Legislature(1997 - 1998)

02/19/1997 01:08 PM House TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
            HOUSE TRANSPORTATION STANDING COMMITTEE                            
                       February 19, 1997                                       
                           1:08 p.m.                                           
 MEMBERS PRESENT                                                               
 Representative Bill Williams, Chairman                                        
 Representative Beverly Masek, Vice Chairman                                   
 Representative John Cowdery                                                   
 Representative Jerry Sanders                                                  
 Representative Kim Elton                                                      
 Representative Al Kookesh                                                     
 MEMBERS ABSENT                                                                
 Representative Bill Hudson                                                    
 OTHER HOUSE MEMBERS PRESENT                                                   
 Representative Joe Green                                                      
 COMMITTEE CALENDAR                                                            
 *HOUSE BILL NO. 95                                                            
 "An Act relating to motor vehicle registration, licensing, and                
 insurance; and providing for an effective date."                              
      - HEARD AND HELD                                                         
 OVERVIEW:  ALASKA MARINE HIGHWAY SYSTEM                                       
 HOUSE BILL NO. 55                                                             
 "An Act relating to the fiscal operations of the Alaska Railroad              
 Corporation and to land acquired by the State of Alaska under the             
 Alaska Railroad Transfer Act of 1982 or otherwise acquired for                
 railroad purposes; and providing for an effective date."                      
      - HEARD AND HELD                                                         
 (* First public hearing)                                                      
 PREVIOUS ACTION                                                               
 BILL:  HB 95                                                                
 SPONSOR(S): REPRESENTATIVE(S) GREEN,Bunde,Rokeberg                            
 JRN-DATE      JRN-PG             ACTION                                       
 01/29/97       168    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/29/97       168    (H)   TRANSPORTATION, JUDICIARY                         
 02/05/97       252    (H)   COSPONSOR(S): BUNDE                               
 02/10/97       297    (H)   COSPONSOR(S): ROKEBERG                            
 02/19/97              (H)   TRA AT  1:00 PM CAPITOL 17                        
 BILL:  HB 55                                                                 
 SHORT TITLE: ALASKA RR BUDGET AND LAND                                       
 JRN-DATE      JRN-PG             ACTION                                       
 01/13/97        42    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/13/97        42    (H)   TRANSPORTATION, FINANCE                           
 01/15/97        78    (H)   STA REFERRAL ADDED                                
 02/05/97              (H)   TRA AT  1:00 PM CAPITOL 17                        
 02/05/97              (H)   MINUTE(TRA)                                       
 02/10/97              (H)   TRA AT  1:00 PM CAPITOL 17                        
 02/10/97              (H)   MINUTE(TRA)                                       
 02/17/97              (H)   TRA AT  1:00 PM CAPITOL 17                        
 02/17/97              (H)   MINUTE(TRA)                                       
 02/19/97              (H)   TRA AT  1:00 PM CAPITOL 17                        
 WITNESS REGISTER                                                              
 KRISTY TIBBLES, Legislative Secretary                                         
   to Representative Joe Green                                                 
 Alaska State Legislature                                                      
 Capitol Building Room, 118                                                    
 Juneau, Alaska   99802                                                        
 Telephone:  (907) 465-4831                                                    
 POSITION STATEMENT:  Sponsor testimony on HB 95.                              
 JUANITA HENSLEY, Chief Driver Services                                        
 Division of Motor Vehicles                                                    
 Department of Public Safety                                                   
 P.O. Box 20020                                                                
 Juneau, Alaska   99811                                                        
 Telephone:  (907) 465-4361                                                    
 POSITION STATEMENT:  Testified in support of HB 95.                           
 JOE YOUNG                                                                     
 3126 Bettles Bay Loop                                                         
 Anchorage, Alaska   99515                                                     
 Telephone:  (907) 277-0515                                                    
 POSITION STATEMENT:  Testified on HB 95.                                      
 RICH KASTELLER, representative                                                
 address and telephone number not provided                                     
 JOHN GEORGE, National Association of Independent Insurers                     
 3328 Fritz Cove Road                                                          
 Juneau, Alaska   99801                                                        
 Telephone:  (907) 789-0172                                                    
 POSITION STATEMENT:  Testified on HB 95.                                      
 MICHAEL LESSMEIER, State Farm Insurance Company                               
 One Sealaska Plaza                                                            
 Suite 303                                                                     
 Juneau, Alaska   99802                                                        
 Telephone:  (907) 586-5912                                                    
 POSITION STATEMENT:  Testified on HB 95.                                      
 GARY HAYDEN, Systems Director                                                 
 Alaska Marine Highway System                                                  
 Department of Transportation & Public Facilities                              
 3132 Channel Drive                                                            
 Juneau, Alaska   99801                                                        
 Telephone:  (907) 465-8827                                                    
 POSITION STATEMENT:  Presented the marine highway overview.                   
 JOE PERKINS, Commissioner                                                     
 Department of Transportation & Public Facilities                              
 3132 Channel Drive                                                            
 Juneau, Alaska   99801                                                        
 Telephone:  (907) 465-8827                                                    
 POSITION STATEMENT: Spoke on the marine highway overview                      
                     Testified against HB 55.                                  
 CHRIS KNIGHT, Researcher                                                      
   to Representative Terry Martin                                              
 Alaska State Legislature                                                      
 Capitol Building, Room 502                                                    
 Juneau, Alaska   99901                                                        
 Telephone:  (907) 465-3783                                                    
 POSITION STATEMENT:  Testified on HB 55.                                      
 JIM BALDWIN, Assistant Attorney General                                       
 Governmental Affairs Section                                                  
 Department of Law                                                             
 P.O. Box 110300                                                               
 Juneau Alaska   99811                                                         
 Telephone:  (907) 465-3600                                                    
 POSITION STATEMENT:  Testified on HB 55.                                      
