Legislature(2001 - 2002)

05/08/2002 03:14 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                   SENATE JUDICIARY COMMITTEE                                                                                 
                           May 8, 2002                                                                                          
                            3:14 p.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Robin Taylor, Chair                                                                                                     
Senator John Cowdery                                                                                                            
Senator Gene Therriault                                                                                                         
Senator Johnny Ellis                                                                                                            
MEMBERS ABSENT                                                                                                                
Senator Dave Donley, Vice Chair                                                                                                 
COMMITTEE CALENDAR                                                                                                            
CS FOR HOUSE BILL NO. 180(JUD)                                                                                                  
"An  Act relating  to  persons  who  provide services  related  to                                                              
children;  establishing   a  legislative   task  force   on  child                                                              
services; and providing for an effective date."                                                                                 
     MOVED CSHB 180(JUD) OUT OF COMMITTEE                                                                                       
CS FOR HOUSE BILL NO. 350(FIN) am                                                                                               
"An Act  relating to  murder, conspiracy,  criminal mischief,  and                                                              
terroristic threatening; and providing for an effective date."                                                                  
     MOVED SCS CSHB 350(JUD) OUT OF COMMITTEE                                                                                   
HOUSE BILL NO. 348                                                                                                              
"An Act  relating to  violations of  domestic violence  protective                                                              
     MOVED HB 348 OUT OF COMMITTEE                                                                                              
HOUSE BILL NO. 501                                                                                                              
"An Act relating  to the use  of unclaimed property to  pay court-                                                              
ordered restitution; and providing for an effective date."                                                                      
     MOVED HB 501 OUT OF COMMITTEE                                                                                              
CS FOR SENATE BILL NO. 235(STA)                                                                                                 
"An Act relating to emergency and  disaster relief forces as state                                                              
employees   for  purposes  of   workers'  compensation   benefits;                                                              
relating to  the Emergency Management  Assistance Compact  and the                                                              
implementation  of the  compact;  and providing  for an  effective                                                              
     MOVED CSSB 235(STA) OUT OF COMMITTEE                                                                                       
SENATE JOINT RESOLUTION NO. 32                                                                                                  
Proposing amendments  to the Constitution  of the State  of Alaska                                                              
relating to a marine and rail transportation fund.                                                                              
     MOVED CSSJR 32(JUD) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 87                                                                                                              
"An Act  providing special absentee  ballots for voters  in remote                                                              
     MOVED SB 87 OUT OF COMMITTEE                                                                                               
CS FOR HOUSE BILL NO. 304(2d RLS) am                                                                                            
"An Act relating to the education  fund and the infrastructure and                                                              
economic development  fund, to the  market value of  the permanent                                                              
fund, to distribution of the income  of the permanent fund, and to                                                              
the determination of net income of  the mental health trust fund."                                                              
     HEARD AND HELD                                                                                                             
PREVIOUS SENATE COMMITTEE ACTION                                                                                              
HB 180 - No previous action to record.                                                                                          
HB 350 - No previous action to record.                                                                                          
HB 348 - See HESS minutes dated 4/24/02.                                                                                        
SB 235 - See State Affairs minutes  dated 1/24/02 and 1/31/02, and                                                              
Labor and Commerce minutes dated 2/21/02.                                                                                       
SJR 32 - See Transportation minutes dated 4/30/02.                                                                              
SB 271 - See Transportation minutes dated 2/26/02 and 4/30/02.                                                                  
SB 87 - See State Affairs minutes dated 5/05/01 and 2/10/02.                                                                    
HB 304 - See Judiciary minutes dated 5/6/02.                                                                                    
WITNESS REGISTER                                                                                                              
Representative Lesil Maguire                                                                                                    
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Sponsor of HB 180 and HB 350                                                                             
Ms. Linda Wilson, Deputy Director                                                                                               
Alaska Public Defender Agency                                                                                                   
Department of Administration                                                                                                    
PO Box 110200                                                                                                                   
Juneau, AK  99811-0200                                                                                                          
POSITION STATEMENT:  Opposed to HB 350                                                                                        
Ms. Anne Carpeneti                                                                                                              
Assistant Attorney General                                                                                                      
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, AK  99811-0300                                                                                                          
POSITION STATEMENT:  Suggested an amendment to HB 350                                                                         
Ms. Minta Montalbo                                                                                                              
Staff to Representative Croft                                                                                                   
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Available to answer questions about HB 348                                                               
Ms. Heather Nobrega                                                                                                             
Staff to the House Judiciary Committee                                                                                          
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Answered questions about HB 501                                                                          
Major General Phil Oates                                                                                                        
Department of Military &                                                                                                        
  Veterans Affairs                                                                                                              
PO Box 5800                                                                                                                     
Ft Richardson, AK  99505-0800                                                                                                   
POSITION STATEMENT:  Presented CSSB 235(STA)                                                                                  
Ms. Carol Carroll                                                                                                               
Director, Administrative Services                                                                                               
Department of Military &                                                                                                        
  Veterans Affairs                                                                                                              
PO Box 5800                                                                                                                     
Ft Richardson, AK  99505-0800                                                                                                   
POSITION STATEMENT:  Answered questions about CSSB 235(STA) and                                                               
stated opposition to SB 271.                                                                                                    
Mr. Wayne Rush                                                                                                                  
No address provided                                                                                                             
POSITION STATEMENT:  Supports CSSB 235(STA)                                                                                   
Mr. Mike Mitchell                                                                                                               
Assistant Attorney General                                                                                                      
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, AK  99811-0300                                                                                                          
POSITION STATEMENT:  Supports CSSB 235(STA)                                                                                   
Mr. Bob Doll                                                                                                                    
Director, Southeast Region                                                                                                      
Department of Transportation &                                                                                                  
  Public Facilities                                                                                                             
3132 Channel Dr.                                                                                                                
Juneau, AK  99801-7898                                                                                                          
POSITION STATEMENT:  Opposed to SB 271 and SJR 32                                                                             
Ms. Sara Boario                                                                                                                 
Staff to Senator Lincoln                                                                                                        
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Presented SB 87 for the sponsor                                                                          
Ms. Gail Fenumiai                                                                                                               
Division of Elections                                                                                                           
Office of the Lt. Governor                                                                                                      
PO Box 110017                                                                                                                   
Juneau, AK  99811-0017                                                                                                          
POSITION STATEMENT:  Answered questions about SB 87                                                                           
Mr. Jack Shay, Mayor                                                                                                            
Ketchikan Gateway Borough                                                                                                       
344 Front St.                                                                                                                   
Ketchikan, AK 99901                                                                                                             
POSITION STATEMENT:  Testified as the President of the Alaska                                                                 
Municipal League in support of CSHB 304(2 RLS)                                                                                  
Mr. Jim Weidner                                                                                                                 
Secretary, A Friend of the Dividend                                                                                             
5479 Chena Hot Springs Rd.                                                                                                      
