HOUSE FINANCE COMMITTEE February 16, 2000 1:40 P.M. TAPE HFC 00 - 34, Side 1 TAPE HFC 00 - 34, Side 2 TAPE HFC 00 - 35. Side 1 TAPE HFC 00 - 35, Side 2 CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:40 P.M. PRESENT Co-Chair Mulder Co-Chair Therriault Representative Foster Vice Chair Bunde Representative Grussendorf Representative Austerman Representative Williams Representative J. Davies Representative Phillips Representative G. Davis Representative Moses was not present for the meeting. ALSO PRESENT Representative Jeannette James; Ginny Fay, Director, Division of Tourism, Department of Community & Economic Development; James Baldwin, Assistant Attorney General, Department of Law; Ann Campbell, Chair, Alaska Travel Industry Association, Anchorage; Bob Dindinger, Vice President, Marketing Chair, Alaska Travel Adventures, Juneau; Robert Wells, Board Member, Board of Agriculture and Conservation, Matsu, (Testified via Teleconference). SUMMARY HB 116 An Act relating to the Board of Agriculture and Conservation, to the agricultural revolving loan fund, to the disposal of state agricultural land, and to the Alaska Natural Resource Conservation and Development Board; and providing for an effective date. HB 116 was HEARD and HELD in Committee for further consideration. Overview: Millennium Plan Update by: Alaska Tourism Marketing Council Alaska Travel Industry Association No Committee Action. This portion of the meeting was taken in computer log note format. Millennium Plan Update by: Alaska Tourism Marketing Council Alaska Travel Industry Association The following overview was taken in log note format. Tapes and handouts will be on file with the House Finance Committee through the 21st Legislative Session, contact 465- 2156. After the 21st Legislative Session they will be available through the Legislative Library at 465-3808. LOG SPEAKER DISCUSSION TAPE HFC 00 - 34 SIDE 1 000 Co-Chair Therriault Co-Chair Therriault convened the meeting at 1:40 p.m. MILLENNIUM PLAN UPDATE BY: ALASKA TOURISM MARKETING COUNCIL ALASKA TRAVEL INDUSTRY ASSN. 150 ANN CAMPBELL, CHAIR, ALASKA TRAVEL INDUSTRY ASSN., ANCHORAGE Spoke to her background and the goals of the Alaska Travel Industry Assn. (ATIA). Ms. Campbell distributed the handout. [Copy on File]. She noted that ATIA is in the initial stages of developing Alaska's statewide tourism programs that will replace the Alaska tourism Marketing Council, the Alaska Visitors Association (AVA) as well as assume the marketing functions of the State through a contract with the Division of Tourism. 365 MS. CAMPBELL Explained that the new millennium plan resulted from the passage of SB 107. She noted that ATIA has spent a good deal of time gathering charter members. She stated that current charter membership consists of 1056 members, which consists primarily of small business throughout Alaska. Ms. Campbell pointed out that only 19% of the membership has more than 15 employees. 470 MS. CAMPBELL The organization has seated its board of directors, consisting of 23 industry businesses ranging from sole proprietors to large companies. She noted that she was elected as the Chair of the Board and that Tina Lindgren was hired as President/CEO. Public forums were held in several cities to gather input for the organizational development and dues structure has been established. Seventeen directors have been elected. Those directors represent a wide group of people throughout the State and that only four of the directors represent large companies. 528 MS. CAMPBELL Pointed out that the work of the directors was to perform the organizational work which would make ATIA a legal entity so to do the business. The initial work was to initiate a search for the president and chief operating officer which resulted in the hiring of Ms. Lindgren. Then six members were appointed to the Board which consists of two cruise operators, one highway tourism business, one raft operator, a representative from the Native Corporation who runs hotels in Anchorage. She pointed out that they tried to get a wide diversity of people on the Board. 608 MS. CAMPBELL During that time, the group was holding forums throughout the State to determine what the process should be for the ATIA Board. At present time, the group is determining what the goals and priorities of a statewide association should be in regards to organization, structure and membership goals. 662 MS. CAMPBELL The association has made some decisions regarding the dues structure. A small category has been added as an informational category for any business with three employees or under. If you do not want to pay the membership fee but still want to be involved, for $100 dollars a year, you can do that. A lower cost category has been added for those businesses that sell to the visitor business industries. She stressed that these were added to try to insure that the association is accessible to the smallest of businesses. 742 MS. CAMPBELL Advised that at this time, the organization is dealing with the transfer of assets from the Alaska Visitors Association. She pointed out that there are a lot of legal and accounting issues related to that transfer. Additionally, she noted that there are a few issues that relate to the Alaska Tourism Marketing Council (ATMC) sunset in June. It is important that those tools continue into the millenium marketing program. 