HOUSE STATE AFFAIRS STANDING COMMITTEE March 16, 1993 8:00 a.m. MEMBERS PRESENT Representative Al Vezey, Chairman Representative Pete Kott, Vice Chairman Representative Harley Olberg Representative Jerry Sanders Representative Fran Ulmer Representative Bettye Davis MEMBERS ABSENT Representative Gary Davis OTHER HOUSE MEMBERS PRESENT Representative Eldon Mulder COMMITTEE CALENDAR HB 65 "An Act relating to the improvement of state finances through reduction of operating costs of certain state agencies and establishment of certain fees; and providing for an effective date." HELD IN COMMITTEE FOR FURTHER CONSIDERATION HB 59 "An Act making a special appropriation to the Department of Natural Resources for refunds to certain veterans who purchased state land and for reimbursement to the University of Alaska for the veterans' land discount applied to land transferred to the University of Alaska; and providing for an effective date." HELD IN COMMITTEE FOR FURTHER CONSIDERATION WITNESS REGISTER Howard Joyce, Legislative Aide to Representative Eldon Mulder Room 116, State Capitol Juneau, Alaska 99801-1182 465-2647 Position Statement: Outlined HB 59 Raga Elim, Assistant to Commissioner Glenn Olds Department of Natural Resources 400 Willoughby Avenue Juneau, Alaska 99801-1724 465-2400 Position Statement: Explained HB 59 - related settlement Representative Eldon Mulder Room 116, State Capitol Juneau, Alaska 99801-1182 465-2647 Position Statement: Prime Sponsor, HB 59 Cheryl Frasca Office of Management and Budget P.O. Box 110020 Juneau, Alaska 99811-0020 465-4681 Position Statement: Supported HB 65 Donald G. Study, Acting Director Division of Labor Standards and Safety Department of Labor P.O. Box 20630 Juneau, Alaska 99802-0630 465-4855 Position Statement: Supported HB 65 Joe Ryan, Committee Aide to Representative Al Vezey Room 102, State Capitol Juneau, Alaska 99801-1182 465-3719 Position Statement: Provided information on CSHB 65 PREVIOUS ACTION BILL: HB 65 SHORT TITLE: FINANCIAL ADMINISTRATION OF STATE GOVT. BILL VERSION: SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR TITLE: "An Act relating to the improvement of state finances through reduction of operating costs of certain state agencies and establishment of certain fees and providing for an effective date." JRN-DATE JRN-PG ACTION 01/15/93 75 (H) READ THE FIRST TIME/REFERRAL(S) 01/15/93 75 (H) L&C, STATE AFFAIRS, JUDICIARY, FINANCE 01/15/93 75 (H) -8 FNS(2-DEC, 2-DHSS, LABOR, DNR, DPS 01/15/93 75 (H) ADM) PUBLISHED 1/15/93 01/15/93 75 (H) -5 REVENUE FNS(DPS, 2-LABOR, 2-DOE)1/15 01/15/93 75 (H) -5 ZERO FNS (3-ADM, LABOR, REV) 1/15/93 01/15/93 75 (H) GOVERNOR'S TRANSMITTAL LETTER 02/01/93 201 (H) -REVISED FN (DNR) 2/1/93 02/08/93 251 (H) -CORRECTED FN (DNR) 2/8/93 02/09/93 (H) L&C AT 03:00 PM CAPITOL 17 02/09/93 (H) MINUTE(L&C) 02/11/93 (H) L&C AT 03:00 PM CAPITOL 17 02/23/93 (H) L&C AT 03:00 PM CAPITOL 17 03/01/93 478 (H) L&C RPT CS(L&C) NEW TITLE 3DP 1NR 03/01/93 478 (H) DP: PORTER, SITTON, GREEN 03/01/93 478 (H) NR: HUDSON 03/01/93 479 (H) -REVENUE FN (DPS) 3/1/93 03/01/93 479 (H) -ZERO FISCAL NOTE (ADM) 3/1/93 03/01/93 479 (H) -7 PREV FNS (2-DEC, 2-DHSS, LABOR, DPS 03/01/93 479 (H) ADM) 1/15/93 PREV FN (DNR) 2/8/93 03/01/93 479 (H) -5 PREV REV FNS(DPS, 2-LABOR, 2-DOE)1/15 03/01/93 479 (H) -5 PREV ZERO FNS(3-ADM,LABOR, REV) 1/15/93 03/01/93 479 (H) REFERRED TO STATE AFFAIRS 03/16/93 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 59 SHORT TITLE: APPROP: VETS' LAND DISCOUNT REFUND BILL VERSION: SPONSOR(S): SPECIAL CMTE MILITARY & VETERANS AFFAIRS TITLE: "An Act making a special appropriation to the Department of Natural Resources for refunds to certain veterans who purchased state land and for reimbursement to the University of Alaska for the veterans' land discount applied to land transferred to the University of Alaska; and providing for an effective date." JRN-DATE JRN-PG ACTION 01/15/93 72 (H) READ THE FIRST TIME/REFERRAL(S) 01/15/93 72 (H) MIL & VET AFF, STATE AFFAIRS, FINANCE 02/18/93 (H) MLV AT 10:00 AM CAPITOL 17 02/24/93 (H) MLV AT 05:00 PM CAPITOL 17 02/24/93 (H) MINUTE(MLV) 03/01/93 483 (H) MLV RPT CS(MLV) 4DP 03/01/93 483 (H) DP: MULDER, WILLIS, FOSTER, NAVARRE 03/01/93 484 (H) -ZERO FISCAL NOTE (DNR) 3/1/93 03/01/93 484 (H) REFERRED TO STATE AFFAIRS 03/16/93 (H) STA