MINUTES SENATE FINANCE COMMITTEE April 3, 1997 9:10 A.M. TAPES SFC-97, # 74, Sides 1 & 2 (000-589, 589-143) CALL TO ORDER Senator Bert Sharp, Cochair, Senate Finance Committee, convened the meeting at approximately 9:10 A.M. PRESENT In addition to COCHAIR SHARP, COCHAIR PEARCE, SENATORS PHILLIPS, TORGERSON, PARNELL and ADAMS were present when the meeting was convened. SENATOR DONLEY arrived as the meeting was in progress. Also Attending: CHRIS CHRISTENSEN, General Counsel, Judicial Branch; NICO BUS, Chief of Financial Services, Support Services Division, Department of Natural Resources (DNR); JOAN BROWN, Fiscal Analyst, Office of Management and Budget (OMB); TRACI CRAMER, Administrative Officer, Exxon Valdez Oil Spill Trustee Council; ANNALEE MCCONNELL, Director, OMB; fiscal analysts and aides to committee members. Also Attending Via Teleconference: TERI CARNS, Senior Staff Associate to Judicial Council; MILT WILTSE, Director, Division of Geological and Geophysical Surveys, DNR; KEN BOYD, Director, Division of Oil and Gas, DNR. SUMMARY INFORMATION HB 58 CIVIL ACTIONS/ATTY FEES/INSURANCE Testimony was heard regarding fiscal notes from CHRIS CHRISTENSEN and TERI CARNS. The bill was HELD for further consideration. SB 107 APPROPRIATIONS: CAPITAL & FUNDS Testimony was heard on capital project requests from representatives of the Court System and the Department of Natural Resources. The bill was HELD for further consideration. CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 58(FIN) am "An Act relating to civil actions; relating to independent counsel provided under an insurance policy; relating to attorney fees; amending Rules 16.1, 41, 49, 58, 68, 72.1, 82, and 95, Alaska Rules of Civil Procedure; amending Rule 702, Alaska Rules of Evidence; and amending Rule 511, Alaska Rules of Appellate Procedure." CHRIS CHRISTENSEN, General Counsel, Judicial Branch, stated that their fiscal note was low considering the massive number of changes the bill proposes. He noted that most parts of tort reform didn't help the state save money, but did help litigants. The fiscal impact of most of the changes would be either neutral or impossible to predict. There would be a slight impact on the way cases were handled. For example, the defendant has the option of making periodic payments for amounts in excess of $100 thousand. Extra judicial time would be involved in that the judgement would have to set up the payment schedule and take testimony from witnesses, and resolve future disputes if payments were not being made. Section 15 relates to collateral benefits and requires the jury to consider them, rather than the judge under current law, which would add jury expenses. Section 23 modifies the rate at which prejudgment interest is accrued by changing it from a fixed rate to a floating rate. This would require a new rate to be set yearly, necessitating new computer software and additional clerical time. Continuing, MR. CHRISTENSEN testified that there would be an increase in the medical malpractice 3-person expert advisory panels because of the inclusion of malpractice claims against government attorneys, but the cost would be minimal, and was not included in the fiscal note. Some judicial costs would be saved regarding motion practices, but would be offset by longer trials and increased appeals. It has been estimated that the bill would result in increased litigation for five to seven years until all the issues were settled. In response to a question from SENATOR ADAMS, MR. CHRISTENSEN responded that the fiscal note he was referring to was dated 3-11-97 for $19.4 thousand. SENATOR ADAMS commented that one of the stated reasons for tort reform was because the court system was clogged, yet their fiscal note was low. Based on that, he doubted the truth of that reasoning and believed the bill should not be before the legislature. He questioned the number of tort cases. MR. CHRISTENSEN stated that torts were a very small percentage of total cases before the courts, excluding small claims. There were less than 1,500 tort cases last year, out of approximately 140 thousand total cases. SENATOR ADAMS questioned the argument that most civil lawsuits were frivolous. He referred to the court system's 1995 annual report indicating that most cases have merit. MR. CHRISTENSEN confirmed that the percentage of lawsuits which are dismissed or fined as frivolous was very tiny, but did not have exact figures. SENATOR ADAMS cited additional statistics regarding tort cases, making the argument that the bill was not needed. He reiterated that because of the small fiscal note the bill did not do anything. TERI CARNS, Senior Staff Associate to Judicial Council, testified via teleconference from Anchorage. She spoke