797 MS. CAMPBELL Noted that ATIA is trying to finalize the contract negotiations by August. It is important to have a contract in order so that ATIA will be able to make sure the marketing commitments are in place. Ms. Campbell stressed that a marketing plan needs to be implemented now. 837 MS. CAMPBELL Emphasized that it is important that the industry match be raised. She noted that ATIA is well on its way to accomplishing that. Ms. Campbell commented that organization is in the process of having conversations to assess their budgets for that process. They are coming to some conclusion as to what would be a fair process. She emphasized that it is important to get the marketing plan put together. 925 MS. CAMPBELL She noted that the sale of the Vacation Planner ads will generate a good portion of the match. Ms. Campbell indicated that ATIA is on track to raising the match and that it would not be a barrier to ATIA moving forward. There is more concern regarding structural issues and the ability to get the marketing plan out. 960 BOB DINDINGER, VICE PRESIDENT, MARKETING CHAIR, ALASKA TOURISM INDUSTRY ASSOCIATION, JUNEAU Spoke to the reasons that ATIA was created. He noted that the industry was to take greater responsibility for marketing tourism in Alaska. That plan was to be broadly representative of the diverse interests of Alaska traveler. ATIA has embraced those goals. He noted that ATIA has been fortunate with the assistance of the Legislature and the LBA Committee to receive funds that were not program receipts. 1053 MR. DINDINGER That money allowed purchasing almost $1 million dollars of tourism marketing that would not otherwise have been possible. Those funds allowed ATIA to be on television this winter. He voiced his appreciation of that decision. 1087 MR. DINDINGER Pointed out the request for the millennium plan called for in SB107 which was for $5 million dollars to be allocated for marketing activity for the FY01 marketing program. The industry would make a matching contribution of $2.1 million dollars. The fiscal note referenced legislative intent that money would be allocated through a separate BRU. He noted that in the Governor's budget proposal, it is difficult to find that money. He emphasized that has been a challenge for ATIA when trying to develop the plan. He encouraged the Committee to look to identify the BRU where those funds could be raised. 1174 MR. DINDINGER The intent of ATIA over the next two years is to scale back the State contribution to $4 million dollars. He noted that was an aggressive goal, which could be accomplished. 1210 MR. DINDINGER Noted that ATIA is prepared to take on all the existing marketing activities of the Division of Tourism, Alaska Visitors Assn., and those that have been done by ATMC in the past. That action will have internal savings. He noted that there is a passive understanding with the ATMC to assist. He suggested that by doing that it will provide continuity from year to year and also reduces the risk of dropping any valuable program elements 1277 MR. DINDINGER Noted that there is concern if there exists a clear understanding as to the extend the Division of Tourism ceases to exist. He asked about the State mandating the components of a tourism- marketing plan. He asked if it was the responsibility of the industry to fully design a plan and fund it or if the State instead designs the plan, and then the industry must be active at that design. The industry believes they know what the Legislature's intent was. He requested that clarification be made in this process. 1325 MR. DINDINGER Summarized the current issues: ? The need to clearly define what funding will be allocated to ATIA during the budget process; and ? To what degree the industry will be involved in the design and to list the components to design for. The current ATIA proposal will be adopted this week and will comprise a substantial portion of the ATIA board and past participants of the ATMC to provide continuity. The intent is to bring in marketing organizations throughout the state. He emphasized that ATIA needs the funding and political support throughout Alaska. Mr. Dindinger voiced little concern with ATIA's ability to formulate a marketing plan by July 1, 2000. 1418 CO-CHAIR THERRIAULT Asked the size of the pool from which the 17 marketing directors were chosen. 1428 MS. CAMPBELL Replied that 40-50 people had run for the board from throughout the State. 1441 CO-CHAIR THERRIAULT Asked if there was anything that ATIA was not willing to provide in the contractual arrangement. 1456 MR. DINDINGER Agreed. 1463 CO-CHAIR THERRIAULT Asked how ATIA expected the money for the match and timing expectation of it coming to the required places on schedule. 1474 MR. DINDINGER Replied that traditionally, the contracts have been received through the solicitation of advertising in the Vacation Planner. Those contracts will go out within the next two months and are expected back by the July 1st. He stated that would raise a large portion of those funds. A smaller amount of funds are raised throughout the year by selling the names that are generated from the (800) number. He noted that a fair amount of the money is front-loaded into the program. ATIA is intent on designing a "pay to play" program which would pull together those operators who have an interest in those programs to make the organization more self supporting. 1545 CO-CHAIR MULDER Noted that last year the Legislative intent was to create a tourism-marketing plan. He questioned how cooperative the Department has been in that effort. 