Legislature(2003 - 2004)
05/07/2004 08:44 AM 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 07, 2004
8:44 AM
TAPES
SFC-04 # 110, Side A
SFC 04 # 110, Side B
CALL TO ORDER
Co-Chair Gary Wilken convened the meeting at approximately 8:44 AM.
PRESENT
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Fred Dyson
Senator Ben Stevens
Senator Lyman Hoffman
Senator Donny Olson
Also Attending: REPRESENTATIVE BUD FATE; JAMES ARMSTRONG, Staff to
Representative Bill Williams; TOMAS BOUTIN, Deputy Commissioner,
Department of Revenue; GREG O'CLARAY, Commissioner, Department of
Labor and Workforce Development; JIM POUND, Staff to Representative
Bud Fate; SUSAN BURKE, Attorney representing Magazine Publishers of
America; SUE STANCLIFF, Staff to Representative Pete Kott; DEBBIE
BUMP, Division of Finance, Department of Administration; JOHN MAIN,
Staff to Representative Pete Kott; PHELAN STRAUBE, Staff to Senator
Ben Stevens; VERN JONES, Chief Procurement Officer, Department of
Administration
Attending via Teleconference: From Offnet Sites: PAT LADNER, Alaska
Aerospace Development Corporation; LINDA WILSON, Deputy Director,
Public Defender Agency, Department of Administration; LINDA WILSON,
Deputy Director, Alaska Public Defender Agency, Department of
Administration
SUMMARY INFORMATION
HB 422-BUDGET RESERVE FUND INVESTMENT
The Committee heard from the sponsor, the Department of Revenue and
the bill was held for further consideration.
HB 559-STEP PROGRAM CONTINUANCE
The Committee heard from the Department of Labor and Workforce
Development and the bill was reported from Committee.
HB 15-SOLICITATIONS/CONSUMER PROTECTION
The Committee heard from the Sponsor, adopted one amendment, and
reported the committee substitute from Committee.
HB 494-ELECTRONIC PAYMENT FOR STATE BUSINESS
The Committee heard from the bill's sponsor, adopted three
amendments, and reported the bill from Committee.
HB 514-CHILD SUPPORT ENFORCEMENT/ CRIMES
The Committee heard from the sponsor and the Public Defender
Agency. A committee substitute was adopted and reported from
Committee.
SB 366-STATE SALES TAX
The Committee heard from the sponsor, adopted a committee
substitute, and reported that bill from Committee.
HB 545-STATE REAL PROPERTY LEASE EXTENSIONS
The Committee heard from the Department of Administration and
reported the bill from Committee.
SB 308-DOMESTIC VIOLENCE PROTECTIVE ORDERS
This bill was scheduled but not heard.
HB 56-UNFAIR TRADE PRACTICES ATTY FEES/COSTS
This bill was scheduled but not heard.
HB 341-DIVE FISHERY MANAGEMENT ASSESSMENT
This bill was scheduled but not heard.
HB 342-DRIVING UNDER INFLUENCE/ALCOHOL OFFENSES
This bill was scheduled but not heard.
HB 425-SCHOOL FUNDS RELATED TO BOARDING SCHOOLS
This bill was scheduled but not heard.
HCR 32-AK INFO INFRASTRUCTURE POLICY TASK FORCE
This bill was scheduled but not heard.
CS FOR HOUSE BILL NO. 422(STA)
"An Act repealing the special subaccount established in the
constitutional budget reserve fund; and providing for an
effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated that this bill would repeal the
Constitutional Budget Reserve (CBR) subaccount and thereby allow
the Constitutional Budget Reserve (CBR) account balance, in its
entirety, "to be invested in fixed income securities." He stated
that CS HB 422(STA), Version 23-LS1527\S, and its accompanying
fiscal note #1 from the Department of Revenue, is before the
Committee.
JAMES ARMSTRONG, Staff to Representative Bill Williams, the bill's
sponsor, specified that this bill would repeal an act enacted in
the year 2000 that created a $400 million subaccount within the CBR
Fund. This action, he continued would "collapse" those funds back
into the primary CBR account. He stated that this subaccount "was
targeted to obtain a higher yield for the investment strategy."
Furthermore, he noted, that the Commissioner of the Department of
Revenue was instructed to assume that the subaccount would not be
accessed for five years. He stated that this legislation is
requested by the Department of Revenue.
Senator Dyson asked regarding the rate of return experienced by the
subaccount.
TOMAS BOUTIN, Deputy Commissioner, Department of Revenue, responded
that during the last three years, the subaccount achieved a 4.70
percent rate of return as compared to the primary CBR account's
5.44 percent rate of return.
Senator Dyson asked whether these are gross or net return rates.
Mr. Boutin expressed that these returns "are gross of fees."
However, he noted that the subaccount has an annual fixed
management fee amounting to $125,000. He stated that the CBR's
fixed income accounts are managed internally, at an annual "rule of
thumb cost" of approximately three basis points.
Senator Dyson declared that contrary to the goal of generating a
higher yield, the subaccount actually returned a lesser rate than
the primary CBR account.
Mr. Boutin opined that the timing of establishing the account
"couldn't have been poorer" in that it ventured into equities in
the spring of the year 2000.
