Legislature(1997 - 1998)
03/11/1997 08:04 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 11, 1997
8:04 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Ethan Berkowitz
Representative Fred Dyson
Representative Kim Elton
Representative Mark Hodgins
Representative Ivan Ivan
Representative Al Vezey
MEMBERS ABSENT
All members present.
COMMITTEE CALENDAR
*HOUSE BILL NO. 83
"An Act relating to commercial motor vehicle inspections; and
providing for an effective date."
- HEARD AND HELD
*HOUSE BILL NO. 124
"An Act relating to items not subject to collective bargaining and
to application of the Public Employment Relations Act to
municipalities and other political subdivisions."
- MOVED HB 124 OUT OF COMMITTEE
*HOUSE JOINT RESOLUTION NO. 25
Proposing amendments to the Constitution of the State of Alaska to
guarantee the permanent fund dividend, to provide for
inflation-proofing, and to require a vote of the people before
spending undistributed income from the earnings reserve of the
permanent fund; and relating to the permanent fund.
- HEARD AND HELD
*HOUSE BILL NO. 84
"An Act limiting the authority to conduct pull-tab charitable
gaming to qualified organizations that are exempt from taxation
under 26 U.S.C. 501(c)(3) or (19); and providing for an effective
date."
- SCHEDULED BUT NOT HEARD
*HOUSE BILL NO. 78
"An Act relating to the definition of certain state receipts; and
providing for an effective date."
- SCHEDULED BUT NOT HEARD
*HOUSE BILL NO. 153
"An Act relating to the eligibility of aliens for state public
assistance and medical assistance programs affected by federal
welfare reform legislation; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
*HOUSE BILL NO. 155
"An Act relating to hearings before and authorizing fees for the
State Commission for Human Rights; and providing for an effective
date."
- SCHEDULED BUT NOT HEARD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 83
SHORT TITLE: COMMERCIAL VEHICLE INSPECTIONS
SPONSOR(S): REPRESENTATIVE(S) MARTIN
JRN-DATE JRN-PG ACTION
01/22/97 122 (H) READ THE FIRST TIME - REFERRAL(S)
01/22/97 122 (H) TRANSPORTATION, STATE AFFAIRS
02/03/97 (H) TRA AT 1:00 PM CAPITOL 17
02/03/97 (H) MINUTE(TRA)
02/10/97 (H) MINUTE(TRA)
02/12/97 306 (H) TRA RPT CS(TRA) NT 3DP 2NR
02/12/97 307 (H) DP: SANDERS, KOOKESH, MASEK
02/12/97 307 (H) NR: ELTON, COWDERY
02/12/97 307 (H) ZERO FISCAL NOTE (DPS)
02/12/97 307 (H) REFERRED TO STATE AFFAIRS
03/11/97 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 124
SHORT TITLE: PERA: LOCAL EXEMPTION/NONNEGOTIABLE ITEMS
SPONSOR(S): REPRESENTATIVE(S) VEZEY
JRN-DATE JRN-PG ACTION
02/12/97 314 (H) READ THE FIRST TIME - REFERRAL(S)
02/12/97 314 (H) STATE AFFAIRS, JUDICIARY
03/11/97 (H) STA AT 8:00 AM CAPITOL 102
BILL: HJR 25
SHORT TITLE: CONST. AM: PERM. FUND INCOME & DIVIDEND
SPONSOR(S): REPRESENTATIVE(S) AUSTERMAN
JRN-DATE JRN-PG ACTION
02/26/97 483 (H) READ THE FIRST TIME - REFERRAL(S)
02/26/97 483 (H) STATE AFFAIRS, JUDICIARY, FINANCE
03/11/97 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
REPRESENTATIVE TERRY MARTIN
Alaska State Legislature
State Capitol, Room 502
Juneau, Alaska 99801-1182
Telephone: (907) 465-3783
POSITION STATEMENT: Sponsor of HB 83.
FRANK DILLON, Executive Director
Alaska Trucking Association
3443 Minnesota Drive
Anchorage, Alaska 99503
Telephone: (907) 276-1149
POSITION STATEMENT: Provided testimony on HB 83.
JOHN MANLY, Legislative Assistant
to Representative Terry Martin
State Capitol, Room 502
Juneau, Alaska 99801-1182
Telephone: (907) 465-3783
POSITION STATEMENT: Provided testimony on HB 83.
SERGEANT BRAD BROWN
Division of Alaska State Troopers
Department of Public Safety
5700 East Tudor Road
Anchorage, Alaska 99507-1225
Telephone: (907) 269-5086
POSITION STATEMENT: Provided testimony on HB 83.
ED FLANAGAN, Deputy Commissioner
Office of the Commissioner
Department of Labor
P.O. Box 21149
Juneau, Alaska 99802-1149
Telephone: (907) 465-2700
POSITION STATEMENT: Provided testimony in opposition to HB 124.
JOHN CYR, President
National Education Association (NEA) - Alaska
114 Second Street
Juneau, Alaska 99801
Telephone: (907) 586-3090
POSITION STATEMENT: Provided testimony in opposition to HB 124.
REPRESENTATIVE ALAN AUSTERMAN
Alaska State Legislature
State Capitol, Room 434
Juneau, Alaska 99801-1182
Telephone: (907) 465-2487
POSITION STATEMENT: Sponsor of HJR 25.
JIM KELLY, Research and Liaison Officer
Alaska Permanent Fund Corporation
Department of Revenue
P.O. Box 25500
Juneau, Alaska 99802-5500
Telephone: (907) 465-2059
POSITION STATEMENT: Provided testimony on HJR 25.
ACTION NARRATIVE
TAPE 97-24, SIDE A
Number 0001
The House State Affairs Standing Committee was called to order by
Chair Jeannette James at 8:04 a.m. Members present at the call to
order were Representatives James, Dyson, Elton, Ivan and Vezey.
Members absent were Berkowitz and Hodgins.
HB 83 - COMMERCIAL VEHICLE INSPECTIONS
The first order of business to come before the House State Affairs
Standing Committee was HB 83, "An Act relating to commercial motor
vehicle inspections; and providing for an effective date."
CHAIR JEANNETTE JAMES called on Representative Terry Martin,
sponsor of HB 83, to present the bill.
Number 0044
REPRESENTATIVE TERRY MARTIN, Alaska State Legislature, stated HB 83
was an easy bill. It was one that he decided to introduce because
it came through a legitimate organization - the Office of the
Ombudsman. The ombudsman recommended that the commercial vehicle
inspection law be repealed for two major reasons: It appeared that
there was a law that was excessive as far as protecting the
public's interest; and that the Alaska Trucking Association
exceeded a double inspection every year. In addition, if there was
a useless law on the book, the legislature could be stung by it.
