Legislature(1997 - 1998)

04/08/1997 06:09 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                             MINUTES                                           
                    SENATE FINANCE COMMITTEE                                   
                          April 8, 1997                                        
                            6:09 P.M.                                          
                                                                               
  TAPES                                                                        
                                                                               
  SFC-97, # 87, Sides 1 & 2 (000-590, 590-000)                                 
  SFC-97, # 88, Side 1 (000-225)                                               
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Senator  Bert  Sharp,  Cochair,  Senate  Finance  Committee,                 
  reconvened the meeting at approximately 6:09 P.M.                            
                                                                               
  PRESENT                                                                      
                                                                               
  In addition to COCHAIR SHARP, SENATORS PHILLIPS,  TORGERSON,                 
  PARNELL  and  ADAMS  were  present   when  the  meeting  was                 
  reconvened.  COCHAIR  PEARCE and  SENATOR DONLEY arrived  as                 
  the meeting was in progress.                                                 
                                                                               
  Also Attending:                                                              
  SENATOR  LYDA GREEN,  SENATOR RICK  HALFORD, SENATOR  JOHNNY                 
  ELLIS,   MICHAEL   MORGAN,   Facilities   Section   Manager,                 
  Department of  Education; LARRY WIGET,  Director, Government                 
  Relations, Anchorage  School District; CARL  ROSE, Executive                 
  Director, Alaska Association of School Boards; JEFFREY BUSH,                 
  Deputy  Commissioner, Department  of  Commerce and  Economic                 
  Development;   SHARON   BARTON,   Director,   Administrative                 
  Services, Department of Administration  (DOA); KAREN MORGAN,                 
  Deputy Director,  Division  of  Information  Services,  DOA;                 
  WENDY   REDMAN,  University   of  Alaska;   MARYLOU  BURTON,                 
  Director,  Statewide  Budget Office,  University  of Alaska;                 
  MIKE GREANY, Director, Legislative Finance Division;  fiscal                 
  analysts and aides to committee members.                                     
                                                                               
  SUMMARY INFORMATION                                                          
       SB 11  SCHOOL DEBT REIMBURSEMENT                                        
                                                                               
       SENATOR HALFORD, Sponsor,  testified on  behalf of  the                 
       bill.  Also testifying were MICHAEL MORGAN, LARRY WIGET                 
       and CARL ROSE.   SENATOR  PHILLIPS MOVED Amendment  #1.                 
       SENATOR DONLEY  objected, then withdrew  his objection.                 
       SENATOR PARNELL objected.   Amendment #1 was ADOPTED by                 
       a 5 to 1  vote.  SENATOR TORGERSON MOVED  Amendment #2.                 
       There being no objection, Amendment #2 was ADOPTED.  SB
       11 was HELD for further consideration.                                  
       HB 58  CIVIL ACTIONS/ATTY FEES/INSURANCE                                
                                                                               
       Testimony was heard from JEFF BUSH.  HB 58 was HELD for                 
       further consideration.                                                  
                                                                               
                                                                               
       HB 75  APPROPRIATIONS: OPERATING BUDGET                                 
       HB 76  APPROPRIATION: MENTAL HEALTH PROGRAM                             
                                                                               
       SENATOR PARNELL,  Chair of  the Information  Technology                 
       Subcommittee, testified on behalf of the subcommittee's                 
       recommendations.   Also testifying were  SHARON BARTON,                 
       KAREN  MORGAN,  WENDY   REDMAN,  and  MARYLOU   BURTON.                 
       SENATOR    PARNELL    MOVED    to    incorporate    the                 
       recommendations  into HB 75.   SENATOR  ADAMS objected.                 
       The MOTION CARRIED on a vote of 6 to 1.                                 
       HB 46 MINING: CREDITS/LEASES/REC. AREA                                  
                                                                               
       This bill was scheduled but not heard.                                  
                                                                               
  SENATE BILL NO. 11                                                           
  "An  Act relating to state aid for school construction debt;                 
  and providing for an effective date."                                        
                                                                               
