that legislation under which the citizens would            
 live would be passed by folks whom they elected to represent them.            
 So, if they didn't like it they could go back and get it changed by           
 getting rid of the people and putting someone new in.  What we have           
 is a...the agreement when we allow the Administration to do it, it            
 very simply...a fellow is being paid man or woman with a state                
 salary, a state pen, state paper, and they just write whatever is             
 convenient for them to do their job.  And, unless there is a large            
 (indisc.) cry it becomes law.  And, somewhere in the arcane                   
 thinking of the Supreme Court they said you can delegate your                 
 authority but to take it back requires the same vote that was                 
 required to overturn the Governor's veto.  They...how this logic              
 was used to arrive at this conclusion a lot of people have                    
 questioned over the years.  But, of course, being what they are....           
 Number 0556                                                                   
 REPRESENTATIVE ROBINSON questioned who would write the regulations.           
 She wondered if the legal drafters would write them and then the              
 legislator would review them.                                                 
 Number 0566                                                                   
 MR. RYAN:  Well, O.K., the process I would assume would be for                
 instance if you were to...you initiate...or to exercise your                  
 legislative prerogative and you were to call up the legislative               
 drafting people and say, "I want a law that does this."  And, then            
 our leg legal would draft that bill for you in its entirety, and              
 they would send it back for your preview.  And you would say,                 
 "Well, this looks fairly comprehensive legislation," and you would            
 introduce it.  Then the various committees and so forth and the               
 testimony that would come from the agencies and they said, "Wait a            
 minute, how can we handle this because it's not (indisc. --                   
 coughing) we have these particular problems perhaps of which you              
 are unaware, and we don't...won't know how to handle this."  And,             
 then the committee would say, "Hum, well we need some                         
 suggestions...the maker perhaps needs to address that and or                  
 suggestions forthcoming from the Administration...how do you                  
 think...now, put it in the...in the legislation itself."  What we             
 come down to is something I have asked to the Administration on               
 numerous occasions, why they want regulations rather than making              
 policy.  And, they have said, "When we go to court with policy we             
 always lose.  This is our division policy...this is how the                   
 administrative policy...when we go to court with regulations, we              
 win because they have the force of law."  So, what does that do to            
 the public?  If you pass a law and the Administration decides                 
 they're going to have a policy of administering it in this respect            
 and someone challenges it in court and they usually lose, the                 
 court... there must be reason why the court is ruling against them.           
 Where it's a regulation, the court has to look at it as a law.                
 And, now they come back with a...with a different interpretation              
 because you folk have given these people the right to write these             
 laws under the Administrative Procedures Act, and so the court                
 assumes that this is your intention - not necessarily the policy of           
 the Administration - so there's...there's a different perspective             
 given there.  When... and that's how the comprehensiveness of the             
 legislation would be.  And, from time-to-time there would be                  
 problems that would arise in the future and these things would have           
 to be tweaked and amended -- nothing is ever written in stone.                
 Things...life is dynamic...things change.  But...that would                   
 probably be addressed from session to session.                                
 Number 0665                                                                   
 CHAIR JAMES said HB 422 represented the typical problem the                   
 legislature was facing today - being in a different place today               
 because of mistakes made earlier.  She agreed mistakes had been               
 made, but she was not convinced going back to the start would solve           
 the problems because of the system in place.                                  
 Number 0720                                                                   
 REPRESENTATIVE PORTER said HB 422 would repeal all regulations, and           
 wondered what would happen during the interim.                                
 Number 0760                                                                   
 CHAIR JAMES replied there was an effective date of July 1, 1997 so            
 nothing would happen until then except for preparation.                       
 Number 0770                                                                   
 REPRESENTATIVE OGAN said as more statutes were passed at least one            
 should be deleted.  He suggested when statutes were passed                    
 regulatory authority should be precluded, otherwise, it turned into           
 a regulatory nightmare for the companies trying to operate.  He               
 further said the cure was worse than the problem.                             
