Legislature(1999 - 2000)

04/12/2000 06:11 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
MINUTES                                                                                                                         
SENATE FINANCE COMMITTEE                                                                                                        
April 12, 2000                                                                                                                  
6:11 PM                                                                                                                         
                                                                                                                                
TAPES                                                                                                                           
                                                                                                                                
SFC-00 # 85, Side A and Side B                                                                                                  
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair John Torgerson convened the meeting at                                                                                 
approximately 6:11 PM.                                                                                                          
                                                                                                                                
PRESENT Co-Chair John Torgerson, Senator Al Adams, Senator                                                                      
Lyda Green, Senator Pete Kelly, Senator Loren Leman,                                                                            
Senator Randy Phillips, Senator Gary Wilken                                                                                     
                                                                                                                                
Also Attending: SENATOR ROBIN TAYLOR; DARRYL HARGRAVES,                                                                         
Executive Director, Alaska Council for School                                                                                   
Administrators; EDDY JEANS, Manager, School Finance and                                                                         
Facilities Section, Education Support Services, Department                                                                      
of Education and Early Development; KEITH LAUFER, Financial                                                                     
and Legal Affairs Manager, Alaska Industrial Development                                                                        
and Export Authority, Department of Community and Economic                                                                      
Development; ELMER LINDSTROM, Special Assistant, Office of                                                                      
the Commissioner, Department of Health and Social Services;                                                                     
BOB LOEFFLER, Director, Division of Mining, Land and Water,                                                                     
Department of Natural Resources;                                                                                                
                                                                                                                                
Attending via Teleconference: From Kenai: PATRICK HICKEY;                                                                       
KARL KIRCHER, Kenai Peninsula Fisherman's Association;                                                                          
SANDY UMLAUT, President, Ugashik Set-netting Association;                                                                       
PAUL SHADURA; From Kodiak: DAVE JONES, Director of Finance,                                                                     
Kodiak School District; From Petersburg: ELIZABETH BACOM,                                                                       
President, Petersburg School Board; From Homer: DAN CHALUP,                                                                     
Representative, Katchemak Bay Salmon Producers Co-op;                                                                           
                                                                                                                                
SUMMARY INFORMATION                                                                                                             
                                                                                                                                
SB 290-PUBLIC SCHOOL FUNDING & EXPENDITURES                                                                                     
                                                                                                                                
The Committee heard from the Department of Education and                                                                        
Early Development, adopted a committee substitute,                                                                              
considered amendments, but adopted none, and reported the                                                                       
bill from Committee.                                                                                                            
                                                                                                                                
SB 248-AIDEA: BONDS & RURAL DEVELOPMENT                                                                                         
                                                                                                                                
The Committee heard from the Alaska Industrial Development                                                                      
and Export Authority. The bill was held in Committee.                                                                           
                                                                                                                                
SB 254-HEIRLOOM MARRIAGE CERTIFICATES                                                                                           
                                                                                                                                
The Committee heard from the Department of Health and                                                                           
Social Services and the bill moved from Committee.                                                                              
                                                                                                                                
SB 257-DEPT NAT RES ADMIN APPEALS/ OIL & GAS                                                                                    
                                                                                                                                
The Committee heard from the Department of Natural                                                                              
Resources and the bill moved from Committee.                                                                                    
                                                                                                                                
SB 259-CRIMES: REPRESENTATIONS/I.D./COMPUTERS                                                                                   
                                                                                                                                
Without further debate, the bill moved from Committee.                                                                          
                                                                                                                                
SB 283-NAT RES.REVENUE: FISH/TIMBER/LAND                                                                                        
                                                                                                                                
The Committee heard from the Department of Natural                                                                              
Resources and members of the public. The bill moved from                                                                        
Committee.                                                                                                                      
                                                                                                                                
SENATE BILL NO. 290                                                                                                             
"An Act relating to state funding for transportation                                                                            
of public school students; and providing for an                                                                                 
effective date."                                                                                                                
                                                                                                                                
                                                                                                                                
PATRICK HICKEY testified via teleconference from Kenai to                                                                       
address Amendment #1, increasing the minimum percentage of                                                                      
school operating expenses to 80 percent from 70 percent,                                                                        
which was not offered. He requested that the Committee give                                                                     
the Association of School District Officials the                                                                                
opportunity to divide the "section 400" accounting                                                                              
component to reflect the shared classroom and                                                                                   
administrative duties of school principals.                                                                                     
                                                                                                                                
DAVE JONES, Director of Finance, Kodiak School District                                                                         
testified via teleconference from Kodiak to address his                                                                         
concerns with the fifty-fifty clause for reimbursement of                                                                       
increased pupil transportation costs. He said the Kodiak                                                                        
School District was a good example of why this would not                                                                        
work. He spoke about the minimum wage required to pay                                                                           
school bus drivers. He stressed the only way the district                                                                       
could cover the costs would be to take money from the                                                                           
classroom, which would be contrary to the intent of the                                                                         
formula funding program. He described the school district's                                                                     
efforts along with other districts to encourage competition                                                                     
to bring the costs down.                                                                                                        
                                                                                                                                
ELIZABETH BACOM, President, Petersburg School Board,                                                                            
testified via teleconference from Petersburg about her                                                                          
understanding that this legislation would apply to the Cost                                                                     
of Living Allowance (COLA) portion of the pupil                                                                                 
transportation contracts. She spoke of the hardship of                                                                          
declining funding due to declining enrollment and how this                                                                      
additional funding reduction would force the district to                                                                        
take money from the classrooms.                                                                                                 
                                                                                                                                
DARRYL HARGRAVES, Executive Director, Alaska Council for                                                                        
School Administrators testified in Juneau about the matter                                                                      
of fairness across the state. He remarked that most of the                                                                      
Committee members represented large school districts and                                                                        
that other smaller communities would have difficulties                                                                          
meeting the matching fund requirements. He stressed that                                                                        
the bus driver contracts were strictly negotiated following                                                                     
many requirements imposed by the Board of Education. He                                                                         
talked about the complexities of the contracts and the                                                                          
required routes.                                                                                                                
                                                                                                                                
