MINUTES  SENATE FINANCE COMMITTEE  April 13, 2000  9:05 AM TAPES SFC-00 # 86, Side A & B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 9:05 AM PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell, Senator Al Adams, Senator Pete Kelly, Senator Loren Leman, Senator Wilken, Senator Phillips, Senator Green, Senator Donley. Also Attending: KATELYN MARKELY, Development Specialist, AIDEA; VERN JONES, Chief Procurement Office, Department of Administration; RICK FULLER, Commissioner's Office, Department of Public Safety; REPRESENTATIVE TOM BRICE; GAYLE GARRIGUES, Staff to Representative Tom Brice REPRESENTATIVE GENE THERRIAULT; JOE BALASH, Staff, Representative Therriault; MIKE TIBBLES, Staff to Representative Therriault; Steven Daugherty, Assistant Attorney General, Natural Resources, Department of Law; PAT GALVIN, Director, Division of Governmental Coordination, Office of Management and Budget; JACK KREINHEDER, Senior Policy Analyst, Office of Management and Budget, Office of the Governor; KEN FREEMAN, Executive Director, Resource Development Council; BOB STYLES, Senior Vice President, Resource Development Council and President, Alaska Coal Association. Attending via Teleconference: From Anchorage: CHESTER WEGER, Assistant State Fire Marshall, Department of Public Safety; JANICE ADAIR, Director, Environmental Health, Department of Environmental Conservation; From Kenai: SCOTT WALDEN, City of Kenai, Fire Department; JASON ELSON, Fire Chief, City of Kenai; From Kodiak: MIKE DOLPH, President, Fire Chiefs Association. SUMMARY INFORMATION SB 261-PREVENTION OF NEEDLE & SHARPS INJURIES This bill was scheduled but not heard. SB 248-AIDEA: BONDS & RURAL DEVELOPMENT An AIDEA representative testified. This amended bill was moved from committee. SB 220-PROCUREMENT PREFS:PARTNERSHP/LTD LIAB CO The Department of Administration testified. This amended bill was moved from committee. HB 3-DRUGS: LISTED CHEMICALS/METHAMPHETAMINE The sponsor testified, along with the Department of Public Safety. The amended bill was moved from committee. HB 380-INSURER TAX CREDIT: FIRE STANDRDS COUNCIL The Department of Public Safety testified, along with the general public. The amended bill was moved from committee. HB 361-FEES FOR STATE SERVICES The sponsor testified, along with various state agencies. The bill was held in 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." Co-Chair Torgerson noted the concern by committee members regarding Alaska Industrial Development and Export Authority (AIDEA) having unlimited authority to transfer assets into the new Economic Development Initiative Fund. He continued that at this committee's last hearing, it was decided that a $2 million cap would be workable. KATELYN MARKELY, Development Specialist, AIDEA, responded that this entity was comfortable with this $2 million cap. Co-Chair Parnell made a motion to move Amendment #1, which reads as follows: Page 4, line 20, following "deposited into the fund by the authority." Insert "The assets transferred to the fund by the authority may not exceed $2 million." Co-Chair Torgerson hearing no objection, Amendment #1 was ADOPTED. Co-Chair Parnell made a motion to move SB 248 from committee with individual recommendations and a Department of Community and Economic Development, zero fiscal note from committee. Hearing no objection SB 248 was MOVED FROM COMMITTEE. SENATE BILL NO. 220 "An Act clarifying the requirements for limited liability companies and partnerships to qualify for the Alaska bidder's and disability preferences under the State Procurement Code; and providing for an effective date." VERN JONES, Chief Procurement Officer, Department of Administration referred to Amendment #1, as addressed by Co-Chair Torgerson. He stated that the department supports this change. Co-Chair Parnell made a motion to move Amendment #1, which reads as follows: Page 2, line 5: Delete "directors" Insert "members" Page 2, line 22: Delete "directors" Insert "members" Co-Chair Torgerson hearing no objection, Amendment #1 was ADOPTED. Co-Chair Parnell made a motion to move SB 220 with individual recommendations and a Department of Administration, zero fiscal note from committee. Hearing no objection SB 220 was MOVED FROM COMMITTEE. CS FOR HOUSE BILL NO. 3(JUD) "An Act relating to controlled substances and to the possession of certain chemicals." REPRESENTATIVE TOM BRICE, as sponsor stated that this legislation bolsters law enforcement's efforts to raid methamphetamine labs before the drug goes into production. He added that this effort would elevate the existing "intent" statute to a higher level of penalty. GAYLE GARRIGUES, Staff to Representative Tom Brice stated that this legislation would call for penalties of a Class A nature. Senator Green asked generally about users of these same chemicals, who might legally possess these substances. She wondered about these individuals being in harms way of false accusations. Representative Brice responded that initially there had been concerns by the National Drug Manufacturers Association regarding the potential of this legislation. He added that individuals could possess 10 boxes of Sudafed legally, for example. He stated that these same 10 boxes cannot be possessed though, along