 Number 0840                                                                   
 MR. RYAN:  Well...If I may just add one thing as an aside, a couple           
 of years ago we passed house bill 65 which gave the Administration            
 the ability to raise fees by regulation.  The last year we                    
 collected the state income tax...we collected 100.5 million dollars           
 last year we collected 196 million in fees.  And you folks are                
 trying to cut the budget, and every time you cut the budget the               
 fees go up on the other end to makeup the whole.  So, I wonder                
 if...you know...is it two steps forwards...one step forward and two           
 steps backward, or you may consider that.                                     
 Number 0868                                                                   
 REPRESENTATIVE OGAN said regulations needed to be reduced as well             
 when reducing the budget this year.  He alleged the size of the               
 government was not decreasing and the burden was being shifted to             
 the user fees.  He stated that was a problem.                                 
 Number 0892                                                                   
 CHAIR JAMES commented the legislature should not have given all its           
 authority away with respect to regulations.  She cited the                    
 legislature gave away its oversite power in the process.                      
 CHAIR JAMES called on the next witnesses in Juneau, Deborah Behr,             
 and John Lindback.                                                            
 Number 0929                                                                   
 JOHN LINDBACK, Chief of Staff, Office of the Lieutenant Governor,             
 addressed policy concerns regarding HB 422.  He stated Governor               
 Knowles' signed Administrative Order No. 157.  He said the order              
 was an attempt to explain its concerns regarding the administrative           
 regulatory process.  He stated it considered minimizing cost, using           
 "plain English," reviewing current regulations, and making the                
 process more accessible.  He further said the Administration                  
 adopted HB 130 passed last year by the legislature which made the             
 Governor more accountable for regulations.  He said the power was             
 delegated to the Lieutenant Governor and was in the process of                
 implementing HB 130.  He stated the Lieutenant Governor was                   
 sympathetic to the legislature as a former member.  He pointed out            
 HB 130 did not give authority to reject boards and commissions.               
 Mr. Lindback said if HB 422 was passed it would be new ground                 
 because no other state in the U.S. had passed a similar law.  He              
 also said the absence of regulations would give unbridled                     
 discretion to the bureaucrat.  He further stated it would be                  
 impossible to draft a piece of legislation that foresaw every                 
 situation which meant the bureaucrat would be making the decisions.           
 He said regulations were a check on bureaucratic power.  He                   
 wondered if the legislature wanted to regulate bag limits, for                
 example, for the Department of Fish and Game every session.  He               
 said it appeared like an overwhelming task.  He wondered about                
 regulating occupations.  He said they wanted regulations of some              
 kind, and if moved to the legislative arena, how would anything get           
 done.  In conclusion, he said, the Administration was committed to            
 improving and streamlining the regulatory process and making it               
 cost conscious.  He further said HB 422 looked like chaos and left            
 it to state managers to interpret laws how they saw fit.                      
 Number 1170                                                                   
 DEBORAH BEHR, Assistant Attorney General, Legislation and                     
 Regulations Section, Civil Division, Department of Law, said HB 422           
 did more than repeal all regulations.  She said it also repealed              
 the APA hearing procedures used by the occupational licensing                 
 boards to allow citizens to raise complaints in a cheap forum.  She           
 said HB 422 also repealed the Alaska Administrative Journal which             
 provided procurement announcements, and lists of board openings.              
 She cited the history of the APA.  In 1946 the first federal                  
 administrative procedures act appeared because Congress wanted to             
 bridle unfettered agency interpretation of statutes.  In 1959                 
 Alaska adopted the APA because it was impossible for a citizen to             
 determine which regulations affected them.  She alleged the APA was           
 a consumer protection act because an agency could not adopt a                 
 manual, policy or an interpretation that affected the public                  
 without giving notice and an opportunity for comment.  The APA also           
 required the Attorney General to sign-off for legal approval.  She            
 cited if the APA was not there she would not have authority to                
 disapprove a regulation on legal grounds.  Ms. Behr said a major              
 check was being taken away by repealing the APA.  Therefore, the              
 clock was being turned back to 1959 before Alaska adopted the APA.            
