HOUSE FINANCE COMMITTEE April 15, 1997 1:30 P.M. TAPE HFC 97-97, Side 1, #000 - end. TAPE HFC 97-97, Side 2, #000 - end. TAPE HFC 97-98, Side 1, #000 - end. TAPE HFC 97-98, Side 2, #000 - end. CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:45 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 Senator Lyda Green; Lynne Smith, Staff, Representative Bunde; Nancy Buell, Director, Division of Teaching and Learning Support, Department of Education; James Popham, IOX Assessment Associates; Tuckerman Babcock, Staff, Senator Green; Marty Rutherford, Deputy Commissioner, Department of Natural Resources; John Baker, Assistant Attorney General, Department of Law. SUMMARY HB 146 "An Act relating to competency testing requirements for secondary students; and providing for an effective date." HB 136 was HELD in Committee for further consideration. HB 244 "An Act relating to cost-of-living adjustments to state employee compensation; and providing for an effective date." HB 244 was reported out of Committee with a "do pass" recommendation and with three zero fiscal notes by the Office of the Governor, the Legislative Affairs Agency, and the Alaska Court 1 System. SB 109 "An Act relating to land used for agricultural purposes and to state land classified for agricultural purposes or subject to the restriction of use for agricultural purposes only; and annulling certain program regulations of the Department of Natural Resources that are inconsistent with the amendments made by this Act." HCS CSSB 109 (FIN) was reported out of Committee with a "do pass" recommendation and with five fiscal impact notes, three by the Department of Natural Resources, one by the Department of Law, and one by the Alaska Court System. HOUSE BILL NO. 146 "An Act relating to competency testing requirements for secondary students; and providing for an effective date." LYNNE SMITH, STAFF, REPRESENTATIVE BUNDE, testified in support of HB 146. She asserted that many high school graduates are finishing school and receiving high school diplomas without the skills necessary to survive in the world. Ms. Smith noted that over twenty states now conduct student competency tests for a standard high school diploma. The students in these states must pass a test with a minimum score before they are allowed to graduate. Three states also have an exit exam for an "Endorsed Diploma." To earn this, the students not only have to pass the test, but must score at a designated level, higher than the minimum required for a regular diploma. "Honors Diplomas" are awarded in three states for higher testing levels. Ms. Smith observed that under the provisions of CS HB 146 (HES), a student is required to pass a competency examination in the areas of reading, English, mathematics, science, Alaska and United States history before receiving a high school diploma. The test would be selected by the Department of Education. A pupil who failed this examination and was no longer in attendance would get a certificate of attendance. It would indicate the number of years of attendance, but would also show that the pupil has neither passed a competency examination nor received a diploma. The pupil would have the opportunity to be re- examined, within three years after the pupil left high school. 2 Representative Martin provided members with Amendment 1 (copy on file). He noted that the amendment would begin testing earlier. NANCY BUELL, DIRECTOR, DIVISION OF TEACHING AND LEARNING SUPPORT explained that it is important for students to have multiple opportunities to take the test and be remediated. Co-Chair Therriault summarized that the test would be administered to earlier grades so that there would be a number of years for students to be brought up to speed. Ms. Buell noted that the Department could not only administer the test in the senior years. Co-Chair Therriault observed that the test would be administered in grades 9 through 12. Representative Mulder noted that the committee substitute would test United States and Alaska history. Ms. Buell noted that social science tests are developmental. She stressed that social science is a broad field. She stated that social science tests are more complex. She emphasized that it would be difficult to estimate the cost of these tests. Representative Mulder spoke in support of testing in mathematics, English and reading. He failed to see how a diploma could be denied to a child that did not have an understanding of Alaska history. Ms. Buell observed that the Department cautioned against the inclusion of this subject area. Representative Martin maintained that the development of humanity and civilization are basic subjects. He stated that the Department of Education should be able to evaluate the students. He noted that Amendment 1 would test children in grades 4, 8 and 11, and make sure remedial courses are available. Ms. Buell clarified that the Department of Education doesn't have the expertise to develop tests that will withstand legal scrutiny, from the state level, to deny a diploma. She observed that teachers throughout the districts are adequately testing competency. She emphasized that there are no mandated curriculums or standards in the State. Representative Kelly questioned why there is a three year limit on the test. Ms. Smith observed that the Sponsor felt that it would be a good idea to enable the student to have another chance. She observed that Representative Bunde felt 3 that three years was a reasonable