 ACTION NARRATIVE                                                              
 TAPE 97-9, SIDE A                                                             
 Number 001                                                                    
 CHAIRMAN BILL WILLIAMS called the House Transportation Standing               
 Committee to order at 1:08 p.m.  Members present at the call to               
 order were Representatives Williams, Masek, Cowdery, Sanders and              
 Elton.  Representative Kookesh arrived at 1:15 p.m.  Representative           
 Hudson was absent.                                                            
 HB 95 - MOTOR VEHICLE INSURANCE & LICENSING                                 
 Number 056                                                                    
 CHAIRMAN WILLIAMS announced the first order of business was HB 95,            
 "An Act relating to motor vehicle registration, licensing, and                
 insurance; and providing for an effective date."                              
 Number 088                                                                    
 KRISTY TIBBLES, Legislative Secretary to Representative Joe Green,            
 read the following sponsor statement into the record:                         
 "HB 95 will allow the Department of Public Safety to create and               
 maintain an insured motorist identification database for the                  
 purpose of verifying compliance with the mandatory motor vehicle              
 insurance provisions of AS 28.22.  The program will cross-index               
 drivers licenses and vehicle registrations with insurance policy              
 records, provided monthly by all insurance companies doing business           
 in Alaska.  Using this database, a statewide list of uninsured                
 motorists will be generated and warning letters will be mailed,               
 requiring motorists to provide proof of insurance or to obtain                
 insurance.  The database system will allow peace officers making              
 routine traffic stops to electronically verify that a person has              
 valid auto insurance.                                                         
 "The Department will contract with a third party agent to establish           
 the insured motorist identification database.  To provide                     
 confidentiality of records, a provision in the bill prohibits                 
 public disclosure of the information in the database.  The cost for           
 maintaining the database will be covered by a surcharge on all                
 vehicle registrations.                                                        
 "The uninsured motorist database has had a significant impact on              
 the uninsured motorist population in Utah.  Since its                         
 implementation in 1995, statistical data show that Utah's uninsured           
 motorist population 322,898, 23.18 percent of all Utah registered             
 vehicles have been reduced by 43 percent to under 140,000                     
 motorists.  If we apply Utah's percentages to Alaska's 630,423                
 registered vehicles, 145,000 may be uninsured.  A 43 percent                  
 reduction like Utah had would result in 64,298 fewer uninsured                
 motorists on Alaska's highways."                                              
 Number 267                                                                    
 REPRESENTATIVE JOHN COWDERY asked if his understanding was correct            
 that existing law requires mandatory insurance but unless there is            
 an accident it is unknown as to whether the driver is insured.                
 MS. TIBBLES replied that was her understanding.                               
 Number 307                                                                    
 JUANITA HENSLEY, Chief Driver Services, Division of Motor Vehicles,           
 Department of Public Safety, stated that there is a self                      
 certification mandatory management program in the state of Alaska.            
 She stated it allows a person to self certify that they have                  
 liability coverage of their vehicle at the registration but does              
 not require proof.  She stated that it requires the division to               
 suspend the drivers license of anyone who is involved in a motor              
 vehicle accident of over $500, if the driver can not prove that               
 they are insured.  She stated that it is an after the fact                    
 situation as opposed to showing proof of insurance at the point of            
 registering the car.                                                          
 Number 372                                                                    
 REPRESENTATIVE COWDERY asked if his understanding was correct that            
 the existing law states that everybody is supposed to be insured              
 but it is not found out until after a tragedy the person was not              
 Number 394                                                                    
 MS. HENSLEY replied that is correct, we do not verify that the                
 person is insured until they have had an accident.                            
 Number 422                                                                    
 CHAIRMAN WILLIAMS asked for a motion to accept the proposed                   
 committee substitute.                                                         
 Number 436                                                                    
 REPRESENTATIVE BEVERLY MASEK moved to adopt CSHB 95(TRA) Version E            
 as a working draft.  There being no objection, CSHB 95(TRA),                  
 Version E was adopted.                                                        
 Number 465                                                                    
 MS. HENSLEY stated that the reason the Department of Public Safety            
 supports the bill because it is an efficiency measure, if the                 
 department is able to verify on line, that the vehicle is insured             
 it would save the department an immense amount of paper work.                 
 Number 531                                                                    
 REPRESENTATIVE COWDERY asked if the bill addresses a person who               
 owns multiple vehicles and suspends the insurance at certain times.           
 Number 559                                                                    
 MS. HENSLEY replied if it is a situation like a motor home that               
 would be registered on a seasonal basis than the vehicle would only           
 need to verify insurance only for that period of time that you                
 would be driving it.  She stated that the department does issue a             
 seasonal registration for vehicles.                                           
 Number 628                                                                    
 REPRESENTATIVE COWDERY asked if liability would be an issue, since            
 he has four vehicles and he suspends the insurance only for six or            
 eight months while he is not driving.                                         
 Number 686                                                                    
 MS. HENSLEY replied that it would not be any different then what is           
 being done today, if before the vehicle was driven the insurance              
 was reinstated.  She stated that she did not think that it needs to           
 be spelled out in statute but would not be adverse to adopting                
 regulations to handle that.                                                   
 Number 731                                                                    
 REPRESENTATIVE COWDERY stated that he thinks it is a good bill but            
 he does not want it to cause problems.                                        
 Number 772                                                                    
 MS. HENSLEY replied that it is not unlike owners of airplanes that            
 suspend the insurance in the winter months.                                   
 Number 787                                                                    
 CHAIRMAN WILLIAMS asked if there was a fiscal note with the bill.             
 Number 804                                                                    
 MS. HENSLEY replied that once the amendments are adopted and a                
 committee substitute is developed than the division will have a               
 fiscal note for the committee.                                                
 Number 851                                                                    
 REPRESENTATIVE COWDERY moved to adopt Amendment 1.                            
 Number 883                                                                    
 MS. HENSLEY stated that Amendment 1 would increase the registration           
 surcharge fee from $1 to $2 but it will still be $1 a year because            
 the registration would be for two years.  She stated that it would            
 be cost effective to register for two years and charge the fee for            
 the two years.  She stated that by contracting with a third party             
 agent it will go through a bidding process and a $1 a year will not           
 be enough to support the 630,000 vehicles registered in Alaska.               
