Legislature(1995 - 1996)
03/27/1996 01:50 PM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE March 27, 1996 1:50 p.m. TAPES SFC-96, #55, Side 1 and 2 SFC-96, #56, Side 1 SFC-96, #56, Side 2 (575-241) CALL TO ORDER Senator Rick Halford, Co-chairman, convened the meeting at approximately 1:50 p.m. PRESENT In addition to Co-chairmen Halford and Frank, Senators Phillips and Rieger were present. Senators Sharp and Zharoff arrived shortly after the meeting began. Senator Donley did not attend. ALSO ATTENDING: Senate President Drue Pearce; Senator Leman; Laurie Otto, Deputy District Attorney, Criminal Division, Dept. of Law; Beth Kerttula, Assistant Attorney General, Oil, Gas, and Mining Section, Dept. of Law; Annie Carpeneti, Assistant Attorney General, Criminal Division, Dept. of Law; Rick Cross, Deputy Commissioner, Dept. of Education; Eddy Jeans, School Foundation, School Finance, Dept. of Education; Dwight Perkins, Special Assistant, Dept. of Labor; Doug Mertz, representing the Prince William Sound Regional Citizens Advisory Committee; Pam LaBolle, President, Alaska State Chamber of Commerce; Wanda Cooksey, representing Single Site Schools; Eddy Grasser, Alaska Outdoor Council; Charles Campbell, Juneau, Alaska; Susie Gregg Fowler, Juneau, Alaska. ALSO PARTICIPATING VIA TELECONFERENCE: Ken Donajkowski, Audit Consultant (E.H.& S. area) ARCO Alaska, Anchorage; Dan Elliot, representing the MatSu Citizens Advisory Board, Wasilla, Alaska. SUMMARY INFORMATION SB 52 - CAPITAL PUNISHMENT FOR MURDER Testimony was presented by Charles Campbell, Susan Gregg Fowler, and Annie Carpeneti. CSSB 52 (Jud) was REPORTED OUT of committee with zero fiscal notes from the Court System and Dept. of Public Safety and a $2.2 note from the Governor's Office/Elections. SB 199 - ENVIRONMENTAL & HEALTH/SAFETY AUDITS Testimony was presented by Senator Leman, Doug Mertz, Laurie Otto, Beth Kerttula, Pam LaBolle, Dwight Perkins, and via teleconference by Ken Donajkowski. Conceptual language, proposed by the Dept. of Law, effecting an exemption for audits and voluntary disclosures relating to the TAPS tariff or enforcement of the state pipeline right- of-way was adopted as an amendment for incorporation within a Senate Finance version of the bill. CSSB 199 (Fin) was then REPORTED OUT of committee with a $39.0 note from the Dept. of Environmental Conservation, a $40.0 note from the Dept. of Natural Resources, a $66.5 note from Dept. of Fish and Game, and zero notes from the Dept. of Transportation and Public Facilities and the Dept. of Military & Veterans Affairs. SB 230 - LEG APPROVE PERM'NT RECREAT'NL RESTRICT'N Discussion was had with Senator Pearce, Eddy Grasser, and via teleconference with Dan Elliot. A draft committee substitute dated 3/26/96 was adopted. CSSB 230 (Fin) was then REPORTED OUT of committee with a $105.8 fiscal note from the Dept. of Natural Resources. SB 244 - CALCULATION OF STATE AID TO EDUCATION Discussion was had with Rick Cross, Eddy Jeans, and Wanda Cooksey. The bill was subsequently held in committee for further review. SENATE BILL NO. 199 An Act relating to environmental audits and health and safety audits to determine compliance with certain laws, permits, and regulations; and amending Alaska Rules of Appellate Procedure 202, 402, 602, 603, 610, and 611. Co-chairman Halford directed that SB 199 be brought on for discussion and noted a prior hearing on the bill. DOUG MERTZ came before committee on behalf of the Prince William Sound Regional Citizens' Advisory Committee, a non-profit corporation formed to promote environmentally safe operation of the Alyeska terminal and associated tanker traffic. The group consists of 18 organizations in communities and boroughs throughout the area impacted by the EXXON VALDEZ spill as well as commercial fishing, aquaculture, native, recreation, tourism, and environmental representatives. While the group supports the fundamental goal of fostering greater compliance with environmental health and safety requirements through a cooperative approach that encourages regulated entities to find and correct problems themselves, SB 199 would not accomplish that in its current form. It would instead invite abuse, generate more public distrust and cynicism, and widen the chasm between regulators and regulated entities. The group thus recommends the following changes: 1. Eliminate the self-audit provision. It creates a shield that is too broad and which interferes with the public's right to know. EPA has found that a self-audit privilege is not necessary to encourage self-auditing by industry. Immunity from prosecution for self-disclosed violations is sufficient to encourage self- auditing. 2. That regulatory agencies not request or use environmental audit reports to initiate a civil or criminal prosecution of a self-disclosed violation. That is the device successfully used by EPA. 3. More precision be added to standards language. As an example, Mr. Mertz noted language requiring disclosure of a violation to occur "promptly." EPA policy requires disclosure within 10 days. He noted the use of vague generalities in other areas of the bill and correspondent use of precise numbers in federal policy. 4. Immunity be narrowed so that violators are not allowed to retain any of the economic benefits derived from violations. Immunity should extend only to punitive portions of enforcement actions. That would provide for fundamental fairness to competitors who have complied, by eliminating the economic advantage of noncompliance. 5. Certain provisions that presently create a safe- haven for violators be tightened or eliminated. Specifically, the violator should not be able to disclose a violation and invoke immunity after there has already been notice of a citizen suit or a whistle- blower complaint concerning the same violation. The violator should also not be able to disclose a violation and invoke immunity if the violation has imminently and substantially endangered the public or the environment. The violator should not be able to create a permanent safe-haven by repeated or continuous self-audits or by announcing an audit after it already has reason to believe a violation may have occurred. 6. Disclosure of a violation should not shield the violator from prosecutions for other violations based on disclosed facts or which are discovered because of disclosed facts. As currently written, the bill would lead to more litigation and effectively shield the violator from future investigations and prosecutions, even for violations that are not voluntarily disclosed. KEN DONAJKOWSKI, Audit Consultant (E.H.