MINUTES  SENATE FINANCE COMMITTEE  April 12, 2000  6:11 PM TAPES SFC-00 # 85, Side A and Side B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 6:11 PM. PRESENT Co-Chair John Torgerson, Senator Al Adams, Senator Lyda Green, Senator Pete Kelly, Senator Loren Leman, Senator Randy Phillips, Senator Gary Wilken Also Attending: SENATOR ROBIN TAYLOR; DARRYL HARGRAVES, Executive Director, Alaska Council for School Administrators; EDDY JEANS, Manager, School Finance and Facilities Section, Education Support Services, Department of Education and Early Development; KEITH LAUFER, Financial and Legal Affairs Manager, Alaska Industrial Development and Export Authority, Department of Community and Economic Development; ELMER LINDSTROM, Special Assistant, Office of the Commissioner, Department of Health and Social Services; BOB LOEFFLER, Director, Division of Mining, Land and Water, Department of Natural Resources; Attending via Teleconference: From Kenai: PATRICK HICKEY; KARL KIRCHER, Kenai Peninsula Fisherman's Association; SANDY UMLAUT, President, Ugashik Set-netting Association; PAUL SHADURA; From Kodiak: DAVE JONES, Director of Finance, Kodiak School District; From Petersburg: ELIZABETH BACOM, President, Petersburg School Board; From Homer: DAN CHALUP, Representative, Katchemak Bay Salmon Producers Co-op; SUMMARY INFORMATION SB 290-PUBLIC SCHOOL FUNDING & EXPENDITURES The Committee heard from the Department of Education and Early Development, adopted a committee substitute, considered amendments, but adopted none, and reported the bill from Committee. SB 248-AIDEA: BONDS & RURAL DEVELOPMENT The Committee heard from the Alaska Industrial Development and Export Authority. The bill was held in Committee. SB 254-HEIRLOOM MARRIAGE CERTIFICATES The Committee heard from the Department of Health and Social Services and the bill moved from Committee. SB 257-DEPT NAT RES ADMIN APPEALS/ OIL & GAS The Committee heard from the Department of Natural Resources and the bill moved from Committee. SB 259-CRIMES: REPRESENTATIONS/I.D./COMPUTERS Without further debate, the bill moved from Committee. SB 283-NAT RES.REVENUE: FISH/TIMBER/LAND The Committee heard from the Department of Natural Resources and members of the public. The bill moved from Committee. SENATE BILL NO. 290 "An Act relating to state funding for transportation of public school students; and providing for an effective date." PATRICK HICKEY testified via teleconference from Kenai to address Amendment #1, increasing the minimum percentage of school operating expenses to 80 percent from 70 percent, which was not offered. He requested that the Committee give the Association of School District Officials the opportunity to divide the "section 400" accounting component to reflect the shared classroom and administrative duties of school principals. DAVE JONES, Director of Finance, Kodiak School District testified via teleconference from Kodiak to address his concerns with the fifty-fifty clause for reimbursement of increased pupil transportation costs. He said the Kodiak School District was a good example of why this would not work. He spoke about the minimum wage required to pay school bus drivers. He stressed the only way the district could cover the costs would be to take money from the classroom, which would be contrary to the intent of the formula funding program. He described the school district's efforts along with other districts to encourage competition to bring the costs down. ELIZABETH BACOM, President, Petersburg School Board, testified via teleconference from Petersburg about her understanding that this legislation would apply to the Cost of Living Allowance (COLA) portion of the pupil transportation contracts. She spoke of the hardship of declining funding due to declining enrollment and how this additional funding reduction would force the district to take money from the classrooms. DARRYL HARGRAVES, Executive Director, Alaska Council for School Administrators testified in Juneau about the matter of fairness across the state. He remarked that most of the Committee members represented large school districts and that other smaller communities would have difficulties meeting the matching fund requirements. He stressed that the bus driver contracts were strictly negotiated following many requirements imposed by the Board of Education. He talked about the complexities of the contracts and the required routes. SENATOR ROBIN TAYLOR thanked the Committee for including Section 3 in the bill. [Description forthcoming.] Senator Wilken moved to adopt CS SB 290, 1-LS1555\N as a workdraft. Co-Chair Torgerson objected for an explanation. Senator Wilken detailed the changes made to the bill in the committee substitute as follows. Section 2 - provides that school district pupil transportation costs eligible for state reimbursement are subject for following adjustments: (1) sets the