amount of time to retake the test. Representative Kelly spoke in support of extending the time that a student could take the test. Representative Grussendorf noted that good students may not be able to pass the test. He asked what would happen to children that cannot pass the test. Ms. Buell stated that the Department is concerned about students that do not pass the test. She observed that studies in Texas show that adequate students have dropped out of school after failing the test, due to test anxiety or other reasons. She stressed that students that could succeed in secondary education will fail the test due to other factors. Representative Grussendorf stated that the system sometimes fails in the delivery of the initial skills, such as reading and writing. Co-Chair Hanley clarified that the legislation would not affect GED's. Ms. Buell noted that GED's cannot be given to anyone who is currently in school. Co-Chair Hanley noted that the student has three years after they leave high school to pass the test. He felt that three years was a reasonable extension. Ms. Buell noted that other states have begun testing in the 8th or 9th grades. She stated that it takes 3 to 4 years to get everyone through the test. She added that there will be a substantial dropout rate following the institution of the test. Co-Chair Hanley stated that it is clear that testing needs to start earlier. He maintained that if able students are failing the test then the test is flawed. He stated that, ideally, it would be up to each individual school district, starting in the first grade, to make sure their students were trained. He observed that the question is "at what place do we as a State mandate, so that the school districts that aren't doing their jobs are forced to do have a test." Representative Davis expressed concern that the test would compete with the GED program. He asked how the content of the test would relate to the GED test. Co-Chair Therriault noted that pupils have to meet all the requirements of high school and pass the test to get a high school diploma. JAMES POPHAM, IOX ASSESSMENT ASSOCIATES testified via the teleconference network. He stated that he has developed 4 assessment tests and has testified regarding assessment tests. He explained that the motivation behind assessment tests is to increase the caliber of the education that the State's children are receiving. He observed that Alaska is in a position to profit from the experiences of other states. He emphasized that the nature of the test is the most important issue. He maintain that if the test is inappropriate or cheaply purchased that education in Alaska will not benefit. Mr. Popham explained that the tests measure the important knowledge and skills that legislators think a high school student ought to possess before receiving a high school diploma. He stated that if the test conceptualizes those skills in a manner that the teachers of the state can address then the test becomes a powerful catalyst to improving the quality of the instruction. If the test is not well designed it can be an impediment to high quality instruction. The test functions as a curriculum magnet. Whatever is assessed becomes a target of instruction for the state's teachers. He cautioned against an "off the shelf" test, such as a standardized achievement test. He noted that these tests are not designed as instructional targets. He observed that these tests cannot be defended in court. He stated that it costs between $150 and $250 thousand dollars to develop a test per subject matter. He stressed that this level of funding has to be available to assure that the test will withstand litigation. Co-Chair Hanley observed that HB 146 provides that the Department of Education develop and score the test. He asked what areas are the most commonly tested. Mr. Popham cautioned against installing measures of content that would not be considered mainline for United States citizens to possess, such as Alaska history. He stated that it would be a violation of a child's constitutional right to be refused a diploma for not passing a test on Alaska history. He observed that most tests focus on reading, language arts and mathematics. Newer tests have included science and social studies. He noted that the first tests were developed to assess basic skills. He noted that there are four major areas reading/language arts, mathematics, science, and social studies. In response to a question by Representative Martin, Mr. Popham noted that tests have been installed because legislators did not believe that students were receiving a proper education. Tests have been used as a lever to increase quality. He cautioned that the installation of a badly conceived test has negative impacts. 