& S area) ARCO Alaska, next testified via teleconference on behalf of the Alaska Oil and Gas Association--a trade association whose 19 members account for the majority of oil and gas exploration, production, transportation, refining and marketing in Alaska. The Association supports the intent of SB 199. A majority of members currently conduct self-audits as a means of ensuring compliance and thus see value in the proposed legislation. Over the past 25 years, health, safety, and environmental regulations have become increasingly complex. Not incidentally, interpretation of these regulations has become correspondingly difficult. Self-auditing identifies areas of inadvertent noncompliance and leads to corrective action. Self-audit is encouraged not only to ensure compliance but to generally improve health, safety, and environmental performance. The proposed legislation encourages greater utilization of self-audits by providing immunity and confidentiality. Immunity should be offered as an incentive for companies to identify, disclose, correct and prevent recurrence of noncompliance. To be effective, self-auditing should be undertaken without fear of consequences from regulatory agencies and without concern for final outcome. Providing immunity for deficiencies that are discovered through self- auditing recognizes efforts by companies to comply rather than penalizing them for those efforts. Immunities should not, however, extend to those who knowingly and willfully commit violations and subsequently audit in order to shield themselves from the consequences. Privilege further protects companies from inappropriate and unnecessary repercussions of disclosing audit results to agencies. It also ensures that the auditing process is not compromised. The issue is not one of secrecy but ability to conduct candid interviews with personnel. To remain effective, it is necessary to preserve the integrity of the audit process and maintain the trust and cooperation of employees. Traditional legal privileges limit the flexibility important to the self-auditing process. As with immunity, there are reasonable limits to application of privilege. It should protect the products of an audit (audit report, working papers, and action plan), but it should not be a vehicle to hide underlying facts. In his concluding remarks, Mr. Donajkowski advised that SB 199 moves health, safety, and environmental compliance in a positive direction through encouragement of self-auditing. He urged passage of legislation containing the intent of SB 199. He reiterated that looking for deficiencies, identifying them, disclosing them to appropriate agencies, and correction is the essence of self-auditing. It is an important tool for voluntary compliance. Without privilege and immunity, voluntary self-audits can put a company at a competitive disadvantage relative to companies that do not audit. Discussion followed between Senator Randy Phillips and Mr. Donajkowski regarding the association's interaction with various federal and state agencies on problem areas in the proposed bill. [Senator Sharp arrived at the meeting at this time.] LAURIE OTTO, Deputy Attorney General, Criminal Division, Dept. of Law, came before committee. She said that while the intent of the bill is good, she would speak to the effect of the legislation on prosecutors. Two things impact ability of the state to prosecute crimes involving environmental or health and safety laws: 1. Privileges as they apply to criminal prosecution. 2. Immunities. It is the opinion of the Dept. of Law that the combined effect of the foregoing provisions "is to make it impossible to prosecute any offense where an environmental audit privilege is claimed." The bill makes an exception for "bad actors." The definition of "environmental audit," at the end of the bill, is so broad that "anything could fall within it." There are no standards, certification, or licensing requirements for auditors. There is broad disagreement, within the field, on what constitutes an environmental audit. Presumably, a bid proposal for cleanup would be considered privileged under the bill. The extent of the privilege is not carefully delineated. Every witness interview, document, scientific test, gathered pursuant to what is identified as an audit would be privileged. The bill provides a full, complete, and absolute shield against provision of "any document to the state and against prosecution of anybody." It would allow companies to "go in and vacuum up every piece of evidence that might be incriminating, . . . under the shield of an environmental audit." Environmental crimes are regulatory offenses. Like any other white collar offense, they are proven with documents generally obtained from the offender. If the legislature does not want environmental offenses prosecuted as crimes, it would be easier and more straightforward to eliminate criminal penalties for the crimes covered by SB 199. Retention of such crimes in statute and passage of the proposed bill would give the appearance of ability to prosecute. The public would then demand the filing of charges in areas where the department has no practical ability to prosecute. Ms. Otto said she asked staff in the office of special prosecutions and appeals to review the legislation to determine whether arguments around cited problems could be made. She then advised that the view presented by staff was "even more negative than what I'm expressing to you today." Ms. Otto said that since the proposed bill is modeled on Texas law, she contacted the national district attorneys association to determine what the national experience has been. The response indicated experience similar to cited concerns. The association unanimously passed a resolution against "this kind of legislation." Ms. Otto referenced both the resolution and correspondence from the association, outlining problems experienced with similar legislation. Senator Randy Phillips expressed frustration over department criticism of the legislation in the absence of suggested alternatives or corrective provisions. Ms. Otto said that EPA has a model that appears to work effectively. There are also other things that can be done from a prosecution standpoint. She cited ability of a judge who sentences a corporation for a crime discovered as a result of an audit to take that into account at sentencing. Language could lower the class of offense if discovered via audit. Further, provisions could require that documents be turned over to the state but not utilized in court. The state would, at least, have access to documents to evaluate what is and is not admissible. The current bill creates a bar to receipt of documents and provides companies transactional immunity from