about the Judicial Council fiscal note that covers two areas. One was an alternative dispute resolution program review at a cost of approximately $8,000 for a contractee to do that work. The other was a review of settlement data. It would provide an opportunity to have confidential data available for analysis to the Judicial Council, which would then be reported periodically to the legislature and the court at a cost of approximately $18 thousand. COCHAIR SHARP noted there were no additional questions. He stated the bill would be HELD for further consideration. SENATE BILL NO. 107 "An Act making and amending capital and other appropriations and to capitalize funds; and providing for an effective date." CHRIS CHRISTENSEN, General Counsel, Judicial Branch, referred to their first priority project on page 29, line 22: a request of $1.375 million to begin the replacement of the court systems recording equipment. He noted that Alaska was the only state that did not use court stenographers. All court cases were electronically recorded. Last year they produced about 52 thousand cassette tapes. From those, over 110 thousand pages of transcript were prepared. If stenographers were used, they would need at least fifty at range 17 or 18, based on outside salaries, so it saves the state approximately $3 million in salaries every year. However, every fifteen years the recording equipment needs replacement. The appropriation would replace the peripheral equipment that supports the recording, such as microphones, mixers and amplifiers. The recording machines would be purchased next year. They plan to go to PC-based digital system that would provide better quality recordings. There was additional discussion about equipment based on an inquiry by SENATOR PHILLIPS. MR. CHRISTENSEN brought up the second priority, that being $580 thousand to continue code upgrades for the 1974 Anchorage courthouse which houses the supreme court, the court of appeals, the public law library, the family law courts, the domestic violence courts and the night magistrate. A 1993 condition inventory showed over a hundred code violations and they received a closure order from the fire marshall. The appropriation would be primarily used for fire protection, accessibility under the Americans with Disabilities Act, seismic resistance, energy conservation and indoor air quality. The third priority was deferred maintenance. MR. CHRISTENSEN acknowledged the legislature planned to take a different approach to deferred maintenance, so he did not elaborate on the request and concluded his testimony. NICO BUS, Chief of Financial Services, Support Services Division, Department of Natural Resources, presented the department's capital projects requests. The first was on page 16, line 8, that being $300 thousand for conversion of manual plats to digital format so it would be electronically accessible. The request would enable 420 township conversions within an ongoing six year project which was nearing completion. SENATOR DONLEY requested identification of the corporate receipt sources. MR. BUS responded that the first project was funded from AIDEA receipts. The next project on line 10 was $400 thousand to delineate potential coalbed methane drilling targets to encourage private sector exploration and development in meeting rural energy needs. It would provide for permits for seismic testing and surveys, limited drilling, data collection and processing, and reporting. In response to a question from COCHAIR SHARP, he stated last year's appropriation was $400 thousand. The funds were from AIDEA. MILT WILTSE, Director, Division of Geological and Geophysical Surveys, DNR, testified on the project via teleconference from Fairbanks. He explained that the funds last year were to start building an exploration model for coalbed methane, a new endeavor which was being conducted in conjunction with the Texas Bureau of Mines on contract. There was additional discussion about the expenditure of the previous year's appropriation. MR. BUS continued with the next project on line 11. It was $200 thousand for parks emergency repairs, a minimal amount considering over $10 million of repairs have been identified. This appropriation would focus on health and safety issues such as outhouse and roof repairs in the areas of Kodiak, southeast Chugach, Kenai, Mat-Su and the northern region. SENATOR PHILLIPS expressed surprise that the governor was requesting such a small amount considering the importance of parks and campgrounds to tourism. He inquired about the thought process behind the minimal request. MR. BUS responded that it was basically a prioritization process among many needs and the request was close to what was appropriated last year. SENATOR