SENATOR ROBIN TAYLOR thanked the Committee for including                                                                        
Section 3 in the bill. [Description forthcoming.]                                                                               
                                                                                                                                
Senator Wilken moved to adopt CS SB 290, 1-LS1555\N as a                                                                        
workdraft.                                                                                                                      
                                                                                                                                
Co-Chair Torgerson objected for an explanation.                                                                                 
                                                                                                                                
Senator Wilken detailed the changes made to the bill in the                                                                     
committee substitute as follows.                                                                                                
                                                                                                                                
Section 2 - provides that school district pupil                                                                                 
transportation costs eligible for state reimbursement                                                                           
are subject for following adjustments:                                                                                          
 (1) sets the funding level received by the school                                                                              
district for student transportation in FY 01 is                                                                                 
considered the limit for future reimbursement.                                                                                  
 (2) stipulates that costs resulting from new                                                                                   
school facilities, increased enrollment or imposed by                                                                           
state or federal law are excluded from the                                                                                      
reimbursement calculation                                                                                                       
 (3) allows the reimbursement limit to increase                                                                                 
each fiscal year by four percent or the Anchorage                                                                               
Consumer Price Index (CPU), whichever is less.                                                                                  
 (4) sets out the pupil transportation cost excess                                                                              
of the limit, shall be reimbursable by 50 percent.                                                                              
                                                                                                                                
Section 3 - addresses the 70-30 percent split of                                                                                
operating versus administrative expenditure issue. It                                                                           
clarifies the definition of the instructional                                                                                   
component for the purpose of determining the school                                                                             
district's operating budget's minimum expenditure for                                                                           
instruction. It sets out that expenditures for school                                                                           
administration, principals, assistant principals or                                                                             
other assistants employed to supervise administrative                                                                           
operations of a school bay not be considered                                                                                    
instructional expenditures.                                                                                                     
                                                                                                                                
Section 4 - lowers the Average Daily Membership (ADM)                                                                           
threshold upon which a school district can count a                                                                              
facility as a separate school from 750 to 450.                                                                                  
                                                                                                                                
Sections 5 and 6 - set out the effective dates                                                                                  
                                                                                                                                
Senator Phillips asked which communities are allowed under                                                                      
the provisions of Section 4.                                                                                                    
                                                                                                                                
EDDY JEANS, Manager, School Finance and Facilities Section,                                                                     
Education Support Services, Department of Education and                                                                         
Early Development, answered that Section 4 would apply to                                                                       
Delta Junction/Greely, Petersburg and Wrangell school                                                                           
districts.                                                                                                                      
                                                                                                                                
Senator Phillips asked if the legislature was not the                                                                           
"assembly" for delta junction                                                                                                   
                                                                                                                                
Mr. Jeans responded that he believed in essence, that was                                                                       
correct.                                                                                                                        
                                                                                                                                
Senator Phillips asked why the legislature could therefore                                                                      
not mandate that community to form its own borough by                                                                           
making school funding a contingency.                                                                                            
                                                                                                                                
Mr. Jeans responded that AS 14.17.905. Facilities                                                                               
Constituting a School., applies to school districts whether                                                                     
they are a municipality or a Rural Education Attendance                                                                         
Area (REAA). He stated that Section 4 of the committee                                                                          
substitute therefore establishes a threshold of how the                                                                         
department can determine how communities can make school-                                                                       
size adjustments.                                                                                                               
                                                                                                                                
Senator Phillips repeated his question of what was                                                                              
preventing the legislature from mandating Delta Junction to                                                                     
form a borough.                                                                                                                 
                                                                                                                                
Co-Chair Torgerson said Mr. Jeans was not the person to                                                                         
address that question. Co-Chair Torgerson stressed that                                                                         
certainly the legislature had the power to mandate                                                                              
boroughs.                                                                                                                       
                                                                                                                                
Senator Phillips said he had concerns with Petersburg and                                                                       
Wrangell paying for the services and Delta Junction not                                                                         
paying.                                                                                                                         
                                                                                                                                
Co-Chair Torgerson remarked he had concerns with the entire                                                                     
Section 4.                                                                                                                      
                                                                                                                                
Co-Chair Parnell asked if Delta Junction/Greely is the                                                                          
first unorganized area that would qualify for funding under                                                                     
this section.                                                                                                                   
                                                                                                                                
Mr. Jeans replied there were other REAA communities that                                                                        
would be affected by the Section 4 clause.                                                                                      
                                                                                                                                
Co-Chair Parnell commented that this was a much bigger                                                                          
issue than just this one school.                                                                                                
                                                                                                                                
Senator Adams addressed the language in Section 2 (4),                                                                          
"only 50 percent of these costs reimbursable under this                                                                         
section that are in excess of the sum calculated under (1)                                                                      
- (3) of this subsection shall be reimbursed to a school                                                                        
district." He asked if this bill increased the "floor" of                                                                       
pupil transportation by reviewing the CPI, which is not                                                                         
used in the foundation formula. He wanted to know if the                                                                        
differences had been calculated.                                                                                                
                                                                                                                                
Senator Wilken answered that figures had not been                                                                               
calculated.                                                                                                                     
                                                                                                                                
Senator Adams asked if therefore the increases were                                                                             
unknown.                                                                                                                        
                                                                                                                                
Senator Wilken replied that the floor would be the amount                                                                       
set in the FY 00 budget, which may change with the FY 01                                                                        
budget if the requested $5 million increase is funded.                                                                          
                                                                                                                                
Senator Adams wanted to see the figures because he thought                                                                      
the costs could be higher.                                                                                                      
                                                                                                                                
Senator Adams then asked if Section 3 applies to rural                                                                          
districts where some principals not only run the school but                                                                     
also teach courses.                                                                                                             
                                                                                                                                
Senator Wilken shared that there is a formula the                                                                               
department can use for small school districts to classify                                                                       
the principal as a working teacher. However, he said                                                                            
schools with more than 50 students would not qualify for                                                                        
this consideration because the principal or assistant is                                                                        
responsible for managing the school.                                                                                            
                                                                                                                                
