Legislature(1999 - 2000)

03/31/1999 06:00 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
MINUTES                                                                                                                         
SENATE FINANCE COMMITTEE                                                                                                        
March 31, 1999                                                                                                                  
6:00 PM                                                                                                                         
                                                                                                                                
TAPES                                                                                                                           
                                                                                                                                
SFC-99 # 76, Side A and Side B                                                                                                  
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair John Torgerson convened the meeting at                                                                                 
approximately 6:00 PM.                                                                                                          
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Senator John Torgerson, Senator Sean Parnell, Senator Loren                                                                     
Leman, Senator Pete Kelly and Senator Lyda Green.                                                                               
                                                                                                                                
Also Attending:                                                                                                                 
                                                                                                                                
SENATOR RICK HALFORD; JACK KREINHEDER, Senior Policy                                                                            
Analysis, Office of Management and Budget; JANICE ADAIR,                                                                        
Director, Division of Environmental Health, Department of                                                                       
Environmental Conservation; DEBORAH BEHR, Assistant                                                                             
Attorney General, Legislation and Regulations Section,                                                                          
Civil Division, Department of Law; DOUG GARDNER, Assistant                                                                      
Attorney General, Oil, Gas and Mining Section, Civil                                                                            
Division, Department of Law; CAROL CARROLL, Director,                                                                           
Division of Support Services, Department of Military and                                                                        
Veterans Affairs and Department of Natural Resources; JOHN                                                                      
BITTNEY, Legislative Liaison, Alaska Housing Finance                                                                            
Corporation, Department of Revenue; GEORGE UTERMOHLE, Legal                                                                     
Council, Division of Legal Services, Legislative Affairs                                                                        
Agency; JAMES CRAWFORD, Assistant Reviser, Division of                                                                          
Legal Services, Legislative Affairs Agency;                                                                                     
                                                                                                                                
Attending via Teleconference: From Mat-Su: GARVAN BUCARIA;                                                                      
BILL BRUU, Treasure, Mat-Su Home Builders; DENNIS WALDOCK;                                                                      
From Anchorage: TERESA WILLIAMS; ERIC DYRUD; DICK DOLMAN;                                                                       
ARLENE PATTON, State Coordinator with Alaska Housing and                                                                        
Urban Development; ARTHUR CLARK; SUE BENEDITTI,                                                                                 
representing the Alaska Banker's and Manager of First                                                                           
National Bank; JUDY KEMPLEN, National Bank of Alaska and                                                                        
Northland Mortgage; JAN SIEBERTS, representing Alaska                                                                           
Bankers, employed at National Bank of Alaska; CHARLES                                                                           
BLALOCK, representing Prudential Insurance; JEWEL JONES;                                                                        
                                                                                                                                
SUMMARY INFORMATION                                                                                                             
                                                                                                                                
SB 101-DEFINITION OF DISASTER                                                                                                   
                                                                                                                                
The committee had questions of the Division of Legal                                                                            
Services. Testimony was taken from the Department of                                                                            
Military and Veterans Affairs. A new committee substitute                                                                       
and Amendment #10 were adopted. CS SB 101 (FIN) was                                                                             
reported out of committee.                                                                                                      
                                                                                                                                
SB  24-REGULATIONS: ADOPTION & JUDICIAL REVIEW                                                                                  
                                                                                                                                
The committee heard testimony from the Department of                                                                            
Environmental Conservation, Department of Natural                                                                               
Resources, Office of Management and Budget and Department                                                                       
of Law on the fiscal notes.  Amendments #14 - 25 were                                                                           
considered. CS SB 24 (FIN) was reported out of committee                                                                        
with new SFC fiscal notes.                                                                                                      
                                                                                                                                
SB 113-FINANCES OF ALASKA HOUSING FINANCE CORP                                                                                  
                                                                                                                                
The committee heard testimony from the sponsor, the Alaska                                                                      
Housing Finance Corporation and various members of the                                                                          
public. The bill was held in committee.                                                                                         
                                                                                                                                
SB  42-1999 REVISOR'S BILL                                                                                                      
                                                                                                                                
The Assistant Reviser from the Division of Legal Services                                                                       
explained the bill to the committee. The bill was reported                                                                      
out of committee.                                                                                                               
                                                                                                                                
SB  84-CIGARETTE SALES: AGREEMENT/ESCROW                                                                                        
                                                                                                                                
The committee heard testimony from the Department of Law.                                                                       
The bill was held in committee.                                                                                                 
                                                                                                                                
                                                                                                                                
SENATE BILL NO. 101                                                                                                             
"An Act amending the definition of 'disaster.'"                                                                                 
                                                                                                                                
                                                                                                                                
This was the sixth hearing for this bill.                                                                                       
                                                                                                                                
Amendment #10 was distributed to members relating to                                                                            
wildland fires.                                                                                                                 
                                                                                                                                
Senator Sean Parnell moved for adoption of Amend #10.                                                                           
Without objection, it was adopted.                                                                                              
                                                                                                                                
Senator Loren Leman requested George Utermohle to explain                                                                       
the flood provision.                                                                                                            
                                                                                                                                
GEORGE UTERMOHLE, Legal Council, Division of Legal                                                                              
Services, Legislative Affairs Agency, told the committee                                                                        
that the President of the US could declare a flood a                                                                            
disaster emergency.  He explained the flood provision and                                                                       
how an event would qualify for $5 million or $1 million in                                                                      
aid.  It did not lower the amount of funds it just lowered                                                                      
the threshold that the Governor must come to the                                                                                
Legislature for further assistance.                                                                                             
                                                                                                                                
Senator Loren Leman clarified that it just changed the                                                                          
methodology that the Governor had to use to obtain the                                                                          
floods.  George Utermohle affirmed.                                                                                             
                                                                                                                                