1612 MR. DINDINGER Replied that there is a lot of "tenseness" between the Department and the industry. He acknowledged that there is a change going on. He voiced concern that the Department has not been forthcoming in giving direction for a tourism-marketing program. They have been tenacious and holding on to the reins of control which has been counter productive. The Department has not been helpful in this process and has slowed the process down. 1683 REPRESENTATIVE AUSTERMAN Noted that he was a supporter of the industry, however, voiced concern with the lack of tourist taxes. He asked why the industry has not come forward with a proposal of statewide tax. He stressed that it is important to support their own way. It is difficult to understand why the fishing industry continues to put money into the tourism industry. There should be tourist taxing used for highway, harbors and roads. 1770 MR. DINDINGER Acknowledged the concerns voiced by Representative Austerman. He noted that the challenge is that the dynamics of the two different industries are very different. He stated that there is an easy porthole for all fishermen to participate. The challenge on the tourism side is that there is not a single place to place a mechanism that would evenly effect all tourists and operators. The industry has recommended a sales tax but there are many challenges to offer that. He suggested that would be the fairest tax to guarantee that all paid equally. 1859 MR. DINDINGER Continued, not all businesses that benefit from tourists are tourism businesses. He reiterated that there is not an easy collection opportunity. He noted that he was optimistic that the program would work. The expectation is that the new business signed on will cooperate in these concerns. 1904 REPRESENTATIVE AUSTERMAN Agreed that there is not a way to equalize the tax base, which does not mean that it is a good argument. The industry has an obligation to the State of Alaska to help maintain the "industry". When everyone else in the State is paying their fair share, the industry should also be contributing. 1975 REPRESENTATIVE FOSTER Echoed his concerns. He emphasized that the industry is not paying its share and that is not fair to any Alaskan. 1990 CO-CHAIR THERRIAULT Asked if there have been any other "problems" identified by ATIA other than the contractual date. 2006 MR. DINGDINER Requested that the budget structure issue be stipulated. Additionally, clarification regarding the design, control and management outlined in SB 107. It is appropriate that the State have an overview of how the activities and funds are being spent. 2038 CO-CHAIR THERRIAULT Explained that there has been tension between various segments of the industry. He asked how that has played out at this point. 2057 MS. CAMPBELL Acknowledged that there are still people that are skeptical of ATIA. However, there are many people who are of "good faith" that the process and the program will work. 2082 REPRESENTATIVE J. DAVIES Requested a list of the current board members and where they came from. He noted that he shared concerns voiced by Representative Austerman. He commented on the State's role in the plan's development. He commented that the State should have a seat in the development of this plan. The State is investing a fair amount of money and should have a role in the developing of the plan. He asked if there could be a + place for both. 2140 MR. DINDINGER Replied that there is a place for the State. The State should identify goals and objectives. The industry should then be responsible for reaching those goals and objectives based on the best resources that ATIA can accumulate. The State should establish the intent. 2176 MR. DINDINGER Added that the State should determine what they expect ATIA should accomplish and then measure ATIA after to see if it has been accomplished. 2181 REPRESENTATIVE J. DAVIES Suggested that step go one move further. He asked if there wasn't a comparable role for the State in not developing the entire plan, but to play a role in that development and implementation through a representative or set of representatives. 2204 MS. CAMPBELL Replied that this undertaking has always been a cooperative effort. She questioned if this was to be a partnership or is it a case of the State laying down the perimeters with ATIA implementing them. 2237 REPRESENTATIVE J. DAVIES Suggested that it would be healthy to have that discussion. 2249 REPRESENTATIVE AUSTERMAN Asked if the number of employees assigned to handling all the inquiries had been determined. 2263 MR. DINDINGER Replied that responding to those inquiries would be part of the markeing process, which would be a continuation of the ATIA marketing structure. 2276 CO-CHAIR THERRIAULT Pointed out that he is a member of the budget Subcommittee for the new Department. He noted that the tourism aspect would be considered during those meetings. The Legislature will then be better able to track what the State expects. 2299 GINNY FAY, DIRECTOR, ALSAKA DIVISION OF TOURISM, DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT Distributed handouts to Committee members. [Copy on File]. She noted that she would speak to the Division's degree of cooperation, budget and the intent of the legislation and how to move forward with the marketing plan. She pointed out that ATIA has recently determined most of their board. TAPE CHANGE 00-34 SIDE 2 000 MS. FAY Noted that ATIA is having a lot of internal confusion regarding what their marketing plan should look like. She noted that her role has been to listen and see where they are going. In January, they went through a strategic planning process to try to decide what they are interested in doing. Ms. Fay noted that the Division of Tourism and ATIA has been having weekly teleconferences since the beginning of January. 