5 Representative Martin noted that legislators are expressing the frustration of parents, employers and colleges. Mr. Popham agreed that citizens have cried out for the tests. He noted that tests, that are built properly, benefit structural planning decisions and improve the quality of schooling. Representative Mulder asked if the scope was limited to only reading, writing, and mathematics, would the State have a more defensible test. Mr. Popham indicated that limiting the subject matter would make it easier to build first rate, legally defensible tests. He noted that there has been ample experience and guidance in the area of basic skills. He observed that the work of other states could be used. Mr. Popham noted that educators and non-educators must review each item for bias. Representatives of individual minority groups must review each item. He emphasized that it is too important not to do the job well. Representative Mulder asked if the State would save money by limiting the scope. Mr. Popham agreed that the State would save money by limiting the scope. He emphasized that any time an exotic area, such as social studies, is considered the cost is greater. He noted that social studies includes history, geography and government. He recommended that the State start with what is well known. Representative Martin maintained that if a person is going to be a full citizen of America they must learn the full political process. (Tape Change, HFC 97-97, Side 2) Mr. Popham observed that the inclusion alone of social studies as a test area would not be contested in court. However, if the test was not properly developed, with involvement of all concerned constituencies, it could lead to a court challenge. He stated that tests cost approximately $200 to $250 thousand dollars per subject area. Co-Chair Hanley stated that the intent is to test for skills versus understanding. He observed that the ability to read allows learning in a lot of areas. He emphasized the benefit of verbal and written communication. He asked how often tests should be issued. Mr. Popham recommended that the law not include all the details. He stated that students should be given four years notice that they are going to master the skills that are going to be tested. He observed that no state has been able 6 to require testing with less than three years notice. Students should begin testing in the ninth or tenth grade. Multiple forms of the test are needed. Co-Chair Therriault summarized that the first test would be offered to ninth graders two years from now. The test would be phased in over four years. Mr. Popham stated that parents and children should be notified in advance of the first test. He observed that some lawsuits have claimed that students have been emotionally marked by doing bad on the first test. Parents should be given a sample test. Representative Martin emphasized that parents and educators need to be responsible. Mr. Popham stated that teachers and administrators do not like testing. He agreed that the focus should be on the educational delivery system. He stressed that the notion is to have reform stimulated by the tests. Representative Grussendorf observed that many tests depend on memory. He asked if a true skills test could be constructed. Ms. Buell stated that the Department of Education does not have the expertise to construct the test. She referred to the Alaska Student Content Standards. She observed that the standards address learning in a more sophisticated way. She stated that the CAT 5 could not be used as an exit exam. Representative Martin MOVED to adopt Amendment 1 (copy on file). He observed that the amendment incorporates recommendations by Anchorage educators. Amendment 1 would assess students at grades 4, 8 and 11. The amendment would also require intervention plans to be developed to assist students whose assessments reveal they have not mastered skills required for the exit exam. Co-Chair Therriault noted that there will be multiple chances for students to be tested. He observed that school districts can implement testing at earlier grades. He asked if the fiscal impact of remedial instruction had been considered. Representative Martin responded that he did not know the impact of remedial instruction requirements. Co-Chair Therriault reiterated that testing will occur in grades 9 through 12. Representative Martin stressed that testing should begin in earlier grades. Ms. Buell explained that the Department will have bench marks available to school districts, of what students will 7 need to know in each grade. Co-Chair Therriault observed that most states administer exit tests in high school. Co-Chair Hanley noted that under the amendment the Department of Education would determine the examination, but the district would set their own standards. Representative Martin responded that perhaps the Department of Education would be a better facilitator. Co-Chair Therriault pointed out that individual districts can do what they want to prepare their students. The State establishes the hurdle for graduation. Representative Martin noted frustration by teachers. A roll call vote was taken on the MOTION to adopt Amendment 1. IN FAVOR: Martin, Grussendorf, Foster, Kohring, Kelly OPPOSED: Mulder, Davis, Hanley, Therriault Representatives Moses and Davies were absent from the vote. The MOTION PASSED (5-4). Representative Mulder discussed Amendment 2 (copy on file). Amendment 2 would delete the requirement for testing science, and social science. He stated that the amendment would leave in the basic areas of reading, writing and mathematics. He stressed that the amendment would reduce the fiscal note and future litigation costs. Representative Kelly MOVED to rescind the Committee's action in adopting Amendment 1. Representative Kelly expressed concern with the fiscal cost of the amendment. There being NO OBJECTION, it was so ordered. Representative Martin spoke in support of Amendment 1. He maintained that the amendment will be minor in relationship to the failure of students in earlier school years. Co- Chair Therriault asserted that establishment of the test will cause school districts to reevaluate