Senator Gary Wilken asked if the Upper Chena River flooded                                                                      
and ten years later, the Lower Chena River flooded would                                                                        
that be considered the second flood.  George Utermohle said                                                                     
it would be incumbent upon the Governor to define the area                                                                      
affected.                                                                                                                       
                                                                                                                                
Co-Chair John Torgerson noted the limit was set at $5                                                                           
million. The authority was actually broadened.                                                                                  
                                                                                                                                
Co-Chair John Torgerson announced that Amendment #10 must                                                                       
be rescinded to allow the committee to adopt the CS Version                                                                     
"K". Action taken on Amendment #10 was rescinded without                                                                        
objection.                                                                                                                      
                                                                                                                                
Senator Sean Parnell moved to adopt the CS Version "K".                                                                         
Without objection it was adopted.                                                                                               
                                                                                                                                
Senator Sean Parnell moved to adopt Amendment #10. Without                                                                      
objection, it was adopted.                                                                                                      
                                                                                                                                
Co-Chair John Torgerson asked if there was anyone wishing                                                                       
to testify for SB 101.                                                                                                          
                                                                                                                                
CAROL CARROLL, Director, Division of Support Services,                                                                          
Department of Military and Veterans Affairs and Department                                                                      
of Natural Resources, testified.  She asked the committee's                                                                     
intent with the adoption of Amendment #10. Co-Chair John                                                                        
Torgerson said wildfires were exempted. They discussed the                                                                      
intent of the amendment.  Co-Chair John Torgerson stated                                                                        
that his intent was exactly as the amendment was worded.                                                                        
Carol Carroll stated her interpretation of that.  Co-Chair                                                                      
John Torgerson agreed that was correct.                                                                                         
                                                                                                                                
Senator Lyda Green wanted to know if that was the current                                                                       
practice.  Co-Chair John Torgerson said it was not, that it                                                                     
had been set at $1 million.                                                                                                     
                                                                                                                                
Senator Lyda Green noted that there had been wildland fires                                                                     
much in excess of $5 million and she had never been polled                                                                      
on whether more funds should be expended.  Co-Chair John                                                                        
Torgerson explained that the presiding officers had made                                                                        
the decision in the past.  Under this legislation, the                                                                          
Legislature would be polled.                                                                                                    
                                                                                                                                
Carol Carroll asked if wildland fires would be less than $5                                                                     
million and more than $1 million.  Co-Chair John Torgerson                                                                      
requested George Utermohle explained the trigger procedure.                                                                     
                                                                                                                                
George Utermohle this provision provided that either $5                                                                         
million or $1 million disaster depending on what the                                                                            
Governor declared and depended on whether the President                                                                         
declared. However, it exempted that it must be declared a                                                                       
federal disaster before additional funds could be                                                                               
appropriated.                                                                                                                   
                                                                                                                                
Senator Sean Parnell made a motion to move CS SB 101 (FIN)                                                                      
from committee. Without objection, it was so ordered.                                                                           
                                                                                                                                
                                                                                                                                
CS FOR SENATE BILL NO. 24(JUD)                                                                                                  
"An Act relating to regulations; relating to                                                                                    
administrative adjudications; amending Rule 65, Alaska                                                                          
Rules of Civil Procedure; and providing for an                                                                                  
effective date."                                                                                                                
                                                                                                                                
                                                                                                                                
This was the fifth hearing for this bill.                                                                                       
                                                                                                                                
Co-Chair John Torgerson reminded the committee that a                                                                           
motion to adopt Amendment #14 was on the table.                                                                                 
                                                                                                                                
Senator Dave Donley moved to withdraw his motion to adopt                                                                       
Amendment #14. There was no objection.                                                                                          
                                                                                                                                
Senator Dave Donley moved for adoption of the CS Version                                                                        
"Y". It was adopted without objection.                                                                                          
                                                                                                                                
Senator Dave Donley stated he would not offer Amendment                                                                         
                                                                                                                                
Senator Dave Donley spoke to Amendment #16 and moved for                                                                        
adoption.  Senator Lyda Green asked how Section 3 would                                                                         
read. Senator Dave Donley read into the record. Without                                                                         
objection adopted.                                                                                                              
                                                                                                                                
Senator Dave Donley moved for adoption of Amendment #17.                                                                        
Co-Chair John Torgerson explained his amendment that                                                                            
clarified language to page 2 line 25. Without objection, it                                                                     
was adopted.                                                                                                                    
                                                                                                                                
Senator Dave Donley moved for adoption of Amendment #18.                                                                        
Co-Chair John Torgerson explained. Senator Gary Wilken                                                                          
wanted to make sure that it changed the * substantially. So                                                                     
the burden was up to the commissioner?  Co-Chair John                                                                           
Torgerson believed the burden would be up to the plaintiff.                                                                     
Senator Dave Donley explained it would first be up to the                                                                       
Department of Law then the plaintiff. Co-Chair John                                                                             
Torgerson commented it should reduce the number of times                                                                        
the regulation had to go out for public notice.                                                                                 
                                                                                                                                
Senator Gary Wilken question. Co-Chair John Torgerson                                                                           
respond.                                                                                                                        
                                                                                                                                
Without objection Amendment #18 was adopted.                                                                                    
                                                                                                                                
Senator Dave Donley moved for adoption of Amendment #19.                                                                        
Co-Chair John Torgerson explained. The burden of proof                                                                          
would be the same.                                                                                                              
                                                                                                                                
Without objection, Amendment #19 was adopted.                                                                                   
                                                                                                                                
Senator Dave Donley moved for adoption of Amendment #20 and                                                                     
explained that it had the same scheme as Amendment #16 and                                                                      
addressed the cost benefit analysis. Without objection,                                                                         
adopted.                                                                                                                        
                                                                                                                                