AT 08:00 AM CAPITOL 102 ACTION NARRATIVE TAPE 93-29, SIDE A Number 000 CHAIRMAN AL VEZEY called the House State Affairs Committee to order at 8:02 a.m. on March 16, 1993. Members present included Representatives Kott, Olberg, B. Davis, Ulmer and Sanders, representing a quorum. Representative Eldon Mulder was also in attendance. HB 59: APPROP: VETS' LAND DISCOUNT REFUND Number 021 CHAIRMAN VEZEY read the title to HB 59 and called for a statement from its sponsor, Representative Eldon Mulder. Number 037 HOWARD JOYCE, LEGISLATIVE AIDE TO REPRESENTATIVE MULDER, PRIME SPONSOR OF HB 59, outlined the history of HB 59, from the initial Veterans Land Discount in 1978, to its being struck down by the Alaska Supreme Court in 1983 in Gilman v. Martin, and its eventual resurrection in the Second Session of the 13th Legislature. He noted the passage of the enabling legislation for a later version of the veterans' discount (HB 134 in the 16th Legislature) and the failure of the needed appropriation bill to pass the Senate in the Second Session of the 17th Legislature in 1992. Number 125 CHAIRMAN VEZEY asked how many people would be affected by HB 59. Number 127 MR. JOYCE stated 36 veterans would benefit from HB 59's passage, with an associated cost of $74,000. CHAIRMAN VEZEY asked why there was an apparent discrepancy between the $74,000 in the fiscal note and the $126,000 cost estimate from the Department of Natural Resources (DNR). Number 175 MR. JOYCE explained the $74,000 was needed in cash to reimburse veterans who had already paid off the loans on their land, while another $50,000 had already been credited to the accounts of veterans still paying on loans. Number 201 REPRESENTATIVE HARLEY OLBERG asked if any of the figures presented included land subject to default. MR. JOYCE said he did not have those figures available, and went on to explain why some veterans never had discounts figured into the cost of their land. He stated many had already paid for their land when HB 134 passed the 16th Legislature, and subsequently did not get credit due them. Veterans who still owed money were given credit against the principal of their debt. Number 255 REPRESENTATIVE JERRY SANDERS asked why $49,000 of the appropriation was slated for the University of Alaska. Number 257 MR. JOYCE stated the University was the rightful owner of the land sold to the veterans by the DNR. Number 285 REPRESENTATIVE OLBERG knew of similar circumstances where land rightfully belonging to the federal government had been sold to private individuals. Number 300 CHAIRMAN VEZEY asked if the state had sold land that did not belong to it. MR. JOYCE replied in the affirmative. Number 307 REPRESENTATIVE SANDERS asked if the issues of reimbursing the veterans and the University should be considered in separate legislation. Number 313 MR. JOYCE explained the two issues were tied together because the veterans received discounts on land rightfully owned by the University. He then deferred to the DNR Special Assistant, Raga Elim, for further clarification. Number 330 RAGA ELIM, SPECIAL ASSISTANT, DNR, explained how the University became involved in the veterans discount. He stated the University and the state had agreed to a dissolution of a land agreement with the municipality of Anchorage, in which the University gave up rights to municipal land in exchange for other tracts, the right to harvest timber on other land, and the administration of a number of contracts, including the loans for veterans' land, which entitled the University to expect revenue. Number 360 REPRESENTATIVE SANDERS felt the University's needs should be considered separate from the veterans' land refunds. CHAIRMAN VEZEY stated HB 59's short title might be misleading, but its full title did include reimbursement of the University. Number 380 REPRESENTATIVE OLBERG noted the amounts to be refunded to the University seemed to be very well rounded off, and wondered if they represented estimates on the lands' value when the discounts were allowed. He asked if the University might still hold title to land that had been defaulted on. Number 389 MR. ELIM agreed the numbers seemed too well rounded off, but had no knowledge of how the figures were generated. Number 391 REPRESENTATIVE OLBERG asked if the University might still hold