  COCHAIR SHARP noted that representatives from the Department                 
  of Education were  present to speak to the bill,  as was the                 
  bill  sponsor.   He invited  Senator Halford to  address the                 
  committee.                                                                   
                                                                               
  SENATOR HALFORD  indicated he  was available  for questions.                 
  SENATOR  ADAMS inquired  about the retroactivity  clause and                 
  its effect on  long term financial  goals.  SENATOR  HALFORD                 
  responded that  retroactivity applied to reimbursement of up                 
  to seventy percent for  bonds sold with prior approval.   It                 
  would apply to  Mat-Su and Anchorage,  and there had been  a                 
  question  regarding  North  Slope  projects.    It  was  not                 
  intended  to  apply  to  anything   that  had  already  been                 
  accomplished.    It would  apply to  projects that  had been                 
  approved  but not yet had bonds  sold.  If bonds had already                 
  been sold, but departmental approval  had not been received,                 
  they could  go  back  to the  department  to  get  approval.                 
  SENATOR ADAMS  had another  concern which  was covered  in a                 
  draft amendment being copied for submittal to the committee,                 
  according  to  SENATOR  HALFORD.   SENATOR  ADAMS  asked for                 
  comments  on  a  proposal  to  reduce  the  percentage  from                 
  seventy-five to fifty.  SENATOR HALFORD responded that fifty                 
  percent  of  something  was  worth  more  than  seventy-five                 
  percent of  nothing.   SENATOR ADAMS  expressed interest  in                 
  merging  other legislation into  the bill so  there would be                 
  equity  among  school  districts,   particularly  for  rural                 
  Alaska.  SENATOR HALFORD responded  briefly about the nature                 
  of the problem.                                                              
                                                                               
  MICHAEL MORGAN,  Facilities Section  Manager, Department  of                 
  Education, testified in opposition to the  legislation based                 
  on two reasons.  The first related to continued advocacy for                 
  legislation that  addressed statewide needs,  whereas SB  11                 
  only addressed  needs for  communities with  the ability  to                 
                                                                               
                                                                               
  bond.     The  other   reason  was   that  it  ignored   the                 
  prioritization process  currently  used  by  the  department                 
  which the  legislature put  in statute.   In  response to  a                 
  question from  SENATOR ADAMS about a proposal  to reduce the                 
  percentage  to  fifty, MR.  MORGAN  supported it  because it                 
  potentially freed up money for  communities not addressed by                 
  the bill.  In response to  a question from SENATOR PHILLIPS,                 
  he said he was speaking on behalf of the department  and not                 
  the  entire  administration.   There  were requests  for the                 
  department's priority list of projects.  MR. MORGAN informed                 
  the committee that the department had been recommending $100                 
  million annually for statewide construction.                                 
                                                                               
  SENATOR PARNELL brought up  an April 15 ballot in  Anchorage                 
  with a list of school  projects to be 100 percent  funded by                 
  city taxpayers.  The retroactivity clause would make some of                 
  the projects available for reimbursement.  He questioned the                 
  wisdom of reimbursement  versus using  the money to  further                 
  fund  additional   projects.     SENATOR  HALFORD   provided                 
  additional explanation.                                                      
                                                                               
  LARRY  WIGET,  Director,  Government   Relations,  Anchorage                 
  School District, addressed the committee.  He brought up the                 
  issue  of  willingness  of a  community  concerning  overall                 
  indebtedness.    By providing  retroactive  reimbursement at                 
  seventy-five percent,  it lowered bonded  indebtedness which                 
  would allow  communities  to take  on  greater debt  in  the                 
  future, or increase  bond capacity.   Research showed  there                 
  would  be  greater  likelihood for  voters  to  support bond                 
  measures if they knew the funds were available.                              
                                                                               
