MINUTES SENATE FINANCE COMMITTEE February 2, 1999 9:00 AM TAPES SFC-99 # 17, Side A and B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 9:00 AM. PRESENT Co-chair John Torgerson, Senator Sean Parnell, Senator Randy Phillips, Senator Dave Donley, Senator Loren Leman, Senator Gary Wilken, Senator Al Adams, Senator Pete Kelly and Senator Lyda Green. Also Attending: Senator RICK HALFORD; TERI KRAMER, Legal Services, Legislative Affairs Agency; CAROL CAROLL, Director, Division of Support Services, Department of Natural Resources; JANET CLARKE, Director, Division of Administrative Services, Department of Health and Social Services; GINGER BLAISDELL, Fiscal Analyst, Division of Legislative Finance; aides to committee members and other legislative members. Attending via Teleconference: DAVID HUDSON, First Sergeant, Alaska State Troopers in Anchorage; DICK MYLIUS, Resource Assessment and Development, Division of Land, Department of Natural Resources in Anchorage. SUMMARY INFORMATION SENATE BILL NO. 49 "An Act relating to missions and measures to be applied to certain expenditures by the executive branch of state government and the University of Alaska from the state operating budget for the fiscal year ending June 30, 1999; and providing for an effective date." Co-chair Torgerson called SB 49, sponsored by the Senate Finance Committee. Senator Parnell explained SB 49 for the committee. It is believed missions, measures and results should be clearly defined for each department in order to assure governmental results were to the satisfaction of the people. He briefly quoted from SB 76, which was passed by the Legislature and signed into law by the Governor last year. He then referred to a Texas budget, Department of Public Safety, 1995, using this as an example and explained how results were obtained. (This was done with the use of an overhead projector.) The next slide was from HB 325 the Department of Health and Social Services showing portions of missions and measures that were vetoed by the Governor last year in order to protect the constitutional mandates. The Governor felt the bill should not contain intent language. Now they must decide what kind of bill to pass and what it should contain. He suggested passage of a bill containing measures that included dollar amounts. These dollar amounts would reflect what had already been appropriated. SB 49 took all finance measures, which were negotiated last year, and then vetoed by the Governor, and put them into law this year for the 1999 budget. He hoped to continue this for 2000. Senator Parnell then briefly summed up SB 49. Senator P. Kelly asked if this was the sum total agreed upon last year? Why not put it into the statutes? Senator Parnell said it was the sum total from last year. He requested Teri Kramer from Legal Services come to the table. Teri Kramer, Legal Services, Legislative Affairs Agency was invited to join the committee. She said the missions and measures could be put into the bill. It would only be arduous to draft and there may be questions regarding existing statutes. Senator Adams asked what was the liability of putting something like this into a bill if it would not be correctly performed? He referred to section 2, page 2. And what happens if they do not come up to full expectations and there is a liability and challenge on each of these? He believed this bill violated the State Constitution and should perhaps have a judicial review. Article 2, section 13 set out the single substance requirement. Senator Adams felt it would not survive judicial scrutiny. Ms. Kramer said the single substance issue was certainly in issue. However, it only addresses a single year of appropriations. Courts have been generous in the past in considering this matter. She suggested it would perhaps be better to put it into several bills rather than lumped into one. Senator Parnell concurred that the Courts have been generous in the past. Missions and measures are an expression of legislative policy and therefore the State would be immune to liability. It is a legislative duty to set policy. Senator Leman agreed with Senator Adams regarding page 2. He felt that performance measures should only be what ought to be acquired. With reference to page 8, line 15, performance measures for permits.he asked what were the workable permits issued compared to the total permits issued. Will there be a total amount of workable permits and another total for unworkable permits? Senator Parnell responded. All missions and measures were established in the subcommittees and are in rough form. They were only a reflection of what was passed last year. Senator Leman asked what does "workable permit" mean. Senator Parnell said Ms. Kramer would have to respond. Senator Adams referred to missions and measures that we presently have and indicated that they were not accomplished as they should. He said, "Perhaps we should get away from the single substance issue." Ms. Kramer said she didn't feel there was any liability under single substance. She did not know what the