Legislature(2001 - 2002)
05/10/2002 05:38 PM Senate FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
May 10, 2002
5:38 PM
TAPES
SFC-02 # 94, Side A
SFC 02 # 94, Side B
CALL TO ORDER
Co-Chair Pete Kelly convened the meeting at approximately 5:38 PM.
PRESENT
Senator Dave Donley, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Jerry Ward, Vice Chair
Senator Loren Leman
Senator Lyda Green
Senator Gary Wilken
Senator Alan Austerman
Senator Lyman Hoffman
Senator Donald Olson
Also Attending: REPRESENTATIVE LESIL MCGUIRE; JIM DUNCAN,
Commissioner, Department of Administration; PHIL OATES, Adjutant
General, Commissioner, Department of Military and Veterans Affairs;
GARY BERRY, American Legion; GENE DALL, Legislative Officer,
Veterans of Foreign Wars Post 5559; DALE ANDERSON, staff to
Representative Mulder; PAT HARTLEY, staff to Representative Scalzi;
MARY MCDOWELL, Commissioner, Commercial Fisheries Entry Commission;
ANNE CARPENETI, Assistant Attorney General, Legal Services Section,
Criminal Division, Department of Law; JESSICA MENENDEZ, Staff to
Representative Green; BOB POE, Executive Director, Alaska
Industrial Development and Export Authority
Attending via Teleconference: There were no teleconference
participants.
SUMMARY INFORMATION
SB 372-TRANSPORTATION BONDS
The bill was discussed and held in Committee.
SB 55-PIONEERS' AND VETERANS' HOME/ADVISORY BD
The Committee heard from the Department of Administration, the
Department of Military and Veterans Affairs and representatives of
veterans. A committee substitute was adopted and the bill moved
from Committee.
HB 447-COM FISH & AGRICULTURE BANK INTEREST RATE
The Committee heard from the sponsor and the bill moved from
Committee.
HB 287-EXEMPT ENTRY PERMITS FROM CREDITOR CLAIMS
The Committee heard from the sponsor and the Commercial Fisheries
Entry Commission. The bill moved from Committee.
HB 350-TERRORISTIC THREATS & OTHER CRIMES
The Committee heard from the sponsor and the Department of Law. The
bill moved from Committee
HB 471-AIDEA LOANS AND DIVIDEND/AEA LOANS
The Committee heard from the sponsor and the Alaska Industrial
Development and Export Authority. The bill moved from Committee.
CS FOR SENATE BILL NO. 372(TRA)
"An Act providing for and relating to the issuance of general
obligation bonds in a principal amount of not more than
$168,120,000 for the purpose of paying the cost of state
transportation projects; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Kelly announced no substantive action would be taken on
this bill at this hearing.
Co-Chair Donley spoke to this bill, sponsored by the Senate
Transportation Committee, which would present a general obligation
bond proposal for voter approval during the upcoming general
election. He pointed out the State has not issued a general
obligation bond for approximately 20 years. He stated that previous
general obligation bonds for road projects have received the
highest percentage of votes.
Co-Chair Donley indicated his intent to further review the matter
of a general obligation bond package during the remainder of the
legislative session.
Senator Austerman asked if the issuance of Grant Anticipation
Revenue Vehicle (GARV) bonds was under discussion in relation to
general obligation bonds.
Co-Chair Kelly responded that legislation pertaining to GARV bonds
would likely be heard at the next Committee meeting.
The bill was HELD in Committee.
CS FOR SENATE BILL NO. 55(STA)
"An Act relating to the Alaska Pioneers' Home and the Alaska
Pioneers' Homes Advisory Board; relating to admissions to,
payment assistance for, and transfers from the home; relating
to housing and services for veterans; and providing for an
effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
Senator Ward indicated he had prepared no amendments to this
legislation.
Senator Wilken moved to adopt CS SB 55, 22-GS1040\J as a working
draft.
Co-Chair Kelly objected for discussion.
Senator Wilken recapped discussions from previous hearing whereby
he opined that some decisions regarding services for Alaska
veterans were being made too quickly. He reminded the Committee of
his comments that while Alaska is the only state without veterans'
homes, it is also the only state with pioneers' homes. He agreed
with the premise of combining the pioneers' homes with veteran's
housing; however further efforts are necessary to achieve this.