Senator Adams spoke of fair and equitable funding for                                                                           
students. He noted Amendment #2 of the previous committee                                                                       
substitute and Amendment #6 for the current version, both                                                                       
of which he sponsored. These amendments he explained,                                                                           
address the issue that rural school districts receive only                                                                      
60 cents on the dollar. He referred to the McDowell study                                                                       
that showed teachers in rural districts were paid                                                                               
differently because of their high cost of living. He wanted                                                                     
the Committee to consider                                                                                                       
                                                                                                                                
Senator Wilken replied that he had not considered the first                                                                     
amendment when drafting this committee substitute and had                                                                       
only just seen the second.                                                                                                      
                                                                                                                                
Co-Chair Torgerson asked if the department had calculated                                                                       
the impact of Section 4 on the fiscal note.                                                                                     
                                                                                                                                
Mr. Jeans had and said the added cost would be                                                                                  
approximately $1,009,800. He noted that the department                                                                          
would be opposed to the changes in the committee substitute                                                                     
because of the requirement of SB 36 to evaluate the                                                                             
effectiveness of that bill and report back to the                                                                               
legislature with recommendations in 2001. Constant changes                                                                      
to SB 36 would make the assessments difficult, he asserted.                                                                     
                                                                                                                                
Senator Adams asked what the cost would be of the proposed                                                                      
Amendment #6 to "stop the eroding floor" and whether the                                                                        
department supports or opposes that amendment.                                                                                  
                                                                                                                                
Mr. Jeans replied that the erosion of the floor went from                                                                       
approximately $17 million in FY 99 to $15 million in 2000.                                                                      
The overall fiscal impact, he said would be the $15 million                                                                     
on the floor at this time. He said it would be hard to                                                                          
project how long it would take for that full amount to                                                                          
erode.                                                                                                                          
                                                                                                                                
In response to the question on the department's position on                                                                     
the amendment, Mr. Jeans repeated that the department would                                                                     
be opposed to any changes to the foundation funding formula                                                                     
as set by SB 36.                                                                                                                
                                                                                                                                
Senator Adams objected to the adoption of the committee                                                                         
substitute on two points. The first is the unknown costs of                                                                     
Section 2, and the second is the absence of the provisions                                                                      
of Amendment #6.                                                                                                                
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Green, Senator Donley, Senator Leman,                                                                         
Senator Wilken, Co-Chair Parnell,                                                                                               
                                                                                                                                
OPPOSED: Senator P. Kelly, Senator Phillips, Senator Adams,                                                                     
and Co-Chair Torgerson                                                                                                          
                                                                                                                                
The motion PASSED (5-4)                                                                                                         
                                                                                                                                
The committee substitute version "N" was adopted as a                                                                           
workdraft.                                                                                                                      
                                                                                                                                
                                                                                                                                
Co-Chair Torgerson established that the proposed amendments                                                                     
would not be offered. [Copies on file.]                                                                                         
                                                                                                                                
AT EASE                                                                                                                         
                                                                                                                                
Amendment #5: This amendment deletes, "principals" from                                                                         
page 2 line 21 of the committee substitute. The amended                                                                         
language in Section 3 reads as follows.                                                                                         
                                                                                                                                
 (1) "instructional component" means [INCLUDES]                                                                                 
expenditures for teachers and [FOR] pupil support                                                                               
services, but does not include expenditures for school                                                                          
administration or for assistant principals, or other                                                                            
assistants employed to generally supervise                                                                                      
administrative operations of a school;                                                                                          
                                                                                                                                
New Text Underlined [DELETED TEXT BRACKETED]                                                                                    
                                                                                                                                
Senator Green moved for adoption. Co-Chair Torgerson                                                                            
objected.                                                                                                                       
                                                                                                                                
Senator Green spoke to earlier discussions regarding the                                                                        
need for classroom supervisors to provide assessment on the                                                                     
teacher performance in the classroom. She stressed that if                                                                      
a principal position was removed she thought the progress                                                                       
of improved performance would go backward. While she did                                                                        
not think 100 percent of the principal salary should go to                                                                      
instruction, she thought that the portion of time spent on                                                                      
instructional duties should be accounted for accordingly.                                                                       
                                                                                                                                
Co-Chair Torgerson replied this was the reason for the 70-                                                                      
30 rule. He stated that this provision changed the intent                                                                       
back to the original SB 36 rather than the recent Board of                                                                      
Education regulation. He warned that if the percentages                                                                         
were constantly changed, the board would be unable to                                                                           
provide adequate assessments of the foundation formula-                                                                         
funding program.                                                                                                                
                                                                                                                                
Senator Wilken explained that there are two conflicts                                                                           
occurring at once. First, he said was the placement of the                                                                      
principal in the organizational structure of the school as                                                                      
a manager. However, he shared, the issue before the                                                                             
Committee is how the principal position is accounted for in                                                                     
the expenditures of the school district. He stated that                                                                         
only the accounting component is changed. He stressed that                                                                      
in order to follow the 70-30 requirement the procedures                                                                         
need to remain constant.                                                                                                        
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Green                                                                                                         
                                                                                                                                
OPPOSED: Senator P. Kelly, Senator Wilken, Senator                                                                              
Phillips, Senator Donley, Senator Leman, Senator Adams, Co-                                                                     
Chair Parnell, Co-Chair Torgerson                                                                                               
                                                                                                                                
The motion FAILED (1-8)                                                                                                         
                                                                                                                                
The amendment FAILED to be adopted.                                                                                             
                                                                                                                                
Amendment #6: This amendment deletes "transportation of"                                                                        
from the title on page 1 line 1. The amended language reads                                                                     
as follows.                                                                                                                     
                                                                                                                                
"An Act relating to state funding for public school                                                                             
students; relating to a minimum amount of expenditures                                                                          
by school districts for instruction; determining the                                                                            
facilities constituting a school for purposes of                                                                                
public school funding; and providing for an effective                                                                           
date."                                                                                                                          
                                                                                                                                
The amendment also inserts a new bill section on page 3,                                                                        
following line 8 with an effective date of July 1, 2000, to                                                                     
read as follows.                                                                                                                
                                                                                                                                