He was pleased with the support of the bill by the industry and the
State Troopers in the hearings in the House Transportation Standing
Committee.
Number 0166
CHAIR JAMES thanked Representative Martin for bringing forward this
issue. She was aware of the inspection process that was put on the
books and never funded. "It's a good idea. It's not working and
hasn't been working; and, so let's move on and do something that
works better."
Number 0185
REPRESENTATIVE FRED DYSON asked Representative Martin if there was
anybody against this thing?
REPRESENTATIVE MARTIN replied that he had not heard anyone, yet.
Number 0219
REPRESENTATIVE ETHAN BERKOWITZ stated he recalled working on a case
where somebody had a recreational commercial vehicle and whether or
not it fell within the reach of these sorts of statutes. He asked
Representative Martin if he thought these types of vehicles should
fall within the reach of these statutes?
Number 0253
REPRESENTATIVE MARTIN replied he did not want to pose as a lawyer
or as an expert. There were specialist here to handle that
question both from the trucking industry and the Department of
Public Safety.
Number 0279
REPRESENTATIVE AL VEZEY commented that "commercial motor vehicle"
was defined in Sec. 6. He asked Representative Martin who was
going to do these vehicle inspections?
Number 0319
REPRESENTATIVE MARTIN replied the in-house trucking industry was
doing a superb job right now, and Mr. Frank Dillon, Alaska Trucking
Association, was here today to talk about that. The industry was
worried about their own safety and liability. There was a good
daily procedure where the truck driver must list anything that was
found that could be a problem. At the end of the driver's duty,
the list went to the mechanic to be fixed and checked off for the
next day. "I think that's far superior than what the law has done
because these people are interested, they do not want to get out
there with vehicles that are going to fall apart."
Number 0389
REPRESENTATIVE VEZEY asked Representative Martin who was going to
do the inspections? What was the intent that qualified them under
the law?
Number 0407
REPRESENTATIVE MARTIN deferred the question to the industry.
REPRESENTATIVE MARTIN further stated that the State Troopers could
show what they were doing and what the industry was doing in
compliance with the federal law, plus their own in-house inspection
guidelines.
Number 0442
REPRESENTATIVE IVAN IVAN referred the committee members to Sec. 2
and said, he was curious which law or statute this bill covered and
what were the qualifications.
Number 0485
FRANK DILLON, Executive Director, Alaska Trucking Association,
explained, in response to Representative Vezey's question, the
association had adopted the federal regulations through the
administrative process - Section 396.25, "Qualification of
inspectors." The section defined by training and experience those
who would be qualified to do a federal motor safety inspection. He
cited most qualified motor mechanics, mechanics who work on trucks,
owner-operators, or any vendor who does truck repair work would be
capable of doing such inspections.
Number 0570
REPRESENTATIVE VEZEY explained he had done a lot of work in the
area of privatization of the Division of Motor Vehicles (DMV). The
model was obtained from the Federal Aviation Administration (FAA)
where there was an unprecedented amount of inspection and safety
programs. "There are no government employees really that do any of
this. When we say and qualify under law why don't we say,
`qualified under federal regulations.'" It was done in other
cases. The state law moved with the changes in the federal law.
"You have to comply with federal law and you have to comply with
state law." So, why not bring the two together so that there was
not any conflict?
Number 0633
MR. DILLON replied he was told that this bill was drafted
specifically to do that and that was why the term "under federal
law" was used.
REPRESENTATIVE VEZEY replied the bill said, "under law."
MR. DILLON further stated the intent of the bill was to make it
inclusive so that the federal rules would apply.
REPRESENTATIVE VEZEY said the only law that would apply would be
the state regulations adopted, according to his understanding. The
bill did not refer to federal regulations. That was done in other
statutes. He cited Title 17, "controlled substances." "We simply
adopt - automatically - we defer to federal regulation." He
suggested saying "in according with federal regulations."
Number 0696
CHAIR JAMES asked Representative Vezey if he had looked at Sec. 4 -
"Regulations."?
REPRESENTATIVE VEZEY replied he was not talking about regulations,
he was talking about the qualifications for inspectors in Sec. 2.
The qualifications, which were also a regulation, could change. "I
understand that we're talking about the regulations -- instructs us
to adopt federal regulations. I'm curious why we just can't use
them and not worry about updating our own administrative code."
Number 0741
CHAIR JAMES replied she understood exactly what Representative
Vezey was saying now. She cited Sec. 2, "Commercial vehicle
inspectors," and read, "A person may not conduct commercial vehicle
inspections unless qualified under law." Therefore, the only law
that would be administrative law as opposed to statutory law. Was
that your concern, Representative Vezey?
Number 0771
REPRESENTATIVE VEZEY replied, "Correct." The law that would be
applicable would either be a statute or a regulation that came down
the line.
CHAIR JAMES replied she understood. According to her attitude
towards regulations, she preferred statutory law as opposed to
regulatory law. Therefore, the language needed to be changed. She
asked if the drafter of the bill was here today?
Number 0794
JOHN MANLY, Legislative Assistant to Representative Terry Martin,
explained the drafter was Mike Ford. The reason he drafted it that
way was so that it applied to either the state or the federal law.
Number 0820
MR. DILLON explained there was a bill passed in the mid-1980's, at
the time of the demise of the Alaska Transportation Commission that
handled the safety regulations and enforcement of the state. When
the commission sunsetted it passed a law that would set up a system
with two inspections a year through a vendor or a qualified
inspection station. That never happened, however. In 1990, when
he came to work in Alaska in the trucking industry, there was a
glaring hole in the structure. There was no safety enforcement or
inspection program. As a result, the trucking industry got
together with the State Troops to find avenues to access federal
money and to set up a program through the troopers. The trucking
industry was successful in adopting, administratively, the Federal
Motors Carrier Safety Regulations. They had been in effect since
1993 and the industry had operated under their prescription since
that time. The drivers and the companies had no better concern for
their safety compared to other industries. The drivers were
concerned for their own personal safety, and the companies were
concerned for their expenses. In other words, the self-inspection
idea was not designed to let a company get by with running
equipment that was not safe; that was not the purpose. What we had
was a law that said we would have two inspections and that we would
set up a system of vendors to do the inspections across the state.
We felt that this would be redundant and would probably lessen the
impact of the regulations that were in place ending up with less
safe trucks than on the road now. The goal in this effort was to
make this as strong as possible. We would prefer to have it in
statute; that was our intent. We sought the administrative
adoption mode out of desperation at the time. We would be happy to
have these regulations in statute in total and a way to adopt the
changes as they came up with the federal government. The
regulations had been drafted very carefully to address specific
problems in the area of safety. They covered everything from
driver qualification to equipment safety. The industry had
accepted the regulations both on the intra and inter-state basis.
