HOUSE FINANCE COMMITTEE May 10, 1998 7:38 P.M. TAPE HFC 98 - 167, Side 1 TAPE HFC 98 - 167, Side 2 CALL TO ORDER Co-Chair Gene Therriault called the House Finance Committee meeting to order at 7:38 p.m. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative Davies Representative Martin Representative Davis Representative Moses Representative Foster Representative Mulder Representative Grussendorf ALSO PRESENT Ralph Bennett, Staff, Senator Taylor; Wendy Redman, Vice President, Statewide Programs, University of Alaska; John T. Shively, Commissioner, Department of Natural Resources; Carol Carroll, Director, Division of Support Services, Department of Natural Resources; Larry Labole, Staff, Representative Foster. SUMMARY SB 231 "An Act making and amending capital appropriations and reappropriations and capitalizing funds; and providing for an effective date." HCS CSSB 231 (FIN) was REPORTED out of Committee with "no recommendation." SB 340 "An Act relating to the University of Alaska and university land, and authorizing the University of Alaska to select additional state land." HCS CSSB 340 (FIN) was REPORTED out of Committee with a "do pass" recommendation and with two fiscal impact notes, one by the Department of Natural Resources and one by the University of Alaska both dated 5/6/98. SB 347 "An Act relating to the increase of an appropriation item based on additional federal or other program receipts." SB 347 was REPORTED out of Committee with a "do pass" recommendation and with a zero fiscal note by the Legislative Finance Division, 4/3/98. SB 360 "An Act authorizing the issuance of bonds in the amount of $257,600,000 by the Alaska Housing Finance Corporation for certain capital projects; relating to those bonds and to the appropriation of revenue of the Alaska Housing Finance Corporation; and providing for an effective date." HCS SB 360 was REPORTED out of Committee with "no recommendation" and with a fiscal impact note by the Department of Revenue, 5/5/98. SENATE BILL NO. 340 "An Act relating to the University of Alaska and university land, and authorizing the University of Alaska to select additional state land." RALPH BENNETT, STAFF, SENATOR TAYLOR read the sponsor statement (copy on file). He observed that the provisions of SB 340 allow the University of Alaska to select 250,000 acres of state land, subject to approval by the Legislature. Land approved for transfer would include the interest of the state in minerals and to oil and gas, subject to certain limitations. Lands subject to a coal lease or pending application for a coal lease are not available for selection. The University would bear the costs of selection, platting, surveying and conveyance. All land selections must be made by December 31, 2020. Twenty percent (20%) of the income derived from selected lands must be used at the campus closest to the income generating parcel(s) if a local match is provided. All lands conveyed under this program are exempt from municipal taxation. He observed that SB 340 is compatible with legislation introduced in Congress by Senator Murkowski, S.660. If passed, S.660 could convey up to 500,000 acres of federal lands in Alaska to the University of Alaska. The first 250,000 acres do not require a state match. Additional federal lands would require a state match. The University of Alaska system was created under federal authority as a land grant institution to provide for the higher education requirements of Alaska's people in perpetuity. Most colleges established under the land grant program were endowed with sizable land bases from which to generate income to be used for operating purposes. Unlike most institutions in the lower 48 states, the University of Alaska does not have the relatively larger population base and proximity to other support services that are so beneficial. The University of Alaska also suffers from a smaller pool of alumni and other normal sources of endowment income, which many institutions rely on to help support operations, especially subsidies for teaching positions. Mr. Bennett observed that in the past decade several legislators have introduced legislation allowing the University of Alaska to select additional lands from the State. The purpose of all legislative attempts to provide more land for the University statewide system has been to provide more income producing assets where monetary resources are becoming scarcer and unpredictable. This bill continues the effort to give the University of Alaska a larger more productive land base. The bill also provides clear expectations that land conveyed is to be used for the development of value added industries where appropriate. Representative Kelly MOVED to ADOPT Amendment 1 (copy on file). WENDY REDMAN, VICE PRESIDENT, STATEWIDE PROGRAMS, UNIVERSITY OF ALASKA explained that Amendment 1 would incorporate a number of amendments requested