funding level received by the school district for student transportation in FY 01 is considered the limit for future reimbursement. (2) stipulates that costs resulting from new school facilities, increased enrollment or imposed by state or federal law are excluded from the reimbursement calculation (3) allows the reimbursement limit to increase each fiscal year by four percent or the Anchorage Consumer Price Index (CPU), whichever is less. (4) sets out the pupil transportation cost excess of the limit, shall be reimbursable by 50 percent. Section 3 - addresses the 70-30 percent split of operating versus administrative expenditure issue. It clarifies the definition of the instructional component for the purpose of determining the school district's operating budget's minimum expenditure for instruction. It sets out that expenditures for school administration, principals, assistant principals or other assistants employed to supervise administrative operations of a school bay not be considered instructional expenditures. Section 4 - lowers the Average Daily Membership (ADM) threshold upon which a school district can count a facility as a separate school from 750 to 450. Sections 5 and 6 - set out the effective dates Senator Phillips asked which communities are allowed under the provisions of Section 4. EDDY JEANS, Manager, School Finance and Facilities Section, Education Support Services, Department of Education and Early Development, answered that Section 4 would apply to Delta Junction/Greely, Petersburg and Wrangell school districts. Senator Phillips asked if the legislature was not the "assembly" for delta junction Mr. Jeans responded that he believed in essence, that was correct. Senator Phillips asked why the legislature could therefore not mandate that community to form its own borough by making school funding a contingency. Mr. Jeans responded that AS 14.17.905. Facilities Constituting a School., applies to school districts whether they are a municipality or a Rural Education Attendance Area (REAA). He stated that Section 4 of the committee substitute therefore establishes a threshold of how the department can determine how communities can make school- size adjustments. Senator Phillips repeated his question of what was preventing the legislature from mandating Delta Junction to form a borough. Co-Chair Torgerson said Mr. Jeans was not the person to address that question. Co-Chair Torgerson stressed that certainly the legislature had the power to mandate boroughs. Senator Phillips said he had concerns with Petersburg and Wrangell paying for the services and Delta Junction not paying. Co-Chair Torgerson remarked he had concerns with the entire Section 4. Co-Chair Parnell asked if Delta Junction/Greely is the first unorganized area that would qualify for funding under this section. Mr. Jeans replied there were other REAA communities that would be affected by the Section 4 clause. Co-Chair Parnell commented that this was a much bigger issue than just this one school. Senator Adams addressed the language in Section 2 (4), "only 50 percent of these costs reimbursable under this section that are in excess of the sum calculated under (1) - (3) of this subsection shall be reimbursed to a school district." He asked if this bill increased the "floor" of pupil transportation by reviewing the CPI, which is not used in the foundation formula. He wanted to know if the differences had been calculated. Senator Wilken answered that figures had not been calculated. Senator Adams asked if therefore the increases were unknown. Senator Wilken replied that the floor would be the amount set in the FY 00 budget, which may change with the FY 01 budget if the requested $5 million increase is funded. Senator Adams wanted to see the figures because he thought the costs could be higher. Senator Adams then asked if Section 3 applies to rural districts where some principals not only run the school but also teach courses. Senator Wilken shared that there is a formula the department can use for small school districts to classify the principal as a working teacher. However, he said schools with more than 50 students would not qualify for this consideration because the principal or assistant is responsible for managing the school. Senator Adams spoke of fair and equitable funding for students. He noted Amendment #2 of the previous committee substitute and Amendment #6 for the current version, both of which he sponsored. These amendments he explained, address the issue that rural school districts receive only 60 cents on the dollar. He referred to the McDowell study that showed teachers in rural districts were paid differently because of their high cost of living. He wanted the Committee to consider Senator Wilken replied that he had not considered the first amendment when drafting this committee substitute and had only just seen the second. Co-Chair