Fairbanks, AK 99712                                                                                                             
POSITION STATEMENT:  Opposed to CSHB 304(2 RLS)                                                                               
Mr. Dale Ulrich                                                                                                                 
Save Your Dividend Alaskans                                                                                                     
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Opposed to CSHB 304(2 RLS)                                                                               
Mr. R. Merrick Pierce                                                                                                           
A Bright Future for Alaskans                                                                                                    
PO Box 10045                                                                                                                    
Fairbanks, AK 99710                                                                                                             
POSITION STATEMENT:  Opposed to CSHB 304(2 RLS)                                                                               
Mr. Jim Kelly                                                                                                                   
Director of Communications                                                                                                      
Alaska Permanent Fund Corporation                                                                                               
PO Box 25500                                                                                                                    
Juneau, AK 99802-5500                                                                                                           
POSITION STATEMENT:  Answered questions about CSHB 304(2 RLS)                                                                 
and said the Permanent Fund Board favors the payout methodology                                                                 
in the bill but wants inflation proofing.                                                                                       
Representative Bill Hudson                                                                                                      
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Answered questions about HB 304                                                                          
ACTION NARRATIVE                                                                                                              
TAPE 02-27, SIDE A                                                                                                            
Number 001                                                                                                                      
CHAIRMAN  ROBIN  TAYLOR  called  the  Senate  Judiciary  Committee                                                            
meeting to  order at  3:14 p.m. Senators  Therriault, Cowdery  and                                                              
Chair Taylor were  present. The first matter before  the committee                                                              
was CSHB 180(JUD).                                                                                                              
      CSHB 180(JUD)-YOUTH SERVICES: REGULATION & TASK FORCE                                                                 
REPRESENTATIVE LESIL  MAGUIRE, sponsor  of HB 180,  explained that                                                              
CSHB 180(JUD) is another step the  Legislature can take to protect                                                              
Alaska's  children.  It passed  the  House almost  unanimously  on                                                              
April 29.  She noted  that Congress  recently passed the  Adoption                                                              
and Safe  Families Act  because of concern  for children  who were                                                              
being placed in  unsafe situations or not removed  from them. CSHB
180(JUD)  will bring  Alaska's laws  up  to the  standards in  the                                                              
federal   legislation.  It   will  bring   Alaska  statutes   into                                                              
compliance  with federal  licensing requirements  in the  areas of                                                              
prohibited crimes  and it provides standards for  mandatory denial                                                              
of licenses to  six state licensed facilities.  CSHB 180(JUD) does                                                              
not  chart  new water;  it  affects  the  areas that  are  already                                                              
licensed  -   foster  homes,  residential  childcare   facilities,                                                              
residential   psychiatric  treatment   centers,  child   placement                                                              
agencies, maternity homes, and domiciliary  schools. She clarified                                                              
that  the domiciliary  schools are  boarding facilities.  Finally,                                                              
CSHB 180(JUD)  also limits the  state from approving  or licensing                                                              
any person  that has  been convicted  of a felony  in one  of four                                                              
areas: child  abuse or neglect; spousal  abuse; a crime  against a                                                              
child; or a crime involving rape,  sexual assault or homicide. She                                                              
noted  that CSHB  180(JUD)  provides  guidelines  that will  allow                                                              
departments to  make decisions regarding the licensing  of certain                                                              
child  care  facilities  through proof  from  authorized  criminal                                                              
background  checks. The  state can  deny licensing  to any  person                                                              
convicted of the above felonies.                                                                                                
REPRESENTATIVE MAGUIRE  said that in  addition, the state  may not                                                              
approve or  license any prospective  foster or adoptive  parent if                                                              
the parent  has, within the last  five years, been convicted  of a                                                              
felony  involving physical  assault,  battery, or  a drug  related                                                              
offense.  CSHB 180(JUD)  also calls  for  the creation  of a  task                                                              
force  to explore  the notion  of criminal  background checks  for                                                              
other  areas.  She  informed  members  that she  was  asked  by  a                                                              
constituent to include a provision  requiring mandatory background                                                              
checks for  all adults who volunteer  in children's clubs  such as                                                              
the YMCA. She received quite a few  comments and concerns from the                                                              
non-profit community  about that requirement because  of costs and                                                              
recruitment  problems. In  an effort  to explore  those costs  and                                                              
other challenges,  CSHB  180(JUD) sets  up a task  force to  study                                                              
those concerns  and report back to  the legislature in  January of                                                              
There being  no questions  or further  testimony, SENATOR  COWDERY                                                              
moved    CSHB   180(JUD)    from    committee   with    individual                                                              
recommendations and its accompanying fiscal notes.                                                                              
CHAIRMAN TAYLOR  announced that  without objection,  CSHB 180(JUD)                                                              
moved from committee.                                                                                                           
       CSHB 350(FIN)am-TERRORISTIC THREATS & OTHER CRIMES                                                                   
REPRESENTATIVE   LESIL  MAGUIRE,   sponsor   of  CSHB   350(FIN)am                                                              
explained that  this legislation  is an omnibus homeland  security                                                              
bill. Alaska  statutes  address issues that  relate to  terrorism,                                                              
but they  do not take  a comprehensive  approach to provide  tools                                                              
for prosecutors.  CSHB 350(FIN)am  is an  effort to provide  those                                                              
responsible for homeland  security in Alaska the  legal tools they                                                              
need to discourage false threats  and to punish actual attempts to                                                              
practice terrorism in  Alaska.  Under CSHB 350(FIN)am,  it will be                                                              
a class  A felony,  punishable  by up  to 20 years  in prison,  to                                                              
intentionally   damage  oil   or  gas   pipelines  or   associated                                                              
facilities.   She  noted  that   specific  facilities   have  been                                                              
identified  and damage to  them would  cause widespread  panic and                                                              
chaos.  In addition  to oil  and  gas pipelines,  the crime  would                                                              
apply to  damage to  water utilities, water  mains, power,  gas or                                                              
electrical  distribution  systems, or  elements  of the  emergency                                                              
responder  system.  Any  unsuccessful   attempt  to  damage  those                                                              
systems or an attempt to damage airplanes  or helicopters would be                                                              
a  class   B  felony.   Finally,  CSHB   350(FIN)am  would   raise                                                              
terroristic threatening  from a class  C to a class B  felony, and                                                              
define  the  crime  more  clearly.   The  existing  definition  is                                                              
ambiguous; CSHB  350(FIN)am narrows it  so that it will  not apply                                                              
to a prankster.  It also adds the act of making  a false report of                                                              
releasing harmful  chemical, biological, or explosive  agents into                                                              
air, food or  cosmetics. The current statute does  not address air                                                              
and water so they were added.                                                                                                   
SENATOR  ELLIS  asked  for  clarification   of  the  reference  to                                                              
REPRESENTATIVE  MAGUIRE  explained  that cosmetics  and  food  are                                                              
named in the existing statutes but water and air are not.                                                                       
SENATOR THERRIAULT  referred to  page 8, lines  29 and 30  of CSHB
350(FIN)am  and asked  why bacteriological,  biological,  chemical                                                              
and  radiological substances  were  separated out  since they  are                                                              
inclusive of each other.                                                                                                        
REPRESENTATIVE  MAGUIRE said  she and Ms.  Carpeneti labored  over                                                              
that question. Those substances were  differentiated as the result                                                              
of a compromise  with some minority  members on the  House Finance                                                              
Committee.  Those  members felt  the  original language  (a  toxic                                                              
agent that could  cause serious bodily harm) was  too broad so the                                                              
federal  definition was  used  to narrow  it.  Those members  were                                                              
concerned that the  original language could apply to  a person who                                                              
did not intend to do harm.                                                                                                      
CHAIRMAN TAYLOR took public testimony.                                                                                          
MS. LINDA  WILSON, Deputy Director  of the Alaska  Public Defender                                                              
Agency,  said  that since  September  11,  the federal  and  state                                                              
governments  have  felt  the  need  to  respond  with  appropriate                                                              
legislation  to   address  terroristic  threats  and   tighten  up                                                              
loopholes  to  strengthen  existing laws.  The  public  defender's                                                              
agency certainly  supports those efforts  but it does  not support                                                              
CSHB 350 (FIN)am for the following reasons.                                                                                     
CSHB  350  (FIN)am  creates  a  "disproportionality"   within  the                                                              
