Legislature(1997 - 1998)
03/27/1997 03:35 PM Senate STA
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SENATE STATE AFFAIRS COMMITTEE
March 27, 1997
3:35 p.m.
MEMBERS PRESENT
Senator Lyda Green, Chairman
Senator Jerry Ward, Vice-Chairman
Senator Jim Duncan
MEMBERS ABSENT
Senator Jerry Mackie
Senator Mike Miller
COMMITTEE CALENDAR
SENATE BILL NO. 42
"An Act relating to the fiscal operations of the Alaska Railroad
Corporation and to land acquired by the State of Alaska under the
Alaska Railroad Transfer Act of 1982 or otherwise acquired for
railroad purposes; and providing for an effective date."
-- CSSB 42(STA) ADOPTED AND MOVED OUT OF COMMITTEE
SENATE BILL NO. 21
"An Act relating to ferries and ferry terminals, establishing the
Alaska Marine Highway Authority, and relating to maintenance of
state marine vessels; and providing for an effective date."
-- AMENDED AND FAILED TO MOVE OUT OF COMMITTEE
SENATE BILL NO. 116
"An Act relating to welfare to work tax credits under the Alaska
Net Income Tax Act; and providing for an effective date."
-- HEARD AND HELD IN COMMITTEE
SENATE BILL NO. 129
"An Act relating to the employer's required savings under the
retirement incentive plan; and providing for an effective date."
-- HEARD AND HELD IN COMMITTEE
SENATE BILL NO. 133
"An Act relating to a small business development tax credit under
the Alaska Net Income Tax Act; and providing for an effective
date."
-- HEARD AND HELD IN COMMITTEE
SENATE BILL NO. 81
"An Act relating to immunization records for children under the age
of seven."
-- SB 81 NOT TAKEN UP BY THE COMMITTEE THIS DATE
PREVIOUS SENATE COMMITTEE ACTION
SB 42 - See Senate Transportation Committee minutes dated 2/20/97
and Senate State Affairs Committee minutes dated 3/25/97.
SB 21 - See Senate Transportation Committee minutes dated 2/18/97
and 3/6/97 and Senate State Affairs minutes dated 3/18/97,
3/25/97.
SB 116 - See Senate State Affairs Committee minutes dated 3/25/97.
SB 129 - No previous action to record.
SB 133 - No previous action to record.
WITNESS REGISTER
Representative Terry Martin
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Offered information on SB 42
Bill Cummings, Assistant Attorney General
Department of Law
P.O. Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Supported removing land provision from
original bill
Joe Ambrose, Staff to Senator Robin Taylor
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Explained amendment to SB 21
Gary Hayden, System Director
Alaska Marine Highway System
Department of Transportation & Public Facilities
3132 Channel Drive
Juneau, AK 99801-7898
POSITION STATEMENT: Testified in opposition to SB 21
Jim Nodlund, Director
Division of Public Assistance
Department of Health & Social Services
P.O. Box 110640
Juneau, AK 99801-0640
POSITION STATEMENT: Presented overview on SB 116
Bob Bartholomew, Deputy Director
Income & Excise Audit Division
Department of Revenue
P.O. Box 110420
Juneau, AK 99801-0420
POSITION STATEMENT: Offered information on SB 116 & SB 133
Joseph Freidman
Trade Dollar Exchange
3820 Lake Otis
Anchorage, AK 99508
POSITION STATEMENT: Testified in support of SB 116
Commissioner William Hensley
Department of Commerce & Economic Development
P.O. Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Testified in support of SB 116 & SB 133
Senator Jim Duncan
State Capitol
Juneau, AK 99801
POSITION STATEMENT: Prime Sponsor of SB 129
Bill Church, Retirement Supervisor
Division of Retirement & Benefits
Department of Administration
P.O. Box 110203
Juneau, AK 99801-0203
POSITION STATEMENT: Answered questions on SB 129
ACTION NARRATIVE
TAPE 97-15, SIDE A
Number 001
SB 42 ALASKA RR BUDGET AND LAND
CHAIRMAN GREEN called the Senate State Affairs Committee to order
at 3:35 p.m. and brought up SB 42 as the first order of business
before the committee.
REPRESENTATIVE TERRY MARTIN , Vice Chairman of the Legislative
Budget & Audit Committee, said SB 42 was introduced on behalf of
that committee. He explained the legislation will put the Alaska
Railroad under the Executive Budget Act, which will give the
Legislature more oversight over the corporation. The legislation
will also transfer land not needed for rail operations to the
Department of Natural Resources.