with the glassware and the remaining components to create methamphetamines with the intent to manufacture. Co-Chair Parnell made a motion to adopt Amendment #1, which reads as follows: Page 1, line 2, following "chemicals": Insert "; and providing for an effective date" Page 2, following line 31: Insert a new bill section to read: "*Sec. 4. AS 11.71.170(b) is amended by adding a new paragraph to read: (29) ketamine hydrocholride." Page 4, following line 23: Insert a new bill section to read: "*Sec. 7. This Act takes effect immediately under AS 01.10.070(c)." Co-Chair Torgerson hearing no objection, Amendment #1 was ADOPTED. RICK FULLER, Commissioner's Office, Department of Public Safety explained the term ketamine hydrocholride for the committee. He explained that this legislation would classify this substance as a "controlled substance." Senator Donley made a motion to move HB 3 from committee with individual recommendations and Public Safety, Criminal Division and Public Defender Agency, zero fiscal notes. Hearing no objection HB 3 was MOVED FROM COMMITTEE. CS FOR HOUSE BILL NO. 380(L&C) "An Act relating to contributions to the Alaska Fire Standards Council and to an insurer tax credit for those contributions; and providing for an effective date." CHESTER WEGER, Assistant State Fire Marshall, Department of Public Safety testified via teleconference from Anchorage to answer any pertinent questions. He stated that the Division of Public safety supports this legislation. Senator Adams questioned the capping of credits at $300,000 that would be funneled into this corresponding fund. Co-Chair Torgerson responded that they would have to get back to this question once the Division of Insurance was available for comment. SCOTT WALDEN, City of Kenai, Fire Department, testified via teleconference from Kenai in support of this legislation. JASON ELSON, Fire Chief, City of Kenai, testified via teleconference from Kenai. He stated that this legislation would be a great service to the state of Alaska by providing professional standards for fire fighters. MIKE DOLPH, President, Alaska Fire Chiefs Association testified via teleconference from Kodiak in support of this legislation. He voiced his appreciation for the committee's persistence for the passage of HB 380. MIKE MCGOWAN, Past President, Alaska Fire Chiefs Association testified via teleconference from Fairbanks in support of HB 380. He reminded the committee about the grim fact that Alaska has the worst fire laws and fire fatality record in the United States. He stressed the necessity of a Firemen Standards Council. Co-Chair Torgerson stated that when the committee heard information about this legislation before, there was a concern about an unlimited contribution in conjunction with a fiscal note that outlined operation costs at an amount of $225,000. He detailed the decision to cap this amount at $300,000. He then read the language of an amendment that would provide for this stipulation. A taxpayer may not claim a contribution as a credit under (A) of this section, unless the taxpayer applies to the director for pre-qualification of the contribution as a tax credit and receives written notice from the director that the contribution pre- qualifies for the tax credit. The director shall allow pre-qualified tax credit for contributions under this section in order that the director receives application by taxpayers, but may not provide notice of pre-qualification if the taxpayers contribution would cause the total contribution made in that calendar year to exceed $300,000. REPRESENTATIVE GENE THERRIAULT stated that he understood the objective of this amendment. He noted the legislature's power to appropriate this money initially, but understood the reasons to cap this money at the same time. Representative Therriault, in response to a question posed by Senator Green, stated that there was a tax credit mechanism for support for universities in the State of Alaska. He continued that the information he received indicated that insurance companies, doing business in the State of Alaska, do not avail themselves of this tax credit mechanism. Senator Adams stated his support for this legislation, but he wanted some assurances that the program created by it works. He worried about the $300,000 cap. He referred to page two, line number two. He pointed out that a contribution claimed by the taxpayer as a credit under this section cannot be claimed as credit or when combined with credits taken during a taxpayer's tax year provided by particular statutes. He pointed out that there are a number of these latter statutes that exceed a $500,000 cap and wondered about the rational of a $300,000 as provided by this current legislation. JOE BALASH, Staff, Representative Therriault acknowledged this concern about a "universe" of tax credits allowed and stated that the university is already absorbing most of these. He stated that Senator Adams' questions prompt the logical question about whether there is any money left over for the Fire Chiefs. Co-Chair Torgerson stated that he thought this credit would be in addition to what might be applied to the university. Representative Therriault responded that the credit must be applied to one or the