JANICE ADAIR, Director, Division of Environmental Health,                                                                       
Department of Environmental Conservation, testified to the                                                                      
fiscal note.  She appreciated the work on the bill but                                                                          
still had some concerns about how the department would                                                                          
instigate some of the changes.  She spoke to the number of                                                                      
comments received on some of the proposed regulations.  If                                                                      
she received only 13 comments, they would be required to                                                                        
send out second notices to all 3000 people on the mailing                                                                       
list.  While she would like to hear from more people, she                                                                       
did not.                                                                                                                        
                                                                                                                                
She noted the prior amendment to the fiscal note. The                                                                           
highest cost to do the notices was newspaper publishing and                                                                     
printing of the notices.  Those costs were contained in the                                                                     
contractual component.                                                                                                          
                                                                                                                                
Senator Loren Leman spoke to the number and length of                                                                           
public notices published in newspapers. Janice Adair                                                                            
detailed the requirements of public notices.                                                                                    
                                                                                                                                
Senator Gary Wilken referred to Amendment #18 and the                                                                           
addition of the word, "substantially" Janice Adair said it                                                                      
did somewhat, but she was still unsure what substantially                                                                       
meant in relationship to regulation changes.                                                                                    
                                                                                                                                
Senator Gary Wilken thought it was the intent of the                                                                            
amendment was to prevent from re-sending additional public                                                                      
notices.  Co-Chair John Torgerson responded not                                                                                 
necessarily. Senator Dave Donley agreed and said there was                                                                      
a reason because if there was a substantial change, the                                                                         
public may want to know of the changes.                                                                                         
                                                                                                                                
Senator Gary Wilken referred to page 2 line 25 and the                                                                          
relationship between the cost benefit analysis and the                                                                          
fiscal note.  He asked for clarification.  Senator Dave                                                                         
Donley replied there were three potential scenarios. The                                                                        
department could research in the Legislative Library.                                                                           
Second, *. If the commissioner found that the cost of doing                                                                     
the analysis was greater than the benefit of the                                                                                
regulation, there was an exemption.  He said there were                                                                         
about five other options.                                                                                                       
                                                                                                                                
Senator Gary Wilken asked if that applied to legislation                                                                        
that was in place for over ten years.  Senator Dave Donley                                                                      
said it was.  Senator Gary Wilken asked if Senator Dave                                                                         
Donley would consider an amendment to limit this bill to                                                                        
legislation passed in the past few years.  Senator Dave                                                                         
Donley said the point was to require the cost benefit                                                                           
analysis to determine the impact to the public.                                                                                 
                                                                                                                                
Senator Gary Wilken moved for adoption of Amendment #21.                                                                        
This would delete language from page 4 lines 21-29. Co-                                                                         
Chair John Torgerson objected and asked if this reflected                                                                       
current statute. Senator Gary Wilken affirmed.                                                                                  
                                                                                                                                
Senator Loren Leman felt that to delete members of the                                                                          
standing committees would be a mistake. Senator Gary Wilken                                                                     
withdrew his motion.                                                                                                            
                                                                                                                                
Senator Loren Leman questioned the mailing list of 3000                                                                         
names and wondered how that list could be shortened.                                                                            
Janice Adair noted the provision in the bill requiring all                                                                      
interested parties be included.                                                                                                 
                                                                                                                                
Senator Loren Leman asked how good Janice Adair felt that                                                                       
list was.  Janice Adair replied that they did remove names                                                                      
for undeliverable mail.  Senator Loren Leman asked if they                                                                      
ever did mailouts to determine interest in remaining on the                                                                     
mailing list. She did not have very good response and then                                                                      
received complaints from those who were purged as a result.                                                                     
She added that the regulations were posted on the Internet.                                                                     
                                                                                                                                
Senator Dave Donley moved to amend the Department of                                                                            
Environmental Conservation fiscal note as Amendment #22 to                                                                      
delete all components but supplies and contractual for each                                                                     
year. The contractual component would be reduced to $35.75.                                                                     
Without objection, it was adopted.                                                                                              
                                                                                                                                
Senator Dave Donley moved to amend the Department of Law                                                                        
fiscal note to reflect the Department of Law memo as                                                                            
Amendment #23. Without objection, it was also adopted.                                                                          
                                                                                                                                
Carol Carroll testified to the Department of Natural                                                                            
Resources fiscal note.                                                                                                          
                                                                                                                                
Senator Dave Donley moved for adoption of Amendment #24,                                                                        
which would amend the Department of Natural Resources                                                                           
fiscal note. Without objection, it was adopted.                                                                                 
                                                                                                                                
JACK KREINHEDER, Senior Policy Analysis, Office of                                                                              
Management and Budget, testified. He asked for                                                                                  
clarification of dec fiscal note. Senator Dave Donley said                                                                      
the contractual component was reduced 50 % and the supplies                                                                     
remained the same. All other components were deleted.                                                                           
                                                                                                                                
                                                                                                                                
Tape: SFC - 99 #76, Side B                                                                                                      
                                                                                                                                
                                                                                                                                
Jack Kreinheder said that helped. However, the extent of                                                                        
the fiscal note reductions would make it difficult to                                                                           
implement the bill. He had trouble understanding the intent                                                                     
for exemptions of the cost benefit analysis. They were not                                                                      
done in an hour.                                                                                                                
                                                                                                                                
It seemed clear to him that the regulatory staff in the                                                                         
state was already under funded. Therefore the ability to                                                                        
absorb the costs of the analysis was limited.                                                                                   
                                                                                                                                
He detailed that an acceptable cost benefit analysis would                                                                      
not be possible under this provision so he assumed the                                                                          
committee intended only cursurary analysis be done.                                                                             
                                                                                                                                
Senator Dave Donley said that was not the intent. They                                                                          
wanted the agencies to exercise common sense.                                                                                   
                                                                                                                                
Co-Chair John Torgerson noted that many regulations were                                                                        
outside the statutory authority.                                                                                                
                                                                                                                                