CHAIRMAN GREEN directed attention to a proposed State Affairs CS,
which she said splits out the land portion contained in the
original bill. REPRESENTATIVE MARTIN added that the land issue is
going to take a lot of time, and the Senate Resources Chair wants
to specifically work on that issue, so removing the land provision
eases that problem.
SENATOR WARD moved the adoption of CSSB 42(STA). Hearing no
objection, it was so ordered.
Number 100
BILL CUMMINGS , an assistant attorney general in the Department of
Law, agreed that separating the Executive Budget portion from the
land portion of the bill is a good idea because the land's portion
is a lot more complicated due to the environmental liabilities
that attach to it. He advised that The Department of Law has been
working with the Department of Environmental Conservation and they
have come up with approximately 40 very polluted sites that are on
railroad land. The way the bill was originally written the title
would vest to that land immediately in the state of Alaska upon the
effective date of the bill. By vesting title, it opens the state
treasury to claims for cleaning up the pollution. Right now the
claims are born strictly by the railroad and the railroad's revenue
stream.
Mr. Cummings related that the department believes that if the land
portion were to be left in with the Executive Budget portion of the
bill, it would necessitate the hiring of three more lawyers to
handle the environmental litigation. He added that there are ways
to deal with transferring the land to the state where the state
would not be liable for cleaning up the sites.
Number 170
There being no further testimony on CSSB 42(STA), CHAIRMAN GREEN
stated she would entertain a motion.
SENATOR WARD moved CSSB 42(STA) and the accompanying fiscal notes
be passed out of committee with individual recommendations.
Hearing no objection, it was so ordered.
Number 178
SB 21 ALASKA MARINE HIGHWAY AUTHORITY
CHAIRMAN GREEN brought SB 21 before the committee as the next order
of business.
JOE AMBROSE , staff to Senator Robin Taylor who is the prime sponsor
of SB 21, directed attention to a proposed Amendment No. 3.
(Amendments one and two were adopted at the previous hearing on the
bill.)
SENATOR WARD moved adoption of the following Amendment No. 3.
SENATOR DUNCAN objected and asked for an explanation of what the
amendment does.
SENATOR WARD moved adoption of the following Amendment No. 3:
Amendment No. 3
Page 16, lines 12 - 16: Delete "In this subsection, "commissioner
of the department that operates the marine vessel" includes the
president of the University of Alaska with regard to a vessel
operated by the university and the chief executive officer of the
Alaska Marine Highway Authority with regard to a vessel operated by
the Alaska Marine Highway Authority."
Insert "A detailed list of the costs and factors considered in
calculating the interport differential must be provided to each
person who expresses an interest in submitting a bid to perform
maintenance or repair work on a marine vessel owned by the state.
[IN THIS SUBSECTION, "COMMISSIONER OF THE DEPARTMENT THAT OPERATES
THE MARINE VESSEL" INCLUDES THE PRESIDENT OF THE UNIVERSITY OF
ALASKA WITH REGARD TO A VESSEL OPERATED BY THE UNIVERSITY.]"
Page 16, line 18, through page 17, line 1: Delete all material and
insert:
"(c) The commissioner of a department that operates a marine
vessel shall adopt regulations establishing the criteria that the
department shall use to determine whether the cost of maintenance
or repair work at a shipyard facility located int he state is
reasonable under (a) of this section. The commissioner shall
designate by regulation the designated base port for each vessel
operated by the department. A vessel's designated base port is the
vessel's delivery and redelivery port. The Alaska Marine Highway
Authority shall adopt regulations establishing the criteria that
the authority shall use in calculating the interport differential
under this section. The criteria for calculating the interport
differential must include costs incurred from the time that the
vessel leaves the vessel's designated base port to enter the
shipyard facility until the time the vessel returns to the
designated base port from the shipyard facility.
(d) In this section,
(1) "commissioner of the department that operates the
marine vessel" includes the president of the University of Alaska
with regard to a vessel operated by the university and the chief
executive officer of the Alaska Marine Highway Authority with
regard to a vessel operated by the Alaska Marine Highway Authority;
(2) "interport differential" includes all costs related
to the performance of the maintenance or repair work of a marine
vessel at a shipyard located outside of the state, including travel
costs incurred moving the vessel from its designated base port to
the shipyard outside of the state; additional fuel consumption;
cost of consumable including lubricants and other engine and deck
stores; maintenance costs incurred during running time; cost of
crew transfers including airfare between Alaska and the shipyard;
wages in travel status; crew room and board; and other interport
costs identified by the Alaska Marine Highway Authority."
