SENATOR TAYLOR introduced CS FOR SENATE BILL NO. 161(STA) (INTEREST RATES: JUDGMENTS/TAXES/ROYALTIES) sponsored by the Senate Rules Committee by request of the Governor. SENATOR TAYLOR invited JOE GELDHOF, from the Attorney General's Office to testify on SB 161. Number 435 MR. GELDHOF began by suggesting that questions relating to the revenue aspects of the bill, Sections 4 and 5, could be addressed to the Revenue Department, and he offered to get those persons for testimony. MR. GELDHOF referred to Section 1 which is the interest on judgment and prejudgment interest, and noted that the Administration, the Attorney General, and the Department of Transportation and Public Facilities strongly support a move into the market rate for setting interest, both for judgement or prejudgment interest. MR. GELDHOF offered some amendment language for page 2, which would alter the language in the State Affairs version to return the bill to a tort reform compromise. He explained, in personal injury cases, a person who prevails, might be entitled to prejudgment interest, but he proposed to change in other cases, not set by contract, that prejudgment interest would only be paid from the date of the issuance of the summons. He offered to answer questions about the proposed amendment for Section 1. SENATOR DONLEY indicated he didn't like the bill, although would support Section 2, but not the rest of the bill. Number 518 SENATOR TAYLOR clarified the language MR. GELDHOF was proposing to amend in Section 1 dealing with when prejudgment interest would accrue: from the date of entry of the judgement or decree, from the date of injury or harm, when the initial summons was issued, or when the initial counter claim or cross-claim was filed - whichever was earliest. MR. GELDHOF agreed, and SENATOR TAYLOR further explained it would make a slight difference in letters-of-demand to be sent or notification to be given to the other side. MR. GELDHOF said that was his understanding of the status quo in personal injury cases which had been changed in State Affairs, and he explained his preference for the original language. He wanted to force the demand as well as the settlement - which is the status quo. He said the amendment would change a contract provision eliminating the prejudgment interest, but would propose a "put up or be quiet" approach, for those who might wait to sue a day before the statute of limitations before asking for prejudgment interest. This would be for personal injury cases only. MR. GELDHOF explained for all other cases, the bill proposed prejudgment interest which would accrue from the date of summons in non-personal injury cases. SENATOR DONLEY argued this didn't make sense and would defeat the purpose. He said it would encourage the filing of a lawsuit instead of mediation. Number 544 MR. GELDHOF suggested the committee might want to make the same provisions for personal injury as a demand, but he described the breach of time before a lawsuit is filed. He also described the involved agencies as not being wild about prejudgment interest for a period of time before a suit is filed. SENATOR DONLEY chided the Department of Law as defending the agencies while the "poor little guy" suffers at the hands of the department for wrongful withholding of payment. He said the legislature was there to protect those people against the thinking contemplated in the bill. MR. GELDHOF thought SENATOR DONLEY had some valid considerations, but he claimed the legislation provided for the period not specified by contract what and how prejudgment would be paid. He reiterated the request of the legislation for a market interest rate principal, and he defended the amendment to reverse the changes by the State Affairs Committee. SENATOR TAYLOR thanked MR. GELDHOF for his testimony. TAPE 93-44, SIDE A Number 001 SENATOR DONLEY thought there was a significant number of people who would be impacted by the legislation and could have a reverse effect by going to a market rate. He thought this solution should be reserved for a decision by the legislature rather than the Commissioner of Revenue. SENATOR DONLEY discussed with SENATOR TAYLOR about a possible constitutional separation of powers question, and he thought the present low market rate would not be an incentive for settlement. SENATOR DONLEY reiterated his concerns for the legislation with the exception of Section 2, which he thought made sense for local governments, and he gave a possible illustration. SENATOR TAYLOR agreed SENATOR DONLEY had given a correct illustration, but he thought there was a problem that needed to be addressed, dealing with the fluctuation of interest rates. There was a general discussion on the diversity of interest rates. SENATOR TAYLOR invited DAN BEARDSLEY, representing the Department of Transportation to testify. MR. BEARDSLEY said he echoed many of the concerns that have been expressed, and he agreed there presently was a period of no incentive to reach a settlement with some of the eminent domain cases. He thought there was less a timing problem, but more of an incentive to settle or to resolve the matter. His department favors the market rate as an incentive not to drag out a case. Number 109 In reference to page 3, Section 5, SENATOR TAYLOR agreed with the way in which it was expressed by SENATOR DONLEY where the determination is left to the Commissioner of Revenue to decide the market rate. JEFFERY OTTENSEN, Chief of Right-of-Way for the Department of Transportation, asked to expand on the previous testimony, and SENATOR TAYLOR invited him to do so. MR. OTTENSEN referred to line 13 on page 1, where the interest rate appears to be set no later that December 15 and explained it was not an opinion of the Commissioner of Revenue, but is information based on the average accepted auction price for auctions of 52-week United States' Treasury bills (T-bills). There was a general discussion on this manner of setting the rate. Number 141 ANN WILLIAMS, representing the Municipality of Anchorage, asked to speak to the committee. She said SENATOR DONLEY had laid out quite fairly the position of the Municipality of Anchorage. She, too, wanted Section 2 to remain in the bill and thanked SENATOR DONLEY for expressing the concerns of the Municipality of Anchorage. SENATOR JACKO moved to pass CS FOR SENATE BILL NO. 161(STA) (INTEREST RATES: JUDGMENTS/TAXES/ROYALTIES) from committee with individual recommendations. SENATOR DONLEY objected. SENATOR DONLEY said he would have no problem with moving Section 2, but he thought there should be more public input on the remainder of the bill. He reviewed areas of concern in the legislation and suggested the legislation be revised over the interim to give a more comprehensive assessment of the goals for the legislation. SENATOR DONLEY suggested removing Section 2 and sending it on as a separate bill. Before a vote was completed, SENATOR JACKO withdrew his motion to move SB 161. SENATOR TAYLOR thought Section 1 was good, also, and suggested that those members wishing to make changes, to bring some prepared amendments next Monday. There was agreement to this.