Legislature(2011 - 2012)SENATE FINANCE 532

03/10/2011 09:00 AM Senate FINANCE

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                  SENATE FINANCE COMMITTEE                                                                                      
                       March 10, 2011                                                                                           
                         9:05 a.m.                                                                                              
9:05:42 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair   Stedman  called  the   Senate  Finance   Committee                                                                   
meeting to order at 9:05 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Lesil McGuire, Vice-Chair                                                                                               
Senator Johnny Ellis                                                                                                            
Senator Dennis Egan                                                                                                             
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Senator Bill  Wielechowski; Michelle Sydeman,  Staff, Senator                                                                   
Wielechowski;   Wanetta   Ayers,  Department   of   Commerce,                                                                   
Community  and  Economic Development,  Division  of  Economic                                                                   
Development; Doug  Wooliver, Administrative  Attorney, Alaska                                                                   
Court System.                                                                                                                   
PRESENT VIA TELECONFERENCE                                                                                                    
Mike Borgford,  made in  Mat-Su Association, Wasilla;  Brooke                                                                   
McLaughlin,   Crabby   Sisters,  Anchorage;   Chris   Shutte,                                                                   
Executive  Director,  Anchorage  Downtown  Partnership;  Erik                                                                   
O'Brien, Southwest  Alaska Municipal Conference;  Jason Hoke,                                                                   
Executive  Director, Copper  Valley Development  Association;                                                                   
Carl Berger,  Lower Kuskokwim  Economic Development  Council,                                                                   
Bethel;  Tracy Lebarge,  Tracy's King Crab  Shack; Lt.  Dial,                                                                   
Alaska  State  Troopers; Quinlan  Steiner,  Director,  Public                                                                   
Defender Agency, Department of Administration.                                                                                  
SB 34     SMALL BUSINESS REVOLVING FUND                                                                                         
          SB 34 was HEARD and HELD in Committee for further                                                                     
SB 58     INCREASING NUMBER OF SUPERIOR CT JUDGES                                                                               
          SB 58 was HEARD and HELD in Committee for further                                                                     
SENATE BILL NO. 34                                                                                                            
     "An Act establishing the Alaska small business                                                                             
     revolving loan fund; relating to the fund and loans                                                                        
     from the fund; and providing for an effective date."                                                                       
9:06:07 AM                                                                                                                    
SENATOR  BILL  WIELECHOWSKI introduced  the  legislation.  He                                                                   
noted that the  governor presented a similar  bill last year.                                                                   
Last  year's bill  did not  pass.  He recalled  conversations                                                                   
with a  number of small  business owners who  were passionate                                                                   
about the  issue and he attempted  many times to  contact the                                                                   
governor's  office. No  reply was  given. His  intent was  to                                                                   
file  SB 34  as bipartisan  legislation from  the Senate.  He                                                                   
commented that small business  owners report great difficulty                                                                   
accessing  credit. Banks are  reluctant to  lend to  start up                                                                   
firms  or  small  businesses  without  an  established  track                                                                   
9:08:47 AM                                                                                                                    
MICHELLE  SYDEMAN,  STAFF, SENATOR  WIELECHOWSKI,  introduced                                                                   
the PowerPoint  presentation: "SB  34: Alaska Small  Business                                                                   
Revolving Loan Fund."                                                                                                           
Ms.   Sydeman   began   with   Slide   2:   "Prime   Sponsors                                                                   
     Senators Wielechowski, Menard, Ellis, Paskvan, McGuire,                                                                    
     and Thomas.                                                                                                                
Ms. Sydeman discussed Slide 3: "Purpose."                                                                                       
     To promote economic development by helping small                                                                           
     businesses in Alaska to access critically needed                                                                           
Ms. Sydeman discussed Slide 4: "The Need."                                                                                      
   · Nationally, the number of  small business able to obtain                                                                   
     adequate  financing has steadily  decreased in  the last                                                                   
     several years.                                                                                                             
   · In 2010,  only 50 percent  of small businesses  reported                                                                   
     adequate access to capital.                                                                                                
   · This  is down  from 78  percent  in August  2008 and  62                                                                   
     percent   in  July   2009.   (National  Small   Business                                                                   
Ms. Sydeman introduced Slide 5: "Fewer Loans."                                                                                  
   · In 2009,  new small  business loans  fell 33 percent  to                                                                   
     $192  billion, the  lowest  total  since 2000.  (Federal                                                                   
     Financial Institutions Examination Council)                                                                                
   · Small business  use of nearly every  financing mechanism                                                                   
     has  decreased--from traditional  bank  loans to  credit                                                                   
     cards to vendor loans. (NSBA)                                                                                              
9:10:20 AM                                                                                                                    
Ms. Sydeman moved to Slide 6: "Credit Crunch."                                                                                  
   · 80 percent of  business owners -4 out of  5- report that                                                                   
     their company has been impacted by the credit crunch.                                                                      
Ms. Sydeman detailed Slide 7: "Why is this a problem?"                                                                          
   · Small  firms  tend  to drive  job  growth,  particularly                                                                   
     during  recoveries.  They  employ  roughly half  of  all                                                                   
     American  workers and  account for  about 60 percent  of                                                                   
     job creation.                                                                                                              
   · Businesses less  than 2 years old are  especially vital.                                                                   
     Over  the past 20  years, start-ups  have accounted  for                                                                   
     roughly 25  percent of job creation. When  capital flows                                                                   
     more freely, small businesses add new jobs.                                                                                