 Number 927                                                                    
 REPRESENTATIVE KIM ELTON stated that it was his understanding that            
 motor vehicle registration fees are not reappropriated to the                 
 Division of Motor of Vehicles.  He asked if the division is not               
 getting the full amount now what makes the division think that it             
 will get the full amount plus $2.                                             
 Number 966                                                                    
 MS. HENSLEY replied that the Division of Motor Vehicles collects              
 about $36 million a year of which $29 million is deposited in the             
 general fund, the remainder $7 million is collected for                       
 municipality taxes and remanded back to the municipalities.  She              
 stated that we are collecting $29 million a year and have a budget            
 of $8.1 million.  She stated that the division collects four times            
 the amount that they are appropriated back.  She stated that the              
 division is at the mercy of the legislature and that the division             
 tries come up with a mechanism for it to pay for itself so that               
 those funds can be reappropriated back in general funds.                      
 Number 1029                                                                   
 REPRESENTATIVE ELTON stated "I'll probably vote for the amendment.            
 It probably means nothing, I mean we could pay for several of these           
 systems if we would just reappropriate to them the money that they            
 are bringing in and I think it is kind of foolish that we are doing           
 this because I think it just means that we are going to increase              
 revenues to the general fund and I just like to remind all my                 
 majority colleagues that this is essentially a tax that we're                 
 adding, this isn't a user fee because the user fees are already put           
 in the general fund for expenditure elsewhere."  He stated that he            
 would imagine that most of the costs are front-end costs for                  
 establishing the hardware and software system, and asked that if              
 this was correct does the division anticipate the fee going away or           
 being reduced.                                                                
 Number 1079                                                                   
 MS. HENSLEY replied that she did not see the fee going away because           
 it is a fee to maintain the database.  She stated that according to           
 the bill, the insurance industry is required to submit to the                 
 division on a monthly basis, updates of any new vehicles or                   
 policies being added or any changes in existing policies.  She                
 stated that it would also require that the company maintains                  
 current technology.                                                           
 Number 1141                                                                   
 CHAIRMAN WILLIAMS asked if there was an objection to Amendment 1.             
 Number 1151                                                                   
 REPRESENTATIVE ELTON stated that he objected to Amendment 1.  He              
 stated that we are collecting more than enough money to accomplish            
 the program and this is essentially a tax increase because it will            
 go into the general fund and the same amount of money will be                 
 reappropriated as in the past.  He said, "I don't think this is               
 going to kill the bill if we deny this hidden tax."                           
 Number 1190                                                                   
 REPRESENTATIVE COWDERY stated that we won't appropriate as much in            
 the future because the workload in the department will diminish.              
 He stated that he does not look at Amendment 1 as a tax and the               
 bill assures responsibility for the public.                                   
 Number 1279                                                                   
 REPRESENTATIVE ELTON stated that he is in total support of the bill           
 but he does not support paying four times more to register his                
 vehicle than it takes to operate the program.  He stated that                 
 Amendment 1 is not going to go to establish this system.                      
 Number 1321                                                                   
 MS. HENSLEY stated that it is correct that the division does                  
 collect a lot more taxes or fees than allowed in the budget.  She             
 stated that last year the division had to delete 13 positions from            
 the budget, four were within the drivers services unit that                   
 processes accidents for at fault drivers to make sure that the                
 victims are paid.  She stated that the program was eliminated due             
 to budget under funding, the bill will create the efficiencies to             
 add part of that program back.                                                
 Number 1402                                                                   
 CHAIRMAN WILLIAMS asked if the fiscal note that will be presented             
 if the bill is passed out will be positive or negative.                       
 Number 1412                                                                   
 MS. HENSLEY stated that it would probably be a wash, in that it               
 will show program receipts coming in and then out to pay for the              
 maintenance of such programs resulting in a net end of zero.                  
 Number 1440                                                                   
 CHAIRMAN WILLIAMS stated that the bill is not going to the finance            
 Number 1450                                                                   
 MS. HENSLEY replied that is correct it is not referred to the                 
 finance committee and with the fiscal note it would have to be                
 referred to the committee.                                                    
 Number 1453                                                                   
 CHAIRMAN WILLIAMS called for a role call vote.  Voting for                    
 Amendment 1 were Representatives Cowdery, Sanders and Williams.               
 Voting against Amendment 1 were Representative Kookesh, Elton and             
 Masek.  Chairman Williams announced that Amendment 1 failed.                  
 Number 1525                                                                   
 REPRESENTATIVE ELTON made a motion to adopt Amendment 2.                      
 Number 1545                                                                   
 MS. HENSLEY stated that Amendment 2 is a technical amendment of               
 Section 5, where it allows the division to verify if a person has             
 insurance.  She stated that if the license was suspended under the            
 point system and then reinstated it could be verified                         
 Number 1570                                                                   
 CHAIRMAN WILLIAMS asked if there was an objection.  Hearing none,             
 Amendment 2 passed.                                                           
 Number 1580                                                                   
 MS. HENSLEY  stated that the fiscal note will reflect because of              
 Amendment 1 failing, approximately $300,000 coming in general fund            
 revenues because it still maintains the $1 processing fee but it              
 will also show an additional $300,000 needed for the program                  
 itself.  She stated that the fiscal note will be for $300,000.                
 Number 1601                                                                   
 REPRESENTATIVE MASEK asked that on page 1, Line 7, it states that             
 every month the insurance agencies have to report to the Department           
 of Public Safety.                                                             
 Number 1624                                                                   
 MS. HENSLEY replied that the seventh day of each calendar month the           
 insurance industry will provide to the division a form that a                 
 person has insurance on the vehicle.                                          
 Number 1647                                                                   
 REPRESENTATIVE MASEK asked if she could tell what the reporting               
 period is currently under statute.                                            
 Number 1655                                                                   
 MS. HENSLEY stated that there is no reporting requirement other               
 than the fact that a person just signs their registration                     
 indicating that they have insurance.                                          
 REPRESENTATIVE MASEK asked if the system has been working.                    
 MS. HENSLEY stated that it is a system that is labor intensive and            
 it is not efficient for the state to operate, it would be faster              
 and more accurate to get information electronically.                          