DEBORAH BEHR, Assistant Attorney General, Legislation and                                                                       
Regulations Section, Civil Division, Department of Law,                                                                         
testified. She had questioned many in the timber and other                                                                      
industries on this matter and was told that this would be a                                                                     
new tool that could be used to halt development. Parties                                                                        
wishing to prevent timber sales and other development could                                                                     
use this process to stop or slow such sales.                                                                                    
                                                                                                                                
In the section addressing supplemental notices, there was                                                                       
some question on whether the burden of proof would be                                                                           
placed on the person contesting the regulation.  Several                                                                        
areas of the bill lent the process to inadvertent errors.                                                                       
She suggested if the intent was to place the burden of                                                                          
proof on the challenger, it needed to be stated in the                                                                          
supplemental notice as it was done in other provisions.                                                                         
                                                                                                                                
She addressed the fiscal note.  Some of the costs listed                                                                        
would be to cover the preparation of the regulation to                                                                          
ensure they would be defensible in court. The remaining                                                                         
costs would be incurred for defense of the regulations when                                                                     
they actually went to court.                                                                                                    
                                                                                                                                
She spoke to the Department of Law's ability to defend the                                                                      
provisions of the bill.  She referred to sections 2, 3 and                                                                      
13 as the greatest concerns. There would need to be an                                                                          
excellent record to show that the regulation was necessary.                                                                     
Frankly, most regulations in the environmental area were                                                                        
compromises, she warned. The result was that these were                                                                         
often not the least intrusive methods, but rather the                                                                           
agreement of the involved parties as a compromise.                                                                              
                                                                                                                                
She believed that very few state regulations would be                                                                           
required by substantial state interest, which was another                                                                       
provision of the bill.                                                                                                          
                                                                                                                                
She anticipated litigation to determine the provisions of                                                                       
the bill.                                                                                                                       
                                                                                                                                
She felt this would result in an unsettling environment for                                                                     
business and investment in the state.                                                                                           
                                                                                                                                
GARVAN BUCARIA, testified via teleconference from Mat-Su.                                                                       
He spoke to the definition of "reasonable" and suggested                                                                        
that word meant different things to different people. He                                                                        
commented that the bill contained superlative language and                                                                      
needed to be cleaned up.                                                                                                        
                                                                                                                                
He was unsure which state agencies the current bill would                                                                       
encompass.                                                                                                                      
                                                                                                                                
Co-Chair John Torgerson clarified that the bill excluded                                                                        
everyone but Department of Environmental Conservation, the                                                                      
Department of Natural Resources and the Division of Habitat                                                                     
and Restoration.  Garvan Bucaria could not go along with                                                                        
that since those agencies were responsible for the health                                                                       
and safety of the state.  They had enough to do without the                                                                     
extra burden placed on them by the Legislature to do these                                                                      
analyses. He spoke of water quality standards in Wasilla                                                                        
saying the only protection was these regulations.                                                                               
                                                                                                                                
Co-Chair John Torgerson debated that this would not change                                                                      
the way water would flow into Wasilla Lake. Garvan Bucaria                                                                      
countered. He was concerned about the regulations being                                                                         
less effective since the agencies were working on limited                                                                       
resources.                                                                                                                      
                                                                                                                                
TERESA WILLIAMS, via teleconference from Anchorage.  She                                                                        
was on line to address Amendment #11, which was not                                                                             
offered.  She was concerned that the sponsor might offer it                                                                     
in the future.                                                                                                                  
                                                                                                                                
Senator Dave Donley took the testimony from Office of                                                                           
Management and Budget to heart and noted language on page 2                                                                     
line 19 saying that was included early in the process and                                                                       
was no longer needed.                                                                                                           
                                                                                                                                
Senator Dave Donley moved to delete page 2 line 17 "or that                                                                     
the cost and benefits cannot be easily determined" as                                                                           
Amendment #25. Senator Loren Leman or Senator Gary Wilken                                                                       
objected. Senator Dave Donley commented that the preceding                                                                      
line in the bill addressed the issue of when the cost of                                                                        
the analysis was prohibitive.                                                                                                   
                                                                                                                                
Senator Gary Wilken felt they should defer to the                                                                               
commissioner's judgement and this amendment would nail down                                                                     
the options more than what was necessary.                                                                                       
                                                                                                                                
Amendment #25 was adopted by a vote of 4/2/3. Senator Gary                                                                      
Wilken and Senator Loren Leman voted nay. Senator Al Adams,                                                                     
Senator Randy Phillips and Senator Sean Parnell were                                                                            
absent.                                                                                                                         
                                                                                                                                
Senator Dave Donley made a motion to move from committee CS                                                                     
SB 24 (FIN). Senator Pete Kelly objected.                                                                                       
                                                                                                                                
Break 7:05 PM / 7:06 PM                                                                                                         
                                                                                                                                
Senator Pete Kelly removed his objection and the bill moved                                                                     
from committee without objection.                                                                                               
                                                                                                                                
Break 7:08 PM                                                                                                                   
                                                                                                                                
SENATE BILL NO. 113                                                                                                             
"An Act making activities of the Alaska Housing                                                                                 
Finance Corporation subject to the Executive Budget                                                                             
Act, relating to appropriations to the Alaska Housing                                                                           
Finance Corporation; relating to bonds and bond                                                                                 
anticipation notes issued by the Alaska Housing                                                                                 
Finance Corporation; and providing for an effective                                                                             
date."                                                                                                                          
                                                                                                                                
                                                                                                                                
SENATOR RICK HALFORD spoke to the bill. The bill was                                                                            
drafted in response to a Commonwealth North Report that                                                                         
dealt with the consolidation and maximization of return on                                                                      
state assets.  AHFC was the third highest cash asset of the                                                                     
State Of Alaska behind the permanent fund and the                                                                               
constitutional budget reserve. Its cast value was somewhat                                                                      
in question because the corporation would not provided                                                                          
information on what the liquidated value would be.                                                                              
Instead, information was given about bond conveyances and                                                                       
provisions.                                                                                                                     
                                                                                                                                