Ms. Sydeman detailed Slide 8: "Is Alaska Different?"                                                                            
   · Probably  not, according to  experts. In fact,  Alaska's                                                                   
    higher business costs could exacerbate the problem.                                                                         
   · Support  for small  businesses is  as important  here as                                                                   
Ms. Sydeman discussed Slide 9: "Given this…"                                                                                    
   · Perhaps we  should listen to Fed Chairman  Ben Bernanke,                                                                   
     who recently said:                                                                                                         
   · "Making credit  accessible to sound small  businesses is                                                                   
     crucial to our economic recovery  and so should be front                                                                   
     and center  among our current policy  challenges." (June                                                                   
     9, 2010)                                                                                                                   
9:11:52 AM                                                                                                                    
Ms. Sydeman discussed Slide 10: "One Answer: Micro-Loans."                                                                      
   · The Small  Business Revolving  Loan Fund Senate  Bill 34                                                                   
     proposes is  modeled after a program  currently operated                                                                   
     by the federal Small business Administration.                                                                              
Ms. Sydeman presented Slide 11: "An Unmet Need."                                                                                
   · 46 other states have "micro-loan" programs                                                                                 
   · Alaska  does  not  because  an  intermediary  lender  is                                                                   
     required and no lenders meeting  SBA qualifications have                                                                   
     been identified to date in the state.                                                                                      
9:12:51 AM                                                                                                                    
Ms. Sydeman noted Slide 12: "A Little History."                                                                                 
   · Last year, Governor Parnell  introduced HB 412 to create                                                                   
     a state micro-loan program.                                                                                                
   · The bill  passed the House  unanimously on April  13 but                                                                   
     stalled in the Senate.                                                                                                     
   · Over the  interim, we tried unsuccessfully  to ascertain                                                                   
     whether the Governor intended  to re-introduce the bill.                                                                   
Ms. Sydeman discussed Slide 13: "Senate Bill 34."                                                                               
   · As a result,  a bipartisan group of Senators  decided to                                                                   
     introduce SB 34.                                                                                                           
   · This bill differs  from HB 412 in that  the maximum loan                                                                   
     amount  has  been  slightly  increased  in  response  to                                                                   
     comments  from small  business  owners  and new  federal                                                                   
Ms. Sydeman detailed Slide 14: Senate Bill 34, cont."                                                                           
   · The Senate  bill also require applicants  for loans over                                                                   
     $35,000  to  prove they  have  been turned-down  from  a                                                                   
     local  financial institution  before requesting  a state                                                                   
   · It also  requires that applicants  provide a  minimum 20                                                                   
     percent match for the loan.                                                                                                
9:14:36 AM                                                                                                                    
Ms. Sydeman discussed Slide 15: "Loan Eligibility."                                                                             
   · Applicants   must   be  Alaska   residents   and   their                                                                   
     businesses must be located in Alaska.                                                                                      
   · They must provide sufficient collateral to secure the                                                                      
Ms. Sydeman detailed Slide 16: "Loan Terms."                                                                                    
   · The loans would bear an interest rate of prime plus 1                                                                      
     percent, with a floor of 6 percent and a cap of 8                                                                          
   · The maximum term would be 6 years.                                                                                         
Ms. Sydeman discussed Slide 17: "Loan Terms, cont."                                                                             
   · Loans could not exceed $50,000 for 1 individual and                                                                        
     $100,000 for 2 or more individuals.                                                                                        
   · The program would be housed within Department of                                                                           
     Commerce, Community and Economic Development.                                                                              
9:15:43 AM                                                                                                                    
Co-Chair Hoffman asked about the  variation of 6 percent to 8                                                                   
percent. He asked to know the  criteria used to determine the                                                                   
6 percent  versus the 8  percent. Ms. Sydeman  responded that                                                                   
loan officers sometimes  look at the business  plan and types                                                                   
of collateral of loan applicants.                                                                                               
Co-Chair  Stedman   referred  to   Page  4,  Line   9,  which                                                                   
illustrated the  interest rate at  prime plus 1.  Ms. Sydeman                                                                   
responded  that if  the prime  were lower  than 3.5  percent,                                                                   
then  the floor  would be  the next  step. If  the prime  was                                                                   
greater  than 8  percent  then  the next  step  would be  the                                                                   
9:17:13 AM                                                                                                                    
Ms. Sydeman presented Slide 18: "Other Programs."                                                                               
     This program would complement two existing programs                                                                        
     administered by the Division of Economic Development:                                                                      
        1. The Small Business Economic Development Revolving                                                                    
          Loan Fund                                                                                                             
        2. The Rural Development Initiative Fund                                                                                
Ms. Sydeman  discussed Slide  19: "Economic Development  Fund                                                                   
     Economic Development Fund (SBEDRLF)                                                                                        
        · This program relies on funding from the federal                                                                       
          EDA and is targeted at communities experiencing                                                                       
          economic hardship.                                                                                                    
        · Funds are primarily used for long-term financing                                                                      
          and numerous federal requirements must be met.                                                                        
9:17:54 AM                                                                                                                    
Ms. Sydeman detailed Slide 20: "Rural Development Fund                                                                          