criminal statutory  scheme. Under  Alaska's criminal  code, crimes                                                              
are classified  according  to the  type of injury  caused and  the                                                              
culpability of  the defendant.  Murder in the  first degree  is an                                                              
unclassified felony  offense. Murder in the second  degree is also                                                              
an unclassified felony  that includes the crime  of felony murder.                                                              
Within  that felony  murder aspect,  many crimes  are listed.  If,                                                              
during  the commission  or  the attempt  to  commit  one of  those                                                              
underlying crimes, or  in fleeing from that crime,  a person dies,                                                              
the person  may be charged with  second degree murder  in addition                                                              
to  the  underlying  offense.  CSHB   350  (FIN)am  leapfrogs  two                                                              
underlying offenses  - criminal mischief  in the first  degree and                                                              
terroristic  threatening  in the  first  degree  as offenses  that                                                              
would qualify under  murder in the first degree  for felony murder                                                              
that would otherwise appropriately  belong in murder in the second                                                              
degree. The crimes  delineated in the murder in  the second degree                                                              
felony  murder  include arson  in  the first  degree,  kidnapping,                                                              
sexual assault  in the first  degree, sexual  abuse of a  minor in                                                              
the first  degree, burglary  in the  first degree,  escape  in the                                                              
first  degree,  robbery  in  the   first  degree,  and  misconduct                                                              
involving controlled substances in  the first degree. Yet CSHB 350                                                              
(FIN)am  pulls out  two  crimes that  were  not  even included  in                                                              
murder in the second degree and elevates  them to felony murder in                                                              
the first  degree. She  stated it is  more appropriate  that these                                                              
two crimes be  included with all of the other  serious crimes that                                                              
are in murder in the second degree.                                                                                             
MS. WILSON continued  by informing members that  class A felonies,                                                              
which are  below unclassified  felonies,  are reserved for  crimes                                                              
that involve  conduct that  actually results  in serious  physical                                                              
injury  or a  substantial risk  of serious  physical injury.  Some                                                              
examples of  crimes classified  as class A  felonies are  arson in                                                              
the  first  degree,  assault  in   the  first  degree,  a  weapons                                                              
misconduct offense  in the first  degree, and escape in  the first                                                              
degree. Class  B felonies are for  the more serious  or aggravated                                                              
property offenses  and offenses  against public administration  or                                                              
order and conduct  that results in less severe  violence against a                                                              
person than would  be in a class A felony. Some  examples of class                                                              
B felonies are burglary in the first  degree, perjury, bribery and                                                              
forgery. CSHB 350(FIN)am  elevates criminal mischief  in the first                                                              
degree to  a class A  felony for damage  to property in  excess of                                                              
$100,000.  It also elevates,  from a  C to  a B felony,  tampering                                                              
with  an airplane  in addition  to tampering  with an  oil or  gas                                                              
pipeline  or supporting  facility.  Increasing  these four  crimes                                                              
creates  "disproportionality."   These four  crimes should  remain                                                              
with the  other sets of crimes  more appropriately described  as B                                                              
and  C felonies  as  they better  fit the  overall  classification                                                              
MS.  WILSON  said she  is  specifically  concerned about  the  new                                                              
offense  created   within  terroristic  threatening   on  page  8.                                                              
Terroristic threatening  right now is  a class B felony.  CSHB 350                                                              
(FIN)am  divides  terroristic  threatening  into two  degrees  and                                                              
makes the more serious of the two,  terroristic threatening in the                                                              
first degree,  a class  B felony. This  particular section  of the                                                              
bill was amended  but the amendment did not make  reference to the                                                              
mental state for  this crime. The original language  required that                                                              
the  person  intentionally  placed  a  person in  fear  or  caused                                                              
serious  public inconvenience  or  evacuation.  The House  Finance                                                              
Committee amended  that section  so that a  crime is  committed if                                                              
the  result  is  that  a person  was  placed  in  fear,  etcetera.                                                              
However,  that amendment  did not  address the  mental element  of                                                              
intent.  She suggested  including that mental  element within  the                                                              
CHAIRMAN  TAYLOR moved to  amend page  8, line  28, to insert  the                                                              
word "intentionally"  after the word "person."  He  then asked Ms.                                                              
Carpeneti to comment.                                                                                                           
MS.  ANNE CARPENETI,  representing  the Criminal  Division of  the                                                              
Department   of   Law,   told  members   the   reason   the   word                                                              
"intentionally"  was   removed  by  House  members   was  that  it                                                              
originally  had been  a specific  intent crime  to knowingly  send                                                              
anthrax-type materials  with the intent to cause  various results.                                                              
The version under  consideration by the House did  not require the                                                              
prosecution  to prove that  the perpetrator  had, in fact,  caused                                                              
those results.  The House  considered that it  wanted to  have the                                                              
result as the element the state needed  to prove and made a change                                                              
on page 9, by adding the results  that were caused. Title 11 reads                                                              
into  those  circumstances  a  reckless   culpable  mental  state,                                                              
meaning the person knew the risk  and disregarded it. Therefore, a                                                              
culpable mental state is included already.                                                                                      
CHAIRMAN  TAYLOR  asked  Ms.  Carpeneti  if she  would  object  to                                                              
including the word "knowingly."                                                                                                 
MS. CARPENETI said she did not.                                                                                                 
CHAIRMAN TAYLOR  withdrew his  amendment and  moved to  insert, on                                                              
page 8, line 28, the word "knowingly"  after the word "person." He                                                              
stated that he felt Ms. Wilson's comments were well founded.                                                                    
There  being   no  objection,  CHAIRMAN  TAYLOR's   amendment  was                                                              
SENATOR  THERRIAULT  noted  that  Ms. Carpeneti  had  mentioned  a                                                              
provision in  the Senate  version that  was more artfully  crafted                                                              
and asked her to direct him to it.                                                                                              
MS. CARPENETI  referred to page 9,  line 26, and said  the problem                                                              
with changing it back to the Senate  language at this time is that                                                              
the entire section  would have to be rewritten because  of the way                                                              
the lead-in reads.                                                                                                              
SENATOR COWDERY  moved SCS  CSHB 350(FIN)  am from committee  with                                                              
its zero fiscal note.                                                                                                           
CHAIRMAN  TAYLOR  announced  that   without  objection,  SCS  CSHB
350(FIN) am moved from committee.                                                                                               
3:36 p.m.                                                                                                                       
          HB 348-VIOLATION OF A DOMESTIC VIOLENCE ORDER                                                                     
MS. MINTA MONTALBO,  staff to Representative Croft,  sponsor of HB
348, asked  that members  ask any questions  of Ms. Carpeneti,  as                                                              
she worked with Representative Croft on this bill.                                                                              
CHAIRMAN  TAYLOR   noted  there  were  no  questions   or  further                                                              
SENATOR  COWDERY  moved  HB 348  from  committee  with  individual                                                              
CHAIRMAN  TAYLOR announced  that without  objection, HB 348  moved                                                              
from committee.                                                                                                                 
The committee took up HB 501.                                                                                                   
             HB 501-UNCLAIMED PROPERTY & RESTITUTION                                                                        
MS. HEATHER  NOBREGA, counsel  to the  House Judiciary  Committee,                                                              
told members  that HB 501  makes it easier  for the  Department of                                                              
Law   to  collect   unclaimed  property   of   criminals  to   pay                                                              
CHAIRMAN  TAYLOR noted  that it  would  be a  rare situation  when                                                              
property is unclaimed or abandoned but it does occur.                                                                           
SENATOR  COWDERY  moved  HB 501  from  committee  with  individual                                                              
recommendations and its accompanying fiscal note.                                                                               
CHAIRMAN  TAYLOR  announced  that  HB  501  moved  from  committee                                                              
without objection.                                                                                                              
The committee took up SB 235.                                                                                                   
         SB 235-EMERGENCY MANAGEMENT ASSISTANCE COMPACT                                                                     
MAJOR GENERAL  PHIL OATES,  Adjutant General  and Commissioner  of                                                              
the  Department  of  Military  and  Veterans  Affairs,  said  CSSB
235(STA) pertains  to the Emergency Management  Assistance Compact                                                              
(EMAC). Other states  in our nation stand in line  to assist other                                                              
states on a duty  rostered basis. The states are  indemnified from                                                              
any liability  for that  support and  are actually reimbursed  for                                                              
it. He  said it  is important  to note  two things:  the New  York                                                              