The program included operations that would occur regardless                                                                     
of the state's cash situation, such as veteran's housing                                                                        
bonds since they were not subsidized and passed along a                                                                         
benefit from the federal government.                                                                                            
                                                                                                                                
It was a complicated issue. He referred to the great deal                                                                       
of feedback the Legislators had received.                                                                                       
                                                                                                                                
The bill was drafted to put AHFC under the Executive Budget                                                                     
Act and draw the corporation into the financial system of                                                                       
the state in such a way that the Legislature would be in                                                                        
control of the appropriation and expenditure processes as                                                                       
well as the authorization of future bonds.                                                                                      
                                                                                                                                
There were concerns from people who represented                                                                                 
bondholders. There were other legitimate concerns about the                                                                     
requirement for appropriation, refunding bonds or debt                                                                          
service on existing bonds. Jeopardizing those items was not                                                                     
the intention of the legislation as far as drawing the                                                                          
system back under state control. If the original bond was                                                                       
authorized and could be refunded at a lower cost, the                                                                           
original authorization was the legislative action that said                                                                     
the appropriation process was followed as well as the                                                                           
constitutional entity behind it.                                                                                                
                                                                                                                                
In the same sense, the appropriation of the debt service on                                                                     
a bond that was already authorized would not need to go                                                                         
back through the process. He felt this addressed the                                                                            
concerns voiced.                                                                                                                
                                                                                                                                
He speculated that the marketplace would love to see $2                                                                         
billion stay in the account and was satisfied with the                                                                          
current system. He spoke about the state's budget                                                                               
appropriations and stressed that the money belonged to the                                                                      
people of Alaska. They had a right to know the worth and                                                                        
what the program was accomplishing. He didn't believe that                                                                      
was currently the case.                                                                                                         
                                                                                                                                
He continued speaking to the merits of the bill.                                                                                
                                                                                                                                
Senator Dave Donley felt that the Commonwealth North did an                                                                     
excellent study showing how the state could maximize its                                                                        
assets. AHFC was one of the largest public assets and until                                                                     
the Legislature had authority to implement the                                                                                  
recommendations of the commonwealth study, there was no way                                                                     
to reach those goals. The intent of the legislature was to                                                                      
do that.                                                                                                                        
                                                                                                                                
JOHN BITTNEY, Legislative Liaison, Alaska Housing Finance                                                                       
Corporation, Department of Revenue, testified. He provided                                                                      
a letter to the committee expressing the position of the                                                                        
corporation.                                                                                                                    
                                                                                                                                
The corporation was concerned and perplexed with the bill.                                                                      
They were unaware that is was being drafted.                                                                                    
                                                                                                                                
The main concern was that AHFC was in the midst of issuing                                                                      
the debt that was authorized by SB 260 last year. The                                                                           
corporation had issued $92.4 million of that debt and did                                                                       
receive an upgrade from Standard and Forbes as part of that                                                                     
issuance. It was uncertain what the impact of this                                                                              
legislation would have on that rating. That could affect                                                                        
the timing and issuance of debt to complete the state                                                                           
capital projects authorized in SB 260                                                                                           
                                                                                                                                
He pointed out that the corporation was already subject to                                                                      
the Executive Budget Act. The operating budget was                                                                              
presented to the Legislature for authorization. The same                                                                        
was done with the capital budget and the mortgage program.                                                                      
However, the extent that the corporation should be under                                                                        
the act had been discussed in the past. The bonding                                                                             
authorizations had always been left to the discretion of                                                                        
the corporation in terms of timing and the amounts. This                                                                        
would allow flexibility under the review and the public                                                                         
process of the board of directors to take advantage of the                                                                      
best timing, interest rates and other factors affecting the                                                                     
investment environment.                                                                                                         
                                                                                                                                
He was dismayed because the corporation felt it already had                                                                     
a process that worked very well.  AHFC provided $103                                                                            
million annually to the state.  That was used to leverage                                                                       
$200 million in bond issuance on behalf of the state.  In                                                                       
addition to that, the corporation provided financing for                                                                        
purchases such as the Bank of America building for state                                                                        
office lease space as well as subsidized financing for the                                                                      
University of Alaska. This was the net of the hundreds of                                                                       
millions of dollars of mortgage activity the corporation                                                                        
provided inside the State Of Alaska.                                                                                            
                                                                                                                                
He apologized for any misperception that the                                                                                    
representatives of the corporation did not provide adequate                                                                     
information.  However, he said they would welcome any                                                                           
request and felt that if there was an intent to review the                                                                      
performance of the corporation, he believed that could                                                                          
happen without this legislation.                                                                                                
                                                                                                                                
Senator Loren Leman asked if the sponsor had worked with                                                                        
the corporation how would the bill be different.  John                                                                          
Bittney said if the intent was to implement the suggestions                                                                     
of the Commonwealth study, they would have been willing to                                                                      
work with the Legislature to implement the programs.                                                                            
                                                                                                                                
There was concern of whether or not the Legislature should                                                                      
approve each and every bond issuance. Section 8 was the                                                                         
main accounting section and would apply to every single                                                                         
home mortgage issuance saying the Legislature would have to                                                                     
appropriate each one. Section 10 would require front                                                                            
section language in each budget to accomplish.                                                                                  
                                                                                                                                
Co-Chair John Torgerson had asked the AHFC for a sectional                                                                      
analysis of the bill and asked if he had that with him.                                                                         
John Bittney did not and said the bond council and the tax                                                                      
council were working on drafting it.  He also noted the                                                                         
request for the fiscal note and gave the reason it was not                                                                      
provided.  He said it was a complex matter and detailed how                                                                     
loan program would have to be analyzed.  It would need                                                                          
front section language.                                                                                                         
                                                                                                                                