   · Created  with  state  funds,   primarily  for  long-term                                                                   
   · Only available  in communities of  5000 or less  (if not                                                                   
     connected by road or rail Anchorage or Fairbanks) or                                                                       
     communities of less than 2000 (if connected).                                                                              
Ms. Sydeman discussed Slide 21: "Alaska Small Business                                                                          
   · Would provide relatively  short-term, low-interest loans                                                                   
     to Alaska small businesses.                                                                                                
   · Could   be   used  for   working   capital,   purchasing                                                                   
     machinery,    equipment,    inventory   and    leasehold                                                                   
9:18:39 AM                                                                                                                    
Ms. Sydeman discussed Slide 22: "Statewide Eligibility."                                                                        
  · Loans would be available in all regions of the state.                                                                       
   · The application  process would  be streamlined  and fees                                                                   
     would be modest: $100 to apply and 1 percent                                                                               
     origination fee.                                                                                                           
Co-Chair Stedman called attention to the table "Loan                                                                            
Servicing Report" (copy on file).                                                                                               
Ms. Sydeman discussed Slide 23: "Capitalization."                                                                               
   · The fund would be capitalized with $3.5 million.                                                                           
   · All earnings  and loan repayments  would be  retained by                                                                   
     the fund for future loans.                                                                                                 
   · And  operating   expenses  would   be  paid   from  fund                                                                   
Ms. Sydeman detailed Slide 24: "Potential Fund Sources."                                                                        
   · Two possibilities:                                                                                                         
        1. General funds                                                                                                        
        2. State Small Business Credit Initiative funding                                                                       
          through the US Treasury                                                                                               
Ms. Sydeman discussed Slide 25: "Small Business Credit                                                                          
   · New federal program created by the Small Business Jobs                                                                     
     Act of 2010.                                                                                                               
   · $1.5 billion appropriated to "strengthen state programs                                                                    
     that  support  lending  to small  businesses  and  small                                                                   
Ms. Sydeman detailed Slide 26: "Small Business Credit                                                                           
Initiative, cont."                                                                                                              
   · Alaska's share = More than $13 million                                                                                     
   · State has filed letter of intent to apply                                                                                  
   · Application deadline: June 27, 2011                                                                                        
9:20:38 AM                                                                                                                    
Ms. Sydeman discussed Slide 27: "Revolving Loan Funds: Self                                                                     
   · Assumptions: 20 loans in first year                                                                                        
   · Average loan = $35,000                                                                                                     
   · 25 in second year and every year thereafter                                                                                
   · By FY17, all principle pushed out                                                                                          
   · Fund starts earning money and re-lending                                                                                   
9:21:05 AM                                                                                                                    
Ms. Sydeman discussed Slide 28: "Widespread Support For                                                                         
     Business  groups  from across  the  state recognize  the                                                                   
     need for a micro-lending  program, such as that proposed                                                                   
     by S.B 34.                                                                                                                 
Ms. Sydeman detailed Slide 29: Bristol Bay Economic                                                                             
Development Corporation."                                                                                                       
     "By  far,  the most  challenging  aspect  of starting  a                                                                   
     small business  in our region  is lack of  capital; even                                                                   
     when  it   involves  a  very  small  amount   of  money.                                                                   
     Traditional sources  of capital such as  banks and other                                                                   
     financial institutes  are not viable sources  of capital                                                                   
     such  as banks and  other financial  institutes  are not                                                                   
     viable  sources of  capital for  small entrepreneurs  in                                                                   
     rural Alaska."                                                                                                             
          H. Robin Samuelsen                                                                                                    
          Chief Executive                                                                                                       
9:21:40 AM                                                                                                                    
Ms. Sydeman discussed Slide 30: "Anchorage Economic                                                                             
Development Corporation."                                                                                                       
     "The  modest investment  by  the state  of Alaska  could                                                                   
     yield  significant  benefits  for communities  in  every                                                                   
     region  of the state.  The sizes of  the loan  are quite                                                                   
     modest,  as  are  the corresponding  fees  and  interest                                                                   
     rates  charged.  The infusion  of  capital this  program                                                                   
     offers will  help both existing businesses  and start-up                                                                   
     businesses to  bridge short-term funding  gaps, purchase                                                                   
     new equipment,  expand services  and employ  more Alaska                                                                   
          Bill Popp                                                                                                             
          President and CEO                                                                                                     
Slide 31: "Alaska Small Business Development Center."                                                                           
     "Micro-lending   is  an   opportunity  for  many   small                                                                   
     businesses  who typically  do not  find lending  options                                                                   
     with  banks  due  to  the small  amount  of  their  loan                                                                   
     request.   Many   lending   institutions   prefer   loan                                                                   
     applications  with  values  of  $100,000  or  more.  The                                                                   
     approval  of  micro-lending   bills  will  significantly                                                                   