072 MS. FAY Referenced the handout regarding the State's goals. ? Serve as an effective economic development tool for communities throughout Alaska; ? Be community driven to allow each community to decide whether tourism is appropriate for their community; ? Preserve the cultural values and quality of life for all Alaska residents; ? Be environmentally and economically sustainable in the long term; ? Provide a significant portion of benefits to the local area where visitation occurs. ? Increase resident satisfaction with the visitor industry; reduce impacts to residents and communities and maintain the quality of life for residents; ? Maintain or improve overall visitor satisfaction. 111 MS. FAY The Division has laid out what they are doing, the main activities and the issues raised when moving from the State funded to the membership driven option issues. She stressed that there are major public policy issues when moving from State funded programs. Ms. Fay noted that the issue of the inquiry section is a good example of this concern. 263 MS. FAY Spoke to the development of the goals. As a State agency, the issues are different as the Division represents the entire state and not just the specific issues of the ATIA group. She emphasized that the State agency has a much broader constituency. She surmised that is why there is an issue at this time. The Division focuses on tourism mainly as an economic development tool, and that is why the State of Alaska has invested money into it. The Division's constituency includes all the residents of the State. The Division fully supports ATIA moving forward; however, the Division also must consider why the small community residents might not become members. 354 MS. FAY Continued, the Division is moving forward with the same programs into next year, and outlines the significant issues that need to be addressed. Ms. Fay emphasized that the State is not micromanaging ATIA and that the expectations have been broad. 395 MS. FAY Argued that the budget has been a "sticky point". The Division submitted a fiscal note, which was not adopted. Ms. Fay pointed out that the State assembled a packet that identified where the different marketing components were. The issue is that the Division's total does not add up to the $5 million dollar fiscal note. There would need to be an increment to reach that amount. 465 MS. FAY Advised that last year's fiscal note included $5.7 million dollars for the FY01 budget. The Division does not spend that amount of money for tourism marketing. She added that there was never an agreement to reallocate the money being spent on tourism because there are many activities involved such as community planning and development and business assistance. 542 MS. FAY Addressed the terms of the intent of the legislation. She stated that the Division understands the legislation to outline that the Division defines the components and what needs to go into the marketing plan and then it will be implemented by ATIA. The Division should have input as to what the goals should be. She concluded that there are not a many issues regarding what the components should be for this year. 607 CO-CHAIR MULDER Asked the amount of money spent on tourism. 628 MS. FAY Replied that $5 million dollars is not spent on tourism marketing. At this time, only $4.1 million dollars is spent on marketing. 650 CO-CHAIR MULDER Referenced the fiscal note and noted that $5.3 million general fund dollars were spent on tourism marketing last year. 678 CO-CHAIR MULDER Recognized that the Division did disagree with last year's fiscal note. He asked why that had not been incorporated into the budget. 699 MS. FAY Explained that would have required an increment. The Division presented a status quo budget. 720 CO-CHAIR MULDER Countered that the point is that a fiscal note should indicate what is incorporated and expected. He asked why that had not been incorporated. 743 MS. FAY Advised that had been an OMB and Department decision. She offered to get back to the Committee on that concern. 765 CO-CHAIR MULDER Voiced his frustration regarding that point. He asked if there had been any staff reductions. 782 MS. FAY Replied that this year was a transition year and that there were not suppose to be any reductions in staff. Next year, there will be a reduction of three employees. 806 CO-CHAIR THERRIAULT Noted that would be worked out in Subcommittee. 835 CO-CHAIR THERRIAULT Added that there are many places in which his staff would be checking from consideration made from the old fiscal notes. He added that full effort should be made to use the fiscal notes as indicated. 876 CO-CHAIR MULDER Emphasized that Legislature is the policy setting body for the State. He expected that the Administration should carry forth the policy intended within the bill. 906 REPRESENTATIVE J. DAVIES Noted that these comments are mixing "apples and oranges". Part of the process of establishing State policy is the work of the Administration. He stressed that the Administration has a significant role in the development of that policy. 968 CO-CHAIR MULDER Submitted that fiscal note concern is a reflection of the overall attitude by Administration regarding the privatization process. He emphasized that this was a problem and that they are trying to force the Legislature to carry out the policy. 