They provided a good framework for folks to operate safe companies.
The oversight to this entire process was the State Troopers and the
Commercial Vehicle Unit. The unit, right now, in cooperation and
guidance with the feds audited companies. It audited both
equipment on the road and the companies. The only problem with the
system right now was that there was not enough inspectors to do an
adequate job. He reiterated the intent was to simply put into
effect, statutorily, what was in effect in reality.
Number 1062
REPRESENTATIVE BERKOWITZ reiterated he had worked on a case where
individuals were "recreationally" using commercial vehicles. He
wondered if that would fall out of the scope defined in Sec. 6.
Number 1099
MR. DILLON replied, as defined in the adopted regulations,
"commercial vehicle" was defined as one which was used for the
furtherance of a commercial enterprise. In other words, if one
used it to make money or to further a business enterprise, it was
a commercial vehicle, regardless of what it was called.
Number 1160
REPRESENTATIVE BERKOWITZ replied, so, there was a definition for
commercial purposes that would make this universal.
MR. DILLON replied, "That's correct." It was effective through
regulation now.
Number 1172
REPRESENTATIVE BERKOWITZ asked Mr. Dillon if there was anything
that precluded the trucking industry from doing its own
inspections? He imagined it would be useful for insurance
purposes.
Number 1183
MR. DILLON replied the basic inspection was done by the company
itself on both a daily basis and an annual basis. The option,
right now, was that if a company did not have a qualified mechanic
in its fleet, it could be taken to a vendor for the inspection.
Most of the trucking companies had mechanics that worked full-time
for them who were qualified and who were expected to keep the
equipment safe and operable. "We don't see any problem with those
folks doing the self-inspections and making sure that equipment is
safe." Furthermore, one or two inspections a year did not make a
safe truck. "If that's all you're doing and you're doing that just
to meet the intent of the regulation, you're not doing what should
be done as a responsible operator." That was why the industry
advocated and enforced the daily inspection report forms, even for
a person who owned his own truck. If there was a problem and it
was not repaired then the onus of that violation was on the driver
for taking it out and on the company for having sent it out. The
intent behind all of the regulations was that they applied to both
the driver and the company.
The record reflected the arrival of Representative Mark Hodgins at
8:22 a.m.
Number 1286
REPRESENTATIVE VEZEY asked Mr. Dillon if he had any ideas, in
regards to his comments earlier, that there were not enough
inspectors?
Number 1294
MR. DILLON replied, currently, there were two troopers who worked
in the Commercial Vehicle Unit. They had four inspectors working
with them who were not commissioned by the Department of Public
Safety, but who functioned as truck inspectors. The six of them
were undermanned. They could not do the geographical work and the
number of inspection that were necessary. The association was
hoping that it could find ways to work with the legislature to
increase the number of inspectors by two or three. It was also
hoping that with the approval of Executive Order 98, the merging of
the functions that covered trucking in the Department of
Transportation, and the cross training of the weigh and inspection
people, additional inspectors would be added without,
fundamentally, having to spend any more money. Right now, however,
there was not enough people to do the equipment inspections that
were needed. There was not a major problem with accidents related
to commercial vehicle equipment, however. The state ranked in the
top four in terms of safety per mile and per ton for commercial
equipment.
Number 1386
REPRESENTATIVE VEZEY stated he thought that the inspectors were
going to be private sector employees.
Number 1393
MR. DILLON replied the inspection itself could be done by a person
who met the qualifications in the regulations. There was also an
oversight program with the State Troopers where they could stop
equipment for cause and inspect it. There was also a national
program called the Commercial Vehicle Safety Alliance (CVSA). The
stickers that were seen in the windows of the trucks were
inspections done by the troopers. That was an entirely different
program from the daily and annual inspections, however. The
enforcement part would be done by the Alaska State Troopers, and
the inspection part would be done by an employee of a company or a
private vendor.
Number 1450
REPRESENTATIVE VEZEY said that the bill called for an annual
inspection. "That's right up there with being worthless, in my
opinion. I can't even think of how many things that would break in
one annual period." A vehicle that was safe today was not safe
tomorrow.
Number 1469
MR. DILLON replied, "I couldn't agree with you more." That was why
the bill was perfunctory. On the other hand, he knew of equipment
that was only getting inspected once a year and when it did get
inspected major repairs were necessary. Nobody, in the state, who
operated a truck with a gross vehicle weight of more than 10,000
pounds, should not be inspecting it daily and completing a daily
inspection report. The annual inspection, he reiterated, was a way
to insure that one time during the year the equipment was defect
free. The trucking industry knew that one inspection per year was
not enough, which was why it worked with the troopers.
Number 1517
CHAIR JAMES said the language in the law that was being deleted was
put in place about ten years ago which called for the privatization
of authorized inspectors rather than the troopers. There were no
funds to certify the inspectors so it was never implemented. Now,
it was being taken away and the current method was being put into
law. She stated more intensive language was needed under the
"inspectors" in the bill to incorporate the federal law. She asked
Mr. Dillon, if that was done, would it call for more than an annual
inspection?
Number 1581
MR. DILLON replied, "Certainly." The federal regulations applied,
period, to anybody who handled or operated inter-state freight.
The federal government superseded the state in that regard. That
was one of the compelling reasons for going into the inspection
program. The federal government's mandate to have a state program
through the troopers was tied into about 10 percent or 20 percent
of the state's highway funding. A substantial portion of the
trooper's budget was paid for by the federal government through a
program called the Motor Carrier Safety Assistance Program.
Therefore, we were putting into the state statute what we were
required to do federally. If we could find a way to craft the
language so that we automatically updated the state's law as the
federal law changed, it would be ideal. He was not sure if that
could be done, however.
CHAIR JAMES noted for the record that Representatives Ethan
Berkowitz and Mark Hodgins were present.
Number 1693
REPRESENTATIVE BERKOWITZ asked Mr. Dillon if there was a back-log
of the inspection requirements, and was it keeping trucks off of
the road?
Number 1700
MR. DILLON replied, "No." The current annual inspection was being
done by companies and/or vendors now. The enforcement was being
done by the troopers on a spot-check basis.
Number 1723
REPRESENTATIVE MARK HODGINS noted that he had owned and operated
trucks for the last 29 years. Anytime one of his trucks went out
on the road they were always at risk to being inspected.
Therefore, it behooved him as a business operator to make sure that
they were in the best condition possible. Anytime there was a
light out, for example, the operator was subject to being pulled
over and detained. Generally, that would cost six to eight times
more than the preventative maintenance. As Representative Vezey
noted, there were times when mechanical things would happen so
inspections were good.