     impact  and  support many  small  businesses  throughout                                                                   
          Debi Fowler                                                                                                           
          Associate State Director                                                                                              
9:22:37 AM                                                                                                                    
Ms. Sydeman discussed Slide 32: Southwest Alaska Municipal                                                                      
     "In Southwest  Alaska, a revolving loan  fund could help                                                                   
     small  boat  owners  or  smaller  fish  processors  with                                                                   
     equipment purchases.  It could assist bed  and breakfast                                                                   
     owners with upgrades to their  homes and business. Or it                                                                   
     could  provide much  needed  capital  to mechanics,  day                                                                   
     care  providers,  and a  host  of other  small  business                                                                   
     startups and entrepreneurs."                                                                                               
Ms. Sydeman discussed Slide 33: "Alaska Small Business                                                                          
Development Center."                                                                                                            
     "As a small business owner,  I depend on credit to place                                                                   
     orders   for  inventory,   expansion,  advertising   and                                                                   
     payroll during  slow times. Availability of  this credit                                                                   
     has   allowed  many  businesses   to  weather   economic                                                                   
     slowdowns in  the past and even to emerge  stronger when                                                                   
     the economy  recovers. This recession is  different: all                                                                   
     forms of available credit have dried up, especially                                                                        
     those for small business."                                                                                                 
          Ted Ragains                                                                                                           
Ms. Sydeman detailed Slide 34:  "Alaska Bankers Association."                                                                   
   · SB 34 even has the support of the Alaska Bankers                                                                           
   · The sponsors of this legislation worked closely with                                                                       
     them to resolve any concerns they had.                                                                                     
9:23:28 AM                                                                                                                    
Ms. Sydeman concluded with Slide 35: "Closing Thoughts."                                                                        
   · Small loans, many under $15,000                                                                                            
   · Alaska residents only                                                                                                      
   · Quick pay-back                                                                                                             
   · The difference between success and failure, especially                                                                     
     when credit is tight                                                                                                       
   · Possible federal funding                                                                                                   
   · Self-sustaining, including operating costs                                                                                 
9:24:00 AM                                                                                                                    
Co-Chair  Stedman asked  if  the loans  can  be stacked.  Ms.                                                                   
Sydeman did not know. She deferred to Director Ayers.                                                                           
Co-Chair Stedman asked about the  federal micro-loan program.                                                                   
Ms. Sydeman  understood  that 46 other  states have  programs                                                                   
under the  Small Business  Association (SBA) guidelines.  She                                                                   
stated  that   two  other  states  access  programs   run  by                                                                   
neighboring  states  and  two states,  including  Alaska  are                                                                   
without existing microloan programs.                                                                                            
9:24:55 AM                                                                                                                    
Co-Chair Stedman  asked about the response from  the industry                                                                   
and the burden  of the regulations. Ms. Sydeman  deferred the                                                                   
question to Director Ayers.                                                                                                     
9:25:51 AM                                                                                                                    
Co-Chair  Stedman  clarified  that  a denial  letter  is  not                                                                   
necessary unless the amount is  greater than $35 thousand and                                                                   
the loan cap is $100 thousand.  Ms. Sydeman agreed and stated                                                                   
an  additional difference  in  the governor's  bill where  an                                                                   
applicant  could borrow  up to  $70 thousand  without a  turn                                                                   
down provision.                                                                                                                 
Co-Chair Stedman clarified that  a document must be presented                                                                   
exhibiting decline  from a lending institution  when applying                                                                   
to borrow $35  thousand. He asked about a minimum  amount. He                                                                   
added that  20 percent is  required despite the  loan amount.                                                                   
Ms. Sydeman replied that 20 percent  is a minimum amount, the                                                                   
department  can require  more. The  department works  closely                                                                   
with loan requestors. No minimum  loan amount is written into                                                                   
the bill.                                                                                                                       
9:27:43 AM                                                                                                                    
Co-Chair Stedman  mentioned the first fiscal  note, which was                                                                   
a  fund  transfer  of  $3.5  million   in  general  funds  to                                                                   
capitalize  the loan  fund.  The second  fiscal  note is  for                                                                   
$85.3  thousand to  cover the  cost  of one  new position  to                                                                   
administer the loan  fund. The expense will be  paid from the                                                                   
earnings of the fund.                                                                                                           
9:28:34 AM                                                                                                                    
MIKE  BORGFORD,  MADE  IN MAT-SU  ASSOCIATION,  WASILLA  (via                                                                   
teleconference), testified in  support of the legislation. He                                                                   
stated that  many small business  owners in the  Wasilla area                                                                   
require additional funding to  expand businesses. He shared a                                                                   
story  about a fellow  business  person in  his area who  was                                                                   
struggling to secure financing for her business.                                                                                
9:30:35 AM                                                                                                                    
BROOKE   MCLAUGHLIN,    CRABBY   SISTERS,    ANCHORAGE   (via                                                                   
teleconference),  testified in  support  of the  legislation.                                                                   
She provided  history of her  business and her  participation                                                                   