State Legislature  met immediately after September  11 and adopted                                                              
EMAC; and  states have  been successful  at the  federal level  in                                                              
arguing for a soft match to receive  the federal supplemental this                                                              
year. The  primary determinant  of getting  the federal  resources                                                              
will be membership in EMAC. At the  end of this year, all but four                                                              
states are  anticipated to have signed  on to EMAC. He  noted this                                                              
piece of  legislation may be one  of the more important  pieces of                                                              
legislation passed this entire year.                                                                                            
CHAIRMAN  TAYLOR announced  his intention  to move  the bill  from                                                              
committee today and took public testimony.                                                                                      
MR. WAYNE RUSH stated support for CSSB 235(STA).                                                                                
MR. MIKE  MITCHELL, Assistant  Attorney General, informed  members                                                              
he  assisted  in drafting  SB  235  and  was available  to  answer                                                              
questions. He added the Department  of Law supports CSSB 235(STA).                                                              
There  being no  further  testimony,  SENATOR COWDERY  moved  CSSB
235(STA) from  committee with  individual recommendations  and its                                                              
zero fiscal note.                                                                                                               
CHAIRMAN TAYLOR  objected so that  Senator Therriault could  ask a                                                              
SENATOR THERRIAULT  asked for an  explanation of the  changes made                                                              
in the Community and Regional Affairs Committee.                                                                                
MS. CAROL  CARROLL, Department of  Military and Veterans  Affairs,                                                              
explained that a  technical change was made that  tightened up the                                                              
eligibility under  Workers' Compensation. It clarified  that to be                                                              
eligible,  a person  had  to be  called or  under  the purview  of                                                              
emergency services before covered by workers' compensation.                                                                     
CHAIRMAN TAYLOR  announced that  without objection,  CSSB 235(STA)                                                              
moved from committee.                                                                                                           
The committee took up SB 271.                                                                                                   
         SB 271-MARINE AND RAIL TRANSPORTATION AUTHORITY                                                                    
CHAIRMAN COWDERY  informed members that the  Senate Transportation                                                              
Committee  held several  hearings  on  SB 271  and  amended it  to                                                              
remove the Alaska Railroad Corporation  (ARRC). He pointed out the                                                              
amendment did not get incorporated into the current version.                                                                    
CHAIRMAN TAYLOR informed  members that is why the  committee has a                                                              
work draft  before it, labeled  Utermohle 4/19/02 (Version  C). He                                                              
asked  for a  motion  to adopt  that  work draft  in  lieu of  the                                                              
original bill.                                                                                                                  
SENATOR COWDERY so moved.                                                                                                       
CHAIRMAN TAYLOR  announced that without  objection, Version  C was                                                              
adopted  as the  working draft  of  the committee.  He then  asked                                                              
Senator Ward to testify.                                                                                                        
SENATOR JERRY WARD,  sponsor of SB 271, told members  that Version                                                              
C  creates an  Alaska Marine  Highway  Authority with  all of  the                                                              
powers of an authority. A companion  piece of legislation, SJR 32,                                                              
addresses the  fact that the  authority will operate  on dedicated                                                              
funds. The  authority is modeled  after many other  authorities in                                                              
the  "Lower 48."  The authority  will  be given  500,000 acres  of                                                              
state land.  He believes the  Alaska Marine Highway  System (AMHS)                                                              
has  not  been  on  the  same  footing   as  the  Alaska  Railroad                                                              
Corporation, which would  be have operated at a loss  for the last                                                              
eight years  without a  land base.   When the  AMHS was  formed in                                                              
1963, it  did not receive a  land base. After several  attempts to                                                              
fund the  AMHS through endowments  and various sources,  the funds                                                              
have  been  depleted so  that  agency  now receives  a  decreasing                                                              
amount of general fund monies each year.                                                                                        
SENATOR   WARD  drew   members'   attention  to   a  letter   from                                                              
Commissioner Pat Pourchot of the  Department of Natural Resources,                                                              
who said that giving 500,000 acres  to the authority will divert a                                                              
significant revenue  stream out of the general  fund. Senator Ward                                                              
submitted  that   if  a  half-million   acres  was   generating  a                                                              
significant  revenue   stream,  this  legislation   would  not  be                                                              
necessary. The  state has 103 million  acres of land that  are not                                                              
being  developed;  if the  Alaska  Railroad Corporation  had  that                                                              
land,  everybody would  be working  for  it. He  asked members  to                                                              
consider passage  of this legislation  to remove 500,000  acres of                                                              
state land  from state  control and  put it  into an authority  so                                                              
that  the AMHS  can eventually  become  self-sufficient. He  added                                                              
that the  AMHS will  not become self-sufficient  from day  one; it                                                              
will still need  general funds or CBR funds.  He  said he believes                                                              
the  AMHS is  every  bit if  not more  important  than the  Alaska                                                              
Railroad.  Senator  Ward informed  members  that  SB 271  is  very                                                              
similar to  legislation introduced in  the past by  former Senator                                                              
Lloyd Jones and  Chairman Taylor, except that SB  271 gives a land                                                              
base to the authority.                                                                                                          
SENATOR THERRIAULT asked if the land  would be located around AMHS                                                              
operations  as the  railroad land  is located  along the  railroad                                                              
SENATOR  WARD  clarified that  ARRC's  land  base is  not  located                                                              
around the railroad corridor. Some  of the land was transferred in                                                              
1983 upon  the sale  of the  railroad, but  about 40,000  acres is                                                              
also available  that has nothing to  do with the operation  of the                                                              
railroad.  He  said he  does  not care  where  the  state land  is                                                              
located because there  is no Alaska land that is  not valuable. He                                                              
said he hopes it  is land that could be logged  right away so that                                                              
the AMHS could begin to supplement its operations.                                                                              
SENATOR COWDERY asked if a high percentage  of ARRC's profits come                                                              
from its landholdings rather than from hauling freight.                                                                         
SENATOR WARD  said that is the way  it should be because  when the                                                              
railroad was built  across the Lower 48, it was  given every other                                                              
section of  land to supplement the  operation of the  railroad. He                                                              
     Even though they're not under  the Executive Budget Act,                                                                   
     that $10  to $11 million per  year - that  generates the                                                                   
     $5 to  $6 million worth of  profit that they  show every                                                                   
     year on  their books.  Without that  they would be  here                                                                   
     asking for a general fund draw,  such as we have now put                                                                   
     the  position of  the Marine  Highway having  to do.  It                                                                   
     just seems  logical to  me if it's  good enough  for the                                                                   
     railroad,  it's  good  enough  for  the  Marine  Highway                                                                   
SENATOR ELLIS asked if the Southeast Conference opposes SB 271.                                                                 
SENATOR WARD said  he believes that is correct and  that they want                                                              
to  leave it  as a  "line-item agency."  He  said that  is why  he                                                              
referred  to  Commissioner  Pourchot's  letter. The  flaw  in  the                                                              
system is  that the 103  million acres owned  by the state  is not                                                              
generating any revenue, which is  why the commissioner's statement                                                              
is incorrect.                                                                                                                   
SENATOR ELLIS  asked why  the Southeast  Conference is  opposed to                                                              
the bill.                                                                                                                       
CHAIRMAN TAYLOR  clarified the Southeast Conference  has indicated                                                              
it will be  putting a group together  to study the concepts  of an                                                              
authority and to  see what other states have done.  The Conference                                                              
was not sure if  SB 271 is the best design. At  times in the past,                                                              
it has strongly supported an authority without a land grant.                                                                    
SENATOR WARD added the Conference said it does not want to go                                                                   
against the Administration's opposition at this time.                                                                           
CHAIRMAN TAYLOR took public testimony.                                                                                          
MS. CAROL CARROLL, Department of Natural Resources, said DNR                                                                    
opposes SB 271 for the following reasons that focus on Section                                                                  
25, which provides 500,000 acres to the fund.                                                                                   
   · State land should be managed for the benefit of all Alaskans                                                               
     and  the legislature  should appropriate  revenue from  state                                                              
     lands rather than appropriate  the land itself. DNR currently                                                              
     manages state land to benefit  all Alaskans and makes quite a                                                              
     bit of  money doing  so. While the  state owns more  than 100                                                              