 Number 1696                                                                   
 REPRESENTATIVE MASEK asked if it puts a big burden on private                 
 industry and the insurance companies to have to report once a                 
 Number 1705                                                                   
 MS. HENSLEY stated that she could not address what the burden would           
 be but because there is going to be more drivers being insured, the           
 uninsured motorists claims will lessen.                                       
 Number 1735                                                                   
 REPRESENTATIVE COWDERY said "You said it is a monthly reported                
 requirement by the insurance industry but say I am financing homes            
 or something like that, they issue a policy and there is no more --           
 say for a twelve month period and then if the policy is cancelled             
 or something like that for whatever reason or the premium is not              
 paid to renew the insurance companies generally are required to               
 notify the lender of this circumstances.  Would that be more                  
 appropriate or is that what we got -- that you're proposing the               
 same thing."                                                                  
 Number 1775                                                                   
 MS. HENSLEY replied that if a person is required to file a                    
 certificate of SR22 insurance, it requires a piece of paper to be             
 sent to the division.  She stated that under the bill it would be             
 reported under a electronic format and it can be verified                     
 electronically that they have the SR22 insurance and the paper slip           
 does not need to be maintained by the division.  She said that if             
 a person cancels it, the statute requires them to report it within            
 ten days after cancellation through the submission paperwork, under           
 the bill, the database would just have to be updated.                         
 Number 1842                                                                   
 JOE YOUNG, testified via teleconference from Anchorage, that he is            
 a licensed driver for 28 years and his wife has been a licensed               
 driver for 14 years, during which time they have been involved in             
 10 accidents, six of which were uninsured drivers.  He stated that            
 he can not afford not to have insurance and being that 60 percent             
 of the people he has been in accidents with have been uninsured, he           
 pays the extra for the premiums and deductibles.  He stated that              
 uninsured motorists are not responsible drivers and would like                
 drivers to have insurance and be required to show proof of                    
 Number 1957                                                                   
 RICH KASTELLER, representative, Insurite, the vendor that runs the            
 Utah uninsured motorist database, testified via teleconference from           
 Salt Lake City, that he would and answer any questions.                       
 Number 2005                                                                   
 REPRESENTATIVE COWDERY asked what his affiliation was.                        
 Number 2016                                                                   
 MR. KASTELLER stated that Insurite is a private industry that has             
 been contracted with the state of Utah to administer and oversee              
 the uninsured motorist database.                                              
 Number 2062                                                                   
 JOHN GEORGE, National Association of Independent Insurers, a                  
 property casualty trade association, stated that Allstate, USAA and           
 Geico, that write a considerable amount of automobile insurance are           
 members.  He stated that his clients are concerned because a                  
 renewal date on an insurance contract is an asset.  He stated, "If            
 you know that someone's insurance is going to expire on June 1st,             
 and you want to write insurance, if you can find out that                     
 information than I am going to go out and solicit your business."             
 He said that the bill states there would be confidentiality but if            
 it is in a computer database, hackers can go in and get the                   
 information out.  He stated that employees could print out and sell           
 the information to a third party.                                             
 Number 2123                                                                   
 MR. GEORGE stated that it costs about $6 per policy for them to               
 obtain this information separately and report it to the state or to           
 the private database.  He stated that the cost has to be passed on            
 to the policy holders, and adding $6 dollars makes the cost even              
 more unaffordable to the insurers.  He stated that they are                   
 currently having trouble convicting people who commit felonies,               
 therefore how could we expect to prosecute uninsured drivers.  He             
 stated that people ought to have insurance but he does not think              
 this bill is the answer.                                                      
 Number 2218                                                                   
 REPRESENTATIVE COWDERY stated that enforcement would have the                 
 ability to suspend drivers licenses and asked what would be a                 
 better way to require responsible drivers.                                    
 Number 2253                                                                   
 MR. GEORGE replied that without creating a big bureaucracy it                 
 probably could not be done.  He stated that there are people                  
 driving with suspended licenses.  He stated that he did not think             
 there is a law that could be passed to make a substantial                     
 difference beyond what is done now and he does not feel that Alaska           
 has a rampant uninsured motorist problem.                                     
 Number 2322                                                                   
 MS. HENSLEY stated that the insurance companies currently maintain            
 their information on computer systems so if hackers were out to get           
 into the database they would be able to get into the insurance                
 companies computers.  She stated this bill will create efficiencies           
 for the division.                                                             
 Number 2385                                                                   
 MICHAEL LESSMEIER, State Farm Insurance Company, stated that he was           
 involved in the mandatory insurance debate in Alaska in 1983.  He             
 stated that the issue of the uninsured driver is not an easy issue            
 to solve.  He stated that in practice a lot of the solutions do not           
 work because not matter what is done a percentage of the public is            
 not going to be forced to buy insurance.  He questioned how much              
 money should be spent to change the percentage of insured drivers             
 by a small amount.  He stated that the solution that the                      
 legislature came up with in 1983 was the Motor Vehicle                        
 Responsibilities Act which would suspend an irresponsible person's            
 drivers license.  He stated that the division does not enforce this           
 anymore.  He stated that it was required to have two points of                
 proof for the mandatory insurance.                                            
 TAPE 97-9, SIDE B                                                             
 Number 006                                                                    
 MR. LESSMEIER stated that it was required that if some one was                
 uninsured that the license was supposed to be suspended for 90                
 days.  He stated that there was a requirement of mandated offers of           
 uninsured and underinsured motorist coverage.  He stated that no              
 matter what is done there will be people that are uninsured and if            
 the division is not even enforcing the present law, how can it be             
 expected to enforce the new law.  He stated the bill will not                 
 change the number of uninsured drivers very much.  He stated that             
 he would encourage the committee not to pass a law that imposes               
 significant burdens on private industry just to computerize the               
 Number 113                                                                    
 CHAIRMAN WILLIAMS stated that it is his intention to hold the bill            
 until Wednesday of next week.                                                
 OVERVIEW: ALASKA MARINE HIGHWAY SYSTEM                                        
 Number 306                                                                   
 GARY HAYDEN, Systems Director, Alaska Marine Highway System,                  
 Department of Transportation & Public Facilities, stated that the             
 economic impacts of the Marine Highway System are both statewide              
 and regional.  He stated that the Marine Highway System returns               
 $171 million into the state's economy as a result of the $28                  
 million state general fund support appropriated into the Marine               
 Highway System.  He stated that the Alaska Marine Highway System              
 employs 860 Alaskans with a payroll of $45 million dollars.  He               
 stated that there are a lot of demands by the different constituent           
 groups that the department strives to meet the needs of and                   
 sometimes they fall short.                                                    
 Number 372                                                                    
 MR. HAYDEN stated that the DOT/PF's objective is to provide service           
 to the traveling public but in providing the service they are                 
 affected by numerous factors.  He said, "Labor contracts set 75               
 percent of our operations, those are on a three year cycle, and               
 then our asset management because the aging of the fleet the                  
 increase regulatory environment that we are operating on.  The fact           
 that we bring the boats out to do increasing maintenance with age.            