Senator Bunde communicated that the reason that CBR Funds are not
positioned in "more aggressive management" is that access to the
funds must be available on "a short-term basis" in order to be used
to balance the State's budget. This, he asserted, was and continues
to be a concern regarding the establishment of this subaccount. He
communicated that because a higher rate of risk accompanies the
decision to achieve a higher rate of return, the investment must
remain invested in the financial market over a long-term in order
to amortize the risk. He stated that this is contrary to being able
to access CBR funds as budgeting factors might require.
Mr. Boutin responded that that is "exactly the reason" the
Department of Revenue has requested this legislation. He
distributed two handouts titled " Constitutional Budget Reserve"
and "Constitutional Budget Reserve Subaccount" [copies on file].
Senator B. Stevens reviewed the "Constitutional Budget Reserve
Subaccount" handout and asked whether eliminating the subaccount at
this time would result in selling at a loss as opposed to
continuing the account until the loss could be "recaptured."
Mr. Boutin qualified that neither the Department of Revenue nor the
Legislature are "market timers," and therefore, he reiterated that
this is the reason the Department of Revenue believes that "fixed
income is appropriate." He noted that the Commissioner of the
Department of Revenue, as the fiduciary for this money, could
invest it, limited by the prudent investor rule, for the highest
rate of return. He disclosed that the Department conducts quarterly
evaluations of the Fund's "targets" to determine the appropriate
investment strategy. He declared that because the CBR is currently
utilized as the State's "checking account," the Department has
determined that long-term investments are not the proper strategy
at this time.
Senator B. Stevens voiced that, "at this point," he does not
support this legislation, as he calculated, that there would not be
"a significant draw" on the CBR, which currently amounts to
approximately $1.5 billion, until June 30, 2005. He opined that
that a three-year and five-year "time horizon on an investment
cycle is short-term." He stated that were the Legislature "forced
to liquidate the $420 million that was originally invested for a
long-term horizon, prematurely, we are destined to lose money." He
spoke against the legislation as he reiterated that the money is
not required at this time and should continue to be invested, as
established, in the long-term equity market investment for a
minimum of five years.
Co-Chair Wilken ordered the bill HELD in Committee for further
consideration.
HOUSE BILL NO. 559 am
"An Act extending the termination of the state training and
employment program; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken noted that HB 559 am, Version 23-LS1954\A.A, would
extend the State's employment training program until the year 2008.
He noted that a Department of Labor and Workforce Development zero
fiscal note accompanies the legislation.
GREG O'CLARAY, Commissioner, Department of Labor and Workforce
Development, informed that this legislation would extend the
State's "successfully implemented" State Training and Employment
Program (STEP) for unemployed workers. He noted that approximately
18,000 unemployed workers "who were unable to be served by federal
or other programs," have received training through the program
since its inception. He urged the Committee members to support the
bill.
Senator Dyson commented that the ultimate success of a training
program is not determined by the number of individuals who receive
training, but is rather determined by the number of those
individuals who obtain employment.
Commissioner O'Claray communicated that more than 90-percent of the
individuals who completed the training obtained jobs as outlined in
a Workforce Investment System report [copy not provided] that was
distributed to Legislators earlier in the year. He noted that the
success of this program supports Governor Frank Murkowski's Alaska
Hire program. The specifics of that program, he continued, are that
the person must desire to work; the person must be a resident of
the State with the intention to remain in the State; and must have
been previously employed in a job that was covered by unemployment
insurance. Continuing, he shared that the intent of this program is
to reduce the number of people who are collecting unemployment.
Senator Bunde asked regarding the job market opportunities for
persons who complete the training.
Commissioner O'Claray responded that one component of the STEP
program was to evaluate the job market in order to determine what
jobs exist and to attempt to establish "a pre-committed job" prior
to training being conducted. He attested that this pre-commitment
is a factor of the "most successful" training programs. He shared
that 4,500 new jobs were created by the State's economy in 2003,
and that the continued development of such things as the mining
industry would provide sustainable employment, "which is the
ultimate goal."
Senator Bunde voiced comfort in knowing that the training provided
was appropriate to the job market.
Senator Dyson moved to report the bill from Committee with
individual recommendations and accompanying zero fiscal note.
There being no objection, HB 559am was REPORTED from Committee with
zero fiscal note #1, dated April 22, 2004 from the Department of
Labor and Workforce Development.
SENATE CS FOR CS FOR HOUSE BILL NO. 15(JUD)
"An Act relating to fair trade practices and consumer
protection, to telephone solicitations, to charitable
solicitations; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated that this legislation, sponsored by
Representative Bud Fate, "would establish specific guidelines for
telemarketers operating in the State." He noted that CS HB 15
(JUD), Version 23-LS0058\X and its accompanying fiscal notes, is
before the Committee.
REPRESENTATIVE BUD FATE, the bill's sponsor, stated that his staff
would present testimony on the bill.
JIM POUND, Staff to Representative Bud Fate, explained that the
intent of this bill is to address the number of telemarketing phone
calls that people receive during the evening dinner hour. He stated
that similarly fashioned federal legislation, referred to as the
National No-Call List, has been developed, and that this bill has
been modified to align with those federal regulations. One of those
modifications, he continued, would "allow the [State's] Department
of Law to enforce the federal statutes" and additionally "would
allow Alaskans to be able to have a local or in-State contact,"
rather than a federal contact through which to file a complaint.
Technical Amendment #1: This amendment deletes "exemption provided
by (a)(11)" and inserts "written disclosure required by (a)(11)(B)"
in Section 22, subsection (b) on page ten, line seven. The amended
language would read as follows.
