SENATE BILL NO. 249 An Act establishing the Alaska capstone avionics revolving loan fund and relating to the fund; and providing for an effective date. Representative Thomas asked if Fish and Game and other Alaska enforcement aircraft that does not want to be identifiable would be exempt from the program. FRANK RICHARDS, DEPUTY COMMISSIONER OF HIGHWAYS & PUBLIC FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, said there was a Department of Fish and Game amendment to equip seven aircraft, but he thought Representative Thomas might be referring to Department of Public Safety law enforcement aircraft. The Department was reluctant to equip planes that they did not want to be tracked. He said the Federal Aviation Administration (FAA) was working on technology to prevent transmission so that certain aircraft could be equipped and not be tracked. Representative Thomas thought if the avionics program was being brought forward for safety reasons it seemed counterproductive to have aircraft that could not be seen. Representative Gara asked if the program had ever been a grant program. Mr. Richards replied that initially the aviation community had talked about a grant program. Representative Gara wondered what the interest rate would be and if the program would lose or make money. GREG WINEGAR, DIRECTOR, DIVISION OF INVESTMENTS, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, said the interest rate would be 4%. All expenses would be paid for out of the fund. At sunset in 2020 the earnings would return to the General Fund. There was a discussion about inflation proofing the fund so that it would not cost the State over time. 1:53:41 PM Co-Chair Chenault referred to the language in the bill establishing the interest rate at not less than 4% and questioned who within the Department under what authority would establish the exact interest rate. He wanted to know why the bill did not establish the rate. Mr. Winegar replied that the rate could be stipulated in the law, or regulations could establish it. The Division came up with 4% because it was low and provided for reasonable repayment amounts, while ensuring that the fund paid its own way. 1:55:19 PM Representative Gara wanted a standard, such as "prime plus one and a half," that would adequately capitalize the fund so that by 2020 the State would get its money back. The statute gives no guidance. Mr. Winegar replied that the language is patterned on other similar loan programs. He said a number of variables played into the decision. Until the funds are loaned out they are invested by the Department of Revenue, and those earnings will also be retained by the fund. The numbers had been run with conservative default rates and he was confident that the original principal plus a substantial amount of earnings would go back to the General Fund. Representative Gara proposed language stipulating that the rate would reflect an amount that would protect the purchasing power of the endowment. Mr. Winegar thought the language already in the bill was sufficient. Representative Crawford stated the goal was to make the skies safer and he wanted to see the avionics operating. If inflation continues at about 3-4%, he thought the 4% minimum would work. Mr. Winegar responded further that the FAA has done studies estimating that savings from lost lives and search and rescue costs would be well over $800 million to the State over a 27-year period. 1:59:34 PM Representative Gara reiterated his concerns with not putting standards for rates in legislation. Co-Chair Chenault asked if $4.8 million would be enough considering the goal is to equip 4,000 aircraft. Mr. Winegar replied that the amount would probably not cover equipping all of the aircraft. However, a revolving fund allows leveraging the money; the Division could potentially make about $13 million in loans with that amount. If loan demand is higher, they may need to come back. Co-Chair Chenault thought the program should move forwarding order to save Alaskan lives. Representative Kelly stated his support for the program. 2:03:46 PM Co-Chair Meyer referred to the fiscal notes. Representative Joule asked if an aircraft equipped with avionics would be easier to locate if it had an accident. Mr. Richards answered that it would be. Vice-Chair Stoltze MOVED to REPORT SB 249 out of Committee with individual recommendations and with the accompanying fiscal notes. Vice-Chair Stoltze OBJECTED for discussion. Vice-Chair Stoltze reported that airplane accidents have killed more of his friends than car accidents. He referred to accidents that had happened. Many Alaskans shared those experiences. He thought the program was a priority. Vice-Chair Stoltze REMOVED his OBJECTION. There being NO further OBJECTION, it was so ordered. SB 249 was REPORTED out of Committee with a "do pass" recommendation and with attached new zero fiscal note by the Department of Transportation and Public Facilities and fiscal note #1 by the Department of Commerce, Community and Economic Development.