Number 200
MR. AMBROSE , speaking to Amendment No. 3, explained there has been
discussion with DOTPF on a provision in the legislation that deals
with the use of Alaska shipyards, and he believes the new language
in the amendment is less onerous. He said the intent throughout
this process is to make use of the two shipyards, which the state
of Alaska has spent a tremendous amount of money on, a little more
practical.
Mr. Ambrose said a major change being made in the amendment
requires that the commissioner, by regulation, designate a base
port for each vessel, and that base port then becomes the delivery
and redelivery port for the vessel. He said the delivery and
redelivery port is important because that is the point of
calculation for the interport differential when a vessel is shipped
out of state. Federal highway authorities have indicated that in
order to use that calculation all the time, there has to be a
delivery and redelivery port. The second change is the defining of
"interport differential" which is all costs related to moving a
vessel to an out-of-state shipyard.
Number 325
GARY HAYDEN , Director, Alaska Marine Highway System, Department of
Transportation & Public Facilities, stated the Marine Highway
System has demonstrated a commitment to doing work in Alaska
shipyards. Over the last seven years, most of the work that did
not involve federal funds has been done in Alaska. When federal
funds are involved, it necessitates going out to bid on these
projects.
Mr. Hayden questioned the need for the amendment because he wasn't
sure there was a problem at this point in time. He referenced a
Legislative Budget & Audit Committee report where it stated they
found the method used by DOTPF in determining the interport
differential for bidding purposes to be sound and based upon a
logical approach for determining vessel transport related costs.
He also suggested that if a Alaska Marine Highway Authority is
going to be established, maybe a good approach to this issue is to
let its board of directors and executive director make the decision
has to how they go out and put together their bidding package on
getting their ships maintained.
Mr. Hayden said there is definitely an issue of declining
maintenance funds, while at the same time, the ships are getting
older and the cost of maintenance is going up. His approach to
getting the most possible out of the maintenance dollars has been
to have competition and get good prices on the work that is being
done.
Mr. Hayden explained that in calculating the interport differential
it starts at the point that the vessel is taken off line. Juneau,
Ketchikan and Seward are currently designated the home ports for
the vessels, but the home port designations are just for the
purpose of crew changes. He questioned designating a base port in
regulation because it ties the system's hands as to where they take
the vessel off a revenue run. The past practice has been to take
it off at the end of the revenue run, and then that would be the
start of their calculations.
Number 410
MR. AMBROSE pointed out that nothing in the amendment would affect
the competitive bidding process, and nothing in the bill is
intended to give the Alaska shipyards so much of an advantage that
bids would be awarded that were not fair to the state as far as
expense is concerned.
Number 430
There being no further objection to Amendment No. 3, it was
adopted.
CHAIRMAN GREEN asked for the will of the committee on CSSB 21(STA).
SENATOR WARD moved CSSB 21(STA), as amended, be passed out of
committee with individual recommendations. SENATOR DUNCAN objected
and stated he was concerned about this piece of legislation. The
roll was taken with the following result: Senators Ward and Green
voted "Yea" and Senator Duncan voted "Nay." CHAIRMAN GREEN stated
the motion to move CSSB 21(STA) out of committee failed.
SB 116 WELFARE TO WORK TAX CREDITS
CHAIRMAN GREEN brought SB 116 before the committee.
JIM NORDLUND , Director, Division of Public Assistance, Department
of Health & Social Services, explained the legislation would offer
tax credits to Alaskan corporations that hire disadvantaged
workers. He said welfare recipients is one of the categories of
disadvantaged workers that this legislation would help the most.
In order to comply with federal law, there is a need to put
approximately 4,000 individuals into a work activity within the
next year.
SB 116 allows an Alaskan corporation to use as a credit up to 15
percent of an employee's wages or up to $1,000 of wages paid in a
year. There is an additional $500 credit if that employer offers
training to that recipient. To earn the credit, the employee must
be on the job for 180 days or 400 hours. Mr. Nordlund pointed out
that they don't need to be consecutive days, taking into account
the seasonality of employment in Alaska. It was also pointed out
that the Alaska Welfare to Work program mirrors the federal work
opportunity tax credit bill.
Mr. Nordlund said SB 116 is one of several incentives the
Administration is looking at because there are a number of tools
they need to have at their disposal to encourage the employer
community to hire welfare recipients.