title to defaulted land. Number 393 MR. ELIM stated it was a possibility. Number 405 REPRESENTATIVE OLBERG stated it seemed some vets may have never paid anything on their property. Number 407 CHAIRMAN VEZEY asked what the "U" designations on some cells of a spreadsheet presented to the committee stood for. He stated it was hard to tell if any land was in default. Number 422 REPRESENTATIVE SANDERS was not in favor of moving HB 59 until the relationship between the University and the DNR, and the breakdown of defaulted properties was better explained. Number 430 REPRESENTATIVE OLBERG said unless the University could show it sustained an out-of-pocket loss, he would not support moving HB 59. Number 437 CHAIRMAN VEZEY asked about the settlement between the DNR and the University. MR. ELIM restated the deal struck by the University and the state involving the land rights, timber cutting and contracts. He said the reason the DNR supported HB 59 was because the DNR did not have the funds to reimburse the veterans themselves. He restated the history behind legislative efforts to refund the veterans. Number 469 CHAIRMAN VEZEY understood the chain of events to be university ownership of the contracts on the lands, which were then bought by veterans who in some cases defaulted on the loans, with the University finally owning the land. Number 472 REPRESENTATIVE OLBERG understood the transaction to be that the University owned the paper on the land at a purported value, the buyer-veteran was given a discount on the land, and the University took the loss in the event of a default. Number 478 MR. ELIM did not know if the University reserved the right to foreclose on individual owners, but felt in any case the University had a right to expect revenue from the deals. Number 499 REPRESENTATIVE OLBERG stated if the veterans defaulted on loans after making some payments to the University, then the numbers presented on the supplied spreadsheet may not be what the University was actually owed. Number 515 CHAIRMAN VEZEY stated five legislatures had looked at the problem and had not taken action, and asked why more than ten years had passed before someone had taken action. He also noted the arrival of Representative Ulmer. Number 520 REPRESENTATIVE OLBERG stated the 16th Legislature had put the process in motion as a "nice idea", but left the dirty work of funding it up to the successive legislatures, such as the 18th. Number 531 CHAIRMAN VEZEY stated non-general fund money would be needed to cover the appropriation under HB 59, and asked if anyone knew of any such money being available. Number 540 MR. ELIM did not know where the money would come from and explained the DNR did not have the money to refund the veterans, which was why the DNR came forward with HB 59. Number 560 REPRESENTATIVE FRAN ULMER noted the history of previous bills like HB 59. She felt it was not a matter of whether the money was owed, bur rather of how much, and asked how confident the DNR was of its numbers. Number 569 MR. ELIM stated the DNR's Division of Land prepared the numbers for Representative Mulder, and the DNR's figures were accurate according to the contracts. He stated further that the veterans involved also knew of the amounts, which would serve as a check. Number 597 REPRESENTATIVE ULMER MOVED passage of HB 59. On roll call, HB 59 FAILED to pass on a 3-3 vote; Representatives Kott, Ulmer and Davis voted yes; Representatives Vezey, Olberg and Sanders voted no. Number 605 CHAIRMAN VEZEY noted the failure of HB 59, and invited its sponsor, Representative Eldon Mulder to comment. Number 617 REPRESENTATIVE ELDON MULDER, PRIME SPONSOR OF HB 59, stated the House Special Committee on Military and Veterans Affairs introduced the bill for two reasons: 1) because it was not fair to introduce legislation that enabled veterans to receive a refund, as was done in the 16th Legislature, without paying off; and 2) because the state was sure to lose any lawsuit veterans might file, which could cost the state more than the amount owed. He stated he would provide the committee any information it needed, including the number of tracts taken into defaults. Number 635 REPRESENTATIVE OLBERG stated he might prefer repealing the enabling legislation if not for a potential lawsuit. Number 647 