Legislature intended if a department did not accomplish its measures. Senator Parnell responded that if an agency did not accomplish its measures then they would either do away with the program or cut it back, or the agency would convince the Legislature they needed more money to perform the specific duty. He said the bill was only an expression of policy and that the Legislature was immune to liability. Senator Adams asked about the public or constituency feeling that the missions and measures were not being fulfilled? The public would like to see an accomplishment. Senator Parnell agreed and said that the Legislature was acting as a representative of the people in holding the departments responsible. Senator P. Kelly reiterated the key to the missions and measures as discussed last year. The agencies did not have much objection, if any, to them. There were some technical problems and if departments and agencies could not agree then they were held over. There was going to be some failure, which would assist in getting a handle on what was expected of the agency. He felt this interaction was good. Senator Parnell said for years the executive branch had put performance measures into their detail books but had never been held accountable, nor did they really know what was in the detail books. In referring to the Executive Budget Act he said results could not be put into the budget itself. Senator Donley said measures should be put in the budget documents as in other states. "We are trying to get more efficiency in State government so people see the result of their money." By use of his veto power the Governor took out some good measures. Most of the departments had agreed to the measures he later vetoed. Jack Kreinheder, Senior Policy Analyst, Office of Management and Budget was invited to join the committee. He said they supported the bill in concept and appreciated the opportunity to work with the committee in the drafting of the bill. It would be preferable to have some clearer wording in the bill, however. In response to Senator Phillips, Mr. Kreinheder responded and used Y2K as an example. A mandatory statement by the Legislature regarding missions and measures could be a problem. Senator Parnell asked if the Administration had any other problems with any other section other than Y2K? Mr. Kreinheder said they had not done a comprehensive review. The Attorney General's office had done some. Y2K popped out because it was a "hot potato". Many of the other measures do not have a target, rather have a baseline. He is not aware of others that may raise pressing legal problems. This bill applies to current year but there were concerns to get it adopted quickly. The Administration was taking this seriously and departments were working on enhancing these measures. It would be preferable for the departments to work with the subcommittees to fine-tune the measures. Senator Parnell said he anticipated the subcommittees would do this but felt they needed the support of the bill. It would then be a potential vehicle for the year 2000. Mr. Kreinheder said they did not have any legal opinion regarding this bill. He spoke with Jim Baldwin along with a few others that had looked at the bill but he noted that no immunity for the State had been discussed. He said a reasonable level of compliance should be reached. Targets for litigation should be set if it were to be a compliance requirement. In response to Senator Parnell he said they felt the State could be held liable. Senator Donley suggested adding an amendment that would read: "The State could not be held liable for anything contained herein." Senator Phillips said he thought the State was looking for perfection. Therefore a standard of excellence should be set up and measured against. Perfection is not going to happen. Department of Law was going to have to work with the Legislature and this bill was a good start. People want to know if they are getting their money's worth. Senator Kelly said he knew there was going to be a problem with Y2K. He asked if they were compliant? Senator Parnell said Y2K was under mission critical. Co- chair Torgerson concurred. Senator Parnell further explained that one hundred percent of mission critical was covered by disaster recovery program. He also advised the committee that there were a host of other Y2K problems. Senator P. Kelly reiterated his concern for the Y2K issue. There will still be problems because everything cannot be anticipated. Co-chair Torgerson felt that the Office of Management and Budget was trying to delay the bill. They want to have words in there that have no accountability. Mr. Kreinheder said it was not their intent to hold the bill up. He was also not going to argue on the one hundred percent compliance for the Y2K problem. The Department of Law can address the other questions raised. Some redrafting would make it clear that the bill was an expression of policy by the Legislature. Senator Adams did not feel that the Office of Management and Budget was trying to hold up the bill, rather they were