Number 510
Responding to an inquiry by Senator Ward, MR. NORDLUND explained
that to the extent that an employer takes advantage of this
provision and hires a welfare recipient, that welfare recipient is
then going to not receive as much money in welfare benefits because
of being employed and becoming self-sufficient. There is a cost to
the state in the sense that there is a credit that's given to that
employer for hiring that recipient, but that would be offset by the
dollars that the recipient is earning on the job as opposed to
being paid in welfare benefits.
CHAIRMAN GREEN asked if this program was reflected in any of the
budget proposals. MR. NORDLUND advised that the Governor's budget
predicts a $2 million reduction in benefits that takes into
consideration a number of different factors, one of which is the
possibility of SB 116 passing this Legislature.
Number 565
BOB BARTHOLOMEW , Deputy Director, Income & Excise Audit Division,
Department of Revenue, speaking to the fiscal note, said the
Department of Revenue worked with the Department of Health & Social
Services to try to estimate what would be the impact of this
legislation. The biggest issue was that not all businesses in
Alaska are corporations, so this incentive relates to corporations
that are registered to pay taxes in Alaska. They estimate that
approximately 880 workers will go work each year, which is a best
guess, high end estimate. If that were the case, the fiscal note
reflects that corporations would have a $1 million a year reduction
in taxes because of hiring employees that are eligible for that
program.
TAPE 97-15, SIDE B
Number 001
Mr. Bartholomew pointed that currently the federal government
allows for a federal work opportunity credit, which the state has
never adopted in the past. It is just by the event that the state
adopted the Federal Internal Revenue Code that it gets their tax
credit along with it, so the state has been losing tax revenues
every year because of people taking the federal credit and then
flowing it to their Alaska return. SB 116 repeals that adoption of
the federal tax credit and provides that if Alaska wants a credit,
it will adopt its own.
Mr. Bartholomew noted there was a lot of discussion amongst the
agencies and with individual businesses about how to keep the
process simple and keep the paper work down. As there is currently
a federal program that employers use, those requirements have been
adopted, so there is no new paper work or new Alaska guidelines.
Number 546
JOSEPH FREIDMAN , testifying from Anchorage, said he was
representing the Trade Dollar Exchange in Anchorage, which is a
program created by private industry to assist small Alaskan
businesses with programs such as the Alaska Welfare to Work
program. It provides the opportunity for a lot of these people who
must go to work at a minimum of 20 hours a week an opportunity to
go into a small business where the business owner will provide the
role modeling and the mentorship to make the transition successful.
Mr. Freidman said their program is very dynamic in the way that it
activates the community and presents a forum for the low income
people to actually work together to help each other. He said to
provide the successful transition for these people, he thinks it is
small business that can do it and private industry needs to take
the lead. He suggested providing a disregard for trade dollars
that these people earn so as not to reduce their cash benefits and
deter them from going to work.
Number 496
COMMISSIONER WILLIAM HENSLEY , Department of Commerce & Economic
Development, testifying from Anchorage, said he has spent a great
deal of time in the last few weeks working with the Department of
Labor and the Department of Health & Social Services on this issue
of welfare to work, and he believes it is a problem that business
and industry is going to have to help government with. He has also
talked with a number of businesses in the private sector and they
are universally supportive of working with the state on this
subject, but he believes small business is the real key to putting
these people to work. He said if these people are given the proper
support systems and if they stay on the job, they have an
opportunity to become productive.
Number 465
There being no further testimony on SB 116, CHAIRMAN GREEN stated
the bill would be held and scheduled for another meeting.
Number 460
SB 129 PERS REQUIRED SAVINGS UNDER RIP
CHAIRMAN GREEN brought SB 129 before the committee as the next
order of business.
SENATOR DUNCAN , prime sponsor of SB 129, explained the legislation
relates to the Retirement Incentive Program (RIP) passed last year
by the Legislature. Last year's bill allowed cost savings to be
calculated over a three-year period of time, and SB 129 amends that
provision to a five-year cost savings calculation. He said he
thinks it is an important provision to consider as far as ensuring
that the program that passed last year will work to its maximum and
allow the cost savings that he believes should be generated under
the program.
Senator Duncan pointed out that the five-year cost savings
calculation is not a new concept, having been in two previous
Retirement Incentive Programs. The numbers of people who not only
were eligible but designated to participate were of a much higher
percentage than what is occurring in the current program. Changing
to the five-year calculation would increase the number of people
who would be eligible to retire and who potentially would retire.
Therefore, as that happens, there is more cost savings in state
government and it will have a very positive impact on helping
reduce government expenditures overall, he stated.