 She also said there would be no published code of rules, but rather           
 interpretation of statutes.  She stated she was not sure how HB 422           
 would be implemented.  She suggested a six month review process               
 after which suggestions would be made of what needed to be laws.              
 She wondered if anything else would be accomplished during the                
 session.  Ms. Behr also said a case resolved in court cost 30                 
 percent more than when resolved at the administrative level and               
 with the repeal of the regulations, litigation was expected.  She             
 further said HB 422 changed the role of the citizen boards and                
 commissions because it took away authority to set policy, for                 
 example.  She alleged this would create an unstable business                  
 climate due to a slower response time.  She said she was concerned            
 about the day-to-day situations which required responses when the             
 legislature was in session.  She cited some issues required focused           
 attention and quick responses.  She was also concerned about                  
 routine changes in the federal programs to meet federal                       
 requirements and the sanctions could be substantial when not in               
 compliance.   She cited federal preemption was a concern also.  She           
 further cited there were approximately 350 to 400 APA hearings each           
 year demonstrating the impact on the courts.  She wondered if the             
 legislature wanted to take away the Department of Correction's                
 ability to regulate prisoners, for example.  She further cited                
 Section 3 (b) which allowed separate agencies to bring laws to the            
 legislature rather than through a central process via the Governor.           
 In conclusion, she said, she would be happy to answer any                     
 CHAIR JAMES called on the next witness via teleconference in                  
 Fairbanks, Gerald Newton.                                                     
 Number 1837                                                                   
 GERALD NEWTON said he was astonished anyone would introduce a bill            
 such as HB 422.  He alleged Representative Vezey introduced it                
 because most of his constituencies were part of Fort Wainwright and           
 it would not apply to them.  He said Representative Vezey continued           
 to attack state institutions with no accountability.  He cited the            
 Electrical Administrator Law which Representative Vezey was                   
 responsible for.  As a result, he alleged three homes were wired by           
 an unqualified contractor.                                                    
 CHAIR JAMES asked Mr. Newton to comment specifically on HB 422.               
 MR. NEWTON said his testimony was specifically on this bill because           
 the administrative part of the law was removed by Representative              
 Vezey and alleged HB 422 would do the same thing.  He said it was             
 not right, not just, and asserted Representative Vezey hid in his             
 federal enclave and did not answer to his constituents.                       
 Number 2026                                                                   
 REPRESENTATIVE ROBINSON asked if it was possible to ask if HB 363             
 move from the House State Affairs Committee with individual                   
 recommendations.  She also said she would have to leave along with            
 Representative Willis.                                                        
 CHAIR JAMES said she would rather not right now, but maybe at the             
 next meeting.                                                                 
 REPRESENTATIVE ROBINSON apologized for having to leave.                       
 CHAIR JAMES wondered if there was a quorum and asked                          
 Representatives Willis and Robinson where they were going.                    
 REPRESENTATIVE ROBINSON said to a meeting with the Governor.                  
 CHAIR JAMES asked Representative Robinson to ask the Governor to              
 not interrupt a committee meeting again in the future.                        
 CHAIR JAMES announced to the teleconference participants that               
 Representatives Ivan, Porter, Ogan and James were present.                    
 HJR 49 - DEDICATED HIGHWAY FUND                                             
 The next order of business to come before the House State Affairs             
 Committee was HJR 49.                                                         
 CHAIR JAMES called on Barbara Cotting, Legislative Assistant to               
 Representative Jeannette James to present the sponsor statement.              