Senator Wilken pointed out for example that it remains uncertain
whether the State's six pioneer home facilities would meet the
required standards for veterans' housing. He explained that federal
requirements prohibit senior veterans' care in conjunction with
other veterans' services. He furthered that it has been learned
that it is uncertain whether federal requirements would allow the
operation of the pioneers' homes together with veterans' homes. He
also stressed that the federal funding, which has been a primary
incentive for the establishment of veterans' homes in Alaska, has
not been guaranteed.
Senator Wilken asserted, "If we're going to do this, lets do it
right. Let's step back for a moment and let's look at the
alternatives." He then directed attention to a spreadsheet,
"Alternatives", he had distributed [copy on file], which lists six
options: 1) Do Nothing, which he did not anticipate would occur, 2)
Stand Alone, and he referenced a 1992 study about the significant
expense of constructing a stand-alone veterans' housing facility,
3) Convert existing Pioneers' Home to Veterans' Home, 4) Separate
Pioneers'/Veterans' Home, dividing existing Pioneers' homes into
separate wings for veterans and pioneers. 5) Combined
Pioneers'/Veterans' Home, similar to the current operation, and 6)
Other.
Senator Wilken noted the proposed committee substitute continues to
support a proposed study of the six aforementioned alternatives,
encourages negotiation with the federal government to secure
funding for veterans' housing, and allows for the creation of a
pilot program.
Senator Wilken expressed his intent to review this issue in a few
years to determine the option that would be in the best interest of
the pioneers and the veterans. He remarked that if "tens of
millions of dollars" are to be expended, those funds should be
leveraged to best serve veterans, as opposed to implementing a
"hurried" decision that may be regretted five or ten years in the
future.
Senator Ward announced he would vote to adopt the committee
substitute. He spoke to a unique opportunity and talked about the
patriotic aspects of supporting veterans. He surmised that changing
the name of the State's pioneers' homes to reflect veterans is the
goal of the Knowles Administration. However, he also was aware that
many Alaskan pioneers do not support changing the name of the
homes. He expressed his intent to make any name change contingent
upon actual receipt of federal funds. He emphasized that he did not
want to loose the opportunity to receive federal funds for
pioneers' homes, although he relayed that he had spoken to US
Senator Ted Stevens and did not receive a commitment that funding
would be forthcoming. Senator Ward predicted that simply changing
the name of the facilities would not guarantee receipt of federal
funds.
JIM DUNCAN, Commissioner, Department of Administration appreciated
the efforts of Senator Wilken with regard to the proposed committee
substitute. However, Mr. Duncan pointed out that intent language
alone is inadequate to demonstrate to the federal Veterans'
Administration, the State's "true strong commitment" to recognizing
Alaska's veterans and the intent of accommodating them in the
Pioneer Home system. He suggested that changing the name of the
Pioneer Homes would provide a necessary "tool" in negotiations with
the Veteran's Administration to secure funding for veterans'
benefits.
Mr. Duncan referenced a letter addressed to him from Anthony J.
Principi, Secretary of Veterans Affairs dated April 2, 2002 [copy
on file.] Mr. Duncan asserted this letter "outlines very clearly"
the understanding between the State and the federal Veterans'
Administration that some current federal regulations may "cause us
some difficulty right now" but that the federal agency is "willing
to work with us to overcome that" even if federal legislation is
required. He predicted that federal legislation would not be
necessary, but emphasized that the Veterans' Administration intends
to assist the State in preserving ownership and management of the
unique pioneer home system as well as seek common ground for
potential demonstration projects.
Mr. Duncan addressed Senator Ward's suggestion of making a name
change contingent upon an agreement between the State and the
Veterans' Administration. Mr. Duncan informed he had not evaluated
this proposal, as it had not been previously raised either in
relation to the bill or the proposed committee substitute.
Co-Chair Kelly pointed out that the aforementioned letter is not a
binding document or a memorandum of understanding, but rather it
outlines a conversation held with Mr. Principi.
Senator Ward noted that in negotiations between the State and local
governments, an "intergovernmental agreement" is used and he asked
if such an agreement would be appropriate in this situation.
Mr. Duncan clarified his testimony regarding the letter from Mr.