REPRESENTATIVE SANDERS stated if the bill were broken into two parts, he might not have a problem, but could not support HB 59 at this time. Number 650 CHAIRMAN VEZEY noted the time of 8:45 a.m. and placed the committee at ease. HB 65: FINANCIAL ADMINISTRATION OF STATE GOVT. TAPE 93-29, SIDE B Number 010 CHAIRMAN VEZEY called the committee back to order at 8:56 a.m. and read the title to CSHB 65. He stated his intention to go through the bill section by section with the committee, and began with sections one to 32, which dealt with the liquor industry. Number 050 CHERYL FRASCA, DIVISION DIRECTOR, DIVISION OF BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET (OMB), explained the OMB's role as the facilitator of the Governor's original version of CSHB 65. She stated the bill was designed to save money by making most licenses biennial, which would cut down on the bureaucracy, and also to allow several departments the right to set fees for licenses, inspections, and certificates. Number 067 CHAIRMAN VEZEY noted the omission of a termination date for late applications for liquor licenses in Section 58, paragraph c, line 15, and asked if that was an oversight. Number 091 MS. FRASCA stated she did not know but would confer with the Department of Law. She stated the law was only for transition from the old statues to new. Number 108 CHAIRMAN VEZEY stated CSHB 65, as written, seemed to modify AS 4.11.270, and asked Ms. Frasca to inquire about the omission. Number 150 MS. FRASCA agreed to comply and stated she was at the committee's disposal to answer questions. Number 170 CHAIRMAN VEZEY asked committee members to look CSHB 65 over to see what questions they might have pertaining to sections one to 32. There were none. Number 178 CHAIRMAN VEZEY directed the committee's attention to sections 32 through 36, dealing with the public guardian statutes in Title 13. He had no questions, but considered it a major change in the law. Number 190 MS. FRASCA explained the Office of Public Advocacy (OPA) is currently part of the Department of Administration, and CSHB 65's changes would allow the OPA to charge for guardian services on the basis of ability to pay. CHAIRMAN VEZEY noted CSHB 65 also gave the OPA the right to appoint public guardians, currently a court duty. Number 216 MS. FRASCA said the authority to provide public guardians came through the court, but OPA had already undertaken the duties. She stated the repealed sections only dealt with the allocation of costs of a public guardian, not the authority of who assigned them. Number 240 CHAIRMAN VEZEY directed the committee to sections 36 through 43, which dealt with student loan guarantees. He stated the sections generally created a loan guarantee fee as part of the cost for a student loan. Number 259 REPRESENTATIVE ULMER asked why such a fee might be needed since current figures showed collections were up, and defaults down. Number 276 MS. FRASCA explained about $900,000 dollars from student loans had to be written off in 1992 due to death, bankruptcy or disability, and the fees would be used to cover those losses. She estimated the fee would provide about $513,000 per year against such losses. Number 290 CHAIRMAN VEZEY announced an upcoming committee substitute he planned to submit would delete increases in the student loan fee. He then directed the committee to section 44, which addressed the Department of Labor, giving the Department authority to set fees for examinations and administering applications for professional inspectors. He noted the upcoming committee substitute would also delete the fees. Number 321 REPRESENTATIVE ULMER asked why the fees would be eliminated. Number 323 CHAIRMAN VEZEY said allowing such fees by regulation fell into the area of giving the Department regulatory powers. Number 326 REPRESENTATIVE ULMER contended charging for inspections would not be regulatory. CHAIRMAN VEZEY disagreed, saying the ability to write regulations on fees would be regulatory. Number 330 REPRESENTATIVE ULMER asked what kind of fee generation the Department might see, and what would happen if the Department was not allowed to impose such fees. MS. FRASCA stated the fee was $400 to administer boiler pressure vessel exams, as opposed to no charge currently. She stated further that the OMB