Torgerson asked if the department had calculated the impact of Section 4 on the fiscal note. Mr. Jeans had and said the added cost would be approximately $1,009,800. He noted that the department would be opposed to the changes in the committee substitute because of the requirement of SB 36 to evaluate the effectiveness of that bill and report back to the legislature with recommendations in 2001. Constant changes to SB 36 would make the assessments difficult, he asserted. Senator Adams asked what the cost would be of the proposed Amendment #6 to "stop the eroding floor" and whether the department supports or opposes that amendment. Mr. Jeans replied that the erosion of the floor went from approximately $17 million in FY 99 to $15 million in 2000. The overall fiscal impact, he said would be the $15 million on the floor at this time. He said it would be hard to project how long it would take for that full amount to erode. In response to the question on the department's position on the amendment, Mr. Jeans repeated that the department would be opposed to any changes to the foundation funding formula as set by SB 36. Senator Adams objected to the adoption of the committee substitute on two points. The first is the unknown costs of Section 2, and the second is the absence of the provisions of Amendment #6. A roll call was taken on the motion. IN FAVOR: Senator Green, Senator Donley, Senator Leman, Senator Wilken, Co-Chair Parnell, OPPOSED: Senator P. Kelly, Senator Phillips, Senator Adams, and Co-Chair Torgerson The motion PASSED (5-4) The committee substitute version "N" was adopted as a workdraft. Co-Chair Torgerson established that the proposed amendments #1 through # 4 were to a different version of the bill and would not be offered. [Copies on file.] AT EASE Amendment #5: This amendment deletes, "principals" from page 2 line 21 of the committee substitute. The amended language in Section 3 reads as follows. (1) "instructional component" means [INCLUDES] expenditures for teachers and [FOR] pupil support services, but does not include expenditures for school administration or for assistant principals, or other assistants employed to generally supervise administrative operations of a school; New Text Underlined [DELETED TEXT BRACKETED] Senator Green moved for adoption. Co-Chair Torgerson objected. Senator Green spoke to earlier discussions regarding the need for classroom supervisors to provide assessment on the teacher performance in the classroom. She stressed that if a principal position was removed she thought the progress of improved performance would go backward. While she did not think 100 percent of the principal salary should go to instruction, she thought that the portion of time spent on instructional duties should be accounted for accordingly. Co-Chair Torgerson replied this was the reason for the 70- 30 rule. He stated that this provision changed the intent back to the original SB 36 rather than the recent Board of Education regulation. He warned that if the percentages were constantly changed, the board would be unable to provide adequate assessments of the foundation formula- funding program. Senator Wilken explained that there are two conflicts occurring at once. First, he said was the placement of the principal in the organizational structure of the school as a manager. However, he shared, the issue before the Committee is how the principal position is accounted for in the expenditures of the school district. He stated that only the accounting component is changed. He stressed that in order to follow the 70-30 requirement the procedures need to remain constant. A roll call was taken on the motion. IN FAVOR: Senator Green OPPOSED: Senator P. Kelly, Senator Wilken, Senator Phillips, Senator Donley, Senator Leman, Senator Adams, Co- Chair Parnell, Co-Chair Torgerson The motion FAILED (1-8) The amendment FAILED to be adopted. Amendment #6: This amendment deletes "transportation of" from the title on page 1 line 1. The amended language reads as follows. "An Act relating to state funding for public school students; relating to a minimum amount of expenditures by school districts for instruction; determining the facilities constituting a school for purposes of public school funding; and providing for an effective date." The amendment also inserts a new bill section on page 3, following line 8 with an effective date of July 1, 2000, to read as follows. "Sec. 5. AS 14.18.490(d) is repealed." Senator Adams moved for adoption. Co-Chair Torgerson objected. Senator Adams expressed that all students, regardless of where they live, should receive the same amount of funding. He stressed this is the worst kind of discrimination. AT EASE 6:43 PM / 6:47 PM Senator Wilken made a statement about Senator Adams's comments regarding the color of one's skin that disturbed him. He said the intent of SB 36 was to instill