Principi that it is a "memorandum for the record", which outlines
the progress to date as well as future intentions. He stated the
goal of these negotiations is that the final document would be a
signed agreement between the State, the Pioneers' Home
administration and the federal Veterans' Administration, containing
the provisions of a new demonstration project.
Senator Hoffman requested General Phil Oats speak to the impacts of
the proposed committee substitute.
PHIL OATES, Adjutant General, Commissioner, Department of Military
and Veterans Affairs, "truly believed" in Senator Wilken's support
for veterans and pioneers; however, cautioned that the committee
substitute would not accomplish the intended goals. General Oates
explained the two issues at hand: a name to indicate that a
facility is a home for veterans, and a priority given to veterans.
He stated that Senator Ward's suggestion regarding a contingent
name change is "creative" and could possibly be implemented in a
manner that would preserve the identity of the Alaska Pioneers'
Homes. General Oates also suggested operating under two names
within one structure as an alternative. He stated that instituting
a "percentage preference" of the number of veterans' admitted to
the pioneers' homes would comply with the Veterans Administration
requirements and would be consistent with veterans' homes in other
states. He clarified that the State must "take the steps to
establish" veterans' housing, then the Veterans' Administration
assistance would follow. He spoke of calculating population
percentages to determine the number of veterans given preference.
Co-Chair Kelly noted that because of the limited amount of time
remaining in the legislative session, significant changes could not
be made to this bill. He recommended passing this bill from
Committee at this hearing and suggested Senator Ward work with
Representative Coghill.
Senator Wilken recalled the State approached the Veterans'
Administration with the intent to offer long-term care housing to
veterans. He surmised that because the State does not "jump ahead"
and change the name of the pioneers' homes, the argument is made
that the State is failing to demonstrate a commitment. He
emphasized this committee substitute provides that the State would
expend $250,000 to conduct a mandated report of the alternatives to
be presented to the next Legislature. He did not predict the
federal government would deny funding in this situation.
Senator Hoffman agreed with Co-Chair Kelly that this legislation
must be sent to the House of Representatives. He disagreed the
matter should be held until the next legislative session because
many current legislators might no longer be in office. He also
pointed out a new gubernatorial administration would be in office
and that priorities might be different.
Co-Chair Kelly directed the Committee to address discussion to the
motion to adopt the committee substitute.
Senator Ward suggested the Committee adopt the committee
substitute, but stressed the final version of this bill must have
the unanimous support of all legislators.
Senator Wilken remarked that it is irrelevant who holds legislative
office during the next session. He deferred the decision to future
lawmakers, predicting they would make the "right decision."
Senator Olson objected to adoption of the committee substitute.
A roll call was taken on the motion to adopt the committee
substitute as a working draft.
IN FAVOR: Senator Ward, Senator Wilken, Senator Austerman, Senator
Green and Co-Chair Kelly
OPPOSED: Senator Hoffman, Senator Leman and Senator Olson
ABSENT: Co-Chair Donley
The motion PASSED (5-3-1)
The committee substitute was ADOPTED as a working draft.
Senator Ward "moved committee substitute for Senate Bill number 55
out of Committee with individual recommendations and accompanying
notes."
Senator Austerman pointed out the committee substitute would
require amended fiscal notes.
Senator Ward amended his motion to stipulate, "Revised notes is
what I meant to say; revised accompanying notes."
Senator Wilken offered to work with Senator Ward to address the
concerns raised.
Co-Chair Kelly summarized the Committee's intent to pass this bill
to the House of Representatives. He warned that "political hay"
must not be made of this action, "because it could be killed like
that [snap fingers]."
Senator Leman commented, "I had heard some things earlier today
that give me hope that we could maybe reach something this year."
He explained this pertained to the proposal of a demonstration
project, different from that contained in the committee substitute.
He expressed he is not concerned that the name change must be made
this year and predicted that if and when an agreement is reached
with the Veterans' Administration, the name of the pioneers' homes
could be changed.
Co-Chair Kelly noted public testimony was taken on this bill
earlier in the day.
GARY BERRY, American Legion, testified that the Committee has "lost
sight" of the issue. He asserted that Alaska veterans'
organizations did not "ask for very much" of the Legislature this
session and listed five items including a pioneer/veterans home and
a veterans' home study. He spoke of his efforts in lobbying the
Legislature for the past ten years, during which time "nothing has
happened." He noted two other veterans' home studies have been
undertaken already but have had no result. He charged that one of
the studies was conducted by the State and was biased.