by the Miners' Association. The amendment excludes, from selection, lands with existing mining claims or prospecting sites. It also excludes lands with oil, gas, or coal leases. Lands included in the Department of Natural Resources' five-year plan or lands that the Department feels might reasonably be included in the five-year plan are also excluded. Representative Martin questioned the limitations on selection. Ms. Redman clarified that the University is not prevented from engaging in mining activity on land that has been selected. The University is prohibited from selecting lands that already have mining activity at the time of selection. She acknowledged the difficulty of having dual ownership between the University and the state of Alaska. The legislation does not apply to federal lands. Amendment 1 would extend the selection period from the year 2012 to the year 2020. Additional provisions in the amendment would assure the protection of proprietary information. There being NO OBJECTION, Amendment 1 was adopted. Ms. Redman discussed Amendment 2 (copy on file). She suggested that the amendment be amended to add a period on line 8 after "order" and delete the rest of line 8 through line 12. Representative Kelly MOVED to amend Amendment 2 as suggested by Ms. Redman. There being NO OBJECTION, it was so ordered. Ms. Redman explained that the amendment limits the amount of acreage in excess of the University's grant that can be requested. The amendment is at the request of the mining industry. It would limit the amount of land that would be tied up prior to legislative action. The amendment would also provide that 20 percent of the earnings from land selected would be used to support natural resource development within the region from which the resource was taken. Municipalities within the region would be required to match the amount. The amendment would also provide tort protection. She clarified that the legislation mandates that the University continues customary and traditional use on the lands. In response to a question by Representative Martin, Ms. Redman clarified that reforestation would be included in the 20 percent calculation. Co-Chair Therriault MOVED to ADOPT Amendment 2. There being NO OBJECTION, it was so ordered. Amendment 3 was not offered. Representative Davies MOVED to ADOPT Amendment 4 (copy on file). He explained that the amendment would clarify that the governor settles disagreements between the University and the Administration in regards to the selection process. Ms. Redman noted that the University supports Amendment 4. There being NO OBJECTION, it was so ordered. Representative Grussendorf MOVED to ADOPT Amendment 5 (copy on file). Amendment 5 provides that the legislation would only take affect if the federal government makes at grant of at least 250,000 acres by January 1, 1999. Representative Martin argued against the amendment. Representative Davies did not think that the effective date would limit action by Congress. Co-Chair Therriault pointed out that the current Congress would have to act or the Alaska Legislature would have to take additional action in the future. Representative Davies MOVED to amend Amendment 5 by deleting "during 1998" on line 5. There being NO OBJECTION, it was so ordered. Ms. Redman stated that the University did not support the amendment. Mr. Bennett observed that the University would lose 250,000 acres in federal land unless SB 340 is passed. Representative Davis questioned if it is the sponsor's intent to link SB 340 to federal legislation. Mr. Bennett replied that it is the sponsor's intent that SB 340 stands alone. Representative Grussendorf argued in support of the amendment. He stressed that if the University receives additional land that there should be some reduction on the University's operating budget. Ms. Redman noted that the University has 112,000 acres, which is the smallest university land grant in the United States. These lands earned $500 thousand dollars in the first 30 years. In the last ten years they have earned $30 million dollars. They are currently generating $3 million dollars a year. She emphasized that it takes a lot of land to create an endowment that will support the University. Receipts from the fund are shown as program receipts in the University's operating budget. A roll call vote was taken on the motion to adopt Amendment 5. IN FAVOR: Davies, Davis, Grussendorf, Foster, Moses OPPOSED: Kelly, Kohring, Martin, Mulder, Therriault Co-Chair Hanley was absent from the vote. The MOTION FAILED (5-5). Representative Davis MOVED to ADOPT Amendment 6 (copy on file). He explained that the amendment would protect municipalities and their selections. Ms. Redman observed that the amendment would extend from three to five years the time that the commissioner can withhold lands. She felt that three years was a reasonable amount of time. She