in financial analysis and projection  seminars. She mentioned                                                                   
the market  potential and  the high  consumer demand  for her                                                                   
product, which  leads to growth  and expansion.  Her business                                                                   
requires a loan  to meet the need for cash flow.  She and her                                                                   
business  partner are  categorized  as a  start up  business,                                                                   
which  provides a  red flag  to  financial institutions.  She                                                                   
believed that she is a qualified  candidate for the microloan                                                                   
9:33:50 AM                                                                                                                    
CHRIS   SHUTTE,  EXECUTIVE   DIRECTOR,   ANCHORAGE   DOWNTOWN                                                                   
PARTNERSHIP  (via teleconference),  testified  in support  of                                                                   
the legislation.  He noted  the lack  of capital for  various                                                                   
small  businesses  in  his  area.  He  echoed  the  need  for                                                                   
financing  to allow  for new  business  growth. He  mentioned                                                                   
needs from an architectural firm  and a small hotel. He added                                                                   
that  the access  to  capital would  benefit  the economy  in                                                                   
9:35:55 AM                                                                                                                    
ERIK  O'BRIEN,  SOUTHWEST ALASKA  MUNICIPAL  CONFERENCE  (via                                                                   
teleconference), testified in  support of the legislation. He                                                                   
believed  that  additional  money  in the  economy  would  be                                                                   
accomplished with  help from the microloan program.  He noted                                                                   
that Alaska  has a lack  of available capital  and liquidity.                                                                   
He offered a  perspective regarding economic  development. He                                                                   
explained the state's potential  regarding natural resources.                                                                   
He  shared a  story  regarding a  small  business and  missed                                                                   
9:40:31 AM                                                                                                                    
JASON  HOKE, EXECUTIVE  DIRECTOR,  COPPER VALLEY  DEVELOPMENT                                                                   
ASSOCIATION  (via teleconference),  testified  in support  of                                                                   
the legislation.  He noted the  lack of ability for  many new                                                                   
businesses to secure funding.                                                                                                   
9:41:50 AM                                                                                                                    
CARL BERGER,  LOWER KUSKOKWIM  ECONOMIC DEVELOPMENT  COUNCIL,                                                                   
BETHEL  (via teleconference),  testified  in  support of  the                                                                   
legislation. He  commented on the  lack of access  to funding                                                                   
for  small businesses.  He supported  the bipartisan  support                                                                   
and thanked Co-Chair Hoffman for the support.                                                                                   
9:43:48 AM                                                                                                                    
TRACY LEBARGE, TRACY'S KING CRAB  SHACK (via teleconference),                                                                   
testified  in support  of the  legislation.  She stated  that                                                                   
access  to this  type  of loan  would  have  provided her  an                                                                   
opportunity to retain  greater than 60 percent  of her sales.                                                                   
She   stressed  the   importance  of   microloans  to   small                                                                   
9:45:52 AM                                                                                                                    
WANETTA  AYERS,   DEPARTMENT   OF  COMMERCE,  COMMUNITY   AND                                                                   
ECONOMIC  DEVELOPMENT,   DIVISION  OF  ECONOMIC   DEVELOPMENT                                                                   
introduced herself.                                                                                                             
Co-Chair  Stedman  asked  how  the bill  would  work  for  an                                                                   
applicant in  a rural  area. He asked  how legitimacy  of the                                                                   
microloan applicants is determined by the department.                                                                           
Ms. Ayers responded  that the loan application  processes can                                                                   
be accessed on  the state website allowing people  across the                                                                   
state to  apply with  ease. She stated  that the  loan demand                                                                   
would be  monitored by the  department. She added  that staff                                                                   
in Juneau and  Anchorage would ascertain the  location of the                                                                   
loan  demand thereby  determining placement  of the  position                                                                   
required to staff  the microloan program. She  explained that                                                                   
84 percent  of the  current loans  are outside of  Anchorage,                                                                   
Fairbanks,  and Juneau.  She  stated confidence  in  Alaska's                                                                   
stable  banking   community.  She  added  that   the  banking                                                                   
communities wish  to compete for  the opportunity  to provide                                                                   
the microloans to accepted businesses.                                                                                          
9:49:12 AM                                                                                                                    
Co-Chair  Stedman   asked  about  loans  for   inventory  and                                                                   
management  of  cash flow.  He  wondered  about proof  of  an                                                                   
applicant's legitimacy.  Ms. Ayers responded  that collateral                                                                   
and documentation  are  required as part  of the  application                                                                   
process.   Some  borrowers   may   require  additional   help                                                                   
determining their request in relation to capacity.                                                                              
Co-Chair  Stedman asked  about  the collateral  requirements.                                                                   
Ms.   Ayers  responded   that  in   some  cases,   collateral                                                                   
requirements  exceed  the  loan  amount  by  two-to-one.  She                                                                   
mentioned  work  with the  fishing  industry  to determine  a                                                                   
business' capacity and the subsequent  scope of the loan. She                                                                   
was  unsure  about  the  use   of  inventory  as  a  form  of                                                                   
9:52:22 AM                                                                                                                    
Co-Chair Stedman expected that  the loan requirements for the                                                                   
small  business  would  be  for   the  purpose  of  obtaining                                                                   
additional   inventory.  He  asked   about  recourse   versus                                                                   
nonrecourse  loans. Ms.  Ayer  did not  know  and offered  to                                                                   
respond  to  the  committee  in  the  near  future.  Co-Chair                                                                   
Stedman explained  that with  a recourse  loan, the  bank can                                                                   
collect any possession to address the debt.                                                                                     
Ms. Ayer stated that current loans  have been foreclosed upon                                                                   