  There was additional discussion about departmental  approval                 
  of  projects.    MR. MORGAN  offered  explanation  of timing                 
  differences concerning approval.  In  response to a question                 
  from SENATOR PARNELL, MR. MORGAN explained there was  no cap                 
  and districts could  bond for as much as  they chose.  There                 
  had been a statutory limit in the  past.  With the cap there                 
  had been a prioritization process, but under the legislation                 
  there  would  be  none,  so  communities  could  submit  the                 
  projects they chose.                                                         
                                                                               
  In response  to a  question from  SENATOR ADAMS,  MR. MORGAN                 
  stated  the  fiscal   note  addressed   a  portion  of   the                 
  retroactivity  clause  but  did  not  include  the  proposed                 
  amendments which had  been discussed.  There  was additional                 
  discussion  about the  indeterminate  amount of  the  fiscal                 
  note.  SENATOR ADAMS believed  the North Slope Borough would                 
  be eligible, but the bill still  needed to be made equitable                 
  for rural schools.   He reiterated his concern about  how it                 
  would impact the long range financial goal.                                  
                                                                               
  The presence of Senator Donley was noted.                                    
                                                                               
  SENATOR   HALFORD   informed   the   committee   about   the                 
                                                                               
                                                                               
  applicability of the amendment.  It  was not intended to pay                 
  back prior expenditures and had a narrow window.                             
                                                                               
  COCHAIR  SHARP called  for  further questions  or  comments.                 
  There being none,  SENATOR PHILLIPS  MOVED Amendment #1  and                 
  explained  that it dropped the reimbursement percentage from                 
  seventy-five  percent  to  fifty  percent.   SENATOR  DONLEY                 
  objected  for sponsor  comment.    SENATOR  HALFORD  briefly                 
  reiterated his position.   SENATOR DONLEY then  withdrew his                 
  objection.  SENATOR PARNELL objected.   A roll call vote was                 
  taken on the MOTION to adopt Amendment #1.                                   
  IN FAVOR: Donley, Adams, Phillips, Torgerson, Sharp                          
  OPPOSED: Parnell                                                             
  Amendment #1 was ADOPTED by a 5 to 1 vote.                                   
                                                                               
  SENATOR  TORGERSON  MOVED  Amendment  #2.   There  being  no                 
  objection, Amendment #2 was ADOPTED.                                         
                                                                               
  A request was  made of  the department by  COCHAIR SHARP  to                 
  provide  additional  information   regarding  other   school                 
  districts with bond issues that would be  eligible under the                 
  retroactivity clause.  He announced that SB 11 would be HELD                 
  for further consideration.                                                   
                                                                               
  CARL ROSE, Executive Director, Alaska Association of  School                 
  Boards, addressed  the committee,  commenting that  the bill                 
  had been somewhat divisive because it created haves and have                 
  nots.  He didn't  oppose the legislation, but noted  it left                 
  out a large portion of the membership he represented, namely                 
  in the  rural  areas, because  they lacked  the capacity  to                 
  issue bonds.  The main issue was fairness and equity.  Brief                 
  discussion followed MR. ROSE'S comments.                                     
                                                                               
  The presence of COCHAIR PEARCE was noted.                                    
                                                                               
  COCHAIR SHARP stated  that SB 11  would be HELD for  further                 
  consideration and took up HB 58.                                             
                                                                               
  CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 58(FIN) am                      
  "An Act relating  to civil actions; relating  to independent                 
  counsel  provided  under an  insurance  policy;  relating to                 
  attorney fees; amending  Rules 16.1, 41,  49, 58, 68,  72.1,                 
  82,  and 95, Alaska Rules of  Civil Procedure; amending Rule                 
  702, Alaska Rules of Evidence; and amending Rule 511, Alaska                 
  Rules of Appellate Procedure."                                               
                                                                               
  SENATOR  PHILLIPS  brought  up  a  letter  from  Bruce  Cain                 
  requesting a  teleconference on the bill.  He reiterated the                 
  request.  COCHAIR SHARP  indicated that an attempt had  been                 
  made  to teleconference but  the operators  were unavailable                 
  for the evening meeting.                                                     
                                                                               