 Those affect how much service we can provide."  He stated that the            
 way the vessels are run affects the employees, public and the                 
 service.  He stated that the DOT/PF receives general fund support             
 appropriation of 40 percent of the expenditures and the other 60              
 percent is generated by the revenues from sales and tariffs.  He              
 stated that if costs and revenues are kept in balance the service             
 will fluctuate depending on what the level of the two vectors are.            
 He stated that in the process of trying to balance it the public              
 can be affected.  He stated that the DOT/PF would like to run all             
 the ships 12 months a year, 52 weeks a year to provide the service            
 to the public, however we do not have the revenue to support it and           
 the cost would be way out of budget.                                          
 Number 475                                                                    
 MR. HAYDEN stated that there are seven labor agreements that                  
 affected the operation of the Marine Highway System during the last           
 12 months.  He stated that two near strike occurrences have                   
 affected the operations and they are currently at an impasse with             
 the Marine Engineering Beneficial Union.  He stated that                      
 expenditures have increased as well as the cost of doing business.            
 He stated that currently they are fighting cost containment equal             
 to $1.6 million as a result of risk management and cost of living             
 Number 573                                                                    
 MR. HAYDEN stated that they have had a general fund decrease this             
 year of $346,000 from the department's allocation and $259,00 from            
 the conference committee.  He stated that general funds have been             
 reduced by $344,000.                                                          
 Number 586                                                                    
 MR. HAYDEN stated that in the summer time there are 68,000 people             
 traveling versus 11,000 traveling in the winter creating the                  
 challenge of capacity to meet the demand.  He stated that in the              
 summer, in order to meet the capacity the frequency falls off.  He            
 stated in the winter the vessels are out of service because they              
 need to be repaired and the department does not have the money to             
 run them all year and the traffic demand is not there to support a            
 higher frequency rate.  He stated that daytime arrivals can be                
 arranged by slowing the vessels down and making fewer port calls.             
 He stated that the public would rather have more ports of call per            
 week than the daylight port calls.                                            
 Number 840                                                                    
 MR. HAYDEN stated that the most frequent port calls are between               
 Valdez and Cordova, followed by Whittier because the distance                 
 between ports are closer.  He stated that in the Southwest system,            
 Valdez is the primary destination, followed by Whittier, Cordova              
 and Homer.  He stated that traffic was off about 4 percent for 1996           
 but he is expecting traffic to grow because 1998 is the Gold Rush             
 Number 885                                                                    
 MR. HAYDEN stated that the marine highway fund was created in 1991            
 and it became operational in 1992 at $32 million with a $6 million            
 supplemental appropriation in 1991.  He stated that currently the             
 fund is at $28.4 million but the service level has fallen off to be           
 consistent with the funding levels.  He stated that the vessel                
 replacement fund and the marine highway fund generated interest for           
 the general fund is over $13.5 million.                                       
 Number 958                                                                    
 MR. HAYDEN stated that the mainline vessels help support the feeder           
 vessels which as a result have lower tariff rates.  He stated that            
 the state has invested $129 million over the last ten years and               
 over the next four to five years it is projected another $100                 
 million will be invested, so there will need to be consideration              
 for having to capitalize the marine highway fund if it is spun off            
 into a separate authority.                                                    
 Number 1000                                                                   
 MR. HAYDEN stated that the public has stated that they would like             
 to have some consistency in the schedule.  He stated that last                
 years schedule was run in conjunction with the communities wishes             
 and it will be run again this summer.  He stated that the double              
 shuffle in Lynn Canal will continue and in the month of May the               
 North and South bound sailings will be eliminated due to economics.           
 Number 1081                                                                   
 MR. HAYDEN stated that buying a reservation system will not meet              
 the needs of the passengers so the department has decided to create           
 their own.  He stated that the system will be pc network based,               
 that will allow access for travel agents to readily use the system.           
 Number 1120                                                                   
 MR. HAYDEN stated that the question with the Malaspina is if the              
 state will make the investment to update ferry with the                       
 international requirements to be able to go into Prince Rupert and            
 if not, then what is to be done with the ferry.  He stated that               
 meeting the requirements would cost $53 million in capital                    
 expenditures, therefore, the department is trying to figure out how           
 to redeploy the ship.  He stated "The constraints on eight vessels            
 versus nine vessels is anything that we do for nine vessels, I                
 would consider as an interim solution to the transportation needs             
 in the Southeast and that if there is an expansion in service the             
 vessels will have to change, the capacities will have to grow,                
 there will have to be additional infrastructure of capitalization."           
 He stated that the department has given a day boat contract in Lynn           
 Canal to the unions and are waiting for a response.  He stated that           
 the department has suggested bringing the manning levels on the               
 Malaspina from 47 to 18 and having a one crew system.  He stated              
 that they have removed the language that would prohibit contracting           
 out and they are deciding whether to cater out or to not provide a            
 food service on that voyage.  He stated that the department has               
 requested additional funds in the capital budget request to do                
 additional overhaul and maintenance on the engine, so they will               
 continue to run for a few more years.  He stated that in the end              
 the legislature will have part of the decision on what happens to             
 the authorization and on general fund support.                                