 Number 2191                                                                   
 BARBARA COTTING, Legislative Assistant to Representative Jeannette            
 James, said there was a wide amount of support for HJR 49.  She               
 said this resolution differed from similar ones in that it utilized           
 only state taxes on motor vehicle fuel, and that the legislature              
 may appropriate money from the fund only for the maintenance of               
 roads and highways.  She said it did not deal with aircraft and               
 watercraft, and enforcement of motor vehicle laws as other attempts           
 had done.  Ms. Cotting said the amendment was an attempt to tighten           
 the resolution.  She further said the Department of Transportation,           
 truckers, and the tourist industry supported HJR 49.  There was               
 information available if the committee members wanted describing              
 the research behind the resolution and what other states had done.            
 CHAIR JAMES announced to Robert Gigler in Anchorage that the House            
 State Affairs Committee would not be hearing HB 363 today in the              
 event he needed to leave.                                                     
 CHAIR JAMES referred the committee members to the amendment and               
 read, "from state taxes on fuel used for the propulsion of highway            
 or road use motor vehicle."                                                   
 TAPE 96-9, SIDE A                                                             
 Number 0000                                                                   
 REPRESENTATIVE IVAN IVAN asked how a road was defined in HJR 49.              
 He cited in rural Alaska there were many dirt and gravel roads.               
 Number 00029                                                                  
 CHAIR JAMES said anyplace a road tax was paid.  She cited a federal           
 definition that mentioned a maintained road.                                  
 Number 0076                                                                   
 REPRESENTATIVE PORTER enquired about the previous attempt and the             
 CHAIR JAMES called on the next witness in Juneau, Sam Kito III, to            
 answer Representative Porter's question.                                      
 Number 0102                                                                   
 SAM KITO III, Legislative Liaison/Special Assistant, Office of the            
 Commissioner, Department of Transportation and Public Facilities,             
 said the previous dedicated fund resolution contained too many                
 components and too many interests which created problems.  He said            
 it was too big of a bill.                                                     
 CHAIR JAMES asked about licensing fees.                                       
 MR. KITO III responded licensing fees were included as well as                
 funding provisions.                                                           
 Number 0182                                                                   
 REPRESENTATIVE OGAN said he did not understand the fiscal note and            
 wondered if it would increase the appropriations for road                     
 Number 0205                                                                   
 CHAIR JAMES replied, no, because the amount of motor vehicle tax              
 received was $24 million to $25 million and the state was spending            
 $75 million in road maintenance.  She further said there was a road           
 tax being proposed, and the public was willing to pay a higher tax            
 if they knew it went into a fund.  Therefore, HJR 49 would                    
 guarantee a certain level of funding and would not suffer with the            
 declining budget.                                                             
 Number 0295                                                                   
 REPRESENTATIVE OGAN wondered if this was a cog in the wheel of the            
 long range fiscal plan.                                                       
 Number 0305                                                                   
 CHAIR JAMES replied it could be.  She read the following definition           
 of a highway found in a statute.                                              
 "`highway' means the entire width between the boundary lines of               
 every way that is publicly maintained when a part of it is open to            
 the public for purposes of vehicular travel, including but not                
 limited to every street and the Alaska state marine highway system            
 but not vehicular ways or areas."                                             
 Number 0349                                                                   
 MR. KITO III added the Department of Transportation and Public                
 Facilities was very interested in the concept of a dedicated fund             
 because it ensured a revenue stream for maintenance.  This, he                
 alleged, was valuable to guarantee the state road system was                  
 adequately maintained.                                                        
 Number 0380                                                                   
 CHAIR JAMES said there was support for a similar resolution for               
 boat and aircraft taxes.  She said she did not want to include them           
 to keep HJR 49 focused in-order-to pass.                                      
 Number 0434                                                                   
 REPRESENTATIVE GREEN mentioned the 90/10 federal government rebate            
 split for road maintenance in Alaska and wondered how HJR 49 would            
 affect it.                                                                    
 Number 0475                                                                   
 MR. KITO III said HJR 49 would demonstrate to the federal                     
 government the state was trying to maintain our existing highway              
 system.  The split he cited was between $6 to $7 for every tax                
 dollar put into the fund.  He cited California put in $1 and                  
 received 80 cents and they wanted to get their dollar back.  He               
 said Alaska needed to justify that $7 for every $1 put in the fund            
 to other states for support.  He cited seven alternatives were                
 released in a report by the General Accounting Office for                     
 redistribution of the federal highway trust revenues to the states.           