Number 1796
CHAIR JAMES stated it would be interesting to see how the
operations would fit under the statutory authority. This was a
good example of where the legislature had the responsibility: To
make law, to ensure that the law worked, and to require as few
regulations as possible so that the statute was the operating law.
Number 1834
REPRESENTATIVE KIM ELTON said he was comfortable with the bill, as
drafted. Mr. Dillon noted that he was comfortable with the
doubling in the size of the regulations. He also commented that
the state needed more state employees which ran counter-intuitive
to what the legislature heard. He noted for the record that there
were some people who were familiar with the way government worked
and the way the industry worked, and who were willing to be
counter-intuitive.
Number 1869
CHAIR JAMES replied she knew Representative Elton would get an
opportunity to say, "more government was better."
Number 1892
SERGEANT BRAD BROWN, Division of Alaska State Troopers, Department
of Public Safety, was the first person to testify via
teleconference in Anchorage. He recommended in Sec. 2, that the
language read "the inspectors must be qualified pursuant to AS
28.32.080." It would cover the qualifications of the inspectors
instead of using the language "qualified under law."
Number 1925
CHAIR JAMES appreciated his suggestion. It was a simple solution.
Did the committee members understand the suggestion?
Number 1931
REPRESENTATIVE VEZEY asked Sergeant Brown what inspectors was he
talking about - the government employees or the private sector
mechanics?
Number 1938
SERGEANT BROWN replied inspectors, including himself, were trained
in accordance to North American standards which exceeded that of
the industry in some respects. Thus, the suggestion addressed the
qualifications of the civilian inspector.
Number 1958
REPRESENTATIVE VEZEY said that was not distinguished in the law.
He asked Sergeant Brown, again, who were we talking about here?
Number 1963
SERGEANT BROWN replied it primarily addressed that the inspectors
meet the qualifications in accordance with the Motor Carrier Safety
Regulations.
Number 1975
REPRESENTATIVE VEZEY asked Sergeant Brown if the intent was to put
requirements onto the regulatory agencies that inspected the
vehicles or the paper work?
Number 1986
SERGEANT BROWN replied he was not sure that he understood the
question.
Number 1995
REPRESENTATIVE VEZEY stated that it primarily addressed the
mechanics who worked for the private sector, but the law did not
distinguish between them. Therefore, he wondered if the
qualifications were for the regulatory agency employees; and, was
it a physical or an administrative inspection?
Number 2020
SERGEANT BROWN replied we were looking at the qualifications of the
civilian inspectors and not so much the qualifications of the state
inspectors. The state inspectors met their qualifications in
accordance with the North American standards, an international
inspection criteria. The CVSA basically said that when the decal
was placed on a vehicle it entitled a truck to travel through
Canada, the U.S. and into Mexico, and the operator or the company
would be free of having to stop and submit to further inspections
so long as the sticker was current. Therefore, the intent of the
law was to set out qualifications for the civilian inspectors in
accordance with the Motor Carrier Safety Regulations that had been
adopted. It further clarified that there would be one annual
inspection compared to two annual inspections because it was not
consistent with the motor carrier regulations.
Number 2099
REPRESENTATIVE VEZEY commented that inter-state commerce was
already preempted by federal law. The federal law also affected
intra-state commerce. It appeared, therefore, that a statute was
being written that only applied to intra-state commerce.
Number 2126
SERGEANT BROWN stated that we were trying to ensure compatibility
and that nobody was treated differently. The intent was to have
everybody play by the same rules and to sing from the same sheet of
music.
Number 2165
CHAIR JAMES commented there were qualified commercial vehicle
inspectors. Therefore, she wondered if the trooper, who also
performed inspections, was an enforcement officer as opposed to an
inspection officer.
Number 2191
SERGEANT BROWN replied, "That's correct."
CHAIR JAMES replied in-order-to enforce inspection, therefore, one
had to be a qualified inspector.
Number 2198
SERGEANT BROWN replied in one sense, "Yes." There were different
levels of inspection, however, that could be performed by field
personnel. A person would have to be qualified in accordance to
the provisions listed in the Federal Motor Carrier Safety
Regulations - Title 49. However, to stop a commercial vehicle and
conduct an inspection did not require any special certification
because any trooper or enforcement officer should be able to write
up a head light discrepancy, for example. Therefore, we were
looking at inspection qualifications that were in accordance to
level one standards.
Number 2242
REPRESENTATIVE VEZEY stated his understanding was that most vehicle
inspections took place at the weigh scales, at least that was where
the number one opportunity was. Now, that was proposed to be taken
over by the Department of Transportation. He wondered if it would
make more sense to use the Department of Transportation's personnel
to do an inspection at the scales.
Number 2271
SERGEANT BROWN replied the weigh station was a good place to
contact the vehicles. However, the majority of the serious
violations were not detected at the weigh stations because there
was a considerable amount of commercial traffic that did cross the
scales. The purpose of the program was to be a random road side
inspection. Thus, the troopers would go to construction sites, for
example, to inspect vehicles. In addition, when the troopers did
work the scales, they averaged one and one-half violations per
commercial vehicle. Away from the weigh station, the violations
jumped to four to six depending on the area. In the last three
years, the Alaska State Troopers had conducted nearly 6,000
inspections statewide, of which, 26,000 violations had been
written. "Therefore, we do not detect the more serious equipment
at the weigh station. It's more of a random sampling and
stopping."
CHAIR JAMES asked Sergeant Brown if he had anything more to add to
his testimony?
Number 2332
SERGEANT BROWN referred the committee members to page 2, line 7,
and suggested eliminating the "(2)" in the statute referenced. It
was too restrictive for the application of commercial vehicles.
The troopers wanted to adopt all of AS 28.05.011. "My
recommendation is that the (2) be deleted and just leave the Alaska
Statute as whole."
Number 2379
CHAIR JAMES asked if the committee members were willing to accept
the recommendations of Sergeant Brown? Was somebody willing to
make a conceptual amendment?
Number 2390
REPRESENTATIVE VEZEY asked that the bill be held over until the
next committee hearing.
CHAIR JAMES replied we would hold the bill until Thursday, March
13, 1997 to come up with a committee substitute.
HB 124 - PERA: LOCAL EXEMPTION/NONNEGOTIABLE ITEMS
The next order of business to come before the House State Affairs
Standing Committee was HB 124, "An Act relating to items not
subject to collective bargaining and to application of the Public
Employment Relations Act to municipalities and other political
subdivisions."
CHAIR JAMES called on Representative Al Vezey, sponsor of HB 124,
to present the bill.
Number 2422
REPRESENTATIVE VEZEY explained HB 124 did two things. First, it
added to existing state statute a list of the items that were not
subject to negotiations during the collective bargaining process
under the Public Employees Relations Act (PERA). The items were
subject to state privatizing or contracting out for services.