only suggesting rewording. Senator Parnell referred to Amendment #1. Accountability, he said, rests back here. He then requested the bill be held over until Thursday. He will work with Legislative Legal, Senator Donley and the Administration on more specific language. Perhaps that would help solve the saber rattling. Senator Adams voiced concern on the single substance issue. He wanted a memorandum on that. Senator Parnell agreed to seek to clarify the single substance issue. Suzanne Tryck, WWAMI Coordinator joined the committee by teleconference from Anchorage. She said she had no comments to make regarding the bill but would be happy to answer any questions. Co-chair Torgerson SET ASIDE SB 49 until Thursday. He then called SB 3. SENATE BILL NO. 3 "An Act relating to the crimes of murder, solicitation to commit murder in the first degree, manslaughter, and criminally negligent homicide; relating to homicides of children; and relating to the crime of interference with custody of a child or incompetent person." Senator Rick Halford was invited to join the committee. He offered brief comments as sponsor of the bill. He explained the fiscal note from the Department of Law at zero and the Department of Administration as being an indeterminate amount. Senator Adams said he supported this piece of legislation. Senator Leman referred to a particular case wherein an individual fleeing a police officer shot and killed an eight-year old child. He asked specifically if this type of activity was covered in this bill? Senator Halford said this was covered. Penalties increase when a firearm is present. Penalties increase when the victim is a child. David Hudson, First Sergeant, Alaska State Troopers, said they supported the bill. He voiced concerns that proper consideration should be given for the necessary enabling language that a convicted individual of sexual offense must register. It was explained that a person could cause death of a child during a sex offense and be charged with murder therefore not having to register as a sex offender. Senator Halford said this was not the intent of the legislation or the sex offender registration program. He would go back and look into this matter. Tape: SFC - 99 #17, Side B Senator Donley referred to item three of the sponsor statement. He wanted an explanation of the impact this would have and how it would apply to crimes against children. Public policy.was taking homicides more seriously and he agreed with this. How did this relate to other forms of homicide in general? Senator Halford asked Senator Donley for a better explanation of his question. Senator Donley explained homicide and a greater degree of culpability. When one was raised what was it being equated to? Was it being equated to a greater amount of culpability. He agreed to talk about it later with the sponsor. Senator Halford said the terms and options would have to be examined. A second-degree offense would be elevated if the victim were a child. There was also an increase in the penalty if the victim was a child. Senator Donley asked if the particular individual would be eligible for good time? Senator Halford said "yes". Senator Halford explained his understanding of manslaughter for Senator Kelly. However, he did not know the exact legal definition. That was charges the lawyers argue about. Senator Kelly asked if perhaps Senator Donley could help out. Which was more grievous, manslaughter or homicide? Senator Halford said he understood manslaughter to be the more grievous charge. However, he would have expected these questions in the judiciary committee. Senator Leman MOVED SB 6. WITHOUT OBJECTION it was REPORTED OUT with individual recommendations and accompanying fiscal notes from the Department of Administration/Public Advocacy, indeterminate; Department of Law, zero; Department of Administration/Public Defender, indeterminate; Department of Corrections, zero. Co-chair Torgerson called SB 6. SENATE BILL NO. 6 "An Act relating to the disposal of state land." Mel Krogseng, staff to Senator Robin Taylor was invited to join the committee. She explained the bill on behalf of Senator Taylor, sponsor. The land in question has been purchased and returned to the State because of default. The Department of Natural Resources proposed the amendments that were already incorporated into bill. It is supported by them and carries a zero fiscal note. Senator Adams asked about the two amendments proposed by the chairman. Ms. Krogseng said there was no objection to the amendments. Carol Carroll, Director, Division of Support Services, Department of Natural Resources was invited to join the committee. She did not wish to testify but said Dick Mylius from the department was available via teleconference in Anchorage. Dick Mylius, Resource Assessment and Development, Division of Land, Department of Natural Resources testified before the committee via teleconference in Anchorage. He said the department supported the bill as currently drafted. It would allow them to get land up for sale more quickly. Under State