(b) The written disclosure required by (a)(11)(B) of this
section does not apply to a sale of a magazine subscription by
a publisher or a publisher's agent operating under a written
agreement between a publisher and the agent
Co-Chair Wilken moved to adopt Amendment #1 and objected for
discussion.
Mr. Pound stated that this technical amendment is required to
correct a drafting error that occurred when an amendment pertaining
to publishers of magazine and periodical sales was incorporated
into the Senate Judiciary Committee committee substitute. He noted
that the intent of the amendment was to address the bill's written
notice of cancellation requirements regarding a transaction that
occurs with an existing customer or were the billing, which is
routinely conducted with a credit card, to be accompanied by an 800
number reflected on the credit card charge on one's statement. This
toll-free number, he continued, would enable an individual to
contract the vendor to discuss the charge. Therefore, he stated,
the adoption of this amendment would address these written
disclosure requirements and correct the drafting error that might
serve to classify the sale of these items as a felony under other
existing statutes.
SUSAN BURKE, Attorney representing Magazine Publishers of America,
noted that collaborative efforts with the Consumer Protection
Division of the Department of Law have resulted in acceptable
compromises. She agreed that this amendment would correct a
drafting error and that her client supports the amendment.
Co-Chair Wilken withdrew his objection to Amendment #1.
There being no further objection, Amendment #1 was ADOPTED.
Co-Chair Wilken asked for further information regarding the effects
of the bill.
Mr. Pound explained that this legislation would "localize" this
issue and provide the State's Department of Law more control
regarding telemarketer issues. He stated that this bill would
require telemarketers operating in the State to register with the
Department of Law, would allow consumer complaints to be addressed
at the State rather than federal level "which should be quicker and
a little more personal," and would allow Alaskans to register on
the National Do-Not-Call List. He noted that the establishment of
the National Do-Not-Call List eliminated the need to establish an
Alaskan Do-Not-Call registry.
Senator Dyson asked whether non-profit agencies such as the
Salvation Army or political campaigns would be affected by this
legislation.
Mr. Pound responded that this legislation would not affect non-
profits or political entities.
Senator Dyson asked whether "significant issue" non-profit
organizations would be affected.
Mr. Pound understood that those organizations would be recognized
as a political entity.
Senator Dyson questioned whether non-profit fund-raising endeavors
would be allowed.
Mr. Pound responded that all non-profits would be exempt from this
legislation.
Senator Dyson asked for confirmation that this would include
political organizations.
Mr. Pound concurred.
Senator Dyson asked regarding "the common denominator for the
exemption list" as referred to in Section 21 on page seven of the
bill.
Mr. Pound explained that the exemption language pertains to
registration and registration fees. He noted that the entities
specified in that section would be required to meet the
requirements of the national Do-Not-Call list.
Senator Dyson characterized the list of exempted entities as "quite
extensive."
Mr. Pound noted that the section, which occurs in existing
regulation, was originally included in the bill as the result of a
minor Department of Law drafting change request. However, he noted
that this "exemption section" has evolved into one of the most
contentious sections of the bill.
Senator Bunde moved to report the bill, as amended, from Committee
with individual recommendations and accompanying fiscal notes.
There being no objections, SCS CS HB 15(FIN) was REPORTED from
Committee with zero fiscal note #4, dated February 13, 2004 from
the Department of Community and Economic Development and zero
fiscal note #5, dated February 23, 2004 from the Department of Law.
CS FOR HOUSE BILL NO. 494(FIN) am
"An Act relating to the methods of disbursement of money by
the state, including employment compensation, unemployment
payments, and permanent fund dividends, and to bank
investments and deposits by the state; and providing for an
effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken noted that this bill, CS HB 494 (FIN) am, Version
23-LS1754\U.A, sponsored by Representative Pete Kott, would mandate
"that monetary disbursements can only be made through an electronic
funds transfer or through an electronic payment card unless doing
so would cause hardship to the recipient." He noted that several
amendments would be forthcoming.
SUE STANCLIFF, Staff to Representative Pete Kott, noted that this
bill would alter the method through which the State disburses funds
in order to reduce associated costs to State agencies and to
"improve service delivery to the public." She informed that the
proposed electronic payment delivery that would utilize such things
as direct deposits would benefits the State, as it would reduce the
high cost of issuing paper checks. She informed, however, that such
electronic payment delivery would not be a viable payment method
for "so-called cash customers" who are those who do not have a bank
account or those who might live in Bush areas of the State and not
have access to a bank or choose not to receive direct deposits.
Ms. Stancliff stated that, in addition to reducing the cost of
issuing paper checks, "considerable" savings would result from: not
having to deal with check fraud; not having to re-issue lost or
stolen checks or address stale dated checks; reduced postage and
bank service fees; and reduced labor costs. Furthermore, she stated
that the proposed process would benefit those who receive
electronic payments because it would eliminate check-cashing fees,
the payment would be made in a timely, reliable manner, and the
check fraud liability would be reduced.
Ms. Stancliff pointed out that while 89-percent of the State's
payroll is direct deposited, only 1.5 percent of the 50,000 vendors
the State does business with currently utilize the electronic
payment transfer method. She pointed out that this is the area to
which the maximum focus would be directed. She noted that the
State's child support and public assistance programs are
increasingly using electronic disbursements.