1007 REPRESENTATIVE J. DAVIES Replied that there has been no "fact" verifying that information. He submitted that was a one liner in the fiscal note and that there are other issues which need to be addressed. Representative J. Davies pointed out that the note has caused a policy disagreement. He stated that the fiscal note does not bind the Administration for the following year. Each proposal can be different each year. There are significant issues that are yet unresolved and have not been addressed by the Legislature to date. He recommended that there should be continuing discussion regarding this concern. 1104 CO-CHAIR THERRIAULT Inquired if there was a bar with getting through the contractual agreements so that a contract could be signed sometime in April versus August. 1128 MS. FAY Noted that the only issues bound in statute is that the Division through statute does not have the authority to sign it. The Division is trying to be as flexible as possible in terms of accounting for the money that comes in. It has been established in statute that the matching dollars had to be available for the contract to be signed. She questioned if ATIA was ready for that commitment. All the money must be on the table. 1185 REPRESENTATIVE J. DAVIES Asked about the State sitting on the Board. He asked for clarification regarding the State involvement on the Board of Directors. 1221 MS. FAY Replied that when there is a contractual arrangement with an entity, you can not sit on that board of the person you are contracting with. The State can not be a member of that group. 1246 MS. FAY Spoke to the fiscal note, pointing out that the fiscal note binds for one year. Additionally, it was planned that the Division would ratchet down the State's contribution. She questioned if the Division would be reducing the State's contribution raising it by $1 million dollars this year. 1302 REPRESENTATIVE AUSTERMAN Stated that his subcommittee will be able to determine the expectations of the Division and the ATIA. He commented that the Industry plans on meeting the financial obligations of the match. He questioned the inquiries. He asked if the Division understood that realm and if they were hesitant of putting that language in the contract. 1389 MS. FAY Replied that it was not fair to say that the Division is hesitant but rather, it is important to remember that this information transmitted over the phone is divided up on behalf of the entire state and not representing a certain business interest. She asked when those inquires are transferred, will they be handled fairly. 1480 MS. FAY Continued identifying services that are offered free of charge by the Division and available to the communities. 1499 REPRESENTATIVE AUSTERMAN Understood the Division's concerns, however, he asked if in discussion with the industry, were they willing to address that concern. He suggested that the industry is in the position to do that through contract. He did not foresee that as a problem. Representative Austerman asked what policy would the Legislature need to set to monitor these contracts. He inquired if there were areas which the Division handles now that the industry should not take over. 1569 MS. FAY Replied that the Division is concerned with the interagency coordination, community planning, and transportation issues which should be items handled by the Division if there continues to be State money. Ms. Fay emphasized that these are important roles for State government. In terms of marketing, it is not a question of what can or can not be done, but rather an issue of how it is done. 1670 MS. FAY Added that these are public resources that they should be working on behalf of the residents of the State and not for private interest groups. 1690 CO-CHAIR THERRIAULT Voiced his appreciation for the testimony of these two groups. 1700 Concluded the overview. (TAPE CHANGE HFC 00 - 35, SIDE 1) HOUSE BILL NO. 116 An Act relating to the Board of Agriculture and Conservation, to the agricultural revolving loan fund, to the disposal of state agricultural land, and to the Alaska Natural Resource Conservation and Development Board; and providing for an effective date. REPRESENTATVE JEANNETTE JAMES noted that HB 116 was the culmination of much intensive work by representatives from the Legislature, the Administration, conservation boards and the agriculture industry. She stated that HB 116 would propose a new board, the Board of Agriculture and Conservation, comprised of the Commissioner of Department of Natural Resources plus seven people involved in grass-roots commercial production agriculture. The legislation would extend the life of the Agriculture Revolving Loan Fund (ARLF) by instituting grass roots fiscally conservation board that would have more control over the Alaska Revolving Loan Fund. HB 116 would make the ARLF interest rate competitive with other loaning institutions which are currently drawing farmers away and shortening the life and income of the ARLF. Representative James noted that HB 116 would allow flexibility for the new board to restructure loans in the event of a disaster, and it would strengthen the emergency loan program. Representative James added that the bill would assure that the board would be consulted prior to any disposal of agricultural land. The new board would take over statutory duties of the existing Division of Agriculture and would hire an executive director. She