pointed out that the commissioner need not make any lands available that they believe are not in the best interest of the state of Alaska. Representative G. Davis spoke in support of the amendment. Representative Davies spoke against the amendment. He emphasized that most municipalities have had an opportunity to make their selections. Representative Grussendorf noted that there is pressure by the Legislature to create boroughs in the unincorporated areas of the state. Representative G. Davis pointed out that there are 600,000 acres of municipal selection awaiting review. JOHN T. SHIVELY, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES spoke in support of the amendment. Representative Martin noted that the Department of Natural Resources granted land to the University that had belonged to local communities. Representative Davies observed that the legislation provides that the commissioner of natural resources may not include land on a land selection list, if the commissioner determines it is not in the best interests of the state. He suggested that land in areas where a borough is about to be formed could be excluded under this provision. Commissioner Shively agreed that it would be possible to exclude land under this provision, but emphasized that it is impossible to anticipate where new boroughs will be organized. Representative Grussendorf stressed that communities must compete with land selections by the University and the Mental Health Trust. A roll call vote was taken on the motion to adopt Amendment 6. IN FAVOR: Moses, Davis, Grussendorf OPPOSED: Foster, Kelly, Kohring, Martin, Mulder, Therriault Co-Chair Hanley absent from the vote. The MOTION FAILED (3-7). Amendment 7 was not offered. Ms. Redman clarified that the University is responsible for paying all costs of the land selection, surveying, planning and conveyance. The University would use university receipts to cover these costs. She stressed that the Department of Natural Resources would not be responsible for the costs, if the legislature did not give the University program receipt authority. Costs will be reimbursed to the Department of Natural Resources through actual proceeds of land development. Co-Chair Therriault questioned why the fiscal note contains $30 thousand general fund dollars. CAROL CARROLL, DIRECTOR, DIVISION OF SUPPORT SERVICES, DEPARTMENT OF NATURAL RESOURCES explained that the Department of Natural Resources' fiscal note contains two sections. One section requires the University to pay for conveyance and selections. The other section requires that the state of Alaska pay the cost for recording patents and documents. She stressed that it is difficult to estimate interagency receipts from the University. Representative Mulder MOVED to report HCS CSSB 340 (FIN) out of Committee with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CSSB 340 (FIN) was REPORTED out of Committee with a "do pass" recommendation and with two fiscal impact notes, one by the Department of Natural Resources and one by the University of Alaska both dated 5/6/98. SENATE BILL NO. 347 "An Act relating to the increase of an appropriation item based on additional federal or other program receipts." Senate Bill 347 was previously heard on 5/5/98. Representative Grussendorf felt that the Legislative Budget and Audit Committee should handle some of the issues, but stated that he would not offer any amendments. Representative Mulder MOVED to report SB 347 out of Committee with the accompanying fiscal note. Representative Davies OBJECTED. He maintained that the existing system has worked and that the legislation is unnecessary. A roll call vote was taken on the motion to move the legislation. IN FAVOR: Foster, Kelly, Kohring, Martin, Moses, Mulder, Therriault, Hanley OPPOSED: Davies, Davis, Grussendorf The MOTION PASSED (8-3). SB 347 was REPORTED out of Committee with a "do pass" recommendation and with a zero fiscal note by the Legislative Finance Division, 4/3/98. SENATE BILL NO. 231 "An Act making and amending capital appropriations and reappropriations and capitalizing funds; and providing for an effective date." Co-Chair Hanley provided members with committee substitute for SB 231, work draft #0-GS2039\L, 5/10/98(copy on file). Co-Chair Hanley provided members with a copy of technical corrections (copy on file). He explained that the work draft incorrectly contained lines 25 - 29 on page 7. These were deleted by previous committee action. He also noted that Amendment 23 was adopted by the Committee and should have been included in the committee substitute. He stated that these technical corrections would Co-Chair Hanley MOVED to ADOPT Amendment 26A (copy on file). Amendment 26A would clarify that the appropriation for the Kenny Lake Elementary School replacement is $4,071.274 million dollars. There being NO OBJECTION, it was so ordered. Co-Chair