  JEFFREY  BUSH, Deputy  Commissioner, Department  of Commerce                 
                                                                               
                                                                               
  and  Economic  Development,  represented the  administration                 
  concerning HB 58, the  tort reform bill.  He  was optimistic                 
  that  the  negotiations  going  on  between  the  interested                 
  parties regarding the  issues would result in  a compromise.                 
  He  pointed   out  that  the  governor   introduced  similar                 
  legislation developed  by the  task force  on civil  justice                 
  reform and to  the extent  that HB 58  was consistent,  they                 
  supported it.   He  expressed some  disappointment that  the                 
  task  force  proposals  received  little  attention  by  the                 
  legislature.   The task force  approach was that the problem                 
  was primarily one  of the cost of the system  to the parties                 
  involved.   As much  as sixty  percent of  damages paid  are                 
  eaten up by the system in court costs, attorney fees, expert                 
  witnesses, et cetera.   There were  two ways to save  money,                 
  either to cut costs in  the litigation process or cut  off a                 
  person's  right  to recover.    The task  force  decided the                 
  second option was inappropriate and unfair.  They  wanted to                 
  make sure people's rights were retained and to save money in                 
  the process by settling  cases more quickly and to  insure a                 
  higher percentage of the money  went to the deserving victim                 
  rather than the attorneys and witnesses.   He believed HB 58                 
  was faulty in that regard.  It contained provisions that had                 
  been unanimously  rejected by  the task  force because  they                 
  were not deemed to be fair to the litigants.                                 
                                                                               
                                                                               
  End SFC-97 #87, Side 1, Begin Side 2                                         
                                                                               
  In  response to  a  question from  SENATOR  ADAMS, MR.  BUSH                 
  discussed   the   task   force   requirements   to   get   a                 
  recommendation or proposal  to move forward.   SENATOR ADAMS                 
  inquired which were the  high points of the task  force that                 
  were missing  in HB 58.   MR.  BUSH responded that  the most                 
  significant   missing  pieces  dealt  with  the  process  of                 
  litigation.   There had been  a proposed  pilot program  for                 
  alternative dispute resolution in an effort to achieve quick                 
  resolution   before   they   went   to   trial.      Another                 
  recommendation was  that the District Court  jurisdiction be                 
  raised  from  $50  thousand  to $100  thousand  and  have an                 
  expedited process that required the litigants to go to trial                 
  within one year.  According to the sponsor, the reasons they                 
  were not included in HB 58 was because the court system said                 
  they would cost too much money.  He disagreed with the court                 
  system analysis.   In response  to a  question from  SENATOR                 
  PHILLIPS, MR. BUSH stated that of the 21 members of the task                 
  force, 9 held law degrees.                                                   
                                                                               
  COCHAIR SHARP announced that HB 58 would be HELD for further                 
  consideration.  He called for a  brief recess and turned the                 
  gavel over to COCHAIR PEARCE.                                                
                                                                               
  CS FOR HOUSE BILL NO. 75(FIN) am(brf sup maj pfld)                           
                                                                               
                                                                               
  "An Act  making appropriations  for the  operating and  loan                 
  program expenses of state government, for  certain programs,                 
  and to capitalize funds; making  an appropriation under art.                 
  IX, sec. 17(c),  Constitution of the  State of Alaska,  from                 
  the constitutional budget reserve fund; and providing for an                 
  effective date."                                                             
                                                                               
                                                                               
  CS FOR HOUSE BILL NO. 76(FIN)                                                
  "An Act making appropriations for  the operating and capital                 
  expenses of  the  state's  integrated  comprehensive  mental                 
  health program; and providing for an effective date."                        
                                                                               
  COCHAIR PEARCE reconvened  the meeting after a  few minutes.                 
  She  noted the  remaining  budget to  close  out on  today's                 
  schedule was the Information Technology Subcommittee, headed                 
  by SENATOR PARNELL.                                                          
                                                                               