 He said in the alternatives the state of Alaska went from $230                
 million to $89 million in the best case scenario.  In the worst               
 case scenario, he stated, Alaska went from $230 million to $37                
 million.  He further said Congress did not have to choose one of              
 the alternatives, but they would take it under advisement.                    
 Therefore, he said in six years or so the state could see a serious           
 decrease in federal dollars.  He also said at this point the                  
 department did not collect enough tax revenue to develop a state              
 program if the federal funding was lost.                                      
 Number 0598                                                                   
 REPRESENTATIVE GREEN replied the federal government would probably            
 look more favorable towards Alaska by adopting HJR 49.                        
 Number 0624                                                                   
 MR. KITO III responded, yes.  He said any indication that the state           
 was working towards stabilizing a maintenance fund for the highways           
 would look favorably compared to other states.                                
 Number 0639                                                                   
 REPRESENTATIVE PORTER wondered if other states that contributed to            
 a federal highway fund used motor fuel taxes or general funds.                
 Number 0666                                                                   
 MR. KITO III cited two states and the District of Columbia that did           
 not have a dedicated fund for transportation.  He said the state of           
 Texas did not have a fund dedicated for transportation, but for               
 every penney raised the state increased the revenue by $200                   
 million.  He said he did not know how the money was allocated to              
 transportation, but the revenue generated was enough to adequately            
 fund the transportation system.  He further stated most states had            
 a constitutional provision or a statute that set aside a separate             
 account for maintenance and operation of the highways.                        
 Number 0715                                                                   
 REPRESENTATIVE PORTER wondered if the state would contribute to the           
 fund through a general appropriation.                                         
 Number 0723                                                                   
 MR. KITO III said everybody in the U.S. paid a federal fuel tax,              
 that went back into the federal highway trust fund then                       
 subsequently reallocated.  Therefore, the state of Alaska was not             
 paying money directly, but paying through the usage of the fuel.              
 Number 0742                                                                   
 CHAIR JAMES announced to the audience the House State Affairs                 
 Committee would not be hearing HB 368 today.                                  
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Robert Eakman.                                                     
 Number 0779                                                                   
 ROBERT EAKMAN, General Manager, Alaska Independent Truckers                   
 Association, announced his support of HJR 49.  He wondered about              
 the definition of the word "maintenance" in the resolution.  Mr.              
 Eakman wondered if fixing pot holes or tearing up roads and                   
 replacing with better material, for example, were included in the             
 definition.  He cited roads were surfaced very recently in                    
 Anchorage that needed repairing again due to ruts creating a                  
 Number 0848                                                                   
 MR. KITO III replied the maintenance that would be covered in HJR
 49 would include filling of pot holes and minor resurfacing, for              
 example.  He also said the revenue coming in from the bill would              
 not increase the current budget so the department would not be able           
 to do more until the tax revenue increased.                                   
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Jack Wiegel.                                                       
 Number 0895                                                                   
 JACK WIEGEL, President, Alaska Independent Trucking Association,              
 said he had been a resident of Alaska for 25 years.  He stated his            
 support for HJR 49 and alleged it would create jobs.  He said it              
 would be a direct injection of dollars into the economy as well as            
 promote safety on the highways.                                               
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Ted Deboer.                                                        
 Number 0935                                                                   
 TED DEBOER, Alaska Operations Manager, Totem Ocean Trailer Express,           
 stated his full support for HJR 49.  He alleged it would solve a              
 lot of the highway problems, as well as promote safety.                       