currently charged for most professional groups, and that institution of this charge would bring them in line with other professions. Number 335 REPRESENTATIVE ULMER asked if there was any justification for not charging the fee. MS. FRASCA said she had no idea. Number 337 DONALD G. STUDY, ACTING DIRECTOR, DIVISION OF LABOR STANDARDS AND SAFETY, DEPARTMENT OF LABOR, said the Department's budget had been cut over the last three years, and wished to fund the system with program receipts. Number 340 CHAIRMAN VEZEY noted the changes in CSHB 65 meant changing fees by regulation as opposed to changing fees by statute, and the legislature had no oversight powers to repeal regulations unless a proposed constitutional amendment was passed. Number 350 MR. STUDY stated those regulations underwent legislative review. Number 353 CHAIRMAN VEZEY stated the legislature could review such regulations, but had no oversight powers. Number 360 REPRESENTATIVE BETTYE DAVIS asked why the Department wanted to go from statutory to regulatory changes on fees. Number 363 MR. STUDY stated it was to reflect true costs of licenses, regulations and inspections. Number 367 REPRESENTATIVE B. DAVIS asked if that was not the case now. Number 370 MR. STUDY explained that was not the case in several instances, and the allowance of fees by regulation would also eliminate peaks and valleys in program receipts, and stabilize the revenues from them. Number 388 MS. FRASCA stated CSHB 65 reflected the frustration of having to pass rate increases through statues, which she said was inefficient. She said CSHB 65 cleared the way to update fees easily. Number 402 JOE RYAN, COMMITTEE AIDE TO CHAIRMAN VEZEY, noted CSHB 65 allowed a broadening of scope for license fees to be regulated, and gave an example of a fee structure under the Department which would increase the professional fees almost immediately. REPRESENTATIVE ULMER stated the debate was more about philosophy than setting fees, and stated supporting user fees made sense. She also stated those who used a service and benefitted should pay. Number 420 CHAIRMAN VEZEY stated the debate was not about user fees, but rather who got to set them: The people running the department or the legislature. He then directed the committee to read through section 53, and called for comments on the catastrophic reserve account. Seeing none, he stated the upcoming committee substitute he planned would eliminate the provisions for the account. He then directed members to the section allowing the DNR to set user fees for state parks, and announced his committee substitute would also delete this reference. Number 462 REPRESENTATIVE ULMER stated Alaska's parks were used by far more people than those in the Lower 48, and not allowing the DNR to charge users for their services would lead to a deterioration of the parks. She stated removing such authority was a mistake. Number 466 CHAIRMAN VEZEY stated he did not intend to remove the authority to charge fees, but rather to prevent them from being set by regulation. Number 480 REPRESENTATIVE ULMER stated it was impractical for the legislature to address fees every year for every department, and by forcing them to do so would cause the parks to deteriorate, since legislators might put off such increases. Number 485 CHAIRMAN VEZEY reiterated the status of a constitutional amendment to allow regulations to be repealed by the legislature, and stated that must be passed before allowing departments to set such fees. He then directed the committee to section 54, which allowed the Department of Environmental Conservation (DEC) to set regulatory fees, and also gave the DEC broader powers. He stated the upcoming committee substitute would delete this section. CHAIRMAN VEZEY also noted section 55 dealt with air quality, and stated consideration of this section would be inappropriate until the legislature's study of air quality was completed. He then noted sections 56 through 58 were housekeeping measures, which generated no comment from members. Number 537 MS. FRASCA noted the sections simply provided a regulatory bridge between the old statutes and the new. ADJOURNMENT Number 556 CHAIRMAN VEZEY then introduced the House State Affairs CS to CSHB 65, and seeing no comment or testimony, adjourned the meeting at 9:31 a.m.