other and referred to language on page one, lines 13 - 14, and noted that these percentages mirror the current university mechanism. He continued that these credits for either entity is not preferable to the other, but rather, place them on a level playing field. Senator Donley made a motion to adopt SCS CS HB 380, 1- LS1398\K. Hearing no objection, it was so ADOPTED. Senator Donley made a motion to move SCS CS HB 380 from committee with individual recommendations and Department of Community and Economic Development, zero fiscal note. Hearing no objection, the bill was MOVED FROM COMMITTEE. HOUSE BILL NO. 361 "An Act relating to charges for state services; requiring that fees levied by resource agencies for designated regulatory services be based on the actual and reasonable direct cost of providing the services, except in the case of certain negotiated or fixed fees; relating to negotiated or fixed fees of resource agencies; relating to invoices for designated regulatory services; establishing a petition process regarding fees charged by resource agencies for regulatory services; and providing for an effective date." Representative Therriault, as sponsor stated that he had been working with the Resource Development Council (RDC) to try to bring under control the fees charged by agencies for permits. He continued that the RDC and resource companies are not opposed to paying fees for the state services received, but they would like some assurance that the money paid is actually linked somehow to the work being performed in relation to a permit's issuance. He stated that this legislation provides assurance mechanisms to the industry. He then outlined a schedule of fees charged as provided for in this current legislation. MIKE TIBBLES, Staff to Representative Therriault stated that the fees levied by resource agencies are required to establish wherever possible, as fixed. He continued that a fee was not to exceed an estimated average, reasonable and direct cost incurred by the resource agency in providing the service. He noted that for those instances where a fixed fee is not appropriate, this legislation allows for a process where the industry may petition for a negotiated agreement. He summed up by stating that if this negotiation fails, it would fall back to a time and expense billing. He then summarized the section of this legislation dealing with invoices. Senator Green asked for a typical example, of permit negotiations that takes place among the various agencies. Mr. Tibbles responded that the agencies that this legislation affects are the Department of Environmental Conservation, Department of Fish and Game, and Department of Natural Resources, with an emphasis on water and solid waste issues. Co-Chair Torgerson referred to page four, lines 23 - 24, and noted that this language does not reference the Executive Procedures Act. He asked what was being left out of this section, which reads as follows: (f) No action taken by a resource agency or the office of management and budget under (c) of this section is subject to AS 44.62 (Administrative Procedure Act). Mr. Tibbles responded that the language addressed a concern by the Department of Law, and this section only refers to the provisions under Subsection (c) on the previous page in the event of a resource agency petition for a single project fee. He clarified that with the use of the word "petition," this section makes it absolutely clear that this is not a petition to adopt new regulations. Senator Phillips referred to page 2, line 7, which reads: A fee or other charge that is set by regulation may no exceed the estimated actual costs of the state agency in administering the activity or providing the service unless otherwise provided by the statute under which the regulation is adopted; Senator Phillips felt that he could foresee an estimate of costs being made and then for whatever reasons, these costs being exceeded. Mr. Tibbles responded that this language was already in existing law and added that this section was added for the exemption of fixed fees related to negotiated agreements. Co-Chair Torgerson referred to language on page 2, line 14, which reads as follows: (b) Money collected for the state shall be deposited by the collector in the nearest bank to the account of the Department of Revenue when the Department of Revenue directs this to be done. Co-Chair Torgerson wondered if this was standard language. Mr. Tibbles responded that this language could also be found in existing statute. Senator Leman referred to this legislation's fiscal notes and wondered if there might be a duplication of efforts between the Civil Division, Department of Law and Office of Management and Budget. Mr. Tibbles responded that this legislation allowed for a $3 million dollar fiscal note originally. He added that he did not necessarily understand the need for reviews, or appeals within the first year as required by the Office of Management and Budget and the Department of Law if this legislation went into effect. JANICE ADAIR, Director, Environmental Health, Department of Environmental Conservation testified via teleconference from Anchorage. She stated that it was clear that the state needs a rational basis for setting