SENATE BILL 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." JOE AMBROSE, STAFF, SENATOR ROBIN TAYLOR, stated that SB 21 would establish an Alaska Marine Highway Authority to assume management of the Marine Highway System from the Department of Transportation and Public Facilities (DOTPF). The Authority would be a public corporation of the State as an extension of DOTPF, but would have a legal existence independent and separate from the State. The new Authority would be comparable to the Alaska Housing Finance Corporation (AHFC) or the Alaska Industrial Development and Export Authority (AIDEA). The powers of the authority would rest with a seven member Board, appointed by the Governor. One member would be the Commissioner of Transportation & Public Facilities. The six other members would be required to have experience in maritime affairs, would serve staggered five year terms and would be subject to legislative confirmation. The Board would hire the system's director. Mr. Ambrose continued, the establishment of such an authority board would bring maritime experience, accountability and continuity to the management of the Alaska Marine Highway System. Based on information gathered at public hearings over the interim, the Senate Task Force on the Alaska Marine Highway System concluded that the Legislature should consider the creation of such an authority. He noted that Senator Taylor supports the fiscal note provided by the Senate Finance Committee. Representative Mulder asked if there was a relationship between the Authority and the Ketchikan shipyard. Mr. Ambrose stated that there are provisions in the legislation that relate to Alaska base maintenance facilities. Sections #21 & #22 more clearly define the applications of that provision and that the sunset provision would be repealed. Representative Mulder asked if it would be in the State's best interest to require the provision to keep the costs down. He felt that the Ketchikan shipyard would loose the impetus to keep prices competitive if there was such a dis-incentive. He noted his support for maintaining the integrity of the Alaska Marine Highway System and using the Ketchikan shipyard if their price was right. Co-Chair Therriault suggested that it would be the work of the Legislature to guard that provision. Representative J. Davies questioned the indirect benefits calculation and asked if it would be in violation of the indirect commerce laws. Mr. Ambrose replied that the language in reference was language from the original statute as passed in 1986, modified in 1992. SENATOR ROBIN TAYLOR noted that the State currently owns both the Seward and Ketchikan facility. He requested that Amendment #1 be adopted. [Copy on file]. He clarified that the above mentioned section would address the local hire concerns, while acknowledging that there would be indirect benefits to Ketchikan such as community employment, economics and utilization of Alaska hire. Representative J. Davies questioned if there was case and decision law record which establishes that a state attempting procurement, could take direct benefits of the local economy into account. Senator Taylor believed that could be resolved in the actual activities. Representative Grussendorf noted that he supported the initial legislation in 1986 which granted that the major reconstruction work to the ferries be completed in Ketchikan. He stressed that action was not a savings to the State, although, was socially and economically good policy. Representative Grussendorf voiced concern with establishing a marine authority given the proposed restrictions. In response to Representative G. Davis, Mr. Ambrose commented that most of the wording contained in Section #21 was taken from the 1986 legislation. He distributed a sheet of cost comparisons between work performed in Ketchikan and work done in Seattle. [Copy on file]. There is no longer a disparity between the costs as seen in the analysis. He argued that there would be a savings to the State for work done in the Ketchikan yard. Representative Mulder questioned if savings in empowering the employees had been considered. Senator Taylor agreed that those employees would provide better service and administration in the new system than they are currently receiving. He pointed out that the action would require a liquidation of State assets. Senator Taylor stressed that the entire economic life of Ketchikan is tied to the ferries. He spoke to the composition of the board membership. Representative Mulder voiced concern with the Board's composition when addressing policy concerns. He pointed out that there will be individuals involved in the process with whom others work; he suggested that would not be good public policy. Senator Taylor was not willing to comment on the monetary terms regarding conflict of interest. He stressed that information would not be involved in the board's combination. Representative Grussendorf voiced concern with the composition of the board. The marine authority will always