Co-Chair Kelly assured the Committee's action in adoption the
committee substitute is "a step in the right direction." He
explained the process of passing legislation through both bodies of
the Legislature before a session adjourns. He assured the specific
language contained in the committee substitute would likely be
amended.
Senator Hoffman informed that if the language were not amended he
would probably vote against the legislation.
GENE DALL, Legislative Officer, Veterans of Foreign Wars Post 5559,
testified about the approximately 100 beds in the pioneers' homes
that have remained empty for four or five years. He warned that
with budget reductions, an additional ten beds would become empty.
He told of waiting lists and the need for funds to staff the
facilities.
Mr. Dall asserted that action to create long-term care for veterans
in Alaska must occur while US Senator Ted Stevens is in office. Mr.
Dall recalled a speech made by Senator Stevens to the Alaska
Legislature in which he indicated his support of this bill. Mr.
Dall stressed that Senator Stevens has the necessary clout to
secure federal funding and told of the numerous congressional
actions taken by Senator Stevens on behalf of the various
organizations Mr. Dall represents. He avowed of Senator Stevens,
"If he says he'll do it, he'll do it, and he wouldn't say he'd do
it if he couldn't do it."
There was no objection and CS SB 55 (FIN) with forthcoming fiscal
notes MOVED from Committee. [Note: Fiscal notes for the Senate
Finance committee substitute were not produced as the Senate Rules
Committee adopted a committee substitute.]
HOUSE BILL NO. 447
"An Act relating to the interest rates that may be charged on
loans by the Commercial Fishing and Agriculture Bank."
This was the first hearing for this bill in the Senate Finance
Committee.
DALE ANDERSON, staff to Representative Mulder, testified this
legislation "addresses the dilemma" in statute that "inhibits the
ability" of the Alaska Commercial Fishing and Agriculture Bank
(CFAB) to serve its mandated purpose of granting loans to Alaskan
small business enterprises.
Mr. Anderson detailed three events that factor into the need for
this legislation: the lowest federal reserve discount rates in
recent history; limited entry permits have begun to trade at a
significantly lower range of $20,000 to $40,000; and a recent bank
examiner's report highlights the issue, warning that if the
statutorily imposed limitation remains, it could lead to the
erosion of the earnings of CFAB.
Mr. Anderson shared that the purpose of this bill is to ensure that
the CFAB is able to continue serving its Alaskan member borrowers
in an efficient manner and equitably compete with other lending
institutions serving this unique market.
Senator Green asked what current activities would change under the
provisions of this bill.
Mr. Anderson referenced the existing "usury law" that limits the
institution to five-percent over "San Francisco rates" on loans
less than $25,000. He noted the CFAB is unable to service these
loans, as it is not profitable to do so. Therefore, borrowers
requesting less than $25,000 are not served by the CFAB.
Mr. Anderson spoke to the uniqueness of the organizational
structure of the CFAB. He explained the institution is required to
serve member borrowers "at cost" and that profits earned are
returned to the member borrowers. He explained that because of
current restrictions, the larger loans subsidize the expenses of
the loans of less than $25,000.
Senator Green asked why the interest rate for the smaller loans is
not increased to cover the operating expenses.
Mr. Anderson responded this legislation would allow the CFAB to
charge rates higher than the current five-percent amount.
Senator Olson asked if any borrowers were present to testify before
the Committee.
It was established no such witnesses were present.
Senator Olson asked the witness how this legislation would impact
borrowers.
Mr. Anderson responded this bill would not affect "anybody", but
rather is an opportunity for the CFAB to become more profitable and
to serve its members. He anticipated the members would be "happier"
because the income of the larger loans would not be needed to
subsidize the smaller loans.
Senator Austerman commented he normally receives feedback on
fisheries issues, but had not in regards to this legislation.
Therefore he surmised there were no problems. He pointed out that
the board of directors of the CFAB is comprised of commercial
fishers who are members of the institution and would subsequently
benefit from this legislation.
Senator Wilken "moved to report House Bill 447 from Committee with
individual recommendations and attached fiscal note."
Without objection HB 447 with accompanying zero fiscal note #1,
dated 3/27/02, from the Department of Community and Economic
Development MOVED from Committee.