Co-Chair Wilken understood that the legislation would allow the
State to utilize electronic funds transfers. He asked whether there
is a "compliant" component associated with the legislation.
Ms. Stancliff stated that rather than "compliant" being the
appropriate word, the hope is that incorporation of this
legislation would encourage its use. She stated that the State
would not require someone to choose this method of payment, as that
would impede on their right not to choose it. However, she noted
that an agreement within the Western States Alliance does have a
compliant component in regards to electronic benefit transfers.
Co-Chair Wilken voiced being "shocked" that the State issues 96,000
checks a month. He asked how this legislation would alter current
payment regulations.
Ms. Stancliff responded that it would insert a new section into
State's statutes that identify the methods of disbursements that
the State shall use. She noted that, included in the new language,
is language specifying that a person would not be required to
utilize electronic payment. Therefore, she concluded, that while a
person could opt out of this payment method, the legislation would
specify that this be the "primary method" utilized by State
departments.
Co-Chair Wilken surmised therefore that the legislation would
establish the method for disbursement, which is currently "quiet"
in statute.
Ms. Stancliff concurred. She noted that the legislation also
updates the statute to "the electronic age" by replacing the word
"warrant" with "disbursement" throughout.
DEBBIE BUMP, Division of Finance, Department of Administration,
noted that she was available to answer questions.
Senator Olson asked for further information regarding how the
legislation would apply to people without a bank account.
Ms. Stancliff responded that this legislation would not require a
person living in a remote community with limited banking options or
who elect not to receive electronic payments to do so. She stated
however, that the State could alternately save money were these
people to receive payment via an electronic or cash card, which is
similar to a debit or credit card that could be used at their local
grocery store or post office.
Senator Olson asked for clarification regarding the fact that no
more warrants would be issued.
Ms. Stancliff clarified that the legislation would allow warrants
to be issued to people "if they have no other means available to
them."
Senator Olson asked for further information regarding the
electronic card.
Ms. Stancliff explained that in lieu of receiving a check in the
mail, funds in the form of cash cards could be utilized were
electronic technology available at an area's post office or grocery
store.
Amendment #1: This amendment inserts a new section into the bill on
page two, line 23, after Section 3, as follows.
Sec. 4. AS 14.40.841 is amended to read:
Sec. 14.40.841 Alaska Aerospace Development Corporation
[REVOLVING] fund. (a) the Alaska Aerospace Development
Corporation {REVOLVING} fund is established in the
corporation. The [REVOLVING] fund consists of appropriations
made to the [REVOLVING] fund by the legislature, and rents,
fees, or other money or assets transferred to the [REVOLVING]
fund by the corporation. Amounts deposited in the [REVOLVING]
fund may be pledged to the payment of bonds of the corporation
or expended for the purpose of the corporation under AS
14.40.821 - 14.40.990.
(b) The corporation shall have custody of the fund, and
shall be responsible for its management. The corporation is
the fiduciary of the fund under AS 37.10.071 and may invest
amounts in the fund in accordance with an investment policy
adopted by the corporation. Notwithstanding AS 37.10.010 -
37.10.050, the corporation may make disbursements from the
fund in accordance with AS 37.25.050. Notwithstanding AS
37.05.130 - 37.05.140, the corporation shall report
disbursements from the fund annually in accordance with AS
14.40.866(b)(1). An appropriation made to the fund by the
legislature shall be transferred from the state treasury to
the corporation for deposit in the fund.
In addition, Sec. 31 on page 11, line 12 is replaced with the
following language.
Sec. 32. Section 4 of this Act takes effect July 1, 2004.
Sections 1-3 and 5-31 of this Act take effect January 1, 2006.
Co-Chair Wilken offered Amendment #1 and objected for explanation.
Co-Chair Wilken shared that the Alaska Aerospace Development
Corporation (AADC), of which he is a Board member, has "struggled
with how to bring their accounting system which is somewhat unique
because of its launch customers" into the State's accounting
system.
PAT LADNER, Executive Director, Alaska Aerospace Development
Corporation, testified via teleconference from an offnet site and
explained that the twelve year-old corporation, after struggling
"in the beginning against long odds," has recently signed a five-
year missile defense contract. He noted that in FY 03, the
Corporation: earned $3.7 million in revenue; is expected to
generate $11 million in FY 04; and, "provided all scheduled
launches occur," would be expected to generate $22.1 million in FY
05. He stressed that this "is money brought into the State." This
amendment, he explained, would allow the Corporation to be
responsive to its customer the federal government, and be
competitive with Vandenberg Air Force Base. He recounted that the
missile defense contract requires an accounting system that is
approved by the federal Defense Audit Agency (DAA), and he noted
that the Corporation's Axis Accounting System does not meet the
established criteria as it was initially designed to be a funds
tracking system for the Legislature. Furthermore, he explained that
the current system segregates disbursements into five categories:
labor; travel; contractual; supplies; and equipment. However, he
continued, the national missile contracts require a work breakdown
structure that consists of approximately 15 categories with sub-
category requirements. He disclosed that because the current system
does not provide that ability, a "shadow mode accounting system"
has been developed, which as subsequently been approved by the DAA.
The continuation of the Axis System and the development of the
shadow system, he disclosed, has resulted in a double accounting
system, which has increased labor costs that could not be recouped
under the contracts. Therefore, he stated that because the
Corporation receives no funding from the State, this scenario is
placing the Corporation in a non-competitive situation as these
overhead rates escalate.