Second, it allowed for the political subdivision of the state to
get into PERA, but once in, it did not allow for it to get out. "I
think that is an affront to the democratic process. This bill
merely clarifies that through the democratic process, political
subdivisions can by vote decide to be in PERA or they can decide to
be out of PERA." There were hundreds of methods of employee
management and relations, and PERA was only one of those. The bill
mandated to a few municipalities, a distinct minority in the state,
that they had to stay under PERA when other communities that were
not subject to PERA had more flexibility in regards to their
management of their employee relations.
TAPE 97-24, SIDE B
Number 0006
ED FLANAGAN, Deputy Commissioner, Office of the Commissioner
Department of Labor, was the first person to testify in Juneau.
The Public Employees Relations Act was in Title 23, the Department
of Labor statute. It was administered for the state by the Alaska
Labor Relations Agency. The department was opposed to the bill
because it potentially denied the right of collective bargaining
currently covered under the act. It had been portrayed as leveling
the playing field. The department, however, believed that it "blew
up and obliterated the playing field," because employees that were
currently organized in unions would potentially loose that right.
The method of choice for municipalities that opted out of PERA or
that did not recognize bargaining was no labor relations
management.
MR. FLANAGAN further stated that the issue of local control was
adequately addressed in the statute which provided for legislative
approval for money. The department also believed that the
subcontracting provision would have a chilling effect on meaningful
negotiations of any public employer. The law worked as it stood
now. And, municipalities going in and out of PERA would create
mayhem and disturb a rather orderly system.
Number 0140
REPRESENTATIVE DYSON asked Mr. Flanagan if the contracting out was
negotiated under present law?
Number 0156
MR. FLANAGAN replied it was provided for in the collective
bargaining agreement. There were agreements that were silent to
subcontracting. Most, however, required a feasibility study and a
cost effectiveness study to show a savings before it could be done.
Furthermore, there was only a requirement to bargain at the table,
not a requirement to agree to any particular term or even to
include that language. It was part of the whole mix of issue that
were negotiated.
Number 0194
REPRESENTATIVE DYSON stated that a political subdivision could find
itself in the position of balancing its best delivery of service
for the public and taking into account its responsibility of the
present employees under the contract. From a public policy
perspective, he asked Mr. Flanagan, what restrictions should be put
on a political subdivision when it was trying to find the best way
to deliver services to the public?
Number 0226
MR. FLANAGAN replied it honored what ever commitments that it had
made in the form of a contractual relationship with the employees
in a collective bargaining agreement. If there was no language,
then it was whatever the public or the legislative body felt was
fair treatment.
Number 0242
REPRESENTATIVE DYSON agreed that we needed to stick by our
commitments. He asked Mr. Flanagan if a political subdivision in
the state was absolutely free to contract out for the next cycle of
services that were formally done by public employees under a labor
agreement?
Number 0264
MR. FLANAGAN replied that would depend on the outcome of the
negotiations for the new contract.
Number 0284
REPRESENTATIVE DYSON wondered if, at the end of a contractual
period, under present state law, there was an obligation to do any
negotiating. If a political subdivision decided that it wanted to
eliminate doing this with public employees and wanted to contract
it out, could it not just announce that decision, and not have to
begin a new contract?
Number 0309
MR. FLANAGAN replied not until a new contract was negotiated. In
most contracts, there was a duty to bargain for a successor
agreement, or a lack there of. There was a transition period that
would have to be undertaken. It would depend on the existing
contractual language in regards to its own expiration.
Number 0328
CHAIR JAMES stated that she generally supported people forming a
union to negotiate the way that they were treated in the work
place. In the private sector, she also supported the ability to
negotiate wages and benefits. In the public sector, however, she
found union negotiations troubling; because, generally the
negotiations were done with the Administration or the authorized
employees and the workers, followed with the approval by the
elected council and then the public, who ultimately were the
employers. "This is a government where all the government is a
people's government. And, we're all participants." Public
employee unions was that it was set up to be conflictive and to not
run smoothly. The reason for bargaining was to make things run
better; or, in other words, an agreement between those who work and
those who tell the people what to do. In addition, the public was
on the non-union side rather than on the union side, nationally.
Trade union membership had declined and most of the union members
were public employees, nationally. She also believed that a deal
made was a deal made, and that the rules should not change in the
middle of a game. However, economics changed and many times the
unions were unbending, especially in small communities. If one
agreed that the public ran the system, then why should they not
have the ability to say, "we don't want to do this anymore?"
Number 0453
MR. FLANAGAN responded he was aware that some differentiated
between public and private employees. The department believed that
when it came to the basic issue of the right to organize, it did
not differentiate because, "a worker is a worker is a worker." A
worker should have the basic right to join collectively for a
collective voice and for strength in numbers to negotiate with his
or her employer. Chair James was correct, nationally, the growth
had been greater in the public sector rather than the private
sector in unionization. The large majority of union members were
still in the private sector; however, at least two-thirds. The
local electorate had its voice in the municipal or state election
that elected the representatives who exercised the statutory
authority under PERA to approve or to reject the monetary terms of
an agreement. It also elected, in most cases, the principle
executive officer charged with negotiating the agreement. The
general climate or tenor of the public sector labor relations in
the state was open to question as to how much discord there was out
there. It was a fact throughout history that a strike, a
protracted impasse, a mediation, or an arbitration decision
received headline news. An agreement that was negotiated
relatively quickly and quietly and passed without controversy
received no ink. In addition, there were numerous examples of when
public employees threw their bargaining agent a half-step forward.
He cited the city of Fairbanks when the employees froze their
agreement and deferred a raise for three to four years in 1986.
They system worked pretty well. The Alaska Labor Relations Agency
had done a lot to try to encourage mediation rather than strikes.
Number 0654
CHAIR JAMES agreed that there were some that worked good and some
that did not work good. She had seen both and she was familiar
with the trials in the Fairbanks area. When the economy was down
and wages were stuck at a certain place, that was when it got even
more controversial because the people who were paying the bills for
the public employees were not making nearly as much so they didn't
want to pay anymore. The city of North Pole opted not to
participate in PERA and they got along real well. "In fact, I
think they're very, very effective and a very good operation in the
city of North Pole." She felt it would be pretty binding for
smaller communities, however. They could opt for PERA when a plant
was in town, for example, and when the plant moved out, what did
the communities do then?
Number 0740
MR. FLANAGAN said there had been organizing attempts in North Pole
when things probably were not going so well. "Nobody's saying all
employees should be in a union. What we're saying is they should
have that right, should they choose, to petition for and then get
an election." And, because North Pole opted out at that time, the
employees did not have that recourse. It was a difference of
philosophy. It was unfortunate when a plant moved out of town, for
example, but it did not give any employer the right to unilaterally
say it was a problem and do away with a collective bargaining
agreement.