  SENATOR PARNELL addressed the committee.   He explained that                 
  the  subcommittee   was  charged   with   pulling  all   the                 
  information technology expenditures  out of each department,                 
  including the university, and examining the combined budgets                 
  that totalled between $120-140 million.   The administration                 
  had commissioned a Compass America  study which conducted an                 
  in-depth  review  of  the  state's information  environment.                 
  Some of  the noted  findings included  random, uncoordinated                 
  purchases  of technology  throughout state  government, wide                 
  disparity of available technology among departments, and the                 
  fact that  the state  is comparatively more  technologically                 
  advanced,  but  wasn't  fully  utilizing  equipment in  many                 
  cases.    The subcommittee  recommended  a reduction  of all                 
  agency expenditures on computer equipment on a  proportional                 
  basis  for a  total  reduction of  $1.25  million.   SENATOR                 
  PARNELL   further  explained   that  they  would   like  the                 
  Department  of Administration (DOA) to set  up an account of                 
  $500  thousand for new  computer purchases.   The next major                 
  component was a  reduction to DOA's Division  of Information                 
  Services of  $350 thousand, via  the reduction of  rates for                 
  services to  other departments.   SENATOR PARNELL summarized                 
  by noting  the total reduction by the  subcommittee was $1.1                 
  million.                                                                     
                                                                               
  COCHAIR PEARCE inquired whether  the Compass America  report                 
  specifically addressed  the  university.    SENATOR  PARNELL                 
  replied that it  did not.   He   explained the  university's                 
  concerns about contributing to the $500 thousand account and                 
  competing for a portion of the funds.                                        
                                                                               
  SENATOR  ADAMS  inquired how  departments would  justify new                 
  technology and  updated equipment when technology changes so                 
  quickly.  He  also requested a  copy of the Compass  America                 
  study.  SENATOR  PARNELL responded that  the attempt was  to                 
  slow  down   uncoordinated  random  purchases   of  computer                 
  equipment.      As   an   example,   he  referred   to   the                 
                                                                               
                                                                               
  Telecommunications Information Council (TIC)  which had just                 
  established  a  standard  software suite  for  all  of state                 
  government that would  allow volume purchase.   It basically                 
  changed the decision-making process.                                         
                                                                               
  SENATOR  ADAMS  requested   testimony  from  the  university                 
  regarding a $459  thousand reduction and expressed  his hope                 
  that  it  did  not  hurt  students because  of  insufficient                 
  computers to handle their work load.                                         
                                                                               
  SHARON BARTON, Director, Administrative Services, DOA, spoke                 
  about the departmental  reductions, many of which  would end                 
  up as an  unallocated reduction  from budgeted amounts  that                 
  may have  been for priority  FY98 purchases.   She suggested                 
  they  not  slow  down  on   those  purchases,  although  the                 
  intention was good.   She agreed with the concept  of buying                 
  smarter and taking advantage of volume purchases.  Regarding                 
  the $500 thousand  fund, the priority of the  department and                 
  the TIC was to set standards for state government.  The fund                 
  would be valuable  to the anticipated  difficult transition.                 
  MS.  BARTON  elaborated   on  a   bigger  concern  for   her                 
  department,  that  being  the chargeback  reduction  and the                 
  complexity of the internal service fund.   She referred to a                 
  multiplier  effect  of  a  $350  thousand reduction  to  the                 
  Division  of  Information Services  that  would result  in a                 
  service  level  reduction  of   $1.4  million  and  provided                 
  additional  information.   In  response  to a  question from                 
  COCHAIR PEARCE, MS.  BARTON responded  that the  Information                 
  Services fund was very dynamic in  that money was flowing in                 
  and out of it on a daily basis.                                              
                                                                               