Mr. Ladner stated that this amendment would serve to make the
Corporation more efficient and competitive by allowing the
incorporation of the separate accounting system. He attested that
no other component of the operation such as annual audits and
reports would be affected. He further assured the Committee that
each contract would continue to require an annual DAA audit, a
legislative audit, and a separate federal audit. He urged the
Committee to support the amendment.
Co-Chair Wilken noted that further information is attached to the
amendment.
Ms. Stancliff stated that the sponsor has no objection to the
amendment.
Co-Chair Wilken removed his objection.
Senator Bunde asked whether this amendment would exclude the
Corporation from a Legislative Budget & Audit review.
Mr. Ladner responded that it would not.
There being no further objection, Amendment #1 was ADOPTED.
Conceptual Amendment #2: This amendment replaces the word "person"
with the words "vendor or grantee" in Section 18, subsection (b)(4)
on page six, line 18. The new language would read as follows.
(4) a vendor or grantee elects not to be paid by the
disbursement methods;
Co-Chair Wilken moved to adopt Conceptual Amendment #2.
Ms. Stancliff explained that this language is being proposed as
most accounts are established with a vendor or a grantee rather
than with a person.
There being no objection, Amendment #2 was ADOPTED.
Conceptual Amendment #3: This amendment deletes Sections 25 and 26
of the bill beginning on page nine, line 20 through line 31, which
read as follows.
Sec. 25. AS 44.99.205(a) is amended to read:
(a) A state agency may not place a picture of an elected
state official on an application form [, A WARRANT,] or a
direct deposit notice provided by the agency.
Sec. 26. AS 44.99.205(b) is amended to read:
(b) A state agency may not place a message on or with an
application form [, A WARRANT,] or a direct deposit notice
provided by the agency unless the message is
(1) from a state agency employee who is not an
elected state official; and
(2) required by law, necessary for the operation of
the document, related to seasonal health issues included in
flu shot reminders, or related to a program or activity of the
state agency.
Co-Chair Wilken moved to adopt Conceptual Amendment #3.
Ms. Stancliff explained that because this legislation incorporates
the disbursement requirement into State statutes and because people
could opt out of the electronic payment method and continue to
receive a paper check or warrant, this language is no longer
required.
There being no objection, Conceptual Amendment #3 was ADOPTED.
Senator Dyson moved to report the bill, as amended, from Committee
with individual recommendations and accompanying fiscal note.
There being no objection, SCS CS HB 494(FIN) was REPORTED from
Committee with seven zero fiscal notes as follows: fiscal note #1,
dated March 19, 2004 from the Public Assistance Field Services,
Department of Health and Social Services; fiscal note #2, dated
March 19, 2004 from the Information Technology Services, Department
of Health and Social Services; fiscal note #3, dated March 19, 2004
from the Administrative Supports Services Division, Department of
Health and Social Services; fiscal note #4, dated March 16, 2004,
from the Unemployment Insurance Division, Department of Labor and
Workforce Development; fiscal note #5, dated March 16, 2004, from
the Employment Services, Department of Labor and Workforce
Development; fiscal note #6, dated March 19, 2004, from the
Department of Revenue; and fiscal note #7, dated March 16, 2004,
from the Department of Administration.
SENATE CS FOR CS FOR HOUSE BILL NO. 514(JUD)
"An Act relating to child support modification and
enforcement, to the establishment of paternity by the child
support enforcement agency, and to the crimes of criminal
nonsupport and aiding the nonpayment of child support;
amending Rule 90.3, Alaska Rules of Civil Procedure; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated that this "omnibus" legislation is sponsored
by Representative Pete Kott and would result in six changes to the
Child Support Enforcement Division statutes.
Senator Bunde moved to adopt SCS CS HB 514, Version 23-LS1639\N as
the working document.
There being no objection, Version "N" was ADOPTED as the working
document.
JOHN MAIN, Staff to Representative Pete Kott, stated that the bill
would correct six items in the child support statutes, with the
first being that it would change "criminal nonsupport," which is
currently a misdemeanor, to a felony. He shared that there are
approximately 14,000 cases that exceed $20,000 in arrears or are in
excess of 24-months in arrears on their child support payments. He
shared that these cases amount to approximately $580 million. He
stated that that fact that a person might be in arrears on a large
amount of child support does not necessarily make that person a
criminal; however, he continued, this change would align the State
with 33 other states who categorize criminal nonsupport as a
felony, primarily because a felony charge as opposed to a
misdemeanor charge mandates that a person be on probation for ten
years with up to a five-year suspended sentence rather than an
informal probation of up to ten years with a suspended sentence of
up to one year. In addition, he stated that the statute of
limitations on a felony is ten years as opposed to five years for a
misdemeanor.
SFC 04 # 110, Side B 09:31 AM
Mr. Main noted that the Child Support Investigator Unit oversees a
misdemeanor probationer, and that were this offense reclassified as
a felony, the probation would be overseen by the Department of
Corrections Probation Office. He stressed that changing the charge
from a misdemeanor to a felony in cases where a large amount of
child support is owed would provide the Child Support Division with
"another tool to have to be able to collect higher amounts."
Senator Dyson asked whether a person who might be convicted as a
felon for being in arrears on their child support would lose their
right to vote and to bear arms.
Mr. Main affirmed that would be the case, were they convicted under
a Class C felony.