and the history of recovery is good within the division.                                                                        
Co-Chair Stedman  asked for additional information  regarding                                                                   
resource   loans.   Ms.   Ayers  offered   to   provide   the                                                                   
9:54:01 AM                                                                                                                    
Senator  Thomas asked  about  Page 4,  Line  11. He  recalled                                                                   
reading about  the need for collateral  considered acceptable                                                                   
to  the  commissioner.  He  wondered   about  other  language                                                                   
indicating  acceptable collateral.  Ms. Ayers responded  that                                                                   
she  would   provide  additional  resources  to   answer  the                                                                   
Senator   Thomas  responded   that  a   list  of   acceptable                                                                   
collateral  would  provide the  answer  he sought.  He  asked                                                                   
about the  low percent of loan  delinquency in the  state. He                                                                   
wondered  if was  typical  among  banks and  other  financial                                                                   
institutions or  specific to small business loans.  Ms. Ayers                                                                   
responded  that  the  delinquency   rate  is  less  than  one                                                                   
percent. She  mentioned various  management plans  that allow                                                                   
for   ease  with   loans  containing   multiple  streams   of                                                                   
9:57:02 AM                                                                                                                    
Senator Thomas  asked if Alaska's loan delinquency  rates are                                                                   
typical  for the industry.  Ms. Ayers  replied that  Alaska's                                                                   
delinquency  rates  fall  significantly  below  the  national                                                                   
9:57:52 AM                                                                                                                    
Co-Chair Stedman recalled conversations  regarding a document                                                                   
providing  education   about  the  available   Alaskan  small                                                                   
business  loans.  He stated  that  an  effort to  update  the                                                                   
document   or   publication  was   underway.   He   requested                                                                   
reevaluation  of  the  legislation  to bring  the  bill  into                                                                   
compliance with the goals of the committee.                                                                                     
SB  34   was  HEARD  and   HELD  in  Committee   for  further                                                                   
10:00:04 AM                                                                                                                   
SENATE BILL NO. 58                                                                                                            
     "An Act increasing the number of superior court judges                                                                     
     designated for the third judicial district; and                                                                            
     providing for an effective date."                                                                                          
Co-Chair  Stedman noted  the first  hearing of  SB 58 in  the                                                                   
Senate Finance Committee (SFC).                                                                                                 
DOUG WOOLIVER, ADMINISTRATIVE  ATTORNEY, ALASKA COURT SYSTEM,                                                                   
stated  that two  new superior  court judges  were needed  in                                                                   
Anchorage to preside over civil  cases. The additional judges                                                                   
are required  because Anchorage  has the highest  caseload in                                                                   
Alaska.  Anchorage judges  handled 687  cases per judge  last                                                                   
year. Changes  in Child In Need  of Aid (CINA)  cases require                                                                   
additional staff in the form of  standing masters. The change                                                                   
resulted in the superior court  judge having better knowledge                                                                   
of the family.  The better a  judge knows a family,  the more                                                                   
trust develops,  which benefits  the family. The  change also                                                                   
takes  more  of  the  judge's   time.  He  encouraged  status                                                                   
hearings  in the  courts,  much  like the  therapeutic  court                                                                   
Mr.  Wooliver  mentioned  the  value  of  deadlines  for  the                                                                   
litigants.  He stated  that encouraging  regular hearings  in                                                                   
front of a judge would greatly  encourage family unification.                                                                   
He  believed   that  the  process  would  result   in  better                                                                   
outcomes. The  child in need of  aid statutes adopted  by the                                                                   
legislature  strongly encourage  family reunification.  While                                                                   
valuable, the status hearings require judicial time.                                                                            
10:06:38 AM                                                                                                                   
Mr.  Wooliver remarked  on the  second change  to the  Alaska                                                                   
judicial system  involving family  law cases. He  stated that                                                                   
33 percent  of cases  have attorneys  on both  sides, but  38                                                                   
percent are  without attorneys.  Unrepresented litigants  are                                                                   
time  consuming for  the court  system. He  pointed out  that                                                                   
while family  law cases  were very  emotional, many  families                                                                   
did  not have  adequate  legal  knowledge to  argue  specific                                                                   
legal  issues. He  stressed the  issue  of motion  practices,                                                                   
with a 34 percent increase in  motion practices in family law                                                                   
cases. He added  that the cases are equally  important to the                                                                   
courts  and  the  litigants  despite  the  increased  use  of                                                                   
judicial  time.  The  Alaska court  system  is  dedicated  to                                                                   
ensuring the accessibility  of the court system.  Divorce and                                                                   
child custody  cases represent  a majority  of cases  seen in                                                                   
family law court rooms.                                                                                                         
10:11:00 AM                                                                                                                   
Mr. Wooliver added that additional  educational opportunities                                                                   
exist for  people required to testify  in a court of  law. He                                                                   
noted that  the court system is  using the efforts  to better                                                                   
manage the cases. He stated that  Anchorage is asking for two                                                                   
new superior court judges, but  the need is really for three.                                                                   
Better management techniques would  allow the municipality to                                                                   
utilize only two additional superior court judges.                                                                              
Co-Chair  Stedman  noted  two  numeric  changes  in  the  one                                                                   
paragraph bill.                                                                                                                 