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Duane Saulnier.                                                    
 Number 0969                                                                   
 DUANE SAULNIER stated his support for HJR 49.  He further said he             
 would like to see some up-keep on the roads.                                  
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Blaine Ghan.                                                       
 Number 0990                                                                   
 BLAINE GHAN, Lynden Transport, said his company strongly supported            
 HJR 49.  He said the wording was critical.  He said the dedication            
 of a highway maintenance fund would be very beneficial to the                 
 highway system for the public and the industry.  In conclusion, he            
 said, provided the wording was correct, his company was in full               
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Kym Swift.                                                         
 Number 1031                                                                   
 KYM SWIFT, said she did not understand why HJR 49 was before the              
 legislature this year.  She said the Administration alleged the               
 resolution would not increase maintenance.  She wondered why the              
 money was being taken off the table when the state was facing a               
 $500 million fiscal gap.  She further said the framers of the                 
 constitution prohibited this for logical reasons because it made it           
 hard to adopt in changing economic times which Alaska was about to            
 face.  She stated 25 states in the U.S. had dedicated education               
 funds and Alaska should look at that before a highway maintenance             
 Number 1099                                                                   
 CHAIR JAMES reiterated the amendment before the committee to HJR 49           
 was to tighten the language to specifically refer to motor                    
 Number 1122                                                                   
 REPRESENTATIVE PORTER moved to adopt the amendment.  Hearing no               
 objection it was so adopted.                                                  
 Number 1152                                                                   
 REPRESENTATIVE PORTER moved that HJR 49 move from the committee               
 with individual recommendations and attached fiscal note.  Hearing            
 no objection, it was so moved from the House State Affairs                    
 Number 1169                                                                   
 CHAIR JAMES explained HJR 51 by Representative Joe Green, proposed            
 an amendment to the constitution of the state of Alaska related to            
 limited entry for sport, fish, guides, and allied professions.  She           
 announced she wanted to waive this resolution from the House State            
 Affairs Committee to the next committee of referral - the House               
 Special Committee on Fisheries.                                               
 Number 1197                                                                   
 REPRESENTATIVE IVAN wondered where his copy of HJR 51 was.                    
 REPRESENTATIVE PORTER replied we did not have a copy before us.               
 CHAIR JAMES said it was a one page bill if Representative Ivan                
 wanted to look at it.                                                         
 Number 1210                                                                   
 REPRESENTATIVE GREEN said Representative Austerman, Chair of the              
 House Special Committee on Fisheries, also proposed a bill of                 
 similar nature so the special committee was probably the best place           
 to try and resolve into a single bill.  He further said the bill              
 would go to the Judiciary Committee of which two members of the               
 House State Affairs Committee were also members.  He said to                  
 relieve Chair James of a back-log this was an expedient move.                 
 Number 1251                                                                   
 CHAIR JAMES asked Representative Ivan if he was comfortable with              
 moving HJR 51 to the next committee.                                          
 Number 1256                                                                   
 REPRESENTATIVE IVAN said he was very interested in HJR 51.                    
 CHAIR JAMES again asked if he would be comfortable moving the                 
 resolution to the next committee because he was not a member of any           
 of the referred committees.                                                   
 REPRESENTATIVE IVAN replied he was not trying to hold the bill and            
 requested to hear it to understand the resolution.                            
 Number 1273                                                                   
 REPRESENTATIVE GREEN replied the resolution established a limit on            
 sport guiding to prevent a proliferation of guides.  He stated the            
 sport guide community favored the bill.                                       
 Number 1314                                                                   
 REPRESENTATIVE IVAN said he now saw the intent of the resolution              
 and would take a look at it, and further said he felt comfortable             
 enough to let it go to the next committee of referral.                        
 Number 1320                                                                   
 CHAIR JAMES recommended Representative Ivan take his time, but to             
 get back to her before the floor session on Friday.                           
 Number 1352                                                                   
 CHAIR JAMES adjourned the House State Affairs Committee at 9:55               

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