statute the land must be appraised before sale. Senator Adams referred to Amendment #1, section 5 having to do with appraisals. His concern was that the director might not reject an appraisal. What happens if there is a low appraisal rating? Mr. Mylius said they opposed Amendment #1. The department may want to reject an appraisal for many reasons. Such as error in computation, the wrong parcel of land, etc. Senator Adams referred to Amendment #2. Mr. Mylius said his concern for Amendment #2 was the statute was changed previously to two years. Further, it does not read quite clear what the addition modifies. Senator Adams suggested that in Amendment #2, line 6, after "lease" insert "or". Mr. Mylius briefly described an inaccurate appraisal and the problems caused by this for the committee. Co-chair Torgerson commented about the situation of the hiring of an appraiser to appraise a specific piece of land, it was rejected and the case was now under administrative appeal. He then explained purpose of the amendment. Mr. Mylius said this kind of situation rarely arises and this one was an exception. There was significant error. The private appraiser ignored all comments and suggestions made by State appraiser. Senator Torgerson said appraisers were hired because they were supposed to be unbiased towards either party. Did they try to negotiate a higher price? Mr. Mylius said there was a lot of differences. The piece of property was a difficult one to appraise. Senator Torgerson asked if appraisers were licensed by the State? Mr. Mylius said they were. Senator Torgerson asked if they were covered by insurance? Mr. Mylius said he did not know. Senator Phillips asked if the process done for everyone was normally the same? Mr. Mylius said parcels of land were appraised beforehand. They appraise the land up front and the buyer pays this fee up front. They do sell exclusively to an individual in certain situations. Senator Phillips asked what happened if an individual did not like the appraisal? Was another appraisal secured? Mr. Mylius said that was correct. Senator Adams asked what the third appraisal in this particular situation came out to be? Mr. Mylius said the issue was currently out to deal and he could not release the amount of the appraisal. Co-chair Torgerson asked what was the expectation of the person paying for the appraisal? In this particular situation, they got two more appraisals and still filed an appeal. Senator Donley MOVED Amendment #1. Senator Adams OBJECTED. He MOVED to delete all of section 5 as an amendment to Amendment #1. Co-chair Torgerson OBJECTED. He said there was an expectation on behalf of the buyer when the appraisal service was paid for. Therefore the department did not have any veto right. Mr. Mylius said this instance was a rare occasion. The State certified appraiser had voiced her concerns. The outside appraiser did not respond to her concerns. Senator Torgerson said he felt Mr. Mylius wanted to leave everything to the discretion of the department. Mr. Mylius said they either do appraisal with their own staff or hire another appraiser. Then it could be appealed to the commissioner, the individual could purchase the property or not, or they could take the matter to Court. Senator Torgerson said this was not great policy and it did not make sense. Senator Phillips asked about the appraisals. Did the same process apply to all properties? Mr. Mylius said they did use the same appraisal process for all properties. Senator Phillips questioned then why was this case so different? Mr. Mylius said this was because of the difference of the value of the property between the purchaser and the department. Senator Kelly asked if there was any contract that the Department of Natural Resources would sell land to a person based on an appraisal carried out by one of their approved people? Mr. Mylius said there was no contract, but it would still have to be approved by their appraiser. He explained that the only ground for disapproval was fraud. Senator Kelly explained his understanding of a contract with an appraiser. Is one stuck with the obligation of buying even if they do not like the appraiser? The larger question to be determined is that is this something that always goes on? Or is this just an isolated incident? He said he would have to support Senator Torgerson's amendment individuals. Senator Donley asked for an explanation of the standard used. Was there clear and convincing evidence that the appraisal was inaccurate? Mr. Mylius said there was no clear and convincing standard. There was however a standard checklist to make sure the appraisal was good. Senator Donley said he had received comments that State policy was not being executed. There were people in positions that have decision-making authority ignoring the intent of the statute. This was causing great concern for many individuals. A systemic pattern was seen and needs to be attended to. He has been hearing of this process in the business community. Mr. Mylius said he would provide statistics to the committee showing