believed that would mean a predictable continuity for that position. She urged the Committee's support of the legislation. Representative James acknowledged that the interest rate issue had been addressed in a separate piece of legislation that has already passed out of the House Finance Committee. Representative James emphasized that it is imperative HB 166 accompany that legislation. She pointed out that all the land sale decisions would be left in the bill. Representative James spoke to the fiscal note. She pointed out that the $9 thousand dollars travel component had been determined by Department of Natural Resources. The Department noted that in creating a new board, there initially would need to be more meetings to establish regulations. She explained the funding would come from the ARLF. She suggested that the board and the Creamery Corporation would offset some of those costs. The creamery funds are not listed on the note. Representative James stated that additionally, there exists an assumption that the change would result in a reduction in revenue from the interest rate. She assumed that interest rate reductions would result in new loans. Currently, the interest rates are higher than most other loan companies, which keeps them from being competitive. She disagreed with the idea of a change to revenues. Co-Chair Therriault commented on the loss of revenue. He noted that in the proposed committee substitute, the changes would conform the loan provisions included in HB 116 with the Committee's work done on Representative Harris' bill. Co-Chair Mulder MOVED to adopt the work draft committee substitute, 1-LS0407\T, Cook, 2/15/00, as the version of the bill before the Committee. There being NO OBJECTION, it was adopted. Co-Chair Therriault referenced the fiscal note. He pointed out that the sponsor statement indicates that the new board would take over the duties and responsibilities of the Division. He asked if it was the intent that the board takes over "all the responsibilities" of that agency. He advised that some of those obligations were specified in statute. Representative James replied that through the legislation, the board would be making the decisions currently made by the Director of Agriculture. She commented that if the Department wanted to change the direction of the Division, that would be their prerogative. The authority given by the Division of Agriculture, which would be managed by a board of directors, would be the hiring of a director as opposed to the advising of a director. Representative James commented that the board has a job to do and a lot of decision making associated with performing that work. The intent of the legislation is to keep the direction going in a forward movement. The purpose of the legislation is to place the regulation and policy power in the hands of the Board of Agriculture. They would implement policies through the statutory authority given to them. Co-Chair Therriault spoke to the duties assigned to the Division of Agriculture. He noted the "vested" duties of each position. The Commissioner delegates certain duties to the Division Director. He summarized how he envisioned the legislation had been drafted. He noted that there are few items that the Division is responsible for which have a specific statutory directive. He asked what would happen to those situations delegated by statute to the Commissioner. Representative James understood that the Division of Agriculture is under Department of Natural Resources. She stated that the issues would instead be delegated to the Division of Agriculture. That Division would be managed by the Board of Agriculture with hired staff. She did not foresee anything changing. She commented that she did not know if there would be a need for a statutory change. Representative Green did not foresee a Board of Agriculture with any authority. Representative Austerman voiced his appreciation on all the work that Representative James had accomplished for agriculture business development. Representative J. Davies echoed his appreciation on that issue. He voiced concern with the option of the board hiring the director. He suggested that idea be revamped, as the current process works well. He stressed that the effect of the current practice has achieved the intent of the proposed legislation. He questioned if expanding the continuity of the director had been considered, because that action would make it more difficult for a governor to remove that director. Representative James responded that the issue had been considered regarding whether or not the removal of a board member could occur at the "pleasure of the Governor or for cause". She believed that the legislation would allow the removal for cause. In the original version of the bill, in order to accomplish that, the board would need to be approved by the Legislature. She noted that at the request of the Department, that clause was removed. Representative James maintained that there is an issue regarding the changing of directors and how that affects the Board of Agriculture. She maintained that a change in policy, which comes with a change in director, is difficult. She stressed the need to provide a continuity of policy and did not believe that the comparison with the Board of Forestry was relevant. Representative Grussendorf questioned if changing the statutes would cause constitutional problems in the Governor's power to appoint. Representative James responded that there are some similarities