Senator Dyson asked whether those rights would be restored upon the
completion of the sentence.
Mr. Main could not provide the answer to that question.
Mr. Main exampled that: were someone to steal oil valued at or in
excess of $500 from an oil company "through deception," they could
be convicted of a Class C felony; were a person to conceal $500 of
merchandise from, for instance, JC Penney's, it would be considered
a Class C felony; were an individual to defraud a creditor of $500
or more that is a Class C felony; or were an individual to steal
$500 or more from a non-profit organization, that would be a Class
C felony. He attested that withholding child support from a child
"is like stealing money from their piggy bank" and yet, he noted, a
person withholding child support payments must be at least $20,000
in arrears before they could be charged with a Class C felony. He
noted that the State's Child Support Agency is currently monitoring
twenty-four cases at this level.
Mr. Main stated that the second change proposed by this legislation
would be to incorporate a Conspiracy Law through which people who
assist people with avoiding child support payments could also be
charged with Class C felony. He noted that the current misdemeanor
charge for non-payment of child support does not have a "conspiracy
law as companion to the actual crime."
Mr. Main further noted that this legislation would address
differing jurisdictional court issues in order to clarify, through
State statute, that the Courts have the statutory authority "across
the board" through which approved payment plans could be developed;
through which a person could be required to seek work; and through
which a person could be required to complete and submit a Permanent
Fund Dividend application, if qualified.
Mr. Main voiced that another important component of the legislation
would be to provide the ability "to compromise State debt through
settlement." He exampled that this would allow individuals with a
large amount of child support in arrears to establish a payment
plan through which payments would be paid over a period of time. He
noted that were this to occur, some of the debt could be forgiven.
This program, he declared, would be limited to those situations in
which it was determined to be in "the best interest of the State
and the children."
Mr. Main explained that the legislation would also address a
situation in which there is "a victim of rape and incest" who, as a
result, bears a child. He noted that State statute currently
prohibits the State Child Support Enforcement Division (CSED) from
assisting someone in establishing paternity. However, he explained,
this legislation would allow the victim to request CSED assistance
in establishing paternity and subsequently, were paternity
established, to assist them in "seeking a child support order." He
explained therefore, that while CSED "would not seek to establish
paternity on their own," they could do so, were this legislation
adopted, if asked to do so by a victim of rape or incest.
Mr. Main noted that the final change proposed in this legislation
would be to change Alaska Statutes in order for State laws to be
consistent and compliant with federal funding requirements.
Senator Dyson voiced appreciation and support for the bill. He
asked whether the legislation should address the "timely change in
enforcement orders" issue.
Mr. Main understood the question to pertain "to adjustments and
modifications of orders," and he noted that while the issue was
raised, it is not addressed in this bill.
Senator Dyson asked whether this issue was not addressed because
"the solution does not require a Statute change, or because there
is no problem, or is it a big enough issue" to be addressed
separately after the issues included in this legislation are
resolved.
Mr. Main responded that in working with CSED in the development of
this legislation, that issue was not identified as needing to be
addressed. However, he stated that it might be an issue that should
be further discussed.
LINDA WILSON, Deputy Director, Alaska Public Defender Agency,
Department of Administration, testified via teleconference from an
offnet site and raised concern in regards "to the large number of
people who would be exposed to a felony prosecution," were this
legislation enacted. She reminded that there are in excess of
14,000 "who owe more than $20,000 in child support or have not made
a payment in 24-months." She declared that prosecuting this number
of people under a felony would have an impact on the operations of
the Public Defender Agency (PDA).
Ms. Wilson pointed out that language "narrowing the qualifications
of a Class C felony" were incorporated into Section 3(d) on page
two, line two of the SCS CS HB 514(JUD), Version 23-LS1639\E, by
the inclusion of the word "intentionally," in that a person could
be prosecuted with a Class C felony were they to "intentionally
fail to provide the support."
Ms. Wilson noted that the recent version of the bill incorporates
the word "knowingly" rather than the word "intentionally." She
stressed that use of the word "'intentionally' would serve to
narrow the exposure to a felony prosecution to really get at the
people that are being targeted." She declared that, "it does not
take much to get behind in child support" and were the intent "to
get at the worst offenders, the ones who intentionally withhold or
have the ability to pay and don't," then using "the word
'intentionally' would hopefully narrow the field from 14,000 to a
smaller number of people."
Ms. Wilson stated that other than the concern regarding "the large
number of people who could be prosecuted for a felony," the
Department is comfortable with the remainder of the provisions
being proposed.
Co-Chair Wilken asked whether the committee substitute, Version "N"
addresses the Department's concern.
Mr. Main noted that, to the contrary, the word "knowingly" is
incorporated into Version "N" at the recommendation of the Criminal
Section of the Department of Law, as, he continued, the use of the
word "intentionally" was determined "to be almost impossible for
the Department to try these people and convict them." He stated
that in order to prosecute a person, the individual would have to
have been legally charged with the support of the child or ordered
to pay support through such things as a Court order; that the
person failed to provide the child support and that "the State must
prove without a reasonable doubt" that the person was aware that he
or she must pay child support and aware that they were not paying
it; and that the lack of payment was without lawful excuse.
Senator Bunde recalled that several years earlier, Legislators were
provided a list [copy not provided] of approximately 100
individuals who owned more $100,000 in back child support. He noted
that the majority of those individuals resided in Rural Alaska, and
who, he opined, would be likely to require assistance from the
Public Defender Agency. He asked therefore, whether this
legislation would have a "substantial impact" on the PDA.