fairness. He listed the several rural districts that actually benefited from the formula funding formula. He suggested that removing this floor would cause the funding mechanism to revert back to the previously flawed formula. Senator Adams responded the school districts cited by Senator Wilken were short-funded beforehand and were only now starting to receive fair funding. He asserted that if Senator Wilken's explanation was so good, then the figures should be reversed and urban schools should receive 60 cents on the dollar and rural schools receive the full dollar. A roll call was taken on the motion. IN FAVOR: Senator Adams OPPOSED: Senator Phillips, Senator Green, Senator Donley, Senator Leman, Senator Wilken, Co-Chair Parnell, Co-Chair Torgerson ABSENT: Senator P. Kelly The motion FAILED (7-1-1) The amendment FAILED to be adopted. Senator Green commented that she appreciated the efforts that went into this legislation. However she needed to understand the impact on those districts that did not have an opportunity to renegotiate their pupil transportation contracts before the floor was set. She referred to a survey that showed those that had negotiated new contracts had an advantage of several million dollars over those districts that had not yet renegotiated. Co-Chair Torgerson commented that the new committee substitute negated all the 50-50 efforts since it allowed for multiple adjustments. He noted that about the only item not accounted for was the COLA. Senator Green did not understand it that way. She would prefer to be a district that had already renegotiated rather than one that had not yet done so. Co-Chair Torgerson stated that the costs of the new contracts would not be known, but if the total were for $7 million, the state would be required to pay the $7 million. Senator Donley wanted to see progress made towards the charter school problem, but he noted he did not have an amendment drafted to address this issue. Senator Adams restated his request for calculations from the department. Mr. Jeans responded that to calculate that would be very difficult and listed reasons why. He was able to say that the COLA increases in Anchorage had been less than four percent since 1982. This would make Senator Green's concerns mute, he stated. Senator Adams asked if the witness could tell the Committee if the cost would be higher or lower than the Committee's calculation of $5 million. Mr. Jeans could not predict exactly what the increases would be but that all current contracts contain COLA provisions. He noted that the Railbelt area districts had issued Requests for Proposal (RFP), which he thought, would bring down the costs by encouraging outside competition. Senator Adams asked if that would be the case only if there was outside competition. Mr. Jeans affirmed. Senator Adams addressed Senator Green's concerns about the effective dates of contracts. He asked if expiring contracts would be taken care of because of the staggered effective dates of Sections 5 and 6. Mr. Jeans responded that Section 6 establishes FY 01 as a base year that any increases will be measured. If fiscal note of over $1 million accompanied the bill, he said, the entire pupil transportation would be fully funded at the Department of Education and Early Development's request and that would establish the base line for the future. Senator Green asked if Mr. Jeans could assure her that those districts that have not yet renegotiated their pupil transportation contract would not be at a detriment. Mr. Jeans answered that was correct, provided the Anchorage COLA did not exceed four percent over the term of the contract. If did go above four, he explained, the increase would be split 50-50 between the district and the state. Co-Chair Torgerson clarified the COLA would be the only expense reimbursable under normal contract provisions and that increased enrollment would not be impacted. Mr. Jeans stated that in his understanding of the committee substitute's language FY 00 would be established as the base year. He continued that if a district required additional routes or added a new school or increased student population would increase the base and set a new threshold for the following years. He qualified that, if this were not the case, he needed to know. Co-Chair Torgerson assured the witness that was the Committee's intent. Senator Green spoke of the efforts made by some districts to combine their contracts with other districts to encourage competitive bidding. She would contend that after one or two years, the state would be back to having only one provider. She did not think this was a competitive arena and therefore, this approach was not a long-term solution. Mr. Jeans agreed that could be the result, but that by not making the step forward, the state was locking into the existing contractors. He relayed that in conversations with Outside contractors, he