Co-Chair John Torgerson asked when the section by section                                                                       
overview would be available.  John Bittney replied he could                                                                     
have that delivered later in the evening.                                                                                       
                                                                                                                                
Section 8 was the most egregious and would affect the                                                                           
ability for the corporation to do business. All the                                                                             
sections of the bill would severely impact the                                                                                  
corporation's ability to conduct business. Section 7 would                                                                      
leave things as a status quo regarding authority for the                                                                        
grant fund within the corporation since that was done                                                                           
already.                                                                                                                        
                                                                                                                                
ERIC DYRUD, Co-Chair, Anchorage Board of Realtors                                                                               
Legislative Committee, testified via teleconference from                                                                        
Anchorage in opposition to SB 113. He suggested passing                                                                         
legislation requiring the corporation to submit reports                                                                         
rather than impede their operations. He invited the                                                                             
committee members to a legislative meeting the organization                                                                     
was holding on Monday.                                                                                                          
                                                                                                                                
Senator Loren Leman accepted the invitation. He would not                                                                       
be able to give background to the bill since he did not                                                                         
draft it.                                                                                                                       
                                                                                                                                
Eric Dyrud gave the time and place of the meeting.                                                                              
                                                                                                                                
DICK DOLMAN, VP Alaska Manager of a Seattle mortgage                                                                            
company, testified in opposition to the bill. He said this                                                                      
bill would place leg irons and hand cuffs on AHFC. AHFC was                                                                     
very successful and had a good reputation. He was one of                                                                        
the founders of the corporation.  Its independence was what                                                                     
allowed it to be successful.  He compared it to Fanny Mae                                                                       
and asked how that program would do if each of its loans                                                                        
had to be approved by Congress.                                                                                                 
                                                                                                                                
ARLENE PATTON, State Coordinator with Alaska Housing and                                                                        
Urban Development, testified via teleconference from                                                                            
Anchorage. During FY98 Alaska benefited from over $780                                                                          
million in federal resources. She limited her comments to                                                                       
the programs HUD relied on AHFC for funds to administer.                                                                        
She listed the positive recognition the corporation                                                                             
received. AHFC must have flexibility. Future opportunities                                                                      
would be jeopardized. She gave figures for the homeless                                                                         
rate in Alaska.  "Please remember what we do today is for                                                                       
the long term."                                                                                                                 
                                                                                                                                
Co-chair Torgerson asked the testifier to point out the                                                                         
relationship with AHFC in contrast to HUD. He requested                                                                         
this be done in writing and faxed to his office.                                                                                
                                                                                                                                
ARTHUR CLARK, Key Working Group Chairman, Alaska                                                                                
Association of Realtors for Industry Issues, testified via                                                                      
teleconference from Anchorage.  His concern with bill was                                                                       
due to a lack of understanding regarding the bond market.                                                                       
He reminded that the corporation has been benefiting the                                                                        
state with dividends.  Problems with communication and                                                                          
management must be addressed, he stated.                                                                                        
                                                                                                                                
SUE BENEDITTI, representing the Alaska Banker's, and                                                                            
Manager of First National Bank testified via teleconference                                                                     
from Anchorage.  In her travels around U.S. she heard how                                                                       
respected the AHFC was.  This was a missing opportunity for                                                                     
Alaskans.                                                                                                                       
                                                                                                                                
JUDY KEMPLEN, National Bank of Alaska and Northland                                                                             
Mortgage testified via teleconference from Anchorage.  If                                                                       
Alaska Housing cannot maintain bonds then there would be                                                                        
higher interest rates for potential homebuyers, he warned.                                                                      
This would encourage substandard housing.                                                                                       
                                                                                                                                
JAN SIEBERTS, representing Alaska Bankers, employed at                                                                          
National Bank of Alaska testified via teleconference from                                                                       
Anchorage.  Over the years, she had seen authority by                                                                           
Legislature over AHFC increased.  More independence should                                                                      
be given to AHFC.  The Banker's Association saw no purpose                                                                      
to this bill.                                                                                                                   
                                                                                                                                
CHARLES BLALOCK, representing Prudential Insurance                                                                              
testified via teleconference from Anchorage.  He noted that                                                                     
twenty-five percent of business was first time homebuyers.                                                                      
He felt the bill just needed to be fine-tuned.                                                                                  
                                                                                                                                
JEWEL JONES, testified via teleconference from Anchorage on                                                                     
her concerns about section 8 and said she needed additional                                                                     
time to look at the impact of the bill.  She had worked                                                                         
with Senator Rick Halford for many years and would continue                                                                     
to work with him regarding this matter.                                                                                         
                                                                                                                                
BILL BRUU, Treasure, Mat-Su HomeBuilders, testified via                                                                         
teleconference from Mat-Su.  He was concerned that the bill                                                                     
smacked of "killing the golden goose".  The Legislature was                                                                     
always trying to strangle Alaska Housing to get last little                                                                     
bit of cash, in his opinion.  He asked who drafted the                                                                          
bill.  Co-Chair John Torgerson responded that the bill                                                                          
drafters had.                                                                                                                   
                                                                                                                                
DENNIS WALDOCK testified via teleconference from Anchorage.                                                                     
He had many suggestions on improvements to the bill.                                                                            
                                                                                                                                
Co-Chair John Torgerson requested he submit his suggested                                                                       
changes in writing to the committee.                                                                                            
                                                                                                                                
Senator Loren Leman wanted to hear from a representative of                                                                     
the real estate industry who could tell the committee the                                                                       
percentage of home sales with AHFC financing.  There was no                                                                     
response.                                                                                                                       
                                                                                                                                
Co-Chair John Torgerson ordered the bill held in committee.                                                                     
He requested a sectional analysis from AHFC.                                                                                    
                                                                                                                                