permit fees. She added that the department felt that equity was a cornerstone of cost and to the extent there is no equity, there should be a rational basis for such. She defined equity as the percentage of program supported by fees and by general funds. She gave percentages of how fees and general funds are allocated throughout various programs. She pointed out how crucial it was that funding of the fiscal notes enable the departments to implement corresponding programs. She stressed that with the implementation of fixed permits fees, it will be necessary to account for program costs more intricately. STEVEN DAUGHERTY, Assistant Attorney General, Natural Resources, Department of Law spoke to the fiscal note as being incorrect. He referred to a revised fiscal note, dated March 22, 2000, which is considerably lower. He then gave a breakdown of the corresponding costs and reasons why some of the amounts seem exorbitant. He summarized the procedure for the review of pertinent regulations by the Department of Law. Tape: SFC - 00 #86, Side B, 9:58 AM PAT GALVIN, Director, Division of Governmental Coordination, Office of Management and Budget, stated that the department had failed to recognize the effective date of this legislation. He gave a justification of the funding amounts outlined in the corresponding fiscal note. He referred to Subsection C of the legislation regarding an opportunity for an entity to petition, as further justification for costs outlined in the corresponding fiscal note. He then referred to the appeals process outlined on page five, lines 11 - 18, in this same subsection. He stated that the Office of Management and Budget would perform these appeal duties. Senator Leman asked how many petitions the departments would expect to receive. Mr. Galvin responded that the departments could not know for sure how many of these petitions would be forthcoming, but realistically the amount would probably not be very large. Senator Leman concurred with this low volume and wondered why the proposal of two, half-time positions to fulfill these duties was being considered. A conversation ensued between Mr. Galvin and Senator Leman regarding the justification for these positions. Senator Wilken quoted a section of the fiscal note, which reads, "In addition the bill provides that any business or an individual can petition," and asked for an example of how this would work. Mr. Galvin responded that if a project required multiple permits, and a petition directed to various departments results, then a standard fee could be attributed to the process. He continued, that in the future, similar fees can be attributed to similar projects. He used the example of where a general permit requirement would apply, such as for "temporary camps," related to exploration activities. JACK KREINHEDER, Senior Policy Analyst, Office of Management and Budget, Office of the Governor responded to the two, one-half time positions accounted for in the Office of Management and Budget fiscal note. He noted that currently there are no available individuals to perform these related duties. He pointed out that these corresponding petition reviews must be performed within 30 days. KEN FREEMAN, Executive Director, Resource Development Council stated that his organization was tasked with building industry-wide consensus on legislation related to departmental permit fees. He then gave an historical summary of this present legislation. He stated that his organization supports SB 361 and noted those state agencies, which the Resource Development Council has been designated to worked with. BOB STYLES, Senior Vice President, Resource Development Council and President, Alaska Coal Association referred to the example of "temporary camps" and noted that anytime a project affects a coastal zone, the Resource Development Council is automatically involved because they are required to go through the coastal zone review process. He added that one of the key elements in moving towards a single fee permit approach is to attempt to categorize related projects, which have a consistent set of permits required for conducting the corresponding work. Co-Chair Torgerson responded that he would explore taking the Office of Management and Budget out of this legislation completely. He noted that the intent of this legislation is to set consistent permit fees and he questioned the validity of challenging already agreed upon costs for permitting. He stated that he did not see the need for additional series of reviews above what the Commissioner deems appropriate. Mr. Freeman stated that some of the Council members would agree with this possibility, but on the other hand, these same individuals might appreciate a second opinion from the Office of Management and Budget. Mr. Tibbles responded that the possibility of removing Office of Management and Budget from this process had yet to be discussed by Representative Therriault's office. He spoke to reducing the amount of employees from two to one, who would travel to the field for possible project reviews under the budget perimeters allowed. Co-Chair Torgerson ordered that SCS CSHB 361 be HELD in committee. ADJOURNED Senator Torgerson recessed the meeting at 10:30 AM until 6:00 PM.