"Sec. 5. AS 14.18.490(d) is repealed."                                                                                          
                                                                                                                                
Senator Adams moved for adoption. Co-Chair Torgerson                                                                            
objected.                                                                                                                       
                                                                                                                                
Senator Adams expressed that all students, regardless of                                                                        
where they live, should receive the same amount of funding.                                                                     
He stressed this is the worst kind of discrimination.                                                                           
                                                                                                                                
AT EASE 6:43 PM / 6:47 PM                                                                                                       
                                                                                                                                
Senator Wilken made a statement about Senator Adams's                                                                           
comments regarding the color of one's skin that disturbed                                                                       
him. He said the intent of SB 36 was to instill fairness.                                                                       
He listed the several rural districts that actually                                                                             
benefited from the formula funding formula. He suggested                                                                        
that removing this floor would cause the funding mechanism                                                                      
to revert back to the previously flawed formula.                                                                                
                                                                                                                                
Senator Adams responded the school districts cited by                                                                           
Senator Wilken were short-funded beforehand and were only                                                                       
now starting to receive fair funding. He asserted that if                                                                       
Senator Wilken's explanation was so good, then the figures                                                                      
should be reversed and urban schools should receive 60                                                                          
cents on the dollar and rural schools receive the full                                                                          
dollar.                                                                                                                         
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Adams                                                                                                         
                                                                                                                                
OPPOSED: Senator Phillips, Senator Green, Senator Donley,                                                                       
Senator Leman, Senator Wilken, Co-Chair Parnell, Co-Chair                                                                       
Torgerson                                                                                                                       
                                                                                                                                
ABSENT: Senator P. Kelly                                                                                                        
                                                                                                                                
The motion FAILED (7-1-1)                                                                                                       
                                                                                                                                
The amendment FAILED to be adopted.                                                                                             
                                                                                                                                
Senator Green commented that she appreciated the efforts                                                                        
that went into this legislation. However she needed to                                                                          
understand the impact on those districts that did not have                                                                      
an opportunity to renegotiate their pupil transportation                                                                        
contracts before the floor was set. She referred to a                                                                           
survey that showed those that had negotiated new contracts                                                                      
had an advantage of several million dollars over those                                                                          
districts that had not yet renegotiated.                                                                                        
                                                                                                                                
Co-Chair Torgerson commented that the new committee                                                                             
substitute negated all the 50-50 efforts since it allowed                                                                       
for multiple adjustments. He noted that about the only item                                                                     
not accounted for was the COLA.                                                                                                 
                                                                                                                                
Senator Green did not understand it that way. She would                                                                         
prefer to be a district that had already renegotiated                                                                           
rather than one that had not yet done so.                                                                                       
                                                                                                                                
Co-Chair Torgerson stated that the costs of the new                                                                             
contracts would not be known, but if the total were for $7                                                                      
million, the state would be required to pay the $7 million.                                                                     
                                                                                                                                
Senator Donley wanted to see progress made towards the                                                                          
charter school problem, but he noted he did not have an                                                                         
amendment drafted to address this issue.                                                                                        
                                                                                                                                
Senator Adams restated his request for calculations from                                                                        
the department.                                                                                                                 
                                                                                                                                
Mr. Jeans responded that to calculate that would be very                                                                        
difficult and listed reasons why. He was able to say that                                                                       
the COLA increases in Anchorage had been less than four                                                                         
percent since 1982. This would make Senator Green's                                                                             
concerns mute, he stated.                                                                                                       
                                                                                                                                
Senator Adams asked if the witness could tell the Committee                                                                     
if the cost would be higher or lower than the Committee's                                                                       
calculation of $5 million.                                                                                                      
                                                                                                                                
Mr. Jeans could not predict exactly what the increases                                                                          
would be but that all current contracts contain COLA                                                                            
provisions. He noted that the Railbelt area districts had                                                                       
issued Requests for Proposal (RFP), which he thought, would                                                                     
bring down the costs by encouraging outside competition.                                                                        
                                                                                                                                
Senator Adams asked if that would be the case only if there                                                                     
was outside competition.                                                                                                        
                                                                                                                                
Mr. Jeans affirmed.                                                                                                             
                                                                                                                                
Senator Adams addressed Senator Green's concerns about the                                                                      
effective dates of contracts. He asked if expiring                                                                              
contracts would be taken care of because of the staggered                                                                       
effective dates of Sections 5 and 6.                                                                                            
                                                                                                                                
Mr. Jeans responded that Section 6 establishes FY 01 as a                                                                       
base year that any increases will be measured. If fiscal                                                                        
note of over $1 million accompanied the bill, he said, the                                                                      
entire pupil transportation would be fully funded at the                                                                        
Department of Education and Early Development's request and                                                                     
that would establish the base line for the future.                                                                              
                                                                                                                                
Senator Green asked if Mr. Jeans could assure her that                                                                          
those districts that have not yet renegotiated their pupil                                                                      
transportation contract would not be at a detriment.                                                                            
                                                                                                                                
Mr. Jeans answered that was correct, provided the Anchorage                                                                     
COLA did not exceed four percent over the term of the                                                                           
contract. If did go above four, he explained, the increase                                                                      
would be split 50-50 between the district and the state.                                                                        
                                                                                                                                
Co-Chair Torgerson clarified the COLA would be the only                                                                         
expense reimbursable under normal contract provisions and                                                                       
that increased enrollment would not be impacted.                                                                                
                                                                                                                                
Mr. Jeans stated that in his understanding of the committee                                                                     
substitute's language FY 00 would be established as the                                                                         
base year. He continued that if a district required                                                                             
additional routes or added a new school or increased                                                                            
student population would increase the base and set a new                                                                        
threshold for the following years. He qualified that, if                                                                        
this were not the case, he needed to know.                                                                                      
                                                                                                                                
Co-Chair Torgerson assured the witness that was the                                                                             
Committee's intent.                                                                                                             
                                                                                                                                
Senator Green spoke of the efforts made by some districts                                                                       
to combine their contracts with other districts to                                                                              
encourage competitive bidding. She would contend that after                                                                     
one or two years, the state would be back to having only                                                                        
one provider. She did not think this was a competitive                                                                          
arena and therefore, this approach was not a long-term                                                                          
solution.                                                                                                                       
                                                                                                                                