     million  acres, DNR  has a limited  amount  of land that  can                                                              
     generate  revenue.  Most  of   that  land  has  oil  and  gas                                                              
   · Transferring land from DNR management to other state                                                                       
     agencies  does  not  necessarily lead  to  increased  revenue                                                              
     production  to the  state. Most  of the  ability to  generate                                                              
     revenue  from  state  land  is a  function  of  either  world                                                              
     markets  for resources,  the  price of  oil  or minerals,  or                                                              
     having the  staff needed to  make land available for  sale or                                                              
   · Simply transferring land from DNR to the fund will not alone                                                               
     generate  more  revenue.  The   bill  will  be  expensive  to                                                              
     implement.  Any potential  increase  in the  revenue must  be                                                              
     weighed  against the significant  costs required  to identify                                                              
     and transfer large  acreage from the land from  one agency to                                                              
     another and  the long term  costs to establish  another state                                                              
     land management  agency that duplicates DNR.  The agency will                                                              
     duplicate DNR's functions. The  land transfers will cost over                                                              
     $15 million  with most  of that cost  being for  land surveys                                                              
     required to transfer land from DNR to the authority.                                                                       
   · SB 271 will further complicate land ownership in Alaska                                                                    
     making   resource   development   and  public   access   more                                                              
     difficult.   It  would  also   compound  the  difficulty   in                                                              
     resolving  the current  school grant  lands litigation  or in                                                              
     providing  additional lands  to the  University of Alaska  as                                                              
     the  fund  will no  doubt  select  lands  that will  be  most                                                              
     suitable for a  legal settlement if the state  is required to                                                              
     transfer  land  to  the University  or  to  reconstitute  the                                                              
     school trust or land trust.                                                                                                
MS. CARROLL said a staff person from the Division of Lands was                                                                  
available via teleconference to answer specific questions.                                                                      
CHAIRMAN TAYLOR  asked if DNR  actively opposed the  conveyance of                                                              
250,000 acres of state land to the University of Alaska.                                                                        
MS. CARROLL said that is correct.                                                                                               
CHAIRMAN TAYLOR asked if DNR also  actively opposed the conveyance                                                              
of lands  to Alaska's schools and  that litigation on  that action                                                              
is pending.                                                                                                                     
MS. CARROLL  said she  does not know  that DNR actively  disagreed                                                              
with the  transfer of the land  under the public school  land. She                                                              
said she believes  DNR is currently undergoing a  process to value                                                              
that land.                                                                                                                      
CHAIRMAN TAYLOR responded:                                                                                                      
     In  fact it  was  the  Department of  Natural  Resources                                                                   
     that, back about  25 years ago, that stole  all the land                                                                   
     away from the  Mental Health Trust and we  got sued over                                                                   
     that  one and  that  cost us  - it  could  have cost  us                                                                   
     several billions  of dollars. In fact what did  we do to                                                                   
     solve the  mental health litigation?  We gave  them land                                                                   
     back, didn't  we? And  it was land  that was given  back                                                                   
     very  reluctantly, I  might  add, by  the Department  of                                                                   
     Natural  Resources  who had  done  such  a poor  job  of                                                                   
     managing it that  there were not funds available  off of                                                                   
     that  management  - giving  away lands,  selling  lands,                                                                   
     locking  lands up into  parks that  were designed  to be                                                                   
     forests  and  to  provide revenue.  Sadly  it  was  your                                                                   
     department  again that put  us in  that position and  we                                                                   
     ended  up  with 3500  families  in  this state  who  had                                                                   
     purchased land  and built houses on it only  to find out                                                                   
     that it  was mental health  land that had  been conveyed                                                                   
     by the Department  of Natural Resources in  violation of                                                                   
     the  Mental  Health  Trust.  All  of  those  things  are                                                                   
     historical things  that I think you and I  both agree on                                                                   
     were  probably  not  the best  decisions  made  in  land                                                                   
     management  by the  Department of  Natural Resources  so                                                                   
     when I hear your comment that  the Department of Natural                                                                   
     Resources  must manage  for  all of  the  people in  the                                                                   
     state,  I have a  hard time  conceiving that anybody  in                                                                   
     their right  mind would ever  turn over any land  to the                                                                   
     Department  of Natural Resources  to manage in  light of                                                                   
     the track record  over there. But that's  only a comment                                                                   
     on my part.                                                                                                                
CHAIRMAN TAYLOR  then thanked Ms.  Carroll for coming  forward and                                                              
said he was not  sure that he favored giving  an authority 500,000                                                              
acres because although he can't imagine  a group that could manage                                                              
it worse  than the department, an  authority might come  close. He                                                              
then asked Mr. Doll to testify.                                                                                                 
MR. BOB  DOLL, Regional Director  for the Southeast Region  of the                                                              
Department  of  Transportation  and   Public  Facilities  (DOTPF),                                                              
informed members  that DOTPF does  not support SB 271  for several                                                              
reasons. First, there is the uncertainty  associated with the sale                                                              
of the land  and the amount  of revenue it would  produce. Second,                                                              
SB 271  creates a separate authority  to perform the  function now                                                              
being performed by the department.                                                                                              
TAPE 02-27, SIDE B                                                                                                              
MR.  DOLL said  that  would be  a  regressive  step regarding  the                                                              
system's  ability to  respond to  public concerns  and to  general                                                              
operations.  Third,  it  creates  an anomalous  position  for  the                                                              
marine highway authority  with regard to approaching  the topic of                                                              
federal  funding  for transportation  projects  in  the state.  If                                                              
DOTPF  has no  responsibility  for operating  the  system and  the                                                              
results  obtained, its  ability to  make  an appeal  for and  gain                                                              
approval  of expenditure  of federal funds  for transportation  on                                                              
marine highway topics would be impaired.  Finally, SB 271 requires                                                              
a constitutional amendment to set  up the fund, which will require                                                              
a  great deal  of  effort for  an  administrative  change that  is                                                              
within  the  capability  of both  the  executive  and  legislative                                                              
branches of government.                                                                                                         
There being  no further  questions or  testimony, SENATOR  COWDERY                                                              
moved CSSB  271(TRA) from committee  with its accompanying  fiscal                                                              
note and individual recommendations.                                                                                            
SENATOR ELLIS objected.                                                                                                         
The  motion to  move  CSSB 271(TRA)  from  committee carried  with                                                              
Senators  Cowdery,  Therriault and  Taylor  voting  in favor,  and                                                              
Senator Ellis voting against.                                                                                                   
The committee took up SJR 32.                                                                                                   
        SJR 32-CONST. AM:MARINE/RAIL TRANSPORTATION FUND                                                                    
SENATOR WARD, sponsor  of SJR 32, informed members  that SJR 32 is                                                              
a companion  bill to SB 271 and  is required to dedicate  funds to                                                              
an Alaska Marine Highway Authority.                                                                                             
CHAIRMAN TAYLOR  pointed out  that a work  draft that  removed the                                                              
Alaska Railroad  Corporation  from the resolution  was before  the                                                              
SENATOR WARD said  the Alaska Railroad Corporation  was removed by                                                              
the Senate Transportation  Committee and the new  draft was before                                                              
members.  He noted some  of the  Transportation Committee  members                                                              
wanted  the  railroad   removed  because  of  concern   about  the                                                              
Executive Budget Act.                                                                                                           
CHAIRMAN  TAYLOR  specified  that   the  work  draft  was  labeled                                                              
Utermohle 4/18/02 Version C. He then  moved that the work draft be                                                              
adopted  and   asked  for  unanimous   consent.  There   being  no                                                              
objection,  the  motion carried.  He  then  moved Version  C  from                                                              
SENATOR ELLIS  objected and commented  that Senator Ward  has said                                                              
this legislation  is important  because he has  seen what  goes on                                                              
with  the   AMHS  budget  but  Senator   Ward  is  in   charge  of                                                              