prosecution. Ms. Otto explained that environmental regulation is not her field. She advised that she was merely telling members what effect the bill would have on prosecutors who are asked to enforce legislation. She said she was providing practical information "about what this bill does." She further advised that the legislation should not be applied to the "criminal arena." The state should not let those who are knowingly and intentionally violating the law "off the hook." That does not help anybody in the industry since it provides a competitive advantage to wrong-doers. Tightening the bill and providing definitions would help. PAM LaBOLLE, President, Alaska State Chamber of Commerce, next came before committee in support of the legislation. She asked that members keep in mind the goal of having regulations that protect the environment, health, and safety. Having "everyone comply with those regulations" makes the bill "very reasonable." It allows those who have inadvertently been out of compliance to voluntarily correct the situation without fear of prosection. There is no incentive for self-audit if the end result is liability for fines, jail, and lawsuits. The legislation provides an opportunity to reach the goal of a partnership between business and government. Similar legislation has been successful in other states. [Senator Zharoff arrived at the meeting at this time.] In response to questions from Senator Phillips, Mrs. LaBolle noted that self-audits discover things "that nobody knows about." The state does not have enough regulators and enforcers to find them. The proposed bill would put business in the position of "helping to bring these about." BETH KERTTULA, Assistant Attorney General; Oil, Gas, and Mining Section; Dept. of Law; next came before committee. Co-chairman Halford asked what would need to be changed, within the bill, to remove application to tariff cases and associated fiscal implications. Ms. Kerttula noted that, as presently written, privilege sections impact self-audit information now received from pipeline owners and Alyeska. Those provisions would have to be rewritten so that the privilege would not apply. The state currently receives both safety and environmental audits. Further, immunity provisions would impact state ability to recover under the existing tariff. Exemption of the tariff and APUC-related filings could solve the problem. Discussion followed between Ms. Kerttula and Co-chairman Halford regarding placement of exemption language within CSSB 199 (Res). Ms. Kerttula expressed need for time within which to develop appropriate language. She also said she could not guarantee that the "fix" would work. She advised she would attempt to craft an appropriate amendment. Senator Leman, sponsor of the legislation, came before committee referencing comments in support of the "intent" of the bill. He then described past discussions with the Dept. of Law regarding provisions within the legislation. He concurred that the bill "does the good things," but he said he did not agree that it would have the negative impact suggested by the department. The sponsor stressed that the intent is greater compliance with environmental laws and increased worker safety. He took exception to misstatements regarding the contents of the bill. Referencing comments by Ms. Kerttula relating to tariff problems, Senator Leman suggested that she was "probably reaching a little far." It is not the intent that the legislation prevent the state from moving forward on tariff cases. He agreed that some measure of comfort could be provided if the issue was clarified under "non-privilege materials." The sponsor referenced comments by Ms. Otto, and voiced reluctance to define "exactly what constitutes an audit." He further noted that 17 other states have passed similar legislation and cited some of the provisions adopted by those states. Senator Sharp attested to slow-downs by representatives of the administration who offer nothing tangible as an alternative. He then described a past situation in which an offer by OSHA for voluntary inspection led to successive OSHA monitoring. He expressed need for legislation that provides for voluntary audit and compliance without fear of administrative repercussions. Senator Zharoff asked if the legislation would impact ongoing cases. Would it limit state ability to obtain information and necessitate state expenditures to obtain reports and information now routinely received from companies? Co-chairman Halford noted that the bill applies to environmental and health and safety audits conducted "on or after the effective date." Senator Leman referenced page 4, line 4, and explained that privilege does not apply if a person or company is required to report specific information to the state. Senator Zharoff noted correspondence from the Dept. of Law indicating that in the case of the 1995 tariff case, it would have cost approximately $25 million to conduct needed audits. If the proposed bill is enacted, the state will not have access to that type of information and would have to bear the cost of obtaining it. Senator Leman said he did not want to compromise state ability to pursue tariff cases. He voiced his belief that necessary tariff information, which is presently being provided, would be exempt under provisions at page 4, lines 4 through 15. He further advised that he would not object to clarifying language. Information needed for tariff cases should be part of the operating permit. The sponsor again stressed lack of state resources to police operations and need for voluntary efforts toward compliance. Co-chairman Halford asked that Ms. Kerttula prepare conceptual language dealing with pipeline tariff cases under non-privileged material provisions. Senator Rieger referenced discussion concerning the intent of the bill versus the manner in which it is drafted. He voiced his recollection that Captain Hazelwood was ultimately "let off" because he voluntarily disclosed the EXXON VALDEZ oil spill. He cautioned that the committee must "think through" how the bill is written. END: SFC-96, #59, Side 1 BEGIN: SFC-96, #59, Side 2 Senator Leman countered the foregoing comment by voicing his belief that Captain Hazelwood got off because the jury made a bad decision "about his state of intoxication." He stressed that for privilege and immunity to apply, the agency must be notified in advance that a self-audit is being performed. It would thus not apply in the Hazelwood situation. Co-chairman Halford raised a question regarding potential loss of federal funds should the state program be less stringent than OSHA requires. Mr. Leman said he was satisfied that