to the Alaska Seafood Marketing Institute Board (ASMI). She emphasized that the concept is how to guarantee continuity of policy. ROB WELLS, BOARD OF AGRICULUTRE AND CONSERVATION, MATSU, (TESTIFIED VIA TELECONFERENCE) expressed concern with the legislation. He acknowledged the intent to bring continuity and policy between Administrations and to allow farmers to control their own entity by managing the revolving loan fund. He referred to an audit by the Legislative Budget and Audit Committee (LBA) from two years ago. Mr. Wells noted that the audit found that the Board is conservative realizing that most of the Division functions are funded from the ARLF. He noted, for the record, that there is concern with the delegation of authority. He advised that the sponsor statement notes that duties of the Division will be transferred to the Board. Mr. Wells added that the three-year appointments could be problematic. He suggested that the current Governor would appoint all members. There could be a change of 6 members in one year, which would most likely result in that Board choosing a new director. Such action would remove the continuity that the sponsor is seeking. Mr. Wells voiced concern with members who have loans, being able to sit on the Board. He suggested such action could warrant members being questioned through the Executive Ethics Act. Mr. Wells agreed with Representative James that the interest income raising and falling would affect revenue. He voiced concern with the constitutional powers of the Governor. A Board should control the State assets in the revolving loan fund, an action still requiring an annual budget. It would no longer need to be an inline provision. Mr. Wells questioned, under the new structure, if an appeal could be made. He reiterated his concern regarding how this would function in today's world. JAMES BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, noted that he had reviewed the bill for the Administration. He spoke to the concept of the legislation placing an independent board over a line agency. He commented that there is a constitutional argument to be made, indicating such action should not be allowed to happen under the current framework. In A.S., Article #3, it clarifies that premise. There is one instance, that you would be allowed to have a multi member board be at the head of a principle department, but in that instance, the Governor would be allowed to approve the Executive Director hired by that board. It would not be legal to take a small discrete section of a department and do that. Divisions are not mentioned in most statutes, as they are an unassigned function. Mr. Baldwin noted that an instance of making a division director as an appointee of a division board is an unusual concept, however, he noted that there have been compromise situations. Mr. Baldwin mentioned that if such provisions were in law, it would be very difficult to remove that board member. He mentioned that there could be problems with imbezzilment and/or responsibility to State agencies. Mr. Baldwin reiterated that it is difficult to enforce a for-clause provision. Mr. Baldwin continued, a "for-clause provision" recognizes that certain individuals have property rights in office. That type of board member does not have a salary but does have a "term of office". That term is staggered which could present a problem. He stressed that continuity is important in government, but the problem arises when trying to determine how to fix responsibility for governments actions. The manner, in which the Alaska Constitution does it, is by making the Governor responsible. The concern is that the State of Alaska has "government by board" to run things locally, but with statehood, the State opted that the Governor be the responsible party for how government operates. At present time, one or two people are responsible. Mr. Baldwin stated that the proposed concept would be erosion back to the old unworkable ways. He urged that the Committee not adopt the legislation. Mr. Baldwin spoke to the "conflict of interest" clause, which is not that much different from what currently exists. He referenced Page 2, Line 20, noting concern with the wording "affects that lease, permit or loan". He commented that language was "loose" and would cause problems. Representative James responded to where the board would sit in the "scheme" of things. She pointed out that those involved in the agriculture industry fear that the ARLF is not spending funds appropriately. "A government does not shrink itself by nature". Representative James advised that the Commissioner would supervise the activity. She pointed out that all decision making power of the Director would go into the Board of Agriculture. That would result in taking the authority from one person and putting it into a board. She noted that a joint group of people would be implementing the intent of the Commissioner. Representative James indicated that the legislation would enhance the agricultural activities of the State. She noted that regulations and policies would be drafted according to the statutes. Policies are looser and need to be treated equally over time. She acknowledged that it would be an experiment. (TAPE CHANGE, HFC 00 - 35, SIDE 2). Representative James emphasized that the allocation of duties would be fairly distributed. Co-Chair Therriault noted that HB 116 would be HELD in Committee for further consideration. ADJOURNMENT The meeting was adjourned at 3:50 P.M. H.F.C. 20 2/16/00