appropriations for the AMHS. He asked  Senator Ward if he is using                                                              
the behavior  of the Senate Majority  as a justification  for this                                                              
SENATOR WARD  said he is  in charge of  the appropriations  but he                                                              
does not  believe the  AMHS has  been treated  fairly. He  said he                                                              
tried to get several land endowment  bills through the legislature                                                              
in  1983 and  was told  at that  time  by some  of his  Democratic                                                              
colleagues that  it would take too  long to develop the  lands, up                                                              
to 20  years. He  repeated that he  does not  believe the  AMHS is                                                              
being   funded   properly  and   that   DOTPF  and   the   Knowles                                                              
Administration are letting the AMHS  sink because they do not have                                                              
a better plan.                                                                                                                  
SENATOR ELLIS maintained  his objection. The motion  to move CSSJR
32(JUD) from  committee carried with Senators  Cowdery, Therriault                                                              
and Chair Taylor voting in favor, and Senator Ellis opposed.                                                                    
The committee took up SB 87.                                                                                                    
                 SB 87-SPECIAL ABSENTEE BALLOTS                                                                             
MS. SARA  BOARIO, staff to  Senator Georgiana Lincoln,  sponsor of                                                              
SB 87,  explained that  SB 87  will give  voters living  in remote                                                              
locations  the  opportunity  to  vote  using  the  60-day  special                                                              
advance absentee  ballot. In current statute, only  voters living,                                                              
working or  traveling outside  of the  United States are  eligible                                                              
for the  special ballot.  However, distance,  terrain and  natural                                                              
conditions have  prevented voters  in remote areas  from receiving                                                              
their by-mail  ballots  because the current  three-week window  of                                                              
opportunity has not provided enough  time for them to be received.                                                              
The Division of  Elections already distributes the  special 60-day                                                              
absentee  ballot so  there will  be no  additional cost.  Concerns                                                              
were expressed  in the  Senate State  Affairs Committee  about the                                                              
interpretation  of the  words "remote"  and  "reasonable" but  the                                                              
Division  of  Legal  Services  addressed  those  concerns  to  the                                                              
satisfaction of the committee.                                                                                                  
SENATOR COWDERY asked if villages would be considered remote.                                                                   
MS. BOARIO  said the Division  of Legal Services  recommended that                                                              
the  Division of  Elections' regulations  be reviewed  to see  how                                                              
they are  applied to determine  permanent absentee voters.  One of                                                              
the  criteria in  the regulations  the Division  uses to  identify                                                              
absentee voter is if the voter resides  in a remote area of Alaska                                                              
where  distance, terrain,  or other  natural  conditions deny  the                                                              
voter reasonable access to the polling place.                                                                                   
MS. GAIL FENUMIAI,  Division of Elections, affirmed that  SB 87 is                                                              
designed  for  people in  remote  locations  without access  to  a                                                              
polling  place   due  to  distance,  terrain,  or   other  natural                                                              
conditions. Mail service  may be sporadic in the  wintertime or no                                                              
mail service  may be available. If  they receive a ballot  60 days                                                              
before the  election, there  is a  better chance  they can  get it                                                              
back in time to be counted for the election.                                                                                    
SENATOR  COWDERY  asked if  the  timeline  established  by law  on                                                              
deadlines for absentee voting will still hold.                                                                                  
MS. FENUMIAI said that is correct.                                                                                              
There  being no  further questions,  SENATOR COWDERY  moved SB  87                                                              
from committee with individual recommendations.                                                                                 
CHAIRMAN  TAYLOR announced  that  without objection,  SB 87  moved                                                              
from committee.                                                                                                                 
      CSHB 304(2 RLS)am-PERM. FUND INCOME/ DIVIDENDS/ FUNDS                                                                 
CHAIRMAN TAYLOR  said the committee  has received  several letters                                                              
on HB 304. He then asked Mr. Shay to testify.                                                                                   
MAYOR JACK  SHAY, Ketchikan Gateway  Borough and President  of the                                                              
Alaska Municipal League (AML), told  members the AML supports CSHB                                                              
304(2  RLS)am. The AML realizes the  legislation is controversial.                                                              
The AML is  appreciative of any consideration  the committee gives                                                              
to this legislation.                                                                                                            
MR. JIM  WEIDNER, a member  of A Friend  of the Dividend,  said he                                                              
has campaigned  to support  the permanent  dividend program  since                                                              
its  inception in  the early  1980s. He  said the  purpose of  the                                                              
permanent  fund   and  dividend   is  to  implement   the  state's                                                              
constitutional  requirement to maximize  the benefits  of Alaska's                                                              
resources to all  people. He enumerated seven examples  of how the                                                              
permanent fund dividend meets the public purpose:                                                                               
   · It equally distributes Alaska's public wealth without regard                                                               
     to age, sex, race, creed, color, economic status, geographic                                                               
     location or political affiliation;                                                                                         
   · It establishes a stable, statewide economic floor which                                                                    
     would not otherwise exist in all areas of the state;                                                                       
   · It helps reduce economic poverty and welfare dependency and                                                                
     related social problems, such as alcohol, violence, child                                                                  
     abuse and criminal behavior;                                                                                               
   · It maximizes individual responsibility by allowing each                                                                    
     person the individual freedom to invest their money as they                                                                
     see fit;                                                                                                                   
   · It reduces government [indisc.] and uneven wealth                                                                          
     distribution and waste inherent in the government's                                                                        
     political system;                                                                                                          
   · It promotes conversion of the Alaska economy from a self-                                                                  
     serving paternalistic system benefiting a very few; and                                                                    
   · It reduces the cost of living for Alaskans and promotes                                                                    
     small scale business and competitive economic development.                                                                 
MR. WIEDNER said  that elements of HB 304 and HB  20 were posed on                                                              
a ballot initiative  several years ago. That ballot  initiative to                                                              
raid  the permanent  fund was  well  funded and  supported by  the                                                              
political establishment  and people living off of  the state's oil                                                              
wealth spending. The University of  Alaska promoted it, as well as                                                              
the teachers' union  and Commonwealth North. That  initiative lost                                                              
with  83 percent  of the  vote, a  crushing  political defeat.  It                                                              
failed in  every single precinct in  the state. He said  that some                                                              
people  spend  their  dividends  on  their  children's  education,                                                              
others  use it  for  house repairs,  car  payments, clothing,  and                                                              
donations.  He noted it  is part  of human nature  to want  to get                                                              
something with someone  else's money. Dividends are  what they are                                                              
today because former  predatory attempts have been  fought off. He                                                              
asked that committee members oppose the legislation.                                                                            
MR. DALE URICH,  Secretary of Save Your Dividend  Alaskans (SYDA),                                                              
said he  agrees with  the former speaker  and opposes  CSHB 304(2                                                               
RLS)am  or  any  other  legislation   that  attempts  to  tap  the                                                              
permanent fund dividend. He stated  that SYDA supports legislators                                                              
who are  fighting to reduce  government spending and  oppose these                                                              
types of  bills and  its members  will be at  the polls.  He asked                                                              
legislators to  strike the term  "budget shortfall" from  any text                                                              
they are working on and use the word "overspending" instead.                                                                    
MR.  R.   MERRICK  PIERCE,  representing   A  Bright   Future  for                                                              
Fairbanks, said the cumulative impact  of HB 303, HB 304 and HB 20                                                              
will  have  a  devastating  effect on  the  Fairbanks  North  Star                                                              
Borough economy.  The population in  the borough has  fallen since                                                              
1995. Wages in  the borough are not keeping up  with inflation. If                                                              
the three  bills were to pass,  they would pull about  $90 million                                                              
annually  out  of   the  private  sector  of   the  borough.  That                                                              
represents the same  amount as the annual budget  of the Fairbanks                                                              
North Star Borough.  He finds it unimaginable  that any legislator                                                              
from that  borough could support  these pieces of  legislation. He                                                              
noted that  recent research published  by the Wall  Street Journal                                                              
showed that  the states  that cut taxes  the most had  the largest                                                              
increase in  jobs. Also, those states  with the lowest  taxes were                                                              
more likely  to have  population growth. He  stated that  if these                                                              