would not occur under the proposed bill. It is not the intention that that occur. He reiterated that 17 other states have adopted similar legislation and suggested that they would not knowingly jeopardize their federal funding. Senator Zharoff sought clarification of language at page 6, subsection (g). Senator Leman explained that the state cannot initiate an inspection solely upon receiving notice of self-audit. DWIGHT PERKINS, Special Assistant, Dept. of Labor, came before committee. He explained that Alaska presently has a state plan and total jurisdiction over safety and environmental review through federal funding. The program consists of auditing and compliance. If a company asks that the department perform an audit, the information becomes privileged. Staff then works with the company to achieve compliance. Audit information is not shared with enforcement staff. Alaska has the only state plan of that kind. The federal government requires that the state be as stringent as federal requirements. If that is not the case, funding is jeopardized, and OSHA functions will revert to the federal government. Senator Leman suggested that EPA has made similar threats to other states. That agency has not changed its policy to encourage self-audits. Mr. Perkins advised of initial discussions with the sponsor to the effect that the department would have no problem with the bill if it does not change current operations and impede inspectors. Following introduction, the department found areas of concern. The Commissioner does not want to put the federal government to the test with a program that is less stringent. Mr. Perkins stressed major concerns regarding worker safety. He noted that the bill would remove part of the department's enforcement powers. The state faces the possibility of losing its plan. He then referenced correspondence from Region 10, sharing those concerns. Senator Leman stressed that the issue is not whether or not the state receives audits that are already being done. The balance is self-audit and subsequent attempts at compliance versus no audits and "not knowing what you're doing wrong." The intent is to encourage audits and corrective action. Discussion of compliance plans followed between Senator Leman and Senator Zharoff. Co-chairman Halford referenced the following conceptual amendment proposed by the Dept. of Law: Page 1, line 8: Except for any audit reports relating to the TAPS tariff or enforcement of the state pipeline right-of-way. Page 4, line 17: Except for any voluntary disclosures relating to the TAPS tariff or enforcement of the state pipeline right- of-way. Senator Phillips MOVED for adoption. No objection having been raised, the amendment was ADOPTED. Co-chairman Halford next queried members regarding disposition of the bill. Senator Sharp MOVED for passage of CSSB 199 (Fin) with accompanying fiscal notes. Senator Zharoff OBJECTED. Co-chairman Halford called for a show of hands. CSSB 199 (Fin) was REPORTED OUT of committee on a vote of 4 to 1, accompanied by the following fiscal notes: Dept. of Military and Veterans Affairs 0 Dept. of Transportation and Public Facilities 0 Dept. of Environmental Conservation 39.0 Dept. of Natural Resources 40.0 Dept. of Fish and Game 66.5 Senator Sharp signed the committee report with a "do pass" recommendation. Co-chairmen Halford and Frank and Senators Phillips and Zharoff signed "no recommendation." Senator Rieger indicated need for amendment. SPONSOR SUBSTITUTE FOR SENATE BILL NO. 52 An Act authorizing capital punishment, classifying murder in the first degree as a capital felony, and establishing sentencing procedures for capital felonies; authorizing an advisory vote on instituting capital punishment; and providing for an effective date. Co-chairman Halford directed that SSSB 52 be brought on for discussion and referenced CSSSSB 52 (Jud). He explained that the judiciary version provides only for an advisory vote on the issue of capital punishment. The only reason it was referred to Finance is the $2.2 fiscal note from the Division of Elections. CHARLES CAMPBELL first came forward to speak to the bill. He advised that he came to Alaska in 1979 as director of corrections and would be testifying based on many years of experience in criminal justice. He voiced his belief that an advisory vote on capital punishment could initiate a public policy with tremendous costs in the future. Further, an affirmative majority on the advisory vote will make it extremely difficult for legislators to vote against the death penalty. Since the death penalty would not be good for Alaska, the committee would be prudent to set the bill aside until there is opportunity for additional research beyond that conducted in Senate Judiciary. If presented to the public at this time, Alaska's residents will be voting on the basis of "a great deal of misinformation." It would be a disservice to present the question to voters under those circumstances. Mr. Campbell voiced his belief that there are no rational arguments in favor of the death penalty. He then referenced evidence which he said indicates that the death penalty in America "has caused murders that might have otherwise not been committed." Death penalty states consistently show higher murder rates than states without capital punishment. Reinstitution of the death penalty has preceded increases in murder rates. Canada abolished the death penalty in 1976, and the murder rate decreased. In the past year, the state of Texas executed three times more prisoners than any other state, and the murder rate in Texas is 14 per 100,000--twice the national average. Review of the death penalty in New York State over a 60-year period (1906-1966) evidences a pattern of two additional murders during each month following one or more executions. Findings indicate that those who are predisposed to violent behavior are more likely to be incited than deterred by the prospect of execution. Mr. Campbell acknowledged that statistics provide indications rather than absolute conclusions. Mr. Campbell said he recognized the political appeal of capital punishment, particularly in districts where constituents feel strongly about the issue. While most people believe in the death penalty from time to time, for particular crimes, when all facts are considered, there are no arguments in favor of it. There are no national organizations working for perpetuation of the death penalty. A better approach would be for the legislature to research what is happening throughout the United States and provide information to constituents. In his closing remarks, Mr. Campbell stressed that capital punishment is not good public