PHILLIPS requested the original list of requests submitted to the governor's office. SENATOR DONLEY noted the funding request was from general funds and thought it would be justifiable to use AIDEA receipts because tourism was an economic issue. He requested a response from OMB. JOAN BROWN, Fiscal Analyst, Office of Management and Budget, explained that decisions about which projects to use AIDEA receipts for were based on whether they were economic development projects and the amount of AIDEA funds available. Parks were funded with general fund money. In response to a question from COCHAIR SHARP about program receipts, MR. BUS explained that the revenue from parks facilities exceeded the state budget by $100 thousand, so the administration allocated that amount of program receipts to the general fund. The next item was reforestation on line 12. According to AS 41.17.060, the state can deposit 25 percent of timber revenues into the timber reforestation fund. $100 thousand of AIDEA funds would reforest 400 acres in interior and southcentral Alaska, specifically in the Tanana valley and Kenai. Line 13, Airborne Geophysical and Geological Mineral Inventory for $400 thousand, was the next project. These projects have been successful in the past in attracting the mineral industry to areas with potential. Line 15, Oil and Gas Areawide Lease Database for $270 thousand, would include all new tract releases, previous tract leases and mapping so that the industry and the department had the information readily available to speed up the process. The funds were from AIDEA. End SFC-97, #74, Side 1, Begin Side 2 MR. BUS continued with the next DNR project on line 16, the National Petroleum Reserve Technical Studies for $400 thousand. The project from AIDEA funds seeks to promote renewed exploration activity in the reserve by supporting geological and geophysical studies in key areas. Much of the work would be contracted out to private sector. MR. WILTSE offered additional information on the project, noting the program was designed to get at subsurface data for new models for the NPRA area. KEN BOYD, Director, Division of Oil and Gas, DNR, testified via teleconference on the previous project regarding the areawide leasing database. He indicated that areawide leasing had implications for the future of the state and it was important to have adequate maps indicating what was for lease, what had been leased and what the status of leases were. In response to a question from SENATOR TORGERSON, he explained that the current database was small and used on an ad hoc basis. With areawide leasing, the database would have to be completed, modernized and maintained. They wanted to produce their own maps in house, showing the changing land status. The project would provide that capability. SENATOR TORGERSON asked if the amount of money would be all that was needed to complete the project. MR. BOYD confirmed. MR. BUS brought up the next request on line 18, that being the Oil and Gas Electronic Interface with Industry for $150 thousand. It would get the department and the industry on the same line regarding data transfers with the purchase of software. It would streamline and speed up the transfer of data between the different groups. It was a one-time item from AIDEA funds. The next item, line 20, was the use of AIDEA funds for streamgaging in different rivers to determine the volume of water available for development projects. The project was matched with federal funds from the USGS. Lines 21 and 22, Value Added Timber Sale for $230 thousand and $75 thousand respectively, would deal with the Tok Delta, Kantishna, Wrangell and Ketchikan areas. It was from AIDEA funds. The next project was on line 23 for Mount McKinley Meat Plant Renovations and Repairs in the amount of $100 thousand, coming from AIDEA funds. The roof and boiler were in desperate need of repairs. MR. BUS noted the next three projects were federal grants passed through to organizations that wanted to develop projects. The grants were awarded to non-profits and municipalities for four categories. The state acts as custodian of the grants. The recipient of the National Historic Preservation grants went predominantly to the Alaska Historical Preservation Organization in the department. The Recorder's Office Information and Imaging System on page 17, line 4, was a new project to streamline an antiquated process. It would automate the process through imaging technology used in other states. It was considered urgent and would allow the recorder to gain efficiency with a turn- key system. It was felt the investment would return many times over by speeding up the process. Line 6, the Old Eagle School Site School Clean-Up for $65 thousand, was for