pieces of legislation pass, the Fairbanks  North Star Borough will                                                              
see jobs  and population  loss. He asked  members to  defeat these                                                              
CHAIRMAN TAYLOR  asked Mr.  Pierce to repeat  the amount  of money                                                              
passage  of  these  bills  will  cost  the  Fairbanks  North  Star                                                              
MR. PIERCE replied $90 million.                                                                                                 
CHAIRMAN TAYLOR stated:                                                                                                         
     I ballparked  at about that  same place, maybe  a little                                                                   
     bit  higher,  because  they're   talking  of  taking  $1                                                                   
     billion total out of the state's  economy in the form of                                                                   
     income taxes, raid on the permanent  fund in this bill -                                                                   
     304, and  then the additional  $70 million that  they're                                                                   
     taking  in  HB 20.  I  was  told that  totals  almost  a                                                                   
     billion  and if you  divide that  out by the  population                                                                   
     for how  many people  live in  the Fairbanks North  Star                                                                   
     Borough, I  actually came out  with a number  that would                                                                   
     roughly be  about - I think  you're about 25  percent of                                                                   
     the population  of this state - maybe you're  not but if                                                                   
     you're  20  percent of  the  population of  this  state,                                                                   
     that's  $200  million  that  has  to  come  out  of  the                                                                   
     Fairbanks  area and  it  comes in  the  form of  reduced                                                                   
     payments on permanent fund dividends,  which is [HB] 304                                                                   
     and [HB]  20 and then  of course increased  income taxes                                                                   
     in the other bill. I was a little  bit higher than that.                                                                   
He then asked if Mr. Pierce used  both the income tax and the raid                                                              
on the permanent fund in calculating $90 million.                                                                               
MR. PIERCE  said the North  Star Borough  has about 13  percent of                                                              
the state population.  He said his calculation was  based on about                                                              
77,000 North Star  Borough residents who collect  a dividend based                                                              
on  $700 per  dividend. That  equals  about $53  million from  the                                                              
permanent  fund  dividend.  He calculated  the  income  tax  using                                                              
34,000 workers paying $100 each, which equals about $34 million.                                                                
CHAIRMAN TAYLOR agreed that will  have a devastating impact on the                                                              
Fairbanks economy, which  he considers one of the  more healthy in                                                              
the state. He  then thanked all participants and  informed members                                                              
that Senator Ward has submitted an amendment.                                                                                   
SENATOR  WARD said  he  hopes the  committee  does  not move  CSHB                                                              
304(2  RLS)am  out but if  it does, he  has proposed  an amendment                                                              
that changes  the effective date  so that CSHB 304(2   RLS)am will                                                              
take effect  upon passage of SJR  23, which is  the constitutional                                                              
spending  limit. He  said he believes  that Alaska  is not  living                                                              
within its  means and  instead of  privatizing, prioritizing,  and                                                              
looking  at other industries  to  see whether  or not they  should                                                              
contribute  to  the  overspending   of  state  government,  it  is                                                              
proposing  to reach  into the  pockets  of every  man, woman,  and                                                              
child. He  said if the committee  wants to steal the  dividend, he                                                              
asks that it put  an effective date on the legislation  so that it                                                              
cannot do so until a constitutional spending limit is voted on.                                                                 
CHAIRMAN TAYLOR stated  that he will have to oppose  the amendment                                                              
because he would hate to see people  vote to take money out of the                                                              
dividend without allowing  them a vote on that  specific question.                                                              
He said  he does  not know  of a  politician who  is currently  in                                                              
office  who  did  not  promise  the  people  of  Alaska  that  the                                                              
permanent fund would not be touched  without a vote of the people.                                                              
He  said  the  amendment  to CSHB  304(2   RLS)am  would  place  a                                                              
condition  on the  taking  of money  from the  fund  based upon  a                                                              
public  vote  on  a  spending  cap  which  is  a  whole  different                                                              
question. He suggested keeping the  two questions separate in that                                                              
there must  be a spending cap in  place before a separate  vote is                                                              
taken on whether or not to raid the fund.                                                                                       
SENATOR WARD  said he agrees and  that is the reason he  asked the                                                              
committee not  to pass the bill  out. He noted the  Governor, when                                                              
asked directly  by the press, gave  an answer that was  3½ minutes                                                              
long and  was not a "yes"  or "no" to  the question of  whether he                                                              
would veto  a bill that did not  require a vote of the  people. He                                                              
said  when the  1989 raid  of the  permanent fund  took effect,  a                                                              
majority of the  Republicans stopped it until,  "the Governor came                                                              
down and solicited  the help of the  Democrats to put that  on the                                                              
ballot." He said  it is very intoxicating to spend  other people's                                                              
CHAIRMAN  TAYLOR  announced that  the  committee  would hold  CSHB                                                              
304(2 RLS)am at this time and asked Mr. Kelly to testify.                                                                       
MR.  JIM  KELLY,   Director  of  Communications   for  the  Alaska                                                              
Permanent Fund  Corporation, informed members that  two things are                                                              
required to  manage a large amount  of money for a long  period of                                                              
time if the  purpose is to  provide benefits to people:  provide a                                                              
stable and  growing amount  of income  for the current  generation                                                              
and manage  the  payout so  that the fund  will be  there for  the                                                              
beneficiaries  of the  future. The  methodology  proposed in  CSHB                                                              
304(2  RLS)am  is one  that the trustees  believe will  accomplish                                                              
both.  Changing the  distribution payout  to 5  percent of  market                                                              
value is an improvement over the  status quo. The Senate Judiciary                                                              
Committee passed  out a  proposed constitutional amendment,  which                                                              
provides for  a spending  limit on the  use of the  permanent fund                                                              
income last  week. That is the  Board of Trustees  preferred route                                                              
as it  puts limits  on how  much of the  fund can  be used  and it                                                              
provides  Alaskans a  chance to  vote on  the issue.  He said  the                                                              
issue of  how the money will  be used once the  payout methodology                                                              
is in  place is not  one the Board  of Trustees has  been involved                                                              
with.  However,  the  Trustees  are concerned  that  the  fund  be                                                              
inflation-proofed so that benefits  can be provided in the future.                                                              
The  constitutional  amendment  puts  inflation  proofing  in  the                                                              
Constitution and that  will ensure that the fund  will produce $40                                                              
billion over  the next 25  years, an  amount double the  amount of                                                              
income  from  oil.  He stated  that  CSHB  304(2   RLS)am  repeals                                                              
statutory inflation proofing which  would be acceptable if, at the                                                              
same time,  a constitutional amendment  is passed.  Otherwise, the                                                              
Trustees  have  difficulty with  CSHB  304(2  RLS)am  because  the                                                              
intention  to limit  the  payout to  5 percent  is  good, but  one                                                              
legislature  can  undo what  another  has  done. He  concluded  by                                                              
saying there  is a lot of merit  in this legislation but  it needs                                                              
to be "married" to the constitutional amendment.                                                                                
4:41 p.m.                                                                                                                       
CHAIRMAN TAYLOR  thanked Mr. Kelly  and said he asked  the sponsor                                                              
of the bill  how to secure  inflation proofing the fund  and where                                                              
the inflation proofing  dollars would reside. He  said he believes                                                              
a major  restructuring of  that portion of  the bill  is necessary                                                              
and that it should be "married" to  a constitutional amendment. He                                                              
asserted that it is such a terrific  risk to hope that legislators                                                              
in the future  will do the  right thing and continue  to inflation                                                              
proof the fund.  He said no one  has dared cross that  line in the                                                              
sand before,  but there is now a  majority in the House  that want                                                              
to  cross that  line  and want  to make  certain  that the  people                                                              
cannot  vote.  He  thanked  Mr. Kelly  and  his  staff  for  their                                                              
responsiveness to the committee.                                                                                                
REPRESENTATIVE  BILL HUDSON  said he  would like  to address  some                                                              
questions posed by  committee members last week.  He distributed a                                                              
chart  of  permanent  fund  financial   projections  on  which  he                                                              
highlighted the last five years of  statutory met income. He noted                                                              
a question  was raised about how  to guarantee that the  fund will                                                              
not be drained in a low-income year.                                                                                            
REPRESENTATIVE HUDSON  said the question of a public  vote and how                                                              
to guarantee  inflation proofing  was discussed  in the  House. He                                                              