policy. It will not control crime. Senator Randy Phillips referenced prior advisory votes and noted that the legislature took no action based on any of them. Mr. Campbell suggested that on this issue the legislature should advise the voters rather than the voters advising the legislature. Senator Phillips said that voters would review the facts prior to a vote. Mr. Campbell suggested that the right information might not be provided. Surveys indicate that the majority thinks the death penalty is inexpensive and would save money. SUSIE GREGG FOWLER next came before committee. She voiced concern that the intent of the advisory vote is to limit discussion on merits and costs of capital punishment. That discussion should occur with statewide public participation. Presenting Alaskans with an advisory vote on capital punishment would be a great disservice in that many residents are not well informed about current punishment for those convicted of murder. A recent poll shows that 78 percent of Alaskans believe that those convicted of first degree murder are released after one to twenty years. In fact, there is no release after twenty years, and the average sentence is eighty to ninety years. People are frightened by stories of those who get out and kill again. Those stories have remained in the mind of the public rather than actual facts about what the criminal justice system provides. A second problem with the advisory vote relates to the question being asked. The death penalty information center released a report, three years ago, which indicated that when the public is simply asked whether it is for or against the death penalty, a high percentage (77%) responds affirmatively. When asked if they support the death penalty or life without parole plus restitution, support for capital punishment dropped to 49 percent, and 44 percent preferred life imprisonment. Opposition to the death penalty does not suggest that one is soft on crime. At issue is the moral question of life or death and the appropriateness of the state taking a life. Mrs. Fowler voiced need for leadership which does not pander to public fears but seeks different opinions and then makes courageous and responsible decisions. She suggested that there is no compelling reason for the advisory vote. ANNIE CARPENETI, Assistant Attorney General, Criminal Division, Dept. of Law, next came before committee voicing opposition to the bill. She stressed that the death penalty is an extremely difficult subject. It is associated with issues that need debate within the legislature. Asking a single question for or against capital punishment is unfair. Will voters know that it costs from three to six times more to execute a prisoner than to house an inmate for the rest of his or her life? Ms. Carpeneti next spoke to problems capital punishment would cause prosecutors because it "skews the case law for all cases." Many decisions in a criminal case are committed to the discretion of a trial judge. When the stakes are as high as the death penalty, judges will want to ensure that they are correct. They will bend over backwards to do so. The criminal justice system is not perfect. It has resulted in execution of innocent people in the past. There is no reason to expect that will not occur in the future. No information evidences that capital punishment deters murder. The Dept. of Law is getting long sentences for those convicted of first degree murder. In territorial days, when capital punishment was in effect, evidence indicates that non-whites were executed at a much higher rate than whites, for similar offenses. This is a problem all states with death penalty provisions are attempting to address. In her concluding remarks, Mrs. Carpeneti advised that the death penalty is wrong. Violence should not be answered with violence. Research shows that if a single question, as contemplated by the advisory vote, is placed before the public, the response is affirmative. A selection of options provides a much different response. There is concern that an advisory vote asking only one question will be perceived as a public mandate. Comments followed by Senator Randy Phillips reiterating earlier statements that the legislature has not, in the past, acted on advisory votes. Senator Sharp requested a brief at ease. RECESS - 3:15 P.M. RECONVENE - 3:30 P.M. Senator Sharp MOVED that CSSSSB 52 (Jud) pass from committee. Senator Zharoff OBJECTED. Co-chairman Halford called for a show of hands. The motion carried on a vote of 5 to 1, and CSSSSB 52 (Jud) was REPORTED OUT of committee with a $2.2 fiscal note from the Office of the Governor (Division of Elections) and zero notes from the Dept. of Public Safety and the Alaska Court System. Co-chairmen Halford and Frank and Senators Phillips and Sharp signed the committee report with a "do pass" recommendation. Senators Rieger and Zharoff signed "no recommendation." SENATE BILL NO. 244 An Act relating to state foundation aid and supplementary state aid for education; and providing for an effective date. Co-chairman Halford directed that SB 244 be brought on for discussion. RICK CROSS, Deputy Commissioner, Dept. of Education, came before committee accompanied by EDDY JEANS, School Foundation, School Finance, Dept. of Education. END: SFC-96, #55, Side 2 BEGIN: SFC-96, #56, Side 1 Mr. Cross referenced the 20 percent test that must be met to include $35 million in federal funds in the foundation. He further advised that SB 244 deducts 95 percent from REAAs as opposed to 90 percent of federal impact aid, but it also redistributes back a $500.00 unit value to ensure that the 20 percent disparity test is met. Senator Sharp asked how the bill would impact the current per student rate flowing to districts. Mr. Jeans said it would increase the per student allocation in some instances and decrease it in others. He noted that the legislature has traditionally provided supplemental funding for single- site school districts. He pointed to the current $1.2 million supplemental request and said that it is equivalent to a $500.00 allocation to REAAs, per instructional unit. The proposed bill would increase the impact aid deduct to offset that cost. Mr. Jeans next pointed to an accompanying fiscal note reflecting a net general fund increase of $224.0. Co-chairman Frank voiced appreciation for the department's attempt to develop an approach that is "somewhat neutral in terms of costs and revenues." He then asked how much of the cost is attributable to single sites and how much relates to the new allocation for disparity. Is that fully offset by the increased deduct, except for the $224.0? Mr. Jeans responded that the fiscal note does not