their students. Representative Davis emphasized that the legislation has been drafted around other states' experiences. He stressed that the amendment should be addressed in separate legislation. He stated that the legislation is the first step. Representative Mulder agreed that HB 146 is the starting point from which to expand. He emphasized that if the legislation is too broad and encompassing it will fail. 8 A roll call vote was taken on the MOTION to adopt Amendment 1. IN FAVOR: Grussendorf, Kohring, Martin OPPOSED: Mulder, Davis, Foster, Kelly, Moses, Hanley, Therriault Representative Davies was absent from the vote. The MOTION FAILED (3-7). Representative Mulder MOVED to adopt Amendment 2. There being NO OBJECTION, it was so ordered. Representative Mulder asked if the Department of Education's fiscal note could be revised downward. Ms. Buell stated that the Department's fiscal note was underestimated. She stressed that the fiscal note is conservative. She observed that the fiscal note did not anticipate implementation of tests for two years. She observed that funding should be transferred from personal services to the contractual line. She stressed the need for expertise. She did not think the fiscal impact of the first year would be changed. She emphasized that if the test security is lost it has to be redeveloped and reprinted. In response to a question by Co-Chair Therriault, Ms. Buell stated that additional clerical support should be maintained. She noted that Department of Education staff has to oversee security, confidentially, scoring, and transmission of data. She estimated that one higher level staff person could be eliminated. She observed that the Department of Education currently has one person for all assessment tests, with no clerical support. She noted that this is almost the only general fund position that "does this kind of thing". Other positions are supported with federal funds. She emphasized that it is not possible to redeploy staff from other tasks. Co-Chair Hanley recounted that the cost to develop the test is around $200 thousand dollars per test. He observed that reading and English would be one test. He stressed that only two tests would be developed. Ms. Buell noted that travel is necessary to convene groups of people who will scrutinize the test. Co-Chair Therriault noted that the educational specialist II position, at range 21A, costs $71,602 thousand dollars. He suggested that this amount be removed from personal services. He stated that he would support $400 thousand dollars in contractual. Ms. Buell stated that this would be 9 the minimum amount needed. She maintained that reading is a separate area from the rest of language arts. Representative Kohring spoke against the legislation. He questioned the cost of the legislation. Ms. Buell noted that Hawaii's assessment budget is $500 thousand dollars per year. Hawaii's student population is similar to Alaska's. Representative Kohring emphasized the need to reduce the budget. Ms. Buell stressed that the Department of Education cannot support the legislation if it is not adequately funded. In response to comments by Representative Martin, Co-Chair Therriault emphasized that tests have to be defensible in court. HB 146 was HELD in Committee for further consideration. (Tape Change, HFC 97-98, Side 1) SENATE BILL NO. 109 "An Act relating to land used for agricultural purposes and to state land classified for agricultural purposes or subject to the restriction of use for agricultural purposes only; and annulling certain program regulations of the Department of Natural Resources that are inconsistent with the amendments made by this Act." Co-Chair Therriault provided members with a new work draft, SENATOR LYDA GREEN reviewed the work draft. She noted that page 6, lines 6 - 14 allow a perpetual covenant. Perpetual covenant is extended to cover homestead entry properties. The right to construct housing in a subdivided parcel is granted upon a $4 thousand dollars fee, paid to the State. Senator Green noted that there is a six year statute of limitation on actions brought against a parcel owner. Senator Green stated that the $4.0 thousand dollar fee, for the right to construct housing, shall be adjusted to correspond with the change in the consumer price index (CPI). Senator Green observed that the construction of condominiums is not permitted. Representative Davis questioned if consideration was given to the language "non-commercial entities." Senator Green observed that the owner has the right to construct needed housing for farm related 10 activities. Co-Chair Hanley noted that the fee was reduced from $6 thousand dollars to $4 thousand dollars, adjusted for CPI. Senator Green clarified that Point McKenzie is set aside as different from the other agricultural areas. She emphasized that some of the parcels are so remote that the addition of a home does not increase the value. The right to construct housing on Point McKenzie parcels on future subdivision would be based on an appraisal. Future Point McKenzie parcels owners would not have the choice of paying the $4 thousand dollars fee. Co-Chair Hanley pointed out that he purchased a condo at half of what it sold for in 1981. He maintained that CPI does not always reflect market price. Senator Green stated that the purchaser has the option to do an appraisal. Senator Green referred to an omission in the work draft. She stated that the intention is that anyone currently