Number 0786
CHAIR JAMES asked Mr. Flanagan who should make the decision that
they had a right? Was it an inherent, state statute, or public
right to make that decision?
Number 0805
MR. FLANAGAN replied the legislature in 1972 found that the
employees should have the right to make that decision. A floor
amendment allowed for the "opt-out" exemption. That was the
determining factor. State law still said that employees should
have the right to bargain. However, in this situation employers
had the chance to opt out, of which, some have exercised that
right. The department believed that employees should have the
right to organize, and once it was granted it was meaningless if it
could be taken away.
Number 0847
REPRESENTATIVE DYSON stated that the public could, once and for
all, do away with a right that they once held. The public, once
they have entered into a public employee union agreement, could
never go back to where they were.
Number 0888
MR. FLANAGAN replied, "Yes."
Number 0893
REPRESENTATIVE BERKOWITZ asked Mr. Flanagan if there was anything
that would prevent a re-negotiation in the middle of a contract?
Number 0910
MR. FLANAGAN replied there was nothing to prevent that. The act
would be silent. Most contracts allowed for - by mutual agreement
- for a revisiting or a reopening. The example he cited earlier
from the city of Fairbanks was exactly that. The contract was in
effect for three years with two annual raises which were deferred
for a number of years extending the contract and saving the
employer a great deal of money. Letter-of-agreements were common
in both state and political subdivision agreements for mid-term
amendments to the contract.
Number 0953
REPRESENTATIVE BERKOWITZ asked Mr. Flanagan if Sec. 2 in the bill
would allow political subdivisions to treat their unions
differently than private organizations?
Number 0964
MR. FLANAGAN replied, "Yes." A private sector employer was always
covered by the National Labor Relations Act; and, therefore,
subject to organizing under the act by their employees. Employers
became non-union because the employees at some point decided to de-
certify the union. Private sector employers did not come in and
out of coverage under the National Labor Relations Act, unless
there was Congressional action to amend the statute.
Number 1010
CHAIR JAMES explained her political philosophy was that the people
had the power while Mr. Flanagan said in this case that they did
not have the power. Therefore, "If we say once you're in you can
never get out you're denying future people from making that
decision or changing that decision." She struggled with that
because it did not fit the democratic process. It seemed that the
members of a bargaining unit had more rights than those who were
not a member creating an uneven playing field. Similarly, the
Twentieth Alaska State Legislature could not bind future
legislatures.
Number 1116
MR. FLANAGAN replied the public that would potentially revoke this
right enjoyed the same rights in their work situation in most
private work places. Therefore, "We have the will of the majority
with the protection of the minority in this country. And, if you
believe that collective bargaining is a basic right of workers, I
guess, where we depart is making a differentiation between public
and private workers." The public had a voice or we would not be
here today. "You folks may in fact exercise that and change it.
We hope you don't, but we'll see how it turns out."
Number 1165
REPRESENTATIVE VEZEY explained the cities of Bethel, Kotzebue and
Haines were in court over the subject of their coverage under PERA.
He asked Mr. Flanagan if he knew the outcome of those court cases?
Number 1192
MR. FLANAGAN replied there was closure with the city of Kotzebue
with the superior court decision, therefore, its option to not be
covered under PERA was effective. The city of Haines and their
option to not be covered under PERA was upheld by the Alaska Labor
Relations Agency. There was a remand to the agency and it was
found that the city had effectively exercised its option. He was
not sure of the status of the city of Bethel.
Number 1251
REPRESENTATIVE VEZEY explained his office had called the city of
Bethel and they were still trying to find somebody that knew
something about it.
MR. FLANAGAN stated it sounded like they did not have an agreement,
if it did not know if it was union or not.
Number 1263
REPRESENTATIVE IVAN wondered if once a community decided to
unionize, if it was forever.
CHAIR JAMES replied that currently was the way. The bill would
allow for municipalities or areas to opt out again.
Number 1318
JOHN CYR, President, National Education Association (NEA) - Alaska,
was the next person to testify in Juneau. The NEA-Alaska was
opposed to HB 124. It found both sections onerous. The first
section that allowed for subcontracting was a bad idea for
educational purposes. The law did not just deal with
municipalities and state workers, it also dealt with school
districts. He explained for 20 years school districts were under
Title 14 which did not allow school districts finality in
bargaining. School employees did not have the right to binding
arbitration nor did they have the right to strike. As a result,
the NEA-Alaska spent 20 years talking to members of the legislature
on how to resolve the problem. It was the will of the members that
school districts have binding arbitration to settle labor disputes
with their employees. It was obvious during the discussions that
school districts were not interested in binding arbitration because
they did not want to put the final decision in the hands of a third
party arbitrator, who could be from out of state or not in the
community. Therefore, school districts were put under PERA. The
NEA-Alaska did not want that, but through the negotiation process
it became obvious that it would be the only route to finality. It
gave the districts access to the labor relations agency and a
playing field that was understood. Last year, the process was
tweaked in HB 465. It made the initial proposal for the district
and the association open for public review forcing the school
district to seek input on its proposals from the public. The NEA-
Alaska believed that to be taken out of PERA removed the public and
its oversight in school district negotiations. Right now, there
were 23 contracts being negotiated around the state. "And, you
know they will be settled thoroughly without a whole lot of
rancor."
MR. CYR further stated that the NEA-Alaska believed subcontracting
was a bad idea, especially for schools, because it led to schools-
for-profit. He cited the lunch program where the corporate dollar
meant more than nutrition. He was concerned that health, safety
and the best teaching practices would be less important than
whether or not a corporation made money. In addition,
subcontracting removed the parents from control. The parents,
right now, were ultimately in control of school districts through
the school board and through the negotiation process. "When you
subcontract then the corporate entity is in control of those --
that section of your work force, not the parents, not the
community, but the corporation."
MR. CYR further said there were a lot of unintended consequences
that ran through the bill for school districts. He explained
wages, benefits, working conditions, for example, were bargained
for and a part of every contract; and rightfully so. He cited the
inclusion of parents and teachers to hire, teacher mentoring to
ensure quality and professional growth, school committee to address
gang violence and drugs, student and parental input in evaluations,
student performance bench marks, exit criteria for seniors, and
language for the inclusion of special education children in regular
classrooms were the issue being discussed in Anchorage. And, as a
result of the bill would be taken out of the public control. In
addition, national research indicated that every state that was not
unionized, student performance was lower; it dropped by up to 10
points. It came to the ability of districts and states to keep and
retain quality people; it was as simple as that.
MR. CYR further said, historically, employees had the right to
bargain and to meet with their employers to talk about their work
conditions. That was the very soul of what America was about.