address the single- site allocation because it is currently built into the department K-12 operating budget. Increase of the deduct from 90 to 95 percent saves the state slightly over $1 million. Single-site funding totals $3,149.0. In response to a further question from Co-chairman Frank, Mr. Jeans acknowledged disparity costs of $1.2 million in FY 96. Co-chairman Frank asked if the department considered increasing disparity to 97 or 98 percent to make it totally revenue neutral. Mr. Jeans explained that the increase from 90 to 95 percent was the recommendation of the foundation task force. That recommendation was forwarded to the state board of education, approved, and forwarded to the Governor's Office. Co-chairman Frank referenced resistance to supplemental funding and a movement to make SB 244 apply to the FY 96 allocation to produce a revenue neutral situation for FY 96 and the future. Mr. Jeans cautioned that the situation would not be revenue neutral for all school districts. A small number would be adversely impacted by that approach. The problem relates to the increase in the 5 percent deduct versus the $500.00 allocation. Mr. Jeans next directed attention to the three- column spread sheet attached to the fiscal note and explained the significance of each column. Senator Sharp noted that Anchorage receives $3,847.00 in state funds per student while other districts receive from $10,000.00 to $24,465.00. It appears that the proposed bill would increase that spread rather than provide a "true fix" for state aid. Mr. Jeans acknowledged that some districts would benefit from increased revenue per student. If those numbers were divided by the number of students served, the increase would "be very minimal on a per-student basis." Senator Sharp commented that all the increases would go to districts that are "probably a little bit above average already on ADM." Mr. Jeans acknowledged that might be true. Senator Sharp next asked about the effort to revamp the entire foundation formula. Mr. Cross said that the state board of education had met three times, as a committee of the whole, to work on the issue. Two more meetings are scheduled to work on a new foundation formula that will be significantly different from that before members today. Senator Rieger asked if disregard of 2 mills of local effort would achieve the same disparity numbers as those proposed in SB 244. Mr. Jeans explained that the disparity is caused by excess local contributions that districts are allowed to make over and above 4 mills. Lowering that to 2 mills would increase disparity. Local effort would have to be increased to lower disparity. Senator Rieger suggested that the excess could be taken off the top rather than from the required minimum. There are a variety of ways to come within federal guidelines. Senator Rieger next voiced his understanding that the state of Kansas, which is at 25 percent disparity, is planning to "take it to Congress and get the law changed rather than try to meet the 20 percent disparity." Mr. Jeans concurred in that understanding. Co-chairman Frank noted that it is difficult to increase dollars to districts that appear to be getting the most per student. He then asked if that results from a requirement that disparity be calculated in the same fashion as moneys are distributed. Mr. Jeans explained that the department could compute the disparity test on a per-pupil basis. That standard was computed and, excluding all exceptions allowed under federal law, it came out worse at 27 percent. Co- chairman Frank asked that computations be provided for committee review. Discussion followed concerning the possibility of changes at the federal level. Mr. Jeans explained that the impact aid program was reauthorized through 1999. The disparity drops to 20 percent for FY 98 and 99. Mr. Cross stressed that the administration believes the proposed bill is the best solution at this time, rather than for all time. Until the foundation is substantively changed, this is the best way to meet present rules. In response to a question from Co-chairman Halford regarding funding for pupil transportation, Mr. Jeans explained that transportation moneys are allocated to a special revenue fund outside of the disparity standard. Disparity is measured on the operating fund only. Capital and federal programs are also outside. Co-chairman Frank voiced his understanding that the single- site issue is separate from the disparity issue. Mr. Jeans concurred. He added, however, that the department would encourage inclusion of the single-site allocation within the foundation program. The federal government has taken note of the single-site appropriation outside of the foundation formula and has put the department on notice that it appears Alaska is creating an entitlement program, and the state's determination could be in jeopardy. WANDA COOKSEY, representing single-site school districts, came before committee and directed attention to file materials (copies on file in the master Senate Finance Committee file for SB 244). She explained that the formula in Sec. 4 is the formula the single-site school district consortium has requested for the last several years. It is also the formula used to determine the grant amount. Ms. Cooksey noted that there is no fiscal note relating to single-site funding because it does not involve new money. It is in the department budget. Co-chairman Halford asked for a list of single-site districts and the funding they receive. Ms. Cooksey directed attention to the attachment to the transmittal letter from the administration. In response to a question from Senator Zharoff, Ms. Cooksey said that the proposal was agreed to by all the single sites, the state board of education, the school board association, the school administrators association, and NEA. Co-chairman Halford noted that additional people who signed up to testify on the bill were no longer present and suggested that SB 244 be set aside pending their return. SENATE BILL NO. 230 An Act providing that state land, water, and land and water may not be classified so as to preclude or restrict traditional means of access for traditional recreational uses. Co-chairman Halford directed that SB 230 be brought on for discussion and directed attention to a work draft committee substitute (9-LS1538\R, Luckhaupt, 3/26/96). SENATE PRESIDENT DRUE PEARCE, sponsor of the legislation, came before committee. She explained that she introduced the bill to protect the right of Alaskans to access state land and water for recreational use. Several things, specific to Denali State Park, have occurred which led to introduction. The state division of