on Point McKenzie land will fall under the same requirements as other agricultural land holders. Therefore, they could choose to pay the $4 thousand dollars fee or have an appraisal. In the future, land conveyed by the State to an individual will be subdivided by appraisal only. TUCKERMAN BABCOCK, STAFF, SENATOR GREEN discovered that language governing appraisals was inadvertently deleted by the drafter. In response to a question by Representative Davis, Co-Chair Therriault explained that agricultural land holders receive two rights to the land. The legislation would add other rights. Land holders would pay an incremental cost for the additional right. Representative Davis asserted that the $4 thousand dollar fee does not relate to the value of the land. Mr. Babcock explained that the appraisal is on the additional value on the right to construct housing. Appraisal values are estimated at between 0 to $8 thousand dollars. Co-Chair Hanley expressed concern that the fee could rise to $10 thousand dollars with inflation, over-time. He observed that an appraisal would protect the landowner. Representative Davis questioned if future transfers to children of the landowners would be consistent with Article VIII, Section 1 of the Constitution. He observed that preferential conveyance is not in the public interest. Senator Green did not think there would be a constitutional 11 problem. She stressed that the intention is to take the State off the title of the land. SB 109 was HELD in Committee for further consideration. HOUSE BILL NO. 244 "An Act relating to cost-of-living adjustments to state employee compensation; and providing for an effective date." Co-Chair Hanley stated that the legislation makes the non- union salary increases subject to legislative approval. He explained that language in the operating budget denying the contracts did not deny increases for non-union members since they are set in statutory schedule. The legislation will add language that will make non-union salary increases subject to funding from the Legislature. Co-Chair Hanley observed that there is no fiscal impact to the legislation. Without the legislation the departments would have to absorb the cost of the increase. Representative Martin MOVED to report HB 244 out of Committee with individual recommendations and with the accompanying fiscal notes. Co-Chair Hanley reiterated that there is no savings or impact from the legislation. Without the legislation the departments would have to absorb the cost of the increase. There being NO OBJECTION, HB 244 was moved from Committee. HB 244 was reported out of Committee with a "do pass" recommendation and with three zero fiscal notes by the Office of the Governor, the Legislative Affairs Agency, and the Alaska Court System. SENATE BILL NO. 109 "An Act relating to land used for agricultural purposes and to state land classified for agricultural purposes or subject to the restriction of use for agricultural purposes only; and annulling certain program regulations of the Department of Natural Resources that are inconsistent with the amendments made by this Act." Co-Chair Therriault MOVED to adopt work draft, #O-LS0690/L, Chenoweth, 4/15/97. There being NO OBJECTION, it was so ordered. Senator Green provided members with Amendment 1 (copy on file). The amendment would add back the appraisal language. 12 Senator Green reviewed Amendment 1: * Page 8, line 6, after "parcel" delete the remainder of the sentence and insert: (1) is $4,000 for the parcel, subject to adjustment under (h) of this section; or (2) shall be determined by an appraisal by an appraiser under contract to the landowner in the parcel; the appraisal must: (A) be based upon the value of the parcel at the time of the original state conveyance of the agricultural rights, subject to adjustment under (h) of this section; and (B) include the value, determined as of the date of subdivision, of the right to construct housing by the landowner under (d)(3) of this section. * Page 9, Line 29, Delete "all Insert "the" * Page 9, Line 29 After "land" insert "estate" * Page 11, Line 1 After "Act" insert: for those landowners who purchase parcels conveyed by the state after the effective date of this act." Co-Chair Hanley noted that the appraisal must be based upon the value of the parcel at the time of the original state conveyance of the agricultural rights, subject to adjustment under (h) of this section; and include the value, determined as of the date of subdivision, of the right to construct housing by the landowner under (d)(3) of this section. Mr. Babcock explained that there are two options. The first option would be to pay the $4 thousand dollars. The second option would be to have an appraisal. The appraiser is instructed to base the value of the parcel on the value at the time of the original state conveyance, adjusted for inflation. The value of the agricultural rights land adjusted for inflation is compared to the incremental value for the right to construct housing. There is no inflation adjustment for the right to construct housing. Co-Chair Hanley argued that the value would still be based on the CPI. He questioned why it would be necessary to establish a value and then adjust it by the CPI on the 13 parcel. Mr. Babcock observed that the drafter thought that the procedure was the only vehicle for someone to appraise the difference in the value of the land with agricultural rights only and the additional right