SENATE BILL NO. 142 An Act relating to the Alaska regional economic assistance program; and providing for an effective date. Co-chair Pearce directed that SB 142 be brought on for discussion. Senator Jacko explained that the Alaska regional economic assistance program was statutorily established in 1988. It currently includes 13 ARDORs funded through the Dept. of Commerce and Economic Development. ARDORs are nonprofit organizations that provide a link and effective delivery system between private, state, and federal economic development resources for local residents and small businesses. The bill effects three changes in the law. The current $50.0 maximum each ARDOR may receive is increased to $100.0. Present law also requires a dollar-for-dollar match. The proposed bill provides flexibility in state match requirements based upon the capability of each organization to raise matching funds. Under section 3 of the bill, contracts between state agencies and ARDORS are exempt from the state procurement process. Language within secs. 1 and 2 limits the civil tort liability of ARDOR board members and staff. Senator Jacko explained that current funding for ARDORs, particularly in rural Alaska, is inadequate to ensure a necessary level of operation. Hence need for the above- noted increase from $50.0 to $100.0. A total of $1.4 million annually will be needed for the 13 designated ARDORs and the new ARDOR being organized in the Matansuka-Susitna Borough. There is $650.0 in the Governor's FY 94 operating budget. The $750.0 fiscal note brings the total to $1.4 million. Senator Jacko directed attention to a sectional analysis for the bill as well as accompanying letters of support. CHRIS GATES, Director, Division of Economic Development, Dept. of Commerce and Economic Development, and TOM LAWSON, Business/Regional Development, Division of Economic Development, Dept. of Commerce and Economic Development, came before committee. Mr. Gates spoke in support of the legislation, advising that it would "help local economic development organizations do their job better in rural and urban Alaska." Mr. Gates explained that the 13 existing ARDORs are functioning well. He noted potential for new organizations in Mat-Su and the Tanana area near Fairbanks. Approximately 93% of Alaska's population is presently represented by ARDORs. It is the only "ground-up" based economic development tool between the state and local entities. There are in excess of 200, local board members attempting to create jobs and development within their areas. He pointed to a listing of projects and jobs and specifically noted businesses and economic activity in rural communities. ARDORs are also involved in the schools, teaching basic business fundamentals to students. In response to a request from Senator Jacko, Mr. Gates explained that section 3 of the bill allows the state to contract with ARDORs "to do specific projects or specific economic development things within the communities without going through the normal competitive bidding situations." He then presented several examples of contractual arrangements. Speaking to limited liability provisions, Mr. Gates explained that they protect volunteer board members from liability relating to hazards associated with the physical facility. Co-chair Frank voiced his belief that ARDORs meet needs in certain areas but questioned need for an additional organization in Fairbanks which already has a borough government, city government, the Fairbanks industrial development corporation, small business assistance center at the University of Alaska, etc. He suggested that ARDORs may well serve rural and regional needs. However, it does not appear to make sense to establish them within organized and developed municipalities. Co-chair Pearce attested to beneficial activities by the Anchorage ARDOR which markets the international airport and works with the city and state to bring industry to Anchorage. Co-chair Frank questioned whether the state should be funding well organized ARDORs in Anchorage, Fairbanks, and the Southeast Conference. Mr. Gates voiced support for the organizations, stressing that the small amount of state funding is a catalyst for federal grants and private moneys. The state funds approximately 16% while the ARDORs garner federal and private moneys totalling 84%. The Fairbanks ARDOR has provided technical assistance to 472 businesses and nonprofits. Mr. Gates next listed some of the projects in Fairbanks. Both Co-chair Frank and Senator Sharp took exception to the claim that the ARDOR had assisted with the hospital expansion project. Co-chair Frank noted that the hospital foundation has been active for thirty years and probably did not need assistance. Senator Sharp suggested that ARDOR connection to many projects merely consists of an ARDOR representative on the board. He questioned whether the ARDOR had actively