 Number 1296                                                                   
 REPRESENTATIVE COWDERY asked if the reservation system was going to           
 be improved.                                                                  
 Number 1309                                                                   
 MR. HAYDEN replied that Reservation Management System 3 is under              
 design and should be implemented in May, the software would then be           
 purchased over the summer and staff would be trained next fall.               
 Number 1331                                                                   
 CHAIRMAN WILLIAMS asked how long the reservation system has been in           
 the process.                                                                  
 Number 1346                                                                   
 MR. HAYDEN stated that he has been working with the department for            
 two years and the contractor was working shortly after that.                  
 CHAIRMAN WILLIAMS asked if money had been appropriated.                       
 Number 1357                                                                   
 MR. HAYDEN replied that there was money appropriated and it had to            
 be in the stipulation.  He stated that it is being funded using               
 federal highway funds.                                                        
 Number 1387                                                                   
 CHAIRMAN WILLIAMS stated, "It seems like before I got here we were            
 talking about the reservation system."  He asked if Mr. Hayden                
 could get a copy of the appropriation to the committee to let them            
 know how long it has taken.  He stated that it should have been               
 done for this season.                                                         
 MR. HAYDEN stated that he wished he had it on line today as well.             
 CHAIRMAN WILLIAMS stated, "It seems like we were bogged down in the           
 past and we are the ones that are hurt, people call the reservation           
 system and then they are told that the ferries are full and they go           
 down to the dock and they get on anyway and half the ferry is                 
 Number 1450                                                                   
 MR. HAYDEN stated that it is because the reservation system is over           
 ten years old and it is difficult to make changes to the program.             
 He stated, "When our reservation agent pulls up an itinerary for              
 someone who is in Haines and they want to go to Prince Rupert, the            
 computer screen that comes up only shows the trips that are the               
 direct routes on the single ship going from Haines to Prince                  
 Rupert.  However, in the last two years in order to provide more              
 service within the region we have changed some of the ships so they           
 turn in Juneau and go over to Sitka and we provide service to Sitka           
 and back depending on what time of year it is the vessel is either            
 doing it on the north bound leg or the south bound leg.  So the               
 reservation agent, being a new reservation agent did not take the             
 next step and look for connecting trips."  He stated that once he             
 was made aware of it, the system was corrected by telling the                 
 agents how to check the connecting routes.  He stated that the new            
 reservation system will show all of the connecting ships and                  
 transfers that are available.                                                 
 Number 1574                                                                   
 REPRESENTATIVE ELTON asked if he could explain what community                 
 marketing $500,000 meant.                                                     
 Number 1586                                                                   
 MR. HAYDEN stated that in the past the department has not actively            
 pursued tour groups, hotels, or bus companies to use the ferries.             
 He stated that now with nine ships there needs to be a 15 percent             
 increase in traffic to break even.  He stated that he does not see            
 this currently existing, therefore, in order to meet the projected            
 15 percent it may be necessary to meet with the communities that              
 the ferries travel to, to come up with a selling plan.                        
 Number 1692                                                                   
 REPRESENTATIVE ELTON asked if the communities are going to pay the            
 MR. HAYDEN stated that it is the department's proposal at this                
 point, more capacity would benefit the communities and he would               
 like them to help with the cost of marketing.                                 
 Number 1722                                                                   
 REPRESENTATIVE COWDERY asked what the plan is for the new ferry's             
 MR. HAYDEN replied that during June, July and August, it would be             
 deployed in the Southeast with probably three different options of            
 either running it out of Prince Rupert, running it parallel with              
 the Columbia out of Bellingham or deploying it in the region                  
 between Ketchikan, Juneau and Sitka.  He stated that after June of            
 the first year they will provide a trans-gulf sailing connecting              
 Southeast and Southwest Alaska.  He stated that the department does           
 not yet know where the ferry would travel in Southwest Alaska.  He            
 stated that when the Tustumena is off line in the winter the new              
 ferry would pick up that service.                                             
 Number 1821                                                                   
 JOE PERKINS, Commissioner, Department of Transportation and Public            
 Safety, stated that when the department starts looking at what to             
 do with the Malaspina and with the new ferry, the Department starts           
 to look at the entire way the ferry system is run.  He stated that            
 the new ferry will affect the entire fleet and the marine highway             
 Number 1899                                                                   
 CHAIRMAN WILLIAMS asked if Mr. Hayden could give the committee some           
 information on the Marine Engineers Beneficial Association (MEBA).            
 Number 1926                                                                   
 MR. HAYDEN stated currently the department is at an impasse with              
 MEBA, they have taken their strike vote and they can strike at any            
 time they want to.  He stated that he has both the state's and                
 MEBA's proposals.  He stated that there is a disagreement over                
 wages, sick leave and out of state workers' compensation in                   
 relation to the cost of living differential.  He stated that on the           
 wage package the state has offered one-half the Consumer Price                
 Index (CPI) starting on July 1, 1997 and one-half of the CPI on               
 July 1, 1998 for a total of 3 percent.  He stated, "The Inland                
 Boatmen's Union (IBU) is asking for 4.5 percent in their written              
 proposal and they like for that to go back retroactive to July 1,             
 1996, their contract expired November 1, 1996.  We are not                    
 interested in going back retroactively amending the existing                  
 contract, or the contract was expired and give them additional                
 funding and they received a pay raise in 1994 that the other two              
 unions did not receive.  The next point is sick leave.  They are              
 all on a personal leave bank and that conversion was made several             
 years ago in a previous agreement and they have asked us in their             
 written proposal, that I have given you, for us to capitalize at              
 the tune of 131 hours per employee over three years.  We have                 
 stated that we have already contributed to their sick leave bank              
 and are not interested in recapitalizing it.  The third item is out           
 of state and instate pay equity issue, from their prospective,                
 after they watched what was happening in the legislature last year,           
 they were concerned that the legislature was going to do away with            
 the cost of living differential, that was paid to them for living             
 in the state, so they have proposed, on page two of their proposal,           
 to amend Section 172(C) and to give all the instate workers or to             
 give everyone a 5 percent pay raise, per year, for three years and            
 then to help offset that increased cost, they are proposing to                
 decrease the cost of living amount by 5 percent per year for three            
 years.  Those two numbers are not in balance and in the other part            
 of that they are proposing to give out of state workers a 5 percent           
 pay raise and we said that we were not interested in doing that               
 either."  He stated that is what the impasse is over and the                  
 department is scheduled to meet with a federal mediator on March 6,           
 Number 2195                                                                   
 MR. HAYDEN stated that the cost of the department's proposal is               
 $222 thousand over two years and MEBA's proposal is $2.3 million              
 over the life of the contract.                                                
 Number 2257                                                                   
 REPRESENTATIVE ELTON stated, "the total cost of the MEBA package is           
 $2.3 million and the total cost of yours is for $222 thousand.  Is            
 your's for two years and their's for three years."                            