                                                                                                                                
Break 7:56 PM / 8:11 PM                                                                                                         
                                                                                                                                
Tape: SFC - 99 #77, Side A    8:11 PM                                                                                           
                                                                                                                                
                                                                                                                                
CS FOR SENATE BILL NO. 42(JUD)                                                                                                  
"An Act making corrective amendments to the Alaska                                                                              
Statutes as recommended by the reviser of statutes;                                                                             
and providing for an effective date."                                                                                           
                                                                                                                                
                                                                                                                                
JAMES CRAWFORD, Assistant Reviser of Statutes, Division of                                                                      
Legal Services, Legislative Affairs Agency, testified.  He                                                                      
said the area of most concern to the committee would                                                                            
probably be Section 21. This addressed an internal                                                                              
numbering reference within an appropriations bill. Between                                                                      
versions of that bill, the section numbering changed and                                                                        
two numbers were skipped. This would correct that and make                                                                      
the changes retroactive to the effective date of the                                                                            
original legislation. He explained the reason for the error                                                                     
was that the original sections contained effective dates                                                                        
that failed to receive the required super-majority vote to                                                                      
be adopted. As a consequence, when the bill was reprinted                                                                       
those sections were removed but the remaining sections were                                                                     
not renumbered properly.                                                                                                        
                                                                                                                                
Co-Chair John Torgerson clarified that this bill contained                                                                      
technical corrections to previously adopted statutes.                                                                           
James Crawford confirmed and detailed.                                                                                          
                                                                                                                                
Co-Chair John Torgerson asked about the different versions                                                                      
of this bill adopted by past committees.  James Crawford                                                                        
spoke about changes to more controversial sections of the                                                                       
bill that did not apply to the Senate Finance Committee.                                                                        
Those sections addressed the criminal justice system and                                                                        
were separated into a supplemental reviser's bill.                                                                              
                                                                                                                                
Senator Dave Donley made a motion to move CS SB 42 (JUD)                                                                        
from committee.  Without objection, it was so ordered.                                                                          
                                                                                                                                
                                                                                                                                
SENATE BILL NO. 84                                                                                                              
"An Act imposing certain requirements relating to                                                                               
cigarette sales in this state by tobacco product                                                                                
manufacturers, including requirements for escrow,                                                                               
payment, and reporting of money from cigarette sales                                                                            
in this state; providing penalties for noncompliance                                                                            
with those requirements; and providing for an                                                                                   
effective date."                                                                                                                
                                                                                                                                
                                                                                                                                
DOUG GARDNER, Assistant Attorney General, Oil, Gas and                                                                          
Mining Section, Civil Division, Department of Law, gave an                                                                      
overview of the bill.                                                                                                           
                                                                                                                                
Co-Chair John Torgerson asked him to begin by explaining                                                                        
why this bill was offered. Doug Gardner explained that on                                                                       
November 30, 1998, the State Of Alaska along with 46 other                                                                      
states and the District of Columbia and five other                                                                              
jurisdictions settled tobacco litigation in a master                                                                            
settlement agreement with the tobacco industry.                                                                                 
                                                                                                                                
The master settlement agreement contained a "non-                                                                               
participating manufacturer adjustment." That was an                                                                             
equation in the agreement that provided that if the                                                                             
industry as a result of entering into this agreement with                                                                       
the state, experienced a loss of market share, the industry                                                                     
was entitled to offset its payments to the state by the                                                                         
amount of the non-participating manufacture percentage.  A                                                                      
non-participating manufacturer was one that did not sign                                                                        
the agreement.  The bill was envisioned to provide that any                                                                     
small company that did not sign the agreement should not be                                                                     
entitled to gain a cost advantage over those competitive                                                                        
companies that signed the agreement. For example, a small                                                                       
renegade manufacturer might decide to sell cheaper                                                                              
cigarettes since they did not have the burdens of the                                                                           
agreement and flood the market and cause the same public                                                                        
health problems.                                                                                                                
                                                                                                                                
This bill would provide for payment of money by non-                                                                            
participating manufacturer into an escrow fund so that the                                                                      
playing field would remain level between the main                                                                               
manufacturers and the non-participating manufacturers.                                                                          
                                                                                                                                
In essence this bill gave the companies two options either                                                                      
to sign the agreement or not sign the agreement and pay                                                                         
into an escrow the amount they would have paid had they                                                                         
participated.                                                                                                                   
                                                                                                                                
He detailed why this was important to the State of Alaska.                                                                      
He referred to a handout before the members that showed a                                                                       
hypothetical scenario that envisioned the problems that                                                                         
could occur if the bill did not pass. It would expose the                                                                       
state to a non-participating manufacturer adjustment. If                                                                        
the bill passed, the state would not have to share in any                                                                       
downside risks if the industry's market share dropped and                                                                       
they reduced payments to the state. It was a way of                                                                             
protecting the state's payments and to provide a mechanism                                                                      
for the citizens to have a fund to recover against.                                                                             
                                                                                                                                
Co-Chair John Torgerson asked for an example of a                                                                               
nonparticipating manufacturer.  Doug Gardner said that was                                                                      
not easy to do.  As of this date, 99.8 percent of the                                                                           
tobacco market share was either an original participating                                                                       
manufacturer, or was one of the smaller companies that                                                                          
became a subsequent participant.  There were very few                                                                           
companies that had not taken the deal offered in the                                                                            
settlement. The fear was that in the future, a smaller                                                                          
manufacturer or newly created company could take advantage                                                                      
of the situation. Co-Chair John Torgerson clarified that                                                                        
none could be identified. Doug Gardner said he could                                                                            
research the matter.                                                                                                            
                                                                                                                                
Co-Chair John Torgerson said he thought it looked like the                                                                      
tobacco companies locked in their sales numbers. This bill                                                                      
addressed the possibility of another company taking a share                                                                     
and impacting the participants.                                                                                                 
                                                                                                                                