participated in economically beneficial aspects of the organizations. Senator Jacko agreed that some ARDORs are more successful than others and that some regions of the state probably need them more than others. He stressed need for ARDOR efforts in rural areas. Co-chair Frank agreed. In response to an inquiry from Co-chair Pearce, Mr. Gates directed attention to language within section 4, requiring the department to establish a formula that determines the amount of the required match based upon the capability of each organization to generate money from nonstate sources. A sliding scale would allow rural ARDORs easier access to funding. Urban ARDORs that can more easily generate match moneys would work on a one-to-one match. Co-chair Frank expressed a preference for reducing the $750.0 fiscal note and focusing the program on areas less capable of raising funds locally. Discussion followed concerning organization and activities of the Fairbanks ARDOR. Senator Sharp asked that the department present a list of projects initiated by ARDORs and that the list indicate whether the projects are "in a profit making mode." Mr. Gates advised that Alaska derived $3.5 million in private and federal economic development as a result of ARDORs. End, SFC-93, #55, Side 1 Begin, SFC-93, #55, Side 2 Co-chair Pearce suggested that language at section 4 specify that the department establish a formula for determining both the amount of the match as well as the maximum amount for which each ARDOR could apply. She expressed concern that as budgets become increasingly tight, $100.0 in funding for all 15 ARDORs will be more difficult to obtain. The Co-chair further suggested that a $250.0 note be prepared to accompany the bill, allowing the conference committee to determine the level of funding during budget deliberations. Mr. Gates advised that a priority for assisting ARDORs could be established to meet the foregoing intent. Co-chair Pearce stressed need to have something on paper to inform each ARDOR of the amount it is eligible to receive. She then directed attention to page 2, line 16, and suggested that the following be added after "determines:" both the maximum an ARDOR can apply for and Mr. Gates explained that both the priority for funding and the match would allow the department to prioritize scarce resources. He then suggested adding the following at page 2, line 17, following "match:" both determines the amount of the match required, and the priority for funding. Senator Rieger voiced discomfort over addition of the above new language. He noted that the legislative opinion regarding priorities may deviate dramatically from that of the executive branch. Mr. Gates explained that the department views ARDORs in terms of three types: 1. Urban (railbelt) 2. Suburban 3. Rural The 13 existing ARDORs are broken down into those areas. The program could specifically target suburban and rural ARDORs. Co-chair Pearce voiced reluctance to preclude railbelt ARDORs. The department should be able to respond to ARDORs that help those who are willing to help themselves. Discussion followed between Co-chair Pearce and Mr. Gates concerning the method of distribution of moneys should full funding not be provided. Both Senators Rieger and Jacko expressed a preference that language within section 4 remain as set forth in CSSB 142 (CRA). Senator Jacko said that if the fiscal note is reduced to $250.0, the program would become more competitive, and ARDORs would have to bring forth better proposals. He said he had no problem with that. Senator Sharp asked if any of the 13 existing ARDORs had experienced problems coming up with the needed match. Mr. Gates explained that Bering Straits in Nome has had "quite a bit of difficulty . . ." He stressed that the private sector base does not generally exist in rural areas. It is thus difficult to raise private matches without an economy to draw from. The department has thus endeavored to allow in-kind, airline tickets, etc., to serve as part of the match. Co-chair Pearce called for additional questions or comments. None were forthcoming. Co-chair Frank MOVED that the committee prepare a new fiscal note to accompany the bill, reducing funding from $750.0 to $250.0. No objection having been raised, IT WAS SO ORDERED. Co-chair Pearce called for additional testimony from the public. None was forthcoming. She then queried members regarding disposition of the bill. Co-chair Frank MOVED that CSSB 142 (CRA) pass from committee with individual recommendations and the $250.0 fiscal note. No objection having been raised, CSSB 142 (CRA) was REPORTED OUT of committee with a $250.0 SFC fiscal note for the Dept. of Commerce and Economic Development. Co-chairs Frank and Pearce and Senator Jacko signed the committee report with a "do pass" recommendation. Senators Kelly, Sharp, and Rieger signed "no recommendation." TELECONFERENCE