parks closed Curry Ridge (a traditional landing area) within Denali State Park to aircraft use. Further, an area adjacent to the park, containing Blair Lake, was transferred to the division of parks by the division of land under an ILMA. Since transfer, the area has been managed as though it was part of the park, and access to the lake has been closed as part of that management effort. Sec. 1 of the work draft adds a new section to the list of department duties so that the division will be required to provide the legislature an annual report on any designation of incompatible use that prohibits or restricts traditional access. Sec. 2 adds a further section to the list of duties required under AS 41.21.020. Language within the new section says that the department may not manage, as special purpose park land, areas that are not inside park boundaries as designated by the legislature. The new provisions do not prohibit the division of parks from operating recreational sites, under present authority. Sec. 3 adds slightly under 11 acres of land to the Chilkat State Park. This provision was included in the work draft at the request of the department. The three parcels involved were purchased by the department in the late 1970s. They were transferred to park management using an ILMA arrangement, but they were never designated as part of the park. Since the legislature mandates that land acquired by the department be managed under the more open statute, the department asked that the land be added to the park. This area has been managed as a park since purchase. Sec. 4 is specific to Denali State Park. The park was designated by the legislature in the late 1960s. It was extremely remote at the time and lacked today's access. There is no special management requirement for traditional access in statutes designating the park. Sec. 4 thus adds a description of incompatible uses. Language requires that management regulations provide ample access for sport and subsistence hunting. Regulations must: 1. Recognize that traditional subsistence and recreational activities include the use of small outboard motors and snow machines. 2. Permit reasonable access by aircraft for recreational purposes. 3. Provide ample access for recreational mining. Sec. 5 specifies that past regulations and regulations currently being promulgated for Denali State Park will take effect only if consistent with provisions in the proposed bill. Regulations that are not consistent would be annulled. Senator Pearce next addressed a new fiscal note. She acknowledged there would be fiscal impact stemming from the annual report to the legislature, but she said that the entire Denali State Park master plan need not be completely rewritten. There is thus no need for additional natural resource officers and associated costs. The four designations in Sec. 4 are the only things that must be changed within the master plan. Co-chairman Halford referenced similar overreaching closures by the Dept. of Fish and Game and asked if they had also been considered when the proposed bill was developed. Senator Pearce responded negatively. She surmised that the situation at the Dept. of Fish and Game is similar. Research relating to the proposed bill indicates that the Dept. of Natural Resources had no specific authority to effect closures. The action was taken because no one has challenged it in the past. Brief discussion followed regarding access by various types of aircraft (wheels, skiis, floats). Senator Pearce attested to department closure of access to recreational areas to Alaskans in deference to an unfettered experience for visitors to the park. Co-chairman Halford voiced his understanding that environmentalists testified that the situation was badly handled in terms of the vested interest of the commercial operator versus other users. Co-chairman Halford further voiced frustration over department closure of lakes, transferred to the state as navigable waters, to float plane landings. He then suggested an amendment disallowing that practice unless there is a compelling public purpose. Senator Pearce said she would have no problem with the amendment, but she questioned whether it would fit under Title 41--the subject of the proposed bill. Title 38 legislation by Representative Masek was noted as an alternative. Senator Pearce said she would also be willing to pursue questions raised by Dept. of Fish and Game closures. Co-chairman Halford expressed a preference for movement of the bill, at this time, as long as cited areas could be addressed in Rules or on the Senate Floor. Senator Rieger referenced an amendment which he explained draws a distinction between park service action that squeezes out traditional access at historic levels as opposed to increasing access beyond that level. The amendment would add "at the level it has historically been conducted" to language at page 3, line 15 and line 21. Discussion followed regarding definition of the word "level." Co-chairman Halford referenced allocation problems associated with limiting the number of users. He noted that it is easier to limit activities that have not yet occurred. END: SFC-96, #56, Side 1 BEGIN: SFC-96, #56, Side 2 Senator Sharp voiced opposition to strengthening department authority to manage people. Senator Rieger withdrew his amendment at this time. Senator Sharp MOVED for adoption of CSSB 230 (Finance). No objection having been raised, CSSB 230 (Finance) was ADOPTED. Senator Rieger then MOVED for adoption of his amendment. Senator Pearce voiced concern that amendment language would prohibit commercial activity within park areas. She clarified that the proposed bill was not intended to prohibit commercial operations. It seeks to ensure that commercial activity is not given preference over access for Alaskans. Senator Rieger explained that the amendment applies to language dealing with actions that prohibit or restrict traditional means. He referenced competing motorized and non-motorized activities in Chugach State Park and explained that the amendment would provide direction to the department to maintain the status quo rather than give preference to one over the other. Co- chairman Halford called for a show of hands. The motion failed on a vote of 2 to 4. Discussion followed regarding regulations for Denali State Park and Chugach State Park. Senator Pearce explained that when the majority of Alaska's parks were designated, the legislature did not specify uses that would be incompatible because recreational areas were not experiencing the pressures of today. She then cited AS 41.21.110 from statutes designating the Chilkat State Park: The commissioner shall designate, by