to construct housing. He stated that subsection (A) or (B) could be deleted. Co-Chair Hanley noted that the appraisal would be based on the value of the property adjusted for the CPI. Mr. Babcock suggested that subsection (A) be deleted. Senator Green noted that the intent was to base the comparison on what it would have cost to buy agricultural rights or patent land at the time of purchase, adjusted for today's price. Representative Moses maintained that there is no reason to get an appraisal. In response to a question by Representative Moses, Senator Green clarified that the land holder determines which method will be used. Co-Chair Hanley spoke in support of allowing the owner to have an appraisal. He noted that if the CPI applied to the dollar amount is over the market value the owner would benefit from an appraisal. Senator Green reiterated that the owner has the choice. Mr. Babcock noted that the Department supports allowing the owner discretion. Co-Chair Hanley MOVED to delete subsection (A). The revised amendment would read: * Page 8, line 6, after "parcel" delete the remainder of the sentence and insert: (1) is $4,000 for the parcel, subject to adjustment under (h) of this section; or (2) shall be determined by an appraisal by an appraiser under contract to the landowner in the parcel; the appraisal must include the value, determined as of the date of subdivision, of the right to construct housing by the landowner under (d)(3) of this section. * Page 9, Line 29, Delete "all Insert "the" * Page 9, Line 29 After "land" insert "estate" * Page 11, Line 1 After "Act" insert: for those 14 landowners who purchase parcels conveyed by the state after the effective date of this act." There being NO OBJECTION, the amendment was adopted. Co-Chair Therriault MOVED to adopt Amendment 1 as amended. There being NO OBJECTION, it was so ordered. Representative Kelly MOVED to adopt Amendment 2 (copy on file). Amendment 2 would delete "or spousal equivalent of the person." He maintained that it should not be the policy of the State to encourage benefits without the contract of marriage. Senator Green did not object to the amendment. Representative Moses thought that the amendment would result in problems due to common law. Co-Chair Therriault pointed out common law marriages do not exist in Alaska. Representative Kohring added his name to Amendment 2 as a sponsor. There being NO OBJECTION, Amendment 2 was adopted. Representative Martin referred to the Department of Law's fiscal note. He noted that the Department of Law will defend challenges to the land instead of the grantee. (Tape Change, HFC 97-98, Side 2) JOHN BAKER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW clarified that currently the State retains the underlying fee interest. Under current law, the State can move to foreclose by bringing an administrative hearing against owners that abuse the agricultural covenant. Under the legislation, the State would be required to bring an original action into court to enforce any alleged violations. Representative Martin noted that this change would result in additional cost to the state. Senator Green stressed that the Department of Law's fiscal note was based on the anticipation that some people would be disgruntled by the fact that there was no charge for the right to construct housing. She concluded that since the legislation now charges for this right there will be less litigation. MARTY RUTHERFORD, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL 15 RESOURCES added that since the fiscal note was compiled the legislation has been amended to allow neighbors or citizens to bring civil action if someone abused the agricultural covenant. Soil and Water Conservation Districts have also been added as arbitrators to ensure that people are aware of the agricultural requirements. She maintained that much of the onerous for management of the covenant has been shared by people in the district. Representative Martin asserted that the person who brings suit should be responsible for the cost. Ms. Rutherford clarified that if the State pursues the civil action the cost would be born by the State. If a citizen pursues a civil action they would bear the cost. She maintained that abuses occur because people are not aware of the limitations. She stressed that there have not been many abuses under current law. She did not anticipate that many actions would be pursued. Mr. Baker agreed that the burden of enforcement would be spread by the private action. He pointed out that the State would still have to monitor any actions that are filed. The State will also have to monitor the parcels and any subdivision or conveyance of the parcels for violations. He noted that there is only one full-time assistant attorney general representing the Division of Agriculture. That position is funded through the Agricultural Revolving Loan and would not be available for this type of enforcement. He emphasized that during 1988 - 1992 there were approximately 70 - 80 litigations at any given time with two and one-half full time attorneys working on the litigation. He observed that under any new legal regime there is a period of adjustment where parties test the parameter of the law. Co-Chair Hanley observed that the intent is to give owners title with a restrictive covenant. The covenant has to be followed. Any actions restricted by the covenant can continue until the owner is sued. If the activity continues over a period