Mr. Jeans agreed that could be the result, but that by not                                                                      
making the step forward, the state was locking into the                                                                         
existing contractors. He relayed that in conversations with                                                                     
Outside contractors, he was told they could not break into                                                                      
the Alaska market with the small routes. Therefore, he                                                                          
stated, aligning these contracts makes the market more                                                                          
appealing to competitors.                                                                                                       
                                                                                                                                
                                                                                                                                
Tape: SFC - 00 #85, Side B    7:03 PM                                                                                           
                                                                                                                                
                                                                                                                                
Mr. Jeans continued that contracts must consist of more                                                                         
than 100 busses in order to make it worthwhile for Outside                                                                      
providers to enter the market.                                                                                                  
                                                                                                                                
Senator Green gave a scenario of high oil prices resulting                                                                      
in high fuel prices to operate the busses and asked if                                                                          
those increased costs were included in the price of the                                                                         
contracts                                                                                                                       
                                                                                                                                
Mr. Jeans answered that was his interpretation as well.                                                                         
                                                                                                                                
Senator Wilken moved to report CS SB 290, 1-LS1555\N from                                                                       
Committee with forthcoming Department of Education and                                                                          
Early Development fiscal note.                                                                                                  
                                                                                                                                
Senator Green objected.                                                                                                         
                                                                                                                                
Co-Chair Torgerson objected saying that while he would not                                                                      
prevent the bill from reporting out of Committee, he could                                                                      
not support Section 4. He stressed that he could not agree                                                                      
to a million-dollar increase to the operating budget                                                                            
already agreed upon by the legislature.                                                                                         
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Wilken, Senator P. Kelly, Senator                                                                             
Phillips, Senator Donley, and Co-Chair Parnell                                                                                  
                                                                                                                                
OPPOSED: Senator Adams, Senator Green, and Co-Chair                                                                             
Torgerson                                                                                                                       
                                                                                                                                
ABSENT: Senator Leman                                                                                                           
                                                                                                                                
The motion PASSED (5-3-1)                                                                                                       
                                                                                                                                
The bill was MOVED from Committee.                                                                                              
                                                                                                                                
SENATE BILL NO. 248                                                                                                             
"An Act relating to the financing authority, payment                                                                            
in lieu of tax agreements, and tax exemption for                                                                                
assets and projects of the Alaska Industrial                                                                                    
Development and Export Authority; relating to renaming                                                                          
and contingently repealing the rural development                                                                                
initiative fund within the Department of Community and                                                                          
Economic Development, and establishing the rural                                                                                
development initiative fund within the Alaska                                                                                   
Industrial Development and Export Authority; and                                                                                
providing for an effective date."                                                                                               
                                                                                                                                
                                                                                                                                
KEITH LAUFER, Financial and Legal Affairs Manager, Alaska                                                                       
Industrial Development and Export Authority (AIDEA),                                                                            
Department of Community and Economic Development referred                                                                       
to the sectional analysis of the bill. [Copy on file.]                                                                          
                                                                                                                                
Mr. Laufer stated that the legislation has three elements.                                                                      
The first, he said extends the AIDEA general bonding                                                                            
authority that would otherwise sunset July 1, 2000. The                                                                         
second element of the bill, he explained transfers the                                                                          
Rural Development Initiative Fund Loan program to AIDEA. He                                                                     
relayed that the third element is technical changes to                                                                          
provisions in existing law dealing with tax exemptions and                                                                      
payment in lieu of tax agreements related to AIDEA                                                                              
development finance projects.                                                                                                   
                                                                                                                                
With regard to the bonding sunset, Mr. Laufer asserted that                                                                     
AIDEA has been subject to these sunsets for many years. He                                                                      
said the current sunset would prevent AIDEA from issuing                                                                        
all bonds other than refunding bonds regardless of size                                                                         
without specific legislative approval. Specifically, he                                                                         
pointed out, the sunset would prevent issuing bonds for                                                                         
less than $10 million for development finance projects. He                                                                      
noted that bonds over $10 million, currently and in the                                                                         
future under this legislation, to require specific                                                                              
legislative approval.                                                                                                           
                                                                                                                                
Mr. Laufer continued that the sunset would also prevent                                                                         
AIDEA from issuing conduit revenue bonds. He explained that                                                                     
these are the bonds that AIDEA can issue and which do not                                                                       
obligate either AIDEA's credit or the credit of the State                                                                       
Of Alaska but provide qualified projects with low-cost tax-                                                                     
exempt financing.                                                                                                               
                                                                                                                                
Mr. Laufer stated that the bill would extend the sunset                                                                         
provision to July 2003 and make clear that the conduit                                                                          
revenue bonds are not subject to the sunset.                                                                                    
                                                                                                                                
Mr. Laufer then addressed the transfer of the Rural                                                                             
Development Initiative Fund (RDIF). That program, he stated                                                                     
would formally move from the former Department and                                                                              
Community and Regional Affairs to AIDEA. He explained the                                                                       
program makes loans under $200,000 to businesses and                                                                            
communities with populations of less than 5,000. He                                                                             
expressed that AIDEA has long supported this program that                                                                       
also advances AIDEA's mission. He spoke of past actions                                                                         
where the legislature has authorized AIDEA to purchase                                                                          
these loans and directed the proceeds from the loans to re-                                                                     
capitalize the initiative fund. He stated that the                                                                              
relocation of this program would allow it to become self-                                                                       
sustaining without the need for periodic legislative                                                                            
appropriations. He noted that AIDEA would continue to work                                                                      
with the Department of Community and Economic Development                                                                       
to administer the program.                                                                                                      
                                                                                                                                
Mr. Laufer stated that this bill anticipates that a                                                                             
separate appropriation will also pass that would allow                                                                          
AIDEA to purchase the existing RDIF loan portfolio and the                                                                      
other assets in the fund.                                                                                                       
                                                                                                                                