clean-up of soil contamination on the state-owned land. There had been a supplemental request of $100 thousand for removal of the buildings. In response to a question from COCHAIR PEARCE, MR. BUS explained that the village of Eagle sued the state for abandonment of the buildings which were a health and safety issue. The state would like to transfer the property to Eagle. The building was received in 1967 from either the BLM or the BIA. The state tried to get the feds to carry some of the clean-up expense but was unsuccessful because of the length of time involved. COCHAIR PEARCE questioned why the state was giving the land away. MR. BUS was uncertain but would follow up on the inquiry. The next item was $15 million out of the Oil Spill Response Fund for the Exxon Valdez Oil Spill Trustee Council Small Parcel Acquisitions on line 7. TRACI CRAMER, Administrative Officer, Exxon Valdez Oil Spill Trustee Council (EVOS), testified that the money would allow the agency to have authority to purchase parcels that were affected by the oil spill. She stated that it was a vigorous public process and explained. In response to a question from SENATOR TORGERSON, she clarified that they currently come back to the Legislative Budget and Audit Committee for purchase authority, but the committee requested they reduce the number of RPL's, so their attempt to do that was to put it in the capital budget. SENATOR TORGERSON felt it was important to keep the oversight of parcel by parcel approval. SENATOR PHILLIPS wanted to know the net effect if the item was deleted. MS. CRAMER explained there would be no impact if the committee was willing to consider parcel by parcel requests. She added that the difficulty of going through the capital process was a matter of timing. If they don't have the authority in the budget, they must wait another year to get additional authority. There was additional discussion on this issue. ANNALEE MCCONNELL, Director, OMB, reiterated that they had been explicitly asked last year not to have this be part of the LBA process, but instead included in the capital budget. She requested that if the legislature's desire was to leave it in the LBA process, it be clearly stated so that they don't have the timing problem. COCHAIR PEARCE stated her position that the EVOS trustees should come back to the legislature like everyone else does for their purchases. COCHAIR SHARP requested that assigned values and purchase prices of the three projects listed be provided to the committee. COCHAIR PEARCE stated her philosophy that state ownership of what was now private land was not necessarily the best use for the Exxon settlement because it did not help restore benefit to the people of Prince William Sound. MR. BUS brought up the next project on line 9, that being the Fairbanks Building Repairs and Maintenance for $100 thousand. It would provide for asbestos removal and fix electrical problems that pose dangers to the employees. The next item was Wildland Fires Urban Interface Support for $100 thousand on line 10. It would allow purchase of excess equipment from the federal government for various fire departments, provide training, buy compressed air systems and remote automated weather stations. SENATOR PHILLIPS inquired if there was duplication of anything the Department of Military and Veteran Affairs (DMVA) was doing. MR. BUS responded that the purchases were strictly for fire related activities and he did not believe there was duplication. Line 11, Fire Communications Equipment for $350 thousand, was similar to the request in the DMVA. It would improve communications to comply with federal mandates. MR. BUS concluded his presentation with the request on line 13 for Fire Equipment Replacement in the amount of $100 thousand from the general fund for fire detection units, chain saws and pumps. In response to an earlier inquiry by SENATOR DONLEY regarding the use of AIDEA funds for parks, ANNALEE MCCONNELL explained they limited recommendations for AIDEA projects to the $16 million declared by the board of directors under the statutes passed last year. There were other projects important for economic development, including parks, but they did not want to exceed the dividend amount declared by the board. In response to SENATOR PHILLIPS' earlier question regarding the small request for parks, she noted $150 thousand was appropriated last year, so this request was more than last year. Additionally, there was a supplemental request for severe emergency situations, which added up to a total request of $400 thousand for the next year. RECESS COCHAIR SHARP recessed the meeting at approximately 10:37 A.M., then reconvened, taking up SB 83 (Supplemental Appropriations). Minutes for SB 83 on file.