of time the court can rule that the covenants are waived for non-enforcement. He pointed out that the Department of Natural Resources anticipates visiting each parcel once every three years to see if the covenants are being followed. He stressed that most violations will be unintentional. He expressed concern that the Department of Law's fiscal note allocates a full-time attorney. He noted that there are 475 parcels. He did not think that there would be 40 cases a year. He suggested that the Department of Law's fiscal note is too high. He acknowledged that it is difficult to anticipate caseloads. Mr. Baker reiterated that there were two and one-half, full- 16 time attorneys and one full-time paralegal working on a total of 80 active litigation cases at any one time. He noted that the cases tend to be fairly complicated with a project life of 4 - 5 years. He emphasized that the cases entail a lot of factual issues that can be litigated. The recurring theme has been the failure to comply with the legal restrictions. He noted that defenses have been raised on lender liability. The agricultural land holders have argued that the State's restrictions made repayment of their loans impossible, resulting in third party litigation. Ms. Rutherford pointed out that the current attorney is funded through the Agricultural Revolving Loan Fund. The funding for this position will be reduced to $20 thousand dollars in FY 98. There will be no full-time attorney or any general funds for the this position in the Division of Agriculture in FY 98. Co-Chair Hanley did not think the legislation would result in the level of litigation that occurred between 1988 to 1992. He questioned how many current cases are currently being litigated. He did not think that the legislation would result in 35 cases. Representative Mulder referred to the Department of Natural Resources, Division of Land's fiscal note. JANE ANGVIK, DIRECTOR, DIVISION OF LAND, DEPARTMENT OF NATURAL RESOURCES discussed the Division's fiscal note. She observed that the change in revenues is the amount of money anticipated to come into the Division as a result of payments for the purchase of building rights. The change in revenues should be reduced by 20 percent to reflect the reduction from $6 to $4 thousand dollars. The change in revenues are anticipated at $60 thousand dollars. Ms. Angvik noted that the purpose of the bill is to address concerns by farmers that they cannot borrow money with their current conveyance documents. The farmers have requested title to the land with an agricultural restriction to allow them to borrow on the land. The Department of Natural Resources supports the concept of the bill. She noted that the ability to put a house on each of the three newly subdivided parcels is the principle value that will be increased. She observed that Point McKenzie can only be subdivided by appraisal because it is closest to Anchorage. Ms. Angvik discussed enforcement. She observed that the State, a neighbor or the municipality can sue a land holder for their failure to live up to the agricultural covenants. In addition, Soil and Water Conservation Districts could sue. She observed that the covenants are recorded at the 17 time of sale. Ms. Angvik observed that similar legislation was vetoed by the Governor in the past legislative session. She noted that the previous bill did not require the purchaser to pay for the additional rights. The Governor was also concerned that state agricultural rights would not be protected and the State could convene in the title to terminate the rights of individuals. She observed that the State has not taken action against a farmer. There were also concerns that, in the previous version, the remedy for non-compliance could only be enforced through a civil suit by the State. Ms. Angvik noted that the Department of Natural Resources would prefer a conservation easement to keep the State in the line of title. The Department of Natural Resources supports the bill. Ms. Angvik further discussed the Division's fiscal note. She noted that the process of converting existing patents would remain the same. The monitoring and enforcement of covenants could be reduced. She indicated that she needed to discuss this component with the Department of Law. She reiterated that the change in revenues would be reduced to reflect the reduction from $6 to $4 thousand dollars. Co-Chair Therriault pointed out that fiscal notes could be addressed in the Conference Committee. In response to a question by Representative Davis, Ms. Angvik agreed that if the covenants are not enforced they could be lost. Mr. Baker observed that if covenants are not enforced there is a risk that the court will deem that the covenant has been waived. The covenants must be enforced uniformly to prevent an argument that they have been waived. Ms. Angvik noted that page 8, line 24 indicates that there is a six year statute of limitation. She clarified that a conservation easement would run with the agricultural uses of the land. Everything except the homesite would have the conservation easement. Co-Chair Therriault noted that the Department of Natural Resources would adjust their fiscal note based on the changes to the bill. He added that all the fiscal notes would be reviewed by the Conference Committee. Representative Mulder MOVED to report HCS CSSB 109 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. 18 ADJOURNMENT The meeting adjourned at 5:09 p.m. 19