Mr. Laufer continued that the bill makes technical                                                                              
amendments to the tax exemption provisions related to                                                                           
AIDEA-owned projects. Under existing law, he explained                                                                          
AIDEA's ownership of these projects is tax-exempt and local                                                                     
jurisdictions are permitted to exempt users of AIDEA-owned                                                                      
development projects from property tax or to enter into                                                                         
payment in lieu of tax agreements with those projects.                                                                          
Unfortunately, he shared these statutes are not clear as to                                                                     
the mechanism which are to be used for the tax exemption.                                                                       
He detailed two specific problems the bill address; pilot                                                                       
agreements and clarification to allow municipalities to                                                                         
grant tax exemptions.                                                                                                           
                                                                                                                                
Co-Chair Torgerson asked about the RDIF.                                                                                        
                                                                                                                                
Mr. Laufer described that due to complicated language in                                                                        
the transfer provision of the bill, there could be two                                                                          
funds. However, he assured that once the purchase of the                                                                        
fund's assets is authorized and consummated, the existing                                                                       
program is repealed and is combined into the new program.                                                                       
This language, he pointed out is contained in Section 10 of                                                                     
the bill.                                                                                                                       
                                                                                                                                
Co-Chair Torgerson wanted to know if the language in the                                                                        
transfer is exactly the same as the existing language.                                                                          
                                                                                                                                
Mr. Laufer replied that the new language mirrors the                                                                            
existing language with the exception of technical changes                                                                       
to allow the fund to comply with AIDEA's assets. He assured                                                                     
there are no changes to the program.                                                                                            
                                                                                                                                
Senator Phillips asked who asked for this legislation and                                                                       
why. He commented that his constituency would like to see                                                                       
the state sell AIDEA.                                                                                                           
                                                                                                                                
Mr. Laufer answered the bill was requested by the governor                                                                      
with the primary intent to extend AIDEA's bonding                                                                               
authority. He added that the RDIF transfer is included to                                                                       
avoid the need for future legislative appropriations to                                                                         
capitalize the fund.                                                                                                            
                                                                                                                                
Senator Phillips wanted to know who requested the governor                                                                      
sponsor this bill.                                                                                                              
                                                                                                                                
Mr. Laufer shared that AIDEA and the department had been                                                                        
discussing this matter for "some time."                                                                                         
                                                                                                                                
Senator Donley asked the criteria for the RDIF loans. He                                                                        
noted that AIDEA's charter requires it to practice due                                                                          
diligence to get repayment of its loans. He wanted to know                                                                      
if the rural loans were subject to the same requirement and                                                                     
what action AIDEA planned to take if a number of the loans                                                                      
began to default. He voiced his skepticism of many loan                                                                         
programs trying to become independent from state funding                                                                        
and instead become part of the AIDEA program. He stated                                                                         
that by becoming part of AIDEA, the programs are no longer                                                                      
subject to legislative scrutiny but that the funds used for                                                                     
the loans could instead be deposited into the general fund                                                                      
as AIDEA dividends.                                                                                                             
                                                                                                                                
Mr. Laufer responded that AIDEA has already been purchasing                                                                     
the RDIF loan portfolios and therefore has experience with                                                                      
these loans. He stated that the default rates are not out                                                                       
of line with what is expected in a typical loan portfolio                                                                       
that AIDEA would manage. He stressed that the loans are                                                                         
required to go through a similar process, as would be                                                                           
required in typical AIDEA programs. He detailed these                                                                           
requirements.                                                                                                                   
                                                                                                                                
Senator Donley asked if there was a maximum dollar amount                                                                       
AIDEA could put into the RDIF program.                                                                                          
                                                                                                                                
Mr. Laufer answered that there is not a maximum and that                                                                        
approximately $1 million would be a significant amount to                                                                       
make it the fund a truly revolving loan program.  He shared                                                                     
that the current problem is that once the department has                                                                        
loaned the money, there is insufficient money returned on                                                                       
an annual basis to fund any new loans. AIDEA would be able                                                                      
to operate the fund as a revolving loan program, he                                                                             
assured.                                                                                                                        
                                                                                                                                
Co-Chair Torgerson asked if AIDEA would oppose a                                                                                
legislative imposed cap of $2 million as the amount that                                                                        
could be given to the RDIF.                                                                                                     
                                                                                                                                
Mr. Laufer did not think so.                                                                                                    
                                                                                                                                
Co-Chair Torgerson asked for an explanation of Section 7                                                                        
asking for authorization to make loans to a political                                                                           
subdivision and if AIDEA is making loans to local                                                                               
governments.                                                                                                                    
                                                                                                                                
Mr. Laufer clarified that is not the case, but that the                                                                         
provision refers to the ability of users of AIDEA-owned                                                                         
projects to enter into payment in lieu of tax agreements to                                                                     
build the subdivisions. He stated that the language is                                                                          
detailed to make sure it is clear that the local                                                                                
subdivisions and the users of the project may enter into                                                                        
the tax agreements.                                                                                                             
                                                                                                                                
Co-Chair Torgerson noted the bill would not be reported                                                                         
from the Committee at this hearing, saying he wanted to                                                                         
consider setting a maximum amount that AIDEA would be                                                                           
allowed to deposit into the RDIF.                                                                                               
                                                                                                                                
Senator Green referred to the language on page 4, line 27                                                                       
"community with a population of 5,000 or less". She wanted                                                                      
to know how many communities fit this description in the                                                                        
state.                                                                                                                          
                                                                                                                                
Mr. Laufer did not have that information.                                                                                       
                                                                                                                                
Co-Chair Torgerson ordered the bill HELD in Committee.                                                                          
                                                                                                                                
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 254(HES)                                                                               
"An Act relating to heirloom certificates of                                                                                    
marriage."                                                                                                                      
                                                                                                                                
                                                                                                                                
This was the second hearing for this bill in the Senate                                                                         
Finance Committee.                                                                                                              
                                                                                                                                
Co-Chair Torgerson announced that he had had earlier                                                                            
concerns with the fiscal note and requested the department                                                                      
to recalculate the cost to implement the legislation.                                                                           
                                                                                                                                