CS FOR HOUSE BILL NO. 287(FIN)
"An Act relating to the exemption of commercial fishing entry
permits from claims of creditors and execution on an interest
in a limited entry permit; and providing for an effective
date."
This was the first hearing for this bill in the Senate Finance
Committee.
PAT HARTLEY, staff to Representative Scalzi, testified that this
legislation passed the House of Representatives unanimously. She
read a statement into the record as follows.
Since enactment of the limited entry program 28 years ago, the
State always has held that limited entry permits are use
privilege, not property, and cannot be seized by creditors.
This legal status is an important element of Alaska fisheries
management system and a central factor in the State's fight
against attempted seizure of permits by the IRS [Internal
Revenue Service] and other creditors. If Alaskan fishermen are
forced out of the water because creditors take their limited
fishing privileges, everyone in Alaska loses and the State
could lose some of its control of fishing privileges to the
courts.
Section 1 of the bill removes permits from the exemption
section of Title 9 to delete any inference that they are
somehow property, and adds in Section 3 specific language to
the Limited Entry Act, spelling out that fishing privileges
are exempt from claims of all creditors making exceptions only
for loans under the Division of Investments, CFAB [Commercial
Fishing and Agriculture Bank], and child support.
Section 2 adds language in the limited entry statute to make
it absolutely clear that the only time a person may request
the transfer of an entry permit due to an execution on that
permit, is for the purpose of enforcing a lien recorded with
the Commission under the statutes of the Child Support
Enforcement Division.
Leaving the legal status of permits open in any way to varying
interpretation could be detrimental to the interests of the
State and of fishermen.
Senator Ward asked for an explanation of the protection this
legislation would place on the limited entry permits and what
parties would be prohibited from seizing the permits.
MARY MCDOWELL, Commissioner, Commercial Fisheries Limited Entry
Commission, responded that this legislation clarifies in statutes
the State's existing position that permits are not property but
rather use privileges under the control of the State. She explained
that current statutory language could be "misconstrued" and that
this legislation eliminates the possibility.
Senator Ward asked the number of permits that have actually been
seized.
Ms. McDowell answered that none have been seized, but emphasized it
has been "a constant struggle" particularly with the IRS.
Senator Ward asked if this legislation is therefore unnecessary
because the efforts to date to prevent seizure have been
successful.
Ms. McDowell informed of a recent federal bankruptcy case whereby a
court ruled that fishing privileges for a vessel are impertinence
to the vessel, which could become problematic for Alaskan permits.
She noted pending congressional legislation would clarify that the
federal government would recognize that fishing privileges have the
legal status granted to them by the issuing entities. Therefore,
she characterized this legislation as a "window of opportunity" for
the State to clarify statutes to take advantage of the future
federal law.
SFC 02 # 94, Side B 06:25 PM
Senator Ward clarified this legislation would ensure that permits
could not be used as collateral.
Ms. McDowell responded the permits could still be used as
collateral against loans from the Division of Investments and the
CFAB, but could not be held as collateral against other loans. She
noted these restrictions are currently in statute.
Senator Leman noted for the record he is a holder of a limited
entry permit.
Senator Hoffman informed is also such a holder.
Senator Wilken "moved to report committee substitute for House Bill
287 Finance from Committee with individual recommendations and
attached fiscal notes".
There was no objection and HB 287 MOVED from Committee with
accompanying zero fiscal notes: #1, dated 3/4/02, from the
Department of Fish and Game, and #3, dated 4/26/02, from the
Department of Community and Economic Development.
SENATE CS FOR CS FOR HOUSE BILL NO. 350(JUD)
"An Act relating to murder, conspiracy, criminal mischief, and
terroristic threatening; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
REPRESENTATIVE LESIL MCGUIRE testified this legislation is an
"omnibus homeland security bill." She shared that this bill was
prompted by the terrorist events that occurred on September 11,
2001. She noted that she, along with representatives from the
Department of Law, reviewed current statutes to identify those that
could be updated to "reflect the new circumstances and security
threats that we face." She spoke to the numerous hearings this bill
has received and the significant efforts to "fine tune" the
language.
