HB 90-STATE TREASURY WARRANTS CHAIR ANDERSON announced that the final order of business would be HOUSE BILL NO. 90, "An Act requiring warrants drawn by the Department of Administration against the state treasury to be negotiable instruments." 3:40:43 PM REPRESENTATIVE MAX GRUENBERG, Alaska State Legislature, explained that HB 90 simply makes state warrants negotiable instruments. The state pays its bills with warrants. He informed the committee that the question as to whether these warrants are legally negotiable instruments under the Uniform Commercial Code (UCC) arose. The Alaska Supreme Court case, Univentures [National Bank of AK v. Univentures 1231 (1/24/92), 824 P 2d 1377] case, to hold that warrants are negotiable instruments. In the aforementioned case the banks were put in the position in which the state would say the warrants weren't negotiable instruments, and therefore the banks would be left "holding the bag." Representative Gruenberg specified that a warrant is similar to a check and the state still pays its employees with warrants. He informed the committee that this legislation was introduced last year, went through the House State Affairs Standing Committee and passed the full House and proceeded to the Senate Rules Standing Committee, where it resided. He said that he wasn't aware of any objection to this legislation. REPRESENTATIVE LEDOUX inquired as to how the state failed to honor its instruments. REPRESENTATIVE GRUENBERG answered that being a warrant, the state took the position that they weren't instruments and the dishonor provisions of the UCC didn't apply. He recalled introducing legislation on this back in the mid 1980s. The state was so opposed to this, that it took the banks taking the matter to the Alaska Supreme Court where it upheld that the warrants were negotiable instruments. REPRESENTATIVE LEDOUX clarified that she was asking why the state was not honoring its own warrants. REPRESENTATIVE GRUENBERG specified that it would depend upon the individual warrant. The state may have felt the vendor was supplying defective merchandise, for instance, and thus didn't want to honor the warrant. He recalled that in the Univentures case the state was a tenant in an office building owned by Univentures. There was a dispute between the partners of Univentures and the state was notified that it shouldn't pay the monthly rent to one of the partners of Univentures, which resulted in the state stopping payment on the warrant. The state was directed to hold the rent in abeyance until a court appointed receiver was named. Meanwhile, National Bank of Alaska had paid out $28,143.47. Representative Gruenberg noted that the aforementioned wasn't the largest warrant that was dishonored. REPRESENTATIVE GUTTENBERG surmised that the state has followed the court ruling and this legislation merely inserts conforming language in statute. REPRESENTATIVE GRUENBERG agreed. 3:48:44 PM KIM GARNERO, Director, Division of Finance, Department of Administration, confirmed that this legislation simply codifies in statute the earlier mentioned 1992 Alaska Supreme Court. The case meant that warrants should be treated as checks in the banking industry. Since that decision, the state has administered its warrants as negotiable instruments, and therefore no administrative changes are necessary if this legislation passes. CHAIR ANDERSON, upon determining there were no questions or witnesses, closed public testimony. 3:50:10 PM REPRESENTATIVE GUTTENBERG moved to report HB 90 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, it was so ordered. ADJOURNMENT  There being no further business before the committee, the House Labor and Commerce Standing Committee meeting was adjourned at 3:50:48 PM.