Number 420
CHAIRMAN GREEN commented that in listening to the budget process
this year, she was disappointed in the amount of cost savings being
shown. SENATOR DUNCAN said he thinks this program is being
managed much more conservatively than previous programs were,
primarily because the legislative intent was to do that. He said
it is hard to compare this program with previous programs because
of the three-year calculation and because the last two programs had
only one window period whereas this program runs through 1999. He
noted Senator Sharp has introduced legislation that would require
eligible employees to take the RIP in the first window they are
eligible.
Number 400
SENATOR WARD commented that it would appear that the Administration
has been restrictive and selective in their approach, making the
program not necessarily working in the way the Legislature had
intended. He also noted that Senator Sharp's bill, SB 126, has a
broad enough title to extend the three-year calculation to five
years, but it is his understanding that the 5-year calculation was
rejected by Senate Finance because that tool was not considered as
a necessity. SENATOR DUNCAN agreed that the provision was
discussed in the Senate Finance Committee, but he said it was never
rejected by the committee. It was only discussed because Senator
Adams asked a question of a union representative. He also stated
he would have no problem with amending Senator Sharp's bill to
include a 5-year cost savings. SENATOR WARD then voiced his
concern that he was not sure if changing the provision from three
years to five years was good public policy.
Number 340
BILL CHURCH , Retirement Supervisor, Division of Retirement &
Benefits, Department of Administration, came forward to respond to
questions from the committee.
SENATOR WARD asked if it was correct that out of the state's 12,500
department employees, there have been 46 individuals that have
actually retired under this RIP. MR. CHURCH responded that it is
probably a little bit more at this point in time. There are people
retiring each month under the program so it's very dynamic in
nature. He agreed with Senator Duncan that they are seeing fewer
people retire under this program than they have in previous RIPs,
although this program is structured much differently than previous
programs.
SENATOR WARD asked Mr. Church if he thinks the new RIP has been
structured to the letter of the legislative intent, or has it been
selective and restrictive on the part of the Administration. MR.
CHURCH replied that he wasn't at the committee hearings when the
bill was passed, but it his understanding that the program is being
run in accordance with the guidance and understanding that was
given through the Legislature.
Number 300
SENATOR DUNCAN asked Mr. Church his reaction to computing cost
savings over five years instead of over three years. MR. CHURCH
said when the law was changed in the previous RIP from three years
to five years, there were many more individuals who met the
qualifications to be able to retire under the program. He added he
believes it was very successful by allowing more people to take
advantage of the RIP, reducing personal services costs to the
employers.
Number 270
There being no further testimony on SB 129, CHAIRMAN GREEN said she
was willing to move the bill out of committee, but she didn't think
there were the signatures to do so. She advised SB 129 would be
held over to the April 1 meeting.
SB 133 SMALL BUSINESS DEVELOPMENT TAX CREDIT
CHAIRMAN GREEN brought SB 133 before the committee as the final
order of business.
COMMISSIONER WILLIAM HENSLEY , Department of Commerce & Economic
Development, said the vast majority of businesses in Alaska are
"small" but they play an enormous role in the state's economy,
providing 70 percent of the private jobs, so any effort to give a
boost to business in Alaska must consider small businesses.
Commissioner Hensley said SB 133 is one of several bills that are
part of the Governor's Alaska Business Investment Incentive Plan.
It was introduced to encourage growth in small businesses by
offering them tax credits for improving and expanding their
operations. The intent is to try to level the playing field
between larger businesses, which have economies of scale and
management, as well as ready access to investment capital at
favorable interest rates. The program can assist small businesses
in covering start-up costs, the purchase of new equipment, etc.
Commissioner Hensley also said the tax credit would benefit non-
affiliated corporations with fewer than 50 employees. The tax
credit would be 10 percent of capital investment up to $100,000,
with a maximum annual credit of $10,000 and 50 percent of the
business's corporate tax liability. To qualify, the investment
must be for new property and the corporation must be in good
standing on unemployment insurance and other state taxes.
Number 220
BOB BARTHOLOMEW , Deputy Director, Income & Excise Audit Division,
Department of Revenue, speaking to the department's fiscal note,
said it is estimated that over 2,000 small businesses would be able
to benefit from the investment tax credit, which is a program that
has been used in prior years by both the federal and state
governments. The fiscal note shows the fiscal impact would be
approximately $2 million a year.
Number 209
CHAIRMAN GREEN inquired if this was reflected in the budget, and
MR. BARTHOLOMEW answered that it was not.
Because the committee had lost its quorum, there was no motion to
move SB 133 out of committee, and the meeting adjourned at 5:00
p.m.
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