 Number 2287                                                                   
 MR. HAYDEN replied that the both contracts would expire on July 1,            
 1999.  He stated, "the difference is that they want it to be                  
 retroactive from July 1, 1996 and have a pay raise for that time              
 period and have another pay raise on November 1, 1996 when that               
 contract expired."                                                            
 Number 2357                                                                   
 CHAIRMAN WILLIAMS stated that the DOT/PF received two letters.  He            
 asked if he was familiar with the letter from Lew Williams.                   
 Number 2459                                                                   
 MR. HAYDEN stated that he met with Mr. Williams and would reiterate           
 his response to the letter.  He stated that the issued is not                 
 selling the Malaspina but what to do with it when it can no longer            
 be used to go to Prince Rupert.                                               
 TAPE 97-10, SIDE A                                                            
 Number 040                                                                    
 CHAIRMAN WILLIAMS stated that the committee would have another                
 meeting at which he would like to have the department's response              
 written out being that the Malaspina is such a hot issue.  He asked           
 that Mr. Hayden get a written response to the committee.                      
 Number 130                                                                    
 MR. HAYDEN requested that he needs sufficient time to prepare a               
 written response due to his responsibilities.                                 
 Number 193                                                                    
 CHAIRMAN WILLIAMS stated that there was a letter from Andrea                  
 Barkley sent to the Senate Transportation Standing Committee that             
 the committee would like to have a response to.  He stated that the           
 ferry system is a hot issue and he would like to get the issues out           
 in the open as to how the system is working.  He stated that he               
 wants the system to work and he knows that the department has to              
 run the system.  He stated, "I want to give you as much help as I             
 can from this committee be it a forum or questions from the users,            
 I will meet and talk with at least two mayors that are going to be            
 coming to your committee meeting next week."                                  
 Number 387                                                                    
 MR. HAYDEN stated that he would appreciate the committee's                    
 assistance to the Marine Highway System.  He stated that he would             
 summarize the issues concerning the Marine Highway System to be               
 cost, revenue and service.  He stated that they are trying to be              
 responsive to the public, however in the process of doing so the              
 department is trying to contain the cost which affects employees'             
 Number 487                                                                    
 CHAIRMAN WILLIAMS stated that he agreed and he would like to talk             
 to some of the employees.                                                     
 Number 522                                                                    
 MR. HAYDEN stated, "I would like to say the Alaska Marine Highway             
 System is live and well, people are being moved, and we are still             
 providing a service to over 400,000 people and transporting their             
 cars through Southeast and in the process there is a struggle at              
 doing that and that is want the discussion is all about is how to             
 improve that service."                                                        
 Number 576                                                                    
 REPRESENTATIVE COWDERY stated that he had never heard a complaint             
 from anyone who had ridden the ferry except that they could not get           
 a reservation.  He asked if the department had considered a                   
 passenger only ferry.                                                         
 Number 687                                                                    
 MR. HAYDEN  replied that the private sector is stepping into the              
 passenger only market and he stated the question is now what the              
 role is for the state transportation system and how can they mirror           
 the private sector's service.                                                 
 Number 750                                                                    
 REPRESENTATIVE COWDERY asked if he thought the private sector is              
 going to take away the business.                                              
 Number 780                                                                    
 MR. HAYDEN stated that he thought the private sector could                    
 compliment the service that the Marine Highway System provides.  He           
 stated that there are passengers that the system can not                      
 accommodate.  He stated "In some corridors we have been asked to              
 totally vacate that corridor and when we do, you have to look at              
 making that decision in the context of the whole region and the               
 rest of the fleet and what that does to your revenue."                        
 Number 842                                                                    
 REPRESENTATIVE COWDERY asked if there were other places where the             
 ferry system is operated entirely by the private sector.                      
 Number 860                                                                    
 MR. HAYDEN replied that the European ferry market is run by the               
 private sector but it is a volume driven sector in that a high                
 volume of people are always being transported.  He stated that the            
 private sector could generate the revenue in the summertime in                
 Southeast Alaska, however, they would not be here in the wintertime           
 so the question is the economics for the private operator.  He                
 stated that Alaska Statutes prohibit the Marine Highway System from           
 competing with the private sector.                                            
 Number 990                                                                    
 REPRESENTATIVE COWDERY asked if the private sector could operate              
 the whole system better than it is operated now.                              
 Number 1001                                                                   
 MR. HAYDEN stated that if is difficult to answer.  He stated that             
 a foreign crew could be put on the vessels to run them cheaper,               
 however, the state would lose the benefit of having Alaskans                  
 employed and having the system run by people who live here and are            
 sensitive to the needs of the communities.                                    
 HB 55 - ALASKA RR BUDGET AND LAND                                           
 Number 1116                                                                   
 CHAIRMAN WILLIAMS stated the committee would hear testimony on HB
 55.  "An Act relating to the fiscal operations of the Alaska                  
 Railroad Corporation and to land acquired by the State of Alaska              
 under the Alaska Railroad Transfer Act of 1982 or otherwise                   
 acquired for railroad purposes; and providing for an effective                
 CHRIS KNIGHT, Researcher to Representative Terry Martin, stated               
 that the committee substitute would place the Alaska Railroad                 
 Corporation under the Executive Budget Act.  He stated that it                
 would give the legislature and the government the process of open             
 communication with the Alaska Railroad corporation that does not              
 exist currently.                                                              
 Number 1143                                                                   
 REPRESENTATIVE MASEK moved to adopt CSHB 55(TRA) for the purpose of           
 discussion.  There being no objection it was so ordered.                      