was told they could not break into the Alaska market with the small routes. Therefore, he stated, aligning these contracts makes the market more appealing to competitors. Tape: SFC - 00 #85, Side B 7:03 PM Mr. Jeans continued that contracts must consist of more than 100 busses in order to make it worthwhile for Outside providers to enter the market. Senator Green gave a scenario of high oil prices resulting in high fuel prices to operate the busses and asked if those increased costs were included in the price of the contracts Mr. Jeans answered that was his interpretation as well. Senator Wilken moved to report CS SB 290, 1-LS1555\N from Committee with forthcoming Department of Education and Early Development fiscal note. Senator Green objected. Co-Chair Torgerson objected saying that while he would not prevent the bill from reporting out of Committee, he could not support Section 4. He stressed that he could not agree to a million-dollar increase to the operating budget already agreed upon by the legislature. A roll call was taken on the motion. IN FAVOR: Senator Wilken, Senator P. Kelly, Senator Phillips, Senator Donley, and Co-Chair Parnell OPPOSED: Senator Adams, Senator Green, and Co-Chair Torgerson ABSENT: Senator Leman The motion PASSED (5-3-1) The bill was MOVED from Committee. SENATE BILL NO. 248 "An Act relating to the financing authority, payment in lieu of tax agreements, and tax exemption for assets and projects of the Alaska Industrial Development and Export Authority; relating to renaming and contingently repealing the rural development initiative fund within the Department of Community and Economic Development, and establishing the rural development initiative fund within the Alaska Industrial Development and Export Authority; and providing for an effective date." KEITH LAUFER, Financial and Legal Affairs Manager, Alaska Industrial Development and Export Authority (AIDEA), Department of Community and Economic Development referred to the sectional analysis of the bill. [Copy on file.] Mr. Laufer stated that the legislation has three elements. The first, he said extends the AIDEA general bonding authority that would otherwise sunset July 1, 2000. The second element of the bill, he explained transfers the Rural Development Initiative Fund Loan program to AIDEA. He relayed that the third element is technical changes to provisions in existing law dealing with tax exemptions and payment in lieu of tax agreements related to AIDEA development finance projects. With regard to the bonding sunset, Mr. Laufer asserted that AIDEA has been subject to these sunsets for many years. He said the current sunset would prevent AIDEA from issuing all bonds other than refunding bonds regardless of size without specific legislative approval. Specifically, he pointed out, the sunset would prevent issuing bonds for less than $10 million for development finance projects. He noted that bonds over $10 million, currently and in the future under this legislation, to require specific legislative approval. Mr. Laufer continued that the sunset would also prevent AIDEA from issuing conduit revenue bonds. He explained that these are the bonds that AIDEA can issue and which do not obligate either AIDEA's credit or the credit of the State Of Alaska but provide qualified projects with low-cost tax- exempt financing. Mr. Laufer stated that the bill would extend the sunset provision to July 2003 and make clear that the conduit revenue bonds are not subject to the sunset. Mr. Laufer then addressed the transfer of the Rural Development Initiative Fund (RDIF). That program, he stated would formally move from the former Department and Community and Regional Affairs to AIDEA. He explained the program makes loans under $200,000 to businesses and communities with populations of less than 5,000. He expressed that AIDEA has long supported this program that also advances AIDEA's mission. He spoke of past actions where the legislature has authorized AIDEA to purchase these loans and directed the proceeds from the loans to re- capitalize the initiative fund. He stated that the relocation of this program would allow it to become self- sustaining without the need for periodic legislative appropriations. He noted that AIDEA would continue to work with the Department of Community and Economic Development to administer the program. Mr. Laufer stated that this bill anticipates that a separate appropriation will also pass that would allow AIDEA to purchase the existing RDIF loan portfolio and the other assets in the fund. Mr. Laufer continued that the bill makes technical amendments to the tax exemption provisions related to AIDEA-owned projects. Under existing law, he explained AIDEA's ownership of these projects is tax-exempt and local jurisdictions are permitted to exempt users of AIDEA-owned development projects from property tax or to enter into