Representative McGuire stated the intent of this bill is to provide
"tools" to allow the discouragement of false threats and the
punishment of attempts to practice terrorism, while ensuring that
the provisions are not too broad. She explained that laws
addressing criminal mischief and terroristic threatening are
"expanded," by specifying that intentional damage of pipelines or
facilities "that provide lifelines to communities" is a Class A
felony punishable by up to 20 years imprisonment. She listed water,
gas or electrical distribution systems and elements of the
emergency responder systems as some such lifeline facilities. She
continued that attempts, whether successful or unsuccessful, to
damage airplanes or helicopters would be Class B felonies.
Representative McGuire asserted that existing statutes related to
terroristic threats are ineffective. This legislation, she stated,
classifies such offenses into terroristic threatening in the first
and second degrees. She listed false reports that cause serious
bodily harm as Class B felonies, and intentionally threatening to
damage pipelines, utilities or transportation systems as a Class C
felony.
Representative McGuire pointed out this bill creates new statutes
pertaining to the offense of intentionally tampering with air and
water. She noted that current statutes address intentional
tampering with food and cosmetics.
Co-Chair Kelly asked why this legislation specifies tampering with
aircraft and not other modes of transportation.
Representative McGuire replied the intent is to address areas
deemed as likely targets. She did not oppose adding other vehicles
if the Committee deemed necessary. She emphasized that the burden
of proof as to the mental state of an individual causing such
tampering is fairly low and therefore the intent is to ensure that
the vehicle tampered with indicates the offense "is very serious
that could cause serious harm."
Co-Chair Kelly why buses and other vehicles are not included in
this provision.
ANNE CARPENETI, Assistant Attorney General, Legal Services Section,
Criminal Division, Department of Law, responded this provision
relates to current law adopted in 1978 and only increases the
severity of these offenses. She surmised the reason that aircraft
was specified is due to the potential widespread harm that
intentional tampering to these vehicles could cause.
Senator Ward asked if the provisions would apply in the event of
intentional damage to a pipeline inflicted using a boat, at a
location where the pipeline crosses a river.
Representative McGuire affirmed noting that the crime committed
would be tampering with a pipeline regardless of the means
employed.
Senator Hoffman asked about a potential smallpox scare.
Representative McGuire referenced language on page 9 of the bill
addressing bacteriological agents, noting that making threats of
such an outbreak would be classified as terroristic threatening in
the second degree.
Representative McGuire relayed discussions held during the Senate
Judiciary Committee hearing on this bill about the specific
identification of bacteriological, biological, chemical, or
radiological substance as meaning "a material that is capable of
causing serious physical injury". She stated prior language read,
"a substance that could serious bodily harm" and noted that
concerns were raised that this language was "too broad" and could
be misinterpreted. She noted the current language reflects the
federal definition.
Senator Hoffman asked about an actual intentional spreading of a
smallpox virus as opposed to making a threat.
Ms. Carpeneti responded that because the smallpox virus is
transmitted by air, the intentional release of the virus would be
classified as criminal mischief in the second degree and a Class B
felony. She furthered that terroristic threatening in the first
degree includes the offense of sending a real or fake
bacteriological agent.
Senator Ward "moved Senate committee substitute for committee
substitute for House Bill number 350 Judiciary out of Committee
with individual recommendations and the accompanying fiscal notes."
Without objection SCS CS HB 350 (JUD) MOVED from Committee with a
zero fiscal note #1, dated 2/20/02 from the Alaska Court System;
and three indeterminate fiscal notes: #3 dated 2/19/02, from the
Department of Law; #4 dated 2/21/02, from the Department of
Administration; #5 dated 2/26/02, from the Department of
Corrections.
CS FOR HOUSE BILL NO. 471(L&C)
"An Act increasing the maximum amount of loans from the bulk
fuel revolving loan fund operated by the Alaska Energy
Authority; precluding certain legal action concerning certain
technical assistance to rural utilities; relating to powers of
the Alaska Energy Authority; relating to the definitions of
'net income' and 'unrestricted net income' for purposes of
determining the amount of the Alaska Industrial Development
and Export Authority's dividend to the state; relating to
communities within which rural development loans may be made
by the Alaska Industrial Development and Export Authority; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
JESSICA MENENDEZ, Staff to Representative Green, testified this
legislation amends three "important" programs of the Alaska
Industrial Development and Export Authority (AIEDA): AIDEA dividend
calculations, the Bulk Fuel Revolving Fund and the Rural
Development Initiative Fund. She reminded the Committee that AIDEA
is a self-supporting State agency that contributes an annual
dividend to the State general fund. She furthered that since its
inception, AIDEA has contributed or authorized $129 million,
including $29,149,500 for the FY 03 fiscal year.