regulation, incompatible uses within the boundaries in accordance with 41.21.110, and those incompatible uses shall be prohibited or restricted as provided by regulation. Nothing in this section affects the rights and uses of water and facilities in the city of Haines located within the boundaries of this area. In designating this more recent park, the legislature made provisions for uses that had to be continued. Language within 41.21.020 (the general purposes section for parks) merely says that the "department shall adopt regulations governing the use and designating incompatible uses within the boundaries of state parks." There is no definition of "incompatible uses." There had been no problem in Denali until recently. EDDY GRASSER, representing the Alaska Outdoor Council, next came before committee in support of the bill. He referenced a recent edition of an Anchorage based environmental group newsletter and noted that it raises concern over the "tiny amount of land in Alaska that has been set aside for . . . quiet recreation." Mr. Grasser stressed that two-thirds of Alaska has been set aside for that type of recreation while other Alaskans have been restricted to "these types of areas along the road system." He further spoke to lack of vehicular access to many park areas. Most of Alaska is off limits to "non-quiet" recreational purposes. The proposed bill represents a balancing proposition. Park lands belong to all Alaskans rather than to a specific group. The proposed bill protects traditional activities on these lands. DAN ELLIOT, representing the MatSu Citizens Advisory Board, next testified via teleconference from Wasilla. He spoke against the legislation, terming it a "poor bill, both in its intent and also in its imprecise language," and suggested that it caters to a lobbying effort. Mr. Elliot explained that development of the Denali State Park masterplan included the public, at all stages, over a number of years. The plan evolved through compromise and consensus. It protects the resource while accommodating all user groups and prepares for increased pressure on park resources. The proposed bill negates the masterplan, takes management of the park away from the department, and vests control in the legislature which is reacting to interests that seek to bypass the public process and masterplan. Mr. Elliot noted that the alpine terrain of Curry/Kesugi Ridge is recognized as a "unique, fragile, natural resource" recommended to be subject to restricted uses. Vast areas of the park are open to snow machines, four-wheelers, and aircraft. But special management considerations were recommended for Kesugi Ridge to provide both Alaskans and visitors an areas free from motorized access. The park plan attempts to accommodate all user groups. Mr. Elliot cited the new Princess Hotel, road access, and a number of other activities as evidence of increased use of the area. He reiterated that lobbying efforts are attempting to bypass the exhaustive public process that led to the masterplan. The proposed bill not only negates that process, it makes no provisions for a new masterplan. It allows no provisions for dealing with all user groups in a compatible way. It is imprecise in defining traditional, historical, popular use, providing ample access, reasonable access, etc. If the legislature intends to take over park management, it "better get specific." Most activities listed in the bill have only sporadically occurred and increased demand has been fairly recent. The proposed bill ignores its negative impact on future uses and resulting incompatibilities. Mr. Elliot asked that the legislature not supplant the exhaustive public process and place an unmanageable situation upon the Dept. of Natural Resources. Senator Randy Phillips noted that the bill appears to have undergone major transformations from the original, dealing with Title 38, to CSSB 230 (Res) which relates to Title 41. Senator Pearce acknowledged that it changed in many respects. Application changed from public lands statutes to public resource statutes when the department pointed out that attempting to place provisions within Title 38 would be "overkill" in terms of specific park management. Inclusion within Title 38 would have led to "a number of fairly unsurmountable problems in . . . management of other state lands." Title 41 was the better place for proposed language. The drafter made the initial decision to use Title 38. He subsequently agreed that Title 41 was preferable. Co-chairman Halford queried members regarding disposition of the bill. He said he would research the question of aircraft access on navigable waters. Senator Rieger voiced concern over impact on Chugach State Park because of the way traditional access and activities are defined. He suggested that failure of his amendment and subsequent passage of the bill would upset a balance in that park. Senator Zharoff raised concern relating to traditional uses and advised that he would work with the sponsor. Senator Sharp raised a question regarding ILMAs. Senator Pearce explained that they are "interagency land management agreements" authorized under Title 38 and administered by the division of land. They provide for land transfers to all agencies for purposes such as material sites for the Dept. of Transportation and Public Facilities, telecommunications repeater sites for the division of communications, fire bases for the division of forestry, etc. In response to a further question from Senator Sharp, Senator Pearce advised that ILMAs are not always adjacent to parks. She noted the Chilkoot Trail, the Eagle Trail Recreational Site, and the Sitka Historical Site as examples. These areas have been designated through ILMA transfers, and the division of parks manages them as state recreational sites, state historical sites, etc. This arrangement has provided more land to division management than the legislature has designated. However, the legislature set up the process so the state could take advantage of such areas. Senator Sharp MOVED for passage of CSSB 230 (Finance) with individual recommendations and accompanying fiscal notes. No objection having been raised, CSSB 230 (Finance) was REPORTED OUT of committee with a $105.8 fiscal note from the Dept. of Natural Resources. Co-chairmen Halford and Frank and Senator Sharp signed the committee report with a "do pass" recommendation. Senators Rieger, Phillips, and Zharoff signed "no recommendation." ADJOURNMENT Co-chairman Halford announced that the committee would continue discussion of legislation listed on the agenda at 8:30 a.m. the next morning. The meeting was adjourned at approximately 4:45 p.m.