payment in lieu of tax agreements with those projects. Unfortunately, he shared these statutes are not clear as to the mechanism which are to be used for the tax exemption. He detailed two specific problems the bill address; pilot agreements and clarification to allow municipalities to grant tax exemptions. Co-Chair Torgerson asked about the RDIF. Mr. Laufer described that due to complicated language in the transfer provision of the bill, there could be two funds. However, he assured that once the purchase of the fund's assets is authorized and consummated, the existing program is repealed and is combined into the new program. This language, he pointed out is contained in Section 10 of the bill. Co-Chair Torgerson wanted to know if the language in the transfer is exactly the same as the existing language. Mr. Laufer replied that the new language mirrors the existing language with the exception of technical changes to allow the fund to comply with AIDEA's assets. He assured there are no changes to the program. Senator Phillips asked who asked for this legislation and why. He commented that his constituency would like to see the state sell AIDEA. Mr. Laufer answered the bill was requested by the governor with the primary intent to extend AIDEA's bonding authority. He added that the RDIF transfer is included to avoid the need for future legislative appropriations to capitalize the fund. Senator Phillips wanted to know who requested the governor sponsor this bill. Mr. Laufer shared that AIDEA and the department had been discussing this matter for "some time." Senator Donley asked the criteria for the RDIF loans. He noted that AIDEA's charter requires it to practice due diligence to get repayment of its loans. He wanted to know if the rural loans were subject to the same requirement and what action AIDEA planned to take if a number of the loans began to default. He voiced his skepticism of many loan programs trying to become independent from state funding and instead become part of the AIDEA program. He stated that by becoming part of AIDEA, the programs are no longer subject to legislative scrutiny but that the funds used for the loans could instead be deposited into the general fund as AIDEA dividends. Mr. Laufer responded that AIDEA has already been purchasing the RDIF loan portfolios and therefore has experience with these loans. He stated that the default rates are not out of line with what is expected in a typical loan portfolio that AIDEA would manage. He stressed that the loans are required to go through a similar process, as would be required in typical AIDEA programs. He detailed these requirements. Senator Donley asked if there was a maximum dollar amount AIDEA could put into the RDIF program. Mr. Laufer answered that there is not a maximum and that approximately $1 million would be a significant amount to make it the fund a truly revolving loan program. He shared that the current problem is that once the department has loaned the money, there is insufficient money returned on an annual basis to fund any new loans. AIDEA would be able to operate the fund as a revolving loan program, he assured. Co-Chair Torgerson asked if AIDEA would oppose a legislative imposed cap of $2 million as the amount that could be given to the RDIF. Mr. Laufer did not think so. Co-Chair Torgerson asked for an explanation of Section 7 asking for authorization to make loans to a political subdivision and if AIDEA is making loans to local governments. Mr. Laufer clarified that is not the case, but that the provision refers to the ability of users of AIDEA-owned projects to enter into payment in lieu of tax agreements to build the subdivisions. He stated that the language is detailed to make sure it is clear that the local subdivisions and the users of the project may enter into the tax agreements. Co-Chair Torgerson noted the bill would not be reported from the Committee at this hearing, saying he wanted to consider setting a maximum amount that AIDEA would be allowed to deposit into the RDIF. Senator Green referred to the language on page 4, line 27 "community with a population of 5,000 or less". She wanted to know how many communities fit this description in the state. Mr. Laufer did not have that information. Co-Chair Torgerson ordered the bill HELD in Committee. COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 254(HES) "An Act relating to heirloom certificates of marriage." This was the second hearing for this bill in the Senate Finance Committee. Co-Chair Torgerson announced that he had had earlier concerns with the fiscal note and requested the department to recalculate the cost to implement the legislation. ELMER LINDSTROM, Special Assistant, Office of the Commissioner, Department of Health and Social Services noted the $12,000 reduction made to the fiscal note. [Copy on file.] Senator Phillips asked if this program adds