 Number 1164                                                                   
 REPRESENTATIVE COWDERY asked that the railroad land has been                  
 increased from 36,000 acres to 44,000 acres of land.                          
 Number 1182                                                                   
 MR. KNIGHT replied that the number is 43,000 acres of land.  He               
 stated that 50 to 60 percent of that has yet to be transferred to             
 the Alaska Railroad Corporation at this time.                                 
 Number 1211                                                                   
 CHAIRMAN WILLIAMS asked what is going to be done with the land                
 portion of the bill.                                                          
 Number 1223                                                                   
 MR. KNIGHT replied that it is up to the chairman of the Legislative           
 Audit Committee to work out the land portion of the bill.                     
 Number 1288                                                                   
 JOE PERKINS, Commissioner, Department of Transportation & Public              
 Facilities, stated that the administration is not in favor of the             
 bill.  He stated that the Alaska Railroad, since the transfer from            
 the federal government, has acted with a deficit for only two of              
 those years.  He stated that the Alaska Railroad provides both                
 public and business purposes and in order to function effectively             
 as a business the railroad needs the flexibility to make business             
 decisions unencumbered by yearly appropriation schedules.  He                 
 stated that the railroad borrows funding from banks and is                    
 dependant on this revenue to manage cash flow.  He stated that the            
 railroad also enters into long term lease agreements which would be           
 hampered by the uncertainty of legislative approval for repayment             
 on a yearly basis.  He stated that at the present time railroad               
 profits would go back into rolling stock and railroad costs.                  
 Number 1383                                                                   
 COMMISSIONER PERKINS stated that state ownership of the railroad              
 has been extremely successful, and does not think changes and risks           
 should be made on a successful operation.  He stated that there are           
 other ways to provide additional legislative oversight.                       
 Number 1506                                                                   
 JIM BALDWIN Assistant Attorney General, Governmental Affairs                  
 Section, Department of Law stated that he was employed by the                 
 attorney general's office when bill was first enacted many years              
 ago.  He referred to a study done by the law firm of Wicwire, Lewis           
 and Shorr on whether the railroad should be subject to the                    
 appropriation of the legislature.  He stated that the result of the           
 study was that other means of oversight should be adopted which               
 could be found under the Enabling Act of the railroad such as,                
 submission of capitol spending plan, review by the governor on                
 fiscal decisions of the railroad, but not the appropriation of the            
 legislature.  He stated that this bill will present legal problems.           
 He stated that the railroad has been in business for a while and              
 has incurred a certain amount of indebtiness.  He stated that this            
 was done through commercial banks being the railroad's creditors.             
 He stated that these arrangements are without a non-appropriation             
 risk.  He stated that a non-appropriation risk means that when                
 money is lent to a public entity, they have to assume that the                
 legislature may not appropriate funds to pay the obligations, so              
 many of these agreements state that there is no backing of the                
 agreement if the legislature fails to appropriate.  He stated that            
 the bill will have to make a provision for this circumstance so               
 that there is not a possibility of a default in any of these                  
 agreements or so that the lenders don't become uncomfortable with             
 the arrangement and declare default.                                          
 Number 1680                                                                   
 CHAIRMAN WILLIAMS asked how the legislature would be liable for               
 what the railroad does.  He asked that if the railroad did not make           
 any money would the state be liable.                                          
 Number 1693                                                                   
 MR. BALDWIN stated that anyone who does business with the railroad            
 is limited to go after only the assets of the railroad.                       
 Number 1750                                                                   
 CHAIRMAN WILLIAMS stated, "They would go back to the railroad which           
 the state owns, and take the railroad for whatever it is but we own           
 it.  So how do we get around the problem, that if your going to go            
 out and invest money and do anything that you want to do, whenever            
 you want to do it and we are sitting back here letting the railroad           
 run and do anything it wants to do and we have no control."                   
 Number 1775                                                                   
 MR. BALDWIN replied that there can be different ways of controlling           
 corporations, some are closely held, having the legislature approve           
 all projects.  He stated that the railroad has service contracts              
 and questions would be raised as to what would happen to those                
 contracts under the Executive Budget Act.                                     
 Number 1857                                                                   
 CHAIRMAN WILLIAMS stated that the legislature feels very                      
 uncomfortable in the direction that the railroad is going, we have            
 no control over what happens to the railroad and we have a lot at             
 Number 1877                                                                   
 MR. KNIGHT replied that Mr. Baldwin's concern of getting investors            
 to sign contracts is a little far fetched, the legislature would              
 not nickel and dime their budget.  He stated the appropriation                
 would be an aggregate amount and not be detailed as to what the CEO           
 and board of directors could choose to spend it on.                           
 Number 1921                                                                   
 REPRESENTATIVE COWDERY asked if Mr. Baldwin thought banks would               
 call the loans that are in existence with the railroad.                       
 Number 1851                                                                   
 MR. BALDWIN replied that they probably would not but he would                 
 recommend that the bill have a savings provision in it for existing           
 contracts and agreements.                                                     
 Number 1974                                                                   
 REPRESENTATIVE COWDERY stated that in the case of a claim against             
 the railroad all of Alaska looses since it is an asset of the                 
 Number 2042                                                                   
 CHAIRMAN WILLIAMS asked what happens if a loan can't be repaid.               
 Number 2064                                                                   
 MR. BALDWIN replied that the reason it is set up as a public                  
 corporation is to limit any loss to the corporation and not have it           
 be a general debt of the state.                                               
 Number 2080                                                                   
 CHAIRMAN WILLIAMS stated that a bank will not lend money without              
 Number 2092                                                                   
 MR. BALDWIN stated that the collateral is usually a stream of                 
 revenue.  He stated that bond ratings may not drop but this issue             
 was considered in the past and the legislature decided they wanted            
 the railroad to act more like a private business.                             
 CHAIRMAN WILLIAMS stated that the committee is out of time and the            
 bill will be taken up at the next meeting.                                    
 Number 2120                                                                   
 CHAIRMAN WILLIAMS adjourned the House Transportation Standing                 
 Committee at 3:15 p.m.                                                        

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