Hanley MOVED to ADOPT Amendment 27 (copy on file). He explained that the legislative drafter to correct problems with the effective dates suggested the amendment. There being NO OBJECTION, it was so ordered. Co-Chair Hanley MOVED to ADOPT Amendment 28 (copy on file). Amendment 28 would delete "no interest loan" on page 18, section 46, line 11 and insert "grant". He explained that section 46 pertains to the Alyeska settlement. There is an existing site for a grant program in the settlement. There are no agencies with the authority to make a loan. There being NO OBJECTION, it was so ordered. Representative Mulder MOVED to ADOPT Amendment 29 (copy on file). Amendment 29 would delete "east" and insert "south". There being NO OBJECTION, it was so ordered. Representative Mulder MOVED to ADOPT Amendment 30 (copy on file). He explained that there are five parts to Amendment 30. The amendment would authorize $150 thousand dollars in AHFC receipts to the city of Nome for the purchase of a fire truck; $230 thousand dollars in AHFC receipts for the Mountainview Community Recreation Center; $200 thousand general fund dollars for the Gravina Island Bride; and $2,137 million dollars in AHFC bonds for the Sand Point Boat Harbor Expansion Project. It also adds $310 thousand dollars to the Department of Administration, Commissioner's Office, for contract negotiations. Representative Davies MOVED to amend Amendment 30 by increasing the appropriation to the Mountainview Community Recreation Center by $100 thousand dollars. Representative Mulder observed that the Committee transferred $100 thousand dollars to the Center in a previous amendment. A roll call vote was taken on the motion. IN FAVOR: Davies, Grussendorf, Moses OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Mulder, Therriault, Hanley The MOTION FAILED (3-8). Representative Foster MOVED to ADOPT Amendment 31 (copy on file). Amendment 31 would add $23,620,289 million dollars for replacement of the Kashunamiut School in Chevak. LARRY LABOLE, STAFF, REPRESENTATIVE FOSTER explained that the Kashunamiut School has been number one on the Department of Education's list. The school replacement has been through the planning stage. The funding source would be the Alaska Housing Finance Corporation (AHFC) bond package. He observed that a parallel amendment would be needed in SB 360. Representative Mulder acknowledged the need for a replacement school in Chevak and suggested that it be addressed in the next legislative session. A roll call vote was taken on the motion. IN FAVOR: Davies, Foster, Grussendorf, Moses, Mulder OPPOSED: Davis, Kelly, Kohring, Martin, Therriault, Hanley The MOTION FAILED (5-6). Co-Chair Hanley MOVED to ADOPT Amendment 32 (copy on file). Amendment 32 is a technical amendment to correctly identify section 116 (b) as a capital project. There being NO OBJECTION, it was so ordered. Representative Mulder MOVED to ADOPT Amendment 33 (copy on file). He explained that the amendment would add $1.2 million dollars to the Department of Public Safety for statewide academy deferred maintenance, repair and construction and $1,090,00 million dollars to the Department of Environmental Conservation for Cordova water system improvements. Representative Grussendorf clarified that the Sitka Academy did not receive funding in the previous fiscal year. There being NO OBJECTION, Amendment 33 was adopted. Representative Mulder MOVED to report HCS CSSB 231 (FIN) out of Committee. There being NO OBJECTION, it was so ordered. HCS CSSB 231 (FIN) was REPORTED out of Committee with "no recommendation." SENATE BILL NO. 360 "An Act authorizing the issuance of bonds in the amount of $257,600,000 by the Alaska Housing Finance Corporation for certain capital projects; relating to those bonds and to the appropriation of revenue of the Alaska Housing Finance Corporation; and providing for an effective date." Representative Mulder MOVED to ADOPT Amendment 3 (copy on file). Amendment 3 includes $1.2 million dollars to the Department of Public Safety for statewide academy deferred maintenance, repair and construction and $1,090,00 million dollars to the Department of Environmental Conservation for Cordova water system improvements in order to conform SB 360 to SB 231. There being NO OBJECTION, it was so ordered. Representative Mulder MOVED to ADOPT Amendment 4 (copy on file). Amendment 4 includes the entire amount of bonding, issuance and reserves and clarifies that the total bond indebtedness is $199.634.809 million dollars. There being NO OBJECTION, it was so ordered. Representative Mulder MOVED to report HCS CSSB 360 (FIN) out of Committee with the accompanying fiscal note. HCS SB 340 was REPORTED out of Committee with "no recommendation" and with a fiscal impact note by the Department of Revenue, 5/5/98. ADJOURNMENT The meeting adjourned at 11:45 p.m. House Finance Committee 10 5/11/98 p.m.