need State subsidy. The manner in which the board is appointed will not address the financial concerns of keeping the ferries running. Representative G. Davis spoke to the conflict of interest concerns. (Tape Change HFC 97-138, Side 2). Mr. Ambrose stated that there has been a change in the worker's viewpoint in the past couple of years. The proposed legislation only changes the management at the top. The people who work for the system, know that it is in jeopardy and the proposed legislation has the possibility of ending the long conflict between ship and the shore. Representative Kelly echoed concern with the make-up of the board. He thought it could be politically stacked as each category has the potential to be a union person. Senator Taylor suggested that the confirmation process would provide the necessary checks and balances. He stressed that there was no intention to stack the board, but rather to create a board with experience. He agreed that the strongest and most effective board, would be the smallest one. Representative Grussendorf questioned if the proposition would create a more efficient structure than currently exists. BERNE MILLER, EXECUTIVE DIRECTOR, SOUTHEAST CONFERENCE, JUNEAU, pointed out that the Alaska Highway System is the "road" through Southeast Alaska. The System is nothing more than the lifeblood of our region's economic strength and social well-being. If the System is allowed to atrophy, our region will wither and die. He noted that the interest of the Conference would be in the economic and social well-being of Southeast Alaska as a region. The system is important to our region's people and communities and to give any priority to passage or defeat of any particular legislation or to seek political alignment with any of the contending factions would not be appropriate. The Conference advocates common sense and careful deliberation in public decision making. Representative Grussendorf pointed out that many members of the Southeast Conference are against the proposal. Mr. Miller responded that the Board of Directors believes that the system is too important to launch off on major changes without some understanding of the consequences to the communities. Representative Grussendorf pointed out that a Marine Highway Task Force has been established in the House and Senate, with the intent to address these concerns during the interim. The proposed legislation is being expedited by Senator Taylor at a time when it needs further consideration. KURT PARKEN, DEPUTY COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, stated that the Department does not support the legislation because it would not be in the best interest of the employees or the communities. He added that a number of communities and unions throughout the State oppose the legislation. He agreed that the Alaska Marine Highway System does have management problems, although, an authority would not guarantee a stability in funding nor would it guarantee adequate staffing for marketing and reservations. Creating an authority could separate the Marine Highway System from receiving the combined federal Intermodal Surface Transportation Efficiency Act (ISTEA) dollars. Mr. Parken enumerated specific problems in the proposed legislation. He noted that there is not reference in the bill on how the transfer of assets from DOTPF to the Marine Highway Authority would take place. Also, the Department believes that there are serious constitutional problems with the confirmation process for the board. The Legislature can not confirm appointments to an authority, and that the definitions of responsibilities are inconsistent in the text of the bill. The bill will create four new collective bargaining units. Representative Grussendorf noted that the Commissioner of DOTPF would be responsible for the allocation of federal ISTEA dollars. He questioned, with the creation of an authority having State subsidy, would federal receipts continue to be allocated for the building of a new vessel. The entity allocating federal funds would be more carefully spent on renovation repair for the boats. He felt that passage of the legislation would jeopardize the Marine Highway System and would place political pressure on the Commissioner. Representative J. Davies requested an overview of the major cost items associated with the creation of the authority. GARY HAYDEN, DIRECTOR, ALASKA MARINE HIGHWAY SYSTEM, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, explained that the fiscal note contained funds for paying for meeting days. The Department made the assumption that after January 1st, there would be 50 meetings for the first year. That compensation would amount to $54 thousand dollars. Travel and per diem would amount to $75 thousand dollars on an annual basis. The fiscal note assumes that the authority will need to add $195 thousand dollars to cover the vacancy by deleting the director position. These expenses are included in the proposed fiscal note from the Department. JAMES BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, stated that the Department opposes the proposed legislation. He noted that there are provisions which do not follow the State constitution regarding confirmation of board members. It was established by the State Supreme Court that the Governor's confirmation power does not extend beyond the specifically enumerated occasions as contained in the Alaska Constitution. The proposed authority does not qualify as that type of entity. The Legislature could not provide for the removal for clause provision as suggested in the legislation. The effect of that clause, if the performance is not adequate, it would have to reach a high level of non-performance before they could be removed. He requested that the Committee seriously question the language of the legislation. Mr. Ambrose referenced Page 4, Line 19, which clarifies that the authority would be a regulatory board. Co-Chair Therriault asked if the regulatory power was incidental to the board or commission or would it be their main function. Mr. Ambrose replied that issue had not been addressed with Legal Services when the legislation was drafted. (Tape Change HFC 97-139, Side 1). Mr. Baldwin noted that the State Constitution interrupts a regulatory board as a board that is regulating an enterprise, a business or a profession. It does not mean something that has the power to adopt regulations to place in statute. In response to Representative Martin, Mr. Ambrose explained that the situation between the Alaska Railroad and the marine highway were different. The railroad is independent, whereas, the proposed changes to the marine highway would continue to remain an agency of State government. Mr. Baldwin explained that the public authorities are established as a political subdivision of the State making them separate from the principle departments. Representative G. Davis MOVED to adopt Amendment #1. [Copy on file]. He stated that the amendment would remove the section which gives priority to the Alaska ports and shipyard facilities, maintaining the status quo. Mr. Hayden added, the current wording would have the inter-port differential only pertaining to the work done out of State. The intent is to have an inter-port differential for both in State and out of State work. Following the discussion between Representative J. Davies, Representative G. Davis and Mr. Hayden regarding the proposed language of the amendment, there was NO OBJECTION and it was adopted. Representative G. Davis WITHDREW Amendment #2. [Copy on file]. Representative Foster MOVED to adopt Amendment #2 which speaks to the membership of the authority. Representative G. Davis noted that the amendment would remove the specific designation of union members. He said that following the discussion with Senator Taylor, he now more clearly understands the need to consider those members. Representative G. Davis OBJECTED to Amendment #2. A roll call vote was taken on the MOTION. IN FAVOR: Foster, Therriault OPPOSED: Martin, Moses, J. Davies, G. Davis, Grussendorf, Kelly, Kohring Representatives Mulder and Hanley were not present for the vote. The MOTION FAILED (2-7). Representative G. Davis WITHDREW Amendment #3. [Copy on file]. There being NO OBJECTION, it was withdrawn. Representative Grussendorf MOVED to adopt Amendment #4. [Copy of file]. He explained that the amendment would require that a plan be presented which would include in detail the amount and funding sources needed for the operating and capital improvements of the Alaska Marine Highway System for five consecutive fiscal years. Mr. Ambrose responded that the sponsor would not object to the proposed amendment. There being NO OBJECTION, Amendment #4 was adopted. Co-Chair Therriault advised that the House Finance Committee had no ability to fund the fiscal note; currently, the operating budget has been closed out. He recommended adding an adjustment to when the bill could be implemented. Mr. Ambrose acknowledged that would be acceptable. Co-Chair Therriault MOVED a change to Page 23, Line 4, deleting 12/01/97 and inserting 7/01/97, and Page 23, Line 9, deleting 1/01/98 and inserting 1/01/99, to accommodate fiscal concerns. There being NO OBJECTION, it was adopted. Representative Moses voiced his opposition to the appointment of the director position. Representative Foster strongly objected that only one person on the authority would be representing the public. Representative Hanley MOVED to report CSSB 21(FIN) with the attached amendments #1, #4, & #6 and individual recommendations out of Committee. Representative Foster OBJECTED. A roll call vote was taken on the MOTION to move the bill from Committee. IN FAVOR: G. Davis, Kelly, Kohring, Martin, Therriault, Hanley OPPOSED: Moses, J. Davies, Grussendorf, Foster Representative Mulder was not present for the vote. The MOTION PASSED (6-4). CSSB 21 (FIN) was reported out of Committee with the attached amendments #1, #4 and #6 with a "no recommendation" and with a Senate Finance Committee fiscal note dated 4/29/97.