that this was a rare incident. Co-chair Torgerson said if he wanted to purchase land he had the option not to purchase it, not the appraiser. Senator Green voiced her concerns. The Commissioner was approving each appraiser. Perhaps it was time to get back into the reversionary relationship of buyer and appraiser. The present system does not work very well. Was this appraiser still on the payroll? Mr. Mylius said this person was no longer a certified appraiser. The particular appraiser did not fill out and submit the required re- certification papers and therefore was not on the certified list. Senator Green asked if a minimum bid was ever set? Mr. Mylius said the appraiser did set a minimum bid. Senator Green asked if they were operating according to policy? Mr. Mylius asked for clarification? Senator Green asked if the department was operating under statute so an individual could anticipate what they might have to go through? Senator Kelly asked if this was under regulation or policy? Mr. Mylius said most operations were under regulation. Senator Phillips asked about list of approved appraisers? And how often was this reviewed? Mr. Mylius said he was not sure how many were on the list. It was reviewed less often than once a year. The appraiser in question was not on the list any longer. Co-chair Torgerson said the Department of Natural Resources also had a list of appraisers that were not approved to use. This has created a problem. He asked if the bank changes the appraisal on a loan? Mr. Mylius said he was unaware of what the bank did. Co=chair Torgerson spoke briefly to the committee regarding appraisals in favor of the State. Senator Wilken asked Co-chair Torgerson to set aside the amendment to Amendment #1 pending receipt of requested information. Senator Donley referred to amendment to Amendment #1 and perhaps it could be incorporated into Amendment #2. Tape: SFC - 99 #18, Side A Co-chair Torgerson explained Amendment #2 and the change of two years to five years for an appraisal. They were trying to assist Alaskans in their purchase of land. Senator Donley spoke to the "clear and convincing" standard. Senator Adams concurred. He suggested they work on this bill overnight to find a negotiated point and also take care of the involved constituent to make sure this does not happen in the future. He felt this truly was an isolated case. Co-chair Torgerson said he did not feel this was an isolated issue. As he said, they might as well not license appraisers. Senator Kelly asked if appraisers were licensed in the State? Co-chair Torgerson said he thought they were certified. Senator Donley asked if the amendment to amendment #1 was presently before the committee. Senator Adams said this could be held overnight and perhaps they could come up with a compromise and get bill out tomorrow. Co-chair Torgerson briefly commented. Senator Donley said there was really two questions. The first one was the approval of appraisers. The department should not have the authority to approve appraisers. Second, was the "clear and convincing" standard if there was "discretion" to be approved by the department. These were possible suggestions offered by Senator Donley. Senator Green said his suggestions would not correct the situation. Senator Donley disagreed saying this suggested standard would have given the constituent something to go by. Co-chair Torgerson felt there should have been an unbiased appraisal. Senator Donley pointed out that the same thing could happen if the Commissioner discriminated in approving appraisers who were sympathetic to them. Co-chair Torgerson's concern was that the State, in this matter, was asking Alaskans to come, give money and then they would do the appraisal. Senator Green asked if the burden of appraisal were back on the State, either there could be a flat fee or the applicant could pay and State would handle the appraisal? Co-chair Torgerson said this could be an option. Mel Krogseng rejoined the committee and also said this could be an option. The price of an appraisal is pretty standard unless it is a remote parcel. She suggested Mr. Mylius check into this matter. Ms. Krogseng continued. It was her understanding that a bank had an appraisal list and no matter who ordered the appraisal the official appraiser is taken from that list. If there is a problem then perhaps we should check into the standard of their certification. Co-chair Torgerson HELD the bill in committee along with the amendments. This should be worked out with Department of Natural Resources. Ms. Krogseng said she would be glad to work with the committee and the department. Co-chair Torgerson reviewed the agenda for tomorrow. An Overview of the Department of Administration was scheduled. Senator Adams asked if the University of Alaska would also be taken up? Senator Parnell said he had asked for a review of all bargaining units. He did not know if the University would be present. ADJOURNED Co-chair Torgerson adjourned the meeting at approximately 10:50 A.M. (Tape number#18, Side A.) SFC-99 (1) 02/02/99