"It's who we are. It's what we do." Therefore, to deny that right
to any group - public or private - was wrong.
Number 1894
REPRESENTATIVE DYSON asked Mr. Cyr if it would be a leap of logic
to infer that the administration was resisting the list of issues
he mentioned in the Anchorage contract?
Number 1927
MR. CYR replied he would not pretend to be a spokesperson for the
administration. But, "Yes." The district was not interested in
those proposals.
Number 1955
REPRESENTATIVE DYSON asked Mr. Cyr if he could infer that
contracting out would have a negative impact, in general, on the
quality of education?
Number 1984
MR. CYR replied there was research that pointed to the fact that
test scores had not gone up but had gone down, therefore, education
suffered over the long-range.
Number 2012
REPRESENTATIVE DYSON asked Mr. Cyr if he would hold the same
position on activities that were outside of the school building,
such as, maintenance?
Number 2034
MR. CYR replied, if it was believed that one of the functions of
unionization was to make sure that the members of the union were
quality employees, then it gave the public and the consumer a
legitimate measure of protection that was not built in the system,
otherwise.
Number 2132
REPRESENTATIVE DYSON asked Mr. Cyr if the association would resist
any contracting out even for school district activities that were
not in the school building?
Number 2146
MR. CYR said he was not sure he understood the question. Bus
drivers, for example, were subcontracted and there had been some
problems. There was very little quality control over who was
hired.
Number 2170
REPRESENTATIVE DYSON asked Mr. Cyr, if the association would resist
any contracting out, even for school district services that did not
have direct contact with the students, such as, maintenance of the
buses?
Number 2198
MR. CYR replied buses were subcontracted in most districts. But,
"Yes," the association believed that every employee in a school
district moved the agenda of the district and worked for the kids
whether they were in a warehouse or a teacher in front of the
classroom. They were all working for the children.
Number 2236
CHAIR JAMES commented on the bargaining in Anchorage. In addition,
the public was not happy with government, unlike Representative
Elton who thought it was wonderful. Yet, they did not vote or
participate because they felt it would not do any good. They were
just generally dissatisfied. The NEA-Alaska was taking a different
approach now. She was encouraged and happy because it was
listening to the public.
Number 2355
CHAIR JAMES further stated speech teachers were contracted out.
Contracting out did have its merits, especially when it was not a
full-time job for somebody.
Number 2398
MR. CYR stated that in the past the association had not told the
public what it was bargaining. It was trying now to be responsive
to the public comments.
MR. CYR further stated that speech teachers were not subcontracted.
TAPE 97-25, SIDE A
Number 0001
MR. CYR stated that mental health positions were contracted out
because school districts did not have the resources to provide the
in-depth psychological work that some kids needed.
Number 0057
CHAIR JAMES explained that she had friends who went from school
district to school district testing students who were contracted
out.
MR. CYR replied she was correct.
Number 0091
REPRESENTATIVE ELTON pointed out that in some cases he agreed with
Mr. Dillon who saw a role for government and who saw a role for
government employees. "I would just like to say that that too
often I think we `demonize' government employees whether they're
operating under a collective bargaining agreement or not."
REPRESENTATIVE ELTON further stated that the committee had not
heard from one school district, municipality, borough or anyone on
this issue today saying that there was a problem that needed to be
addressed by the adoption of this bill. "I think that many people
out there probably think that we're trying to address a problem
that they don't have and if they have it they aren't telling us
about it."
Number 0184
CHAIR JAMES stated that the prime responsibility of government was
public safety. And, the committee did talk about public safety a
little while ago with a different connotation. She agreed with
Representative Elton, however, she thought that the room would be
full of people today since this was a controversial issue.
Number 0223
MR. CYR stated that Anchorage was out of PERA so it did not have to
bargain with its employees; yet, it did bargain because it found it
to be the most expedient way. He also cited the city of Palmer and
probably Fairbanks were out of PERA and they also bargained with
their employees. "It is the most expedient way to negotiate
working conditions with employees. It is the standard of the
industry for that very reason. The state in its declaration of
policy stated that "the legislature finds that joint decision-
making is the modern way of administering government."
Number 0318
REPRESENTATIVE VEZEY stated that most of the citizens of the state
of Alaska did not live in a community that was covered by PERA.
The municipality of Anchorage, the City and Borough of Juneau, the
Mat-Su Borough, and the city of Kodiak, for example, opted out of
PERA. There were approximately 18 communities in the state and
some other political subdivisions that were covered by PERA. The
bill was saying; therefore, to a distinct minority of Alaskans,
that the way they governed themselves was not equal to the way
others governed themselves.
Number 0388
MR. CYR replied that all 54 school districts were covered by PERA.
Every school entity in the state fell under PERA. Therefore, the
bill would certainly affect the school districts and thousands of
employees.
CHAIR JAMES asked the committee members if they were comfortable
moving the bill out of the committee today?
Number 0455
REPRESENTATIVE ELTON moved to table HB 124.
CHAIR JAMES called for a roll call vote. Representatives James,
Dyson, Hodgins, Ivan and Vezey voted against the motion.
Representatives Berkowitz and Elton voted in favor of the motion.
House Bill 124 was not tabled.
Number 0515
REPRESENTATIVE HODGINS moved that HB 124 move from the committee
with individual recommendations and the attached fiscal note(s).
Number 0524
REPRESENTATIVE ELTON objected.
Number 0538
REPRESENTATIVE BERKOWITZ stated that Representative Elton made a
compelling point. The bill was trying to fix a problem that no one
had acknowledge existed. He had not heard from a single school
district or political subdivision that said it wanted to opt out.
"We can go around fixing problems that don't exist all day long.
I just don't think that we ought to be sticking our nose, much less
the camel's nose, under that tent."
CHAIR JAMES called for a roll call vote. Representative James,
Dyson, Hodgins, Ivan and Vezey voted in favor of the motion.
Representatives Berkowitz and Elton voted against the motion.
House Bill 124 was so moved from the House State Affairs Standing
Committee.
HJR 25 - CONST. AM: PERM. FUND INCOME & DIVIDEND
The next order of business to come before the House State Affairs
Standing Committee was HJR 25, Proposing amendments to the
Constitution of the State of Alaska to guarantee the permanent fund
dividend, to provide for inflation-proofing, and to require a vote
of the people before spending undistributed income from the
earnings reserve of the permanent fund; and relating to the
permanent fund.
CHAIR JAMES called for a brief at east at 9:46 a.m.
CHAIR JAMES called the House State Affairs Standing Committee back
to order at 9:48 a.m.
CHAIR JAMES called on Representative Alan Austerman, sponsor of HJR
25, to present the resolution.