ELMER LINDSTROM, Special Assistant, Office of the                                                                               
Commissioner, Department of Health and Social Services                                                                          
noted the $12,000 reduction made to the fiscal note. [Copy                                                                      
on file.]                                                                                                                       
                                                                                                                                
Senator Phillips asked if this program adds another                                                                             
position to government. While he thought this program would                                                                     
be nice to have, he did not consider it a function of                                                                           
government.                                                                                                                     
                                                                                                                                
Senator Adams offered a motion to report from Committee, CS                                                                     
SB 254 (HES) with $55,400 fiscal note from the Department                                                                       
of Health and Social Services. Senator Phillips objected.                                                                       
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Leman, Senator Adams, Senator Wilken,                                                                         
Senator P. Kelly, and Co-Chair Torgerson                                                                                        
                                                                                                                                
OPPOSED: Senator Green, Senator Phillips                                                                                        
                                                                                                                                
ABSENT: Senator Donley, Co-Chair Parnell                                                                                        
                                                                                                                                
The motion PASSED (5-2-2)                                                                                                       
                                                                                                                                
The bill was MOVED from Committee.                                                                                              
                                                                                                                                
AT EASE to 7:29 PM                                                                                                              
                                                                                                                                
SENATE BILL NO. 257                                                                                                             
"An Act relating to notice requirements for certain                                                                             
final findings concerning the disposal of an interest                                                                           
in state land or resources for oil and gas; relating                                                                            
to administrative appeals and petitions for                                                                                     
reconsideration of decisions of the Department of                                                                               
Natural Resources; and providing for an effective                                                                               
date."                                                                                                                          
                                                                                                                                
                                                                                                                                
BOB LOEFFLER, Director, Division of Mining, Land and Water,                                                                     
Department of Natural Resources, explained the bill does                                                                        
two things, creates a uniform appeals process for the                                                                           
Department of Natural Resources and corrects a notice                                                                           
problem for the Division of Oil and Gas.                                                                                        
                                                                                                                                
Mr. Loeffler explained the problems that precipitated this                                                                      
bill. He stated that for a variety of reasons, different                                                                        
laws have been passed over several years, and because of                                                                        
the way they interact, there is a variety of appeals                                                                            
processes within the department. He noted that these                                                                            
different processes follow different schedules with 15 - 30                                                                     
days allowed to file an appeal. The different processes, he                                                                     
added require different channels and opportunities for                                                                          
appeals. He remarked that this causes confusion for the                                                                         
public and for department staff. He stated that this bill                                                                       
establishes there is only one appeal process, one appeal to                                                                     
the commissioner and the next appeal made in court.                                                                             
                                                                                                                                
Mr. Loeffler continued with the second problem relating to                                                                      
notices for lease sales stating that there are currently                                                                        
three notices. He detailed these notices. As a result, he                                                                       
said the public is confused and there is additional cost                                                                        
for publishing the multiple notices.                                                                                            
                                                                                                                                
Co-Chair Torgerson asked why this bill does not have a                                                                          
negative fiscal note.                                                                                                           
                                                                                                                                
Mr. Loeffler responded that the Division of Oil and Gas has                                                                     
a higher workload this year, and the intent is to use the                                                                       
small cost savings from this legislation to pay for the                                                                         
other operations. The savings anticipated by other                                                                              
divisions, he said are spread between many employees and                                                                        
would be difficult to identify. He stated that because the                                                                      
department had a $750,000 budget reduction, "we're just                                                                         
struggling to keep up."                                                                                                         
                                                                                                                                
Co-Chair Torgerson asked if the fiscal note therefore has                                                                       
nothing to do with the bill but rather with the                                                                                 
department's desire to save money to be spent elsewhere                                                                         
within the department.                                                                                                          
                                                                                                                                
Mr. Loeffler repeated that the savings would be difficult                                                                       
to calculate.                                                                                                                   
                                                                                                                                
Senator Leman asked how much the department spends annually                                                                     
on public notices.                                                                                                              
                                                                                                                                
Mr. Loeffler did not know the entire cost but knew that the                                                                     
intermediate notice is a few thousand dollars for each oil                                                                      
and gas lease sale. He noted that the department offers "a                                                                      
few" of these sales each year.                                                                                                  
                                                                                                                                
Senator Leman was interested in reducing costs and stated                                                                       
that if this bill could allow the department to save money,                                                                     
he supported it. He suggested a conceptual amendment to                                                                         
remove the appeals process from the bill and maintain only                                                                      
the public notice portion.                                                                                                      
                                                                                                                                
Co-Chair Torgerson wanted the amendment offered on the                                                                          
Senate floor.                                                                                                                   
                                                                                                                                
Co-Chair Parnell pointed out that the Committee has in its                                                                      
possession, another bill that contains this language.                                                                           
                                                                                                                                
Co-Chair Parnell offered a motion to report from Committee,                                                                     
SB 257, 1-GS2046.A with accompanying zero fiscal note from                                                                      
the Department of Natural Resources.                                                                                            
                                                                                                                                
Without objection, the bill MOVED from Committee.                                                                               
                                                                                                                                
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 259(JUD)                                                                               
"An Act relating to crimes and offenses relating to                                                                             
aural representations, recordings, access devices,                                                                              
identification documents, impersonation, false                                                                                  
reports, and computers; and providing for an effective                                                                          
date."                                                                                                                          
                                                                                                                                
                                                                                                                                
This was the fifth hearing for this bill in the Senate                                                                          
Finance Committee. At the last hearing, a proposed                                                                              
committee substitute, 1-LS1284\M was before the members but                                                                     
not adopted.                                                                                                                    
                                                                                                                                
Senator Green asked which version contains the more complex                                                                     
language.                                                                                                                       
                                                                                                                                
It was established that Version "M" would not be adopted.                                                                       
                                                                                                                                
Co-Chair Parnell offered a motion to report from Committee,                                                                     
CS SB 259 (JUD), 1-LS1284\K with accompanying Department of                                                                     
Administration $84,700 fiscal note and Department of Public                                                                     
Safety $22,800 fiscal note.                                                                                                     
                                                                                                                                
There was no objection and the bill MOVED from Committee.                                                                       
                                                                                                                                