believes a  public vote is only  guaranteed by the passage  of SJR
13. He  pointed out that at  the present time,  inflation proofing                                                              
and  payment  of  permanent  fund  dividends  is  subject  to  the                                                              
legislature.  The  legislature  has  open  entrée  to  the  entire                                                              
earnings of the permanent fund on  an annual basis and has put the                                                              
money into  the fund  statutorily  in order to  pay the  dividends                                                              
based on a five  year average of the statutory met  income. In the                                                              
year  2002, the  statutory met  income  was $376  million yet  the                                                              
legislature passed out $938 million  in dividends by virtue of the                                                              
formula  and  $602 million  in  inflation  proofing by  virtue  of                                                              
statutory  provisions.  He  said  if  legislators  agree  that  an                                                              
enormous fiscal gap  exists, that the probability  of filling that                                                              
gap from new revenues in the immediate  future is not likely, that                                                              
the legislature  will not  be able  to cut  $800 million  from the                                                              
budget, that  no income tax  will pass, and  that the CBR  will be                                                              
gone in  three years,  there will  be no place  to go except  into                                                              
enormous taxes,  enormous cuts,  and the  earnings reserve  of the                                                              
permanent  fund. He  said the point  of fiscal  policy members  is                                                              
that rather than wait until the permanent  fund money is devoured,                                                              
the legislature  should begin to use  some of the earnings  of the                                                              
permanent fund early  coupled with a modest income  tax along with                                                              
budget  cuts.  He noted  the  House  reduced  the budget  by  $100                                                              
million  this year.  He  said the  House is  trying  to offer  the                                                              
Senate a series of things that it  took out to public hearings and                                                              
worked on  with the Department of  Revenue and the  Permanent Fund                                                              
Corporation.  He  noted  Mr.  Kelly was  accurate  in  saying  the                                                              
Trustees would  like to  see inflation proofing  of the  corpus of                                                              
the  permanent  fund  fixed  into  the  Constitution,  which  will                                                              
require a  public vote. He asked  what is wrong with  adopting SJR                                                              
13 as nothing in CSHB 304(2 RLS)am interrupts that.                                                                             
TAPE 02-28, SIDE A                                                                                                              
REPRESENTATIVE  HUDSON said CSHB  304(2  RLS)  does not  begin the                                                              
50-50 split  until 2004.  It does  tap $300  million for  the 2003                                                              
budget to  reduce the  amount of  take on the  CBR to prolong  its                                                              
life as  an income account  and shock  absorber for the  operating                                                              
CHAIRMAN TAYLOR thanked Representative Hudson.                                                                                  
SENATOR THERRIAULT  asked why  the fiscal  policy group  felt that                                                              
expending out  of the earnings reserve  is preferable to  the CBR.                                                              
He pointed out that both accounts generate income.                                                                              
REPRESENTATIVE  HUDSON said he  disagrees that  the CBR is  a fund                                                              
that is established to "jack the price up."                                                                                     
SENATOR THERRIAULT said that is how it has been used.                                                                           
REPRESENTATIVE HUDSON  asserted that has been recent.  He recalled                                                              
that when  the Republicans were in  the minority, they used  it to                                                              
reduce the  expenditure, not  to increase it.  He said as  long as                                                              
the legislature  has individuals  who say they  won't vote  to use                                                              
CBR funds unless another project  is funded in their district, the                                                              
cost will  go up.  He said the  fiscal policy  group felt  the CBR                                                              
fund  is  the  shock  absorber for  the  capital  budget  and  the                                                              
earnings reserve is the shock absorber  for the permanent fund and                                                              
that  prefers  to take  $300  million  from the  earnings  reserve                                                              
because the CBR is down to $2.3 billion  now. Even if $100 million                                                              
in interest  is added,  it will drop  down too  fast with  an $800                                                              
million budget gap.                                                                                                             
REPRESENTATIVE  HUDSON asked  members  to give  the legislation  a                                                              
chance and stated:                                                                                                              
     ...and if  we can have an  open and honest  dialogue and                                                                   
     discussion of  what's in the state's best  interest, and                                                                   
     if we can take  the politics all of aside -  this is not                                                                   
     a  campaign ploy  on my part  - it's  not a  re-election                                                                   
     ploy on my  part, I am not introducing taxes  and trying                                                                   
     to  distribute the  earnings  of the  permanent fund  in                                                                   
     order to further  my chances to get re-elected.  I think                                                                   
     anybody with  any common sense  would recognize  the way                                                                   
     you get  re-elected is to put  more pork in the  pot and                                                                   
     stay the devil  away from people's assets.  But I think,                                                                   
     as an  Alaskan at any rate,  this is the  most important                                                                   
     issue   confronting   not   only  us,   but   the   next                                                                   
CHAIRMAN TAYLOR said he totally disagrees because:                                                                              
     We  give the  bureaucrats, we  give  the big  government                                                                   
     folks around here  the key to the golden  door, and they                                                                   
     never  need to  talk to  another citizen  in the  state.                                                                   
     They've got  themselves an endowment  that will  pay for                                                                   
     every single  new salary, benefit,  and bonus  for every                                                                   
     state worker  forever. Will  they ever develop  one inch                                                                   
     of land in this state? Will  we ever see the Beluga coal                                                                   
     fields used for a coal field?  Will we ever see the vast                                                                   
     timber resources of this state  used? Will you or I ever                                                                   
     be  able  to  buy  a  piece  of  Alaska  land  from  the                                                                   
     Department  of Natural Resources  that now only  has one                                                                   
     person  even  selling  land?   No  Bill,  you  won't.  I                                                                   
     guarantee  you, as long  as these  halls can suck  money                                                                   
     out  of the  back pockets  of  working Alaskans  through                                                                   
     income taxes or  steal money out of the back  pockets of                                                                   
     working Alaskans through the  permanent fund, they never                                                                   
     have to develop  one inch of this state and  they won't.                                                                   
     They haven't for over 20 years.                                                                                            
REPRESENTATIVE HUDSON  replied that  he and Chairman  Taylor could                                                              
have a wonderful discussion on this issue.                                                                                      
CHAIRMAN TAYLOR  said what is so  difficult is that HB  304 should                                                              
be the very last  resort that the legislature turns  to for money,                                                              
but sadly it  is the first resort. He noted  the legislature can't                                                              
give land to  the University because the Governor  will veto those                                                              
kinds of actions.                                                                                                               
REPRESENTATIVE HUDSON  said that he agrees and would  also like to                                                              
see  more land  available, resource  development and  to hold  the                                                              
damper  down  on  public  spending  and  privatization  and  other                                                              
methods.  He voted for  all of  those efforts.  However, where  he                                                              
disagrees is that HB 304 is just  a part of many actions that need                                                              
to be taken  otherwise the CBR will  be lost and when  it is gone,                                                              
the people  will not receive any  permanent fund dividend  at all.                                                              
He said when the  CBR is gone, the legislature will  have no other                                                              
place to go except the earnings reserve of the permanent fund.                                                                  
CHAIRMAN TAYLOR said  it will be depleted somewhat  because of low                                                              
income years  and by inflation proofing  so there will  be nothing                                                              
for this government to grab.                                                                                                    
REPRESENTATIVE  HUDSON asserted  there will  be no permanent  fund                                                              
dividend unless, "you want to try  to develop this thing with some                                                              
action up front and work it on out."                                                                                            
CHAIRMAN TAYLOR said that is why  he wants to put a constitutional                                                              
amendment on the  ballot to provide voters with  an opportunity to                                                              
stabilize inflation proofing.                                                                                                   
REPRESENTATIVE HUDSON said HB 304 does the same thing.                                                                          
CHAIRMAN TAYLOR  said if  he could get  DNR to sell  200,000 acres                                                              
per year, he  might be willing to  look at something like  HB 304.                                                              
He noted that when the Administration  will not sell a square inch                                                              
of land  or develop  anything, it's  hard to  believe the  state's                                                              
only choice is to tax people.                                                                                                   
REPRESENTATIVE  HUDSON  said  he  will  not argue  that.  He  then                                                              
thanked members.                                                                                                                
CHAIRMAN TAYLOR adjourned the meeting at 4:47 p.m.                                                                              

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