Mr. Main replied that the procedure that must be undertaken in
order to charge these people is such that only "the most egregious
individuals" are investigated. He noted that in the last three
years, only 24 cases have been presented as the CSEA only has four
investigators, and only two of those address criminal non-support.
He concurred with the information that some people owe upwards of
$50,000 in back child support, but noted that the biggest issue is
"ability to pay." Therefore, he concluded, the CSEA only pursues
those who have the ability to pay and who "have refused to pay." He
noted that the Department works with people who live in Rural
Alaska and people who have "very larges arrearages to be able to
get those reduced."
Senator Dyson moved to report the Finance committee substitute from
Committee with individual recommendations and accompanying fiscal
notes.
There being no objection, SCS CS HB 514(FIN) was REPORTED from
Committee with indeterminate fiscal note #2, dated February 23,
2004 from the Court System; indeterminate fiscal note #3, dated
February 22, 2004 from the Department of Law; zero fiscal note #4,
dated March 12, 2004 from the Division of Retirement and Benefits,
Department of Administration; zero fiscal note #5, dated March 9,
2004 from the Division of Risk Management, Department of
Administration; zero fiscal note #6, dated March 12, 2004 from the
Department of Public Safety; indeterminate fiscal note #9, dated
April 6, 2004 from the Department of Administration; and a new zero
fiscal note, dated May 6, 2004 from the Department of Revenue.
SENATE BILL NO. 366
"An Act relating to the levy and collection of sales and use
taxes, to the levy and collection of municipal sales and use
taxes, and to municipal sales and use taxes on alcoholic
beverages; and providing for an effective date."
This was the fifth hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken informed that this legislation addresses a State
sales tax.
Senator B. Stevens moved to adopt CS SB 366, Version 23-LS1051\Z as
the working document.
There being no objection, the Version "Z" committee substitute was
ADOPTED as the working document.
Senator B. Stevens explained that the committee substitute
incorporates the following changes: in Section 17, on page six,
lines 17-21, language is inserted that would allow communities "to
levy and collect specific sales or excise taxes" on categories to
include single events such as a car rentals and fish taxes. This
language reads as follows.
Sec. 17. AS 29.45 is amended by adding a new section to read:
Sec. 29.45.655. Specific taxes on property and services.
Unless otherwise prohibited by law, a municipality may levy
and collect specific sales or excise taxes on single
categories of tangible and intangible property or services,
such as bed taxes, car rental taxes, and fish taxes.
Senator B. Stevens pointed out that another change is incorporated
into the bill in Section 29 (c) on page ten, lines 14 and 15, as
follows.
(c) The rate of the sales tax is three percent of the sales
price. The rate of the use tax is three percent of the
purchase price.
Senator B. Stevens also noted that new language exempting
communities with a population of less than 500 "from any of the
provisions included in this bill" is inserted in Section 29,
subsection 43.44.020 Exemptions. on page 12, lines 15 and 16, as
follows.
(16) sales, leases, or rentals made in a municipality or
unincorporated community with a population of less than 500.
Senator B. Stevens also noted that a new provision in added in
Section 29, Article 3. Administration of Tax., subsection 43.44.310
Relationship to municipal levies. on page 20, lines 10-13, that
would allow the Department of Revenue to contract with the local
municipality that currently have an existing tax office. This
language reads as follows.
(d) The department shall have sole responsibility and
authority for the administration of taxes levied under this
chapter, AS 29.45.650, and 29.45.700. The department may
contract with a municipality to provide a field office for
that municipality 's geographic area of the state.
Senator B. Stevens communicated that the committee substitute would
establish a termination date for the legislation to be effective as
of July 1, 2013, as denoted in Sec. 37 on page 26, lines 12 and 13.
Senator B. Stevens opined, "that this is a fiscal proposal that
would generate revenue." He noted that while the Department of
Revenue has not yet provided a fiscal note specific to this new
committee substitute, it is estimated that a three percent State
sales tax would generate approximately $250 million, with $166
million of that to be designated for the State and with
approximately a $85 million return to communities. He identified
the exemption of communities with less than 500 residents as "the
largest exemption provided to date." He noted that this exemption
would exempt 87 of the 164 incorporated communities that currently
levy taxes.
Senator Bunde asked the rationale of exempting communities of less
than 500, as, he attested, many of those communities rely on the
State for a number of services including education support.
Senator B. Stevens responded that the reason for the exemption is
that these communities "are the most vulnerable." He noted that the
tax that might be collected in those communities "is not worth the
fight."
PHELAN STRAUBE, Staff to Senator Ben Stevens, further noted that
most of the communities consisting of 500 residents or less "have
high prices for goods" as previously pointed out by Senator Hoffman
and Senator Olson; however, he continued, most of the goods and
services purchased by those communities' residents are from larger
communities such as Bethel, Fairbanks, and Anchorage, and
therefore, he attested, "the sales tax would still be collected."
Senator Bunde voiced concern for "a counter-intuitive incentive" in
that communities might not grow in order to avoid the tax in the
future.
Senator B. Stevens disclosed that there have been interesting
discussions in this regard. He stated that the original argument
was that requiring small communities to pay a five-percent tax
would force commerce outside of the State. He declared that now
that it is being proposed to exempt those communities, "the
discussion has transformed into saying "oh, that's a good idea
because you still capture those people because they spend all their
money in Anchorage…or the local hubs in their regions anyway.'"