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 283(RES)                                                                               
"An Act establishing the shore fisheries development                                                                            
lease program account and the timber receipts account;                                                                          
relating to the accounting for and appropriation of                                                                             
revenue from the state land disposal program, the                                                                               
shore fisheries development lease program, and the                                                                              
state timber disposal program; and providing for an                                                                             
effective date."                                                                                                                
                                                                                                                                
                                                                                                                                
BOB LOEFFLER, Director, Division of Mining, Land and Water,                                                                     
Department of Natural Resources testified that the bill                                                                         
provides for a land disposal income fund for similar shore                                                                      
fisheries and for timber harvests. He detailed that this                                                                        
bill provides a separate accounting system for a land sale                                                                      
program to allow the legislature and the public to                                                                              
understand the benefits and the physical consequences of                                                                        
the land sales.                                                                                                                 
                                                                                                                                
Mr. Loeffler continued that the bill promotes the concept                                                                       
that state land sale programs should return revenues, not                                                                       
only for the sake of more land sales, but should also                                                                           
provide a return to the state. While he did not think these                                                                     
land sales would close the state's budget gap, he noted                                                                         
they would provide revenue above the amount needed to fund                                                                      
a stable land disposal program.                                                                                                 
                                                                                                                                
Mr. Loeffler detailed that the bill allows the department                                                                       
to use the income from past and present sales to fund more                                                                      
land disposals up to $5 million, with the remaining                                                                             
revenues going to the general fund.                                                                                             
                                                                                                                                
Mr. Loeffler addressed the fiscal note, which he said                                                                           
contain the concepts discussed during hearings on SB 6,                                                                         
another lands disposal legislation. The amount of the                                                                           
fiscal note, he said is enough to "jump start" the program                                                                      
and to keep up with new acreage in future years.                                                                                
                                                                                                                                
Mr. Loeffler spoke to the fisheries program, saying this                                                                        
bill provides a similar fund in the state treasury for the                                                                      
shore fisheries program. This program, he explained                                                                             
currently generates $360,000 for 1,200 shore fisheries                                                                          
leases and this bill would allow a portion of that revenue                                                                      
be used to fund the program.                                                                                                    
                                                                                                                                
DAN CHALUP, Representative, Katchemak Bay Salmon Producers                                                                      
Co-op, testified via teleconference from Homer in support                                                                       
of Section 3 of the legislation. His organization thought                                                                       
that a portion of the proceeds should go into the program                                                                       
to protect it from any further budget reductions from the                                                                       
Department of Natural Resources.                                                                                                
                                                                                                                                
KARL KIRCHER, Kenai Peninsula Fisherman's Association,                                                                          
testified via teleconference from Kenai in favor of the                                                                         
bill and referred to written testimony submitted to the                                                                         
Committee. [Copies not provided.] He also gave details                                                                          
about the organization; its purpose and the existing shore                                                                      
lease problems.                                                                                                                 
                                                                                                                                
SANDY UMLAUT, President, Ugashik Set-netting Association,                                                                       
testified via teleconference from Kenai about the                                                                               
organization and to request that members of the Committee                                                                       
vote in favor of this bill. She stated that this bill would                                                                     
continue to provide stability for the set-net industry.                                                                         
                                                                                                                                
PAUL SHADURA, member of a family that set-nets, testified                                                                       
via teleconference from Kenai telling about the successful                                                                      
fishing areas. His family supported the bill.                                                                                   
                                                                                                                                
Co-Chair Torgerson asked if new staff would be hired to                                                                         
implement the legislation.                                                                                                      
                                                                                                                                
Mr. Loeffler said approximately eight people would run the                                                                      
program. He noted that three title-search positions already                                                                     
existed and would be staffed by employees whose funding was                                                                     
eliminated in the operating budget. He qualified that two                                                                       
new positions would be needed for the shore fisheries                                                                           
portion of the program to offset staff reductions from the                                                                      
previous year.                                                                                                                  
                                                                                                                                
Senator Phillips asked how the legislature should explain                                                                       
to the public that the state is adding new positions to the                                                                     
government.                                                                                                                     
                                                                                                                                
Mr. Loeffler said the division would contract out functions                                                                     
as best as it can, but cautioned that in order to have a                                                                        
stable lands disposal system, staff are needed.                                                                                 
                                                                                                                                
Senator Phillips contended that would not stop people from                                                                      
complaining.                                                                                                                    
                                                                                                                                
Co-Chair Torgerson asked about the increase of 55,000 acres                                                                     
up from the earlier 50,000.                                                                                                     
                                                                                                                                
Mr. Loeffler referred to discussions regarding SB 6 and the                                                                     
five scenarios provided. He detailed that 55,000 acres was                                                                      
one of those scenarios, which is made up of 50,000 of re-                                                                       
offered, previously distributed parcels and 5,000 in remote                                                                     
sales and subdivisions. He explained how the funds                                                                              
allocated would be used to implement the lands disposal.                                                                        
                                                                                                                                
Co-Chair Torgerson commented that he would not hold the                                                                         
bill, but the warned that the performance measures would be                                                                     
scrutinized thoroughly. He did not have problem with the                                                                        
additional funding for positions.                                                                                               
                                                                                                                                
Senator Leman stated that he holds a set-net shore                                                                              
fisheries lease. He attested that the personal cost to him                                                                      
would be the same whether or not this bill passes.                                                                              
                                                                                                                                
Senator Adams offered a motion to move from Committee, CS                                                                       
SB 283 (RES) with two accompanying fiscal notes from the                                                                        
Department of Natural Resources, Division of Minerals, Land                                                                     
and Water. One fiscal note is $1,014,300 for the Land Sales                                                                     
and Municipal Entitlements component and the other fiscal                                                                       
note is $200,000 for the Claims, Permits and Leases                                                                             
component.                                                                                                                      
                                                                                                                                
Without objection, the bill MOVED from Committee.                                                                               
ADJOURNED                                                                                                                       
                                                                                                                                
Senator Torgerson adjourned the meeting at 7:55 PM.                                                                             
SFC-00 (23) 04/12/00                                                                                                            

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