Number 0680
REPRESENTATIVE ALAN AUSTERMAN, Alaska State Legislature, explained
that over the last two and one-half years, since he had been a
legislator, the first thing out of people's mouth was to leave the
dividend alone when discussing a balanced budget. When he tried to
explain the parameters of the permanent fund dividend program and
how it was set up, the people had a hard time understanding because
their dividend was part of the Permanent Fund. "When you mention
dividend all they think about is Permanent Fund. And, they don't
associate the difference in how the dividend program is set up
within the Permanent Fund." Therefore, his frustration, as well as
discussions with Senator Lyda Green, author of a similar senate
bill, and her staff, he volunteered to introduce a similar bill in
the House.
REPRESENTATIVE AUSTERMAN explained that HJR 25 proposed amending
the state constitution to guarantee the dividend checks to the
people of the state. The interest earnings were used three ways:
For the paying of the dividend, for inflation proofing and for the
undistributed interest earnings. When he talked to people about
the original intend of the Permanent Fund, to help balance the
budget as oil revenues declined; they said, "Don't touch my
dividend program." It was hard to have a good conversation with
the people because they assumed one was attacking the dividend
program.
REPRESENTATIVE AUSTERMAN explained that HJR 25 said inflation
proofing and the dividend program could not be touched by the
legislature without the vote of the people. Under current statute,
the dividend program, inflation proofing and the spending of the
undistributed interest earnings were set so that legislators could
eliminate the program. Most people thought that they were already
protected by a vote of the people. In conclusion, he introduced
the resolution to give the people a comfort level and to give them
a say in whether the legislators could touch or spend their
dividend, the inflation proofing or the undistributed interest
earnings. He explained he would introduce a committee substitute
to leave the undistributed interest earnings in statute, if it was
needed to balance the budget at some point in time, for example.
Number 1047
CHAIR JAMES asked Representative Austerman if the permanent fund
dividend program was first and then inflation-proofing or did he
turn it around?
Number 1058
REPRESENTATIVE AUSTERMAN replied it was left exactly the way it was
in statute now. The dividend program and how the funds were used
were number one.
Number 1065
REPRESENTATIVE HODGINS asked to be excused from the meeting. He
was chairman of another committee that was starting soon.
Number 1078
REPRESENTATIVE VEZEY said he did not hear more about a subject when
he was campaigning than the Permanent Fund. Therefore, he moved
that HJR 25 move from the committee.
CHAIR JAMES agreed with Representative Vezey, but more discussion
was needed. She assumed he was being factitious.
Number 1105
REPRESENTATIVE DYSON said her assumption was unwarranted.
CHAIR JAMES said the resolution did have two more committees of
referral. It could be moved out of the committee, if that was the
will of the members.
Number 1115
REPRESENTATIVE VEZEY moved that HJR 25 move from the committee with
individual recommendations and the attached fiscal note(s).
Number 1118
REPRESENTATIVE BERKOWITZ objected. He was concerned that the
resolution would jeopardize the Permanent Fund, therefore, he would
like to hear more about it. "If we vote on it now, we're basically
pushing $20 billion out the door without listening to it."
CHAIR JAMES said she and Representative Berkowitz would hear it
again in the House Judiciary Standing Committee.
REPRESENTATIVE BERKOWITZ replied he was just concerned about
everyone's political self-interest. "I wouldn't want them to have
to go back to their districts and have to hear how they missed the
opportunity on protecting the Permanent Fund."
Number 1173
REPRESENTATIVE AUSTERMAN said he had anticipated more discussion in
this committee. He would prefer that the committee members look at
the committee substitute before moving the resolution out of the
committee.
CHAIR JAMES stated there was not enough time today to move the bill
out. It would be scheduled again for Thursday, March 13, 1997.
Number 1219
REPRESENTATIVE VEZEY noted, for the record, that Representative
Austerman held his own bill up.
Number 1231
JIM KELLY, Research and Liaison Officer, Alaska Permanent Fund
Corporation, Department of Revenue, was the first person to testify
in Juneau. Any decisions on how to use the Permanent Fund income
were rightly placed with the legislature and the executive branch,
and not with the Board of Trustees. However, there was a
connection between distribution policy and investment policy which
had evolved over the years. The Permanent Fund had been blessed
with some very favorable financial markets for the last decade or
so, and as it moved higher and higher into equities it had
experienced good volatilities. It had not experienced, however,
when equity markets fell dramatically. Therefore, to put a
distribution policy into the constitution and to expect it to work
for the next 20 years was not correct. The world would be a
different place in the next 20 years and the investment markets
would perform differently. Therefore, the board would like the
opportunity to look at the options and the alternatives available,
and even some distribution policies that existed, so that a change
would not have any unintended negative consequences. Many of these
issues were discussed in the letter from Michael J. O'Leary, Jr.,
Executive Vice President, Callan Associates, dated March 10, 1997.
There was also a letter addressing the concerns of the tax-exempt
status of the Permanent Fund and the possible consequences of the
resolution. The corporation wanted to help the legislature
calculated the income available for distribution and still protect
and grow the Permanent Fund principle. "You all hear about the
dividend end of it. We spend our time looking at the investment of
the principle part."
Number 1403
CHAIR JAMES stated that she had the feeling that inflation-proofing
should be done first before the dividend.
Number 1410
MR. KELLY replied the Board of Trustees had supported that in the
past and would probably view it favorably in the future.
Number 1416
CHAIR JAMES said that the earnings had been put back in a number of
times and that the legislature had made deposits over and above its
requirement creating the argument of pre-inflation-proofing. She
asked Mr. Kelly if he agreed with the argument?
Number 1434
MR. KELLY replied he would not agree with that according to the
reading of the statute. The statute required inflation-proofing
every year and it spelled out how it would happen.
Number 1447
CHAIR JAMES explained there were projections in 1993 that by the
time dividends and inflation-proofing were paid there would not be
enough for inflation-proofing in the long-haul. She did not quite
buy that argument at the time, but there was the potential for that
under the current program.
MR. KELLY replied that the board's consultant said over a rolling
five year period, 21 percent of time there was no real income, zero
income. It was not only possible that there would not be money for
inflation-proofing, but there might not be money for dividends as
well because the distribution policy was based on realized income.
There were other ways to do it to minimize the impact, of which,
the Board of Trustees continued to look at. He suggested that the
legislature look at it as well.
Number 1509
CHAIR JAMES explained she was scared of the stock market because
she was born one month after the crash in 1929. Therefore, she was
very concerned about a crash, despite protections and improved
technology. She was pleased with the Board of Trustees and its
decisions, however.
Number 1587
CHAIR JAMES announced the resolution would be held over to
Thursday, March 13, 1997.
ADJOURNMENT
Number 1596
CHAIR JAMES adjourned the House State Affairs Standing Committee
meeting at 10:06 a.m.
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