This argument, he contended, indicates, "that they don't spend
money outside of the State in the first place."
Senator Bunde shared that some small communities with 1,000
citizens are decrying that placing a sales tax on top of their
local sales tax would encourage citizens to conduct business with
communities of less than 500 residents.
Senator Olson asked the cost incurred to the State to generate that
$250 million in gross sales tax revenue.
Senator B. Stevens stated that page two of the Department of
Revenue indeterminate fiscal note, dated March 31, 2004 indicates
that an on-going operational expense of $5.9 million would be
required to provide for 79 full-time positions. He stated that this
is an estimate and does not account for the new provision that
would allow the State to contract with local municipalities to
provide the service. He concluded that while the effort would cost
money, it would generate money.
Senator Bunde agreed "that whatever the cost, there would be a net
gain to the State."
Senator Olson asked for verification that the proposed tax would
now be three percent rather than four percent.
Senator B. Stevens confirmed that this committee substitute would
reduce the tax rate from four percent to three percent as indicated
in Sec. 29, subsection (c) on page ten, lines 14 and 15.
Continuing, he noted that the amount contributed to the community
or the Rate that "would be returned to the community" would remain
the same, as specified in Section 29, Article 3. Administration of
Tax. Subsection (b) (1), (b) (2), (b) (3), and (b) (4) on page 19,
beginning on line 23 through page 20, line 4 which read as follow.
(1) less than three percent, the department shall remit the
amount of the tax levied by the municipality;
(2) at least three percent but less than four percent, the
department shall remit the amount that would have been
collected in the municipality if the sales and use tax had
been four percent;
(3) at least four percent but less than five percent, the
department shall remit the amount that would have been
collected in the municipality if the sales and use levy tax
had been five percent.
(4) five percent of more, the department shall round up to the
next whole number and remit the amount that would have been
collected in the municipality if the sales and use tax levy
had been that whole number; for example, if a municipality
levied a sales and use tax at the rate of five percent, the
department shall remit the amount that would have been
collected under a six percent levy.
Senator B. Stevens stated that, "in reality, one-third of the
revenue collected by the State would be returned back to the
community." He noted that those communities that do not collect a
sales tax would not receive a percentage.
Senator Olson asked whether exemptions might apply to the rental
and sale of real estate as related to language in Section 29,
subsection (d) on page ten, line 16 that reads as follows.
(d) The maximum tax on a single sale, lease, or rental is $60.
Senator B. Stevens responded that the sale, rental, lease, or
construction of real property are exempt from the sales tax in
communities of less than 500 residents.
Senator Hoffman asked for further clarification of this matter by
asking in regards to the taxes on a five-year home lease agreement.
Senator B. Stevens declared that it would be exempt from the tax.
Senator Bunde moved to report the committee substitute from
Committee with individual recommendations and accompanying
"pending" fiscal note.
There being no objection, CS SB 366 (FIN) was REPORTED from
Committee with an indeterminate fiscal note, dated May 7, 2004,
from the Department of Revenue.
CS FOR HOUSE BILL NO. 545(L&C)
"An Act relating to time extensions under the State
Procurement Code for real property leases; and providing for
an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated that this bill, CS HB 545(L&C), Version 23-
GH2150\H, is sponsored by the House Rules Committee by Request of
the Governor, and would allow a State agency to negotiate a lease
agreement for ten years provided that there be a minimum cost
savings of ten percent below the market rental value.
VERN JONES, Chief Procurement Officer, Department of
Administration, stated that the current State procurement code
allows the State to negotiate extensions for real estate leases for
up to ten years in exchange for rent reductions. He noted that this
bill "would increase the State's ability to negotiate lease
extensions by changing the requiring threshold from a ten to
fifteen percent reduction off of the existing lease rate, as the
current law requires, to a ten percent reduction from the current
market rate." He stated that the current statutory regulations have
negatively impacted the Department's ability to negotiate lease
extensions with landlords, as, he attested, the State's real estate
market combined with the way the State's lease agreements are
structured, often makes the 15 percent reduction from the current
lease rates "unobtainable."
Mr. Jones stated "that tying the lease rate to a percentage of the
current market rate would be a more reasonable approach" that would
allow the State "to negotiate reduced rates more frequently and
avoid the lengthy and expensive re-procurement process, not to
mention the cost and disruption" of moving States offices and
employees.
Mr. Jones detailed the current lease process, including improvement
options, and concluded that this bill would allow the State to
reduce its overall leasing expenses.
Co-Chair Wilken asked whether this legislation is a new approach or
is modeled after that of other states.
Mr. Jones responded that this legislation "is just making a small
adjustment to a tool" that is already in place. He noted that other
states often exempt real estate leases from their procurement code
similar to a business or brokerage model. He estimated that while
approximately half of the states have similar lease procedures to
the State, the proposed provision is unique.
Senator Dyson moved to report the bill from Committee with
individual recommendations and accompanying fiscal notes.
There being no objection, CS HB 545(L&C) was REPORTED from
Committee with zero fiscal note #1, dated February 25, 2004 from
the Department of Administration.
RECESS TO THE CALL OF THE CHAIR 10:05 AM / 5:11 PM
ADJOURNMENT
Co-Chair Gary Wilken adjourned the meeting at 05:11 PM.
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