another position to government. While he thought this program would be nice to have, he did not consider it a function of government. Senator Adams offered a motion to report from Committee, CS SB 254 (HES) with $55,400 fiscal note from the Department of Health and Social Services. Senator Phillips objected. A roll call was taken on the motion. IN FAVOR: Senator Leman, Senator Adams, Senator Wilken, Senator P. Kelly, and Co-Chair Torgerson OPPOSED: Senator Green, Senator Phillips ABSENT: Senator Donley, Co-Chair Parnell The motion PASSED (5-2-2) The bill was MOVED from Committee. AT EASE to 7:29 PM SENATE BILL NO. 257 "An Act relating to notice requirements for certain final findings concerning the disposal of an interest in state land or resources for oil and gas; relating to administrative appeals and petitions for reconsideration of decisions of the Department of Natural Resources; and providing for an effective date." BOB LOEFFLER, Director, Division of Mining, Land and Water, Department of Natural Resources, explained the bill does two things, creates a uniform appeals process for the Department of Natural Resources and corrects a notice problem for the Division of Oil and Gas. Mr. Loeffler explained the problems that precipitated this bill. He stated that for a variety of reasons, different laws have been passed over several years, and because of the way they interact, there is a variety of appeals processes within the department. He noted that these different processes follow different schedules with 15 - 30 days allowed to file an appeal. The different processes, he added require different channels and opportunities for appeals. He remarked that this causes confusion for the public and for department staff. He stated that this bill establishes there is only one appeal process, one appeal to the commissioner and the next appeal made in court. Mr. Loeffler continued with the second problem relating to notices for lease sales stating that there are currently three notices. He detailed these notices. As a result, he said the public is confused and there is additional cost for publishing the multiple notices. Co-Chair Torgerson asked why this bill does not have a negative fiscal note. Mr. Loeffler responded that the Division of Oil and Gas has a higher workload this year, and the intent is to use the small cost savings from this legislation to pay for the other operations. The savings anticipated by other divisions, he said are spread between many employees and would be difficult to identify. He stated that because the department had a $750,000 budget reduction, "we're just struggling to keep up." Co-Chair Torgerson asked if the fiscal note therefore has nothing to do with the bill but rather with the department's desire to save money to be spent elsewhere within the department. Mr. Loeffler repeated that the savings would be difficult to calculate. Senator Leman asked how much the department spends annually on public notices. Mr. Loeffler did not know the entire cost but knew that the intermediate notice is a few thousand dollars for each oil and gas lease sale. He noted that the department offers "a few" of these sales each year. Senator Leman was interested in reducing costs and stated that if this bill could allow the department to save money, he supported it. He suggested a conceptual amendment to remove the appeals process from the bill and maintain only the public notice portion. Co-Chair Torgerson wanted the amendment offered on the Senate floor. Co-Chair Parnell pointed out that the Committee has in its possession, another bill that contains this language. Co-Chair Parnell offered a motion to report from Committee, SB 257, 1-GS2046.A with accompanying zero fiscal note from the Department of Natural Resources. Without objection, the bill MOVED from Committee. COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 259(JUD) "An Act relating to crimes and offenses relating to aural representations, recordings, access devices, identification documents, impersonation, false reports, and computers; and providing for an effective date." This was the fifth hearing for this bill in the Senate Finance Committee. At the last hearing, a proposed committee substitute, 1-LS1284\M was before the members but not adopted. Senator Green asked which version contains the more complex language. It was established that Version "M" would not be adopted. Co-Chair Parnell offered a motion to report from Committee, CS SB 259 (JUD), 1-LS1284\K with accompanying Department of Administration $84,700 fiscal note and Department of Public Safety $22,800 fiscal note. There was no objection and the bill MOVED from Committee. COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 283(RES) "An Act establishing the shore fisheries development lease program account and the timber receipts account; relating to the accounting for and appropriation