Ms. Menendez explained that under current statute, AIDEA pays an
annual dividend based on the agency's net income and fund-
restricted net income. She informed that statute defines these two
incomes as "the net income and unrestricted income included in the
audited financial statements." However, she stated that new
guidelines imposed by the Governmental Accounting Standards Board
(GASB) no longer include these terms and that without these amounts
reported, the AIDEA Board of Directors has no clear instruction of
how to determine the annual dividend to the State.
Ms. Menendez added that GASB standards also stipulate that any
governmental transfers, capital contributions or grants must be
listed as an expense or revenue. She explained this method would
reduce the agency's net income for the base fiscal year and
subsequently reduce the amount of the dividend calculated from the
audited financial statements.
Ms. Menendez stated that Sections 2 and 3 of the bill address these
issues by defining unrestricted net income using the new GASB
terminology.
Ms. Menendez continued that this legislation also increases the
maximum amount of the Bulk Fuel Revolving Fund. She described the
purpose of the fund to assist rural communities in purchasing bulk
fuel supplies. She spoke of the advantage for participating
communities to purchase bulk fuel in more frequent, smaller
shipments; also, shipments to some communities could only be made
during certain timeframes. To accommodate this, she pointed out
this legislation increases the maximum amount of the fund from
$100,000 to $200,000.
Ms. Menendez next addressed Section 4 of the bill, which contains
the eligibility requirements for the Rural Development Initiative
Fund. She explained this program provides funding opportunities for
those rural communities that have no other funding options
available. She noted the intent of this provision is to ensure that
the loans are awarded to the communities for which the program is
intended. She detailed that eligible communities would have a
population less of than 5,000 residents, and not connected by road
or railroad to Anchorage or Fairbanks, or have a population of less
than 2,000 if connected to Anchorage or Fairbanks.
Ms. Menendez concluded by stressing the importance of this
legislation, not only because AIDEA provides the State with an
annual dividend, but also because it provides programs and
financing options to allow the establishment and expansion of
businesses statewide, which subsequently provides jobs for Alaska
and helps diversify the economy.
BOB POE, Executive Director, Alaska Industrial Development and
Export Authority (AIDEA) testified the intent is to maintain the
annual dividend in the current manner and that this legislation
would allow that to occur. He explained the changes to the Bulk
Fuel Revolving Fund are requested because the capacity of many
updated fuel storage systems is increased and also because the
amount of fuel that could be purchased for $100,000 has decreased
due to higher fuel prices. He added that US Senator Ted Stevens was
successful in securing a $5 million grant for the fund.
Mr. Poe stated that the provisions of this bill governing the Rural
Development Initiative Fund would "make…wording that was a little
problematic, much clearer." He gave examples of businesses located
outside of city limits arguing for rural status, when lending
institutions were nearby that were willing to lend money under the
AIDEA loan participation program.
Senator Ward asked which communities would be affected by the
changes to population eligibility for the Rural Development
Initiative Fund program.
Mr. Poe surmised no communities would be excluded. He spoke of
Settlers Bay located near Wasilla would be eligible for
conventional financing. He noted the City of Bethel would not be
impacted, although the population of Bethel has increased beyond
5,000 residents, because businesses in this area would qualify for
AHFC-sponsored conventional financing.
Senator Wilken asked if passage of this bill would change the
amount of the annual dividends.
Mr. Poe answered the provisions in this bill would not affect the
amount of dividends.
Senator Wilken next asked the status of federal funding for an
unrelated project.
Mr. Poe replied the pending congressional legislation contains an
amendment that authorizes the Secretary of the Department of Energy
to negotiate with AIDEA for a loan of up to $125 million. He
emphasized this is an authorization rather than an appropriation
and therefore subject to negotiation. He predicted the chances of
the amendment and the legislation passing into law was good.
Senator Austerman "moved House Bill 471 out of Committee."
Without objection CS HB 471 (CRA) with accompanying zero fiscal
note #1, dated 3/22/02, from the Department of Community and
Economic Development.
ADJOURNMENT
Co-Chair Pete Kelly adjourned the meeting at 06:47 PM.
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