  KAREN  MORGAN,  Deputy  Director,  Division  of  Information                 
  Services, DOA,  responded to the  same question.   She noted                 
  that they operate the  fund at a zero balance  level because                 
  of the accounting  requirements to not  make a profit.   The                 
  federal government disallows  a balance  to be carried  over                 
  sixty days.  She further described the cash flow of the fund                 
  as it related to the fiscal year.                                            
                                                                               
  SENATOR ADAMS asked for further explanation of the structure                 
  of  the  proposed  fund.     SENATOR  PARNELL  responded  by                 
  describing the composition  of the  TIC.  He  added that  it                 
  would have oversight of a limited pool of funds as an effort                 
  to get a handle on this area.                                                
                                                                               
  In response  to a  question from  COCHAIR SHARP about  rates                 
  charged by the  division, there was lengthy  explanation and                 
  discussion from MS. MORGAN and MS. BARTON.                                   
                                                                               
  SENATOR ADAMS  restated his request to hear about the impact                 
  of a $459 thousand reduction on the university.                              
                                                                               
  WENDY REDMAN, University  of Alaska  (UA), stated that  they                 
  had no difficulty  with the chargeback portion  for provided                 
                                                                               
                                                                               
  services, as they  represented a small amount.  She provided                 
  written   information  to  the   committee  (copy  on  file)                 
  regarding the impact  of the overall reduction,  noting that                 
  the university's share  totaled 37  percent, adding that  it                 
  had  been  based  on   a  study  that  didn't  include   the                 
  university.  She pointed out that the university already had                 
  an integrated  system and  software standards.   She  called                 
  attention to a difficulty regarding the national standard of                 
  twenty students per  computer, noting the university average                 
  was currently closer to fifty students per computer, so they                 
  were far  behind in  student computing.   That  was a  major                 
  concern with regard to the reductions.                                       
                                                                               
  End SFC-97 #87, Side 2                                                       
  Begin SFC-97 #88, Side 1                                                     
                                                                               
  MARYLOU BURTON, Director, Statewide Budget Office, UA, spoke                 
  briefly in response to a question from SENATOR ADAMS about a                 
  recalculation of what reduction the university could stand.                  
                                                                               
  MS. REDMAN commented that they  were supportive of the  TIC,                 
  but  many  of  their  discussions  did  not  apply  to   the                 
  university.   In response to a question from COCHAIR PEARCE,                 
  she  further explained  how  they  control spending  through                 
  their integrated standards.                                                  
                                                                               
  SENATOR  PARNELL requested  an explanation from  Mike Greany                 
  regarding how the university number was arrived at.                          
                                                                               
  MIKE   GREANY,   Director,  Legislative   Finance  Division,                 
  testified that they treated the  university similar to other                 
  agencies  with  regard  to  identifying  a base  amount  for                 
  equipment and explained in detail.  He acknowledged that the                 
  university didn't do their  budget in the same way  as other                 
  state agencies, so they  made their best attempt to  fit the                 
  university  into  the  main   scheme,  purposely  taking   a                 
  conservative  approach.    He  stated  there  was  a  policy                 
  question on whether or not the university should be included                 
  within this type of review.   In response to a question from                 
  SENATOR ADAMS, MR. GREANY explained that the Legislature and                 
  Court  System  were  excluded  because  they  were  separate                 
  branches of government  with their  own needs and  governing                 
  structure.  SENATOR PARNELL  added that another  distinction                 
  was that they were not voting members of the TIC.                            
                                                                               
  SENATOR  PARNELL  MOVED  to   incorporate  the  subcommittee                 
  recommendations into HB 75.  SENATOR ADAMS objected.                         
  A show of hands was taken on the MOTION.                                     
  IN  FAVOR:  Donley,  Torgerson,  Phillips,  Parnell,  Sharp,                 
  Pearce                                                                       
  OPPOSED: Adams                                                               
  The MOTION CARRIED on a vote of 6 to 1.                                      
                                                                               
                                                                               
  COCHAIR PEARCE announced upcoming committee agendas.                         
                                                                               
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting was adjourned at approximately 8:03 P.M.                         

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