Senator Dave Donley said this was the kind of bill that he                                                                      
would like to see the recommendations from the previous                                                                         
committees. He would like to have this provided for all                                                                         
previous bills.                                                                                                                 
                                                                                                                                
Co-Chair John Torgerson said it would be considered but                                                                         
that it may cause an additional burden.                                                                                         
                                                                                                                                
Co-Chair John Torgerson wondered if another option would be                                                                     
to impose a separate tax on those that did not sign the                                                                         
agreement. Doug Gardner wagered to say there would be a                                                                         
high likely hood there would be difficulties in taxing                                                                          
interstate commerce at different rates. This would not                                                                          
comply with the state constitution and perhaps the federal                                                                      
constitution as well.                                                                                                           
                                                                                                                                
Co-Chair John Torgerson asked if this was required in order                                                                     
to collect the settlement monies.  Doug Gardner affirmed.                                                                       
However, if the bill did not pass there was exposure to                                                                         
adjustments of reduced market-share.                                                                                            
                                                                                                                                
Co-Chair John Torgerson asked what was the outward timeline                                                                     
if the bill was not passed this year. Doug Gardner replied                                                                      
that the Legislature could do that but that by the time the                                                                     
problem was identified, the bill would not be in place for                                                                      
the year prior that the industry requested a reduction. The                                                                     
state would then be out the funds for that year.                                                                                
                                                                                                                                
Co-Chair John Torgerson asked if some of the larger tobacco                                                                     
companies announced that they sold off their to another                                                                         
company, how do we know that they won't form some funny                                                                         
company that was not part of the agreement.  Doug Gardner                                                                       
said there were protections in the Master Settlement                                                                            
Agreement.                                                                                                                      
                                                                                                                                
Co-Chair John Torgerson asked about RJR/Nabisco's                                                                               
announcement of a sell-off.  Doug Gardner said it was                                                                           
complicated and he would research the matter.  Co-Chair                                                                         
John Torgerson requested him to do that.  Doug Gardner                                                                          
understood that the exposure was not great, but if we                                                                           
allowed them to do that then if the tobacco companies were                                                                      
allowed to sell without the underlying agreement this would                                                                     
become an important piece of legislation.                                                                                       
                                                                                                                                
Senator Loren Leman had questions on page 4 regarding                                                                           
identifying the qualifying financial institutions for the                                                                       
escrow funds.  How many institutions in Alaska met that                                                                         
requirement?  Doug Gardner said the intention of that                                                                           
language was to prevent a company from managing the escrow                                                                      
account itself.  He didn't think there was a company in                                                                         
Alaska that had the assets to manage the escrow account.                                                                        
                                                                                                                                
Senator Loren Leman wondered why it was necessary to have                                                                       
that great of market capitalization for the portion that                                                                        
Alaska was concerned about. Doug Gardner responded that the                                                                     
escrow account would hold funds for all the participating                                                                       
parties that could collect from the settlement agreement.                                                                       
                                                                                                                                
Senator Loren Leman noted the language "revert back" on                                                                         
line 13 was probably a technical amendment. He suggested                                                                        
deletion of the word "back".                                                                                                    
                                                                                                                                
Senator Lyda Green asked if every tobacco manufacturer in                                                                       
the nation was named and involved in the original suit.                                                                         
Doug Gardner replied that the suit primarily named the                                                                          
larger companies. There could have been smaller companies                                                                       
that might be unable to pay the judgements.                                                                                     
                                                                                                                                
Senator Lyda Green assumed at that time the department did                                                                      
not anticipate non-participating manufacturers be an issue.                                                                     
Doug Gardner said that was possible.                                                                                            
                                                                                                                                
Senator Lyda Green asked if every plaintiff named agreed to                                                                     
the settlement.  Doug Gardner answered yes.  Senator Lyda                                                                       
Green wanted to know if this applied to those in business                                                                       
now or could be in the future.  Doug Gardner said this was                                                                      
market share today in America and there could be an                                                                             
infinite number in the future. Without this legislation,                                                                        
there could be an incentive to do business in that way.                                                                         
                                                                                                                                
Senator Loren Leman returned to the escrow fund matter.  It                                                                     
appeared that the manufacturer had to identify what was                                                                         
sold in the state.  Was there any reason listed in the                                                                          
Master Agreement why it could not be required that the fund                                                                     
be held in Alaska? Doug Gardner said there wasn't anything                                                                      
in the agreement.  However, the model agreement was                                                                             
tailored to Alaska to fit within the statutory scheme and                                                                       
was hard-fought with the opponents.  They had indicated to                                                                      
him that if they made changes they would take the position                                                                      
that the statute was not qualifying and challenge. In                                                                           
principle, he did not see a problem but warned that the                                                                         
industry could challenge.                                                                                                       
                                                                                                                                
Co-Chair John Torgerson asked if the settlement funds were                                                                      
handled by an independent source.  Doug Gardner explained                                                                       
the system. He stated there was an independent auditor and                                                                      
that was where the challenge would be heard.                                                                                    
                                                                                                                                
The bill was held in committee.                                                                                                 
                                                                                                                                
Doug Gardner clarified the information requested by Co-                                                                         
Chair John Torgerson.                                                                                                           
                                                                                                                                
                                                                                                                                
Co-Chair John Torgerson announced the next meeting schedule                                                                     
to hear SB 100 and SB 6.                                                                                                        
                                                                                                                                
Break 8:38 PM / 8:40 PM                                                                                                         
                                                                                                                                
Senator Gary Wilken asked about the schedule for the next                                                                       
week.  Co-Chair John Torgerson detailed.                                                                                        
                                                                                                                                
Senator Sean Parnell commented that he did not anticipate                                                                       
subcommittee closeouts on the operating budget until later.                                                                     
                                                                                                                                
ADJOURNED                                                                                                                       
                                                                                                                                
Senator Torgerson adjourned the meeting at 8:45 PM.                                                                             
SFC-99 (21) 3/31/99                                                                                                             

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