of revenue from the state land disposal program, the shore fisheries development lease program, and the state timber disposal program; and providing for an effective date." BOB LOEFFLER, Director, Division of Mining, Land and Water, Department of Natural Resources testified that the bill provides for a land disposal income fund for similar shore fisheries and for timber harvests. He detailed that this bill provides a separate accounting system for a land sale program to allow the legislature and the public to understand the benefits and the physical consequences of the land sales. Mr. Loeffler continued that the bill promotes the concept that state land sale programs should return revenues, not only for the sake of more land sales, but should also provide a return to the state. While he did not think these land sales would close the state's budget gap, he noted they would provide revenue above the amount needed to fund a stable land disposal program. Mr. Loeffler detailed that the bill allows the department to use the income from past and present sales to fund more land disposals up to $5 million, with the remaining revenues going to the general fund. Mr. Loeffler addressed the fiscal note, which he said contain the concepts discussed during hearings on SB 6, another lands disposal legislation. The amount of the fiscal note, he said is enough to "jump start" the program and to keep up with new acreage in future years. Mr. Loeffler spoke to the fisheries program, saying this bill provides a similar fund in the state treasury for the shore fisheries program. This program, he explained currently generates $360,000 for 1,200 shore fisheries leases and this bill would allow a portion of that revenue be used to fund the program. DAN CHALUP, Representative, Katchemak Bay Salmon Producers Co-op, testified via teleconference from Homer in support of Section 3 of the legislation. His organization thought that a portion of the proceeds should go into the program to protect it from any further budget reductions from the Department of Natural Resources. KARL KIRCHER, Kenai Peninsula Fisherman's Association, testified via teleconference from Kenai in favor of the bill and referred to written testimony submitted to the Committee. [Copies not provided.] He also gave details about the organization; its purpose and the existing shore lease problems. SANDY UMLAUT, President, Ugashik Set-netting Association, testified via teleconference from Kenai about the organization and to request that members of the Committee vote in favor of this bill. She stated that this bill would continue to provide stability for the set-net industry. PAUL SHADURA, member of a family that set-nets, testified via teleconference from Kenai telling about the successful fishing areas. His family supported the bill. Co-Chair Torgerson asked if new staff would be hired to implement the legislation. Mr. Loeffler said approximately eight people would run the program. He noted that three title-search positions already existed and would be staffed by employees whose funding was eliminated in the operating budget. He qualified that two new positions would be needed for the shore fisheries portion of the program to offset staff reductions from the previous year. Senator Phillips asked how the legislature should explain to the public that the state is adding new positions to the government. Mr. Loeffler said the division would contract out functions as best as it can, but cautioned that in order to have a stable lands disposal system, staff are needed. Senator Phillips contended that would not stop people from complaining. Co-Chair Torgerson asked about the increase of 55,000 acres up from the earlier 50,000. Mr. Loeffler referred to discussions regarding SB 6 and the five scenarios provided. He detailed that 55,000 acres was one of those scenarios, which is made up of 50,000 of re- offered, previously distributed parcels and 5,000 in remote sales and subdivisions. He explained how the funds allocated would be used to implement the lands disposal. Co-Chair Torgerson commented that he would not hold the bill, but the warned that the performance measures would be scrutinized thoroughly. He did not have problem with the additional funding for positions. Senator Leman stated that he holds a set-net shore fisheries lease. He attested that the personal cost to him would be the same whether or not this bill passes. Senator Adams offered a motion to move from Committee, CS SB 283 (RES) with two accompanying fiscal notes from the Department of Natural Resources, Division of Minerals, Land and Water. One fiscal note is $1,014,300 for the Land Sales and Municipal Entitlements component and the other fiscal note is $200,000 for the Claims, Permits and Leases component. Without objection, the bill MOVED from Committee. ## ADJOURNED Senator Torgerson adjourned the meeting at 7:55 PM.