10:13:41 AM                                                                                                                   
Co-Chair  Hoffman asked  about  the numbers  of case  filings                                                                   
presented. He requested  a three year average  of case files.                                                                   
He asked  about the last time  that Anchorage received  a new                                                                   
superior court  judge. Mr. Wooliver responded  that Anchorage                                                                   
received new  judges in 2006  and prior  to that in  2001. He                                                                   
offered to update the material  to contain additional current                                                                   
information for FY 11.                                                                                                          
Co-Chair  Hoffman  clarified  his question.  He  requested  a                                                                   
three year  average for  case files.  Mr. Wooliver  agreed to                                                                   
provide the information.                                                                                                        
Co-Chair  Stedman  mentioned  SB  246,  which  requested  one                                                                   
superior  court  judge for  Anchorage.  He wondered  about  a                                                                   
change in  the request.  He wondered why  only one  judge was                                                                   
requested last year.                                                                                                            
10:15:26 AM                                                                                                                   
Mr. Wooliver responded  that the superior court  in Anchorage                                                                   
asked  the  Supreme  Court  for three  new  judges,  but  the                                                                   
Supreme Court  decided to ask  the legislature for  only one.                                                                   
The   plan  to   incorporate   additional  improvements   was                                                                   
considered, as mentioned earlier  in the meeting. Since then,                                                                   
the  caseload  in  Anchorage has  increased  by  another  662                                                                   
cases.  The higher  caseload justified  the  request for  two                                                                   
10:15:54 AM                                                                                                                   
Senator  Ellis  commented  about   prior  discussion  in  the                                                                   
Judiciary  Committee  where Senator  Paskvan  stated  another                                                                   
reason to  have divorce cases  heard in district court  is to                                                                   
allow the  mandatory right of  appeal to superior  court, but                                                                   
not  to  the  Supreme  Court.  This  recommendation  for  two                                                                   
additional  judges is  approved  by the  Supreme  Court as  a                                                                   
request to the legislature.                                                                                                     
Mr. Wooliver  responded that  he met  with the Supreme  Court                                                                   
and with Senator Paskvan. The  Supreme Court does not support                                                                   
a specifically  designated family law bench  in Anchorage. He                                                                   
stated that  historically, a family  court division  leads to                                                                   
judicial  burnout.   Some  states  address  the   problem  by                                                                   
allowing for a revolving family  law bench. Another option is                                                                   
the creation  of a family law  court. A family law  judge can                                                                   
then apply for the position if  necessary. The courts concern                                                                   
with  the  model  is  judicial   burnout.  In  addition,  the                                                                   
applicant pool is often narrow.                                                                                                 
10:20:21 AM                                                                                                                   
Mr. Wooliver stated that the district  court is a high volume                                                                   
business.  The district  court spends  a short  time on  each                                                                   
case. District  courts can have arraignments  with 100 people                                                                   
in the morning  and 50 defendants in the afternoon.  He added                                                                   
that small  claims cases are  addressed very quickly.  Family                                                                   
law cases  can last for years  and do not work in  a district                                                                   
court calendar.                                                                                                                 
Mr. Wooliver  stressed that the  Supreme Court is  not asking                                                                   
for additional  help with  the appeals  of family law  cases.                                                                   
Placing  the district  court in  charge of  family law  cases                                                                   
would not work in the district law calendar.                                                                                    
10:21:30 AM                                                                                                                   
Senator McGuire  commented about a conversation  with Justice                                                                   
Morgan Christian regarding the  possibility of a subcommittee                                                                   
of lawmakers,  staff, and the  Justice to address  the issue.                                                                   
She agreed  that citizens want  the opportunity to  appeal to                                                                   
the Supreme Court.  She spoke about burnout.  She stated that                                                                   
many attorneys are ill equipped  to deal with family law. She                                                                   
mentioned  an  Oregon  model which  includes  mediation.  The                                                                   
model serves as a filter to provide  a liaison or mediator as                                                                   
a precursor to court.                                                                                                           
10:24:29 AM                                                                                                                   
Senator  McGuire stated  that only one  superior court  judge                                                                   
exists in  South Central Alaska.  She pointed out  that women                                                                   
in South Central Alaska have no  gender choice when seeking a                                                                   
superior   court  judge.   She   wondered  about   recruiting                                                                   
additional women  to the bench.  One report showed  that many                                                                   
female names  have been put forward  over the years,  and the                                                                   
head of  state chose  males over  females. She stressed  that                                                                   
Alaska must have more women on the bench.                                                                                       
10:27:55 AM                                                                                                                   
Co-Chair Hoffman  requested additional information  regarding                                                                   
caseloads for district court judges.                                                                                            
10:28:18 AM                                                                                                                   
Senator Egan asked  about the request of $425  for remodeling                                                                   
seen in fiscal  note one. He queried the interim  location of                                                                   
the courts  for the period  of remodel. Mr. Wooliver  replied                                                                   
that the judicial  council utilizes several months  to choose                                                                   
the judge.  By the time the  judges are seated,  the remodels                                                                   
are scheduled to be finished.                                                                                                   
Senator Egan asked if the fiscal  note would be lessened as a                                                                   
result. Mr.  Wooliver responded  that retired superior  court                                                                   
judges will substitute until additional judges are chosen.                                                                      
10:29:58 AM                                                                                                                   
Senator  Thomas asked  about the  percentage  of cases  filed                                                                   
that  are  ultimately  contested.  Mr.  Wooliver  offered  to                                                                   
provide the information.                                                                                                        
Co-Chair Stedman  detailed the eight different  fiscal notes.                                                                   
The total cost by the administration  and the court system is                                                                   
$2,400,600 for a total of 16 new positions.                                                                                     
10:32:44 AM                                                                                                                   
Co-Chair Stedman asked about the  addition of a new probation                                                                   
officer for the civil court cases.                                                                                              
10:33:03 AM                                                                                                                   
LT.  DIAL,   ALASKA  STATE  TROOPERS  (via   teleconference),                                                                   
responded  that additional  judges, even  civil court  judges                                                                   
will generate additional work  for the judicial services unit                                                                   
in Anchorage. That work includes  assignments to hearings for                                                                   
security  reasons  and to  process  and serve  paperwork  and                                                                   
subpoenas generated by the new  judges. To adequately provide                                                                   
for the  needs of the  court, the request  for one  new court                                                                   
service officer was made.                                                                                                       
10:33:49 AM                                                                                                                   
Co-Chair Stedman  asked about the caseloads  and the existing                                                                   
public  defenders  and public  advocacy  attorneys  regarding                                                                   
child in need of aid cases.                                                                                                     
10:34:25 AM                                                                                                                   
QUINLAN   STEINER,   DIRECTOR,    PUBLIC   DEFENDER   AGENCY,                                                                   
DEPARTMENT OF  ADMINISTRATION (via teleconference)  addressed                                                                   
Co-Chair  Stedman's query.  He  stated that  the fiscal  note                                                                   
illustrates  proposed funding  for a  position and a  support                                                                   
staff  position in  Anchorage. The  additional position  will                                                                   
accelerate the workload for the  civil division. He mentioned                                                                   
a push  for more  status hearings  and the additional  judges                                                                   
will place pressure  on the attorneys to be  prepared for the                                                                   
hearings. Additionally,  the rest of the state  carries mixed                                                                   
caseloads.  He  added that  CINA  cases are  increasing.  The                                                                   
Anchorage  unit specializes  to  provide  assistance in  both                                                                   
case oversight  and training and  the additional  pressure is                                                                   
placed  on Anchorage.  The additional  attorney will  require                                                                   
Co-Chair  Stedman asked  about  SB 246  and  the zero  fiscal                                                                   
note. He wondered  why SB 58 has a positive  fiscal note. Mr.                                                                   
Steiner offered to  revisit the past fiscal  note and provide                                                                   
an explanation.                                                                                                                 
Co-Chair  Stedman  stated  that   a  request  of  one  agency                                                                   
sometimes leads to additional requests from other agencies.                                                                     
10:37:41 AM                                                                                                                   
Senator McGuire  asked about the governor's  operating budget                                                                   
and the overarching fiscal concerns.  Co-Chair Stedman stated                                                                   
that the  committee has been  supportive of the  expansion of                                                                   
the court  system's capital needs.  He noticed $4  million in                                                                   
court renovations located in the capital budget.                                                                                
10:39:18 AM                                                                                                                   
Senator  McGuire  pointed  out  that  the  office  of  public                                                                   
advocacy  and  the  CINA  issues  can  be  addressed  in  the                                                                   
administrative  and  operating  levels.  She  commented  that                                                                   
Ketchikan might be in need of one more judge.                                                                                   
Co-Chair Stedman added that the  numbers may change along the                                                                   
way.  He  requested  a  ratio  for the  sake  of  saving  the                                                                   
committee members' time.                                                                                                        
Senator McGuire asked if judges rotate throughout                                                                               
Mr. Wooliver responded that the judges travel exclusively                                                                       
throughout Southeast and Southwest Alaska.                                                                                      
10:41:37 AM                                                                                                                   
SB 58 was HEARD and HELD in Committee for further                                                                               
10:42:33 AM                                                                                                                   
The meeting was adjourned at 10:42 AM.                                                                                          

Document Name Date/Time Subjects
SB 34 Presentation (black background) Small Biz Revolving Loan Fund.pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 013111 DCCED LoanServicing Report.xlsx SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 Background.pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 Letter of Support AK Bankers Assn.pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 Letter of Support Lower Kuskokwim.pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 Letter of Support Mat Su .pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 Letter of Support PWS.pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 Letter of Support SWAMC.pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 News Articles.pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 Sectional Analysis.pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 Small Biz Statistics.pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 Sponsor Statement.pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 58 Sponsor Statement.doc SFIN 3/10/2011 9:00:00 AM
SB 58
SB 58 Court Letter dated March 4 2010.pdf SFIN 3/10/2011 9:00:00 AM
SB 58
SB034 New FN -CCED-DED-03-05-11(B).pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB034 New FN-CCED-DED-03-05-11(A).pdf SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 Letter of Support Southeast Conference.doc SFIN 3/10/2011 9:00:00 AM
SB 34
SB 34 - 03 14 11_DCCED response to SFIN re.docx SFIN 3/10/2011 9:00:00 AM
SB 34
SB 58 Court Letter to Sen Mcguire dated March 15 2010.pdf SFIN 3/10/2011 9:00:00 AM
SB 58
SB 58 Court Letter to Sen. Hoffman dated March 15 2010.pdf SFIN 3/10/2011 9:00:00 AM
SB 58
SB 58 Court Letter dated March 4 2010.pdf SFIN 3/10/2011 9:00:00 AM
SB 58
SB 58 Sponsor Statement.doc SFIN 3/10/2011 9:00:00 AM
SB 58
NEW - SB58-DOC-OC-03-10-11.pdf SFIN 3/10/2011 9:00:00 AM
SB 58